JKSM Jacksam Corporation (PK)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

 

FORM 10-Q

_______________

 

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

 

For the quarterly period ended June 30, 2010

  

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

 For the transition period from ______to______.

 

CHINA GRAND RESORTS, INC.

 (Exact name of registrant as specified in Charter)

 

NEVADA		0-27246		62-1407521
(State or other jurisdiction of incorporation or organization)		(Commission File No.)		(IRS Employee Identification No.)

RM 905, Reignwood Center

No.8 Yong’an Dongli Jianguomen Outer Street,

Chaoyang District Beijing, 100022,

People’s Republic of China

  (Address of Principal Executive Offices)

 _______________

 

 (86-10) 8528 8755

 (Issuer Telephone number)

_______________

 (Former Name or Former Address if Changed Since Last Report)

 

Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.   [X]  Yes  [  ] 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 large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer o

     Accelerated Filer o 

Non-Accelerated Filer o 

    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  [X]No  

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of August 10, 2010: 3,272,311 shares of common stock 

1

  

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		Page
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	14
Item 4.	Controls and Procedures	20
PART II -OTHER INFORMATION
Item 6.	Exhibits.	20
SIGNATURES		22

2

CHINA GRAND RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Currency expressed in United States Dollars (“US$”))
		As of
		June 30, 2010			September 30, 2009
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	147,576			$	26,424
Other receivables			20,432				7,751
Total Current Assets			168,008				34,175
Property and equipment, net			32,323				6,809
Intangible assets, net		1,314				-
		$	201,645			$	40,984
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Other payables		$	20,956			$	106,491
Shareholders payable			583,013				65,281
Related party payables			-				49,072
Total Current Liabilities			603,969				220,844
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock ($.001 par value, 1,750,000,000 shares authorized, 3,272,311 shares issued and outstanding as of June 30, 2010 and September 30, 2009)			3,272				3,272
Additional paid-in capital – common stock			9,346,133				9,346,143
Additional paid-in capital – warrants			752,907				752,907
Accumulated other comprehensive income			63,561				65,152
Accumulated deficit			(10,568,198)				(10,347,324)
Treasury stock			-				(10)
Total Stockholders' Deficiency			(402,325)				(179,860)
		$	201,645			$	40,984

See notes to consolidated financial statements

3

  CHINA GRAND RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Currency expressed in United States Dollars (“US$”))

		Three Months Ended June 30,	Nine Months Ended June 30,
			2010			2009			2010			2009
			(unaudited)			(restated) (unaudited			(unaudited)			(restated) (unaudited)
CONTINUING OPERATIONS
OPERATING EXPENSES
General and administrative expenses		$	64,113		$	236,913		$	209,610		$	609,839
Depreciation and amortization			1,643			37,976			4,500			222,210
LOSS FROM OPERATIONS			(65,755)			(274,889)			(214,110)			(832,049)
OTHER INCOME (EXPENSE)
Interest (expense) income			(3,116)			85			(6,374)			4,688
Income from revaluation of liquidated damages			-			-			-			1,903,000
Impairment loss on intangible assets			-			-			-			(95,568)
Other income(expense)			(390)			206			(390)			206
(LOSS) INCOME BEFORE INCOME TAX EXPENSE FROM CONTINUING OPERATIONS			(69,262)			(274,598)			(220,874)			980,277
Income tax expenses			-			-			-			-
(LOSS) INCOME FROM CONTINUING OPERATIONS			(69,262)			(274,598)			(220,874)			980,277
DISCONTINUED OPERATIONS
Impairment loss on goodwill due to disposal			-			-			-			(4,172,981)
Loss from discontinued operations			-			(713)			-			(19,706)
Gain on disposal of discontinued operations			-			-			-			189,230
LOSS FROM DISCONTINUED OPERATIONS			-			(713)			-			(4,003,457)
NET LOSS			(69,262)			(275,311)			(220,874)			(3,023,180)
OTHER COMPREHENSIVE LOSS
Foreign currency translation gain (loss)			(1,482)			28,416			(1,591)			(163,640)
TOTAL COMPREHENSIVE LOSS		$	(70,744)		$	(246,895)		$	(222,466)		$	(3,186,820)
Weighted average number of common stock outstanding -basic and diluted			3,272,311			381,042			3,272,311			343,056
Net loss per share – basic and diluted		$	(0.021)		$	(0.723)		$	(0.067)		$	(8.812)
(Loss) earnings per share from continuing operations -basic and diluted		$	(0.021)		$	(0.721)		$	(0.067)		$	2.857
Loss per share from discontinued operations -basic and diluted		$	-		$	(0.002)		$	-		$	(11.67)

See notes to consolidated financial statements

4

CHINA GRAND RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED JUNE 30, 2010 AND 2009

(Currency expressed in United States Dollars (“US$”))

		Nine Months Ended June 30,
		2010			2009
		(Unaudited)			(Restated) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(220,874)			$	(3,023,180)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			4,500				222,210
Impairment loss on goodwill and intangible assets			-				4,268,550
Income from revaluation of liquidated damages			-				(1,903,000)
Loss from discontinued operations			-				19,706
Gain on disposal of discontinued operations			-				(189,230)
Changes in operating assets and liabilities
Other receivables			(12,681)				(25,685)
Other payables			(85,535)				(86,639)
Net cash used in operating activities			(314,590)				(717,268)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment			(29,578)				-
Proceeds from sale of property and equipment			-				307,464
Purchase of intangible assets			(1,577)				-
Collection from related parties			-				493,945
Net cash (used in) provided by investing activities			(31,155)				801,409
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment to related parties			(49,072)				-
Increase in loan from shareholders			517,733				-
Net cash provided by financing activities			468,661				-
Effect of exchange rate fluctuation on cash and cash equivalents			(1,765)				(68,407)
NET INCREASE IN CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS			121,152				15,734
NET DECREASE IN CASH AND CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS			-				(13,084)
NET INCREASE IN CASH AND CASH EQUIVALENTS			121,152				2,650
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			26,424				42,780
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	147,576			$	45,430
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid		$	-			$	-
Income taxes paid		$	-			$	-
NONCASH INVESTING AND FINANCING ACTIVITIES
Liquidated damage share issued		$	-			$	87,000

See notes to consolidated financial statements

5

CHINA GRAND RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited consolidated financial statements of China Grand Resort, Inc. (f.k.a Asia Premium Television Group, Inc) and its subsidiaries (“CGND”, the “Company,” “we,” “us,” or “our”) have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim consolidated financial statements includes normal recurring adjustments and reflects all adjustments that, in the opinion of management, are necessary for a fair presentation of such consolidated financial statements.  Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's most recent audited consolidated financial statements and notes included in its annual report on Form 10-K for the fiscal year ended September 30, 2009 filed on January 13, 2010. Operating results for the three months and nine months ended June 30, 2010, are not necessarily indicative of the results that may be expected for longer periods or the entire year.

 

Organization

 

The Company was incorporated in the state of Nevada on September 21, 1989 under the name Fulton Ventures, Inc.

In June 2001, we acquired American Overseas Investment Co., Ltd. (“AOI”), a company incorporated in Macau, the special administrative region of the People’s Republic of China (“PRC” or “China”). With our acquisition of AOI, we began to focus our business on acquiring and developing companies with the goal of building a broad network of media, marketing and advertising companies in the PRC. On September 19, 2002, we changed our name to Asia Premium Television Group, Inc. to more accurately reflect our business at the time.

In July 2004, we completed the acquisition of 100% of Beijing Asia Hongzhi Advertising (“BAHA”), a company organized under the laws of the PRC, and its wholly-owned subsidiaries.  In July 2004, we also completed the acquisition of 100% of BAHA’s other subsidiary, Beijing Hongzhi Century Advertising (“BHCA”), a company organized under the laws of the PRC. As a result of these transactions, we became engaged in advertising production, and media consultation providing marketing, brand management, advertising, media planning, public relations and direct marketing services to clients in the PRC. In September 2005, we sold our interest in AOI to an unaffiliated third party.

In March 2007, we effected a 1,000 for 1 reverse stock split of our issued and outstanding common stock.

In July 2007, the Company acquired 100% of Sun New Media Transaction Service Ltd. (“SNMTS”), a company incorporated in Hong Kong, and its wholly owned subsidiary China Focus Channel Development Co., Ltd (“CFCD”), a company incorporated in People’s Republic of China, from NextMart Inc. (OTB: NXMR) for limited consideration.

On December 31, 2007, the Company entered into an agreement with Nanchang Hongcheng Mansion Limited, an unaffiliated company, to acquire a 70% equity interest in Jiangxi Hongcheng Tengyi Telecommunication Company, Ltd ("JXHC"), a local reseller of mobile minutes in Jiangxi Province. As consideration, we paid the seller 2 million RMB (approximately $282,486 USD).

On January 3, 2008, we entered into an agreement with Union Max Enterprises Ltd. to acquire a Provincial Class One Full Service Operator license for the Jiangxi Province, PRC. On that same date, we divested our traditional advertising business and focused on our new mobile phone-based marketing and advertising business, In this regard, we effected the divestiture of our traditional advertising business through a sale and purchase agreement with Fanya Advertising Company Ltd. ("Fanya"). Pursuant to the agreement, we sold BAHA and its wholly-owned Chinese subsidiaries, including BHCA ("BAHA Group") to Fanya for a total consideration of $4.8 million which was completed on January 10, 2008.  Under the agreement with Union Max, we paid them the sum of $6 million, of which $4.5 million was paid in cash and $1.5 million was paid in the form of our common stock. The acquisition was completed on March 31, 2008. As a result of that transaction, we acquired a Provincial Class One Full Service Operator license for the Jiangxi Province. Union Max was a subsidiary of China Mobile and Communications Association ("CMCA"). CMCA is China's leading association of telecommunications and telecommunication-related companies. Subsequently, in December 2008, the Board of Directors of the Company resolved to terminate the Company’s top up services in Jiangxi Province, and, on May 11, 2009, we entered into a share transfer agreement with an unaffiliated third party wherein we sold our ownership in JXHC for a total consideration of US$100. The transaction was effective March 31, 2009.

6

On March 30, 2009, we completed an acquisition agreement (the “Acquisition Agreement”) with GlobStream Technology Inc. (“GlobStream”) and its shareholders to acquire 100% of GlobStream, a Cayman Islands corporation. GlobStream was founded by Dr. Wenjun Luo, one of our previous directors and was an internet developer of unique mobile Internet software called Total Mobile Media. In May 2009, we terminated the operations related to GlobStream. Effective on August 1, 2009, the Company sold its ownership in GlobStream to Beijing Hua Hui Hengye Investment Limited.

On July 9, 2009, we entered into an agreement with Redrock Capital Venture Limited (“Redrock”), a BVI company, to satisfy and cancel $223,529 in outstanding loans in exchange for the issuance of 1,853,659 shares of our common stock.

On August 1, 2009, the Company entered into a subscription and asset sale agreement (the “Agreement”) with Beijing Hua Hui Hengye Investment Ltd. (“Hua Hui”), an unaffiliated PRC company. Hua Hui is an affiliate of The Beijing Hua Hui Corporation, a PRC real estate construction and development conglomerate that specializes in constructing and developing travel, resort, hotel, and apartment properties in popular tourist and other destinations within the PRC. Under the Agreement, we received from Hua Hui the commercial income rights to 10,000 square meters to a 17 story apartment building in the Huadun Changde International Hotel’s Apartment Complex located in the city of Changde, Hunan Province (“Project”). The Apartment Complex consists of a total of 215,000 square meters that sits on an approximately 3.6 acre piece of land. The Project when completed will be the site of a total 128 apartments, of which we will have the commercial rights to approximately 64 units. The Project is currently under development by Hua Hui. In exchange, we agreed to issue to Hua Hui 55,487,805 shares of our common stock valued at US$0.12 per share (the closing price of the Company’s common stock on the transaction date) for a total stock value of RMB 45,500,000 (or US$6,658,536), and transferred to Hua Hui certain other company assets valued at approximately RMB 4,500,000 (US$658,241.18). These assets consisted of all of our shares of the GlobStream, certain assets of both Sun New Media Transaction Services Limited and China Focus Channel Development Co., Ltd, and other miscellaneous assets of us. On September 8, 2009, we issued 16,646,342 shares of our common stock to Wise Gold Investment Ltd., a British Virgin Island company acting on behalf of Hua Hui. On that same date, we also issued 38,841,463 shares of common stock to Blossom Grow Holdings Limited, a British Virgin Island company, as escrow agent under an escrow agreement by and among our company, the escrow agent, and Hua Hui. The escrow agent will hold the escrow shares pending completion of the Project which is expected to occur at or near the end of calendar 2010. If the escrow agent receives written instructions from the Company that the Project is completed in accordance with the terms of the Agreement, the escrow agent will release the escrow shares to Hua Hui. However, if after projected completion date, the Project has not been completed, the escrow shares will continue to be held at escrow for one year. If after one year, the project still has not been completed, then the Company and Hua Hui will negotiate an agreement to deal with the escrow shares. During the escrow period, Hua Hui will be able to vote such shares provided it has reached an agreement with us on such matter(s). As a result, Hua Hui and Mr. Menghua Liu, Hua Hui’s Chairman and sole shareholder and the Company’s Chairman and Chief Executive Office, are deemed the beneficial owner of such shares. After giving effect to the transaction, Hua Hui became the Company’s majority shareholder and beneficially owns approximately 84.77% Company’s outstanding shares.

Effective on November 16, 2009, we changed our name to China Grand Resorts Inc. to better reflect our new business efforts and effected a 20 for 1 reverse split of our issued and outstanding common stock. The par value and our total number of authorized shares were unaffected by the reverse stock split.

In December 2009, the Company acquired 100% shareholdings of Key Prosper Holdings Limited, a company incorporated in the British virgin Islands on December 8, 2009.

Subsidiaries

 

On July 1, 2007, the Company acquired 100% of Sun New Media Transaction Service Ltd. (“SNMTS”), a company incorporated in Hong Kong, and its wholly owned subsidiary China Focus Channel Development Co., Ltd (“CFCD”), a company incorporated in the People’s Republic of China, from NextMart Inc. (OTB: NXMR) for limited consideration. In December 2009, the Company acquired 100% shareholdings of Key Prosper Holdings Limited, a company incorporated in the British Virgin Islands on December 8, 2009. On the date of acquisition, Key Prosper Holdings Limited had no assets or liabilities.

Nature of Prior Businesses and Hua Hui Transaction

From 2004 through January 2008, as a result of our acquisitions of the BAHA Group, we were engaged in traditional advertising production, and media consultation providing marketing, brand management, advertising, media planning, public relations and direct marketing services in the People’s Republic of China. As disclosed above, we ceased those operations when we sold our interest in BAHA Group in January 2008.

In January 2008, we changed our business focus when we acquired our interest in JXHC and the Provincial Class One Full Service Operator license for the Jiangxi Province from Union Max. We attempted to provide top-up services for cell-phone customers in

7

Jiangxi Province whereby customers could buy minutes on the fly using their debit card or bank account. However, in December 2008, due to third party issues which negatively affected our ability to launch that business, we determined to terminate that business which resulted in a sale of our interests to an unaffiliated third party effective in March 2009.

On August 1, 2009, we entered into the agreement with Hua Hui described above. Under the agreement, we received the commercial income rights to the Project. In the PRC, local and central governments own all of the real property, however, they grant land use rights to third parties. Hua Hui owns the land use rights to the Project and is responsible for the construction costs associated with the Project; however, we own the commercial income rights to the Project. Commercial income rights means the exclusive right to own and/or receive any and all income and proceeds derived from the Project in any capacity.

Consolidation

 

The consolidated financial statements include the accounts of the Company, and its subsidiaries- SNMTS, CFCD and Key Prosper Holdings Limited. All inter-company balances and transactions between parent and subsidiaries have been eliminated in consolidation.

 

Basis of Presentation - Going Concern and Management Plan

The Company’s consolidated financial statements are prepared using the accounting principles generally accepted in the United States of America (“US GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of June 30, 2010, the Company had an accumulated deficit totaling $10,568,198 and negative working capital of $435,961. The Company suffered a loss of $69,262 for the three months ended June 30, 2010 which is mainly due to the lack of revenues and the occurrence of general and administrative expenses for such period. In view of the matters described above, the appropriateness of the going concern basis is dependent upon continuing operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and succeed in its future operations. The 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 be unable to continue as a going concern.

In connection with its August 1, 2009 agreement with Hua Hui, the Company sold to Hua Hui its equity interest in GlobStream and certain other Company assets of Sun New Media Transaction Services Limited and China Focus Channel Development Co., Ltd.

As a result of the transaction with Hua Hui, we will receive the commercial income rights to the Project. In addition, we planned on becoming a leading specialty real estate sales company in China for tourism developments. However, due to recent legislation and other governmental measures affecting real estate development in the PRC, the Company currently is assessing the impact of such legislation on its proposed real estate consulting and marketing business (see Item 2.  Management's Discussion And Analysis Of Financial Condition And Results Of Operations – Our Current Business Strategy).

The Company is actively pursuing additional capital in an effort to fund its ongoing capital requirements, as well as seeking agreements with potential strategic partners to develop its new business strategy. The Company’s working capital requirements for the next 12 month is approximately $600,000 (please refer to “Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations - Capital Requirements For The Next 12 Months ” ) Management is hopeful that it will receive sufficient funding to allow the Company to continue its operations through the fiscal year.

`

  Accounting 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 at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Company's consolidated financial statements include allowance for doubtful accounts, estimated useful lives and impairment of acquired intangible assets and goodwill.

Revenue Recognition

 

The Company relies on SEC Staff Accounting Bulletin: No. 104 "Revenue Recognition in Financial Statements" ("SAB 104") (ASC No 605) to recognize our revenue. SAB 104 in establishing our accounting policy states that revenue generally is realized or realizable and earned when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the seller's price to the buyer is fixed or determinable, and (4) collectability is reasonably assured.

 

Income Taxes

8

 

The Company accounts for income taxes under the provisions of SFAS No. 109 (ASC No 740), "Accounting for Income Taxes," as described in Note 9 to the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2009. The Company records a valuation allowance to reduce the deferred tax assets to the amount that it believes is more likely than not to be realized. In the event the Company was to determine that we would be able to realize our deferred tax assets in the future in excess of their recorded amount, an adjustment to our deferred tax assets would increase our income in the period such determination was made. Likewise, if the Company determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to our deferred tax assets would be charged to our income in the period such determination is made. The Company records income tax expense on our taxable income using the balance sheet liability method at the effective rate applicable in China in the consolidated statements of operations and comprehensive loss. There is no income tax expenses during the three months and nine months ended June 30, 2010 and 2009 due to the net loss incurred.

Recently issued Accounting Pronouncements

 

FASB Establishes Accounting Standards Codification

In February 2010, the FASB issued Accounting Standards Update (ASU) 2010-09 to amend ASC 855, Subsequent Events, whose effective date is for interim or annual reporting periods ending after June 15, 2010. As a result, ASU No. 2010-09 excludes SEC reporting entities from the requirement to disclose the date on which subsequent events have been evaluated; In addition, it modifies the requirement to disclose the date on which subsequent events have been evaluated in reissued financial statements to apply only to such statements that have been restated to correct an error or to apply U.S. GAAP retrospectively.

In June 2009, the FASB issued Accounting Standards Update No. 2009-01, “Generally Accepted Accounting Principles” (ASC Topic 105) which establishes the FASB Accounting Standards Codification (“the Codification” or “ASC”) as the official single source of authoritative U.S. GAAP. All existing accounting standards are superseded. All other accounting guidance not included in the Codification will be considered non-authoritative. The Codification also includes all relevant Securities and Exchange Commission (“SEC”) guidance organized using the same topical structure in separate sections within the Codification.

Following the Codification, the Board will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASU”) which will serve to update the Codification, provide background information about the guidance and provide the basis for conclusions on the changes to the Codification.

The Codification is not intended to change GAAP, but it will change the way GAAP is organized and presented. The Codification is effective for the companies’ 2009 financial statements and the principal impact on our financial statements is limited to disclosures as all future references to authoritative accounting literature will be referenced in accordance with the Codification.

In January 2010, the FASB issued the following ASC Updates:

ASU No. 2010-06—Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This Update amends ASC 820 subtopic 10 that requires new disclosures about transfers in and out of Levels 1 and 2 and activity in Level 3 fair value measurements. This Update also amends ASC 820 subtopic 10 to clarify certain existing disclosures. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010.

The Companies expects that the adoption of the above updates issued in the year 2010 will not have any significant impact on its financial position and results of operations.

NOTE 2 –PROPERTY AND EQUIPMENT, NET

The following is a summary of property and equipment, at cost, less accumulated depreciation and amortization:

		June 30 2010			September 30 2009
		(Unaudited)
Office equipment	$	19,810		$	8,879
Leasehold improvement		18,647			-
Less: accumulated depreciation and amortization		6,134			2,070
	$	32,323		$	6,809

9

Depreciation and amortization expenses for the three months ended June 30, 2010 and 2009 were $1,643 and $37,976 respectively, and for the nine months ended June 30, 2010 and 2009, depreciation and amortization expenses were $4,500 and $222,210 respectively.

NOTE 3 – OTHER PAYABLES

 

The following table summarizes other payables:

	June 30, 2010				September 30, 2009
	(Unaudited)
Other payables	$	20,956		$	106,491

 

As of June 30, 2010 and September 30, 2009, the balances of other payables mainly include audit fees and other office expenses payables.

NOTE 4—STOCKHOLDERS PAYABLE

The balance of stockholders payable is summarized as follows:

		June 30, 2010		September 30, 2009
		(Unaudited)
Redrock Capital Venture Limited	$	100,280		$	65,281
Beijing Hua Hui Hengye Investment Limited		482,733			-
	$	583,013		$	65,281

Commencing in June 2009, we began receiving loans from Redrock Capital Venture Limited. As of June 30, 2010, the amounts due to Redrock is $100,280, which amounts is due on demand and bears no interest. Commencing in October 2009, we began receiving loans from Beijing Hua Hui Hengye Investment Limited. As of June 30, 2010, the amount is $482,733. The amounts due to Hua Hui are due on demand and bear interest at the prevailing rate charged by the PRC Central Bank on the payment date. Hua Hui is a majority shareholder and Redrock is a greater than 5% shareholder.

NOTE 5 – CAPITAL STOCK

 

Common Stock

On January 4, 2009, the Company received a notice of claims (the “Default Notice”) from certain investors (the “Investors”) with respect to a private placement transaction dated June 4, 2007 (the “Financing Transaction”), pursuant to which the Company issued 1,000,000 shares of common stock and 1,000,000 common stock warrants to the Investors. The Default Notice was made by the Investors due to the Company’s failure to fulfill its registration statement obligation under the Financing Transaction. The Default Notice demanded the issuance of 1,000,000 shares of the Company’s common stock as liquidated damages under the agreement. After due consideration and reasonable deliberation, the Company agreed to issue to each of the Investors 100,000 shares of the Company’s common stock, which represented a total of 1,000,000 shares. The shares of common stock were issued to the Investors in March and April 2009. In connection with its audited financial statements for the fiscal year ended September 30, 2009, the Company decided to restate its financial statements for the 2008 fiscal year end period and each quarter in 2009 fiscal year to reflect the issuance of these shares as liquidated damages (see NOTE 9 – RESTATEMENT below).

 

On February 1, 2009, the Company cancelled 19,989 shares returned from Her Village pursuant to an Asset Transfer Agreement.

In May 2009, the Company issued 884,377 shares of common stock and 155,623 warrants as consideration for the acquisition of Globestream. At the same time, the Company cancelled 240,000 common stock then held by Globstream on acquisition.

On July 9, 2009, the Company entered into an agreement with Redrock Capital Venture Limited which cancelled outstanding loans in the amount of $223,529 in favor of Redrock for the issuance of 1,853,659 shares of its common stock.

On September 8, 2009, pursuant to the transaction with Beijing Hua Hui on August 1, 2009, the Company issued 16,646,342 shares of its common stock to Wise Gold Investment Ltd., a British Virgin Island company acting on behalf of Hua Hui. In addition, on that same date, it issued 38,841,463 shares of common stock to Blossom Grow Holdings Limited, a British Virgin Island company, as escrow agent under an escrow agreement by and among the Company, the escrow agent, and Hua Hui.

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Effective on November 16, 2009, we effected a 20 for 1 reverse split of our issued and outstanding common stock. This reverse stock split already gave retroactive effect in the computation of basic and diluted EPS for all period presented accordingly.

As of June 30, 2010, the Company had 3,272,311 shares issued and outstanding.

Warrants / Options

 On July 22, 2007, 1,200,000 common stock warrants were issued to the Investors. Under the warrants, the Investors have the right, for a period of three years from the date of such warrants, to purchase a total of 1,200,000 (60,000 split-adjusted) shares of the Company’s common stock. The per share exercise price of the Warrant is $1.65.

 

On June 28, 2009, pursuant to the Acquisi tion Agreement made and entered into by the Company and Globstream,, the Company issued warrants to Mr. Luo Wenjun for the option to purchase 155,623 (7,782 split-adjusted) shares of Common Stock with an exercise price of $0.15 and an expiration after March 23, 2019.

These Warrants may be exercised, in whole or in part, by the Holder during the Exercise Period by (i) the presentation and surrender of this Warrant to the Company along with a duly executed Notice of Exercise specifying the number of Warrant Shares to be purchased, and (ii) delivery of payment to the Company of the Exercise Price for the number of Warrant Shares specified in the Notice of Exercise.

 

At June 30, 2010, the Company had warrants issued and outstanding to purchase 67,782 common shares.

 

2001 Stock Plan

 

In 2001, the Board of Directors of the Company (the “Board”) adopted a Stock Plan (“Plan”). Under the terms and conditions of the Plan, the Board is empowered to grant stock options to employees, consultants, officers, and directors of the Company. Additionally, the Board will determine at the time of granting the vesting provisions and whether the options will qualify as Incentive Stock Options under Section 422 of the Internal Revenue Code (Section 422 provides certain tax advantages to the employee recipients). The Plan was approved by the shareholders of the Company on September 15, 2001. The total number of shares of common stock available under the Plan may not exceed 2,000. As of June 30, 2010, no options were granted under the Plan.

 

 Development Fund

In 2004, certain shareholders, directors, and officers entered into an agreement to establish a fund wherein 0.65 million shares of common stock would be returned by the shareholders to the Company for cancellation and reissuance as incentives to compensate new officers, directors and other management team members based on the management effort and performance decided by the three shareholders.

On July 28, 2005, one of the shareholders returned 10,000 shares to the Company, which are treated as treasury stock at the face value and the premium as additional paid-in capital. The shares have been valued at a predecessor cost value of $0.001 per share and were held by the Company. And only 10,000 shares have been returned to the Company. On November 14, 2009, the Board of Directors resolved to cancel and retire these 10,000 shares.

NOTE 6 – RELATED PARTY TRANSACTIONS AND BALANCES

 

Shareholders payable

Commencing in October 2009, we began receiving loans from Beijing Hua Hui Hengye Investment Limited. As of June 30, 2010 and September 30, 2009, the balance is $482,733 and $0, respectively. The amounts due to Hua Hui are due on demand and bear interest at the prevailing rate charged by the PRC Central Bank on the payment date. Hua Hui is a majority shareholder of the Company (See Note 4).

Related party payables

We have no balance of related party payables as of June 30, 2010. The balance of $49,072 at September 30, 2009 was a loan from Oxus (Beijing) Cancer Research Ltd (“Oxus”). Hua Hui, our majority shareholder, is the controlling party of Oxus. The balance was due on demand and bore no interests.

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NOTE 7 – EARNINGS (LOSS) PER SHARE

 

The Company accounts for Earnings (loss) per share in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 128 (ASC No. 260), “Earnings Per Share”, which requires the Company to present basic income per share and dilutive income per share. Basic earnings (loss) per share includes no dilution and is computed by dividing (loss) income available to common stockholders by the weighted average number of common shares outstanding for the periods.

 

The following data show the amounts used in computing earnings (loss) per share and the weighted average number of shares for the three and nine months ended June 30, 2010 and 2009. As the Company had losses, presenting diluted net earnings (loss) per share is considered anti-dilutive. Therefore they are not included in the statement of operations.

:

	Three months ended		Nine months ended
		June 30,											June 30,
	2010		2009		2010		2009
		(Unaudited)					(Restated) (Unaudited)						(Unaudited)				(Restated) (Unaudited)
NET LOSS	$	(69,262)		$	(275,311)		$	(220,874)		$	(3,023,180)
(Loss) income from continuing operations (Numerator)			(69,262)					(274,598)				(220,874)						980,277
Loss from discontinued operations (Numerator)		-			(713)			-			(4,003,457)
Weighted average number of common shares outstanding used in earnings (loss) per share during the period (Denominator)			3,272,311					381,042				3,272,311						343,056
Net loss per share - basic and diluted	$	(0.021)		$	(0.723)		$	(0.067)		$	(8.812)
(Loss) earnings per share from continuing operations - basic and diluted	$	(0.021)			$	(0.721)		$	(0.067)			$	2.857
Loss per share from discontinued operations - basic and diluted	$	-		$	(0.002)		$	-		$	(11.670)

 NOTE 8– COMMITMENTS AND CONTINGENCIES

Operating Lease Obligations

In December 2009, we relocated our office to a new office lease in Beijing. The term of the old lease was from September 1, 2009 to July 31, 2011; however, we terminated the old lease on December 11, 2009. The new Beijing office lease is from December 11, 2009 to December 10, 2011 and provides for monthly lease payment of $5,333 with two months period of free rent. In connection with the sale of our interest in JXHC in March 31, 2009, we are no longer responsible for the Jianxi office lease since such date. As of June 30, 2010, our total future commitments for minimum lease payments are as follows:

		Lease commitments
September 30, 2010		$	15,999
September 30, 2011			58,672
September 30, 2012			12,446
Total		$	87,117

Rental expenses for the three months ended June 30, 2010 and 2009 was $15,999 and $ 44,109, and for the nine months ended June 30, 2010 and 2009, the rental expenses totaled approximately $37,137 and $53,446 respectively.

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NOTE 9 – RESTATEMENT

On January 4, 2009, the Company received a notice of claims (the “Default Notice”) from certain investors (the “Investors”) with respect to a private placement transaction dated June 4, 2007 (the “Financing Transaction”), pursuant to which the Company issued 1,200,000 common shares of common stock and 1,200,000 common stock warrants to the Investors. The Default Notice was made by the Investors due to the Company’s failure to fulfill its registration obligations under a registration rights agreement commencing in August 2007. The Default Notice demanded the issuance of 1,000,000 shares of the Company’s common stock for such failure. After due consideration and reasonable deliberation, the Company agreed to issue to each of the Investors 100,000 shares of the Company’s common stock, which represented a total of 1,000,000 shares. These shares were issued to the Investors in March and April 2009.

Pursuant to FSP EITF 00-19-2 (ASC No. 825-20), the Company should have reported probable damages for fiscal years ended September 30, 2007 and September 30, 2008 since the default date, which was August 22, 2007. The damages are based on the number of shares to be issued at the stock price at each reporting date.  However, the Company did not record the probable damages until the shares were issued, and recorded a loss of $250,000 liquidated damages for the nine months ended June 30, 2009.

The damage for the year ended September 30, 2007 and September 30, 2008 should have been $1,281,150 and $708,850, respectively. As of June 30, 2010, the obligation was settled by issuing all the required shares. The subsequent reduction in the price of the common stock since September 30, 2008 resulted in an income of $1,903,000 from the revaluation of liquidated damages for the nine months ended June 30, 2009, however, there is no income or loss recognized from the revaluation of liquidated damages for the three months ended June 30, 2009 because the stock price kept same during these three months. This also brings the impact in the amount of additional paid-in capital.  The effect of the restatement on the Company’s previously issued financial statements as of June 30, 2009 is as the following schedules.

The restatement for annual period ended September 30, 2008 has been made in its audited financial statements for the annual period ended September 30, 2009 to reflect this obligation.  The restatement for each quarter in fiscal 2009 has been made in each quarterly unaudited financial statement in fiscal 2010.

Restated Balance Sheet

As of June 30, 2009
	As reported		Adjustments		Restated
	(unaudited) (US$)		(US$)		(unaudited)  (US$)
Common stock	8,112		(7,706)		406
Additional paid-in capital – common stock	9,779,853		(155,294)		9,624,559
Accumulated deficit	(9,149,909)		163,000		(8,986,909)
Total stockholders' equity	1,109,332		-		1,109,332
Total liabilities and stockholders' equity	1,380,505		-		1,380,505

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Restated Statements of Operations and Comprehensive loss

	Three Months Ended June 30, 2009
	As reported		Adjustments		Restated
	(unaudited) (US$)		(US$)		(unaudited) (US$)
Liquidated damages on registration payment arrangement	800,000		(800,000)		-
Income (loss) from continuing operations	525,402		(800,000)		(274,598)
Net income (loss)	524,689		(800,000)		(275,311)
Total comprehensive income ( loss)	553,105		(800,000)		(246,895)
Weighted average number of common shares outstanding – basic and diluted	381,042				381,042
Net income (loss) per share – basic and diluted	1.377				(0.723)
Earnings (loss) per share from continuing operations- basic and diluted	1.379				(0.721)

	Nine Months Ended June 30, 2009
	As reported		Adjustments		Restated
	(US$)		(US$)		(US$)
Income from revaluation of liquidated damages	-		1,903,000		1,903,000
Liquidated damages on registration payment arrangement	(250,000)		250,000		-
Loss (income) from continuing operations	(1,172,723)		2,153,000		980,277
Net loss	(5,176,180)		2,153,000		(3,023,180)
Total comprehensive loss	(5,339,820)		2,153,000		(3,186,820)
Weighted average number of common shares outstanding – basic and diluted	343,056				343,056
Net loss per share – basic and diluted	(15.088)				(8.812)
(Loss) earnings per share from continuing operations- basic and diluted	(3.418)				2.857

NOTE 10 – SUBSEQUENT EVENTS

There are no events that have occurred subsequent to the date of the financial statements that in the Company's management opinion would require adjustment or disclosure in these statements.

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

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the U. S. Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the U.S. Securities Exchange Act of 1934, as amended(the “Exchange Act”). Such statements relate to, among other things, our future plans of operations, business strategy, operating results and financial position and are often, though not always, indicated by words or phrases such as “anticipate,” “estimate,” “plan,” “project,” “outlook,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” and similar words or phrases. These forward-looking statements include statements other than historical information or statements of current condition, but instead represent only our belief regarding future events, many of which by their nature are inherently uncertain and outside of our control. Important factors that could cause actual results to differ materially from forward-looking statements include, but are not limited to, those described in the section titled “Risk Factors” previously disclosed in our Annual Report on Form 10-K for the year ended September 30, 2009, as well as the following:

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	•		our ability to implement and execute our current business plan, including the ability to sell the apartment units of the Project and the ability to attract customers for our consulting and marketing business;
	•		the economic conditions in the Changde market, the location of the apartment units and elsewhere in the PRC for our consulting and marketing business,
	•		our reliance on our major shareholders ;
	•		our ability to execute key strategies;
	•		actions by our competitors;
	•		our ability to raise additional funds to execute our new business plan ;
	•		risks associated with assumptions we make in connection with our critical accounting estimates;
	•		potential adverse accounting related developments;
	•		other matters discussed in this Quarterly Report generally.

 

Consequently, readers of this Quarterly Report should not rely upon these forward-looking statements as predictions of future events. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we access the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We undertake no obligation to update or revise any forward-looking statement in this Quarterly Report to reflect any new events or any change in conditions or circumstances. All of the forward-looking statements in this Quarterly Report are expressly qualified by these cautionary statements.

Overview

We were organized under the laws of the State of Nevada on September 21, 1989. We went through various name changes prior to November 2009 when the name was changed to China Grand Resort, Inc. We were originally formed to purchase, merge with or acquire any business or assets which management believes has potential for being profitable.

On January 3, 2008, in order to divest from our traditional advertising business and focus on our new mobile phone-based marketing and advertising business, we entered into a sale and purchase agreement with Fanya Advertising Company Ltd. ("Fanya") to sell Beijing Asia Hongzhi Advertising (“BAHA”), a company organized under the laws of the PRC and its wholly-owned Chinese subsidiaries ("BAHA Group"). We sold the BAHA Group to Fanya for a total consideration of $4.8 million which was completed on January 10, 2008.

On January 3, 2008, we entered into an agreement with Union Max Enterprises Ltd. to acquire a Provincial Class One Full Service Operator license for the Jiangxi Province, PRC. As consideration, we paid Union Max the sum of $6 million, of which $4.5 million was paid in cash and $1.5 million was paid in the form of our common stock. As a result of that transaction, we acquired a Provincial Class One Full Service Operator license for the Jiangxi Province. Union Max was a subsidiary of China Mobile and Communications Association ("CMCA"). CMCA is China's leading association of telecommunications and telecommunication-related companies. The acquisition was completed on March 31, 2008. In December 2008, the Board of Directors of the Company resolved to terminate the Company’s top up services in Jiangxi Province, and, on May 11, 2009, we entered into a share transfer agreement with an unaffiliated third party wherein we sold our ownership in JXHC for a total consideration of US$100, effective March 31, 2009.

On March 30, 2009, we completed an acquisition agreement with GlobStream Technology Inc. (“GlobStream”) and its shareholders to acquire 100% of GlobStream, a Cayman Islands corporation. GlobStream was founded by Dr. Wenjun Luo, one of our previous directors and was a developer of unique mobile Internet software called Total Mobile Media. In May 2009, we terminated the operations related to GlobStream. Effective on August 1, 2009, the Company sold its ownership in GlobStream to Beijing Hua Hui Hengye Investment Limited (“Hua Hui”).

As previously disclosed, on August 1, 2009, we entered into the agreement with Beijing Hua Hui Hengye Investment Ltd. (“Hua Hui”), an unaffiliated PRC company. Under the agreement, we received the commercial income rights to 10,000 square meters to a 17 story apartment building in the Huadun Changde International Hotel’s Apartment Complex located in the city of Changde, Hunan Province (“Project”). In the PRC, local and central government own all of the real property, however, they grant land use rights to third parties. Hua Hui owns the land use rights to the Project, and granted the commercial income rights to the Project to us under our agreement. Commercial income rights means the exclusive right to own and/or receive any and all income and proceeds derived from the Project in any capacity.  As described in Our Current Business Strategy below, we intend to market and sell commercial rights to the Project and to provide consulting and marketing services to the real estate industry in the PRC..

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Our Current Business Strategy

General

Hua Hui and its affiliates, including The Beijing Hua Hui Corporation, are a PRC real estate construction and development group that specializes in constructing and developing travel, resort, hotel, and apartment properties in popular tourist and other destinations within the PRC.As a result of the transaction with Hua Hui, our new business goal is to become a leading specialty real estate consulting and marketing company for tourism projects in the PRC. Initially, we intend to market the commercial rights to the Project that we received from Hua Hui. We used to expect to expand our business by using existing resources and know how of our affiliates and other parties to engage in providing consulting and marketing services to real estate developers. But due to the adverse impact of the new real estate policies announced by the State Council which aim to bring the overheating real estate prices back to normality, the Company decided not to engage in these businesses. In the future, the Company may seek to engage in some other business that related to real estate, such as continuing care retirement communities.

With respect to the Project, we will be responsible for project marketing and Hua Hui will perform the actual unit sales. We expect to pay Hua Hui a sales commission of not less than 5‰ of the unit sales price and we will receive the remainder of the unit sales price.  As of the date of this report, we do not have any formal agreements or arrangements with any developer or Hua Hui for fees that we will earn, or fees that we will pay Hua Hui.

The Project

As mentioned above, the Project consists of 10,000 square meters of apartment space in the concerning Building of the Huadun Changde International Hotel’s Apartment Complex, a 17 story building, located in the city of Changde, Hunan Province (“Project”). The Project is currently under construction by Hua Hui. Changde is a popular tourist destination located in China’s central Hunan province. Upon completion, the Complex will consist of a total of 215,000 square meters that sits on an approximately 3.6 acre piece of land that has access roads on the North, East, and West. The city is accessible by rail and air and is in close proximity to several tourist, scenic, and commercial areas. The Project is in close proximity to several tourist, scenic, and commercial areas. Construction began on June 1, 2009 and is expected to be completed on December 31, 2010. All permits concerning the Project have been acquired from governmental authorities, and the construction of the Project is approximately 50% completed. We also have acquired the pre-sale permits for the sale of the apartments from the local real estate authority.

The Project when completed will be the site of a total 128 apartments. The units are expected to range in size from 120 square meters to 210 square meters. Under current market conditions, we expect prices of the apartment units to range from RMB5,500 ($805 USD) per square meter to RMB 6,500 ($950 USD) per square meter. The units when sold will be unfurnished. We began pre-completion marketing efforts in the mid-calendar 2010. In this regard, we have initiated outdoor advertisements; printed sales brochures; visited with potential buyers; commenced website design for the Project; and currently, a sales center and several model units with respect to the Project are being constructed by Hua Hui and are expected to be completed in late August. Potential buyers can tour then these models to gain a appreciation of the design, structure and appearance of the units. In any pre-completion sale, the amount of the down payment that we will be able to obtain from a buyer is subject to the housing policy of governing real estate authorities. The current policy allows for a down payment ranging from 30% to 50% of the sales price dependent on the property size. As mentioned, Hui Hua will act as the sales agent and is expected to receive a sales commission of not less than 5‰ of the unit sales price. Hua Hui has informed us that in course of selling the units, it will act in good faith in selling the units and will not act preferentially toward selling its units over the units of the Company. However, at the present time, the Company does not have a formal agreement with Hua Hui regarding sales commission or the manner of sale with respect to the units.

Due to the fact that we have suspended our real estate sales consulting and marketing business, our working capital budget for the next 12 months has been reduced from $1,100,000 to approximately $600,000 which relate principally to costs of our executive offices. This amount is comprised of $250,000 in salaries and related personnel costs, $200,00 in professional fees, $100,000 for executive office rent, and $50,000 in miscellaneous expenses. We will not incur any costs of marketing the Project. We expect to generate revenues from the sale of the apartment units in the third quarter of calendar year 2010. Thereafter, subject to the foregoing, we believe that revenues from the Project will be sufficient to fund our ongoing working capital needs.

Our business strategies are subject to certain risks and uncertainties, including our ability to raise additional funds in the future. We cannot predict whether we will successful with any of business strategies. We do not anticipate seasonal fluctuations in our business.

Results of Operations

Unless otherwise indicated, all amounts are in U.S. Dollars.

Three Months Ended June 30 , 2010 Compared to Three Months Ended June 30 , 2009

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Total Revenues and Gross Margin

For the three month period ended June 30, 2010, we were developing our new business strategy discussed above. As a result, we had no revenues from operations or gross margin. During the comparable period in 2009, we had no revenues from operations or gross profit attributable to our mobile phone based business.

Loss from Operations

During the three months ended June 30, 2010, we incurred general and administrative expenses of $64,113 compared with $236,913 for the three months ended June 30, 2009. The decrease in general and administrative expenses is primarily due to reduced overhead at the corporate level. Commencing in 2009, we made an effort to reduce our ongoing overhead expenditures, which includes personnel reductions and office expense, due to our reduced operations. We also had $1,643 in depreciation and amortization for the three months ended June 30, 2010 compared with $37,976 for the comparable three months ended June 30, 2009, the difference is due to the disposal of the fixed assets in the beginning of the fiscal year. Our loss from operations for the three months ended June 30, 2010 was $65,755 compared to $274,889 for the three months ended June 30, 2009. The difference between the periods is due to lower depreciation and amortization expenses and the reduction of general and administrative expenses discussed above.

 

Other Income (Expense)

Other expense for the three months ended June 30, 2010 is $3,506, which mainly is the interest expense for the period. For the corresponding period in year 2009, other income is $291 which includes an interest income of $85.

Loss Before Income Taxes from Continuing Operations

Our loss from continuing operations was $69,262 for the three months ended June 30, 2010 compared to a loss of $274,598 for the three months ended June 30, 2009. The difference is due to the reasons discussed above.

Net Loss

As a result of the foregoing, our net loss was $69,262 for the three months ended June 30, 2010 compared to a loss of $275,311 for the three months ended June 30, 2009.

Comprehensive Loss

During three months ended June 30, 2010, we had a foreign currency translation loss of $1,482 compared with an income of $28,416 for the three months ended June 30, 2009. The difference is due to fluctuation of value of US dollar against RMB. As a result of all of the issues mentioned above, we had a total comprehensive loss of $70,744 for the three months ended June 30, 2010 compared with a total comprehensive loss of $246,895 for the comparable three months ended June 30, 2009.

Nine Months Ended June 30 , 2010 Compared to Nine Months Ended June 30 , 2009

Total Revenues and Gross Margin

For the nine month period ended June 30, 2010, we were developing our new business strategy discussed above. As a result, we had no revenues from operations. During the comparable period in 2009, we had no revenues from operations or gross profit attributable to our mobile phone based business.

Loss from Operations

During the nine months ended June 30, 2010, we incurred general and administrative expenses of $ 209,610 compared with $609,839 for the nine months ended June 30, 2009. The decrease in general and administrative expenses is primarily due to reduced overhead at the corporate level. Commencing in 2009, we made an effort to reduce our ongoing overhead expenditures, which includes personnel reductions and office expense, due to our reduced operations. We also had $4,500 in depreciation and amortization for the nine months ended June 30, 2010 compared with $222,210 for the comparable nine months ended June 30, 2009, the difference is due to the disposal of the fixed assets in the beginning of the fiscal year. Our loss from operations for the nine months ended June 30, 2010 was $214,110 compared to a loss of $832,049 for the nine months ended June 30, 2009. The difference between the periods is due to lower depreciation and amortization expenses and the reduction of general and administrative expenses discussed above.

Other Income (Expense)

Other net expense for the nine months ended June 30, 2010 was $6,764, which mainly was the accrued interest for the period. For the nine month period ended June 30, 2009, we had a net income of $1,812,326 mainly from revaluation of liquidated damages. Please refer to Note 9 for more information.

Loss (Income) Before Income Taxes from Continuing Operations

Our loss from continuing operations was $220,874 for the nine months ended June 30, 2010 compared to an income of $980,277 for the nine months ended June 30, 2009 for the reasons discussed above.

Loss from Discontinued Operations

Loss from discontinued operations was $0 for the nine months ended June 30, 2010 compared to a loss of $4,003,457 for the nine months ended June 30, 2009 on the disposal of subsidiary and impairment loss on goodwill.

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Net Loss

As a result of the foregoing, our net loss was $220,874 for the nine months ended June 30, 2010 compared to a loss of $3,023,180 for the nine months ended June 30, 2009.

Comprehensive Loss

During nine months ended June 30, 2010, we had a foreign currency translation loss of $1,591 compared to a translation loss of $163,640 for the nine months ended June 30, 2009. The difference is due to fluctuation of value of US dollar against RMB. As a result of all of the above, we had a comprehensive loss of $222,466 for the nine months ended June 30, 2010 compared with a comprehensive loss of $3,186,820 for the nine months ended June 30, 2009.

Liquidity and Capital Resources

We finance our operations primarily through cash generated from operating activities, a mixture of short and long-term loans (including loans from affiliates) and issuance of common stock.

The following table summarizes our cash flows for the nine months ended June 30, 2010 and 2009:

 

		Nine Months Ended June 30,
		2010				2009
Net cash used in operating activities		$	(314,590)			$	(717,268)
Net cash (used in) provided by investing activities		$	(31,155)			$	801,409
Net cash provided by financing activities		$	468,661			$	-
Effect of exchange rate fluctuations on cash and cash equivalents		$	(1,765)			$	(68,407)
Net decrease in cash from discontinued operations		$	-			$	(13,084)
Net increase in cash from continuing operations		$	121,152			$	15,734
Cash and cash equivalents (closing balance)		$	147,576			$	45,430

The net cash used in operating activities for the nine months ended June 30, 2010 was $314,590 , compared with net cash used in operating activities of $717,268 for the nine months ended June 30, 2009. The difference of $402,678 is due to the reduction of general and administrative expenses discussed above during the nine months ended June 30, 2010.

The net cash used in investing activities for the nine month ended June 30, 2010 was $31,155, compared with net cash provided by investing activities of $801,409 for the nine month ended June 30, 2009.  The difference of $832,564 is primarily caused by the proceeds from the sale of plant and equipment and collection of loans from a related party in the 2009 period.

The net cash provided by financing activities for the nine month ended June 30, 2010 was $468,661, compared with net cash provided by financing activities of $0 for the nine month ended June 30, 2009. The difference of $468,661 is mainly due to increased shareholder loans for the nine months ended June 30, 2010.

The effect of the exchange rate on cash was a loss of $1,765 for the nine months ended June 30, 2010, compared with a loss of $68,407 for the nine months ended June 30, 2009. The difference is due to reduction in foreign currency transactions.

The difference between the closing balance of cash and cash equivalents for the nine months ended June 30, 2010 and 2009 is due to the reasons mentioned above.

Capital Requirements for the Next 12 Months

We continue to experience significant losses from operations. We are uncertain as to when we will achieve profitable operations. We have an immediate need for capital to conduct our new business endeavors as well as our ongoing working capital needs. We anticipate raising capital through additional private placements of our equity securities, and, if available on satisfactory terms, debt financing. It is conceivable that funding of all or part of the budget required above may come from Hua Hui, our largest shareholder,.

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However, we do not have any agreements, arrangements or commitments with or guarantees from any party, including our largest shareholder, to provide funding to us. We cannot guarantee that we will be successful in our efforts to enhance our liquidity. If we are unable to raise sufficient funds to meet our cash requirements as described above, we may be required to curtail, suspend, or discontinue our current and/or proposed operations. Our inability to raise additional funds as described above may force us to restructure, file for bankruptcy, sell assets or cease operations, any of which could adversely impact our business and business strategy, and the value of our capital stock. Due to the current price of our common stock, any common stock based financing, including transactions with affiliates which may include equity conversions of outstanding loans, will likely create significant dilution to the then existing shareholders. In addition, in order to conserve capital and to provide incentives for our employees and service providers, it is conceivable that we may issue stock for services in the future which also may create significant dilution to existing shareholders.

Our capital budget for the next 12 months is as follows:

·

$ 600,000 for our executive offices expenditures, which includes $250,000 in salaries and related costs of personnel, $200,000 in professional fees, $100,000 in executive office rent, and $50,000 in miscellaneous office expenditures.  

We expect to generate revenues from the sale of the apartment units in the third quarter of calendar year 2010. Thereafter, the Company believes that revenues from the Project will be sufficient to support our ongoing capital working needs for the ensuing six to twelve month period. However, our projections are subject to certain risks and uncertainties, including our ability to raise additional funds in the near future. We cannot predict whether we will successful with any of business strategies.

 

Contractual Obligations

 

The Company relocated its offices in December 2009 by terminating its then outstanding office lease, and entering into a new lease in Beijing on December 11, 2009. The monthly rental payment under the terminated lease was $2,676 and under the new lease, the monthly rental is $5,333. The lease expense for the three months ended June 30, 2010 amounted to $15,999 and the total lease commitment for our current fiscal year period is $15,999.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are described in Note 1 to our consolidated financial statements included in the annual report for the year ended September 30, 2009. We prepare our financial statements in conformity with U.S. GAAP, which requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the financial reporting period. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We consider the policies discussed below to be critical to an understanding of our financial statements as their application places the most significant demands on our management’s judgment.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

FASB Establishes Accounting Standards Codification

In February 2010, the FASB issued Accounting Standards Update (ASU) 2010-09 to amend ASC 855, Subsequent Events, whose effective date is for interim or annual reporting periods ending after June 15, 2010. As a result, ASU No. 2010-09 excludes SEC reporting entities from the requirement to disclose the date on which subsequent events have been evaluated; In addition, it modifies the requirement to disclose the date on which subsequent events have been evaluated in reissued financial statements to apply only to such statements that have been restated to correct an error or to apply U.S. GAAP retrospectively.

In June 2009, the FASB issued Accounting Standards Update No. 2009-01, “Generally Accepted Accounting Principles” (ASC Topic 105) which establishes the FASB Accounting Standards Codification (“the Codification” or “ASC”) as the official single source of authoritative U.S. GAAP. All existing accounting standards are superseded. All other accounting guidance not included in the Codification will be considered non-authoritative. The Codification also includes all relevant Securities and Exchange Commission (“SEC”) guidance organized using the same topical structure in separate sections within the Codification.

Following the Codification, the Board will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASU”) which will serve to update the Codification, provide background information about the guidance and provide the basis for conclusions on the changes to the Codification.

The Codification is not intended to change GAAP, but it will change the way GAAP is organized and presented. The Codification is effective for the companies’ 2009 financial statements and the principal impact on our financial statements is limited to disclosures as all future references to authoritative accounting literature will be referenced in accordance with the Codification.

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In January 2010, the FASB issued the following ASC Updates:

ASU No. 2010-06—Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This Update amends ASC 820 subtopic 10 that requires new disclosures about transfers in and out of Levels 1 and 2 and activity in Level 3 fair value measurements. This Update also amends ASC 820 subtopic 10 to clarify certain existing disclosures. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010.

The Companies expects that the adoption of the above updates issued in the year 2010 will not have any significant impact on its financial position and results of operations.

OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

 

Revenue Recognition

 

We rely on SEC Staff Accounting Bulletin: No. 104 "Revenue Recognition in Financial Statements" ("SAB 104") (ASC No605) to recognize our revenue. SAB 104 in establishing our accounting policy states that revenue generally is realized or realizable and earned when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the seller's price to the buyer is fixed or determinable, and (4) collectability is reasonably assured.

 

Income Taxes

 

We account for income taxes under the provisions of SFAS No. 109 (ASC No 740), "Accounting for Income Taxes," as described in Note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2009. We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of their recorded amount, an adjustment to our deferred tax assets would increase our income in the period such determination was made. Likewise, if we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to our deferred tax assets would be charged to our income in the period such determination is made. We record income tax expense on our taxable income using the balance sheet liability method at the effective rate applicable in China in our consolidated statements of operations and comprehensive loss. There is no income tax expenses during the three months and nine months ended June 30, 2010 and 2009 due to the net loss incurred.

 

Item 4.  Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Company’s Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in internal controls

There were no changes in our internal controls over financial reporting that occurred during the three months ended June 30, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

 

Item 6. Exhibits.

  

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	China Grand Resorts, Inc.
Date: August 12, 2010	By:	/s/Menghua Liu
		Menghua Liu Chief Executive Officer
Date: August 12, 2010	By:	/s/Xiaojun He
		Xiaojun He  Chief Financial Officer

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