UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended March 31, 2011
¨ Transition Report under Section 13 of 15(d) of the Securities Exchange
Act of 1934
For the transition period from ___________ to __________
Commission file number: 000-53364
CHINA DOMESTICA BIO-TECHNOLOGY HOLDINGS, INC.
(Exact Name of Registrant as specified in its charter)
| Nevada | | 20-5432794 |
| (State or other jurisdiction of | | (I.R.S. Employer |
| incorporation or organization) | | Identification No.) |
Room 2303, 2304 ShenFang Square, 3005 RenMing Road South, LuFung District, Shenzhen, China | | 518001 |
| (Address of principal executive offices) | | (Zip code) |
Registrant’s telephone number, including area code: (86) 13168096855
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x
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 ¨ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company:
| Large accelerated filer | ¨ | Accelerated filer | ¨ |
| | | | |
| Non-accelerated filer | ¨ | 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 ¨
The aggregate market value of the Registrant's voting and non-voting common equity held by non-affiliates of the Registrant at the last business day of the Registrant’s most recently completed second fiscal quarter ended September 30, 2010 was approximately$1,073,055, computed at the last reported sales price as of such date for the Registrant's common stock of $49.55.
As of November 14, 2011, the registrant had 49,899 shares of common stock outstanding (giving effect to the 1-for-46 reverse stock split which took effect on June 29, 2010).
INDEX
| | | | Page |
| | PART I | | |
| | | | |
| Item 1. | Business. | | 3 |
| | | | |
| Item 1A. | Risk Factors. | | 6 |
| | | | |
| Item 2. | Properties. | | 6 |
| | | | |
| Item 3. | Legal Proceedings. | | 6 |
| | | | |
| | PART II | | |
| | | | |
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. | | 6 |
| | | | |
| Item 6. | Selected Financial Data. | | 7 |
| | | | |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | | 7 |
| | | | |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. | | 11 |
| | | | |
| Item 8. | Financial Statements and Supplementary Data. | | 11 |
| | | | |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. | | 11 |
| | | | |
| Item 9A | Controls and Procedures. | | 11 |
| | | | |
| Item 9B. | Other Information. | | 13 |
| | | | |
| | PART III | | |
| | | | |
| Item 10. | Directors, Executive Officers and Corporate Governance. | | 13 |
| | | | |
| Item 11. | Executive Compensation. | | 14 |
| | | | |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. | | 15 |
| | | | |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence. | | 16 |
| | | | |
| Item 14. | Principal Accountant Fees and Services. | | 17 |
| | | | |
| Item 15. | Exhibits and Financial Statement Schedules. | | 18 |
| | | | |
| Signatures | | 19 |
PART I
Cautionary Statements Regarding Forward Looking Statements
This report on Form 10-K of China Domestica Bio-technology Holdings, Inc. (referred to herein as “we” or the “Company”) may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside of our control. These statements include statements other than historical information or statements of current conditions and may relate to our future plans, operations and objectives and results, among other things, our plans to consider possible acquisitions, statements with respect to our expectations or beliefs with respect to future competition and statements concerning our need for and ability to attract additional capital. We have no duty to update these statements. Actual future events, circumstances, performance and trends could materially differ from those set forth in these statements due to various factors, including the risks, uncertainties and other factors discussed in Item 1A “Risk Factors” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
We expressly qualify in their entirety all forward-looking statements attributable to us or any person acting on our behalf by the cautionary statements contained or referred to in this section.
Item 1. Business.
Overview and Recent History
China Domestica Bio-technology Holdings, Inc. was incorporated in the State of Nevada on August 17, 2006 under the name “Cienega Creek Holdings, Inc.” The Company was previously engaged in the computer software business. On March 16, 2010, the Company entered into a material definitive agreement (the “Belmont Stock Purchase Agreement”) with Michael Klinicki and Belmont Partners, LLC (“Belmont”) whereby Belmont purchased a controlling interest of the Company’s common stock (the “Belmont Purchase Transaction”) from Michael Klinicki on March 18, 2010. Pursuant to the Belmont Stock Purchase Agreement, Joseph Meuse, a managing member of Belmont, was appointed as a member of the Company’s Board of Directors and to the office of President and all other Directors and officers of the Company resigned. Concurrent with this change of management, the Company moved its principal executive offices to 360 Main Street, Washington, VA 22747. Contemporaneously with the Belmont Purchase Transaction, the Company changed its plan of business from the development and marketing of computer software to seeking to acquire or merge with a revenue-producing company.
On April 26, 2010, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) by and among China Sheng Yong Bio-Pharmaceutical Holding Company Limited, or the “Buyer,” Belmont, or the Seller, and the Company. Pursuant to the terms of the Purchase Agreement, on April 26, 2010, the Buyer acquired from the Seller a controlling interest in the Company’s common stock. Pursuant to the terms of the Purchase Agreement, the Company agreed to issue to the Seller shares of its common stock such that the Seller will own 5% of the issued and outstanding capital stock of the Company after the closing of a merger transaction with an as of yet unidentified target corporation contemplated by the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, Joseph J. Meuse resigned on the Closing Date and Qingyu Meng was named President and Director of the Company and Yung Kong Chin was named Secretary and Director of the Company. Such resignation and appointments were effective as of the Closing Date with respect to the officers of the Company. The resignation of Joseph J. Meuse as a director and the naming of Messrs. Meng and Chin as directors took effect on May 22, 2010. Concurrent with this change of management, the Company moved its principal executive offices to Room 2303, 2304 ShenFang Square, 3005 RenMing Road South, LuFung District, Shenzhen, China. The Company’s telephone number is (86) 13168096855. The Company’s fiscal year end is March 31.
On June 29, 2010, the Company amended its articles of incorporation to change its name to “China Domestica Bio-technology Holdings, Inc.,” to authorize the issuance of up to 10,000,000 shares of “blank check” preferred stock and to effect a 46-for-1 reverse stock split of its outstanding shares of common stock. The reverse stock split reduced the number of issued and outstanding shares of our Common Stock from 2,294,250 shares outstanding prior to the split to 49,896 shares outstanding after the split. The reverse stock split became effective on June 29, 2010.
From inception to the present, the Company has not generated any revenue, and remains a development stage business with limited operations. We have limited assets, and our prospects of future profitable operations may be delayed or never realized. We may encounter difficulties that prevent us from operating our business as intended or that will prevent us from doing so in a profitable manner. Our business must be evaluated in view of possible delays, additional expenses, and other unforeseen complications that are often encountered by new business ventures.
Selection of a Business Combination
The Company is currently seeking to acquire or merge with a revenue-producing company. Due to our lack of financial resources, the scope and number of suitable business ventures is limited. We are therefore most likely to participate in a single business venture. Accordingly, the Company will not initially be able to diversify and will be limited to one merger or acquisition. The lack of diversification will prevent us from offsetting losses from one business opportunity against profits from another.
The decision to participate in a specific business opportunity will be made upon management’s analysis of the quality of the opportunity’s management and personnel, the anticipated acceptability of products or marketing concepts, the merit of technological changes and numerous other factors which are difficult, if not impossible, to analyze through the application of any objective criteria. Further, it is anticipated that the historical operations of a specific venture may not necessarily be indicative of the potential for the future because of the necessity to substantially shift a marketing approach, expand operations, change product emphasis, change or substantially augment management, or make other changes. The Company will be partially dependent upon the management of any given business opportunity to identify such problems and to implement, or be primarily responsible for the implementation of required changes.
Since we may participate in a business opportunity with a newly organized business or with a business which is entering a new phase of growth, it should be emphasized that the Company may incur risk due to the failure of the target’s management to have proven its abilities or effectiveness, or the failure to establish a market for the target’s products or services, or the failure to realize profits.
The Company will not acquire or merge with any company for which audited financial statements cannot be obtained. Management anticipates that any opportunity in which we participate will present certain risks. Many of these risks cannot be adequately identified prior to selection of a specific opportunity. Our shareholders must therefore depend on the ability of management to identify and evaluate such risks. Further, in the case of some of the opportunities available to us, it may be anticipated that some of such opportunities are yet to develop as going concerns or that some of such opportunities are in the development stage in that same have not generated significant revenues from principal business activities prior to our participation.
Acquisition of Business
Implementation of a structure for any particular business acquisition may involve a merger, consolidation, reorganization, joint venture, franchise or licensing agreement with another corporation or entity. The Company may also purchase stock or assets of an existing business. On the completion of a transaction, it is possible that present management and shareholders of the Company would not remain in control of the Company. Further, our officers and directors may, as part of the terms of any transaction, resign, to be replaced by new officers and directors.
We anticipate that any securities issued in any such reorganization would be issued in reliance on exemptions from registration under applicable federal and state securities laws. However, in certain circumstances, as a negotiated element of any transaction, the Company may agree to register securities either at the time a transaction is consummated, under certain conditions, or at a specified time thereafter. The issuance of substantial additional securities and their potential sale into any trading market may have a depressive effect on such market.
While the actual terms of a transaction to which the Company may be a party cannot be predicted, it may be expected that the parties to a business transaction will find it desirable to avoid the creation of a taxable event and thereby structure the acquisition in a so called “tax-free” reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”). In order to obtain tax-free treatment under the Code, it may be necessary for the owners of the acquired business to own 80% or more of the voting stock of the surviving entity. In such event, our shareholders would retain less than 20% of the issued and outstanding shares of the surviving entity, which could result in significant dilution in the equity of such shareholders.
The manner in which we participate in an opportunity will depend on the nature of the opportunity and the respective needs and desires of the Company and other parties. Negotiations that involve mergers or acquisitions will focus on the percentage of the Company that the target company shareholders would acquire in exchange for their shareholdings in the target company. Depending upon, among other things, the target company’s assets and liabilities, our shareholders will in all likelihood hold a lesser percentage ownership interest in the Company following any merger or acquisition. The percentage ownership may be subject to significant reduction in the event the Company acquires a target company with substantial assets. Any merger or acquisition effected by the Company can be expected to have a significant dilutive effect on the percentage of shares held by our current shareholders.
Operation of Business after Acquisition
The Company’s operation following its merger or acquisition of a business will be dependent on the nature of the business and the interest acquired. We are unable to determine at this time whether the Company will be in control of the business or whether present management will be in control of the Company following the acquisition. We may expect that any future business will present various challenges that cannot be predicted at the present time.
Competition
We will be involved in intense competition with other business entities to obtain a suitable business opportunity, many of which competitors will have a considerable edge over us by virtue of their stronger financial resources and prior experience in business.
Employees
At this time we have no employees. All of our activities are carried out by our officers and directors.
How to Obtain Our SEC Filings
We file annual, quarterly, and special reports, proxy statements, and other information with the Securities and Exchange Commission (SEC). Reports, proxy statements and other information filed with the SEC can be inspected and copied at the public reference facilities of the SEC at 100 F Street N.E., Washington, DC 20549. Such material may also be accessed electronically by means of the SEC’s website at www.sec.gov.
Item 1A. Risk Factors.
As a smaller reporting company, we are not required to provide risk factors.
Item 2. Properties.
We do not own any properties. During fiscal year 2011 we leased office space from our President Qingyu Meng on a rent-free basis without any lease agreement or obligation.
Item 3. Legal Proceedings.
We are not currently involved in any material pending legal proceeding.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
The Company’s common shares are quoted on the inter-dealer electronic quotation and trading system maintained by OTC Markets Group Inc. under the ticker symbol “CDBH.” Trading of our stock is sporadic and does not constitute an established public market for our shares and hence we are not able to provide high and low bid information for our common shares during the relevant periods.
Holders
As of November 14, 2011, there were approximately 25 record holders of the Company’s Common Stock as reflected on the books of the Company’s transfer agent.
Dividends
The Company had not paid any dividends on its Common Stock and the Board of Directors of the Company presently intends not to declare dividends, but to pursue a policy of retaining earnings, if any, for use in the Company’s operations and to finance expansion of its business. The declaration and payment of dividends in the future on the Common Stock will be determined by the Board of Directors in light of conditions then existing, including the Company’s earnings, financial condition, capital requirements and other factors.
Securities Authorized for Issuance Under Equity Compensation Plans
As of March 31, 2011, we had no equity compensation arrangements or plans either approved or not approved by our stockholders. We granted no options during our fiscal year ended March 31, 2011 and had no options outstanding as of March 31, 2011.
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read together with the factors discussed in Item 1A “Risk Factors” and with the financial statements, including the notes thereto, and the other financial information appearing elsewhere in this Report. Period-to-period comparisons of financial data are not necessarily indicative, and therefore should not be relied upon as indicators, of the Company’s future performance. Words or phrases such as “believes,” “does not believe,” “will,” “may,” “plan,” “estimate,” “anticipate,” “expect,” “intend” and similar expressions may identify “forward-looking statements.”
Recent Developments
China Domestica Bio-technology Holdings, Inc. was incorporated in the State of Nevada on August 17, 2006 under the name “Cienega Creek Holdings, Inc.” The Company was previously engaged in the computer software business. On March 16, 2010, the Company entered into a material definitive agreement (the “Belmont Stock Purchase Agreement”) with Michael Klinicki and Belmont Partners, LLC (“Belmont”) whereby Belmont purchased a controlling interest of the Company’s common stock (the “Belmont Purchase Transaction”) from Michael Klinicki on March 18, 2010. Pursuant to the Belmont Stock Purchase Agreement, Joseph Meuse, a managing member of Belmont, was appointed as a member of the Company’s Board of Directors and to the office of President and all other Directors and officers of the Company resigned. Concurrent with this change of management, the Company moved its principal executive offices to 360 Main Street, Washington, VA 22747. Contemporaneously with the Belmont Purchase Transaction, the Company changed its plan of business from the development and marketing of computer software to seeking to acquire or merge with a revenue-producing company.
On April 26, 2010, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) by and among China Sheng Yong Bio-Pharmaceutical Holding Company Limited, or the “Buyer,” Belmont, or the Seller, and the Company. Pursuant to the terms of the Purchase Agreement, on April 26, 2010, the Buyer acquired from the Seller a controlling interest in the Company’s common stock. Pursuant to the terms of the Purchase Agreement, the Company agreed to issue to the Seller shares of its common stock such that the Seller will own 5% of the issued and outstanding capital stock of the Company after the closing of a merger transaction with an as of yet unidentified target corporation contemplated by the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, Joseph J. Meuse resigned on the Closing Date and Qingyu Meng was named President and Director of the Company and Yung Kong Chin was named Secretary and Director of the Company. Such resignation and appointments were effective as of the Closing Date with respect to the officers of the Company. The resignation of Joseph J. Meuse as a director and the naming of Messrs. Meng and Chin as directors took effect on May 22, 2010. Concurrent with this change of management, the Company moved its principal executive offices to Room 2303, 2304 ShenFang Square, 3005 RenMing Road South, LuFung District, Shenzhen, China. The Company’s telephone number is (86) 13168096855. The Company’s fiscal year end is March 31.
On June 29, 2010, the Company amended its articles of incorporation to change its name to “China Domestica Bio-technology Holdings, Inc.,” to authorize the issuance of up to 10,000,000 shares of “blank check” preferred stock and to effect a 46-for-1 reverse stock split of its outstanding shares of common stock. The reverse stock split reduced the number of issued and outstanding shares of our Common Stock from 2,294,250 shares outstanding prior to the split to 49,896 shares outstanding after the split. The reverse stock split became effective on June 29, 2010.
Plan of Operations
We are a start-up, development-stage corporation and have not yet generated or realized any revenues from our business operations.
Whereas sales and marketing activities were our focus during fiscal 2009, we were unable to realize any revenues as a result of these activities. As a result of our lack of revenues and inability to secure additional funding to allow business operations to continue, our Board of Directors determined that it was necessary to terminate the execution of our prior business plan, and that a change in business focus was needed and in the best interests of the Company and its shareholders. The goal of the new business plan is to merge with or acquire a revenue-producing business or a development stage business with a high potential for growth.
We will need additional capital in fiscal 2012. As of March 31, 2011, we had $215 in cash and cash equivalents. During recent fiscal years, we made certain cost reductions. We have no remaining employees. Our former CEO Michael Klinicki agreed to terminate his employment agreement effective as of January 1, 2010.
Although we continue to look for ways to raise additional capital, we recognize that it is not likely this will be successful. As an alternative strategy, we have decided to focus on identifying suitable candidates to merge with or acquire. We believe that our ability to continue to operate depends on finding a suitable merger target with the ability to raise additional needed capital. Notwithstanding the elimination of many of our remaining expenses, we may need additional cash during the next twelve months. As a result of our current limited cash availability we do not anticipate hiring any employees for the foreseeable future.
Results of Operations
Year Ended March 31, 2011 Compared to the Year Ended March 31, 2010
For the year ended March 31, 2011, we incurred a net loss of approximately $61,388, which was approximately $869 more, or 1.4% more than the prior year’s loss of $60,519. During the fiscal year ended March 31, 2010, the Company terminated its one employee pursuant to the change in its business focus, and its expenses were primarily a result of salary paid to its CEO before his employment agreement was terminated and professional fees associated with being a public company. During the most recent fiscal year, our expenses were primarily a result of professional fees associated with being a public company.
Operating expenses for the year ended March 31, 2011 of $65,988 increased $6,973 from those of $59,015 for the year ended March 31, 2010 due primarily to: a decrease in officer salaries from 37,500 in 2010 to $0 in 2011, an increase in professional fees from $13,424 in 2010 versus $65,734 in 2011, a decrease in depreciation expense from $1,664 in 2010 to $0 in 2011, and a decrease in general and administrative expense from $6,427 in 2010 to $254 in 2011.
Liquidity and Capital Resources
At its current level of operations, the Company will need to begin profitable operations and/or raise additional capital during the next fiscal year. As of March 31, 2011, the Company had not generated any revenue and had $215 in cash and cash equivalents and owed accounts payable and accrued liabilities of $200 and other liabilities of $66,188. We estimate that we will require minimum funding in fiscal year 2011 of approximately $30,000 in order to fund our operations. Our ability to continue operating depends on our ability to locate and merge with a business generating revenues. If the Company is successful in finding a suitable merger target, it may result in significant dilution to existing shareholders.
Going Concern
We incurred a net loss of approximately $61,388 for the fiscal year ended March 31, 2011, and a cumulative net loss of approximately $494,898 since inception (August 17, 2006) through March 31, 2011, and there is substantial doubt about our ability to continue as a going concern. As of March 31, 2011, we had approximately $215 in cash and cash equivalents. In order to continue to operate we need to develop additional sources of capital and to ultimately achieve profitable operations. We do not have sufficient resources to fund our operations for the next twelve months.
We estimate that we will require minimum funding in fiscal year 2011 of approximately $30,000 in order to fund our operations. Although we are actively seeking new sources of equity and reduce our expenses while seeking a suitable merger candidate, there can be no assurances that we will be able to raise additional capital on terms that are acceptable to us or at all. Additionally, there can be no assurance that we will be able to find a suitable merger candidate.
Current market conditions, continued negative cash flows and lack of liquidity create significant uncertainty about the our ability to fully implement our operating plan, as a result of which we may have to further reduce the scope of our operations.
Off-Balance Sheet Arrangements
At March 31, 2011, we did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Critical Accounting Policies
Cash and Cash Equivalents
For Statement of Cash Flows purposes, the Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
Revenue Recognition
Presently, the Company is in the development stage and as such, has no revenues. Upon emerging from the development stage the Company will adopt a policy of recognizing revenue when a definitive agreement with a determinable price exists, product delivery and/or invoicing (in each case where there is reasonable assurance of meeting customer-specified criteria) has occurred, and the collectability of the invoice is reasonably assured.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. At March 31, 2011, the deferred tax asset and deferred tax liability accounts, as recorded when material to the financial statements, are entirely the result of temporary differences. Temporary differences represent differences in the recognition of assets and liabilities for tax and financial reporting purposes, primarily accumulated depreciation and amortization.
As of March 31, 2011, the deferred tax asset related to the Company’s net operating loss carryforward is fully reserved. Due to the provisions of Internal Revenue Code Section 338, the Company may have no net operating loss carryforwards available to offset financial statement or tax return taxable income in future periods as a result of a change in control involving 50 percentage points or more of the issued and outstanding securities of the Company.
Dividends
The Company is a Development Stage Company and has not yet adopted a policy regarding the payment of dividends.
Earnings (Loss) per Share
Basic earnings (loss) per share is computed by dividing the net income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.
Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants).
Common stock equivalents represent the dilutive effect of the assumed exercise of outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.
As of March 31, 2011, the Company has no issued and outstanding warrants or options.
Use of Estimates
The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
The Company’s management has evaluated recently issued accounting standards through the filing date of these financial statements and believes that the recently issued accounting standards will not have a material impact on the Company’s financial position, operations, or cash flows.
Inflation
We believe that inflation has not had a material effect on our operations to date.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
The Financial Statements are filed as part of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer (our President and Secretary, respectively), we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to our company, particularly during the period when this report was being prepared.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the company.
Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
Under the supervision and with the participation of our president, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of March 31, 2011, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under this framework, management concluded that our internal control over financial reporting was not effective as of the evaluation date due to the factors stated below.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of evaluation date and identified the following material weaknesses:
Insufficient Resources: We have an inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting.
Inadequate Segregation of Duties: We have an inadequate number of personnel to properly implement control procedures.
Lack of Audit Committee and Outside Directors on the Company’s Board of Directors: We do not have a functioning audit committee or outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.
Insufficient Written Policies: We have insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.
Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) may consider appointing outside directors and audit committee members in the future.
Management, including our president, has discussed the material weaknesses noted above with our independent registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report.
Changes in Internal Controls Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter for our fiscal year ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
Not applicable.
PART III
Item 10. Directors, Executive Officers, and Corporate Governance.
Directors and Executive Officers
The following table sets forth, as of November 14, 2011, the name, age and position for each executive officer and Director of the Company. Our executive officers and Directors serve until death, removal or resignation or until their successors have been duly elected and have qualified.
| NAME | | AGE | | POSITION |
| Qingyu Meng | | 42 | | Director and President |
| Yung Kong Chin | | 58 | | Director and Secretary |
Information regarding the business backgrounds of our directors and executive officers is set forth below.
Qingyu Meng Mr. Meng has served as our President since April 2010 and a Director of the Company since June 2010. Mr. Meng is a Master’s Degree candidate with a bio-pharmaceuticals major in the life science college, Heilongjiang August First Land Reclamation University. Since 2001, he has specialized in housefly bio-active proteins’ medical application research in the area of molecular biology. He is the member of Heilongjiang Provincial Hospital Management Association Professional Committee of Clinical Nutrition; the managing director of Daqing Nutrition Society; a technology partner of State Key Protein Structure Laboratory; and he independently has four national invention patents of full housefly bio-active proteins. Since 2005, he has been the chairman and president of China Housefly Biotechnology Holding Company.
Yung Kong Chin Mr. Chin has served as our Secretary since April 2010 and a Director of the Company since June 2010. Mr. Chin graduated from the University of Hull in the United Kingdom with a Master of Finance. Mr. Chin served as president of QMIS Capital Finance Pty. Ltd. in Singapore and QMIS Capital Finance Investment Inc. from 2003 to the present. Before joining QMIS, he was a financial controller for the Kwok Group company in China.
Family Relationships
There is no family relationship among any of our officers or directors.
Involvement in Certain Legal Proceedings
No director or executive officer has been convicted of a criminal offense within the past ten years or is the subject of a pending criminal proceeding. No director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities. No director or officer has been found by a court to have violated a federal or state securities or commodities law.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s directors and officers and holders of more than 10% of the issued and outstanding shares of our Common Stock to file with the SEC initial reports of ownership, and reports of changes in ownership, of common stock and other equity securities of the Company. Based solely on our review of copies of the reports by some of those persons, the Company believes that, during fiscal year 2011, all of its directors and officers and holders of more than 10% of the issued and outstanding shares of our common stock complied with all reporting requirements under Section 16(a).
Code of Ethics
We do not currently have a code of ethics. Because we have only limited business operations and only two officers and directors, we believe a code of ethics would have limited utility at this time.
Item 11. Executive Compensation.
The following table shows the compensation of our executive officers for the fiscal years ended March 31, 2011 and March 31, 2010:
| Summary Compensation Table | |
| | | | | | | | | | | | |
| Name and Principal Position | | Year | | Salary ($) | | | Stock Awards | | | All Other Compensation | |
| | | | | | | | | | | | |
| Qingyu Meng | | | | | | | | | | | |
| President and Director | | 2011 | | $ | -0- | | | $ | -0- | | | $ | -0- | |
| | | 2010 | | $ | -0- | | | $ | -0- | | | $ | -0- | |
| | | | | | | | | | | | | | | |
| Joseph J. Meuse | | | | | | | | | | | | | | |
| Former President | | 2011 | | $ | -0- | | | $ | -0- | | | $ | -0- | |
| | | 2010 | | $ | -0- | | | $ | -0- | | | $ | -0- | |
Employment Agreements
At present, the Company is operated by its executive officers and directors without compensation and the Company is currently not a party to any employment agreements.
Equity Compensation Plans
As of March 31, 2011, we had no equity compensation arrangements or plans and no options outstanding to purchase shares of our Common Stock. During the fiscal years ended March 31, 2011, and March 31, 2010, we have not granted any stock options to our named executive officers. During our fiscal year ended March 31, 2011, none of our named executive officers or directors exercised any options to purchase shares of our Common Stock.
Director Compensation
Directors of our Company are not compensated in cash for their services but are reimbursed for out-of-pocket expenses incurred in furtherance of our business.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information regarding beneficial ownership of our common stock as of November 14, 2011 (i) by each person who is known by us to beneficially own more than 5% of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group. Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, Room 2303, 2304 ShenFang Square, 3005 RenMing Road South, LuFung District, Shenzhen, China 518001. Except as indicated in the footnotes to this table and subject to applicable community property laws, the persons named in the table to our knowledge have sole voting and investment power with respect to all shares of securities shown as beneficially owned by them. The information in this table is as of November 14, 2011 based upon 49,899 shares of common stock outstanding.
| Name and Address of Beneficial Owner | | Office, If Any | | Amount and Nature of Beneficial Ownership | | | Percent Common Stock | |
| | | Officers and Directors | | | | | | |
| Qingyu Meng | | President and Director | | | 28,240 | (1) | | | 56.6 | %(1) |
| | | | | | | | | | | |
| Yung Kong Chin | | Secretary and Director | | | 28,240 | (2) | | | 56.6 | %(2) |
| | | | | | | | | | | |
Joseph Meuse 360 Main Street PO Box 393 Washington, Virginia 22747 | | Former President | | | - | (3) | | | - | (3) |
| | | | | | | | | | | |
| All officers and directors as a group (three persons named above) | | | | | 28,240 | | | | 56.6 | % |
| | | | | | | | | | | |
| | | 5% Security Holders | | | | | | | | |
| | | | | | | | | | | |
| China Sheng Yong Bio-pharmaceutical Holding Company Limited | | | | | 28,240 | | | | 56.6 | % |
* Less than 1%
- N/A
(1) Mr. Meng is a director and President of China Sheng Yong Bio-pharmaceutical Holding Company Limited, which is the owner of 28,240 shares of the Company’s common stock.
(2) Mr. Chin is a director and Secretary of China Sheng Yong Bio-pharmaceutical Holding Company Limited, which is the owner of 28,240 shares of the Company’s common stock.
(3) Mr. Meuse is a Managing Member of Belmont Partners, LLC, to which the Company is obligated to issue shares of its common stock such that the Belmont Partners, LLC will own 5% of the issued and outstanding capital stock of the Company after the closing of a merger transaction with an as of yet unidentified target corporation contemplated by the Purchase Agreement. As there is no right to acquire such shares within 60 days and the actual number of shares to be issued cannot be determined until the time of such merger, such shares have not been included in the numbers of shares listed in the table.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Transactions with Related Persons
The following includes a summary of transactions since the beginning of the fiscal year ending March 31, 2010, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation”). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.
On April 26, 2010, the Company entered into the Purchase Agreement by and among China Sheng Yong Bio-pharmaceutical Holding Company Limited, or the Buyer, Belmont Partners, LLC, or the Seller, and the Company. Pursuant to the terms of the Purchase Agreement, on April 26, 2010, the Buyer acquired from the Seller 1,299,000 shares, or approximately 56.62%, of the issued and outstanding common stock of the Company. In consideration for the sale of the Purchased Stock, the Buyer paid the Seller $280,000 and the Company agreed to issue to the Seller shares of its common stock such that the Seller will own 5% of the issued and outstanding capital stock of the Company after the closing of a merger transaction with an as of yet unidentified target corporation contemplated by the Purchase Agreement. Joseph J. Meuse, the former President and a current director of the Company, is a managing member of the Seller. The closing of the sale of the Purchased Stock, and the appointment of Qingyu Meng as President and Director of the Company and Yung Kong Chinas Secretary and Director of the Company, resulted in a change in control of the Company. Qingyu Meng is a director and President of the Buyer and Yung Kong Chin is a director and Secretary of the Buyer.
Our former CEO and director Michael Klinicki loaned the Company a total of $9,100 as of February 25, 2010. These loans were evidenced by a note which is noninterest-bearing, unsecured and due on demand. Mr. Klinicki agreed to waive repayment of $4,500 of such loans in March 2010. Mr. Klinicki agreed to waive repayment of the remainder of such loans in September 2010. As of September 7, 2010 and March 31, 2010, the Company owed $0 and $4,600 to Mr. Klinicki, respectively.
Insider Transactions Policies and Procedures
The Company does not currently have an insider transaction policy.
Director Independence
We currently do not have any independent directors, as the term “independent” is defined by the rules of the American Stock Exchange.
Item 14. Principal Accountant Fees and Services
AUDIT AND NON-AUDIT FEES
Aggregate fees for professional services rendered for the Company by Moore & Associates Chartered, the Company’s principal accountants until August 7, 2009, Seale and Beers, CPAs, the Company’s principal accountants from August 7, 2009 until January 11, 2011, and Stan J. H. Lee, CPAs, the Company’s principal accountants from January 11, 2011 through the present, for the years ended March 31, 2011 and 2010 are set forth below.
| | | Year 2010 | | | Year 2011 | |
| | | | | | | |
| AUDIT FEES | | $ | 10,270 | | | $ | 7,165 | |
| AUDIT-RELATED FEES | | $ | 0 | | | $ | 0 | |
| TAX FEES | | $ | 0 | | | $ | 0 | |
| ALL OTHER FEES | | $ | 0 | | | $ | 0 | |
| TOTAL | | $ | 10,270 | | | $ | 7,165 | |
Audit Fees for the fiscal years ended March 31, 2011 and 2010 were for the audits of the consolidated financial statements of the Company, quarterly review of the financial statements included in Quarterly Reports on form 10-Q, consents, and other assistance required to complete the year end audit of the consolidated financial statements. Amounts included are for the respective year’s audit work.
Audit-Related Fees as of the years ended March 31, 2011 and 2010 would have been for assurance and related services reasonably related to the performance of the audit or reviews of financial statements and not reported under the caption Audit Fees.
Tax Fees as of the years ended March 31, 2011 and 2010 were for professional services related to tax compliance, tax authority audit support and tax planning. Amounts are included in the year billed.
As the company does not have a formal audit committee, the services described above were not approved by the audit committee under the de minimus exception provided by Rule 2-01 I (7) (i) I under Regulation S-X.
PART IV
Item 15. Exhibits and Financial Statement Schedules
Reports of Independent Registered Public Accounting Firms
Balance Sheets as of March 31, 2011 and 2010
Statements of Operations for the Years Ended March 31, 2011 and 2010 and from Inception (August 17, 2006) to March 31, 2011
Statement of Stockholders’ Equity (Deficit) for the Years Ended March 31, 2011 and 2010 and from Inception (August 17, 2006) to March 31, 2011
Statements of Cash Flows for the Years Ended March 31, 2011 and 2010 and from Inception (August 17, 2006) to March 31, 2011
Notes to Financial Statements
| (3) | The following Exhibits are filed as part of this report on Form 10-K: |
| 3.1 | | Articles of Incorporation (as amended, incorporated by reference to Exhibit 3.1 to the Form 10-K of the Company filed with the SEC on December 3, 2010) |
| | | |
| 3.2 | | By-Laws (incorporated by reference to Exhibit 3.2 to the Form SB-2 of the Company filed with the SEC on July 12, 2007) |
| | | |
| 10.1 | | Common Stock Purchase Agreement dated April 26, 2010, by and among China Sheng Yong Bio-pharmaceutical Holding Company Limited, Belmont Partners, LLC and Cienega Creek Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Form 8-K of the Company filed with the SEC on April 28, 2010) |
| | | |
| 21 | | List of Subsidiaries (incorporated by reference to Exhibit 21 to the Form 10-K of the Company filed with the SEC on May 15, 2008) |
| | | |
| 31.1* | | Rule 13a-14(a) Certification of Principal Executive Officer |
| | | |
| 31.2* | | Rule 13a-14(a) Certification of Principal Financial Officer |
| | | |
| 32.1* | | Section 1350 Certification of Principal Executive Officer |
| | | |
| 32.2* | | Section 1350 Certification of Principal Financial Officer |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | CHINA DOMESTICA BIO- TECHNOLOGY HOLDINGS, INC. | |
| | | |
| Date: November 17, 2011 | By: /s/ Qingyu Meng | |
| | Qingyu Meng, President and Director | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Date: November 17, 2011 | By: /s/ Qingyu Meng | |
| | Qingyu Meng, President and Director | |
| Date: November 17, 2011 | By: /s/ Yung Kong Chin | |
| | Yung Kong Chin, Secretary and Director | |
CHINA DOMESTICA BIO-TECHNOLOGY HOLDINGS, INC.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
For the Fiscal Years Ended
March 31, 2011 and 2010
| | | Page |
| | | |
| Reports of Independent Registered Public Accounting Firms | | F-2 |
| | | |
| Financial Statements: | | |
| | | |
| Balance Sheets as of March 31, 2011and 2010 | | F-4 |
| | | |
| Statements of Operations for the fiscal years ended March 31, 2011 and 2010 and from Inception (August 17, 2006) to March 31, 2011 | | F-5 |
| | | |
| Statement of Stockholders’ Equity (Deficit) from Inception (August 17, 2006) to March 31, 2011 | | F-6 |
| | | |
| Statements of Cash Flows for the fiscal years ended March 31, 2011 and 2010 and from Inception (August 17, 2006) to March 31, 2011 | | F-7 |
| | | |
| Notes to Financial Statements | | F-8 |
SEALE AND BEERS, CPAs
PCAOB & CPAB REGISTERED AUDITORS
www.sealebeers.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
China Domestica Bio-technology Holdings, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of China Domestica Bio-technology Holdings, Inc. (A Development Stage Company) as of March 31, 2010, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the year then ended March 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). 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 China Domestica Bio-technology Holdings, Inc. (A Development Stage Company) as of March 31, 2010, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended March 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has incurred significant losses since inception and has not yet established a source of revenues sufficient to cover operating expenses. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Seale and Beers, CPAs
Seale and Beers, CPAs
Las Vegas, Nevada
August 31, 2010
50 S. Jones Blvd. Suite 202 Las Vegas, NV 89107 Phone: (888)727-8251 Fax: (888)782-2351
Stan J.H. Lee, CPA
2160 North Central Rd. Suite 209 Fort Lee NJ 07024
Mailing address: P.O. Box 436402 San Diego CA 92143-9402
619-623-7799 Fax 619-564-3408 E-mail) stan2u@gmail.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
China Domestica Bio-technology Holdings, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of China Domestica Bio-technology Holdings, Inc. (a Development Stage Company) as of March 31, 2011 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the fiscal year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of China Domestica Bio-technology Holdings, Inc. as of March 31, 2010, were audited by other auditors whose report, dated August 31, 2010, expressed an unqualified opinion on those statements. Their report included an explanatory paragraph regarding going concern.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 China Domestica Bio-technology Holdings, Inc. (a Development Stage Company) as of March 31, 2011, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the year then ended March 31, 2011 and , in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has incurred significant losses since inception and has not yet established a source of revenues sufficient to cover operating expenses. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| /s/ Stan J. H. Lee, CPAs | |
| | |
| Stan J. H. Lee, CPAs | |
| August 9, 2011 | |
CHINA DOMESTICA BIO-TECHNOLOGY HOLDINGS, INC
(A Development Stage Company)
BALANCE SHEETS
| | | As of | |
| | | March 31, 2011 | | | March 31, 2010 | |
| Current assets | | $ | 215 | | | $ | 215 | |
| Cash and cash equivalents | | | | | | | | |
| Total current assets | | | 215 | | | | 215 | |
| | | | | | | | | |
| Fixed assets | | | | | | | | |
| Computer equipment | | | | | | | | |
| Less: accumulated depreciation | | | | | | | | |
| Net fixed assets | | | | | | | | |
| | | | | | | | | |
| Total assets | | $ | 215 | | | $ | 215 | |
| | | | | | | | | |
| Liabilities | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 200 | | | $ | 200 | |
| Due to related parties | | | 0 | | | | 4,600 | |
| Other payables | | | 65,988 | | | | | |
| Total liabilities | | | 66,188 | | | | 4,800 | |
| | | | | | | | | |
| Stockholders' equity (deficit) | | | | | | | | |
| Common stock | | | 51 | | | | 51 | |
| Additional paid-in capital | | | 428,874 | | | | 428,874 | |
| Accumulated deficit during the development stage | | | (494,898 | ) | | | (433,510 | ) |
| Total stockholders' equity (deficit) | | | (65,973 | ) | | | (4,585 | ) |
| | | | | | | | | |
| Total liabilities and stockholders' equity (deficit) | | $ | 215 | | | $ | 215 | |
See Notes to Financial Statements
CHINA DOMESTICA BIO-TECHNOLOGY HOLDINGS, INC
(A Development Stage Company)
STATEMENTS OF OPERATIONS
| | | | | | From | |
| | | For the fiscal years ended March 31, | | | inception | |
| | | | | | | | | (August 17, | |
| | | | | | | | | 2006) to | |
| | | | | | | | | March 31, | |
| | | 2011 | | | 2010 | | | 2011 | |
| Revenues | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | |
| Operating expenses | | | | | | | | | | | | |
| Officer salaries | | | | | | | 37,500 | | | | 50,000 | |
| Professional fees | | | 65,734 | | | | 13,424 | | | | 102,589 | |
| Professional fees related party | | | | | | | - | | | | 306,700 | |
| Depreciation expense | | | | | | | 1,664 | | | | 2,936 | |
| General & administrative expenses | | | 254 | | | | 6,427 | | | | 35,970 | |
| Total operating expenses | | | 65,988 | | | | 59,015 | | | | 498,195 | |
| | | | | | | | | | | | | |
| Loss from operation | | | (65,988 | ) | | | (59,015 | ) | | | (498,195 | ) |
| | | | | | | | | | | | | |
| Other income (expense) | | | | | | | | | | | | |
| Interest income | | | | | | | 12 | | | | 1,540 | |
| Cancellation of Debt | | | 4,600 | | | | | | | | 4,600 | |
| Loss on disposal of fixed assets | | | | | | | (1,516 | ) | | | (1,516 | ) |
| Impairment expense | | | | | | | - | | | | (1,327 | ) |
| Total other income (expense) | | | 4,600 | | | | (1,504 | ) | | | 3,297 | |
| | | | | | | | | | | | | |
| Loss before income taxes | | | (61,388 | ) | | | (60,519 | ) | | | (494,898 | ) |
| | | | | | | | | | | | | |
| Provision (benefit) for income Taxes | | | | | | | - | | | | | |
| | | | | | | | | | | | | |
| Net loss | | $ | (61,388 | ) | | $ | (60,519 | ) | | $ | (494,898 | ) |
| | | | | | | | | | | | | |
| Earnings (loss) per common share | | | | | | | | | | | | |
| Common shares outstanding | | $ | (1.23 | ) | | $ | (1.21 | ) | | $ | | |
| Basic and fully diluted weighted average | | | | | | | | | | | | |
| Common shares outstanding (after effect of 1 for 46 share reverse stock split occurring June 29, 2010) | | | 49,896 | | | | 49,896 | | | | | |
See Notes to Financial Statements
CHINA DOMESTICA BIO-TECHNOLOGY HOLDINGS, INC
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
From Inception (August 17, 2006) to March 31, 2011
| | | Common Share | | | Stock Amount | | | Additional Paid-in Capital | | | Deficit Accumulated during Development Stage | | | Total | |
| Balance, August 17, 2006 | | | | | | | | | | | | | | | |
| Common shares issued for cash, $0.46 per share between August 2006 and March 2007 | | | 156,522 | | | $ | 157 | | | $ | 71,843 | | | $ | | | | $ | 72,000 | |
| Net loss for the period from inception on August 17, 2006 through March 31, 2007 | | | | | | | | | | | | | | | -2,640 | | | | -2,640 | |
| Balance, March 31, 2007 | | | 156,522 | | | | 157 | | | | 71,843 | | | | -2,640 | | | | 69,360 | |
| Net loss for the year ended March 31, 2008 | | | | | | | | | | | | | | | -20,744 | | | | -20,744 | |
| Balance, March 31, 2008 | | | 156,522 | | | | 157 | | | | 71,843 | | | | -23,384 | | | | 48,616 | |
| Common shares issued for services, $4.6 per share on June 12, 2008 | | | 1,522 | | | | 2 | | | | 6,998 | | | | | | | | 7,000 | |
| Common shares issued for cash, $4.6 per share on June 30, 2008 | | | 22,266 | | | | 22 | | | | 102,403 | | | | | | | | 102,425 | |
| Common shares issued for services at $11.5 per share on January 1, 2009 | | | 21,739 | | | | 22 | | | | 249,978 | | | | | | | | 250,000 | |
| Common shares repurchased and retired at $0.046 per share on March 11, 2009 | | | -152,174 | | | | -152 | | | | -6,848 | | | | | | | | -7,000 | |
| Additional shares issued in the 1 for 46 share reverse stock split due to rounding up of fractional shares | | | 21 | | | | | | | | | | | | | | | | 0 | |
| Net loss for the year ended March 31, 2009 | | | | | | | | | | | | | | | -349,607 | | | | -349,607 | |
| Balance, March 31, 2009 (Restated) | | | 49,896 | | | | 51 | | | | 424,374 | | | | -372,991 | | | | 51,434 | |
| Forgiveness of debt from related party | | | | | | | | | | | 4,500 | | | | | | | | 4,500 | |
| Net loss for the year ended March 31, 2010 | | | | | | | | | | | | | | | -60,519 | | | | -60,519 | |
| Ending Balance, March 31, 2010 | | | 49,896 | | | | 51 | | | | 428,874 | | | | -433,510 | | | | -4,585 | |
| Net loss for the year ended March 31, 2011 | | | | | | | | | | | | | | | -61,388 | | | | -61,388 | |
| Ending Balance, March 31, 2011 | | | 49,896 | | | $ | 51 | | | $ | 428,874 | | | $ | -494,898 | | | $ | -65,973 | |
See Notes to Financial Statements
CHINA DOMESTICA BIO-TECHNOLOGY HOLDINGS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
| | | | | | | | | From Inception | |
| | | | | | | | | (August 17, | |
| | | For year ended March 31, | | | 2006) to March | |
| | | 2011 | | | 2010 | | | 31, 2011 | |
| Cash Flows Provided By (Used In) Operating Activities | | | | | | | | | | |
| Net income (loss) | | $ | -61,388 | | | $ | -60,519 | | | $ | -494,898 | |
| | | | | | | | | | | | | |
| Adjustments to reconcile net income (loss) to net cash provided from (used by) operating activities: | | | | | | | | | | | | |
| Common stock issued for services | | | | | | | | | | | 257,000 | |
| Cancellation of Debt | | | -4,600 | | | | | | | | -4,600 | |
| Depreciation and amortization | | | | | | | 1664 | | | | 2,936 | |
| Impairment of fixed assets | | | | | | | | | | | 1,327 | |
| Loss on disposal of fixed assets | | | | | | | 1516 | | | | 1,516 | |
| Changes in operating assets and liabilities: | | | | | | | | | | | | |
| Prepaid officer's salaries | | | | | | | 37500 | | | | | |
| Increase (decrease) in accounts payable | | | 65,988 | | | | -1,773 | | | | 66,188 | |
| Net cash provided by (used in) operating activities | | | 0 | | | | -21612 | | | | -170,531 | |
| | | | | | | | | | | | | |
| Cash Flows Provided By (Used In) Investing Activities | | | | | | | | | | | | |
| Purchase of fixed assets | | | | | | | | | | | -7,179 | |
| Sale of fixed assets | | | | | | | 1400 | | | | 1400 | |
| Net cash provided by (used in) investing activities | | | | | | | 1,400 | | | | -5,779 | |
| | | | | | | | | | | | | |
| Cash Flows Provided By (Used In) Financing Activities | | | | | | | | | | | | |
| Proceeds from loan by related party | | | | | | | 9,100 | | | | 9,100 | |
| Common stock purchased and retired | | | | | | | | | | | -7,000 | |
| Issuance of common stock for cash | | | | | | | | | | | 174,425 | |
| Net cash provided by (used in) financing activities | | | | | | | 9,100 | | | | 176,525 | |
| | | | | | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | 0 | | | | -11,112 | | | | 0 | |
| Cash and cash equivalents, beginning of period | | | 215 | | | | 11,327 | | | | 215 | |
| Cash and cash equivalents, end of period | | $ | 215 | | | $ | 215 | | | $ | 215 | |
| | | | | | | | | | | | | |
| Supplemental disclosure of Cash Flow Information | | | | | | | | | | | | |
| Interest paid | | | | | | | | | | | | |
| Income taxes paid | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Schedule of Non Cash investing and financing activities | | | | | | | | | | | | |
| Common stock issued for services | | | | | | | | | | $ | 257,000 | |
| Cancellation of Debt | | $ | 4600 | | | | | | | $ | 4,600 | |
| Impairment of fixed assets | | | | | | | | | | $ | 1,327 | |
| Loss on disposal of fixed assets | | | | | | $ | 1,516 | | | $ | 1,516 | |
| Forgiveness of debt from related party | | | | | | | 4,500 | | | $ | 4,500 | |
See Notes to Financial Statements
China Domestica Bio-Technology Holdings, Inc.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2011 & 2010
Note 1. Business Organization
China Domestica Bio-technology Holdings, Inc. (the “Company”) was incorporated in the State of Nevada on August 17, 2006 under the name Cienega Creek Holdings, Inc. . On June 29, 2010, the Company changed its name to China Domestica Bio-technology Holdings, Inc. The Company’s fiscal year end is March 31st. The Company was previously engaged in the computer software business. The Company has not realized revenues from operations as of March 31, 2011 and accordingly is classified as a development stage company. The company is currently in the development stage and has limited assets and no revenue. In accordance with FASB ASC 915, it is considered a Development Stage Company.
Accounting Basis
These financial statements have been prepared on the accrual basis of accounting following generally accepted accounting principles in the United States of America consistently applied.
Note 2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
For Statement of Cash Flows purposes, the Company considers all cash on hand and in banks, certificates of deposit and other highly liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation has been calculated over the estimated useful lives of the assets using the straight line method. The cost of maintenance and repairs is expensed as incurred.
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
Advertising Costs
The Company's policy regarding advertising is to expense advertising when incurred. The Company has incurred no advertising expenses during the years ended March 31, 2011 and 2010.
Revenue Recognition
Presently, the Company is in the development stage and as such, has no revenues. Upon emerging from the development stage the Company will adopt a policy of recognizing revenue when a definitive agreement with a determinable price exists, product delivery and/or invoicing (in each case where there is reasonable assurance of meeting customer-specified criteria) has occurred, and the collectability of the invoice is reasonably assured.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. At March 31, 2011, the deferred tax asset and deferred tax liability accounts, as recorded when material to the financial statements, are entirely the result of temporary differences. Temporary differences represent differences in the recognition of assets and liabilities for tax and financial reporting purposes, primarily accumulated depreciation and amortization.
As of March 31, 2011, the deferred tax asset related to the Company's net operating loss carry forward is fully reserved. Due to the provisions of Internal Revenue Code Section 338, the Company may have no net operating loss carry forwards available to offset financial statement or tax return taxable income in future periods as a result of a change in control involving 50 percentage points or more of the issued and outstanding securities of the Company.
Dividends
The Company is a Development Stage Company and has not yet adopted a policy regarding the payment of dividends.
Earnings (Loss) per Share
Basic earnings (loss) per share is computed by dividing the net income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.
Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants).
Common stock equivalents represent the dilutive effect of the assumed exercise of outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.
As of March 31, 2011, the Company’s has no issued and outstanding warrants or options.
Use of Estimates
The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
The Company’s Management has evaluated recently issued accounting standards through the filing date of these financial statements and believes that the recently issued accounting standards will not have a material impact on the Company’s financial position, operations, or cash flows.
Note 3. Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. However, the Company has incurred significant losses and is dependent on obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain the necessary funding it could cease operations as a new enterprise.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management's efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern. This raises substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments that might result from this uncertainty.
Note 4. Capital Stock
On August 8, 2006, the Company received $3,000 from its founder for 6,522 shares of its common stock. On March 20, 2007, the Company completed an unregistered private offering under the Securities Act of 1933, as amended, relying upon the exemption from registration afforded by Rule 504 of Regulation D promulgated there under. The Company issued 150,000 shares of its common stock at a price of $0.46 per share for $69,000 in cash.
On June 12, 2008, 1,522 shares of common stock were issued for services valued at $7,000, on June 30, 2008, the Company issued 22,266 shares of its common stock for $102,425 and on January 1, 2009 the Company issued an additional 21,739 shares of common stock for services to its President for having met certain Company milestones valued at $250,000. On March 11, 2009, the Company repurchased and retired 152,174 shares of its common stock for $7,000. The shares were purchased from the estate of one of the Company's deceased directors.
On June 29, 2010, the Company effected a one for forty six (1:46) reverse stock split of the outstanding shares of Common Stock. The reverse stock split reduced the number of issued and outstanding shares of common stock of the Company from 2,294,250 shares outstanding prior to the reverse stock split to 49,896 shares outstanding after the reverse stock split. The Company issued an additional 21 shares of common stock in connection with the reverse stock split due to the rounding up of fractional shares. This reverse stock split became effective June 29, 2010. These financial statements show the retroactive effect of this reverse stock split.
At March 31, 2011, there were no outstanding stock options or warrants.
Note 5. Income Taxes
The Company provides for income taxes under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. SFAS No. 109 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 39% to the net loss before provision for income taxes for the following reasons:
Net deferred tax assets consist of the following components as of March 31:
| | | 2011 | | | 2010 | |
| Net Operating Loss Carryover | | $ | (193,010 | ) | | $ | ( 169,069 | ) |
| | | | | | | | | |
| Valuation allowance | | | 193,010 | | | | 169,069 | |
| | | | | | | | | |
| Net deferred tax asset | | $ | - | | | $ | - | |
The Company has a net operating loss carryover of $494,898 as of March 31, 2011 which expires in 2026. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.
The Company has net operating loss carry forwards that were derived solely from operating losses from prior years. These amounts can be carried forward to offset future taxable income for a period of 20 years for each tax year’s loss. No provision was made for federal income taxes as the Company has significant net operating losses.
At March 31, 2011 and 2010, the Company has established a valuation allowance equal to the deferred tax assets as there is no assurance that the Company will generate future taxable income to utilize these assets.
Due to the provisions of Internal Revenue Code Section 338, the Company may have no net operating loss carry forwards available to offset financial statement or tax return taxable income in future periods as a result of a change in control involving 50 percentage points or more of the issued and outstanding securities of the Company.
Note 6. Related Party Transactions
As of March 31, 2011 and 2010, the Company owed $0 and $4,600, respectively, to its former President and CEO. This note payable was non-interest bearing, unsecured and due on demand.
On December 4, 2008 the Company entered into an employment agreement with its President and CEO for $50,000 annual salary beginning on January 1, 2009 and terminating on December 31, 2013. On January 1, 2010 this agreement was terminated and no further salary is owed or to be accrued.
Note 7. Commitments and Contingencies
There are no commitments or contingencies to disclose during the twelve months ended March 31, 2011.
Note 8. Subsequent Events
Management has evaluated subsequent events, and the impact on the reported results and disclosures and determined that there have not been any events that would be required to be reflected in the financial statements or the notes.
