NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
NOTE
–
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, 2016 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 September 30, 2016 are not necessarily indicative of the results to be expected for
the entire fiscal year ending March 31, 2017 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, 2016.
NOTE
–
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.
Description of subsidiaries
Company Name
|
|
Place of incorporation
and kind of
legal entity
|
|
Principal activities
and place of operation
|
|
Particulars of issued/
registered share
capital
|
|
Effective interest
held
|
|
|
|
|
|
|
|
|
|
Green Dragon Industrial Inc.
(“GDI”)
|
|
British Virgin Islands (“BVI”), May 30, 2007
|
|
37,500 issued shares of common of US$1 each
|
|
Investment holding
|
|
100%
|
|
|
|
|
|
|
|
|
|
Green Dragon Wood Products Co., Limited (“GDWPCL”)
|
|
Hong Kong,
March 14, 2000
|
|
5,000,000 issued shares
of ordinary shares
|
|
Re-sale and
trading of wood
|
|
100%
|
GDWP and its subsidiaries are hereinafter referred
to as the “Company”.
NOTE
–
3 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed consolidated financial
statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying
condensed consolidated financial statements and notes.
The condensed consolidated financial statements
include the accounts of GDWP and its subsidiaries. All inter-company balances and transactions between the Company and its subsidiaries
have been eliminated upon consolidation.
GREEN DRAGON WOOD PRODUCTS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
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.
|
l
|
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 Six months or less as of the purchase date of such investments.
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.
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
|
Leasehold improvement
|
|
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
September 30, 2016 and 2015 was $749 and $4,500, respectively.
Depreciation expense for the six months ended
September 30, 2015 and 2015 was $3,658 and $9,097, respectively.
|
l
|
Impairment of long-lived assets
|
In accordance with Accounting Standards Codification
("ASC") Topic 360-10-5, “
Impairment or Disposal of Long-Lived Assets
”, the Company reviews its long-lived
assets, including plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount
of the assets may not be fully recoverable or that useful lives are no longer appropriate. If the total of the expected undiscounted
future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value
and carrying amount of the asset. There has been no impairment charge as of September 30, 2016 and 2015.
GREEN DRAGON WOOD PRODUCTS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
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.
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.
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 periods 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 and six months ended September
30, 2016 and 2015, the Company did not have any interest and penalties associated with tax positions. As of September 30, 2016,
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.
The Company calculates net loss per share in
accordance with ASC Topic 260, “
Earnings per Share.
” Basic income per share is computed by dividing the net
income by the weighted-average number of common share outstanding during the period. 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.
GREEN DRAGON WOOD PRODUCTS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
|
l
|
Foreign currencies translation
|
Transactions denominated in currencies other
than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional
currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the
consolidated statement of operations.
The reporting currency of the Company is United
States Dollar ("US$") 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$, in accordance with ASC Topic 830-30, “ Translation of Financial Statement”, using the exchange rate on the
balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting
from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive
income within the statements of changes in stockholders’ equity.
Translation of amounts from HK$ into US$1 has
been made at the following exchange rates for the six months ended September 30, 2016 and 2015:
|
|
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
Period-end HK$: US$1 exchange rate
|
|
|
7.75476
|
|
|
|
7.7499
|
|
Period average HK$: US$1 exchange rate
|
|
|
7.75824
|
|
|
|
7.7515
|
|
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.
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 six months ended September 30, 2016 and 2015, the Company operates one reportable business segment in Hong
Kong.
|
l
|
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
|
GREEN DRAGON WOOD PRODUCTS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
●
|
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.
|
l
|
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.
|
l
|
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.
NOTE
–
4 ACCOUNTS
RECEIVABLE
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 six months ended September 30, 2016
and 2015, no provision for doubtful accounts was charged to operations.
|
|
September 30, 2016
|
|
|
March 31, 2016
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Accounts receivable, cost
|
|
$
|
4,828,171
|
|
|
$
|
4,425,256
|
|
Less: allowance for doubtful accounts
|
|
|
(2,002,639
|
)
|
|
|
(2,002,715
|
)
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
2,825,532
|
|
|
$
|
2,422,541
|
|
NOTE
–
5 PREPAYMENT,
DEPOSITS AND OTHER RECEIVABLES
Prepayments, deposits
and other receivables consisted of:
|
|
September 30, 2016
|
|
|
March 31, 2016
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Purchase deposits to vendors
|
|
$
|
1,871,162
|
|
|
$
|
1,779,405
|
|
Rental and utilities
|
|
|
34,818
|
|
|
|
34,819
|
|
Other receivables
|
|
|
247,686
|
|
|
|
181,628
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,153,666
|
|
|
$
|
1,995,852
|
|
GREEN DRAGON WOOD PRODUCTS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
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.
NOTE
–
6 SHORT-TERM
BORROWINGS
Short-term borrowings consist of:
|
|
September 30, 2016
|
|
|
March 31, 2016
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Payable to financial institutions in Hong Kong
|
|
|
|
|
|
|
|
|
Revolving line of credits
|
|
|
|
|
|
|
|
|
DBS Bank (Hong Kong) Limited
|
|
$
|
595,719
|
|
|
$
|
881,815
|
|
Industrial and Commercial Bank of China (Asia) Limited
|
|
|
547,043
|
|
|
|
635,703
|
|
Shanghai Commercial Bank Limited
|
|
|
-
|
|
|
|
447,739
|
|
ICICI Bank Limited
|
|
|
128,641
|
|
|
|
-
|
|
|
|
|
1,271,403
|
|
|
|
1,965,257
|
|
|
|
|
|
|
|
|
|
|
Short-term bank borrowing
|
|
|
|
|
|
|
|
|
Shanghai Commercial Bank Limited
|
|
|
124,263
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Payable to third parties (under supplier agreement)
|
|
|
|
|
|
|
|
|
Tai Wah Timber Factory Limited
|
|
|
671,777
|
|
|
|
671,803
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,067,443
|
|
|
$
|
2,637,060
|
|
The DBS Bank (Hong Kong) Limited (“DBS”)
provides a credit facility for borrowings up to HK$14,000,000 (approximately $1,804,000) 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$6,400,000 (approximately $825,000),
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 $837,000), 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. Since June 2016, the Company terminated the credit facility with Shanghai
Commercial Bank Limited and released the restricted cash deposit accordingly.
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.
On September 30, 2016, the Company had
aggregate secured banking facilities of $2,759,283 in which $1,487,880 is unused.
GREEN DRAGON WOOD PRODUCTS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
NOTE
–
7 INCOME
TAXES
For the six months ended September 30, 2016
and 2015, the local (United States) and foreign components of loss before income taxes were comprised of the following:
|
|
Six months ended September 30,
|
|
|
|
2016
|
|
|
2015
|
|
Tax Jurisdictions from:
|
|
|
|
|
|
|
|
|
-Local
|
|
$
|
-
|
|
|
$
|
-
|
|
-Foreign
|
|
|
(174,648
|
)
|
|
|
(389,117
|
)
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(174,648
|
)
|
|
$
|
(389,117
|
)
|
Provision for income taxes consisted of the
following:
|
|
Six months ended September 30,
|
|
|
|
2016
|
|
|
2015
|
|
Current:
|
|
|
|
|
|
|
|
|
- Local
|
|
$
|
-
|
|
|
$
|
-
|
|
- Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
- Local
|
|
|
-
|
|
|
|
-
|
|
- Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income tax expenses
|
|
$
|
-
|
|
|
$
|
-
|
|
The effective tax rate in the periods 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 six months ended September 30, 2016 and 2015, 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 six months ended September 30, 2016 and 2015, 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.
GREEN DRAGON WOOD PRODUCTS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2016
(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 income (loss) before income taxes from foreign operation for the six months ended September
30, 2016 and 2015 are as follows:
|
|
Six months ended September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
$
|
(174,648
|
)
|
|
$
|
(389,117
|
)
|
Statutory income tax rate
|
|
|
16.5
|
%
|
|
|
16.5
|
%
|
Income tax at Hong Kong statutory income tax rate
|
|
|
(28,817
|
)
|
|
|
(64,204
|
)
|
Tax loss (utilized) not recognized as deferred tax assets
|
|
|
28,817
|
|
|
|
64,204
|
|
|
|
|
|
|
|
|
|
|
Income tax expenses
|
|
$
|
-
|
|
|
$
|
-
|
|
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 September 30, 2016 and March 31, 2016, therefore
no deferred tax assets or liabilities have been recognized.
NOTE
–
8 STOCKHOLDERS’
EQUITY
|
a.
|
Preferred Stock - Series A Convertible Preferred Stock
|
As of September 30, 2016, the Company had a
total of 2,000,000 shares of its preferred stock issued and outstanding.
As of September 30, 2016, the Company had a
total of 23,725,000 shares of its common stock issued and outstanding, respectively.
NOTE
–
9 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:
|
|
Six months ended September 30,
|
|
|
|
2016
|
|
|
2015
|
|
Revenue, net:
|
|
|
|
|
|
|
- The PRC (including Hong Kong)
|
|
$
|
176,150
|
|
|
$
|
1,761,153
|
|
- Middle East
|
|
|
1,441
|
|
|
|
40,448
|
|
- India
|
|
|
666,512
|
|
|
|
782,911
|
|
- Europe
|
|
|
57,127
|
|
|
|
24,651
|
|
- Other
|
|
|
51,469
|
|
|
|
244,410
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
952,699
|
|
|
$
|
2,853,573
|
|
All of the Company’s long-lived assets
are located in Hong Kong.
GREEN DRAGON WOOD PRODUCTS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
NOTE
–
10 CONCENTRATIONS
OF RISK
The Company is exposed to the following concentrations of risk:
For the three and six months ended September 30, 2016 and 2015,
the customer who accounts for 10% or more of the Company's revenues and its outstanding accounts receivable at period-end date,
are presented as follows:
|
|
Three months ended September 30, 2016
|
|
|
September 30, 2016
|
|
|
|
Revenue
|
|
|
Percentage
of revenue
|
|
|
Accounts
receivable, net
|
|
Customer E
|
|
$
|
45,502
|
|
|
|
10
|
%
|
|
$
|
47,685
|
|
Customer F
|
|
|
44,828
|
|
|
|
83
|
%
|
|
|
44,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
90,330
|
|
|
|
93
|
%
|
|
$
|
92,533
|
|
|
|
Six months ended September 30, 2016
|
|
|
September 30, 2016
|
|
|
|
Revenue
|
|
|
Percentage
of revenue
|
|
|
Accounts
receivable, net
|
|
Customer B (Vendor A)
|
|
$
|
176,150
|
|
|
|
18
|
%
|
|
$
|
1,715,488
|
|
Customer C
|
|
|
114,421
|
|
|
|
12
|
%
|
|
|
155,766
|
|
Customer D
|
|
|
253,101
|
|
|
|
27
|
%
|
|
|
358,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
543,672
|
|
|
|
57
|
%
|
|
$
|
2,229,754
|
|
|
|
Three months ended September 30, 2015
|
|
|
September 30, 2015
|
|
|
|
Revenue
|
|
|
Percentage
of revenue
|
|
|
Accounts
receivable, net
|
|
Customer K
|
|
$
|
116,439
|
|
|
|
13
|
%
|
|
$
|
116,439
|
|
Customer L
|
|
|
194,270
|
|
|
|
22
|
%
|
|
|
194,270
|
|
Customer M
|
|
|
168,465
|
|
|
|
19
|
%
|
|
|
132,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
479,174
|
|
|
|
54
|
%
|
|
$
|
443,145
|
|
|
|
Six months ended September 30, 2015
|
|
|
September 30, 2015
|
|
|
|
Revenue
|
|
|
Percentage
of revenue
|
|
|
Accounts
receivable, net
|
|
Customer B (Vendor A)
|
|
$
|
644,077
|
|
|
|
22
|
%
|
|
$
|
2,995,480
|
|
For the three and six months ended September 30, 2016 and 2015,
the vendor who accounts for 10% or more of the Company's purchases and its outstanding accounts payable at period-end date, are
presented as follows:
|
|
Three months ended September 30, 2016
|
|
|
September 30, 2016
|
|
|
|
Purchase
|
|
|
Percentage
of purchase
|
|
|
Accounts
payable
|
|
Vendor A (Customer B)
|
|
$
|
321,474
|
|
|
|
88
|
%
|
|
$
|
-
|
|
|
|
Six months ended September 30, 2016
|
|
|
September 30, 2016
|
|
|
|
Purchase
|
|
|
Percentage
of purchase
|
|
|
Accounts
payable
|
|
Vendor A (Customer B)
|
|
$
|
560,237
|
|
|
|
73
|
%
|
|
$
|
-
|
|
Vender G
|
|
|
183,390
|
|
|
|
24
|
%
|
|
|
515,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
743,627
|
|
|
|
97
|
%
|
|
$
|
515,982
|
|
GREEN DRAGON WOOD
PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30,
2016
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
|
|
Three months ended September 30, 2015
|
|
|
September 30, 2015
|
|
|
|
Purchase
|
|
|
Percentage
of purchase
|
|
|
Accounts
payable
|
|
Vendor A (Customer B)
|
|
$
|
218,073
|
|
|
|
25
|
%
|
|
$
|
-
|
|
Vendor C
|
|
|
119,031
|
|
|
|
14
|
%
|
|
|
95,759
|
|
Vender E
|
|
|
217,945
|
|
|
|
25
|
%
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
555,049
|
|
|
|
64
|
%
|
|
$
|
95,759
|
|
|
|
Six months ended September 30, 2015
|
|
|
September 30, 2015
|
|
|
|
Purchase
|
|
|
Percentage
of purchase
|
|
|
Accounts
payable
|
|
Vendor A (Customer B)
|
|
$
|
646,248
|
|
|
|
26
|
%
|
|
$
|
-
|
|
Vendor B
|
|
|
358,339
|
|
|
|
15
|
%
|
|
|
89,687
|
|
Vender E
|
|
|
306,270
|
|
|
|
12
|
%
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,310,857
|
|
|
|
53
|
%
|
|
$
|
89,687
|
|
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.
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 short-term 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 September 30, 2016, all of borrowings
were at variable rates. The interest rates and terms of repayment of the borrowings are disclosed in Note 7.
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.
NOTE
–
11 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 2017. Total rent
expenses for the six months ended September 30, 2016 and 2015 was $78,120 and $73,908, respectively.
As of September 30, 2016, the Company has
the future minimum rental payments approximately $28,316 (HK$219,586) under various non-cancelable operating leases in the next
twelve months.
(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 $31,287 in liquidated damages from GDWPCL, aggravated/exemplary damages and injunction
from further defamation. The claim was filed with the High Court of the Hong Kong Special Administrative Region, Court of First
Instance.
GREEN DRAGON WOOD
PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30,
2016
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
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 trial
occurred in October 2013.
On June 30, 2015, the High Court of the
Hong Kong Special Administrative Region dismissed the claim of Mr. Yip and CCGL and allowed Mr. Lee and GDWPCL’s counterclaim
by granting an award of $350,000 with interest and legal costs.
(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, 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.
On January 26, 2016, Plaintiff and Ka L.
Lee entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”) to resolve certain disputes
between the parties which are the subject of the Indiana Case. Pursuant to the Settlement Agreement, Plaintiff agreed to authorize
its counsel to file a stipulation dismissing the Complaint and Judgment with Prejudice and both parties agreed to mutually release
and discharge each other of and from any and all actions, claims and demands whatsoever arising out of or in any way related to
the Complaint and Judgment.
As of September 30, 2016, in the opinion
of Company’s management, the resolution of this matter will not have a material effect on the Company’s financial statements
in the foreseeable future.
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.
|
(c)
|
Contractual commitment
|
The Company is committed to a series of
20 foreign exchange contracts with DBS bank to hedge the fluctuation between USD and RMB for a term of period from September 2015
to April 2017, monthly expiry. As of September 30, 2016, 13 contracts were fully executed and the remaining 7 contracts are outstanding.
The Company expects no material contingent loss from these committed contracts in the next twelve months.
NOTE
–
12 SUBSEQUENT
EVENTS
The Company evaluated subsequent events
through the date the financial statements were issued and filed with this Form 10-Q. There were no subsequent events that required
recognition or disclosure.