Attached files
file | filename |
---|---|
EX-32.2 - EX 32.2 - CN Dragon Corp | ex322.htm |
EX-32.1 - EX 32.1 - CN Dragon Corp | ex321.htm |
EX-31.1 - EX 31.1 - CN Dragon Corp | ex311.htm |
EX-31.2 - EX 31.2 - CN Dragon Corp | ex312.htm |
U.S.
Securities and Exchange Commission
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the Quarterly period ended January 31, 2010
|
|
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: 333-90618
|
CN
DRAGON CORPORATION
(Exact
name of small business issuer as specified in its charter)
NEVADA
|
98-0358149
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
|
incorporation
or organization)
|
||
8/F
Paul Y Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong
|
||
(Address
of principal executive offices)
|
(Zip
Code)
|
Issuers
Telephone Number (702)
951-5682
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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 x NO o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YES o NO x
APPLICABLE
ONLY TO CORPORATE ISSUERS
State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date: 1,804,696 of March 19, 2010.
CN
DRAGON CORPORATION
Form 10-Q
for the nine months ended January 31, 2010
TABLE OF
CONTENTS AND INFORMATION REQUIRED IN REPORT
Page
|
||
PART
I
|
Financial
Information
|
|
Item
1.
|
Financial
Statements (unaudited):
|
|
Consolidated:
|
||
Balance
Sheets as of January 31, 2010 and April 30, 2009
|
3
|
|
Statements
of Operations for the three month periods ended January 31, 2010 and
January 31, 2009
|
4
|
|
Statements
of Operations for the nine month periods ended January 31, 2010 and
January 31, 2009
|
5
|
|
Statements
of Cash Flows for the nine month periods ended January 31, 2010 and
January 31, 2009 and from inception (December 13, 2002) through January
31, 2010
|
6
|
|
Notes
to Financial Statements
|
8
|
|
Item
2.
|
Management’s
Discussion and Analysis or Plan of Operation
|
12
|
Item
3.
|
Controls
and Procedures
|
15
|
PART
II
|
Other
Information
|
|
Item
1.
|
Legal
Proceedings
|
16
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
16
|
Item
3.
|
Defaults
Upon Senior Securities
|
16
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
16
|
Item
5.
|
Other
Information
|
16
|
Item
6.
|
Exhibits
|
17
|
SIGNATURES
|
18
|
CN
Dragon Corp. and Subsidiaries
Consolidated
Balance Sheets
(Unaudited)
January
31,
|
April 30,
|
||||||
2010
|
2009
|
||||||
Assets
|
|||||||
Current
Assets:
|
|||||||
Cash
|
$
|
-
|
$
|
-
|
|||
Accounts
receivable
|
21,277
|
20,142
|
|||||
Inventory
|
144,007
|
144,007
|
|||||
Prepaid
expenses and deposits (Note 4)
|
23,775
|
129,271
|
|||||
Total
Current Assets
|
189,059
|
293,420
|
|||||
Property
and Equipment, net of accumulated depreciation
|
201,697
|
218,752
|
|||||
Other
assets, net of accumulated amortization
|
7,660
|
7,786
|
|||||
Goodwill
(Note 5)
|
417,574
|
417,574
|
|||||
Total
Assets
|
$
|
815,990
|
$
|
937,532
|
|||
Liabilities
and Stockholders’ Equity (Deficit)
|
|||||||
Current
Liabilities:
|
|||||||
Bank
Overdraft
|
$
|
315
|
$
|
345
|
|||
Accounts
payable
|
282,892
|
270,000
|
|||||
Accounts
payable - related parties
|
478,659
|
1,472,427
|
|||||
Loans
payable
|
117,644
|
109,555
|
|||||
Compensation
payable (Note 7)
|
-
|
-
|
|||||
Total
Current Liabilities
|
879,510
|
1,852,326
|
|||||
Long
Term Liabilities:
|
|||||||
Due
to Shareholders (Note 6)
|
643,803
|
1,372,734
|
|||||
Total
Long Term Liabilities
|
643,803
|
1,372,734
|
|||||
Stockholders’
Equity (Deficit)
|
|||||||
Preferred
stock, voting; $0.001 par value; 375,000,000 shares
authorized;
|
|||||||
no
shares issued and outstanding at January 31, 2010 and April 30,
2009,
|
|||||||
respectively
|
-
|
-
|
|||||
Common
stock, voting; $0.001 par value; 250,000,000 shares
authorized;
|
|||||||
1,804,696
and 804,696 shares issued and outstanding at
|
|||||||
January
31, 2010 and April 30, 2009, respectively (Note 8(u))
|
180
|
80
|
|||||
Additional
paid in capital
|
5,875,407
|
4,223,842
|
|||||
Accumulated
other comprehensive income
|
44,162
|
(68,591
|
)
|
||||
Deficit
accumulated during the development stage
|
(6,627,072
|
)
|
(6,442,860
|
)
|
|||
Total
Stockholders’ Equity (Deficit)
|
(707,323
|
)
|
(2,287,529
|
)
|
|||
Total
Liabilities and Stockholders’ Equity (Deficit)
|
$
|
815,990
|
$
|
937,532
|
The
accompanying notes are an integral part of these financial
statements 3
CN
Dragon Corp. and Subsidiaries
Consolidated
Statements of Operations
(Unaudited)
For the three months ended
|
|||||||
January 31,
|
|||||||
2010
|
2009
|
||||||
Revenue
|
$
|
104
|
$
|
1,136
|
|||
Revenue
from related parties
|
-
|
-
|
|||||
104
|
1,136
|
||||||
Cost
of goods sold
|
(26,667
|
)
|
(25,392
|
||||
Gross
Profit(Loss)
|
(26,563
|
)
|
(24,256
|
||||
Expenses
|
|||||||
Selling,
General and Administrative
|
15,660
|
488,275
|
|||||
Total
Expenses
|
15,660
|
488,275
|
|||||
Operating
Loss
|
(42,223
|
)
|
(512,531
|
||||
Other
Income and Expenses
|
|||||||
Loss/Gain on Foreign Exchange
|
-
|
-
|
|||||
Debt
Forgiveness
|
-
|
-
|
|||||
Discontinued Operations
|
-
|
-
|
|||||
Impairment
of goodwill
|
-
|
-
|
|||||
Net
loss before taxes
|
(42,223
|
)
|
(512,531
|
||||
Provision
for income taxes
|
-
|
-
|
|||||
Net
Loss
|
$
|
(42,223
|
)
|
$
|
(512,531
|
||
Net
Loss Per Share (Basic and Diluted)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
||
Weighted
Average Shares Outstanding (Basic and Diluted)
|
1,804,696
|
706,808
|
The
accompanying notes are an integral part of these financial statements
4
CN
Dragon Corp. and Subsidiaries
(A
Development Stage Company)
Consolidated
Statements of Operations
(Unaudited)
Cumulative
|
|||||||||||
amounts
|
|||||||||||
from inception
|
|||||||||||
(December 13,
|
|||||||||||
For the nine months ended
|
2002)
|
||||||||||
January 31,
|
through
|
||||||||||
2010
|
2009
|
January 31, 2010
|
|||||||||
Revenue
|
$
|
341
|
$
|
27,115
|
$
|
1,122,246
|
|||||
Revenue
from related parties
|
-
|
-
|
1,676
|
||||||||
341
|
27,115
|
1,123,922
|
|||||||||
Cost
of goods sold
|
(80,000
|
)
|
(94,027
|
)
|
(1,022,214
|
)
|
|||||
Gross
Profit(Loss)
|
(79,659
|
)
|
(66,912
|
)
|
101,708
|
||||||
Expenses
|
|||||||||||
Selling,
General and Administrative
|
104,553
|
1,111,942
|
6,296,042
|
||||||||
Total
Expenses
|
104,553
|
1,111,942
|
6,296,042
|
||||||||
Operating
Loss
|
(184,212
|
)
|
(1,178,854
|
)
|
(6,194,334
|
)
|
|||||
Other
Income and Expenses
|
|||||||||||
Loss/Gain on Foreign Exchange
|
-
|
4,222
|
83,072
|
||||||||
Debt
Forgiveness
|
-
|
42,000
|
387,882
|
||||||||
Discontinued Operations
|
-
|
-
|
(738,692
|
)
|
|||||||
Impairment
of goodwill
|
-
|
-
|
(165,000
|
)
|
|||||||
Net
loss before taxes
|
(184,212
|
)
|
(1,132,632
|
)
|
(6,627,072
|
)
|
|||||
Provision
for income taxes
|
-
|
-
|
-
|
||||||||
Net
Loss
|
$
|
(184,212
|
)
|
$
|
(1,132,632
|
)
|
$
|
(6,627,072
|
)
|
||
Net
Loss Per Share (Basic and Diluted)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
|||||
Weighted
Average Shares Outstanding (Basic and Diluted)
|
1,592,378
|
575,384
|
The accompanying notes are an integral part of these financial statements 5
CN
Dragon Corp. and Subsidiaries
(A
Development Stage Company)
Consolidated
Statements of Cash Flows
(Unaudited)
Cumulative
|
||||||||||
amounts from
|
||||||||||
inception
|
||||||||||
(December 13,
|
||||||||||
For the nine
month period ended
|
2002)
|
|||||||||
January 31,
|
through
|
|||||||||
2010
|
2009
|
January 31, 2010
|
||||||||
Cash
Flows From Operating Activities
|
||||||||||
Net
Loss
|
$
|
(184,212
|
)
|
$
|
(1,132,632
|
)
|
$
|
(6,627,072
|
)
|
|
Adjustments
to reconcile net loss to cash
|
||||||||||
Depreciation
|
18,176
|
25,559
|
153,373
|
|||||||
Acquisition
fees
|
-
|
-
|
90,000
|
|||||||
Impairment
of goodwill
|
-
|
-
|
165,000
|
|||||||
Written
off goodwill
|
-
|
-
|
738,692
|
|||||||
Changes
in working capital items
|
||||||||||
Increase
(decrease) in bank overdraft
|
(29
|
)
|
958
|
(373)
|
|
|||||
Increase
(decrease) in accounts payable
|
12,892
|
6,381
|
282,892
|
|||||||
Increase
(decrease) in compensation payable
|
-
|
51,998
|
-
|
|||||||
Increase
(decrease) in accounts payable - related parties
|
(993,768
|
)
|
975,164
|
478,659
|
||||||
Decrease
(Increase) in accounts receivable
|
(1,135
|
)
|
9,209
|
(21,081
|
)
|
|||||
Decrease
(increase) in inventory
|
-
|
(92,380
|
)
|
-
|
||||||
Decrease
(increase) in other assets
|
(606
|
)
|
1,034
|
(606
|
)
|
|||||
Decrease
(Increase) in prepaid expenses
|
105,496
|
54,507
|
(23,775
|
)
|
||||||
Net
Cash (Used In) Operating Activities
|
(1,043,186
|
)
|
(100,202
|
)
|
(4,764,291
|
)
|
||||
Cash
Flows to Investing Activities
|
||||||||||
Acquisition
of property and equipment
|
(23,791
|
)
|
(568,403
|
)
|
(404,750
|
)
|
||||
Acquisition
of other assets
|
-
|
-
|
(9,881
|
)
|
||||||
Net
Cash (Used in) Investing Activities
|
(23,791
|
)
|
(568,403
|
)
|
(414,631
|
)
|
||||
Cash
Flows from Financing Activities
|
||||||||||
Increase
(decrease) in loans payable to stockholders
|
(728,931
|
)
|
(51,869
|
)
|
643,803
|
|||||
Increase
(decrease) in Note Payable
|
-
|
85,000
|
-
|
|||||||
Increase
(decrease) in Loans Payable
|
8,089
|
(9,966
|
)
|
8,089
|
||||||
Cash
received in recapitalization
|
-
|
-
|
1,353
|
|||||||
Proceeds
from issuance of common stock
|
1,874,028
|
648,097
|
4,481,515
|
|||||||
Net
Cash Provided by Financing Activities
|
1,153,186
|
671,262
|
5,134,760
|
|||||||
Increase
(Decrease) in Cash in the Period
|
86,209
|
96,020
|
(44,162
|
)
|
||||||
Comprehensive
gain (loss) on translation
|
86,209
|
(96,914
|
)
|
44,162
|
||||||
Cash
- Beginning of Period
|
0
|
894
|
0
|
|||||||
Cash
- End of Period
|
$
|
0
|
$
|
0
|
$
|
0
|
The
accompanying notes are an integral part of these financial
statements 6
(continued...)
CN
Dragon Corp. and Subsidiaries
(A
Development Stage Company)
Consolidated
Statements of Cash Flows (continued)
(Unaudited)
Cumulative
|
||||||||||
amounts from
|
||||||||||
inception
|
||||||||||
(December 13,
|
||||||||||
For the nine month period ended
|
2002)
|
|||||||||
January 31,
|
through
|
|||||||||
2010
|
2009
|
January 31, 2010
|
||||||||
Non-Cash Financing
Activities
|
||||||||||
Common
stock issued for equipment
|
$
|
$
|
703,135
|
$
|
93,193
|
|||||
Supplementary
Disclosure of Non-Cash Items
|
||||||||||
Net
liabilities assumed in recapitalization
|
$
|
-
|
$
|
-
|
$
|
(234,467
|
)
|
|||
Issuance
of common stock for purchase goodwill
|
$
|
-
|
$
|
-
|
$
|
838,358
|
||||
Issuance
of common stock for services
|
$
|
-
|
$
|
-
|
$
|
1,340,599
|
||||
Issuance
of common stock for consulting
|
$
|
-
|
$
|
61,000
|
$
|
223,937
|
The
accompanying notes are an integral part of these financial statements
7
CN
Dragon Corp. and Subsidiaries
Notes
to the Consolidated Financial Statements
Unaudited
1.
Interim Financial Information
The
consolidated financial statements of CN Dragon Corp. (formerly Wavelit, Inc.)
(the Company) and its wholly owned subsidiaries, Precision Aviation, Inc.,
Galaxy Networks Inc., China Teletech (formerly Stream Horizon Studios Ltd.), and
Galaxy US Networks Inc. (formerly Eventec, Inc.) for the nine month periods
ended January 31, 2010 and 2009 and related footnote information are unaudited.
All adjustments (consisting only of normal recurring adjustments) have been made
which, in the opinion of management, are necessary for a fair presentation.
Results of operations for the nine month periods ended January 31, 2010 and 2009
are not necessarily indicative of the results that may be expected for any
future period.
Certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America, have been omitted. These financial statements should
be read in conjunction with the audited financial statements and notes on Form
10-K for the year ended April 30, 2009 and filed on August 13,
2009.
2. Going Concern
The
accompanying consolidated financial statements, which have been prepared in
conformity with accounting principles generally accepted in the United States of
America, contemplates the continuation of the Company as a going concern.
However, the Company has been in the development stage since its inception
(December 13, 2002), sustained losses and has used capital raised through the
issuance of stock and loans to fund activities. Continuation of the Company as a
going concern is contingent upon establishing and achieving profitable
operations. Such operations will require management to secure additional
financing for the Company in the form of debt or equity.
Management
believes that actions currently being taken to revise the Company’s funding
requirements will allow the Company to continue its operations. However, there
is no assurance that the necessary funds will be realized by securing debt or
through stock offerings. The consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty
3. Summary of Significant Accounting
Policies
Reclassifications
Certain
amounts in the prior year have been reclassified to conform to the current
period presentation. These reclassifications had no impact on the
Company’s consolidated financial position, results of operations or cash
flows.
Recent Accounting
Pronouncements
With the
exception of those stated below, there have been no recent accounting
pronouncements or changes in accounting pronouncements during the nine months
ended September 30, 2009, as compared to the recent accounting
pronouncements described in the Annual Report that are of material significance,
or have potential material significance, to the Company.
Effective
July 1, 2009, the Company adopted the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting
Principles – Overall (“ASC 105-10”). ASC 105-10
establishes the FASB
Accounting Standards Codification (the “Codification”) as the source
of authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with U.S. GAAP. Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative
U.S. GAAP for SEC registrants. All guidance contained in the
Codification carries an equal level of authority. The Codification
superseded all existing non-SEC accounting and reporting
standards. All other non-grandfathered, non-SEC accounting literature
not included in the Codification is non-authoritative. The FASB will
not issue new standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts. Instead, it will issue
Accounting Standards Updates (“ASUs”). The FASB will not consider
ASUs as authoritative in their own right. ASUs will serve only to
update the Codification, provide background information about the guidance and
provide the bases for conclusions on the change(s) in the
Codification. References made to FASB guidance throughout this
document have been updated for the Codification.
Recent Accounting
Pronouncements (Continued)
Effective
January 1, 2008, the Company adopted FASB ASC 820-10, Fair Value Measurements and
Disclosures – Overall (“ASC 820-10”) with respect to its financial
assets and liabilities. In February 2008, the FASB issued updated
guidance related to fair value measurements, which is included in the
Codification in ASC 820-10-55, Fair Value Measurements and
Disclosures – Overall – Implementation Guidance and
Illustrations. The updated guidance provided a one year
deferral of the effective date of ASC 820-10 for non-financial assets and
non-financial liabilities, except those that are recognized or disclosed in the
financial statements at fair value at least annually. The adoption of
ASC 820-10 did not have an impact on the Company’s results of operations or
financial condition.
Effective
April 1, 2009, the Company adopted FASB ASC 820-10-65, Fair Value Measurements and
Disclosures – Overall – Transition and Open Effective Date
Information (“ASC 820-10-65”). ASC 820-10-65 provides
additional guidance for estimating fair value in accordance with ASC 820-10 when
the volume and level of activity for an asset or liability have significantly
decreased. ASC 820-10-65 also includes guidance on identifying
circumstances that indicate a transaction is not orderly. ASC
825-10-65 also amends ASC 825-10 to require disclosures about fair value of
financial instruments in interim financial statements as well as in annual
financial statements and also amends ASC 270-10 to require those disclosures in
all interim financial statements. The adoption of ASC 820-10-65 did not
have an impact on the Company’s results of operations or financial
condition.
Effective
April 1, 2009, the Company adopted FASB ASC 855-10, Subsequent Events –
Overall (“ASC 855-10”). ASC 855-10 establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued. It requires the disclosure of the date through which an
entity has evaluated subsequent events and the basis for that date – that is,
whether that date represents the date the financial statements were issued or
were available to be issued. This disclosure should alert all users of
financial statements that an entity has not evaluated subsequent events after
that date in the set of financial statements being
presented. Adoption of ASC 855-10 did not have a material impact on
the Company’s consolidated results of operations or financial
condition. The Company has evaluated subsequent events from January
31, 2010 to the date the financial statements were issued.
Effective
July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurements and
Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05
provided amendments to ASC 820-10, Fair Value Measurements and
Disclosures – Overall, for the fair value measurement of
liabilities. ASU 2009-05 provides clarification that in circumstances
in which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using certain
techniques. ASU 2009-05 also clarifies that when estimating the fair
value of a liability, a reporting entity is not required to include a separate
input or adjustment to other inputs relating to the existence of a restriction
that prevents the transfer of a liability. ASU 2009-05 also clarifies
that both a quoted price in an active market for the identical liability at the
measurement date and the quoted price for the identical liability when traded as
an asset in an active market when no adjustments to the quoted price of the
asset are required are Level 1 fair value measurements. Adoption of
ASU 2009-05 did not have a material impact on the Company’s results of
operations or financial condition.
4.
Prepaid Expenses
On
November 1, 2007, the Company entered into a consulting agreement and paid for
consulting services which have not yet been provided as of the end of this
quarter ended January 31, 2010.
5.
Due to Shareholders
The total
amount owing at January 31, 2010 and April 30, 2009 was $643,803 and $1,372,734
respectively. Convertible Debentures were issued to the following Shareholders:
TOV Trust $500,000 ($250,000 Converted to shares July 7 2009); Arthur Griffiths
$250,000 (Converted to shares June 29 2009); Edward Clunn $175,000 (Converted to
shares March 4 2009); Bram Solloway $125,000 (Converted to shares March 4 2009);
Carol Shaw $75,000 (Converted to shares March 4 2009); Robert Danvers $50,000
(Converted to shares March 4 2009); and Lorne Milne $27,730. All Convertible
Debentures are 36-month term, bearing interest at 10%per annum payable upon
conversion or end of term. Total Face Value of all Convertible Debentures is
$1,202,730 and convert to a total of 24,054,600 common shares. Convertible
Debentures were issued in order to consolidate debts owed and debt forgiveness
of $264,856 was realized in the fiscal year ended April 30, 2008.
6.
Capital Stock
|
On
November 20, 2009, the Company effected a reverse split of its common
stock on a 100:1 basis so that the 180,469,940 shares of common stock
issued, were decreased to 1,804,699 shares of common stock issued and
outstanding. The authorized common stock remained unchanged at
1,250,000,000 shares authorized (750,000,000 common shares and 375,000,000
preferred shares). Par value of the preferred and common stock remained
unchanged at $0.001. All figures in these financial statements, including
comparative information have been updated to give effect to the reverse
100:1 split.
|
ITEM 2. Management's Discussion and
Analysis or Plan of Operation
Statements
contained in this Plan of Operation of this quarterly report on Form 10-Q and
elsewhere in this filing that are not statements of historical or current fact
constitute "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 involve known and unknown risks, uncertainties and
other factors which could cause the actual results of the Company, its
performance (financial or operating) or its achievements expressed or implied by
such forward-looking statements not to occur or be realized. Forward-looking
statements may be identified by the use of forward-looking terminology such as
"may," "will," "project," "expect," "believe," "estimate," "anticipate,"
"intends," "continue", "potential," "opportunity" or similar terms, variations
of those terms or the negative of those terms or other variations of those terms
or comparable words or expressions. You should read statements that contain
these words carefully because they discuss our future expectations, make
projections of our future results of operations or our financial condition or
state other forward-looking statements. The factors listed under the caption
"Additional Risk Factors" below, as well as any other cautionary language in
this report, provide examples of risks, uncertainties and events which may cause
our actual results to differ materially from the expectations we described in
our forward-looking statements. We do not undertake any obligation to publicly
update forward-looking statements to reflect events or circumstances after the
date on which the statement is made or to reflect the occurrence of
unanticipated events.
The
following information should be read in conjunction with the consolidated
financial statements and the notes thereto appearing elsewhere in this filing as
well our annual report on Form 10-K filed with the Securities and Exchange
Commission on August 13, 2009. All figures representing shares of our capital
stock have been adjusted to reflect the 100 to 1 reverse split of our capital
stock on November 20, 2009.
General
Our
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate these estimates, including those related to software
development expenses, financing operations and contingencies and litigation. We
base these estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions.
Financial
Reporting Release No. 60, which was recently released by the SEC, requires all
companies to include a discussion of critical accounting policies or methods
used in the preparation of financial statements. Note 3 to our consolidated
financial statements includes a summary of the significant accounting policies
and methods used in the preparation of our financial statements. We believe that
the following critical accounting policies affect our more significant judgments
and estimates used in the preparation of our consolidated financial
statements.
We
recognize revenues in accordance with the Securities and Exchange Commission
Staff Accounting Bulletin No. 101, “Revenue recognition in Financial
Statements”. Revenue is recognized only when the price is fixed or determinable,
persuasive evidence of an arrangement exists, the service is performed, and
collectibility is reasonably assured.
12
Overview
CN Dragon
Corp.
The Board
of Directors of the Company has made the determination to change the direction
of the Company’s current business operations and to direct the Company’s future
activities and endeavors into the development, ownership and operation of hotels
& leisure facilities in China. We plan to primarily derive our
revenue and earnings from the operation of hotels & resorts, which includes
management and other revenue generated from hotel investments. We also intend to
derive revenue and earnings from the operation of serviced
apartments.
Our aim
is to specialize in the luxury segment of the hospitality sector, targeting the
upscale business and leisure traveler. We are presently seeking to acquire
interests in respect to properties in this segment. Our long term strategy is to
build an asset based portfolio of these businesses throughout China’s fast
developing second-tier cities.
Market
Place
In 2008,
China was the world’s second largest economy with its GDP registering US$ 7.9
trillion. According to the IMF, this figure will be eclipsed this year with
China’s GDP already registering US$ 8.7 trillion in Oct 2009. In comparison with
the US (1.1%) and Europe (0.80%), China was the fastest growing economy last
year with a GDP real growth rate of 9% (CIA). China’s emerging second-tier
cities have prospered along with that growth, attracting major investment and
developments. With the population’s increased purchasing power, second-tier
cities have become an attractive proposition for developers; with such markets
evidencing a strong demand for modernization and presenting investors with
comfortable room for growth.
Our
research strategy involves identifying those markets and examining whether they
exhibit a demand for luxury hotels & leisure facilities. We carry this out
by thoroughly analyzing tourism figures, the supply of 5-Star lodging facilities
and other industry related data. Additional factors we evaluate include the
locality, population, GDP, infrastructure and the major industries. Overall
economic indicators must project a positive outlook for high growth before the
Company will consider investing in those markets.
Objective
Our
objective is to fill a niche not presently available, namely the availability of
5-Star hospitality services in China's fastest growing second-tier cities.
Consumers in the growing premium segment of these markets are looking for
facilities that reflect their image – impressive and worldly. They expect and
demand a high quality of service and a full array of amenities which we will
endeavor to provide. Further, we believe timing is critical as there is still
comfortable room for growth in these markets. By pioneering the development in
these cities, our objective is to create a benchmark for future industry players
to measure up to.
Precision Aviation,
Inc. (wholly-owned subsidiary of CN Dragon Corp.)
Precision
Aviation, Inc. (PAI) is in the business of developing, manufacturing and
marketing Unmanned Aerial Vehicles (UAVs) for aerial surveillance and scanning
missions. PAI markets these production and custom UAVs to civilian, industrial,
governmental, policing and military clients.
PAI is a
developer and marketer of short, medium and long-range aerial drones. Since the
1940's federal and locals governments have used varying forms of remotely
piloted vehicles for many purposes primarily as target practice for manned
aircraft. Our drones are intended for both private and governmental use in such
a diverse array of applications such as oil and gas exploration, municipal
operations, forestry, agriculture and coastal/border surveillance as well as
various military applications.
PAI has
taken a new approach to the development of UAV technology by making use of
advanced composite construction techniques and materials. The company
incorporates the latest in ultra light high speed computer processors to deliver
a flexible, mission specific UAV to our customers that can perform various
complex missions.
While
military applications for PAI products are a natural in these current times of
global instability, PAI is looking forward to a more peaceful future and is
focusing not only on military, but also on civilian uses for UAVs. PAI products
will provide platforms necessary for aerial imaging in industries and sectors as
diverse as agricultural, forestry, livestock ranches, law enforcement,
environmental protection agencies, coast guard, and even Hollywood. Currently,
PAI is aggressively developing a class of micro-UAVs to support law enforcement
with perimeter level reconnaissance to preserve the safety of officers in close
contact and hostage type situations. These UAVs provide much more focused
coverage than having only trained officers at street-level.
Results of
Operations
Our
January 31, 2010 consolidated interim financial statements have been prepared on
the basis of the accounts and operations of Galaxy Networks Inc. from
incorporation, December 13, 2002 to January 31, 2010 and incorporate the
accounts and operations for CN Dragon Corp. (formerly Wavelit, Inc.), Precision
Aviation, Inc., China Teletech (formerly Stream Horizon Studios Ltd.) and Galaxy
US Networks Inc. from October 1, 2005 to January 31, 2010.
For the
period from incorporation, December 13, 2002 through January 31, 2010, we
incurred a deficit of $6,769,146. Operating expenditures during the period
totaled $5,838,430.
For the
nine month period ended January 31, 2010, we incurred a loss from operations of
$184,212. Revenues were $341, and costs of goods sold were $80,000 in the
period.
Liquidity and Capital
Resources
As of
January 31, 2010, we had an accumulated deficit of $6,769,146, stockholders
deficit of $707,323 and cash on hand of $0. Our working capital deficit at
January 31, 2010 was $690,452.
Our
working capital is currently insufficient to sustain our current operations. Our
operations are currently dependent on our suppliers’ willingness and ability to
continue to provide services without some assurance of payment. As set out under
the heading “Operation Development and Plan” above, our plan is to seek
additional funding to underwrite our operations and our development
plan.
While
management believes that sales can be grown and that ultimately profitable
operations can be attained in the future, there is no assurance that sales will
be maintained or grown or that they will ultimately be of a level required to
generate profitable operations or provide positive cash flow. We are unable to
predict at this time the exact amount of any additional working capital we may
require to fund the implementation of our business plan and achieve cash flow
sufficient to sustain operations and achieve profitability. To fund our
operations and implementation of our business plan, we are seeking additional
capital in the private and/or public equity markets or through the sale of debt
securities, or through the issuance of debt instruments. If we receive
additional funds through the issuance of equity securities, however, our
existing stockholders may experience significant dilution. If we issue new
securities, they may contain certain rights, preferences or privileges that are
senior to those of our common stock. Moreover, we may not be successful in
obtaining additional financing when needed or on terms favorable to our
stockholders. As we have no commitments from any third parties to provide
additional equity or debt funding, we cannot provide any assurance that we will
be successful in attaining such additional funding.
We
currently market a range of products and services, however, we have limited
revenues and only a limited operating history from which to assess our
operations. Due to our lack of revenue-production history and our lack of
contractual commitments to generate profits, there is no basis at this time for
investors to make an informed determination as to the prospects for our future
success. For this reason and, as we have not achieved profitable operations and
require additional capital to achieve our objectives, our auditors have included
in their report covering our financial statements for the period from
incorporation to January 31, 2010, that there is substantial doubt about our
ability to continue as a going concern.
Additional Risk
Factors
As noted
throughout this quarterly report, CN Dragon Corp. (formerly Wavelit, Inc.), is
an emerging development stage company and accordingly, there are many risks that
affect our operations and our ultimate viability. It is not possible, however,
to foresee all risks which may affect us. Moreover, we cannot predict the
magnitude of each risk nor can we predict whether we will successfully
effectuate our current business plan. Each prospective investor is encouraged to
carefully analyze the risks and merits of an investment in our securities and to
take into consideration when making such analysis, among others, the financial
risks discussed under the subheading “Liquidity and Capital Resources” above and
the additional risk factors we have set out below.
Operating History -
We are presently in the process of marketing products and services which we have
developed or acquired. We have only a limited operating history from which
investors can evaluate our future business prospects or managements performance.
As a result, you have no reliable means to determine whether you should make an
investment in this company.
Marketable Products -
In order to sell our products and services, we must demonstrate to potential
customers that we have systems and services that are functional, supported, cost
effective and address their needs. We have developed products and services which
we have introduced and from which we are receiving sales revenues. At present
however, we have only limited history in offering and supporting these product
offerings. If products and services we offer do not meet customer needs and if
customers are not convinced we can maintain, support and upgrade our offerings
in future, or if our products contain product flaws or bugs, we will not be able
to successfully market our products and services or earn revenues.
14
Staff Availability -
We currently have employment agreements with the directors, officers and
employees we depend on for the successful implementation of our
plan.
Competition - We face
competition from a wide range of firms in the streaming media, filing and
hosting services industry. These include large, well established and financially
stronger companies. We do not currently have resources to compete and may never
have sufficient funds to be able to refine, and successfully market our
offerings so that we may become a factor in the industry. These competitive
disadvantages represent another factor which may cause investors in our
securities to lose the value of their investment.
ITEM 3. Controls and
Procedures
On
January 31, 2010, our management concluded its evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures. As of the
Evaluation Date, our Chief Executive Officer (also President, Secretary,
Treasurer), interim Chief Financial Officer concluded that we maintain
disclosure controls and procedures that are effective in providing reasonable
assurance that information required to be disclosed in our reports under the
Securities Exchange Act of 1934 (Exchange Act) is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer (also President, Secretary,
Treasurer), interim Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. Our management necessarily applied its
judgment in assessing the costs and benefits of such controls and procedures,
which, by their nature, can provide only reasonable assurance regarding
managements control objectives.
There
have been no significant changes in our internal controls or in other factors
that could significantly affect internal controls over financial reporting
subsequent to its evaluation.
15
PART
II OTHER INFORMATION
ITEM 1. Legal
Proceedings.
None.
ITEM 2. Unregistered Sales of
Equity Securities and Use of Proceeds.
None.
ITEM
3. Defaults Upon Senior Securities.
None
ITEM 4. Submissions of Matters
to a Vote of Security Holders.
On
February 20, 2007, a vote was put to the shareholders in order to change the
corporate name from Infotec Business Systems, Inc to Wavelit, Inc., to approve a
30:1 reverse split of the authorized, issued and outstanding common shares and
to increase the authorized common shares from 50,000,000 (post-split) to
250,000,000 authorized common shares. (as referenced by the Definitive 14C
filing with the Securities and Exchange Commission on May 5, 2007 and the Form
8-K filing with the Securities and Exchange Commisssion on June 13, 2007.) The
company received not less than 51% approval from its shareholders of record as
at February 20, 2007.
On
November 22, 2007, a vote was put to the shareholders in order to approve the
Stock Purchase Agreement between Wavelit, Inc. and ATB Company, a Colorado
corporation, in which Wavelit, Inc. will purchase 100% of the issued and
outstanding shares of Precision Aviation, Inc., a Nevada corporation, for Forty
Million (40,000,000) Wavelit, Inc. common shares. The company received not less
than 51% approval from its shareholders of record as at November 22,
2007.
On
February 10, 2009, a vote was put to the shareholders in order to approve “the
spin-off of Wavelit, Inc.'s wholly-owned subsidiaries: Galaxy Networks, Inc.
(Canada), Galaxy Networks, Inc. (USA) and Stream Horizon Studios Ltd. (Canada),
resulting in the Wavelit, Inc. shareholders, on the Record Date, owning a direct
interest in each of the three subsidiaries that is proportionate to their
ownership in Wavelit, Inc.” The company received not less than 51% approval from
its shareholders of record as at February 10, 2009.
On July
20, 2009, a vote was put to the shareholders in order to change the corporate
name from Wavelit, Inc to CN Dragon Corporation (as referenced by the Definitive
14C filing with the Securities and Exchange Commission on October 20, 2009) The
company received not less than 51% approval from its shareholders of record as
at July 20, 2009.
On
September 2, 2009, a vote was put to the shareholders in order to approve a
100:1 reverse split of the authorized, issued and outstanding common shares (as
referenced by the Definitive 14C filing with the Securities and Exchange
Commission on November 20, 2009.) The company received not less than 51%
approval from its shareholders of record as at September 2, 2009.
ITEM
5. Other Information.
None
16
ITEM
6. Exhibits.
Index
to Exhibits
Exhibits
|
Description
of Documents
|
|
3.1a
|
Form
of Certificate Change (Incorporated by reference to the Form Definitive
14C filed with the Securities and Exchange Commission on October 20,
2009).
|
|
3.1b
|
Change
of Directors and Officers (Incorporated by reference to the Form 8-K filed
with the Securities and Exchange Commission on October 12,
2009.)
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
32.1
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
17
SIGNATURES
Pursuant
to the requirements 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.
CN
Dragon Corp.
(Registrant)
|
||
Date:
March 22, 2010
|
By:
|
/s/ Teck
Fong Kong
|
(Teck
Fong Kong, President, Director, CEO)
|
||
By:
|
/s/
Chong Him Lau
|
|
(Chong
Him Lau, Director, CFO)
|
18