Item 2.01. Completion of Acquisition or Disposition of Assets.

The Merger

The Merger was consummated on February 8, 2017. In consideration for the Merger, the Zeecol shareholders exchanged all of the issued and outstanding shares of Zeecol to the Company, and the Company issued 116,561,667 shares of Company common stock, par value $0.001 (“Common Stock”) to the Zeecol Shareholders.

As a condition to closing the Merger, Kwok Leung Lee (“Mr. Lee”), the previous majority shareholder and previous Chief Executive Officer of the Company agreed to return 20,120,000 of his shares of Common Stock, representing all of his Common Stock holdings, to the Company.

Business

The Business of Zeecol

Business Overview

Zeecol’s goal is to provide environmentally low-impact farming integration solutions. Zeecol’s plan is to incorporate proven farming technology with its own proprietary processes to eliminate the carbon foot-print of its client dairy farmers in New Zealand, while substantially reducing its client’s operating costs and easing their regulatory scrutiny. Zeecol intends to advance the New Zealand dairy industry, using best practices for sustainable dairy farming, bringing it in line with or ahead of the world’s industry standard in terms of reducing environmental impact. The concept of “Zero Impact Farming” involves converting environmentally harmful pollutants into valuable commodities for the farm, as well as for the Zeecol supply chain. Dairy farms purchase five main categories of commodities: water, feed, fuel, fertilizer and electricity. Zeecol will purchase and/or build equipment enabling it to supply the farmer with all of these commodities.

The primary Zeecol system will take low value products derived from animals, including all waste streams on a dairy farm or feed lot, and efficiently produce/convert these low value products into high value products such as energy and animal feed that are to be sold back to the farmer on long term contracts. The objective is to reduce both environmental costs and dollar costs of farming.

The process will utilize an anaerobic digester that makes waste suitable for use by plants, and a photo bioreactor that supports colonies of highly efficient single celled plants called micro algae. The cows and other farm animals will essentially “feed” the digester, and the digester will feed the photo bioreactor. Finally, the photo bioreactor will feed the cows and farm animals completing the closed cycle. Throughout the process, we anticipate that fuel, electricity and fertilizer will be produced as saleable byproducts. In this way, the Zeecol system hopes to eliminates all waste while supercharging what happens naturally.

Our goal is to purchase waste treatment equipment at wholesale prices utilizing company resources, and then resell the equipment products at a profit while maintaining long-term relationships with our client farmers.

At the current time, we do not have sufficient capital to fully exploit the opportunities available, and will look to raise significant additional capital in the future.

New Zealand Environmental Regulations

The Environmental Protection Authority (or, the “NZ EPA”) is a government agency and environmental regulator in New Zealand. See http://www.epa.govt.nz.

The NZ EPA began operations in July of 2011 under its own Act called the Environmental Protection Authority Act 2011. The Act requires the NZ EPA to contribute to the effective and transparent management of New Zealand’s environment and natural and physical resources. The NZ EPA has multiple responsibilities, functions, duties and powers under six other Acts.

The NZ EPA authorized the installation of 800 water sampling stations across the nation and created a unified water pollution model. This resulted in a computer based regulatory model that gave estimates of how much pollution was entering the water ways, lakes and streams of New Zealand. In New Zealand, farms must attain consents from their Regional Councils to obtain operating permits. Those Councils must comply with Parliamentary rules to obtain the rates (property taxes) paid in their region. Compliance with the computer program limits became part of that process in 2011. The process is as follows;

Failure to follow NZ EPA recommendations means that farmers will not obtain their consents to operate their farm. Without consent to operate it is impossible to maintain a credit line for the operation or maintain a contract for the production and sale of milk to buyers.

Zeecol’s model is to be paid to take an option (the “Option”) to possess all of a farm’s waste and waste treatment systems existing on these farms giving it legal authority to deal with the environmental and regulatory agencies. Zeecol approaches regulators and submits a plan to process waste into feed fuel fertilizer and electricity that are sold on the farm and asks for a five year period to construct the facility. Once environmental approvals have been attained, Zeecol then approaches the local and Regional councils for their approvals and building permits. This is usually done as a variation on an existing waste treatment system (i.e. replacing a clay lined manure pond with a series of closed steel tanks). Once these are approved, Zeecol signs an off-take contract with the farm. If approvals are not forthcoming the Option expires and the problems return to the farm.

Addressing a Growing Problem in New Zealand

To comply with the NZ EPA, dairy farms are required to demonstrate their ability to meet specific quality standards. Under these new standards and regulations, the present method of dairy farming in New Zealand is viable for only a small number of farms. Most farms will either be forced to reduce their herd size to be compliant, or pay for expensive barns and equipment and manage their farms more profitably. According to a 2015 DairyNZ study of the distribution of Dairy Debt in New Zealand, 3,800 of New Zealand’s 11,000 dairy farms are losing money and over half are under severe financial stress. The number of dairy cows dropped from 6.4 million in 2011 to 5.0 million at the time of the report.

Management believes a trend is forming where New Zealand farm assets will likely be acquired by overseas agricultural enterprises and the operation of these highly efficient corporate facilities will place continuing financial pressure on the remaining New Zealand farm families. 

In recent years, New Zealand farmers have been vulnerable to these large agricultural enterprises, broadly referred to as “Agribusiness,” taking over unprofitable, distressed or non-compliant farms. Zeecol intends to give New Zealand farmers an alternative: the opportunity to continue owning and operating their farms at a greater profit with the use of Zeecol’s anaerobic digesters, providing farmers with the use and benefit of otherwise prohibitively costly and complex equipment. Zeecol’s “Build Own Operate” (or “BOO”) approach works with quality farm owners, permitting them to retain ownership of their farms while generating greater value and earning more per cow than the farmers did before, while simultaneously reducing their pollution and operating costs.

Lowering the cost of milk production, increasing farm profits, expanding the size of New Zealand’s dairy exports, while substantially reducing dairy’s impact on the environment, all have far reaching consequences beyond Zeecol’s bottom line.

Proposed Design of Zeecol Digester

Discussion of Zeecol’s Farm Waste Treatment Process

Zeecol considers manure from cows to be a renewable national resource, and the costs of processing of this manure into useful fuels and feed will be covered by other farm generated commodities.

Our plan:

Virtually all components in our process are recycled in a highly sustainable way, and sold back to the farmer per the off-take agreements.

Financing Model for Zeecol

In the Zeecol financing model, farmers establish:

Onboarding Farms

Our sales team, led by our CEO, William Mook, conducts the following to bring on new farm clients:

Zeecol has completed this process with five farms and collected for 10,800 cows across those farms. These are not the number of cows these farms have today, rather, it is the number of cows they will be permitted to operate following construction of the Zeecol facilities on those farms. Presently, these farms have 6,200 cows, or an average of 1,240 cows per farm. At the present time, no Zeecol facilities are constructed.

IP Agreement with William Mook

In May 2017, we entered into an IP license agreement (the “Agreement”) with our CEO and largest shareholder, William Mook. Pursuant to the Agreement, Mr. Mook granted to the Company the exclusive license (the “Exclusive License”) to the intellectual property rights of the method and substance of the Products. The Products are defined as products developed by Mr. Mook relating to the treatment of animal waste. Mr. Mook cannot sell the Products to any other person or enter into arrangements other than those contemplated by the Agreement to commercialize the Products in New Zealand. Pursuant to the Agreement, the Company will pay to Mr. Mook the sum of NZ$100,000 per year, or such larger amounts as are agreed to in advance for the second and subsequent years, payable in quarterly installments. The Company will also owe to Mr. Mook an 8% royalty in perpetuity for the net sales of any Products. Additionally, one third of the proceeds that the Company receives for the grant of any sub-license to third parties shall be payed immediately to Mr. Mook as well as 20% of all royalties payable by any sub-licensee to the Company. Additionally, the Company will pay to Mr. Mook a to be negotiated “product fee” immediately upon the Company producing a Product. The term of the Agreement is for a period of 20 years, unless terminated earlier by the mutual agreement of the parties or terminated within 24 months of the date of the Agreement if the Company is unable to raise additional capital in an amount equal to or in excess of NZ$5,000,000, of which none has been raised to date. Additionally, the Company may cancel the Agreement at any time upon two months’ notice. The Agreement may also be terminated by an event of breach, which includes the event in which 51% or more of the shareholding of the Company changes from the date of the Agreement.

The Market and Target Customers

Livestock numbers come from the Agricultural Production Census (APS) and Agricultural Production Survey conducted by Stats NZ with the Ministry for Primary Industries. ¹

New Zealand is one of the largest dairy exporters in the world. Dairy is one of the largest asset classes in New Zealand and represents a significant fraction of the New Zealand economy. There are 4.2 million dairy milking cows in New Zealand, and 5.26 million dairy cattle in total an increase from 3 million in 1982. As of 2016, there are 12,786 dairy farms, with a total area of 2.1 million hectares.

In 2016, New Zealand was the world’s eighth largest milk producer, with about 2.2% of world production. Total production was 2.33 billion kg of milk solids, and NZ$8.38 billion of dairy products were exported.

New Zealand formally recognizes livestock and in particular the dairy industry as a leading contributor of that countries greenhouse gasses (methane and CO2) in their ‘Cap and Trade’ program. Zeecol has delivered a government accepted management plan that recycles methane and CO2 produced from dairies into fuel, power, feed and fertilizer.

New Zealand has implemented a policy for water quality and sewage runoff wherein individual farms must submit and be approved on their management plan and/or face a reduced stocking rate or shut down. Farmers do have a time-frame of 20 years to comply with clean water legislation. This is negotiated with regulators on a case by case basis and involves obtaining consents from local and regional councils to operate. Zeecol has sought and attained approvals for five years among its client base.

1 http://www.stats.govt.nz/browse_for_stats/environment/environmental-reporting-series/environmental-indicators/Home/Land/livestock-numbers.aspx

Zeecol has submitted and received approval from the government for certain of its farms that it has signed 20 year off take contracts with. Certain of our farms have approved plans for Zeecol’s system and have received consents from local and regional councils to operate under the relevant acts.

Below is a profile of our target customers:

Our target customer is any successful farm owner who has a decade or more of profitable operation yet is having trouble maintaining its intensive feeding program and current stocking rate and herd size. We are looking at dairy operators located in New Zealand willing to place waste treatment equipment on their land and supply waste at little or no cost and in return purchase products on a long-term supply contract from Zeecol:

Competition

Direct Purchase of Equipment

Government Programs

Direct Competitors

We maintain an office at 57a Nayland Street, Sumner 8081 Christchurch, New Zealand. We do not have a formal lease agreement for this property, but Zeecol pays NZ$3,250 per every 10 week period.

Employees

As of May 12, 2017, Zeecol had no permanent employees. Zeecol has three sales associates and two executives, both of which are investors in the Company and have received no compensation. A third executive has a consultancy contract with the company totaling less than $100,000 per year and receives no direct compensation. None of our employees are represented by a labor union, and we consider our employee relations to be good.

The Business of Green Dragon

For a description of the business of Green Dragon, please refer to the section “Item 1. Business – Our Business” of the Company’s Form 10-K for the fiscal year ended March 31, 2016, filed with the Securities and Exchange Commission (the “SEC”) on January 27, 2017 (the “2016 10-K”).

Risk Factors

Our business, financial condition, operating results and cash flows can be affected by a number of factors, including, but not limited to, those set forth below, any one of which could cause our actual results to vary materially from recent results or from our anticipated future results. The risks described below are not the only ones we face, but those we currently consider to be material. There may be other risks which we now consider immaterial, or which are unknown or unpredictable, with respect to our business, our competition, the regulatory environment or otherwise that could have a material adverse effect on our business. For risk factors associated with the business of Green Dragon and risks associated with our Common Stock, please refer to the sections “Item 1A. Risk Factors – Risks Related To Our Business” and Item 1A. Risk Factors – Risks Related To Our Common Stock” of the 2016 10-K, respectively.

Risks Related to the Business of Zeecol

Zeecol only has a limited history upon which an evaluation of our prospects and future performance can be made and have no history of profitable operations.

Although Zeecol was incorporated in New Zealand in 2011, we have never earned a profit, and only in recent years have we truly began to operate our business. Accordingly, we have only a limited history upon which an evaluation of our prospects and future performance can be made and have no history of profitable operations. Due to our lack of operating history, our proposed operations are subject to all business risks associated with new enterprises. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the startup of a business and operation in a competitive and highly regulated industry. We will sustain losses in the future as we implement our business plan. There can be no assurance that we will ever generate revenues or operate profitably.

Since we have a limited operating history, it is difficult for potential investors to evaluate our business.

Our limited operating history makes it difficult for potential investors to evaluate our business or prospective operations. Since our formation, we have not generated any revenues. As an early stage company, we are subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays inherent in a new business. Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive environment. Our business is dependent upon the implementation of our business plan. We may not be successful in implementing such plan and cannot guarantee that, if implemented, we will ultimately be able to attain profitability.

We will need to obtain additional financing to fund our operations.

We will need significant additional capital in the future to continue to execute our business plan, which includes the construction of our digesters. Therefore, we will be dependent upon additional capital in the form of either debt or equity to continue our operations and commercialize our products. At the present time, we do not have arrangements to raise all of the needed additional capital, and we will need to identify potential investors and negotiate appropriate arrangements with them. We may not be able to arrange enough investment within the time the investment is required or that if it is arranged, that it will be on favorable terms. If we cannot get the needed capital, we may not be able to become profitable and may have to curtail or cease our operations.

We are dependent on the New Zealand rural sector, which can be affected by a wide range of factors outside our control.

Our revenues and results of operations depend significantly on the prospects of the New Zealand rural sector where we primarily operate. Our prospects also depend, to a significant extent, on positive farmer sentiment in New Zealand which can be affected by a wide range of factors outside our control. The following are key factors and risks that can have a material impact on the performance of the rural sector and farmer sentiment and in turn our business performance:

We depend heavily on our CEO William Mook and we have entered into a license agreement which governs the terms of our relationship. If the license agreement is terminated or if we were to lose the services of Mr. Mook, the loss could have a material adverse effect upon our business, financial condition or results of operations.

In May 2017, we entered into an IP license agreement (the “Agreement”) with our CEO and largest shareholder, William Mook. Pursuant to the Agreement, Mr. Mook granted to the Company the exclusive license (the “Exclusive License”) to the intellectual property rights of the method and substance of the Products. The Products are defined as products developed by Mr. Mook relating to the treatment of animal waste. Mr. Mook cannot sell the Products to any other person or enter into arrangements other than those contemplated by the Agreement to commercialize the Products in New Zealand. Pursuant to the Agreement, the Company will pay to Mr. Mook the sum of NZ$100,000 per year, or such larger amounts as are agreed to in advance for the second and subsequent years, payable in quarterly installments. The Company will also owe to Mr. Mook an 8% royalty in perpetuity for the net sales of any Products. Additionally, one third of the proceeds that the Company receives for the grant of any sub-license to third parties shall be payed immediately to Mr. Mook as well as 20% of all royalties payable by any sub-licensee to the Company. Additionally, the Company will pay to Mr. Mook a to be negotiated “product fee” immediately upon the Company producing a Product. The term of the Agreement is for a period of 20 years, unless terminated earlier by the mutual agreement of the parties or terminated within 24 months of the date of the Agreement if the Company is unable to raise additional capital in an amount equal to or in excess of NZ$5,000,000, of which none has been raised to date. Additionally, the Company may cancel the Agreement at any time upon two months’ notice. The Agreement may also be terminated by an event of breach, which includes the event in which 51% or more of the shareholding of the Company changes from the date of the Agreement.

We believe our success depends heavily on the continued active participation Mr. Mook and the continued existence of the Agreement. If we were to lose the services of Mr. Mook, or if the Agreement was to be terminated, amended or modified, the loss could have a material adverse effect upon our business, financial condition or results of operations.

Extreme weather conditions and other natural or man-made disasters could damage our products and customers and adversely affect demand from end users/farmers, which would cause a material reduction in revenues.

Customer demand for our products are subject to the risks associated with agriculture, including extreme weather conditions and other natural disasters such as drought, flood, snowstorm, earthquake, pestilence, plant diseases and insect infestations. The quality, cost and volume of our products that we produce could be materially adversely affected by extreme weather conditions or natural disasters.

The efficiencies of our farming system may not be scalable.

Our model has not yet been formally implemented on any farm, and if our system is not as efficient as projected, this could impair Zeecol’s ability to implement its strategic plan and negatively affects its operating results.

Key assets such as land, livestock and infrastructure could increase in price, increasing our operating costs.

An increase in the cost of items such as land, livestock and infrastructure could increase our operating costs and additional capital may not be available to us on acceptable terms when needed.

A change in the water availability may negatively impact the efficiency of the business model.

The success of our farming system is partly dependent on the availability of water on a farm. If there was a reduction in water availability on a farm subsequent to Zeecol beginning its operations on such farm, due to drought, contamination or otherwise, Zeecol’s profitability on that farm could be negatively affected.

If we are unable to effectively manage our growth plan, we may be unable to implement our business strategy.

Our growth plan requires significant operational and financial resources. There is no assurance that we can obtain the operational and financial resources we will need in order to manage develop and manage our growth strategy. Rapid growth may place a significant strain on management and administrative, operational and financial infrastructure, and failure to adequately manage growth could have a material adverse effect on our business, prospects, financial condition or results of operations.

We face significant competition from a variety of sources.

We operate in competitive markets and our future success will be largely dependent on our ability to provide quality products, services and solutions at competitive prices. We face competition in the form of direct purchases of equipment, government programs and direct competitors in New Zealand. These competitors may have been in business longer than we have, may have substantially greater financial and other resources than we have and may be better established in their markets. We can provide no assurance that our current or potential competitors will not provide products or services comparable or superior to those provided by us or adapt more quickly than we do to evolving industry or market trends. It is also possible that strategic alliances may form among competitors which may acquire a significant share of the market. Increased competition may result in price reductions, reduced gross margins and loss of market share, any of which would materially and adversely affect our business, prospects, financial condition or results of operations. We cannot assure investors that we will be able to compete effectively against current and future competitors.

As a result of their existing ownership, our executive officers and directors own a substantial interest in our voting capital and investors may have limited voice in our management.

Mr. Mook owns approximately 95% of our Common Stock Additionally, the holdings of our officers and directors may increase in the future if they otherwise acquire additional shares of our Common Stock.

As a result of their ownership and positions, our executive officers and directors, particularly Mr. Mook, will be able to influence all matters requiring shareholder approval, including the following matters:

In addition, Mr. Mook’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company, which in turn could reduce our stock price or prevent our shareholders from realizing a premium over our stock price.

We could incur significant costs in complying with environmental, health and safety laws or permits or as a result of satisfying any liability or obligation imposed under such laws or permits.

Our operations are subject to various New Zealand environmental, health and safety laws and regulations. Among other things, these laws regulate the emission or discharge of materials into the environment, govern the use, storage, treatment, disposal and management of hazardous substances and wastes, protect the health and safety of our employees and the end-users of our products, regulate the materials used in and the recycling of products and impose liability for the costs of investigating and remediating, and damages resulting from, present and past releases of hazardous substances, including releases by prior owners or operators of sites we currently own or operate. Violations of these laws and regulations or of any conditions contained in any environmental permit can result in substantial fines or penalties, injunctive relief, requirements to install pollution or other controls or equipment, civil and criminal sanctions, permit revocations and/or facility shutdowns. We could be held liable for the costs to address contamination of any real property we have ever owned, or operated.

Currency exchange rate fluctuations could adversely affect our results of operations.

Our business is exposed to fluctuations in exchange rates. Although our reporting currency is U.S. dollars, we operate in New Zealand. Our other transacting currencies include the New Zealand dollar. Where possible, we try to minimize the impact of exchange rate fluctuations by transacting in local currencies so as to create natural hedges. There can be no assurance that we will be successful in protecting against these risks. Under certain circumstances in which we are unable to naturally offset our exposure to these currency risks, we may enter into derivative transactions to reduce such exposures. Nevertheless, exchange rate fluctuations may either increase or decrease our revenue and expenses as reported in U.S. dollars. Given the volatility of exchange rates, we may not be able to manage our currency transaction risks effectively, and volatility in currency exchange rates may materially adversely affect our financial condition or results of operations.

If we are unable to stay abreast of changing technology in our industry, our profits may decline.

Our businesses are subject to frequent and sometimes significant changes in technology, and if we fail to anticipate or respond adequately to such changes, or do not have sufficient capital to invest in these developments, our profits may decline. Our future financial performance will depend in part upon our ability to develop and market new products and strategies and to implement and utilize technology successfully to improve our business operations. We cannot predict all the effects of future technological changes. The cost of implementing new technologies could be significant, and our ability to potentially finance these technological developments may be adversely affected by our debt servicing requirements or our inability to obtain the financing we require to develop or acquire competing technologies.