China Water (CEEC) 8-K/A Entry into a Material Definitive Agreement

China Water Group, Inc.

Unaudited Pro Forma Combined Financial Statements

As of December 31, 2007

On December 31, 2007, China Water Group, Inc. (the “Company”) entered into an Equity Assignment Contract (the “EAC”) with Fortune Luck Global International Limited (“Fortune Luck”) wherein it agreed to acquire a 90% interest in Guangzhou Xinchen Water Co, Ltd (“GXWC”) from Fortune Luck.  GXWC owned 100% of Aba Xinchen Dagu Glacier Spring Co., Ltd (“Dagu Glacier”).  By reason of the acquisition, which closed on January 23, 2008, the Company became an indirect 90% owner of Dagu Glacier.

Dagu Glacier holds a 50 year license commencing on January 22, 2006 and  expiring in 2056 to process bottled water from the Dagu Glacier located in  Sichuan Province.  At the time of the acquisition, Dagu Glacier had acquired certain assets related to bottled water processing but its business was not operational.  The Company has treated the EAC as an assets acquisition as Dagu Glacier did not have meaningful operations prior to the date of the EAC.  The consummation of the EAC was subject to the approval of various government agencies which approvals have been obtained.

The purchase price to the Company under the EAC was $13.45 million, consisting of $7.5 million in cash and $5.95 million in stock which the EAC stated was to be valued at $0.20 per share.  The valuation of the Company’s common stock to be issued under the EAC was negotiated between the parties with reference to contemporaneous prices of the Company’s common stock on the pink sheets. As of November 20,2009  the Company had paid the $7.5 million cash portion of the purchase price through application of its available cash resources.   In January 2010, the Company initiated steps for the issuance of 29,750,000 shares of its common stock to Fortune Luck, valued at $0.20 per share, as provided in the EAC, without any penalty related to the delay in the time of the delivery.  In January 2010 the market price of the Company’s common stock was approximately $0.07.

The purpose of the EAC was to enable the Company to enter a new line of business as a producer and marketer of bottled water and to leave the business of building, operating and selling waste water treatment plants.

The unaudited pro forma financial statements of China Water Group, Inc. (the “Company”) have been prepared to indicate how the financial statements of the Company might have looked if the acquisition of Aba Xinchen Dagu Glacier Spring Co., Ltd. (“Aba”) had occurred as of the beginning of the period presented.  In the opinion of the Company's management, all significant adjustments necessary to reflect the effect of the acquisition that can be factually supported within the SEC regulations covering the presentation of pro forma financial statements have been made.

The pro forma condensed financial statements have been prepared using the historical financial statements of the Company and Aba for the year ended December 31, 2007.

The pro forma condensed financial statements should be read in conjunction with a reading of the historical financial statements of the Company and Aba. The pro forma condensed financial statements are presented for illustrative purposes only and are not intended to be indicative of actual financial condition or results of operations had the acquisition been in effect during the periods presented, or of financial condition or results of operations that may be reported in the future.

China Water Group, Inc.

Unaudited Pro Forma Combined Balance Sheet

As of December 31, 2007

	Historical						Pro Forma
	China Water			Aba			Adjustments			Notes	Combined
ASSETS
CURRENT ASSETS
Cash & cash equivalents		341,575			19,161							360,736
Accounts Receivable		518,066			22,584							540,650
Inventory		-			461,003							461,003
Prepayment, deposits and other receivables		8,531,742			150,102							8,681,844
Due from related companies		1,940,670										1,940,670
Due from affiliated companies		3,166,470						(3,166,470	)	(a)		-
Deferred tax assets		1,928,186										1,928,186
Total Current Assets		16,426,709			652,850			(3,166,470	)	(a)		13,913,089
Property, plant and equipment, net		4,752,192			813,732							5,565,924
Construction in progress		95,309										95,309
Interests in affiliated companies		2,180,947										2,180,947
OTHER ASSET
Goodwill								13,536,657		(b)		13,536,657
Intangibles, net					130,193							130,193
Other Assets					1,709,317							1,709,317
Total other assets:		-			1,839,510			13,536,657				15,376,167
Total Assets		23,455,157			3,306,092			10,370,187		(a)		37,131,436
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Warrant liability		1,179,965										1,179,965
Note payable		27,344										27,344
Accounts payable and accrued expenses		6,923,872			198,096							7,121,968
Other payable		-			3,195,653			(3,195,653	)	(a)		-
Accrued liabilities		3,168,841										3,168,841
Due to directors		1,454,372										1,454,372
Due to related companies		1,853,779										1,853,779
Income tax payable		1,794,580										1,794,580
Total Current Liabilities		16,402,753			3,393,749			(3,195,653	)	(a)		16,600,849
Long-term liabilities								13,449,000		(b)		13,449,000
MINORITY INTEREST		313,986			-							313,986
Total Liabilities		16,716,739			3,393,749			10,253,347		(a)		30,363,835
STOCKHOLDERS' EQUITY
Contributed capital					96,800			(96,800	)	(c)		-
Common stock		107,184						32,199		(b)		139,383
Additional paid-in capital		6,163,731						(32,199	)	(b)		6,131,532
Accumulated deficit		(670,851	)		(184,344	)		184,344		(c)		(670,851	)
Accumulated Other comprehensive income		1,138,354			(113	)		29,296		(a)(c)		1,167,537
Total Stockholders' Equity		6,738,418			(87,657	)		116,840		(a)		6,767,601
Total Liabilities and Stockholders' Equity		23,455,157			3,306,092			10,370,187				37,131,436

(a) These adjustments reflect the payments made by Xinsheng Enviroment and Xinchen Water (China Water Related Party) behalf of the company for  the purchase of machinery, equipment, vehicles and advertising fees for Aba Xinchen Dagu Glacier Spring Co.,Ltd.

(b) The aggregate cost of the acquisition of Aba was approximately $13,450K, consisting of $7.5 million in cash and issuance of 29,750,000 shares of the company's common stock with the par value $0.001 valued at $0.20 per share.  We have allocated the aggregate cost of the acquisition to Aba's net assets based on their estimated fair values.  The excess of the aggregate cost of the acquisition over the nest estimated fair values of the nest assets assumed was recorded to goodwill.  Below is a summary of the preliminary allocation of the aggregate cost of the acquisition.  The final purchase price allocation will depend on the final valuation of the assets acquired and the liabilities assumed.  Consequently, the actual allocation of the purchase could differ from that presented herein.

	Aggregate Cost
	of the
	Acquisition
	($ in thousands)
Net assets acquired		(88	)
Goodwill		13,538
Total		13,450

(c) Represents the elimination of Aba's historical equity accounts.

China Water Group, Inc.

Unaudited Pro Forma Combined Statements of Operations

For the Twelve Months Ended December 31, 2007

	Historical						Pro Forma
	China Water			Aba			Adjustments		Notes	Combined
SALES		1,554,624			70,760			-			1,625,384
COST OF SALES		1,323,523			47,714			-			1,371,237
GROSS PROFIT		231,101			23,046			-			254,147
EXPENSES
Selling, general and administrative		2,025,922			264,060			-			2,289,982
Total Expenses		2,025,922			264,060			-			2,289,982
INCOME FROM OPERATIONS		(1,794,821	)		(241,014	)		-			(2,035,835	)
OTHER INCOME (EXPENSES)
Other income		174,249									174,249
Interest expense		(1,138	)		(257	)					(1,395	)
Non-operating expense		(292,950	)		(1,317	)					(294,267	)
Share of results in affiliated companies		156,089									156,089
Total Other Income (Expenses)		36,250			(1,574	)		-			34,676
INCOME BEFORE PROVISION FOR INCOME TAX		(1,758,571	)		(242,588	)		-			(2,001,159	)
INCOME TAX BENEFIT (EXPENSE)		(217	)		80,054			-			79,837
INCOME BEFORE MINORITY INTERESTS		(1,758,788	)		(162,534	)					(1,921,322	)
MINORITY INTERESTS		(34,836	)		-			-			(34,836	)
NET INCOME		(1,793,624	)		(162,534	)		-			(1,956,158	)
OTHER COMPREHENSIVE INCOME(LOSS)
Foreign currency transalation adjustment		686,965			(5,191	)		-			681,774
COMPREHENSIVE INCOME		(1,106,659	)		(167,725	)		-			(1,274,384	)