UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2010
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______.
Commission File Number: 001-34858
CHINA DIGITAL VENTURES CORPORATION
(Exact name of registrant as specified in its charter)
| Nevada | 98-0568076 | ||
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | ||
13520 Oriental St. Rockville, MD | 20853 | ||
| (Address of principal executive offices) | (Zip Code) |
(202) 536-5191
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes x No o
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 o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company x
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes x No o
As of as of February 17, 2011 the registrant had 15,228,000 shares of its Common Stock, $0.001 par value, outstanding.
CHINA DIGITAL VENTURES CORPORATION
FORM 10-Q
DECEMBER 31, 2010
INDEX
| PART I – FINANCIAL INFORMATION | 3 | |
| Item 1. | Financial Statements | 3 |
| Balance Sheets as of December 31, 2010 (unaudited) and September 30, 2010 | 3 | |
| Statements of Operations for the Three Months Ended December 31, 2010 and 2009 and for the Period March 26, 2007 (Inception) to December 31, 2010 (unaudited) | 4 | |
| Statement of Stockholders’ Deficit for the Period March 26, 2007 (Inception) to December 31, 2010 (unaudited) | 5 | |
| Statements of Cash Flows for the Three Months Ended December 31, 2010 and 2009 and for the Period March 26, 2007 (Inception) to December 31, 2010 (unaudited) | 6 | |
| Notes to Financial Statements (unaudited) | 7 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 19 |
| Item 4. | Controls and Procedures | 19 |
| PART II – OTHER INFORMATION | 20 | |
| Item 1. | Legal Proceedings | 20 |
| Item 1.A. | Risk Factors | 20 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 20 |
| Item 3. | Defaults Upon Senior Securities | 20 |
| Item 4. | (Removed & Reserved) | 20 |
| Item 5. | Other Information | 20 |
| Item 6. | Exhibits | 21 |
| SIGNATURE | 22 | |
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Balance Sheets
December 31, 2010 | September 30, 2010 | |||||||
| (unaudited) | Restated | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | - | $ | - | ||||
| Total assets | $ | - | $ | - | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 2,920 | $ | - | ||||
| Accrued expenses | 2,000 | 2,500 | ||||||
| Amount due to shareholder | 28,603 | 19,103 | ||||||
| Amount due to director | 180 | 180 | ||||||
| Total liabilities | 33,703 | 21,783 | ||||||
| Stockholders' deficit: | ||||||||
Common stock, $.001 par value, 75,000,000 shares authorized, 15,228,000 shares issued and outstanding | 15,228 | 15,228 | ||||||
| Additional paid-in capital | 69,332 | 69,332 | ||||||
| Deficit accumulated during the development stage | (118,263 | ) | (106,343 | ) | ||||
| Total stockholders' deficit | (33,703 | ) | (21,783 | ) | ||||
| Total liabilities and stockholders' deficit | $ | - | $ | - | ||||
See accompanying notes to financial statements.
3
CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Statements of Operations
(unaudited)
| For the Three Months Ended | For the Period March 26, 2007 | |||||||||||
| December 31, | December 31, | December 31, | ||||||||||
| 2010 | 2009 | 2010 | ||||||||||
| Net revenue | $ | - | $ | 550 | $ | 31,912 | ||||||
| Cost of revenue | - | 320 | 15,731 | |||||||||
| Gross profit | - | 230 | 16,181 | |||||||||
| General and administrative expenses | 11,920 | 55,318 | 277,121 | |||||||||
| Loss from operations | (11,920 | ) | (55,088 | ) | (260,940 | ) | ||||||
| Other income (expense): | ||||||||||||
| Gain on disposal of subsidiaries | - | - | 118,193 | |||||||||
| Exchange gain | - | - | 1,028 | |||||||||
| Interest income | - | 141 | 293 | |||||||||
| Other income | - | - | 903 | |||||||||
| Interest expense | - | (726 | ) | (2,170 | ) | |||||||
| Total other income (expense) | - | (585 | ) | 118,247 | ||||||||
| Loss before income taxes | (11,920 | ) | (55,673 | ) | (142,693 | ) | ||||||
| Provision for income taxes | - | - | - | |||||||||
| Net loss | (11,920 | ) | (55,673 | ) | (142,693 | ) | ||||||
| Net loss attributable to noncontrolling interest | - | 9,717 | 24,430 | |||||||||
| Net loss attributable to China Digital Ventures Corporation | $ | (11,920 | ) | $ | (45,956 | ) | $ | (118,263 | ) | |||
| Net loss per share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||||||
| Weighted average number of shares outstanding - | ||||||||||||
| Basic and Diluted | 15,228,000 | 15,228,000 | ||||||||||
| Net loss attributable to China Digital Ventures Corporation | $ | (11,920 | ) | $ | (45,956 | ) | $ | (118,263 | ) | |||
| Foreign currency translation gain (loss) | - | (553 | ) | - | ||||||||
| Comprehensive loss | $ | (11,920 | ) | $ | (46,509 | ) | $ | (118,263 | ) | |||
See accompanying notes to financial statements.
4
CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Statement of Stockholders' Deficit
For the period March 26, 2007 (Inception) to December 31, 2010
(unaudited)
| Common stock | Additional paid-in | Deficit accumulated | Accumulated other | Noncontrolling | Total Stockholders' | |||||||||||||||||||||||
| Shares | Amount | capital | stage | income (loss) | interest | deficit | ||||||||||||||||||||||
| Common stock issued to founders for cash at $.001 per share | 10,000,000 | $ | 10,000 | $ | - | $ | - | $ | - | $ | - | $ | 10,000 | |||||||||||||||
| Common stock issued for cash at $0.01 per share | 3,000,000 | 3,000 | 27,000 | - | - | - | 30,000 | |||||||||||||||||||||
| Net loss for the period March 26, 2007 (inception) to September 30, 2007 | - | - | - | (38,799 | ) | - | - | (38,799 | ) | |||||||||||||||||||
| Balance, September 30, 2007 | 13,000,000 | 13,000 | 27,000 | (38,799 | ) | - | - | 1,201 | ||||||||||||||||||||
| Common stock issued for cash at $0.02 per share | 208,000 | 208 | 3,952 | - | - | - | 4,160 | |||||||||||||||||||||
| Common stock issued for services at $0.02 per share | 20,000 | 20 | 380 | - | - | - | 400 | |||||||||||||||||||||
| Net loss for the year ended September 30, 2008 | - | - | - | (49,952 | ) | - | - | (49,952 | ) | |||||||||||||||||||
| Balance, September 30, 2008 | 13,228,000 | 13,228 | 31,332 | (88,751 | ) | - | - | (44,191 | ) | |||||||||||||||||||
| Shares issued for acquisition of subsidiary | 2,000,000 | 2,000 | 38,000 | - | - | - | 40,000 | |||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | (920 | ) | - | (920 | ) | |||||||||||||||||||
| Net loss for the year ended September 30, 2009 | - | - | - | (63,258 | ) | - | (2,091 | ) | (65,349 | ) | ||||||||||||||||||
| Balance, September 30, 2009 | 15,228,000 | 15,228 | 69,332 | (152,009 | ) | (920 | ) | (2,091 | ) | (70,460 | ) | |||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | 920 | - | 920 | |||||||||||||||||||||
| Disposal of subsidiary | - | - | - | - | - | 16,546 | 16,546 | |||||||||||||||||||||
| Net income for year ended September 30, 2010 | - | - | - | 45,666 | - | (14,455 | ) | 31,211 | ||||||||||||||||||||
| Balance, September 30, 2010 | 15,228,000 | 15,228 | 69,332 | (106,343 | ) | - | - | (21,783 | ) | |||||||||||||||||||
| Net loss for the three months ended December 31, 2010 (unaudited) | - | - | - | (11,920 | ) | - | - | (11,920 | ) | |||||||||||||||||||
| Balance, December 31, 2010 (unaudited) | 15,228,000 | $ | 15,228 | $ | 69,332 | $ | (118,263 | ) | $ | - | $ | - | $ | (33,703 | ) | |||||||||||||
See accompanying notes to financial statements.
5
CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(unaudited)
| For the Three Months Ended | For the Period March 26, 2007 | |||||||||||
December 31, 2010 | December 31, 2009 | December 31, 2010 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net loss | $ | (11,920 | ) | $ | (45,956 | ) | $ | (118,263 | ) | |||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||||||
| Depreciation | - | 1,269 | 2,914 | |||||||||
| Noncontrolling interest | - | (9,717 | ) | (24,430 | ) | |||||||
| Gain on disposal of subsidiaries | - | - | (118,193 | ) | ||||||||
| Common stock issued for services | - | - | 400 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | - | (288 | ) | (859 | ) | |||||||
| Other receivable | - | 2,048 | 1,812 | |||||||||
| Loan receivable | - | 14,049 | 12,822 | |||||||||
| Due from related party | - | - | (19,443 | ) | ||||||||
| Deposit | - | 11 | (5,871 | ) | ||||||||
| Inventory | - | (592 | ) | (1,897 | ) | |||||||
| Accounts payable | 2,920 | 28,967 | 85,661 | |||||||||
| Accrued expenses | 1,500 | 1,480 | 3,960 | |||||||||
| Net cash used in operating activities | (7,500 | ) | (8,729 | ) | (181,387 | ) | ||||||
| Cash flows from investing activities: | ||||||||||||
| Acquisition of subsidiary, net of cash | - | - | 75,650 | |||||||||
| Disposal of subsidiary, net of cash | - | - | 39,742 | |||||||||
| Capital expenditures | - | (2,236 | ) | (12,511 | ) | |||||||
| Net cash provided by (used in) investing activities | - | (2,236 | ) | 102,881 | ||||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from loan payable | - | 1,454 | 6,793 | |||||||||
| Amounts due shareholder | 7,500 | - | 26,603 | |||||||||
| Amounts due directors | - | (2,467 | ) | 4,860 | ||||||||
| Proceeds from sale of common stock | - | - | 44,160 | |||||||||
| Net cash provided by (used in) financing activities | 7,500 | (1,013 | ) | 82,416 | ||||||||
| Effect of exchange rate fluctuations on cash | - | (553 | ) | (3,910 | ) | |||||||
| Net increase (decrease) in cash | - | (12,531 | ) | - | ||||||||
| Cash and cash equivalents at beginning of period | - | 36,227 | - | |||||||||
| Cash and cash equivalents at end of period | $ | - | $ | 23,696 | $ | - | ||||||
| Supplemental disclosure of cash flow information: | ||||||||||||
| Cash paid for interest | $ | - | $ | 726 | $ | 2,170 | ||||||
| Cash paid for taxes | $ | - | $ | - | $ | - | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||||||
| Accrued expenses paid by shareholder | $ | 2,000 | $ | - | $ | 2,000 | ||||||
See accompanying notes to financial statements.
6
CHINA DIGITAL VENTURES CORPORATION
Notes to Financial Statements
December 31, 2010
(unaudited)
Note 1 – Restatement of Prior Period Consolidated Financial Statements
The Company restated its previously issued consolidated financial statements included in the original Annual Report on Form 10-K for the year ended September 30, 2010 to reflect the effect of an accounting and reporting error resulting from a deficiency in its accounting and financial statement preparation process. This error and the related adjustments resulted in an understatement of general and administrative expenses of $500 for the three and twelve months ended September 30, 2010 and the understatement of $2,680 of deficits accumulated during the development stage. The revisions applied to the affected individual line items in the consolidated financial statements are as follows:
| Consolidated Balance Sheet | ||||||||||||
September 30, 2010 | ||||||||||||
| As previously reported | Adjustments | As restated | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | - | $ | - | $ | - | ||||||
| Total assets | $ | - | $ | - | $ | - | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | - | $ | - | $ | - | ||||||
| Accrued expenses | - | 2,500 | 2,500 | |||||||||
| Amount due to shareholder | 19,103 | - | 19,103 | |||||||||
| Amount due to director | - | 180 | 180 | |||||||||
| Total liabilities | 19,103 | 2,680 | 21,783 | |||||||||
| Stockholders' deficit: | ||||||||||||
| Common stock | 15,228 | - | 15,228 | |||||||||
| Additional paid-in capital | 69,332 | - | 69,332 | |||||||||
| Deficit accumulated during the development stage | (103,663 | ) | (2,680 | ) | (106,343 | ) | ||||||
| Total stockholders' deficit | (19,103 | ) | (2,680 | ) | (21,783 | ) | ||||||
| Total liabilities and stockholders' deficit | $ | - | $ | - | $ | - | ||||||
7
CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2010
(unaudited)
Note 1 – Restatement of Prior Period Consolidated Financial Statements (Continued)
| Consolidated Statement of Operations | ||||||||||||
| For the Year Ended September 30, 2010 | ||||||||||||
As previously reported | Adjustments | As restated | ||||||||||
| Net revenue | $ | 1,127 | $ | - | $ | 1,127 | ||||||
| Cost of revenue | 320 | - | 320 | |||||||||
| Gross profit | 807 | - | 807 | |||||||||
| General and administrative expenses | 87,139 | 500 | 87,639 | |||||||||
| Loss from operations | (86,332 | ) | (500 | ) | (86,832 | ) | ||||||
| Other income (expense): | ||||||||||||
| Gain on disposal of subsidiaries | 118,193 | - | 118,193 | |||||||||
| Exchange gain | 1,028 | - | 1,028 | |||||||||
| Interest income | 141 | - | 141 | |||||||||
| Other income | - | - | - | |||||||||
| Interest expense | (1,319 | ) | - | (1,319 | ) | |||||||
| Total other income (expense) | 118,043 | - | 118,043 | |||||||||
| Net income (loss) | 31,711 | (500 | ) | 31,211 | ||||||||
| Net loss attributable to noncontrolling interest | 14,455 | - | 14,455 | |||||||||
| Net income (loss) attributable to China Digital Ventures Corporation | $ | 46,166 | $ | (500 | ) | $ | 45,666 | |||||
8
CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2010
(unaudited)
Note 1 – Restatement of Prior Period Consolidated Financial Statements (Continued)
| Consolidated Statement of Cash Flows | ||||||||||||
| For the Year Ended September 30, 2010 | ||||||||||||
As previously reported | Adjustments | As restated | ||||||||||
| Cash flows used in operating activities: | ||||||||||||
| Net loss | $ | 46,166 | $ | (500 | ) | $ | 45,666 | |||||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||||||
| Depreciation | 2,115 | - | 2,115 | |||||||||
| Noncontrolling interest | (14,455 | ) | - | (14,455 | ) | |||||||
| Gain on disposal of subsidiaries | (118,193 | ) | - | (118,193 | ) | |||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | (705 | ) | - | (705 | ) | |||||||
| Other receivable | 1,328 | - | 1,328 | |||||||||
| Loan receivable | 14,049 | - | 14,049 | |||||||||
| Due from related party | (12,339 | ) | - | (12,339 | ) | |||||||
| Deposit | (5,784 | ) | - | (5,784 | ) | |||||||
| Inventory | (658 | ) | - | (658 | ) | |||||||
| Other payables | 50,254 | - | 50,254 | |||||||||
| Loan payable | 3,300 | - | 3,300 | |||||||||
| Accrued expenses | (37,729 | ) | 500 | (37,229 | ) | |||||||
| Amount due to directors | 1,908 | - | 1,908 | |||||||||
| Net cash used in operating activities | (70,743 | ) | - | (70,743 | ) | |||||||
| Cash flows from investing activities: | ||||||||||||
| Acquisition of subsidiary, net of cash | - | - | - | |||||||||
| Disposal of subsidiary, net of cash | 39,742 | - | 39,742 | |||||||||
| Capital expenditures | (2,236 | ) | - | (2,236 | ) | |||||||
| Net cash from investing activities | 37,506 | - | 37,506 | |||||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from sale of common stock | - | - | - | |||||||||
| Net cash from financing activities | - | - | - | |||||||||
| Effect of exchange rate fluctuations on cash | (2,990 | ) | - | (2,990 | ) | |||||||
| Net increase (decrease) in cash | (36,227 | ) | - | (36,227 | ) | |||||||
| Cash and cash equivalents at beginning of period | 36,227 | - | 36,227 | |||||||||
| Cash and cash equivalents at end of period | $ | - | $ | - | $ | - | ||||||
9
CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2010
(unaudited)
Note 2 – Organization and Basis of Presentation
Organization
China Digital Ventures Corporation (the "Company") was incorporated in Nevada on March 26, 2007. The Company is currently a development stage enterprise, and following the disclosures being required by Accounting Standards Codification ASC 915 "Development Stage Entity". The principal business of the Company was its web based telecom and IPTV businesses, both of which were disposed of during the year ended September 30, 2010. As of the date hereof, the Company has no operations.
On July 23, 2010, the Company experienced a change in control. Canton Investments Ltd (“CIL”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between CIL and Wireless One International Limited (“Wireless One”), Bing HE and Ning HE, the Company’s former directors, and other various shareholders. On the closing date, July 23, 2010, pursuant to the terms of the Stock Purchase Agreement, CIL purchased from Wireless One and Bing HE and Ning HE 11,500,000 shares of the Company’s outstanding common stock for $205,750. Also on July 23, 2010, CIL purchased 2,440,000 shares of the Company’s outstanding common stock for $36,600 from various shareholders. As a res ult of the change in control, CIL owns a total of 13,940,000 shares of the Company’s common stock representing 91.54%.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements include the accounts of the Company and its wholly-owned subsidiary, Lead Concept Limited, and the other subsidiaries listed below. The results of the subsidiaries acquired or disposed of during the period are consolidated from their effective dates of acquisition and through their effective dates of disposition.
| Percentage | |||||||
| Company Name | Place of Incorporation | Ownership | |||||
| Lead Concept Limited * | Hong Kong | 100% | Direct | ||||
| China Integrated Media Corporation Limited ** | Australia | 76.8% | Direct | ||||
| China Television Corporation ** | British Virgin Islands | 76.8% | Indirect | ||||
| CIMC Marketing Pty Limited ** | Australia | 76.8% | Indirect | ||||
| Guangzhou HwaHe Culture & Media Company Limited ** | China, Peoples Republic of China | 76.8% | Indirect | ||||
| * Disposed of on June 20, 2010 | |||||||
| ** Acquired and consolidated on July 6, 2009. Disposed of on April 30, 2010. | |||||||
All significant intercompany accounts and transactions have been eliminated in the accompanying financial statements.
Note 3 – Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred a net loss of $11,920 for the three months ended December 31, 2010 and has incurred cumulative losses since inception of $118,263. The Company has a stockholders’ deficit of $33,703 at December 31, 2010. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate revenues, its ability to continue to raise investment capital, and implement its business plan. No assurance can be given that the Company will be s uccessful in these efforts.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern. No assurance can be given that the Company will be successful in these efforts.
10
CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2010
(unaudited)
Note 4 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures 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.
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2010 and September 30, 2010, respectively, the Company had no cash equivalents.
Earnings (Loss) Per Share
The Company computes income (loss) per share in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) ASC Topic 260, "Earnings per Share", which requires presentation of both basic and diluted earnings per share (“EPS”). Basic EPS is computed by dividing income (loss) available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. Dilutive loss per share has not been presented because as of December 31, 2010 and 2009, there were no common share equivalents o utstanding.
Foreign Currency Translation
The accounts of the Company's Hong Kong and China subsidiaries were maintained in Hong Kong dollars (HK) and Chinese Renminbi, respectively. Such financial statements are translated into U.S. Dollars (USD) in accordance with ASC 830 "Foreign Currency Translation" which codified Statement of Financial Accounts Standards ("SFAS") No. 52, "Foreign Currency Translation," with the respective currency as the functional currency. According to ASC 830, all assets and liabilities were translated at the exchange rate on the balance sheet date, stockholder's equity are translated at the historical rates, and statements of operations items are translated at the weighted average exchange rate for the year. The resulting translation adjustments are reported under accumulated other comprehensive income (loss) in accordance wit h Accounting Standard Codification ASC 220 that codified SFAS No. 130, "Reporting Comprehensive Income”.
Revenue Recognition
The Company recognized revenue on arrangements in accordance with FASB Codification Topic 605, “Revenue Recognition” (“ASC Topic 605”). Under ASC Topic 605, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. Revenue is recognized when products are received and accepted by the customer and is recorded net of estimated product returns, which is based upon the Company's return policy, sales agreements, management estimates of potential future product returns related to current period revenue, current economic trends, changes in customer compositi on and historical experience.
Equity Based Compensation
The Company accounts for equity-based compensation transactions with employees under the provisions of ASC Topic 718, “Compensation, Stock Compensation” (“Topic No. 718”). Topic No. 718 requires the recognition of the fair value of equity-based compensation in net earnings. The fair value of common stock issued for compensation is measured at the market price on the date of grant. The fair value of our equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award. In addition, the calculation of equity-based compensation costs requi res that we estimate the number of awards that will be forfeited during the vesting period. The fair value of equity-based awards granted to employees is amortized over the vesting period of the award and we elected to use the straight-line method for awards granted after the adoption of Topic No. 718.
11
CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2010
(unaudited)
Note 4 – Summary of Significant Accounting Policies (Continued)
The Company accounts for equity-based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, which ever is more reliably measurable. When the equity instrument is utilized for measurement, the fair value of (i) common stock issued for payments to non-employees is measured at the market price on the date of grant; (ii) equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize an asset or expense in the sa me manner as if it is to receive cash for the goods or services instead of paying with or using the equity instrument.
Income Taxes
Income taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized or the liability settled. The effect of a change in income tax rates on future income tax liabilities and assets is recognized in income in the period that the change occurs. Future income tax assets are recognized to the extent that they are considered more likely than not to be realized.
The Financial Accounting Standards Board (FASB) has issued ASC 740 “Income Taxes” (formerly, Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” – An Interpretation of FASB Statement No. 109 (FIN 48)). ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with prior literature FASB Statement No. 109, Accounting for Income Taxes. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial stateme nts.
As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740. As a conclusion, the tax position of the Company has not met the more-likely-than-not threshold as of December 31, 2010.
Development Stage Enterprise
The Company is a development stage enterprise, as defined in ASC Topic 915 “Development Stage Entities”. The Company's planned principal operations have not fully commenced.
Accounting Standards Codification
The Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC” became effective on July 1, 2009. At that date, the ASC became FASB’s officially recognized source of authoritative generally accepted accounting principles (“GAAP”) applicable to all public and non-public non-governmental entities, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”) and related literature. All other accounting literature is considered non-authoritative. The switch to the ASC affects the way companies refer to U.S. GAAP in financial statements and accounting policies. Citing particular content in the ASC involves speci fying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure.
Reclassifications
Certain amounts in the December 31, 2009 financial statements have been reclassified to conform to the presentation used in the December 31, 2010 financial statements.
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CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2010
(unaudited)
Note 4 – Summary of Significant Accounting Policies (Continued)
Subsequent Events
The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there are no other such events that warrant disclosure or recognition in the consolidated financial statements.
Note 5 – Recent Accounting Pronouncements
In January 2010, the FASB issued, and the Company adopted, ASC Update No. 2010-05, “Escrowed Share Arrangements and the Presumption of Compensation” (ASCU No. 2010-05”). ASCU No. 2010-05 codifies the SEC staff’s views on escrowed share arrangements which historically has been that the release of such shares to certain shareholders based on performance criteria is presumed to be compensatory. When evaluating whether the presumption of compensation has been overcome, the substance of the arrangement should be considered, including whether the transaction was entered into for a reason unrelated to employment, such as to facilitate a financing transaction. In general, in financing transactions the escrowed shares should be reflected as a discount in the allocation of proceeds. In debt financings the discounts are to be amortized using the effective interest method, while discounts on equity financings are not generally amortized. As it relates to future financings, the adoption of this update may have an effect on the Company’s financial statements.
In January 2010, the FASB issued ASC Update No. 2010-06 “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements” which updated guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. This update requires new disclosures on significant transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy (including the reasons for these transfers) and the reasons for any transfers in or out of Level 3. This update also requires a reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis. In addition to these new disclosure requirements, this update clarifies certain existing disclosure requirem ents. For example, this update clarifies that reporting entities are required to provide fair value measurement disclosures for each class of assets and liabilities rather than each major category of assets and liabilities. This update also clarifies the requirement for entities to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. This update will become effective for the Company with the interim and annual reporting period beginning November 1, 2010, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will become effective for the Company with the interim and annual reporting periods beginning November 1, 2011. The Company will not be required to provide the amended disclosures for any previous periods presented for comparative purposes. Other than requiring additional disclosures, adoption of t his update will not have a material effect on the Company’s financial statements.
In September 2009, the FASB issued Update No. 2009-13, “Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force” (ASU 2009-13). It updates the existing multiple-element revenue arrangements guidance currently included under ASC 605-25, which originated primarily from the guidance in EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” (EITF 00-21). The revised guidance primarily provides two significant changes: 1) eliminates the need for objective and reliable evidence of the fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and 2) eliminates the residual method to allocate the arrangement consideration. In addition, the guidance also expands the disclosure requirem ents for revenue recognition. ASU 2009-13 will be effective for the first annual reporting period beginning on or after June 15, 2010, with early adoption permitted provided that the revised guidance is retroactively applied to the beginning of the year of adoption. The Company is currently assessing the future impact of this new accounting update to its financial statements.
Management does not believe any other recently issued but not yet effective accounting pronouncements, if adopted, would have an effect on the accompanying financial statements.
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CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2010
(unaudited)
Note 6 – Related Party Transactions
As of December 31, 2010 and September 30, 2010, the amount due from the Company’s director was $180. The amount due from the director is unsecured, non-interest bearing and payable on demand.
In connection with the change in control which occurred on July 23, 2010, Canton Investments Ltd (“Canton”), the Company’s principal shareholder, assumed an outstanding loan from the former shareholders of the Company of $19,103. During the three months ended December 31, 2010, Canton paid an additional $9,500 of expenses in connection with the Company’s operations, resulting in an amount due to Canton of $28,603 at December 31, 2010. The loan is unsecured, non-interest bearing and there is no repayment date.
Note 7 – Stockholders’ Deficit
During the period from March 26, 2007 (date of inception) to September 30, 2007, the Company issued 10,000,000 shares of its common stock to founders of the Company for $10,000 cash or $0.001 per share.
During the period from March 26, 2007 (date of inception) to September 30, 2007, the Company issued 3,000,000 shares of its common stock for $30,000 cash or $0.01 per share.
During the year ended September 30, 2008, the Company issued 208,000 restricted shares of its common stock for $4,160 cash or $0.02 per share.
During the year ended September 30, 2008, the Company issued 20,000 restricted shares of its common stock for services rendered aggregating $400 as stock based compensation.
On July 6, 2009, the Company issued 2,000,000 shares of its Common Stock to the then current major shareholder of the Company for the acquisition of 19,200,000 shares in China Integrated Media Corporation Limited.
Note 8 – Income Taxes
No provision was made for income taxes for the period from March 26, 2007 (Inception) to December 31, 2010 as the Company had cumulative operating losses. For the three months ended December 31, 2010 and 2009, the Company incurred net losses for tax purposes of $11,920 and $55,673, respectively. Total net operating loss carried forward at December 31, 2010 is approximately $15,000. If not utilized, they will start to expire in 2027.
The income tax expense (benefit) differs from the amount computed by applying the United States Statutory corporate income tax rate as follows:
For the Three Months Ended December 31, | ||||||||
| 2010 | 2009 | |||||||
| United States statutory corporate income tax rate | 34.0% | 34.0% | ||||||
| Change in valuation allowance on deferred tax assets | -34.0% | -34.0% | ||||||
| Provision for income tax | -% | -% | ||||||
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CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2010
(unaudited)
Note 8 – Income Taxes (Continued)
Deferred income taxes reflect the tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The components of the net deferred income tax assets are approximately as follows:
December 31, 2010 | September 30, 2010 | |||||||
| Deferred income tax assets: | ||||||||
| Net operating loss carry forwards | $ | 4,960 | $ | 910 | ||||
| Valuation allowance | (4,960 | ) | (910 | ) | ||||
| Net deferred income tax assets | $ | - | $ | - | ||||
The Company has established a full valuation allowance on our deferred tax asset because of a lack of sufficient positive evidence to support its realization. The valuation allowance increased by $4,050 for the three months ended December 31, 2010 and decreased by $14,985 for the year ended September 31, 2010.
Note 9 – Disposal of Subsidiaries
On April 30, 2010, the Company disposed of its subsidiary China Integrated Media Corporation Limited, an Australian public company, for $50,000. The Company realized a profit of $92,975 from the sale of this investment.
On June 20, 2010, the Company disposed of its subsidiary Lead Concept Limited, a Hong Kong corporation, for HK$1.00 and the Company realized a profit of US$25,218. After the disposals and as of the date of this report, the Company had no operations.
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CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2010
(unaudited)
Note 9 – Disposal of Subsidiaries (Continued)
The following table summarized the assets and liabilities disposed of and the resulting gains from their disposal:
Disposal of China Integrated Media Corporation Ltd | Disposal of Lead Concept Ltd | Total for Year Ended | ||||||||||
| Net assets disposed of: | ||||||||||||
| Cash | $ | 10,086 | $ | 172 | $ | 10,258 | ||||||
| Accounts and other receivables | 1,556 | 859 | 2,415 | |||||||||
| Due from related parties | 19,257 | 7,770 | 27,027 | |||||||||
| Deposits | 130,585 | - | 130,585 | |||||||||
| Inventory | 1,964 | 279 | 2,243 | |||||||||
| Property and equipment | 12,081 | - | 12,081 | |||||||||
| Goodwill | 13,902 | - | 13,902 | |||||||||
| Other payables and accrued expenses | (195,687 | ) | (34,652 | ) | (230,339 | ) | ||||||
| Loan payable | (40,114 | ) | - | (40,114 | ) | |||||||
| Due to related parties | (16,033 | ) | (674 | ) | (16,707 | ) | ||||||
| Noncontrolling interest | 16,546 | - | 16,546 | |||||||||
| Foreign currency translation adjustment | 2,882 | 1,028 | 3,910 | |||||||||
| Net liabilities disposed | (42,975 | ) | (25,218 | ) | (68,193 | ) | ||||||
| Consideration - cash | 50,000 | - | 50,000 | |||||||||
| Gain on disposal of subsidiaries | $ | 92,975 | $ | 25,218 | $ | 118,193 | ||||||
| Supplemental discolsure of cash flow information: | ||||||||||||
| Net cash from disposal of subsidiaries: | ||||||||||||
| Cash outflow of subsidiary disposed | $ | (10,086 | ) | $ | (172 | ) | $ | (10,258 | ) | |||
| Consideration - cash | 50,000 | - | 50,000 | |||||||||
| Total, net | $ | 39,914 | $ | (172 | ) | $ | 39,742 | |||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” ”will,” “anticipate,” “belie ve,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.
Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended September 30, 2010 and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.
Company Overview
The Company was incorporated in Nevada on March 26, 2007 and was in the web based telecom services business in China. The Company's mission was to acquire, own and manage a portfolio of "technology", "media" and "telecommunication" assets in China. During the periods under review all revenue was derived from the telecom business sector.
In July 2009, CDVC acquired a 76.8% interest in China Integrated Media Corporation Limited ("CIMC"), a public company in Australia.
In February 2010, the Company decided to divest from its investment in CIMC due to its inability to raise the capital necessary to pursue this investment on a timely manner and concerns on its internal liquidity. On April 30, 2010 the Company disposed of CIMC.
On June 20, 2010, the Company disposed of its subsidiary company, Lead Concept Limited, which operated its web based VOIP business as the Company was no longer competitive in this market segment. After the disposal, the Company had no operations. The Company is currently a development stage enterprise.
On July 23, 2010, the Company experienced a change in control. Canton Investments Ltd (“CIL”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between CIL and Wireless One International Limited (“Wireless One”), Bing HE and Ning HE, the Company’s former directors, and other various shareholders. On the closing date, July 23, 2010, pursuant to the terms of the Stock Purchase Agreement, CIL purchased from Wireless One and Bing HE and Ning HE 11,500,000 shares of Company’s outstanding common stock for $205,750. Also on July 23, 2010, CIL purchased 2,440,000 shares of the Company’s outstanding common stock for $36,600 from various shareholders. As a re sult of the change in control, CIL owns a total of 13,940,000 shares of the Company’s common stock representing 91.54%.
Management is currently assessing and evaluating new strategic opportunities as it remains in its development stage.
Results of Operations
For the Three Months Ended December 31, 2010 and 2009 and For the Period March 26, 2007 (Inception) to December 31, 2010
Revenues
The Company had no revenue for the three months ended December 31, 2010 compared to $550 for the three months ended December 31, 2009. The Company incurred a cost of revenue of $0 and $320, achieving a gross profit of $0 and $230 for the three months ended December 31, 2010 and 2009, respectively. All revenue was derived from the telecom business and reflects the disposal of the Company’s operating subsidiaries during the year ended September 30, 2010.
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For the period from March 26, 2007 (date of inception) to December 31, 2010, the Company realized revenue of $31,912, incurred a cost of revenue of $15,731 and achieved a gross profit of $16,181
Operating Expenses
For the three months ended December 31, 2010 our total operating expenses were $11,920 compared to $55,318 for the three months ended December 31, 2009 resulting in a decrease of $43,398. The decrease is attributable to the disposal of our operating subsidiaries during the year ended September 30, 2010.
For the period from March 26, 2007 (date of inception) to December 31, 2010, the accumulated gross profit was $16,181, the total operating expenses was $277,121 which was all selling, general and administrative expenses and had $118,193 in gain on disposal of subsidiary, $1,028 in exchange gain, $2,170 in interest expense, $1,196 in interest income and other income and loss attributable to minority interest of $24,430, resulting in an accumulated net loss to our shareholders of $118,263.
Liquidity and Capital Resources
As of December 31, 2010, the Company had no cash and a deficit in working capital of $33,703.
We do not have sufficient resources to effectuate our business. As of December 31, 2010, we had no cash. We expect to incur a minimum of $50,000 in expenses during the next twelve months of operations. We estimate that this will be comprised of the following expenses: $25,000 for business planning and development, and $25,000 will be needed for general overhead expenses such as salaries, legal and accounting fees, office overhead and general expenses.
We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.
We used cash for operating activities of $7,500 and $8,729 for the three months ended December 31, 2010, and 2009. The principal elements of cash flow used in operations for the three months ended December 31, 2010 included a net loss of $11,920, offset by an increase in accounts payable of $2,920 and an increase in accrued expenses of $1,500.
Cash generated in our financing activities was $7,500 for the three months ended December 31, 2010, compared to cash used of $1,013 during the comparable period in 2009. This increase was primarily attributed to amounts due to our principal shareholder for expenses paid on our behalf by the shareholder.
Cash used in investing activities during the three months ended December 31, 2010 was $0 compared to $2,236 during the same period in 2009.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
Management's Discussion and Analysis of Financial Condition and Results of Operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. When preparing our financial statements, we make estimates and judgments that affect the reported amounts on our balance sheets and income statements, and our related disclosure about contingent assets and liabilities. We continually evaluate our estimates, including those related to revenue, allowance for doubtful accounts, reserves for income taxes, and litigation. We base our estimates on historical experience and on various other assumptions, which we believe to be reasonable in order to form the basis for making judgments about the carrying values of assets and liabilities that are not readily ascertained from other sources. Actual results may deviate from these estimates if alternative assumptions or condition are used.
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Our significant accounting policies are summarized in Note 4 of our financial statements. While all of these significant accounting policies impact the Company’s financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on the Company and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our financial position or liquidity, results of operations or cash flows for the periods presented.
Additional Information
We file reports and other materials with the Securities and Exchange Commission. These documents may be inspected and copied at the Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549. You can obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. You can also get copies of documents that the Company files with the Commission through the Commission's Internet site at www.sec.gov.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is not exposed to market risk related to interest rates or foreign currencies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief fin ancial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to chief executive and chief financial officers to allow timely decisions regarding disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and interim chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Interim Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as of such date. The Chief Executive Officer and Interim Chief Financial Officer has determined that the Company continues to have the following deficiencies which represent a material weakness:
| ● | Lack of functioning independent directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; | |
| ● | Lack of segregation of duties over financial transaction processing and reporting; | |
| ● | Ineffective controls and insufficient written policies and procedures over period end financial disclosure and reporting processes. |
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To the extent reasonably possible, given our limited resources, our goal is to separate the responsibilities of Principal Executive Officer and Principal Financial Officer, intending to rely on two or more individuals. We will also seek to expand our current board of directors to include additional independent individuals willing to perform directorial functions. Since the recited remedial actions will require that we hire or engage additional personnel, this material weakness may not be overcome in the near term due to our limited financial resources. Until such remedial actions can be realized, we will continue to rely on the advice of outside professionals and consultants.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company's property is not the subject of any pending legal proceedings.
The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of Regulation S-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None.
Item 4. (Removed and Reserved).
Item 5. Other Information.
None.
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Item 6. Exhibits
| Exhibit 3.1 | Articles of Incorporation (1) |
| Exhibit 3.2 | Bylaws (1) |
| Exhibit 10.1 | A letter agreement for the Loan Advance dated September 30, 2009 from Mr. Bing HE (2) |
| Exhibit 31.1 | Rule 13a-14(a) Certification by the Principal Executive Officer and Interim Principal Financial Officer (3) |
| Exhibit 32.1 | Certification by the Principal Executive Officer and Interim Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (3) |
| (1) | Incorporated by reference from Registrant’s Form SB-2 filed with the Securities and Exchange Commission on October 16, 2007. |
| (2) | Incorporated by reference from Registrant’s Amendment No. 2 to Form 10-K/A filed with the Securities and Exchange Commission on November 20, 2009. |
| (3) | Filed herewith. |
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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.
| Date: February 22, 2011 | By: /s/ Robert M. Price | |
| Robert M. Price | ||
| Director, Chief Executive Officer, Interim Chief Financial Officer |
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