Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (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 [X] No [ ]
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 [X] No [ ]
Indicate by check mark whether the registrant is a larger
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act. (Check one)
Large accelerated filer [ ]
Accelerated filer [ ] Non-accelerated filer
[ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes [
] No [X]
The numbers of shares outstanding of each of the issuers
classes of common equity, as of August 16, 2016 are as follows:
Part I FINANCIAL INFORMATION
CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2016
2
CHINA LONGYI GROUP INTERNATIONAL HOLDINGS
LIMITED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
|
Unaudited
|
|
|
Audited
|
|
|
|
June 30,
|
|
|
December 31,
|
|
ASSETS
|
|
2016
|
|
|
2015
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
84,702
|
|
$
|
29,429
|
|
Inventories
|
|
350,071
|
|
|
359,194
|
|
Account receivables
|
|
162,202
|
|
|
5,544
|
|
Due from Related
parties
|
|
-
|
|
|
-
|
|
Other receivables
|
|
29,653
|
|
|
26,508
|
|
Interest
receivable
|
|
-
|
|
|
-
|
|
Short term investment
|
|
-
|
|
|
-
|
|
Deposits and
prepayments
|
|
40,868
|
|
|
14,447
|
|
Total current assets
|
|
667,496
|
|
|
435,122
|
|
|
|
|
|
|
|
|
Investment
|
|
85,697
|
|
|
87,512
|
|
Property, plant and equipment (net)
|
|
302,367
|
|
|
320,386
|
|
|
$
|
1,055,560
|
|
$
|
843,020
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Short-term loan
|
$
|
27,144
|
|
$
|
58,519
|
|
Accounts payable
|
|
1,478
|
|
|
4,869
|
|
Accrued liabilities
|
|
300,398
|
|
|
192,306
|
|
Due to directors
|
|
605,387
|
|
|
627,832
|
|
Due to related parties
|
|
432,133
|
|
|
417,653
|
|
Other payables
|
|
717,205
|
|
|
660,868
|
|
Total current liabilities
|
|
2,083,745
|
|
|
1,962,047
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Common stock: par
value $.01; 200,000,000 shares authorized; 77,655,862 shares issued
and outstanding
|
|
776,558
|
|
|
776,558
|
|
Additional paid-in capital
|
|
28,877,540
|
|
|
28,877,540
|
|
Deficit accumulated
during the development stage
|
|
(30,947,897
|
)
|
|
(30,996,907
|
)
|
Accumulated other comprehensive income
|
|
229,110
|
|
|
204,099
|
|
Total China Longyi stockholders'
equity
|
|
(1,064,689
|
)
|
|
(1,138,710
|
)
|
Noncontrolling interest
|
|
36,504
|
|
|
19,683
|
|
Total Equity
|
|
(1,028,185
|
)
|
|
(1,119,027
|
)
|
|
$
|
1,055,560
|
|
$
|
843,020
|
|
See notes to unaudited consolidated interim financial statements
3
CHINA LONGYI GROUP INTERNATIONAL HOLDINGS
LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
|
|
Three months
ended
|
|
|
Six months
ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
624,345
|
|
$
|
5,583
|
|
$
|
640,811
|
|
$
|
9,143
|
|
Cost of sales
|
|
455,167
|
|
|
6,532
|
|
|
471,633
|
|
|
10,697
|
|
Gross margin
|
|
169,178
|
|
|
(949
|
)
|
|
169,178
|
|
|
(1,554
|
)
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
173,452
|
|
|
103,185
|
|
|
276,938
|
|
|
242,328
|
|
Goodwill
impairment loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-off inventory and
bus
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development costs
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
173,452
|
|
|
103,185
|
|
|
276,938
|
|
|
242,328
|
|
Loss from operations
|
|
(4,274
|
)
|
|
(104,134
|
)
|
|
(107,760
|
)
|
|
(243,882
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
4
|
|
|
30
|
|
|
11
|
|
|
49
|
|
Other income (expense)
|
|
171,149
|
|
|
13,960
|
|
|
196,422
|
|
|
13,960
|
|
Transaction
exchange gain
|
|
(13,375
|
)
|
|
3,981
|
|
|
(16,203
|
)
|
|
5,303
|
|
Interest expense
|
|
(3,240
|
)
|
|
-
|
|
|
(9,100
|
)
|
|
-
|
|
|
|
154,538
|
|
|
17,971
|
|
|
171,130
|
|
|
19,312
|
|
Loss before income tax
expense and noncontrolling interest
|
|
150,264
|
|
|
(86,163
|
)
|
|
63,370
|
|
|
(224,570
|
)
|
Income tax
expense
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net profit
|
|
150,264
|
|
|
(86,163
|
)
|
|
63,370
|
|
|
(224,570
|
)
|
Less: Net
profit attributable to noncontrolling interest
|
|
(21,877
|
)
|
|
7,859
|
|
|
(14,360
|
)
|
|
15,274
|
|
Net profit attributable to China Long $
|
|
128,387
|
|
$
|
(78,304
|
)
|
$
|
49,010
|
|
$
|
(209,296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
0.00
|
|
$
|
0.00
|
|
$
|
0.00
|
|
$
|
(0.00
|
)
|
Weighted average number of
shares outstanding-basic and dilut
|
|
77,655,862
|
|
|
77,655,862
|
|
|
77,655,862
|
|
|
77,655,862
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit
|
$
|
150,264
|
|
$
|
(86,163
|
)
|
$
|
63,370
|
|
$
|
(224,570
|
)
|
Foreign currency translation
|
|
-
|
|
|
2,874
|
|
|
27,472
|
|
|
(6,422
|
)
|
Comprehensive profit
|
|
150,264
|
|
|
(83,289
|
)
|
|
90,842
|
|
|
(230,992
|
)
|
Comprehensive profit attributable to
noncontrolling interest
|
|
21,877
|
|
|
(7,859
|
)
|
|
16,821
|
|
|
(15,302
|
)
|
Comprehensive profit
attributable to China Longyi
|
$
|
128,387
|
|
$
|
(75,430
|
)
|
$
|
74,021
|
|
$
|
(215,690
|
)
|
See notes to unaudited consolidated interim financial statements
4
CHINALONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
Six months ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
Net profit
|
$
|
63,370
|
|
$
|
(224,570
|
)
|
Adjustments
to reconcile net loss to net cash used in operations:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
11,545
|
|
|
11,858
|
|
Changes in
operating assets and liabilities:
|
|
|
|
|
|
|
Accounts receivables
|
|
(159,181
|
)
|
|
(26,355
|
)
|
Other receivables
|
|
(3,751
|
)
|
|
(13,490
|
)
|
Deposits and prepayment
|
|
(27,132
|
)
|
|
-
|
|
Inventory
|
|
1,695
|
|
|
(95
|
)
|
Other payables
|
|
182,800
|
|
|
276,399
|
|
Due to related parties
|
|
19,558
|
|
|
22,903
|
|
Accounts payable and accrued liabilities
|
|
(3,340
|
)
|
|
16,317
|
|
Net cash used in operations
|
|
85,564
|
|
|
62,967
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
Purchase of investment
|
|
-
|
|
|
(62,003
|
)
|
Purchases of
property and equipment
|
|
-
|
|
|
(4,134
|
)
|
Net
cash provided by (used in) investing activities
|
|
-
|
|
|
(66,137
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Addition of
short term loans
|
|
(30,624
|
)
|
|
-
|
|
Proceeds (repayments) loans from
directors
|
|
(11,901
|
)
|
|
(1,632
|
)
|
Net cash provided by financing activities
|
|
(42,525
|
)
|
|
(1,632
|
)
|
Effect of foreign exchange rate
fluctuation
|
|
12,234
|
|
|
(5,389
|
)
|
Increase(decrease) in cash and cash equivalents
|
|
55,273
|
|
|
(10,191
|
)
|
Cash and cash equivalents,
beginning of period
|
|
29,429
|
|
|
46,366
|
|
Cash and cash
equivalents, end of period
|
$
|
84,702
|
|
$
|
36,175
|
|
|
|
|
|
|
|
|
Supplemental disclosures of
cash flow information:
|
|
|
|
|
|
|
Cash paid for interest
|
$
|
-
|
|
$
|
-
|
|
Cash paid for
income taxes
|
$
|
-
|
|
$
|
-
|
|
See notes to unaudited consolidated interim financial statements
5
CHINA LONGYI GROUP INTERNATIONL HOLDINGS LIMITED
Notes to
unaudited condensed consolidated interim financial statements (Unaudited)
June 30, 2016
The accompanying unaudited consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America (US GAAP) for financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by US GAAP for
annual financial statements. These unaudited consolidated financial statements
should be read in conjunction with the audited consolidation financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 2015. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. The unaudited consolidated financial statements
of China Longyi Group International Holdings Limited (the Company or China
Longyi) include the accounts of China Longyi and its wholly-owned and
majority-owned subsidiaries. All material intercompany accounts and transactions
have been eliminated in consolidation.
1.
|
BUSINESS DESCRIPTION AND ORGANIZATION
|
We are a holding company that only operates through our
indirect Chinese subsidiaries Beijing SOD and Chongqing SOD. Through our Chinese
subsidiaries, we develop, manufacture and market our SOD products in China. SOD
is a naturally occurring enzyme which may act as a potent antioxidant defense in
cells that are exposed to oxygen.
The following chart reflects our organizational structure as of
the date of this report.
6
CHINA LONGYI GROUP INTERNATIONL HOLDINGS LIMITED
Notes to
condensed consolidated financial statements (Unaudited)
June 30, 2016
1.
|
BUSINESS DESCRIPTION AND ORGANIZATION (Continued)
|
CONTROL BY PRINCIPAL STOCKHOLDERS
The directors, executive officers,
affiliates and related parties own, beneficially and in the aggregate, the
majority of the voting power of the outstanding shares of the common stock of
the Company. Accordingly, if they voted their shares uniformly, directors,
executive officers and affiliates would have the ability to control the approval
of most corporate actions, including increasing the authorized capital stock of
China Longyi and the dissolution, merger or sale of the Company's assets.
GOING CONCERN
The Company has earned only
insignificant revenues since its inception. As at June 30, 2016, the Company has
a working capital deficiency of $1,416,249 and accumulated deficit from
recurring net losses of $30,947,897 incurred for the current and prior years as
of June 30, 2016. As at June 30, 2016, the Company has cash and cash equivalents
of $84,702.
The Companys ability to continue as a
going concern ultimately is dependent on the managements ability to obtain
equity or debt financing, attain further operating efficiencies, and achieve
profitable operations. The unaudited consolidated financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company not be able to continue as a going concern.
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
PRINCIPLES OF CONSOLIDATION AND BASIS
OF PRESENTATION
The unaudited consolidated financial
statements for all periods presented include the financial statements of China
Longyi Group International Holdings Limited, and its subsidiaries: Top Team
Holdings Limited, Full Ample Group Limited (Daykeen Group, BVI), Top Time
International Limited (HK), Beijing SOD, and Chongqing SOD. The unaudited
consolidated financial statements have been prepared in accordance with US GAAP.
All significant intercompany accounts and transactions have been eliminated.
The Company has determined the Peoples
Republic of China Chinese Yuan Renminbi (RMB) to be its functional currency.
The accompanying unaudited consolidated financial statements are presented in
United States (US) dollars. The unaudited consolidated financial statements are
translated into US dollars from RMB at quarter-end exchange rates for assets and
liabilities, and weighted average exchange rates for revenues and expenses.
Capital accounts are translated at their historical exchange rates when the
capital transactions occurred.
RMB is not freely convertible into the
currency of other nations. All such exchange transactions must take place
through authorized institutions. There is no guarantee the RMB amounts could
have been, or could be, converted into US dollars at rates used in translation.
7
CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to
condensed consolidated financial statements (Unaudited)
June 30, 2016
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
NONCONTROLLING INTEREST IN SUBSIDIARIES
The Company owns 90% of the equity
interests in Beijing SOD, and the remaining 10% is owned by Miss Ran Wang.
Therefore, the Company records non-controlling interest expense to allocate 10%
of the loss of the Beijing SOD to Miss Ran Wang, its non-controlling
shareholder.
The Company owns 81% of the equity
interest in Chongqing SOD of which 9% is owned by Miss Ran Wang, and the
remaining 10% by Mr. Guoqing Tan. Therefore, the Company records non-controlling
interest charge in the statement of operations to allocate 19% of the results of
operations of Chongqing SOD to its non-controlling shareholders.
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
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
SIGNIFICANT ESTIMATES
Several areas require significant
management estimates relating to uncertainties for which it is reasonably
possible that there will be a material change in the near term. The more
significant areas requiring the use of management estimates related to
determination of net realizable value of inventory, allowance for doubtful
accounts, property and equipment, accrued liabilities, and the useful lives for
depreciation.
REVENUE RECOGNITION
Revenue is recognized when persuasive
evidence of an arrangement exists, the price is fixed and determinable, delivery
has occurred and there is a reasonable assurance of collection of the sales
proceeds. The Company generally obtains purchase authorizations from its
customers for a specified amount of products at a specified price and considers
delivery to have occurred when the customer takes title of the products.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are
recorded at cost. Significant additions and improvements are capitalized, while
repairs and maintenance are charged to expenses as incurred. Equipment purchased
for specific research and development projects with no alternative uses are
expensed. Assets under construction are not depreciated until construction is
completed and the assets are ready for their intended use. Gains and losses from
the disposal of property, plant and equipment are recorded in loss on disposal
and impairment of property, plant and equipment included in the consolidated
statements of comprehensive income (loss).
Depreciation and amortization are
provided for financial reporting purposes primarily on the straight-line method
over the estimated useful lives of the respective assets as follows:
8
CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to
condensed consolidated financial statements (Unaudited)
June 30, 2016
|
|
Estimated
|
|
|
|
Useful Life
|
|
Transportation equipment
|
|
5 years
|
|
Furniture and office equipment
|
|
5 years
|
|
Production equipment
|
|
10 years
|
|
Building and improvements
|
|
20 years
|
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly
liquid investments that are readily convertible to cash generally with
maturities of three months or less when purchased.
INVENTORY
Prior to January 1, 2015, inventories
are stated at the lower of cost or replacement cost with respect to raw
materials and the lower of cost or market with respect to finished goods and
work in progress. The Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2015-11 (ASU 2015-11), Simplifying the
Measurement of Inventory, which the Company adopted on January 1, 2015.
Subsequent to January 1, 2015, inventories are stated at the lower of cost or
replacement cost with respect to raw materials and the lower of cost or net
realizable value with respect to finished goods and work in progress. The cost
of work in progress and finished goods is determined on a weighted average cost
basis and includes direct material, direct labor and overhead costs. Net
realizable value represents the anticipated selling price, net of distribution
cost, less estimated costs to completion for work in progress.
Inventories as of June 30, 2016 were
$350,071 and $359,194 in December 31, 2015.
INCOME TAXES
Income tax expense is based on reported
income before income taxes. Deferred income taxes reflect the effect of
temporary differences between assets and liabilities that are recognized for
financial reporting purposes and the amounts that are recognized for income tax
purposes. In accordance with ASC Topic 740 (formerly SFAS No. 109, Accounting
for income taxes) these deferred taxes are measured by applying currently
enacted tax laws.
The Company did not provide any current
or deferred income tax provision or benefit for any period presented to date
because it has experienced operating losses since inception. The benefit of any
tax income (loss) carry forwards is fully offset by a valuation allowance, as
there is a more than fifty percent chance that the Company will not realize
those benefits.
There are net operating loss carry
forwards allowed under the Hong Kong and China Governments tax system.
RESEARCH AND DEVELOPMENT COSTS
Company sponsored research and
development costs, related to both present and future products, are charged to
operations when incurred and are included in operating expenses. Expenditures
for research and development for the six months period ended June 30, 2016 and
2015 were both $0 and a cumulative amount of $8,880,206 for the period from June
4, 1997 (inception) to June 30, 2016.
9
CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to
condensed consolidated financial statements (Unaudited)
June 30, 2016
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
SHIPPING AND HANDLING
Costs relating to shipping and handling
are part of general and administrative expenses in the unaudited consolidated
statements of operations and comprehensive loss. Insignificant amount of
shipping and handling costs incurred during the six months ended June 30, 2016
and 2015.
EARNING (LOSS) PER SHARE
Basic earnings (loss) per common share
("LPS") is calculated by dividing net income (loss) by the weighted average
number of common shares outstanding during the period. Diluted earnings (loss)
per common share is calculated by adjusting the weighted average outstanding
shares, assuming conversion of all potentially dilutive stock options.
There were no stock options and
potentially dilutive securities outstanding as at June 30, 2016.
STOCK - BASED COMPENSATION
Compensation expense for costs related
to all share-based payments, including grants of stock options, is recognized
through a fair-value based method. The Company uses the Black-Scholes
option-pricing model to determine the grant date fair value for stock options.
The Company uses the grant date stock price to determine the grant date fair
value of restricted shares. The Company has elected to recognize share-based
compensation costs using the straight-line method over the requisite service
period with a graded vesting schedule, provided that the amount of compensation
costs recognized at any date is at least equal to the portion of the grant date
value of the awards that are vested at that date. Forfeitures are estimated at
the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from initial estimates. Share based compensation costs are
recorded net of estimated forfeitures such that expense is recorded only for
those awards that are expected to vest.
The Company had no such compensation
expense for the six months ended June 30, 2016 and 2015.
COMPARATIVE FIGURES
Certain comparative figures have been
reclassified in order to conform with the presentation adopted in the current
period.
COMPREHENSIVE INCOME (LOSS)
The Companys comprehensive income
(loss) consists of net income (loss) and foreign currency translation
adjustments.
RECENTLY ADOPTED ACCOUNTING STANDARDS
There were no changes to the new
accounting pronouncements as described in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2015 except for the following:
10
CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to
condensed consolidated financial statements (Unaudited)
June 30, 2016
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
In February 2016, the Financial
Accounting Standards Board ("FASB") issued guidance which amends the existing
accounting standards for leases. Consistent with existing guidance, the
recognition, measurement, and presentation of expenses and cash flows arising
from a lease by a lessee primarily will depend on its classification. Under the
new guidance, a lessee will be required to recognize right-of-use assets and
lease liabilities on the balance sheet. The new guidance is effective for us
from November 1, 2020, and interim periods in the following year. Early adoption
of this guidance is permitted and we will be required to adopt using a modified
retrospective approach. We are evaluating the timing and the impact of adopting
this guidance on our consolidated financial statements and disclosures.
In January 2016, FASB issued amendments
to address certain aspects of recognition, measurement, presentation, and
disclosure of financial instruments. The standard requires entities to measure
equity investments that do not result in consolidation and are not accounted for
under the equity method at fair value and recognize any changes in fair value in
net income. The provisions under this amendment are effective for us from
November 1, 2018, and for interim periods in the following year and early
adoption is not permitted. We are evaluating the impact of adopting this
guidance to our consolidated financial statements.
In November 2015, FASB issued guidance
intended to simplify accounting for deferred taxes. Beginning on November 1,
2017 and including the interim periods following that date, we will be required
to present all deferred tax balances as non-current. Existing GAAP guidance
requires us to record deferred tax balances as either current or non-current in
accordance with the classification of the underlying attributes. Early adoption
of this guidance is permitted and may be applied either prospectively or
retrospectively to all periods presented. We expect to early adopt this guidance
prospectively at the end of the second quarter of fiscal year 2016, but we are
still evaluating how significant the impact of the adoption will be on our
consolidated balance sheet.
Other amendments to GAAP in the U.S.
that have been issued by the FASB or other standards-setting bodies that do not
require adoption until a future date are not expected to have a material impact
on our consolidated financial statements upon adoption.
The Company's capital structure as of
June 30, 2016 and December 31, 2015 was as follows:
|
Common stock par value $0.01
|
Authorized
|
Issued and outstanding
|
|
June 30, 2016
|
200,000,000
|
77,655,862
|
|
December 31, 2015
|
200,000,000
|
77,655,862
|
As of June 30, 2015, the Company had
accumulated deficit of $30,947,897.
11
CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to
condensed consolidated financial statements (Unaudited)
June 30, 2016
On January 5, 2010, the Company
invested in Cangshan Duoha Vegetable Food Company (Duoha) with 50,000 shares
of the Companys common stock worth $10,000 as $0.2 per share to acquire 20%
equity interest in of Duoha. According to the investment agreement, although we
own 20% equity of Duoha, we do not have significant influence over Duohas
operating and financing policies. Therefore, the management of the Company
implemented the cost method to account above investment.
In May of 2015, we signed an investment
agreement with Guizhou Biology Technology Ltd. (Guizhou). According to the
investment agreement, the Company invested RMB 500,000 to acquire 20% equity
interest in of Guizhou. Although we own 20% equity of Guizhou, we do not have
significant influence over Guizhous operating and financing policies. As of
June 30, 2016, the company has invested RMB 500,000 in Guizhou.
The amount of investment as of June 30,
2016 and December 31, 2015 was $85,697 and $87,512, respectively.
Inventories at June30, 2016and December
31, 2015 consisted of:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Raw Materials
|
$
|
50,508
|
|
$
|
26,124
|
|
|
Work in progress
|
|
256,614
|
|
|
266,717
|
|
|
Finished goods
|
|
42,949
|
|
|
66,353
|
|
|
|
$
|
350,071
|
|
$
|
359,194
|
|
6.
|
PROPERTY AND EQUIPMENT
|
Property and equipment at cost
consisted of:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Transportation equipment
|
|
51,795
|
|
$
|
52,892
|
|
|
Furniture and office equipment
|
|
55,859
|
|
|
57,043
|
|
|
Production equipment,
buildings and improvements
|
|
368,522
|
|
|
376,331
|
|
|
Subtotal
|
|
476,176
|
|
|
486,266
|
|
|
Less: impairment provision
|
|
(46,577
|
)
|
|
(47,563
|
)
|
|
accumulated depreciation
|
|
(309,077
|
)
|
|
(304,015
|
)
|
|
|
|
120,522
|
|
|
134,688
|
|
|
Construction in progress
|
|
181,845
|
|
|
185,698
|
|
|
|
$
|
302,367
|
|
|
320,386
|
|
Depreciation expense as of June 30,
2016 was $5,062. Accumulate impairment as of June 30, 2016 and December 31, 2015
was $46,577 and $47,563.
12
CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to
condensed consolidated financial statements (Unaudited)
June 30, 2016
7.
|
COMMITMENTS AND CONTINGENCIES
|
From time to time, the Company has
disputes that arise in the ordinary course of its business. Currently, according
to management, there are no material legal proceedings to which the Company is a
party to or to which any of their property is subject that will have a material
adverse effect on the Companys financial condition.
The principal amount for six months
ended June 30, 2016 was $27,144 and for the year ended of 2015 was $58,519,
respectively, and were recorded on the balance sheet as short-term loan.
Other payables are carrying value as of
the balance sheet date of obligations incurred and payable, which are not
elsewhere specified in the taxonomy.
Other payables as of June 30, 2016 and
December 31, 2015 consist of the following:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Due to Tailong Zhongrui
International Corporation
|
$
|
34,685
|
|
$
|
35,419
|
|
|
Due to Beijing De Qiuhong Investment Ltd.
|
|
476,028
|
|
|
486,116
|
|
|
Due to Small and Medium Sized
Enterprises Union of
|
|
|
|
|
|
|
|
China
|
|
40,883
|
|
|
-
|
|
|
Due to Xinxiang Tianjieshan
Biotechnology Co., Ltd.
|
|
18,197
|
|
|
-
|
|
|
Educational funds
|
|
10,330
|
|
|
9,754
|
|
|
Wage payable
|
|
69,198
|
|
|
86,740
|
|
|
Project payment
|
|
22,620
|
|
|
23,100
|
|
|
Other payable
|
|
45,264
|
|
|
19,739
|
|
|
Total
|
$
|
717,205
|
|
$
|
660,868
|
|
10.
|
RELATED PARTY TRANSACTIONS AND STOCKHOLDERS LOAN
|
Due to directors and Due to Related
Companies are loans that are unsecured, non-interest bearing and have no fixed
terms of repayment, therefore, deemed payable on demand.
The Company rents office space from the
related company on a month to month basis.
Management has considered all events
occurring through the date the financial statements have been issued, and has
determined that there are no such events that are material to the financial
statement.
13
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
our financial statements and the notes thereto.
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, including the following
Managements Discussion and Analysis of Financial Condition and Results of
Operations, contains forward-looking statements relating to the business of
China Longyi Group International Holdings Limited and its subsidiary companies.
The forward-looking statements include, among others, statements concerning our
expected financial performance and strategic and operational plans, as well as
all assumptions, expectations, predictions, intentions or beliefs about future
events. These statements are based on assumptions and are subject to known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any future
results, performances or achievements expressed or implied by the
forward-looking statements. Risks and uncertainties include risks related to new
and existing products; any projections of sales, earnings, revenue, margins or
other financial items; any statements of the plans, strategies and objectives of
management for future operations; any statements regarding future economic
conditions or performance; uncertainties related to conducting business in
China; any statements of belief or intention; and any of the factors mentioned
in the Risk Factors section of the Companys annual report on Form 10-K filed
on April 14, 2016. Given these uncertainties, you should not place undue
reliance on these forward-looking statements. Except as required by law, we
assume no obligation to update any forward-looking statements publicly, or to
update the reasons actual results could differ materially from those anticipated
in any forward-looking statements, even if new information becomes available in
the future.
Use of Certain Defined Terms
Except as otherwise indicated by the context, references in
this report to:
|
|
Beijing SOD are references to Beijing Longyi Biology
Technology Co. Ltd., our indirect, 90% owned subsidiary, a PRC company;
|
|
|
China and PRC are references to the Peoples Republic
of China;
|
|
|
China Longyi, we, us, our, or the Company are
references to the combined business of China Longyi Group International
Holdings Limited and/or its consolidated subsidiaries, as the case may be;
|
|
|
Chongqing SOD are references to Chongqing JiuZhou
Dismutase Biology Technology Co., Ltd., our indirect, majority-owned
subsidiary, a PRC company;
|
|
|
Exchange Act mean the Securities Exchange Act of 1934,
as amended;
|
|
|
RMB refer to Renminbi, the legal currency of China;
|
|
|
Securities Act mean the Securities Act of 1933, as
amended;
|
|
|
Top Time are references to Top Time International
Limited, our indirect wholly-owned subsidiary, a Hong Kong company; and
|
|
|
U.S. dollar, $ and US$ are to the legal currency of
the United States.
|
Overview of our Business
We are a holding company that only operates through our
indirect Chinese subsidiaries Beijing SOD and Chongqing SOD. Through our Chinese
subsidiaries, we develop, manufacture and market our SOD products in China. SOD
is a naturally occurring enzyme which may act as a potent antioxidant defense in
cells that are exposed to oxygen. Certain research has shown that under certain
biological conditions, SOD revitalizes cells and reduces the rate of cell
destruction. It neutralizes the most common free radicalsuperoxide radicalby
converting it into hydrogen peroxide and water. Because superoxide is harmful to
human cells, and certain forms of SOD exist naturally in most humans, many
studies show that SOD is valuable in protecting human cells from the harmful
effects of superoxide. SOD is thought to be more powerful than antioxidant
vitamins as it activates the body's productions of its own antioxidants. As a result, SOD is referred to as the enzyme of
life. Commercially, SOD has a wide range of applications and is widely applied
in foods, drinks, skin care productions, pharmaceuticals, to combat ailments
ranging from sunburn to rheumatoid arthritis.
14
Second Quarter of 2016 Financial Performance
Highlights
The following are some financial highlights for the three
months ended June 30, 2016:
|
|
Revenue
: Revenue increased $618,762 to
$624,345 for the three months ended June 30, 2016, from $5,583 for the
same period in 2015.
|
|
|
|
|
|
Expense from operations
: Expense from
operations increased $70,267, or 68.10%, to $173,452 for the three months
ended June 30, 2016, from $103,185 for the same period in 2015.
|
|
|
|
|
|
Net profit
: Net profit increased
$236,427, or 274.40%, to $150,264 for the three months ended June 30,
2016, from $(86,163) for the same period in 2015.
|
|
|
|
|
|
Fully diluted net income per share
:
Fully diluted net loss per share was $0 for the three months ended June
30, 2016, as compared to $0 for the same period in 2015.
|
Provision for Income Taxes
|
|
United States
: China Longyi Group International
Holding Limited is subject to United States tax at a tax rate of 34%. No
provision for income taxes in the United States has been made as China
Longyi Group International Holding Limited had no income subject to United
States taxation in the second quarter of 2016.
|
|
|
|
|
|
British Virgin Islands
: Our wholly owned
subsidiary Top Team Holdings Limited was incorporated in the British
Virgin Islands, or the BVI, and, under the current laws of the BVI, is not
subject to income taxes.
|
|
|
|
|
|
China
: Before the implementation of the enterprise
income tax, or EIT, Foreign Invested Enterprises or FIEs, established in
the PRC were generally subject to an EIT rate of 33.0%, which includes a
30.0% state income tax and a 3.0% local income tax. On March 16, 2007, the
National Peoples Congress of China passed the new Corporate Income Tax
Law, or EIT Law, and on November 28, 2007, the State Council of China
passed the Implementing Rules for the EIT Law, or Implementing Rules,
which took effect on January 1, 2008. The EIT Law and Implementing Rules
impose a unified EIT of 25.0% on all domestic- invested enterprises and
FIEs, unless they qualify under certain limited exceptions. Therefore,
nearly all FIEs are subject to the new tax rate alongside other domestic
businesses rather than benefiting from the old tax laws applicable to
FIEs, and its associated preferential tax treatments, beginning January 1,
2008.
|
|
|
|
|
|
Despite these pending changes, the EIT Law gives the FIEs
established before March 16, 2007, or Old FIEs, such as our subsidiaries
Beijing SOD and Chongqing SOD, a five-year grandfather period during which
they can continue to enjoy their existing preferential tax treatments.
During this five-year grandfather period, the Old FIEs which enjoyed tax
rates lower than 25% under the original EIT Law shall gradually increase
their EIT rate by 2% per year until the tax rate reaches 25%. In addition,
the Old FIEs that are eligible for the two-year exemption and three-year
half reduction or five-year exemption and five-year half-reduction
under the original EIT Law, are allowed to remain to enjoy their
preference until these holidays expire. The discontinuation of any such
special or preferential tax treatment or other incentives would have an
adverse effect on any organizations business, fiscal condition and
current operations in China.
|
15
In addition to the changes to the
current tax structure, under the EIT Law, an enterprise established outside of
China with de facto management bodies within China is considered a resident
enterprise and will normally be subject to a EIT of 25.0% on its global income.
The Implementing Rules define the term de facto management bodies as an
establishment that exercises, in substance, overall management and control over
the production, business, personnel, accounting, etc., of a Chinese enterprise.
If the PRC tax authorities subsequently determine that we should be classified
as a resident enterprise, then our consolidated global income will be subject to
PRC income tax of 25.0% .
We incurred no income taxes in either the three months ended
June 30, 2016 or the three months ended June 30, 2015.
Results of Operations
Three Months Ended June 30, 2016 Compared to Three Months
ended June 30, 2015
The following table summarizes the results of our operations
for the three months ended June 30, 2106 and 2015 and provides information
regarding the dollar and percentage increase or (decrease) from the three months
ended June 30, 2015 to the same period of 2016.
|
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
Increase
|
|
|
% Increase
|
|
Item
|
|
2016
|
|
|
2015
|
|
|
(Decrease)
|
|
|
(% Decrease)
|
|
Revenue
|
$
|
624,345
|
|
$
|
5,583
|
|
$
|
618,762
|
|
|
11,082.97%
|
|
Cost of Revenue
|
|
455,167
|
|
|
6,532
|
|
|
448,635
|
|
|
6,868.26%
|
|
Gross Profit
|
|
169,178
|
|
|
(949
|
)
|
|
170,127
|
|
|
17,926.98%
|
|
Operating Expenses
|
|
173,452
|
|
|
103,185
|
|
|
70,267
|
|
|
68.10%
|
|
Other Income (expense)
|
|
154,538
|
|
|
17,971
|
|
|
136,567
|
|
|
759.93%
|
|
Provision for Taxes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net profit attributable to
China Longyi
|
$
|
128,387
|
|
$
|
(78,304
|
)
|
$
|
206,691
|
|
|
263.96%
|
|
Revenues.
Our revenues are derived primarily from sales
of our SOD products. Our revenues increased $618,762, to $624,345 for the three
months ended June 30, 2016, from $5,583 for the same period in 2015. The
increase in revenues was due to more SOD products being sold for the three
months ended June 30, 2016 compared with the same period of 2015.
Cost of Revenues.
Our cost of revenues is primarily
comprised of the costs of our raw materials, labor and overhead. Our cost of
revenues increased $448,635, to $455,167 for the three months ended June 30,
2016, from $6,532 during the same period in 2015 because more SOD products being
produced and sold for the three months ended June 30, 2016 compared with the
same period of 2015.
Gross Profit.
Our gross profit increased by $170,127, to
$169,178 for the three months ended June 30, 2016 from $(949) during the same
period in 2015. The gross profit increased mainly due to more SOD products being
sold for the three months ended June 30, 2016 compared with the same period of
2015.
Operating Expenses
. Our total operating expenses for the
three months ended June 30, 2016 increased $70,267, or 68.10%, to $173,452, from
$103,185 for the same period in 2015. We paid a part of annual audit fee of 2015
during the second quarter of 2016; however we paid all of annual audit fee of
2014 in the first quarter of 2015.
Other Income (expense).
Other income was $154,538 during
the three months ended June 30, 2016, an increase of $136,567 from $17,971
during a same period in 2015. Such increase was mainly due to the written off
the inventory in investment which was sold for the six months ended June 30,
2016.
16
Net Profit attributable to China Longyi.
As a result of
above facts, our net profit increased by $206,691, or 263.96%, to $128,387 for
the three months ended June 30, 2016, from $(78,304) for the same period in
2015.
Six Months Ended June 30, 2016 Compared to Six Months
ended June 30, 2015
The following table summarizes the results of our operations
for the six months ended June 30, 2106 and 2015 and provides information
regarding the dollar and percentage increase or (decrease) from the six months
ended June 30, 2015 to the same period of 2016.
|
|
Six Months
Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
Increase
|
|
|
% Increase
|
|
Item
|
|
2016
|
|
|
2015
|
|
|
(Decrease)
|
|
|
(% Decrease)
|
|
Revenue
|
$
|
640,811
|
|
$
|
9,143
|
|
$
|
631,668
|
|
|
6908.76%
|
|
Cost of Revenue
|
|
471,633
|
|
|
10,697
|
|
|
460,936
|
|
|
4309.02%
|
|
Gross Profit
|
|
169,178
|
|
|
(1,554
|
)
|
|
170,732
|
|
|
10986.62
|
|
Operating Expenses
|
|
276,938
|
|
|
242,328
|
|
|
34,610
|
|
|
14.28%
|
|
Other Income (expense)
|
|
171,130
|
|
|
19,312
|
|
|
151,818
|
|
|
786.13%
|
|
Provision for Taxes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
--
|
|
Net profit attributable to
China Longyi
|
$
|
49,010
|
|
$
|
(209,296
|
)
|
$
|
258,306
|
|
|
123.42%
|
|
Revenues.
Revenues increased $631,668, to $640,811 for
the six months ended June 30, 2016, from $9,143 for the same period in 2015. The
increase in revenues was due to more SOD products being sold for the six months
ended June 30, 2016 compared with the same period of 2015.
Cost of Revenues.
Our cost of revenues increased
$460,936, to $471,633 for the six months ended June 30, 2016, from $10,697
during the same period in 2015 because more SOD products being produced and sold
for the six months ended June 30, 2016 compared with the same period of 2015.
Gross Profit.
Our gross profit increased by $170,732, to
$169,178 for the six months ended June 30, 2016 from $(1,554) during the same
period in 2015. The gross profit increased mainly due to more SOD products being
sold for the six months ended June 30, 2016 compared with the same period of
2015.
Operating Expenses
. Our total operating expenses for the
six months ended June 30, 2016 increased $34,610, or 14.28%, to $276,938, from
$242,328 for the same period in 2015. This increase was mainly because we paid
less professional and financial consultation fees for the six months ended June
30, 2016 compared with the same period of 2015.
Other Income (expense).
Other income was $171,130 during
the six months ended June 30, 2016, an increase of $151,818 from $19,312 during
a same period in 2015. Such increase was mainly due to the written off the
inventory in investment which sold for the six months ended June 30, 2016.
Net Profit attributable to China Longyi.
As a result of
above facts, our net profit increased by $258,306, or 123.42%, to $49,010 for
the six months ended June 30, 2016, from $(209,296) for the same period in
2015.
17
Liquidity and Capital Resources
We had $84,702 in cash and cash equivalents as of June 30,
2016. As of such date, we also had total current assets of $667,496 and total
assets of $1,055,560. We had total current liabilities (consisting of accounts
payable, accrued liabilities, due to directors and other payables) in the amount
of $2,083,745. Our stockholders equity as of June 30, 2016 was $(1,028,185).
Since inception, we have accumulated a net loss of $30,947,897.
The following table summarizes the statements of cash flows
from the financial statements for the six months ended June 30, 2016 compared to
the six months ended June 30, 2015:
|
|
Six Months
Ended
|
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Net Cash Provided By (Used
In) Operating Activities
|
$
|
85,564
|
|
$
|
62,967
|
|
Net Cash Provided By (Used In) Investing
Activities
|
|
-
|
|
|
(66,137
|
)
|
Net Cash Provided By (Used
In) Financing Activities
|
|
(42,525
|
)
|
|
(1,632
|
)
|
Effect of foreign exchange rate fluctuation
|
|
12,234
|
|
|
(5,389
|
)
|
Net increase (decrease) in
Cash and Cash Equivalents
|
|
55,273
|
|
|
(10,191
|
)
|
Cash and Cash Equivalents - Beginning of
Period
|
|
29,429
|
|
|
46,366
|
|
Cash and Cash Equivalents
End of Period
|
|
84,702
|
|
|
36,175
|
|
Operating Activities
Net cash provided by operating activities was $85,564 for the
six-month period ended June 30, 2016 representing an increase of $22,597 from
$62,967 of net cash provided by the operating activities for the same period of
2015. The increase in the cash provided by operating activities was mainly
attributable to the number of account of Net Loss, Account receivables, Deposits
and prepayment, and other payables changed. Cash flows provided by Net Loss
increased $287,940 to $63,370 for the six months ended June 30, 2016, from
($224,570) for the same period in 2015. Cash flow used in Account receivables
decreased $9,739, to $3,751 for the six months ended June 30, 2016, from $13,490
for the same period in 2015. Cash flows used in Deposits and prepayment
increased $27,132, to $27,132 for the six months ended June 30, 2016, from $0
for the same period in 2015. Cash flow provided by other payables decreased
$93,599, to $182,800 for the six months ended June 30, 2016, from $276,399 for
the same period in 2015.
Investing Activities
Net cash provided by investing activities for the six-month
period ended June 30, 2016 was $0 as compared with $66,137 of net cash used in
investing activities for the same period of 2015. Such change was mainly because
we didnt have any investing activities for the six months ended June 30, 2016
compared with the same period of 2015.
Financing Activities
Net cash provided by financing activities for the six-month
period ended June 30, 2016 was $(42,525) as compared to $(1,632) used in
financing activities for the same period in 2015. We repaid certain short term
loans and loans from directors in an amount of $30,624 and $11,901,
respectively, for the six months ended June 30, 2016.
The Company did not have any bank loans as of June 30, 2016.
We expect to generate approximately $1 million to $1.5 million
of revenues from the sale of our products during the next 12 months. If our cash
on hand and cash flow from operations do not meet our expected capital
expenditure and working capital requirements for the next 12 months, we expect
that our directors will provide more cash as loans to the company. However, we may in the future require additional
cash resources due to changed business conditions, implementation of our
strategy to expand our production capacity or other investments or acquisitions
we may decide to pursue. If our own financial resources are insufficient to
satisfy our capital requirements, we may seek to sell additional equity or debt
securities or obtain additional credit facilities. The sale of additional equity
securities could result in dilution to our stockholders. The incurrence of
indebtedness would result in increased debt service obligations and could
require us to agree to operating and financial covenants that would restrict our
operations. Financing may not be available in amounts or on terms acceptable to
us, if at all. Any failure by us to raise additional funds on terms favorable to
us, or at all, could limit our ability to expand our business operations and
could harm our overall business prospects.
18
Critical Accounting Policies
Economic and Political Risks
The Company faces a number of risks and challenges as a result
of having primary operations and marketing in the PRC. Changing political
climates in the PRC could have a significant effect on the Companys business.
Foreign Currencies
The company has determined that RMB to be its functional
currency. The accompanying audited consolidated financial statements are
presented in U.S. dollars. The audited consolidated financial statements are
translated into US dollars from RMB at year-end exchange rates for assets and
liabilities, and weighted average exchange rates for revenues and expenses.
Capital accounts are translated at their historical exchange rates when the
capital transactions occurred.
|
|
|
|
|
June 30,
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
|
RMB
|
|
|
HK$
|
|
|
RMB
|
|
|
HK$
|
|
|
RMB
|
|
|
HK$
|
|
Balance sheet items, except
for equity accounts
|
|
6.6312
|
|
|
7.7542
|
|
|
6.1136
|
|
|
7.7524
|
|
|
6.4936
|
|
|
7.7510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items in the statements of
income and comprehensive income, and the statements of cash flows
|
|
6.5309
|
|
|
7.7738
|
|
|
6.1287
|
|
|
7.7534
|
|
|
6.2272
|
|
|
7.7522
|
|
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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 reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Significant Estimates
Several areas require significant management estimates relating
to uncertainties for which it is reasonably possible that there will be a
material change in the near term. The more significant areas requiring the use
of management estimates related to determination of net realizable value of
inventory, allowance for doubtful accounts, property and equipment, accrued
liabilities and, the useful lives for depreciation.
Restrictions on Transfer of Assets Out of the PRC
Dividend payments by Beijing SOD are limited by certain
statutory regulations in the PRC. No dividends may be paid by Beijing SOD
without first receiving prior approval from the Foreign Currency Exchange
Management Bureau. Dividend payments are restricted to 85% of profits, after
tax.
Revenue Recognition
The Company recognizes revenue in accordance with Staff
Accounting Bulletin No.104 Revenue recognition (ASC Topic 605). Revenues are recognized as earned when the
following four criteria are met: (1) a customer issues purchase orders or
otherwise agrees to purchase products; (2) products are delivered to the
customer; (3) pricing is fixed or determined in accordance with the purchase
order or agreement; and (4) collectability is reasonably assured.
19
Inflation
Inflation does not materially affect our business or the
results of our operations.
Seasonality
We may experience seasonal variations in our future revenues
and our operating costs, however, we do not believe that these variations will
be material.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to investors.
ITEM 3.
|
QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Not Applicable.
ITEMS 4.
|
CONTROLS AND
PROCEDURES
|
Disclosure Controls and Procedures
Our management, with the participation of our chief executive
officer and chief financial officer, Ms. Jie Chen and Mr. Xinmin Pan,
respectively, evaluated the effectiveness of our disclosure controls and
procedures. The term disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other
procedures of a company that are designed to ensure that information required to
be disclosed by a company in the reports, such as this report, that it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SECs rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the companys management, including its principal executive and
principal financial officers, as appropriate to allow timely decisions regarding
required disclosure. Management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving their objectives and management necessarily applies its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
Based on that evaluation, Ms. Jie Chen and Mr. Xinmin Pan concluded that as of
June 30, 2016, our disclosure controls and procedures were effective at the
reasonable assurance level.
Internal Controls Over Financial Reporting
During the quarter ended June 30, 2016, there were no changes
in our internal control over financial reporting identified in connection with
the evaluation performed that occurred during the fiscal quarter covered by this
report that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
20