Aclor International (MTIZ) 10-12G/A Registration of securities (amended)

Exhibit 99.1

ACLOR, INC

CONSOLIDATED

FINANCIAL STATEMENTS

Year Ended December 31, 2010 & 2009

Eugene M Egeberg

Certified Public Accountant

2400 Boston Street, Suite 102

Baltimore, Maryland  21224

(410) 218-1711

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S REPORT

To the Stockholders

Aclor, Inc.

We have audited the consolidated accompanying balance sheets of Aclor, Inc. as of December 31, 2010 and 2009, and the related statements of operations and changes in stockholder’s deficit and cash flows for the years then ended.   These financial statements are the responsibility of the Company management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards required by the Public Company Accounting Oversight Board.  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.    An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aclor, Inc. as of December 31, 2010 and 2009 and the results of its operations and its cash flows for each of the years then ended in conformity with U.S. generally accepted accounting principles.

/s/ Eugene M Egeberg             

Eugene M Egeberg, CPA

Baltimore, MD

30 September 2011

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ACLOR, INC

BALANCE SHEET

Consolidated

December 31, 2010 & December 31, 2009

ASSETS
	2010.12.31		2009.12.31
CURRENT ASSETS
Cash & Cash Equivalents	$	35,224	$	37,573
Restricted Cash		666,000		-
Trades reveivable		1,143,566		2,136,092
Inventory		1,529,725		3,473,599
Prepaid expenses		1,139,448		603,466
TOTAL CURRENT ASSETS		4,513,963		6,250,730
PROPERTY AND EQUIPMENT, net of accumulated	$	7,867,292	$	8,927,651
Accumulated depreciation
PROPERTY AND EQUIPMENT net of accumulated
OTHER ASSETS
Other deposits		82,504		27,348
Deferred tax asset (not of valuation allowance of $1,165,438)		-		-
Trademarks & Patents		104,618		104,618
Investment - Mexico subsidiaries
TOTAL OTHER ASSETS		187,122		131,966
TOTAL ASSETS	$	12,568,377	$	15,310,347

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ACLOR, INC

BALANCE SHEET

Consolidated

December 31, 2010 & December 31, 2009

LIABILITIES AND STOCKHOLDERS' EQUITY
	2010.12.31			2009.12.31
CURRENT LIABILITIES
Trades payable	$	2,313,020		$	858,741
Other payable		19,697			4,649,908
Accrued expenses		131,395			1,238,171
Other current liabilities		604,450			373,107
Short-term Loan - Honetech		423,691			-
Equipment loans - current portion		16,067			25,762
Loan from HSBC		419,395			263,249
HuaNan Bank Advance		824,111			1,000,000
Loan from Chinatrust Bank		3,833,332			4,000,000
TOTAL CURRENT LIABILITIES		8,585,158			12,408,938
LONG-TERM LIABLITIES
Deferred tax liability		-		��	60,286
Equipment loans - long term		9,430			45,979
Loan from related parties		4,393,395			1,055,529
TOTAL LONG-TERM LIABILITIES		4,402,825			1,161,794
TOTAL LIABILITIES		12,987,983			13,570,732
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 100,000 shares authorized, 100,000 shares issued		337			337
Additional paid-in capital		4,955,587			4,955,587
Retained earnings		(5,375,530	)		(3,216,310	)
TOTAL SHAREHOLDERS' EQUITY		(419,606	)		1,739,615
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	12,568,377		$	15,310,347

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ACLOR, INC

STATEMENT OF INCOME AND RETAINED EARNINGS

Consolidated

Year ended December 31, 2010 & December 31, 2009

	2010			2009
REVENUES	$	13,150,482		$	19,436,800
COST OF GOODS SOLD
Cost of merchandise		11,396,303			14,728,758
Obsolete inventory adjustment		2,358,489			1,115,512
Freight and customs		181,114			915,564
Other cost		258,594			0
		14,194,500			16,759,834
GROSS  PROFIT		(1,044,018	)		2,676,967
SELLING,GENERAL & ADMINISTRATIVE EXPENSES
Advertising		7,161			25,188
Bank service charge		83,615			84,637
Bad Debt		49,197			-
Depreciation		598,418			677,410
Dues and subscription		5,211			5,247
Insurance		36,317			27,607
Lease & rent		28,656			45,417
License and taxes		28,144			33,343
Marketing, consulting, & designer fee		566,991			255,308
Office supplies		3,080			3,228
Postage and delivery		28,486			34,668
Professional fees		155,606			46,423
Repairs and maintenance		16,500			72,020
Salaries, wages and benefits		286,965			299,303
Sales commission		25,000			122,823
Telephone		19,602			19,529
Testing/inspection/translation fee		60,081			33,678
Travel		104,290			99,178
Utilities		7,050			5,693
Total Selling, General & Administrative Expenses	$	2,110,370		$	1,890,700

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ACLOR, INC

STATEMENT OF INCOME AND RETAINED EARNINGS

Consolidated

Year ended December 31, 2010 & December 31, 2009

	2010			2009
OTHER INCOME (EXPENSES)
Interest income	$	22		$	4,065
Other income		1,840,388			103,875
Gain(Loss) on  foreign exchange		355,986			(585,391	)
Loss on disposal of assets		(590,203	)		-
Royalty expense		(9,901	)		(11,402	)
Interest expense		(639,025	)		(387,042	)
Total Other Income (Expenses)		957,267			(875,895	)
Income before Income Taxes		(2,197,121	)		(89,629	)
INCOME TAX BENEFIT (EXPENSE)		37,901			(122,220	)
Net Income (Loss)		(2,159,220	)		(211,849	)
RETAINED EARNING, BEGINNING OF YEAR		(3,216,310	)		(3,004,461	)
RETAINED EARNING, END OF YEAR	$	(5,375,530	)	$	(3,216,310	)

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ACLOR, INC

STATEMENT OF CASH FLOWS

Consolidated

For the Year ended December 31, 2010 & December 31, 2009

	2010			2009
CASH FLOW FROM OPERATING ACTIVITIES
Net income (Loss)	$	(2,159,220	)	$	(211,849	)
Adjustments:
Depreciation and amortization		598,418			677,410
Deferred income taxes		(60,286	)		149,814
Loss from Disposal of Assets		590,203			-
(Increase) decrease in:
Restricted Cash		(666,000	)		-
Accounts receivable		992,526			(1,937,969	)
Inventory		1,943,874			(1,189,873	)
Prepaid expenses		(535,982	)		318,423
Other current asset		(55,156	)		56,056
Increase (decrease) in:
Accounts payable		1,454,279			(752,928	)
Accrued expense		(1,106,776	)		1,219,438
Other payable		(1,765,273	)		1,784,969
Other current liabilities		231,344			223,290
NET CASH USED BY
OPERATING ACTIVITIES	$	(538,049	)	$	336,782
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(162,751	)		(633,448	)
Proceeds from disposal of assets		34,489			-
Acquisition of intangible assets		-			(9,445	)
NET CASH PROVIDED BY
INVESTING ACTIVITIES		(128,262	)		(642,893	)
CASH FLOWS FROM FINANCING ACTIVITIES
Loan payments to HuaNan Bank		(175,889	)		1,000,000
Loan payments to Chinatrust Bank		(166,668	)		4,000,000
Loan proceeds form Honetech		423,691
Loan proceeds from HSBC		156,146			78,149
Loan proceeds from related party		472,927			1,055,529
Loan payments on equipment loans		(46,245	)		48,464
Loan payment on payable to Apego		-			(5,959,687	)
NET CASH PROVIDER BY
FINANCING ACTIVITIES	$	663,962		$	222,455

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ACLOR, INC

STATEMENT OF CASH FLOWS

Consolidated

For the Year ended December 31, 2010 & December 31, 2009

	2010			2009
NET INCREASE IN CASH	$	(2,349	)	$	(83,657	)
CASH AT BEGINNING OF YEAR		37,573			121,229
CASH AT END OF YEAR	$	35,224		$	37,573
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest		248,505			387,042

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ACLOR, INC

NOTES TO FINANCIAL STATEMENTS

Year ended December 31, 2010 & December 31, 2009

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Aclor Inc (the “Company”) was incorporated in the state of Georgia on November 2, 2007. The Company is a contract manufacturer and wholesale distributor of stationery products throughout North America, Asia, and Europe.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash and cash equivalents.

Accounts receivable

The Company annually determines the collectability of its accounts receivable by individually analyzing each customer’s outstanding receivables, historical collection information, and existing economic conditions. Accordingly, no allowance for doubtful accounts has been established. If accounts become uncollectible, they will be charged off when that determination is made.

Inventories

Inventories are stated at the lower of cost or market in a perpetual inventory. System using the first-in, first-out method.

Revenue recognition

Revenue is recognized at the time of delivery of the product.

Property and equipment

Property and Equipment are stated at cost. Depreciation is provided using the straight line method over the estimated useful lives of the assets which range from 3 to 40 years.

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ACLOR, INC

NOTES TO FINANCIAL STATEMENTS

Year ended December 31, 2010 & December 31, 2009

Note 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

	Useful Life	Depreciation Method
Building	39	SL
Production Equipment	15	SL
Automobile	5	SL
Office Equipment	3-5	SL
Warehouse Equipment	5-15	SL
Furniture & Fixture	7	SL

Management’s estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of asset and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. The estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Intangible assets

The intangible asset is the trademark and patents of the company in the original amount of $104,618, amount which $89,443 was purchased in 2008. The Company capitalized $9,445 in legal fee for trademark and patent registrations in 2009. The management determined there should be no impairment loss in 2010.

Impairments

The building, other property, equipments, and intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When indicators of impairment are present, management evaluates the carrying amount of such assets in relation to operating performance and future estimated undiscounted net cash flows expected to be generated by the assets or underlying businesses. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of assets exceeds the fair value of the assets. The assessment of the recoverability of assets will be impacted is estimated future operating cash flow are not achieved.

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ACLOR, INC

NOTES TO FINANCIAL STATEMENTS

Year ended December 31, 2010 & December 31, 2009

Note 1 .  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Advertising cost

Advertising costs are expensed as incurred. Advertising costs were $7,161 for 2010, and $25,188 for 2009.

Shipping and handling costs

Shipping and handling costs are included in cost of goods sold on the statement of income and retained earnings.

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standard Codification (ASC) 740-10 (formerly known as Statement of Financial Accounting Standards 109), which requires the use of the assets and liabilities method accounting for deferred income taxes.

Note 2 .  PROPERTY AND EQUIPMENT

	2010			2009
Building	$	800,000			800,000
Production Equipment		8,476,134			9,197,785
Automobile		31,682			31,682
Office Equipment		209,087			47,914
Warehouse Equipment		120,544			120,544
Furniture & Fixture		18,875			18,875
		9,656,322			10,216,800
Less: accumulated depreciation		(1,789,060	)		(1,289,149	)
Net book value of Property and Equipment	$	7,867,292			8,927,651

Depreciation expense was $598,418 for the year ended December 31, 2010, and $677,410 for the ended December 31, 2009.

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ACLOR, INC

NOTES TO FINANCIAL STATEMENTS

Year ended December 31, 2010 & December 31, 2009

Note 3 .  LINE OF CREDIT

The Company has a $2,000,000 line of credit from HuaNan Bank which expires on May 27, 2011, interest is payable at a rate of (LIBOR+1.2%)/0.9445. This line is secured by a deposit of 33.3% of Line of Credit amount and the personal guarantees of the Company’s officers. The balance of the line of the credit is $824,111 as of December 31, 2010. The credit line includes certain covenants. The company was in compliance with the covenants as of December 31, 2010. In 2009, the Company has a $1,000,000 line of credit from HuaNan Bank which expires on April 22, 2010, interest is payable at a rate of (LIBOR+1.7%)/0.9445. This line is secured by a deposit of 30% of Line of Credit amount and the personal guarantees of the Company’s officers. The balance of the line of the credit is $1,000,000 as of December 31, 2009. The credit line includes certain covenants. The company was in compliance with the covenants as of December 31, 2009.

The Company has s special credit facility up to $1,000,000 with HSBC Bank for invoices to approved buyers. The interest is the charged on a daily rate at 1.5% per annum over the prevailing interest rate, published by HSBC Bank as Trade Finance Rates. The credit facility expires on February 15, 2011. The facility is secured by related documentary credit or invoices to approved buyers and guaranteed by the company’s officers and a major shareholder. The balance of the credit facility as of December 31, 2010 is 419,395. The facility includes certain covenants and the Company was in compliance with the covenants as of December 31, 2010. In 2009, the Company has a special credit facility up to $400,000 with HSBC Bank for invoices to approved buyers. The interest is the charged on a daily rate at 1.5% per annum over the prevailing interest rate, published by HSBC Bank as Trade Finance Rates. The credit facility expires on February 15, 2010 and the Company is negotiating the renewal of the credit at the time of the issuance of this financial statement. The facility is secured by related documentary credit or invoices to approved buyers and guaranteed by the company’s officers and a major shareholder. The balance of the credit facility as of December 31, 2009 is $263,249. The facility includes certain covenants and the Company was in compliance with the covenants as of December 31, 2009.

The Company has two credit facilities with Chinatrust Bank which matures on September 30, 2010. One credit facility has interest payable monthly at PRIME rate plus 2 percentage points but no less than 6.5% per annum. The outstanding balance is $1,833,332 as of December 31, 2010. The other credit facility has interest payable monthly at PRIME rate plus 2 percentage points but no less than 6.25%. The outstanding balance is $2,000,000 as of December 31, 2010. Both credit facility are secured by the building and equipment of the Company and co-guaranteed by an officer and affiliates of the Company. Both loan facilities include certain covenants. The company was not in compliance with the covenants for both credit facilities as of December 31, 2010. Chinatrust Bank demanded the repayment of the full loan balances of both credit facilities after the maturity date of September 30, 2010. The Company is in the process of negotiating the renewal of the both credit facilities at the time of issuance of the financial statements. In 2009, the Company has a line of credit of $4,000,000 with Chinatrust Bank which extended on September 30, 2010, interest is payable monthly at PRIME rate plus 1.5 percentage points but no less than 6.25%. The line is co-guaranteed by an officer of the company and an affiliate of the company. The outstanding balance is $4,000,000 as of December 31, 2009.

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ACLOR, INC

NOTES TO FINANCIAL STATEMENTS

Year ended December 31, 2010 & December 31, 2009

The Company engaged Honetech to facilitate procurement of some inventory and supplies in 2010. The Company incurred payable of $423,691 to Honetech as of December 31, 2010. The payable is carrying interest of 6% per annum and interest is payable each month.

Note 4 .  LONG-TERM DEBT

The Company has capitalized leases and notes on various transportation and warehouse equipments in 2010. The lease and note agreements provide for the Company to pay consecutive monthly payments. The outstanding balance on the capitalized lease and notes are $25,497 as of December 31, 2010, and $71,742 as of  December 31, 2009. The leases and notes are collateralized by the equipments that were acquired with the funds provided by them.

Note 5 .  OPERATING LEASES

The Company leased various warehouse spaces in 2010. The leases are to be paid based on the volume of shipments handled. There is no minimum payment requirement. The company also has leases on various office space and warehouse equipments. The total lease/rent expense was $180,319 in 2010, $151,663 of which was included in Cost of Goods Sold, and $543,817 in 2009 $543,817 of which was include in cost of goods sold. The future lease obligations are as follow:

Year ended	Amount
December 31, 2011	$	28,067
December 31, 2012	$	12,430

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ACLOR, INC

NOTES TO FINANCIAL STATEMENTS

Year ended December 31, 2010 & December 31, 2009

Note 6 .  ROYALTY EXPENSE

The Company paid royalty fees to a third party company for use its intellectual properties during 2010 and 2009. The fee is payable based on the volume of products using the intellectual properties and the total royalty expense is totaled to $9,901 for 2010, and $11,402 for 2009.

Note 7 .  CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the company to concentration of credit risk consist primarily of cash and accounts receivable.  The company maintains cash balances at several financial institutions that, at times, may exceed federally insured limits, Accounts receivable consists receivable as of December 31, 2010 and 2009 are collectible and made no provision for allowance for doubtful accounts. One customer accounted for approximately 94% of gross revenue for 2010 and 2009.

Note 8 .  RELATED  PARTY  TRANSACTIONS.

The Company contracted its Mexico subsidiary to manufacture and process some of the orders it received. The contract payments to the Mexico subsidiary is based on the order volume processed. The Company paid its Mexico subsidiary $2,524,031 in 2010, and $3,105,264 in 2009. The amount was included in the Cost of Goods Sold on the statement of income and retained earnings. The Company does not consolidate the Mexico subsidiary’ financial statements for the year ended December 31, 2010 and 2009. The Company sold products to its Mexico subsidiary for $29,451in 2010 and the amount was included in Gross Revenue on the statement of income and retained earnings.

The Company acquired certain inventory and production equipment form an affiliate in 2009. Some of the production equipment and most of the inventory was obsolete. The two parties reached an agreement that the affiliate forgave the payable of $1,764,969 related to the acquiring of inventory and production equipment owed by the Company. As result of the transactions, the Company recognized other income of $1,764,969 for the forgiveness of the other payable; the Company wrote off the obsolete inventory of $2,358,489 and the write-off was reflected in the Cost of Goods Sold; The Company realized a loss of $590,203 for the disposal of the obsolete production equipment in 2010.

13

ACLOR, INC

NOTES TO FINANCIAL STATEMENTS

Year ended December 31, 2010 & December 31, 2009

The company engaged in other transactions with the affiliate mention above in 2009. A summary of the amounts recognized in the accompanying financial statements which result from these transactions for the year ended December 31, 2009 is following:

Purchase	$	2,271,048
Sales	$	179,042
Rent Income	$	68,000

Two related parties provided financing for the Company’s operation in 2010 and 2009. One related party did not charge interest for the financing and the ending balance of the loan from the related party as of December 31, 2010 is $2,864,939, and as of December 31, 2009 is $2,864,939. The other related party charged 6% interest rate for the financing and the ending balance of the loan from the related party as of December 31, 2010 is $1,528,456 and as of December 31, 2009 is 1,055,529.

Note 9 . INCOME TAXES

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxed currently due plus deferred taxes. Deferred taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. The difference relate to fixed assets is available to offset future taxable income. The deferred tax assets and liabilities represent the future tax consequences of these differences, which will either be deductible or taxable when the assets and liabilities are recovered or settled.

The income tax provision for the year ended December 31, 2010 and 2009 consists of the following:

	2010		2009
Current expense	$	0		0
Deferred income tax benefit (expense)		60,286		(149,814	)
Total income tax benefit (expense)	$	60,286		(149,814	)

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ACLOR, INC

NOTES TO FINANCIAL STATEMENTS

Year ended December 31, 2010 & December 31, 2009

The Company’s total deferred tax assets and deferred tax liabilities at December 31, 2010 are as follows:

         Deferred income tax assets (liabilities):

	2010			2009
Current tax assets (liabilities)	$	0
Non-current tax assets (liabilities)		1,165,438			(60,286	)
Allowance for deferred tax assets (liabilities)		(1,165,438	)
Deferred income tax assets (liabilities):	$	0			(60,286	)

Note 10 . GOING CONCERN

As discussed in Note 3, if the Company is unable to renew its credit facilities with Chinatrust Bank or obtains financing from other source, the Company may be unable to continue as a going concern. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

Note 11 . SUBSEQUENT EVENTS

In accordance with the FASB issued Accounting Standard Codification (ASC) 855-10 (formerly know as Statement of Financial Accounting Standards No. 165), subsequent events have been evaluated through September 30, 2011, the date the financial statements are issued.

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