Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2014

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File No. 000-53379

GREEN DRAGON WOOD PRODUCTS, INC.

(Exact name of small business issuer as specified in its charter)

FLORIDA	26-1133266
(State or other jurisdiction of incorporation or organization)	(I.R.S. Tax. I.D. No.)

Unit 312, 3rd Floor, New East Ocean Centre

9 Science Museum Road

Kowloon, Hong Kong

(Address of Principal Executive Offices)

852-2482-5168

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer. o	Accelerated filer. o

Non-accelerated filer. o (Do not check if a smaller reporting company)	Smaller reporting company. þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares outstanding of the issuer’s common stock as of August 20, 2014 was 23,725,000 shares.

Table of Contents


	TABLE OF CONTENTS
		Page
	PART I
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

	PART II
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
SIGNATURES		29

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 . FINANCIAL STATEMENTS

Green Dragon Wood Products, Inc.

Condensed Consolidated Balance Sheets

As of June 30, 2014 and March 31, 2014

(Currency expressed in United States Dollars ("US$"), except for number of shares)

	June 30,			March 31,
	2014			2014
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalent	$	90,032		$	34,597
Restricted cash		448,388			395,893
Accounts receivable, net		5,659,756			6,202,445
Bills receivable		1,185,594			-
Income tax recoverable		26,789			26,789
Prepayments, deposits and other receivables		1,519,898			1,171,399
TOTAL CURRENT ASSETS		8,930,457			7,831,123
Non-current assets:
Plant and equipment, net		31,053			34,101
TOTAL NON-CURRENT ASSETS		31,053			34,101

TOTAL ASSETS	$	8,961,510		$	7,865,224

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving lines of credit	$	4,895,173		$	4,441,711
Accounts payable, trade		892,056			655,782
Accrued liabilities and other payables		947,322			564,769
Amount due to a director		18,933			16,318
Obligation under finance lease		12,342			12,219
TOTAL CURRENT LIABILITIES		6,765,826			5,690,799
NON-CURRENT LIABILITIES
Obligation under finance lease		28,419			31,548
TOTAL NON-CURRENT LIABILITIES		28,419			31,548
TOTAL LIABILITIES		6,794,245			5,722,347
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; 50,000,000 preferred shares authorized; Series A Convertible Preferred Stock, 2,000,000 shares and 0 shares issued and outstanding, respectively.		2,000			2,000
Common stock, $0.001 par value; 450,000,000 shares authorized; 23,725,000 shares issued and outstanding		23,725			23,725
Additional paid-in capital		1,236,400			1,236,400
Subscription receivable		(100,000	)		(100,000	)
Deferred stock-based compensation		(264,839	)		(306,392	)
Retained earnings		1,276,609			1,293,904
Accumulated other comprehensive (loss) gain		(6,630	)		(6,760	)
TOTAL STOCKHOLDERS' EQUITY		2,167,265			2,142,877

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	8,961,510		$	7,865,224

See accompanying notes to condensed consolidated financial statements.

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Green Dragon Wood Products, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income

FOR THE THREE MONTHS ENDED JUNE 30, 2014 AND 2013

(Currency expressed in United States Dollars ("US$"), except for number of shares)

(Unaudited)

	Three Months ended June 30,
	2014			2013

Revenues, net	$	3,101,795		$	2,467,668

Cost of revenue		(2,850,171	)		(2,316,634	)

Gross profit		251,624			151,034

General and administrative expenses		240,166			277,568

Total operating expenses		240,166			277,568

INCOME (LOSS) FROM OPERATIONS		11,458			(126,534	)

Other income/(expense):
Foreign exchange (loss), net		(11,350	)		(17,923	)
Interest income		329			8,776
Interest expense		(58,959	)		(62,450	)
Other income		41,227			84,704

LOSS BEFORE INCOME TAXES		(17,295	)		(113,427	)

Income tax expense		-			(9,104	)

NET LOSS		(17,295	)		(122,531	)

Other comprehensive income (loss):
- Reclassification adjustment for disposal of available-for-sales-securities		-			(52,363	)
- Foreign currency translation adjustment		130			(3,679	)

COMPREHENSIVE LOSS	$	(17,165	)	$	(178,573	)

Net loss per share - Basic and diluted	(0.07		)	(0.55		)

Weighted average common shares outstanding during the period - Basic and diluted		23,725,000			22,098,076

See accompanying notes to condensed consolidated financial statements.

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Green Dragon Wood Products, Inc.

Condensed Consolidated Statements of Stockholders' Equity

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars ("US$"), except for number of shares)

(Unaudited)

																				Accumulated
									Additional					Deferred						other			Total
	Preferred stock				Common stock				paid		Subscription			stock-based			Retained			comprehensive			stockholders’
	Shares		Amount		Shares		Amount		in capital		receivable			compensation			earnings			(loss) / gain			equity

Balance as of March 31, 2013		2,000,000	$	2,000		20,200,000	$	20,200	$	1,222,300	$	(100,000	)	$	(473,059	)	$	1,713,255		$	51,402			2,436,098

Amortization of deferred stock-based compensation		-		-		-		-		-		-			166,667			-			-			166,667

Equity Settled – Share based Payment		-		-		3,525,000		3,525		14,100		-			-			-			-			17,625

Reclassification adjustment for disposal on available-for-sales securities		-		-		-		-		-		-			-			-			(52,363	)		(52,363	)

Net loss for the 12 months ended March 31, 2014		-		-		-		-		-		-			-			(419,351	)		-			(419,351	)

Foreign currency translation adjustment		-		-		-		-		-		-			-			-			(5,799	)		(5,799	)

Balance as of March 31, 2014		2,000,000	$	2,000		23,725,000	$	23,725	$	1,236,400	$	(100,000	)	$	(306,392	)	$	1,293,904		$	(6,760	)		2,142,877


Amortization of deferred stock-based compensation		-		-		-		-		-		-			41,553			-			-			41,553

Net loss for the three months ended June 30, 2014		-		-		-		-		-		-			-			(17,295	)		-			(17,295	)

Foreign currency translation adjustment		-		-		-		-		-		-			-			-			130			130

Balance as of June 30, 2014		2,000,000	$	2,000		23,725,000	$	23,725	$	1,236,400	$	(100,000	)	$	(264,839	)	$	1,276,609		$	(6,630	)	$	2,167,265

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Green Dragon Wood Products, Inc.

Condensed Consolidated Statements of Cash Flows

FOR THE THREE MONTHS ENDED JUNE 30, 2014 AND 2013

(Currency expressed in United States Dollars ("US$"), except for number of shares)

(Unaudited)

	Three Months ended June 30,
	2014			2013
Cash flow from operating activities:
Net loss	$	(17,295	)	$	(122,531	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		3,974			5,059
Stock-based compensation		41,553			59,178
Net gain on changes in fair value of life insurance		-			(5,259	)
Net gain on disposal of available-for-sales securities		-			(84,704	)
Changes in operating assets and liabilities:
Accounts receivable		542,689			624,830
Income tax recoverable		-			97,205
Prepayments, deposits and other receivables		(348,499	)		(267,665	)
Accounts payable, trade		236,274			(426,754	)
Bills receivable		(1,185,594	)		-
Accrued liabilities and other payables		382,553			(103,720	)
Income tax payable		-			(94,197	)
Net cash used in operating activities		(344,345	)		(318,558	)

Cash flows from investing activities:
Purchase of plant and equipment		(926	)		(64	)
Proceed from disposal of available-for-sale securities		-			393,362
Net cash (used in) provided by investing activities		(926	)		393,298

Cash flows from financing activities:
(Repayment of) proceeds from revolving lines of credit		453,462			(607,057	)
Change in restricted cash		(52,495	)		386,055
Repayment of insurance policy loan		-			(19,814	)
Repayment of finance lease		(3,006	)		(2,846	)
Repayment of short-term bank loan		-			(125,538	)
Repayment of long-term bank loans		-			(37,914	)
Advance from (repayment) to a director		2,615			(959	)
Net cash provided by (used in) financing activities		400,576			(408,073	)

Effect of exchange rate changes on cash and cash equivalents		130			16,039

Net change in cash and cash equivalents		55,435			(317,294	)
Cash and cash equivalents, beginning of period		34,597			342,329
Cash and cash equivalents, end of period	$	90,032		$	25,035


Supplemental disclosure of cash flow information:
Interest paid	$	58,959		$	62,450
Income tax paid	$	-		$	6,077

See accompanying notes to condensed consolidated financial statements.

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GREEN DRAGON WOOD PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars (“US$” ), except for number of shares)

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both generally accepted accounting principles in the United States (“GAAP”) , and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

In the opinion of management, the consolidated balance sheet as of March 31, 2014 which has been derived from audited financial statements and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended June 30, 2014 are not necessarily indicative of the results to be expected for the entire fiscal year ending March 31, 2015 or for any future period.

These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended March 31, 2014.

2. ORGANIZATION AND BUSINESS BACKGROUND

Green Dragon Wood Products, Inc., (the “Company” or “GDWP”) was incorporated under the laws of the State of Florida on September 26, 2007.

The Company, through its subsidiaries, mainly engages in re-sale and trading of wood logs, wood lumber, wood veneer and other wood products in Hong Kong.

Details of the Company’s subsidiaries:

Company name	Place/date of incorporation	Particulars of issued share capital	Principal activities	Effective interest held

1. Green Dragon Industrial Inc. (“ GDI” )	British Virgin Islands (“ BVI” ), May 30, 2007	37,500 issued shares of common stock of US$1 each	Investment holding		100	%

2. Green Dragon Wood Products Co., Limited (“GDWPCL” )	Hong Kong, March 14, 2000	5,000,000 issued shares of ordinary shares	Re-sale and trading of wood		100	%

GDWP and its subsidiaries are hereinafter referred to as the “Company”.

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GREEN DRAGON WOOD PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars (“US$” ), except for number of shares)

(Unaudited)

3. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES

The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.

·	Basis of consolidation

The condensed consolidated financial statements include the accounts of GDWP and its subsidiaries. All inter-company balances and transactions between the Company and its subsidiaries have been eliminated upon consolidation.

·	Use of estimates

In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates.

·	Cash and cash equivalents

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

·	Restricted cash

As of June 30, 2014 and March 31, 2014, the Company maintained minimum cash balances of $448,388 and $395,893 in a pledged deposit account as collateral for the revolving lines of credit and long-term bank borrowings provided by the financial institutions in Hong Kong.

·	Accounts receivable and allowance for doubtful accounts

Accounts receivable are recorded at the invoiced amount less an allowance for any uncollectible accounts and do not bear interest, which are due within contractual payment terms, generally 60 to 180 days from shipment. The Company extends unsecured credit to its customers in the ordinary course of business, based on evaluation of a customer’s financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 180 days and those over a specified amount are reviewed individually for collectability. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history, and the current economic conditions to make adjustments in the allowance when it is considered necessary. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

·	Bills receivable

Bills receivable represents a short-term notes receivable issued by a financial institution that entitles the Group to receive the full face amount from the financial institution at maturity, which generally ranges from 60 to 90 days from the date of issuance. These bills receivable can be sold to any third party at a discount before maturity. The Company does not maintain allowance for bills receivable in the absence of bad debt experience and the payments are undertaken by the banks.

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GREEN DRAGON WOOD PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars (“US$” ), except for number of shares)

(Unaudited)

·	Plant and equipment

Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational:

	Expected useful life
Computer equipment	3 - 5 years
Motor vehicle	3 years
Office equipment	5 years

Expenditure for repairs and maintenance is expensed as incurred. When assets have retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

Depreciation expense for the three months ended June 30, 2014 and 2013 was $3,974 and $5,059, respectively.

·	Impairment of long-lived assets

In accordance with Accounting Standards Codification ("ASC") Topic 360-10-5, “ Impairment or Disposal of Long-Lived Assets ”, the Company reviews its long-lived assets, including plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable or that useful lives are no longer appropriate. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset. There has been no impairment charge as of June 30, 2014 and 2013.

·	Revenue recognition

In accordance with ASC Topic 605, “Revenue Recognition” , the Company recognizes revenue when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured.

Revenue from re-sale and trading of wood logs, wood lumber, wood veneer and other wood products is recognized upon shipment to the customer when title and risk of loss are transferred and there are no continuing obligations to the customer. Title and the risks and rewards of ownership transfer to the customer at varying points, which is determined based on shipping terms. Revenue is recorded net of sales discounts, returns, allowances, customer rebates and other adjustments that are based upon management’s best estimates and historical experience and are provided for in the same period as the related revenues are recorded. Based on historical experience, management estimates that sales returns are immaterial and has not made allowance for estimated sales returns.

Interest income is recognized on a time apportionment basis, taking into account the principal amounts outstanding and the interest rates applicable.

·	Cost of revenue

Cost of revenue includes cost of wood logs, wood lumber and wood veneers for re-sale to the customers, purchase returns and sales commission. Shipping and handling costs associated with the distribution of the products to the customers totaled approximately $81,674 and $62,901 for the three months ended June 30, 2014 and 2013, respectively, which are recorded in cost of revenue.

·	Comprehensive income

ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

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GREEN DRAGON WOOD PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars (“US$” ), except for number of shares)

(Unaudited)

·	Income taxes

The provision for income taxes is determined in accordance with ASC Topic 740, “Income Taxes ” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

For the three months ended June 30, 2014 and 2013, the Company did not have any interest and penalties associated with tax positions. As of June 30, 2014, the Company did not have any significant unrecognized uncertain tax positions.

The Company conducts major businesses in Hong Kong and is subject to tax in this jurisdiction. As a result of its business activities, the Company files tax returns that are subject to examination by the foreign tax authority.

·	Net loss per share

The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing the net loss by the weighted-average number of common share outstanding during the year. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common share that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.

·	Foreign currencies translation

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.

The reporting currency of the Company is United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company’s operating subsidiary in Hong Kong maintains its books and record in its local currency, Hong Kong Dollar (“HK$”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “ Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the year. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholders’ equity.

Translation of amounts from HK$ into US$1 has been made at the following exchange rates for the three months ended June 30, 2014 and 2013:

	June 30,
	2014		2013
Period-end HK$: US$1 exchange rate	$	7.7515	$	7.7580
Period average HK$: US$1 exchange rate		7.7525		7.7622

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GREEN DRAGON WOOD PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars (“US$” ), except for number of shares)

(Unaudited)

·	Related parties

Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

·	Segment reporting

ASC Topic 280, “ Segment Reporting ” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in the financial statements. For the three months ended June 30, 2014 and 2013, the Company operates one reportable business segment in Hong Kong.

·	Fair value of financial instruments

The carrying value of the Company’s financial instruments (excluding revolving lines of credit and long-term bank borrowings): cash, accounts receivable, prepayments, deposits and other receivables, accounts payable, amount due to a director, income tax payable, accrued liabilities and other payable approximate at their fair values because of the short-term nature of these financial instruments. The fair value of the marketable securities is based on quoted prices in active exchange-traded or over-the-counter markets.

Management believes, based on the current market prices or interest rates for similar debt instruments, the fair value of its revolving lines of credit and long-term bank borrowing approximate the carrying amount.

The Company also follows the guidance of ASC Topic 820-10, “ Fair Value Measurements and Disclosures ” ("ASC 820-10"), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

~Level 1 : Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;

~Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

~Level 3 : Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.

Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

·	Economic and political risk

The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.

The Company’s major operations in Hong Kong are subject to considerations and significant risks typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic, and legal environment. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.

·	Recent accounting pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

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GREEN DRAGON WOOD PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars (“US$” ), except for number of shares)

(Unaudited)

4. ACCOUNTS RECEIVABLE, NET

	June 30, 2014			March 31, 2014
	(Unaudited)			(Audited)

Accounts receivable, trade	$	5,662,471		$	6,205,160
Less: allowances for doubtful accounts		(2,715	)		(2,715	)
Accounts receivable, net	$	5,659,756		$	6,202,445

The majority of the Company’s sales are on open credit terms and in accordance with terms specified in the contracts governing the relevant transactions. The Company evaluates the need of an allowance for doubtful accounts based on specifically identified amounts that management believes to be uncollectible. If actual collections experience changes, revisions to the allowance may be required.

For the three months ended June 30, 2014 and 2013, no provision for doubtful accounts was charged to operations.

5. PREPAYMENT, DEPOSITS AND OTHER RECEIVABLES

Prepayments, deposits and other receivables consisted of:

	June 30,		March 31,
	2014		2014
	(Unaudited)		(Audited)

Purchase deposits to vendors	$	1,079,279	$	901,824
Rental and utilities deposits		27,945		27,945
Other receivables		412,674		241,630
Total	$	1,519,898	$	1,171,399

Purchase deposits represent deposit payments made to vendors for procurement, which are interest-free, unsecured and relieved against accounts payable when goods are received by the Company.

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GREEN DRAGON WOOD PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars (“US$” ), except for number of shares)

(Unaudited)

6. LINES OF CREDIT

Revolving lines of credit consist of:

	June 30,		March 31,
	2014		2014
	(Unaudited)		(Audited)
Payable to financial institutions in Hong Kong:
DBS Bank (Hong Kong) Limited	$	1,878,516	$	1,810,274
Industrial and Commercial Bank of China (Asia) Limited		1,074,374		875,188
Shanghai Commercial Bank Limited		606,852		650,023
ICICI Bank Limited		500,622		255,414
		4,060,364		3,590,899
Payable to third parties (under supplier agreement)
Tai Wah Timber Factory Limited		834,809		850,812

Total	$	4,895,173	$	4,441,711

On February 4, 2013, the Company entered into a credit facility and financing agreement with the DBS Bank (Hong Kong) Limited (“DBS”) provides for borrowings up to HK$14,000,000 (approximately $1,806,000) for up to 120 days generally with interest at (i) 1% per annum below Prime Rate for Hong Kong Dollar bills and (ii) Standard Bills Rate quoted by DBS from time to time for foreign currency bills on the outstanding amount from drawdown until repayment in full as conclusively calculated by DBS.

The credit facility with the Industrial and Commercial Bank of China (Asia) Limited (“ICBC”) provides for borrowings up to HK$8,000,000 (approximately $1,032,000), which bears interest at a rate of 2% per annum below the ICBC’s Hong Kong Dollar Best Lending Rate and are guaranteed by the Hong Kong Mortgage Corporation Limited (“HKMC”), and Ms. Mei Ling Law and Mr. Kwok Leung Lee, directors of the Company.

The credit facility with Shanghai Commercial Bank Limited provides for borrowings up to HK$ 6,500,000 (approximately $838,500), which bears interest at a rate of 0.25% per annum over Hong Kong prime for HK dollars facilities and at a rate of 0.25% per annum over US prime for US dollars facilities and is personally guaranteed by Mr. Lee, director of the Company. The Company also is required to maintain a minimum cash deposit not less than $264,500 that is considered restricted as compensating balances to the extent the Company borrows against this line of credit. In addition, the Company is subject to the settlement of accounts due and payable to the restricted vendors under the line of credit at the bank’s discretion. The line will be extended or renewed on a regular basis at the option of the bank.

The credit facility with ICICI Bank at June 30, 2014 was the used credit amount of HK$3,880,575 (approximately $500,622), and it is changed from time to time.

For the three months ended June 30, 2014, the Company entered into a $4.0 million letter of credit facility with ICICI Bank, on a back-to-back basis against receipt of original letters of credit from a bank upon acceptance. The Company shall, at all times, maintain a cash margin equivalent to 5% of the amount of the facility utilized with the Bank in the form of a fixed deposit. The facility is secured by assignment of receivable under the letter of credit opened in favor of the Customer from time to time to the bank. Availability under this credit facility is reduced by outstanding letters of credit. As of June 30, 2014, there were no borrowings under this letter of credit facility and the Company had $585,000 of issued letters of credit under this letter of credit facility.

The financing arrangement with Tai Wah Timber Factory Limited provides for borrowings for trade payable financing with maturities of 2 to 3 months. The Company is charged a commission fee of 5% on each amount drawn from the line, payable monthly and an interest of 12% per annum, payable monthly. Additional interest is charged on any overdue balance.

At June 30, 2014, the Company had aggregate secured banking facilities of $3,676,500 in which $116,758 is unused.

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GREEN DRAGON WOOD PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars (“US$” ), except for number of shares)

(Unaudited)

7. OBLIGATION UNDER FINANCE LEASE

On February 20, 2013 the Company entered into a finance lease agreement to purchase a motor vehicle. The lease has a term of 54 months expiring August 20, 2017with a monthly payment of approximately $1,139 (HK$8,828).

As of June 30, 2014, the minimum remaining lease payments under this finance lease are as follows:

	June 30,			March 31,
	2014			2014
	(Unaudited)			(Audited)
Finance lease	$	43,276		$	46,691
Less: interest expenses		(2,515	)		(2,924	)

Net present value of finance lease	$	40,761		$	43,767

Current portion	$	12,342		$	12,219
Non-current portion		28,419			31,548

Total	$	40,761		$	43,767

As of June 30, 2014, the minimum remaining lease payments under this finance lease are as follows:

Year ending June 30:	June 30, 2014			March 31, 2014
2015	$	13,666		$	13,666
2016		13,666			13,666
2017		13,666			13,665
2018		2,278			5,694
Subtotal		43,276			46,691
Less: interest		(2,515	)		(2,924	)
Net minimum lease payment under finance lease		40,761			43,767
Less: current portion of net minimum lease payments		(12,342	)		(12,219	)
Long-term portion of net minimum lease payments	$	28,419		$	31,548

8. AMOUNT DUE TO A DIRECTOR

As of June 30, 2014 and March 31, 2014, the balance represented temporary advances made to the Company by Mr. Lee, the director, which was unsecured, interest-free with no fixed terms of repayment. Imputed interest is not significant.

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GREEN DRAGON WOOD PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars (“US$” ), except for number of shares)

(Unaudited)

9. INCOME TAXES

For the three months ended June 30, 2014 and 2013, the local (United States) and foreign components of income before income taxes were comprised of the following:

	Three months ended June 30,
	2014			2013
Tax jurisdictions from:
- Local	$	-		$	-
- Foreign		(17,295	)		(113,427	)
(Loss)/income before income taxes	$	(17,295	)	$	(113,427	)

Provision for income taxes consisted of the following:

	Three months ended June 30,
	2014		2013
Current:
- Local	$	-	$	-
- Foreign		-		9,104

Deferred:
- Local		-		-
- Foreign		-		-

Income tax expenses	$	-	$	9,104

The effective tax rate in the years presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. The Company and its subsidiaries are mainly operated in the United States of America, BVI and Hong Kong that are subject to taxes in the jurisdictions in which they operate, as follows:

United States of America

GDWP is registered in the State of Florida and is subject to the tax laws of the United States of America. For the three months ended June 30, 2014 and 2013, the Company incurred no operation in the United States of America. GDWP is delinquent in filing its United States corporation income tax returns for the periods from inception in 2007. The Company does not expect any tax to be due upon filing of these delinquent returns.

British Virgin Island

Under the current BVI law, GDI is not subject to tax on income or profit. For the three months ended June 30, 2014 and 2013, GDI incurred no operation in the BVI.

Hong Kong

The Company’s major operating subsidiary is subject to Hong Kong Profits Tax, which is charged at the statutory income tax rate of 16.5% on its assessable income.

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GREEN DRAGON WOOD PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars (“US$” ), except for number of shares)

(Unaudited)

The reconciliation of income tax rate to the effective income tax rate based on (loss) income before income taxes from foreign operation for the three months ended June 30, 2014 and 2013 are as follows:

	Three months ended June 30,
	2014			2013

(Loss) income before income taxes	$	(17,295	)	$	(113,427	)
Statutory income tax rate		16.5	%		16.5	%
Income tax at Hong Kong statutory income tax rate		(2,854	)		(18,715	)

Tax loss not recognized		2,854			18,715
Tax adjustments for prior years		-			9,104

Income tax expenses	$	-		$	9,104

Deferred income taxes reflect 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. There was no significant temporary difference as of June 30, 2014 and March 31, 2014, therefore no deferred tax assets or liabilities have been recognized.

10. EQUITY SETTLED – SHARE BASED COMPENSATION

During the three months ended June 30, 2014, the Company has the following stock transactions:

(a)	Preferred Stock - Series A Convertible Preferred Stock

On January 30, 2013, the Company’s Board of Directors approved amending the Company’s Articles of Incorporation to designate 2,000,000 shares of preferred stock (of the 50,000,000 authorized shares of preferred stock) as Series A Convertible Preferred Stock (the “Series A Preferred Stock“). Each share of Series A Preferred Stock is entitled to 50 votes per share, has a liquidation preference of $0.001 per share, and is convertible into 50 shares of Company common stock over three years as set forth in the Articles of Amendment to the Articles of Incorporation. Notwithstanding the rights to conversion upon the occurrence of either:

(i)	the Company attaining an audited net income of $500,000 in the fiscal year ended March 31, 2014 or the Corporation attaining an audited gross revenue of $17,500,000 in the fiscal year ended March 31, 2014, or

(ii)	the Company attaining an audited net income of $750,000 in the fiscal year ended March 31, 2015 or the Corporation attaining an audited gross revenue of $20,000,000 in the fiscal year ended March 31, 2015, and;

(iii)

the market price of the Company’s Common Stock on the date of conversion is equal to greater than $0.25.

Then, all shares of Series A Preferred Stock held by each holder shall immediately be convertible.

Concurrently, on January 30, 2013, the Company executed an Employment Agreement with Mr. Kwok Leung Lee, chief executive officer of the Company. The agreement, which has a term of 3 years, provides for annual compensation to Mr. Lee of HK$487,500 (approximately equal to $62,897). The agreement also provides for the Company’s issuance of 2,000,000 shares of the Company’s Series A Convertible Preferred Stock to Mr. Lee at a price of $0.25 per share (representing the equivalent number of common stock at $0.005 per share).

For the three months ended June 30, 2014, the Company recorded $41,553 amortization of deferred compensation over its service period of 3 years. As of June 30, 2014, the deferred compensation was $264,839 to be amortized, on a straight-line basis over its service period.

As of June 30, 2014 and March 31, 2014, the Company had a total of 2,000,000 shares of its preferred stock issued and outstanding.

(b)	Common Stock

As of June 30, 2014 and March 31, 2014, the Company had a total of 23,725,000 shares of its common stock issued and outstanding, respectively.

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GREEN DRAGON WOOD PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars (“US$” ), except for number of shares)

(Unaudited)

11. SEGMENT INFORMATION

The Company considers its business activities to constitute one single reportable segment. The Company’s chief operating decision makers use consolidated results to make operating and strategic decisions. The geographic distribution analysis of the Company’s revenues by region is as follows:

	Three months ended June 30,
	2014		2013
Revenue, net:
~ The PRC (including Hong Kong)	$	2,339,714	$	1,528,874
~ Middle East		164,515		226,786
~ India		400,533		276,317
~ Europe		50,220		26,071
~ Others		146,813		409,620

Total	$	3,101,795	$	2,467,668

All of the Company’s long-lived assets are located in Hong Kong.

12. CONCENTRATIONS OF RISK

The Company is exposed to the following concentrations of risk:

(a) Major customers

For the three months ended June 30, 2014 and 2013, the customer who accounts for 10% or more of the Company's revenues and its outstanding accounts receivable at year-end date, are presented as follows:

	Three months ended June 30, 2014					June 30, 2014
			Percentage of			Accounts
	Revenues		revenues			receivable
Customer E	$	465,881		15	%	$	187,755
Customer F		386,344		13	%		59,596
Customer G		383,572		12	%		241,213
Customer A		364,027		12	%		1,016,699
Customer B (Vendor A)		358,045		12	%		3,700,837
Total	$	1,957,869		64	%	$	5,206,100

	Three months ended June 30, 2013					June 30, 2013
			Percentage of			Accounts
	Revenues		revenues			receivable
Customer A	$	993,161		40	%	$	1,235,944
Customer B		471,097		19	%		3,604,235
Customer C		276,317		11	%		97,764
Total	$	1,740,575		70	%	$	4,937,943

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GREEN DRAGON WOOD PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars (“US$” ), except for number of shares)

(Unaudited)

b)	Major vendors

For the three months ended June 30, 2014 and 2013, the vendor who accounts for 10% or more of the Company's purchases and its outstanding accounts payable at year-end date, are presented as follows:

	Three months ended June 30, 2014					June 30, 2014
			Percentage of
	Purchases		purchases			Accounts payable
Vendor A (Customer B)	$	643,204		23	%		$	-
Vendor D		465,317		17	%			66,827
Vendor I		336,724		12	%			124,417

Total	$	1,445,245		52	%		$	191,244

	Three months ended June 30, 2013					June 30, 2013
			Percentage of
	Purchases		purchases			Accounts payable
Vendor A (Customer B)	$	813,559		36	%		-
Vendor E		239,950		12	%		-
Vendor F		260,754		11	%		-

Total	$	1, 314,263		59	%		-

(c)	Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.

(d)	Interest rate risk

As the Company has no significant interest-bearing assets, the Company’s income and operating cash flows are substantially independent of changes in market interest rates.

The Company’s interest-rate risk arises from revolving lines of credit and bank borrowings. Borrowings issued at variable rates expose the Company to cash flow interest rate risk. The Company manages interest rate risk by varying the issuance and maturity dates variable rate debt, limiting the amount of variable rate debt, and continually monitoring the effects of market changes in interest rates. As of June 30, 2014, all of borrowings were at variable rates. The interest rates and terms of repayment of the borrowings are disclosed in Note 9, 10 and 11.

(e)	Exchange rate risk

The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HK$ converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.

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GREEN DRAGON WOOD PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(Currency expressed in United States Dollars (“US$” ), except for number of shares)

(Unaudited)

13. COMMITMENTS AND CONTINGENCIES

(a)	Operating lease commitments

The Company’s subsidiary in Hong Kong is committed under several non-cancelable operating leases with fixed monthly rentals, due through February 2015. Total rent expenses for the three months ended June 30, 2014 and 2013 was $31,956 and $31,916 respectively.

As of June 30, 2014, the Company has future minimum rental payments of approximately $45,635 (HK$353,785) under various non-cancelable operating leases in the next twelve months.

(b)	Legal proceedings

(i) On February 12, 2009, a claim was filed by Chi Yim Yip, Roger (“Mr. Yip”) and Characters Capital Group Limited (“CCGL”) against Mr. Kwok Leung Lee (“Mr. Lee”), a director of the Company, and GDWPCL alleging (i) breach of contract by GDWP concerning the engagement of CCGL to assist GDWPCL in securing GDWP’s listing on the OTC Bulletin Board and (ii) defamation by Mr. Lee related to the contract dispute. Damages being sought include $31,287 in liquidated damages from GDWPCL, aggravated/exemplary damages and injunction from further defamation. The claim was filed with the High Court of the Hong Kong Special Administrative Region, Court of First Instance.

On April 9, 2009, Mr. Lee and GDWPCL filed a Defense and Counterclaim. GDWPCL asserted a breach of contract claim against CCGL, alleging that CCGL failed to fulfill its obligations pursuant to the CCGL agreement to effect the listing of GDWP through a reverse merger by the use of a company that was listed on the Pink Sheets. Mr. Lee additionally asserted a breach of contract claim against Mr.Yip for the Stock Purchase Agreement dated March 31, 2007, for failing to deliver a shell company, Tabatha V, Inc., that was listed on the Pink Sheets, which, pursuant to the Stock Purchase Agreement, was to be purchased by Mr. Lee. Both Mr. Lee and GDWPCL also claimed damages for fraudulent misrepresentation related to the failure to deliver the Pink Sheet shell company. On May 22, 2009, Mr.Yip and CCGL replied to the counterclaim.

On January 26, 2011, the High Court of the Hong Kong Special Administrative Region granted leave to Mr. Yip and CCGL to set the case down for a 7-day trial. The hearing occurred in October 2012 and the parties are waiting for the judgment of the court. At March 31, 2014, in the opinion of Company management, the resolution of this matter will not have a material effect on the Company’s financial statements in the foreseeable future.

(ii) On March 17, 2014, Paul Stamper (“Plaintiff”) filed a complaint (the “Complaint”) against, among other parties, GDWPCL, in the Hendricks Superior Court located in Hendricks County in the State of Indiana, Case No. 32D05-1403-MI-70, seeking, among other things, enforcement of a judgment entered into against all defendants on December 8, 2011 in Wabash County Circuit Court, Case No. 85C01-1112-MI-1013, in the aggregate principal amount of $42,697.14 plus interest and costs (the “Judgment”). The Company, its officers and directors deny the material allegations of the Complaint since the Company does not conduct business in the State of Indiana and intend to vigorously defend itself in this action.

The Company is committed to a series of 22 structured foreign exchange contracts with DBS bank to hedge the fluctuation between USD and RMB for a term of period from November 2013 to August 2015, monthly expiry. As of June 30, 2014, 8 contracts were fully executed and the remaining 14 contracts are outstanding. The Company expects no material contingent loss from these committed contracts in the next twelve months.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Cautionary Note Regarding Forward-Looking Statements

We make certain forward-looking statements in this report. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings), demand for our services, and other statements of our plans, beliefs, or expectations, including the statements contained under the captions “Management ’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” as well as captions elsewhere in this document, are forward-looking statements. In some cases these statements are identifiable through the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “int end,” “plan,” “project,” “target,” “can”, “could,” “may,” “should,” “will,” “would,” and similar expressions. The forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. Indeed, it is likely that some of our assumptions will prove to be incorrect. Our actual results and financial position will vary from those projected or implied in the forward-looking statements and the variances may be material. You are cautioned not to place undue reliance on such forward-looking statements. These risks and uncertainties, together with the other risks described from time to time in reports and documents that we file with the SEC should be considered in evaluating forward-looking statements.

The nature of our business makes predicting the future trends of our revenue, expenses, and net income difficult. Thus, our ability to predict results or the actual effect of our future plans or strategies is inherently uncertain. The risks and uncertainties involved in our business could affect the matters referred to in any forward-looking statements and it is possible that our actual results may differ materially from the anticipated results indicated in these forward-looking statements. Important factors that could cause actual results to differ from those in the forward-looking statements include, without limitation, the following:

·	the effect of political, economic, and market conditions and geopolitical events;

·	legislative and regulatory changes that affect our business;

·	the availability of funds and working capital;

·	the actions and initiatives of current and potential competitors;

·	investor sentiment; and

·	our reputation.

We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report, except as required by law.

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes thereto as filed with the SEC and other financial information contained elsewhere in this report.

Except as otherwise indicated by the context, references in this Form 10-Q to “we,” “us,” “our,” “the Registrant”, “Green Dragon”, “our Company,” or “the Company” are to Green Dragon Wood Products, Inc., a Florida corporation and its consolidated subsidiaries. Unless the context otherwise requires, all references to (i) “BVI” are to British Virgin Island ds; (ii) “PRC” and “China” are to the People’s Republic of China; (iii) “U.S. dollar,” “$” and “US$” are to United States dollars; (iv) “RMB” are to Yuan Renminbi of China; (v) “Securities Act” are to the Securities Act of 1933, as amended; and (vi) “Exchange Act” are to the Securities Exchange Act of 1934, as amended.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("US GAAP"). US GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expenses amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of condensed consolidated our financial statements.

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We believe the following is among the most critical accounting policies that impact our condensed consolidated financial statements. We suggest that our significant accounting policies, as described in our condensed consolidated financial statements in the Summary of Significant Accounting Policies, be read in conjunction with this Management's Discussion and Analysis of Financial Condition and Results of Operations.

Accounts receivable and allowance for doubtful accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 60 to 180 days from shipment. The Company extends unsecured credit to its customers in the ordinary course of business, based on evaluation of a customer's financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 180 days and those over a specified amount are reviewed individually for collectability. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history, and the current economic conditions to make adjustments in the allowance when it is considered necessary. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The credit terms of our two major customers are summarized as below:

Major Customers	Contractual Credit Term	Repayment Term #

Customer A	60 to 90 days	Accounts receivable are repaid on a regular basis to the Company and the cash receipt is made to Customer B upon the instruction of the Company.

Customer B (also a major supplier)	90 to 180 days	Customer B receives the cash settlement from Customer A and the aggregate receivable will offset against its trade payable.

In March 2010, the Company entered into a tri-parties settlement arrangement among Customer A and Customer B. Under such arrangement, Customer A agreed to transfer its accounts receivable balance to Customer B and Customer B agreed to receive such accounts receivable balance from Customer A, on behalf of the Company, to offset against its trade payable due to the Company.

Accounting Standard Codification ("ASC") Topic 605

We recognize revenue in accordance with ASC Topic 605, “Revenue Recognition” when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured.

The majority of the Company's revenue results from sales contracts with direct customers and revenues are generated upon the shipment of goods. The Company's pricing structure is fixed and there are no rebate or discount programs. Management conducts credit background checks for new customers as a means to reduce the subjectivity of assuring collectability. Based on these factors, the Company believes that it can apply the provisions of ASC Topic 605 with minimal subjectivity.

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

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Results of Operations

Comparison of the Three Months Ended June 30, 2014 and 2013

The following table summarizes the results of our operations during the three months ended June 30, 2014 and 2013, and provides information regarding the dollar and percentage increase or (decrease) from the three months ended June 30, 2014 to the three months ended June 30, 2013.

	Three Months Ended
	June 30,						Increase/			Increase/
	2014			2013			(Decrease)			(Decrease)

Revenue, net	$	3,101,795		$	2,467,668		$	634,127			26	%
Cost of Revenue		(2,850,171	)		(2,316,634	)		533,537			23	%
Gross Profit		251,624			151,034			100,590			67	%

General and Administrative Expenses		240,166			277,568			(37,402	)		(13	) %

Total Operating Expenses		240,166			277,568			(37,402	)		(13	) %

Income /(Loss) from Operations		11,458			( 126,534	)		137,992			109	%
Other (Expense)/Income		(28,753	)		13,107			(41,860	)		(319	) %
Loss before Income Tax		(17,295	)		(113,427	)		(96,132	)		(85	) %
Income Tax Expense		-			(9,104	)		9,104			n/a
Net Loss	$	(17,295	)	$	(122,531	)	$	105,236			86	%

Revenue

Revenue for the three months ended June 30, 2014 was $3,101,795, an increase of $634,127 or 26% from $2,467,668 for the comparable period in 2013. This increase was primarily attributable to the result of broaden our customer base.

Cost of revenue and gross profit

Cost of revenue for the three months ended June 30, 2014 was $2,850,171, an increase of $533,537 or 23% from $2,316,634 for the comparable period in 2013. This increase was primarily attributable to an increase in sales.

Gross profit for the three months ended June 30, 2014 was $251,624, an increase of $100,590 or 67% from $151,034 for the comparable period in 2013. This increase was primarily attributable to an increase in revenue. The gross profit margin for the three months ended June 30, 2014 increased from 6% to 8% for the comparable period in 2013. The increase was primarily attributable to increase of sales that typically had a high profit margin.

General and Administrative

General and administrative expenses for the three months ended June 30, 2014 was 240,166, a decrease of $37,402 or 13% from $277,568 for the comparable period in 2013. This decrease was primarily attributable to decrease of professional fees.

Other (Expense)/Income

Other expense for the three months ended June 30, 2014 was $28,753, a decrease of $41,860 or 319% from other income of $13,107 for the comparable period in 2013. This decrease in other income was primarily attributable to a gain on disposal of available-sales-securities was recorded in the comparable period in 2013, and no such gain was arose in current period.

Loss before income tax

Loss before income tax for the three months ended June 30, 2014 was $17,295, a decrease of $96,132 or 85% compared to $113,427 loss for the comparable year in 2013. The decrease in loss was primarily attributable to the increase in revenue for the three months ended June 30, 2014 and the decrease in the general and administrative expenses discussed above.

Net loss

Net loss for the three months ended June 30, 2014 was a loss of $17,295, a decrease of $105,236 or 86% from loss of $122,531 for the comparable period in 2013. This decrease in loss was primarily due to the decrease of loss before income tax discussed above.

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Liquidity and Capital Resources

Cash and Cash Equivalents

Our cash and cash equivalents as at the beginning of the three months ended June 30, 2014 was $34,597 and increased to $90,032 by the end of the period, an increase of $55,435 or 160%. The increase was primarily attributable to proceeds from revolving line of credit.

Net cash used in operating activities

Net cash outflow from operating activities for the three months ended June 30, 2014 was $344,345, an increase of $25,787 or 8% of cash outflow from net cash used by operating activities of $318,558 for the comparable period in 2013. The increase cash outflow from operating activities was primarily attributable to the decrease in cash inflow from accounts receivable.

Net cash (used in) provided by investing activities

Net cash used in investing activities was $926 for the three months ended June 30, 2014, a decrease of $394,224 or 101% in cash inflow from net cash provided by investing activities for the corresponding period of last year. The decrease was primarily attributable to HKD393, 362 proceeds from disposal of available-for-sale securities in the comparable period in 2013, and no such kind of cash inflow from the current period.

Net cash provided by (used in) financing activities

Net cash provided by financing activities for the three months ended June 30, 2014 was $400,576, an increase cash inflow of $808,649 or 198% from net cash used in financing activities of $408,073 for the comparable period in 2013. The increase cash inflow was primarily attributable to proceeds from revolving lines of credit.

Non-cash transaction

In March 2010, the Company entered into a tri-parties settlement arrangement among two major customers, Customer A and Party B. Under such arrangement, Customer A agreed to transfer its accounts receivable balance to Party B and Party B agreed to receive such accounts receivable balance from Customer A, on behalf of the Company, to offset against its trade payable due to the Company.

Pursuant to the terms of the Tri-parties Settlement Arrangement among Customer A, Party B and us;

1.	Customer A agrees to make cash payments directly to the designated bank accounts of Party B, per our monthly instruction;

2.	We and Party B agree to offset the cash proceeds against the accounts payable which we owe to Party B, and;

3.	In any event if Party B is not reimbursed by Customer A, we are responsible to chase Customer A for the settlement under obligation among the sales contracts. Meanwhile, we are legally liable to repay the accounts payable to Party B under the purchase contract.

Under this arrangement, we can assure the collection from Customer A to meet with the purchase payable due to Party B on a timely basis. We also can reduce the time and costs to handle the fund remittance among Customer A, Party B and ourselves. As we continue to make the purchase orders to Party B, the accounts receivable originally due from Customer A will be gradually eliminated and offset by our future accounts payable due to Party B.

We have developed a prolonged business relationship with Party “B” in the sale and purchase of wood veneer and the related products with a history of 10 years. In the normal course of business, Party B is acting as a “customer” or a “vendor”, who generally sells and buys different types of wood products to and from us on an arm-length basis. These sale and purchases transactions are independent.

We expect to sustain and continue this prolonged business relationship with Party B, because;

1.	Party B has a long-term commercial history and experience in sale and procurement of wood products in China;

2.	Party B has developed an extensive marketing and sourcing network in China, and;

3.	We have built up a prolonged trust and confidence in doing business with each other.

We believe that there is no collectability concern with regard to the accounts receivable balance due from Party B, which will be recoverable by our future purchase orders.

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As of June 30, 2014 and March 31, 2014, the accounts receivable balance transferred from Customer A to Party B was $0 and $951,161, respectively. The accounts receivable balances of Customer A and Party B under the tri-parties settlement arrangement is presented as follows:

	As of June 30, 2014
	Customer A		Party B
Accounts receivable	$	1,016,699	$	3,700,837
Accounts payable		-		-
Add (less): Transfer of accounts receivable from Customer A to Party B		-		-
Accounts receivable, net	$	1,016,699	$	3,700,837

	As of March 31, 2014
	Customer A			Party B
Accounts receivable	$	1,935,073		$	2,889,446
Accounts payable		-			-
Add (less): Transfer of accounts receivable from Customer A to Party B		(951,161	)		951,161
Accounts receivable, net	$	983,912		$	3,840,607

As of June 30, 2014 and March 31, 2014, the aging analysis of Party B is as follow:

	As of
	June 30, 2014		March 31, 2014
0-90 days	$	1,179,452	$	1,290,439
91-180 days		1,271,128		1,435,544
181-270 days		953,843		628,301
271-360 days		296,414		486,323
Over 360 days		-		-
Total	$	3,700,837	$	3,840,607

Trends

We are not aware of any trends, events or uncertainties that have or are reasonably likely to have a material impact on our short-term or long-term liquidity.

Inflation

We believe that inflation has not had a material or significant impact on our revenue or our results of operations.

Working Capital

Our working capital was $2,164,631 and $2,140,324 at June 30, 2014 and March 31, 2014, respectively.

We currently generate our cash flow through our operations. We believe that our cash flow generated from operations will be sufficient to sustain operations for at least the next 12 months. There is no identifiable expansion plan as of June 30, 2014, but from time to time, we may identify new business opportunities to improve the profitability and working capital from operations.

Capital Resources

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The credit facility with ICICI Bank at June 30, 2014 was the used credit amount of HK$3,880,575 (approximately $500,622), and it is change from time to time.

At June 30, 2014, the Company had aggregate secured banking facilities of $3,676,500 in which $116,758 is unused.

Financing Arrangement

As of June 30, 2014 and March 31 2014, the outstanding balance was $834,809 and $850,812.

While the capital resources of the Company are stable from a cash perspective, the credit of the Company for debt financing if necessary is extremely strong due to our strong banking relations and the credit facilities provided for our veneer products. From time to time we do have a need to exercise our credit options on a short term basis due to the nature of our business as importers/exporters. The company has established lines of credit with banks and management maintains very strong relations with these banks. Management believes that its current lines of credit are more than sufficient to cover any short and long term liquidity needs. Our historical financial liquidity needs have been shown to be more than adequately covered by our credit facilities. We believe that the strength of our management team to maintain strict internal control of its cash flow and liquidity that the current credit facilities are adequate for our needs.

In the event we are unable to generate sufficient funds to continue our business efforts or if the company is pursued by a larger company for a business combination, we will analyze all strategies to continue the company and increase shareholder value. Only under these circumstances would we consider a merger, acquisition, joint venture, strategic alliance, a roll-up, or other business combination to increase business and potentially increase the shareholder value of the Company. Management believes its responsibility to increase shareholder value is of paramount importance, which means the Company should consider the aforementioned alternatives in the event funding is not available on favorable terms to the Company when and if needed.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), our management carried out an evaluation, with the participation of our Chief Executive Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act), as of the period covered by this report. Disclosure controls and procedures are defined as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based upon their evaluation, our management (including our Chief Executive Officer) concluded that our disclosure controls and procedures were not effective as of June 30, 2014 based on the material weaknesses defined below.

●	The Company did not implement proper segregation of duties due to the Company’s small size and only one executive officer. In certain instances, persons responsible to review transactions for validity, completeness and accuracy were also responsible for preparation.

●

Due to the Company’s limited resources, the Company does not have accounting personnel with extensive experience in maintaining books and records and preparing financial statements in accordance with US GAAP which could lead to untimely identification and resolution of accounting matters inherent in the Company’s financial transactions in accordance with US GAAP. Additionally, the Company does not have a formal audit committee, and the Board does not have a financial expert, thus the Company lacks the board oversight role within the financial reporting process.

MANAGEMENT’S REMEDIATION PLAN

While management believes that the Company’s condensed consolidated financial statements previously filed in the Company’s SEC reports have been properly recorded and disclosed in accordance with US GAAP, based on the control deficiencies identified above, we have designed and plan to implement, or in some cases have already implemented, the specific remediation initiatives described below:

The Company is currently looking for an outside consultant with considerable public company reporting experience and breadth of knowledge of US GAAP to assist it with the preparation and review of its condensed consolidated financial statements. The Company is committed to establishing procedures and utilizing experienced individuals with professional supervision to properly segregate duties, prepare and approve the condensed consolidated financial statements and footnote disclosures in accordance with US GAAP.

·	The Board of Directors will be more actively involved in providing additional oversight of the Company’s internal controls, formal review of our condensed consolidated financial statements, and more detailed review of the periodic reports we anticipate filing with the SEC.

·	The Company has initiated efforts to ensure our employees understand the importance of internal controls and compliance with corporate policies and procedures.

·	The Company may retain third party specialists to assist us in the design, implementation and testing of our internal controls as necessary.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

No changes in the Company's internal control over financial reporting have come to management's attention during the Company's last fiscal quarter ended June 30, 2014 that have materially affected, or are likely to materially affect, the Company's internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

On February 12, 2009, a claim was filed by Chi Yim Yip, Roger (“Mr. Yip”) and Characters Capital Group Limited (“CCGL”) against Mr. Kwok Leung Lee (“Mr. Lee”), a director of the Company, and GDWPCL alleging (i) breach of contract by GDWP concerning the engagement of CCGL to assist GDWPCL in securing GDWP’s listing on the OTC Bulletin Board and (ii) defamation by Mr. Lee related to the contract dispute. Damages being sought include $31,287 in liquidated damages from GDWPCL, aggravated/exemplary damages and injunction from further defamation. The claim was filed with the High Court of the Hong Kong Special Administrative Region, Court of First Instance.

On March 17, 2014, Paul Stamper (“Plaintiff”) filed a complaint (the “Complaint”) against, among other parties, GDWPCL, in the Hendricks Superior Court located in Hendricks County in the State of Indiana, Case No. 32D05-1403-MI-70, seeking, among other things, enforcement of a judgment entered into against all defendants on December 8, 2011 in Wabash County Circuit Court, Case No. 85C01-1112-MI-1013, in the aggregate principal amount of $42,697.14 plus interest and costs (the “Judgment”). The Company, its officers and directors deny the material allegations of the Complaint since the Company does not conduct business in the State of Indiana and intend to vigorously defend itself in this action.

Other than as disclosed above, we know of no material, active, pending or threatened proceeding against us or our subsidiaries, nor are we, or any subsidiary, involved as a plaintiff or defendant in any material proceeding or pending litigation.

ITEM 1A. RISK FACTORS.

Not Applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

None.

ITEM 5 . OTHER INFORMATION.

None.

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ITEM 6. EXHIBITS.

EXHIBIT NO.	DESCRIPTION
31.1	Certificate of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1	Certificate of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GREEN DRAGON WOOD PRODUCTS, INC.

Dated: September 5, 2014	By:	/s/Kwok Leung Lee
		Kwok Leung Lee
		President
		(principal executive officer, principal financial officer, and principal accounting officer )

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Kwok Leung Lee, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Green Dragon Wood Products, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: September 5, 2014	By:	/s/ Kwok Leung Lee
		Kwok Leung Lee
		President

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Green Dragon Wood Products, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2014 (the “Report”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Kwok Leung Lee, president of the Company, certifies, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 5, 2014	By:	/s/ Kwok Leung Lee
		Kwok Leung Lee
		President

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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