SINO GREEN LAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2010 AND DECEMBER 31, 2009
JUNE 30, DECEMBER 31,
2010 2009
(Unaudited) (Restated)
ASSETS
Current Assets
Cash and cash equivalents $ 4,054,824 $ 1,987,616
Accounts receivable, net 252,933 171,143
Due from related parties - 1,006
Inventories 4,230 9,934
Advances-current portion 445,735 256,225
Other current assets 135,585 343,169
Total Current Assets 4,893,306 2,769,093
-
Property and Equipment, net 515,682 547,727
Deposit 367,183 365,647
Advances 7,706,002 4,355,829
Long-term Prepayments 21,833,655 18,961,869
Total Assets $ 35,315,828 $ 27,000,165
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 891,421 $ 1,186,923
Advances from customers 14,687 48,690
Due to related parties 128,673 3,364
Shares to be issued as stock compensation 591,821 -
Derivative liability 4,852,185 5,206,567
Total Current Liabilities 6,478,787 6,445,544
Shareholders' Equity
Preferred stock, par value $.001 per share,
20,000,000 shares authorized, of which 2,000,000
shares are designated as series A convertible
preferred stock, with 1,956,000 and 1,650,000 shares
outstanding on June 30, 2010 and December 31,
2009, respectively
956
650
Common stock, $0.001 par value, 780,000,000
shares authorized, 128,943,670 and 104,943,337
issued and outstanding as of June 30, 2010 and
December 31, 2009, respectively
128,944
104,944
Deferred compensation (874,575 ) -
Additional paid in capital 13,175,480 7,736,406
Other comprehensive income 947,748 762,504
Retained earnings 15,458,488 11,950,117
Total shareholders' equity 28,837,041 20,554,621
Total Liabilities and Stockholders' Equity $ 35,315,828 $ 27,000,165
The accompanying notes are integral part of these unaudited consolidated financial statements.
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SINO GREEN LAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2010 2009 2010 2009
(Restated) (Restated)
Sales $ 29,771,125 $ 21,775,636 $ 63,326,928 $ 40,306,199
Cost of goods sold 26,928,570 19,563,887 56,560,136 36,146,317
Gross profit 2,842,555 2,211,749 6,766,793 4,159,882
Operating expenses
Selling expenses 373,922 663,933 1,454,340 888,137
General and administrative expenses 354,186 247,297 796,923 1,054,649
Salary & Wages 208,660 125,231 417,057 254,831
Stock Compensation 588,196 - 591,821 -
Total operating expenses 1,524,964 1,036,461 3,260,141 2,197,617
Operating income 1,317,591 1,175,288 3,506,652 1,962,265
Other income(expense)
Interest expenses (income) 337 - 1,943 (22,500 )
Change in derivative liability 2,626,863 25,471 354,382 (13,329 )
Others, net (2,233 ) 261,827 (4,603 ) 72
Total other income (expense) 2,624,967 287,298 351,722 (35,757 )
Net income 3,942,557 1,462,586 3,858,374 1,926,508
Other comprehensive income (loss)
Foreign currency
translation gain (loss)
188,973
(140,287 )
185,244
(167,228 )
Comprehensive income $ 4,131,531 $ 1,322,299 $ 4,043,617 $ 1,759,280
Net income per share
Basic $ 0.03 $ 0.02 $ 0.03 $ 0.02
Diluted $ 0.03 $ 0.02 $ 0.03 $ 0.02
Weighted average number of shares outstanding
Basic 118,365,892 85,466,388 108,551,381 84,396,563
Diluted 153,944,387 86,017,744 146,896,474 84,947,919
The accompanying notes are integral part of these unaudited consolidated financial statements.
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SINO GREEN LAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(UNAUDITED)
JUNE 30,
2010 2009
Cash flows from operating activities (Restated)
Net income $ 3,858,374 $ 1,926,508
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 41,138 42,088
Amortization 510,549 423,991
Change in derivative liability (354,382 ) 13,329
Stock compensation 591,821 -
Decrease / (Increase) in current assets
Accounts receivable (80,760 ) (25,338 )
Inventories 5,723 1,410
Other current assets 710,252 (275,851 )
Advances (4,019,243 ) 11,658
Increase (decrease) in current liabilities
Accounts payable & accrued expense (108,658 ) (422,913 )
Advances from customer (34,075 ) (7,638 )
Tax payables 589 1,031,302
Other payables (116,267 ) (29,234 )
Net cash provided by operating activities 1,005,061 2,689,314
Cash flows from investing activities
Acquisition of plant, property, and equipment (6,929 ) (2,336 )
Long-term land lease prepaid expense (3,292,005 ) (3,074,581 )
Net cash used in investing activities (3,298,934 ) (3,076,917 )
Cash flows from financing activities
Proceeds from sale of preferred stock, net of -
offering cost 350,000
Proceeds from sale of common stock, net of offering cost 3,888,804 -
Proceeds from loan from related parties 24,701 471,016
Net cash provided by financing activities 4,263,505 471,016
-
Effect of exchange rate change on cash and cash equivalents 97,575 (668 )
-
Net increase in cash and cash equivalents 2,067,207 82,745
Cash and cash equivalents, beginning balance 1,987,616 544,860
Cash and cash equivalents, ending balance $ 4,054,824 $ 627,605
Supplement disclosure of cash flow information
Interest expense paid $ - $ -
Income taxes paid $ - $ -
Non-cash financing activities:
Deemed dividend on preferred stock associated
with its beneficial conversion feature
350,000
-
Conversion of preferred stock into common stock $ 44,000 $ -
The accompanying notes are integral part of these unaudited consolidated financial statements.
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SINO GREEN LAND CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization
Sino Green Land Corporation (the “Company”) was incorporated in Nevada in March 2008 under the name of Henry County Plywood Corporation, as the successor by merger to a Virginia corporation organized in May 1948 under the same name. On March 23, 2009, the Company’s corporate name was changed to Sino Green Land Corporation.
The Company, through its Chinese operating subsidiaries, Zhuhai Organic Region Modern Agriculture Ltd. (“Zhuhai Organic”) and Guangzhou Organic Region Agriculture Ltd. (“Guangzhou Organic”), is engaged in the wholesale distribution, marketing and sales of premium fruits through wholesale centers and to supermarkets in China.
On January 15, 2009, the Company entered into a share exchange agreement with Organic Region Group Limited (“Organic Region”), its stockholders and its wholly owned subsidiaries, Zhuhai Organic, Guangzhou Organic, Fuji Sunrise International Enterprises Limited (“Fuji Sunrise”), Southern International Develop Limited (“Southern International”) and HK Organic Region Limited (“HK Organic”). Pursuant to the share exchange agreement and a related agreement with the Company’s two former principal stockholders:
The Company issued to the former stockholders of Organic Region a total of 81,648,554 shares of common stock, constituting approximately 98% of our outstanding stock, in exchange for all of the capital stock of Organic Region; and
Our former majority stockholders sold to the Company 1,666,298 shares of common stock, representing 50% of the outstanding shares, for $500,000 non-interest bearing convertible promissory notes. The Company cancelled these shares. As of April 27, 2009, the Company had paid the principal and accrued interest on the notes in full and had no further obligations to the former majority stockholders.
Prior to the closing of these transactions, the Company, then known as Henry County Plywood Corporation, was not engaged in any business activity.
The Company is the sole stockholder of Organic Region, a British Virgin Islands corporation which was incorporated on January 30, 2003. Organic Region is the sole stockholders of five limited liability companies organized under the laws of the People’s Republic of China, each of which is a wholly foreign-owned entity, known as a WFOE: Zhuhai Organic, Guangzhou Organic, Fuji Sunrise, Southern International, HK Organic, and Guangzhou Metro Green Trading Ltd. Guangzhou Metro Green Trading Ltd, wholly owned by Southern International, was formed on March 31, 2010 and is engaged in the wholesale distribution, marketing and sales of grocery products, and real estate and consulting services in China.
Under generally accepted accounting principles, the acquisition by the Company of Organic Region is equivalent to the acquisition by Organic Region of the Company, then known as Henry County Plywood Corporation, with the issuance of stock by Organic Region for the net monetary assets of the Company. This transaction is reflected as a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition. Under reverse acquisition accounting, the comparative historical financial statements of the Company, as the legal acquirer, are those of the accounting acquirer, Organic Region. The accompanying financial statements reflect the recapitalization of the stockholders’ equity as if the transactions occurred as of the beginning of the first period presented. Thus, only the 81,648,554 shares of common stock issued to the former Organic Region stockholders are deemed to be outstanding for all periods reported prior to the date of the reverse acquisition. As a result of the reverse acquisition effected by the share exchange agreement, the Company’s business has become the business of the Organic Region. The 1,666,297 shares of common stock that were outstanding on January 15, 2009, net of the 1,666,298 shares that were purchased by the Company and cancelled, are treated as if they were issued on January 15, 2009, as part of a recapitalization.
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The Company has an exclusive agreement with the Company’s chief operating officer, who is the owner and holder of the business license for Guangzhou Greenland Co. Ltd. (“Guangzhou Greenland”). Pursuant to this agreement, Organic Region provides consulting services, including business operations, human resources and research and development services, to Mr. Luo with respect to Guangzhou Greenland to enable Guangzhou Greenland to operate the fruit trading business in China. In exchange for such services, Mr. Luo agreed to pay a consulting services fee to Organic Region equal to all of the revenues obtained by Guangzhou Greenland. The agreement gave the Company the ability to substantially influence Guangzhou Greenland’s daily operations and financial affairs, appoint its senior executives and approve all matters requiring stockholder approval. Mr. Luo also irrevocably granted the Company an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Guangzhou Greenland and agreed to entrust all the rights to exercise voting power to the person appointed by the Company. Guangzhou Greenland is considered a variable interest entity under ASC 810 (Originally issued as FIN 46R), and its financial statements are included in our consolidated financial statements. Substantially all of the Company’s revenue is derived from the business of Guangzhou Greenland. As a result, the Company consolidates the financial results of Guangzhou Greenland as variable interest entity pursuant to ASC 810 (Originally issued as Financial Interpretation No. 46R, Consolidation of Variable Interest Entities “FIN 46R”).
Guangzhou Greenland holds the licenses necessary to operate its fruit trading business in China.
The Company has the exclusive privilege to purchase the fruit and vegetables from and it provides other general business operation services to Guangzhou Greenland in return for a consulting services fee which is equal to Guangzhou Greenland’s revenue.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Information - The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results for any future period. These statements should be read in conjunction with the Company's audited financial statements and notes thereto for the fiscal year ended December 31, 2009, as restated. See Note 1. The results of the six month period ended June 30, 2010 are not necessarily indicative of the results to be expected for the full year ending December 31, 2010.
Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Zhuhai Organic and Guangzhou Organic, Fuji Sunrise, HK Organic, Southern International, and Guangzhou Metro Green Trading Ltd, together with its 100% Variable Interest Entity (VIE), Guangzhou Greenland. All significant inter-company accounts and transactions have been eliminated in consolidation.
In accordance with ASC 810, VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.
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Use of estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.
Cash and cash equivalents
The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
Accounts receivable
The Company’s policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of June 30, 2010 and December 31, 2009, the Company had accounts receivable, of $252,933 and $171,143, net of allowance for bad debts in the amount of $9,283 and $9,244, respectively.
Other current assets
Other current assets as of June 30, 2010 and December 31, 2009 were valued at $135,585 and $343,169 respectively. The other current assets mainly comprise of advances to employees and deposit to unrelated party in PRC. The unsecured loan amount of $292,517, which was included in other current assets in 2009, has been collected in first quarter of 2010.
Advances
As of June 30, 2010, advances of the Company amounted to $8,151,737 including current and non current portion, which represents $128,500 prepaid office decoration fee to unrelated party and the rest are advances made by the Company to an unrelated party in return for an 18 year lease commencing in 2010. The advances leases are required to be used to construct a multi level distribution center the Company intends to lease. The non current advances amounted to$7,706,002 and $4,355,829 as of June 30 2010 and December 31, 2009 respectively.
Deposit
As of June 30, 2010 and December 31, 2009, the Company had deposits in the amounts of $367,183 and $365,647, respectively with an unrelated third party in connection with the lease described above. The deposit is refundable after the expiration of the term of the lease.
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