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EX-31 - China Grand Resorts, Inc.ex31.htm
EX-32 - China Grand Resorts, Inc.ex32.htm

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 June 30, 2011

  

   
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 For the transition period from ______to______.

 

CHINA GRAND RESORTS, INC.

 (Exact name of registrant as specified in Charter)

 

         
NEVADA   0-27246   62-1407521
(State or other jurisdiction of incorporation or organization)   (Commission File No.)   (IRS Employee Identification No.)

 

RM 905, Reignwood Center

No.8 Yong’an Dongli Jianguomen Outer Street,

Chaoyang District Beijing, 100022,

People’s Republic of China

 (Address of Principal Executive Offices)

 _______________

 

 (86-10) 8528 8755

 (Issuer Telephone number)

_______________

 (Former Name or Former Address if Changed Since Last Report)

 

Indicate by check 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.[X] Yes [ ] No

 

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 [X] No

 

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 [ ] Accelerated Filer [ ]

Non-Accelerated Filer [ ] Smaller Reporting Company [X]

 

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act [ ]Yes [X] No

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of June 30, 2011: 3,272,311 shares of common stock 

1
 

  

TABLE OF CONTENTS

 

     
PART I - FINANCIAL INFORMATION      Page       
   
Item 1.   Financial Statements 3
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operation 13
Item 4.   Controls and Procedures 18
     
     
PART II -OTHER INFORMATION
 
Item 6.   Exhibits. 20
SIGNATURES   21
     

 

2
 

 

CHINA GRAND RESORTS, INC.
CONSOLIDATED BALANCE SHEETS
(IN U.S. DOLLARS)
  As of  
  June 30, 2011   September 30, 2010  
  (Unaudited)   (Audited)  
ASSETS        
Current Assets        
Cash and cash equivalents 32,455   78,373  
Other receivables                        10,496   10,379  
Security deposit                        16,909                                    -  
Total Current Assets 59,860   88,752  
         
Property and equipment, net 26,473   31,957  
Security deposit -   16,330  
  26,473   48,287  
Total Assets 86,333   137,039  
         
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY      
         
Current Liabilities        
  Other payables 15,365   32,554  
Loan from related parties 761,146   596,565  
Total Current Liabilities 776,511   629,119  
Total Liabilities 776,511   629,119  
         
Commitment and Contingencies        
         
Stockholders' Deficiency        
Common stock, $0.001 par value, authorized 1,750,000,000 shares, 3,272,311 shares issued and outstanding as of June 30, 2011 and September 30, 2010                                                                       3,272   3,272  
Additional paid-in capital 10,099,040   10,099,040  
Accumulated deficit (10,866,998)   (10,655,326)  
Accumulated other comprehensive income 74,508   60,934  
Total Stockholders' Deficiency (690,178)   (492,080)  
Total Liabilities and Stockholders’ Deficiency 86,333   137,039  
           

 

 

See accompanying notes to the consolidated financial statements

3
 

 CHINA GRAND RESORTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(IN U.S. DOLLARS)

    Three Months Ended Nine Months Ended
June 30, June 30,
    2011   2010   2011   2010
      (unaudited)           (unaudited)      
(unaudited) (unaudited)
OPERATING EXPENSES                        
General and administrative expenses     46,789     64,113     154,104     209,610
Depreciation and amortization     2,191     1,643     6,487     4,500
                         
OPERATING LOSS     (48,980)     (65,756)     (160,591)     (214,110)
                         
OTHER (EXPENSE) INCOME                        
Interest income(expense)     (7,328)     (3,116)     (19,683)     (6,374)
Other expenses     (27)     (390)     (273)     (390)
TOTAL OTHER EXPENSES, NET     (7,355)     (3,506)     (19,956)     (6,764)
LOSS BEFORE INCOME TAX     (56,335)     (69,262)     (180,547)     (220,874)
Income tax expenses     -     -     -     -
NET LOSS     (56,335)     (69,262)     (180,547)     (220,874)
                         
OTHER COMPREHENSIVE LOSS                        
Foreign currency translation adjustment     (7,359)     (1,482)     13,573     (1,591)
                         
TOTAL COMPREHENSIVE LOSS     (63,694)     (70,744)     (166,974)     (222,465)
                         
Weighted average number of common stock outstanding -basic and diluted     3,272,311   3,272,311            
3,272,311 3,272,311
Net (loss) earnings per share     (0.02)     (0.02)     (0.05)     (0.07)
(Loss) earnings per share from continuing operations -basic and diluted     (0.02)     (0.02)            
(0.05) (0.07)
Earnings (loss) per share from discontinued operations -basic and diluted     -     -            
- -

See accompanying notes to the consolidated financial statements

 

4
 

 

CHINA GRAND RESORTS. INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(IN U.S. DOLLARS)  
  For the nine months ended  
  June 30,  
  2011   2010
  (Unaudited)   (Unaudited)
Cash flows from operating activities :      
Net loss (180,547)   (220,874)
Adjustments to reconcile net loss to net cash used in      
    operating activities :
    Depreciation and amortization 6,487   4,500
Change in operating assets and liabilities:      
    Other receivables (696)   (12,681)
    Other payables (17,189)   (85,535)
Net cash used in operating activities (191,945)   (314,590)
       
CASH FLOWS FROM INVESTING ACTIVITIES      
(Purchase of ) proceeds from sale of property and equipment -   (29,578)
Purchase of intangible assets -   (1,577)
       
Net cash provided by (used in) investing activities -   (31,155)
       
Cash flows from financing activities :      
Repayment to related parties for loans -   (49,072)
Advances from shareholders 164,581   517,733
       
Net cash provided by financing activities 164,581   468,661
       
Effect of exchange rate fluctuations on cash (18,554)   (1,765)
       
Net (decrease)/ increase in cash and cash equivalents (45,918)   121,152
Cash and cash equivalents at beginning of year 78,373   26,424
Cash and cash equivalents at end of year 32,455   147,576

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

5
 

CHINA GRAND RESORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(stated in US dollars)

 

(1) BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited consolidated financial statements of China Grand Resorts, Inc. (“CGND”) and its wholly owned subsidiaries including Sun New Media Transaction Service Ltd. (“SNMTS”), China Focus Channel Development Co., Ltd (“CFCD”) and Key Proper Holdings Limited (“KPH”), defined herein below, collectively referred to as the “Company” or “we" have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with US GAAP have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim consolidated financial statements includes normal recurring adjustments and reflects all adjustments that, in the opinion of management, are necessary for a fair presentation of such consolidated financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's most recent audited consolidated financial statements and notes included in its annual report on Form 10-K/A for the fiscal year ended September 30, 2010 filed on January 20, 2011. Operating results for the three months ended June 30, 2011, are not necessarily indicative of the results that may be expected for longer periods or the entire year.

 

On November 16, 2009, the Company effected a 20 for 1 reverse split of our issued and outstanding common stock. The par value and our total number of authorized shares were unaffected by the reverse stock split. All shares and per share amounts in these consolidated financial statements and note thereto have been retrospectively adjusted to all periods presented to give effect to the reverse stock split.

 

(a) Organization

 

The Company was incorporated in the State of Nevada on September 21, 1989 under the name Fulton Ventures, Inc. On September 19, 2002, we changed our name to Asia Premium Television Group, Inc., and on November 16, 2009, we changed our name to China Grand Resorts, Inc. to more accurately reflect our business focus.

 

On March 30, 2009, we completed an acquisition pursuant to an Acquisition Agreement (the “Acquisition Agreement”) with the shareholders of GlobStream Technology Inc. (“GlobStream”) to acquire 100% of GlobStream, a Cayman Islands corporation for $156,000. GlobStream was founded by Dr. Wenjun Luo, one of our previous directors. In May 2009, we terminated the operations related to GlobStream because the mobile phone multi-media and advertising businesses of GlobStream were not performing well. Effective on August 1, 2009, the Company used the ownership in GlobStream, among other more material considerations, to acquire from Beijing Hua Hui Hengye Investment Limited, the commercial income rights as detailed below – acquisition of commercial income rights.

 

On July 1, 2007, the Company acquired 100% interest of Sun New Media Transactional Services Limited (“SNMTS”), a company incorporated in Hong Kong, and its wholly owned subsidiary China Focus Channel Development Co., Ltd (“CFCD”), a company incorporated in the People’s Republic of China, from a third party for limited consideration. In December 2009, the Company incorporated Key Prosper Holdings Limited (“KPH”), a company incorporated in the British Virgin Islands.

 

Below is the current organizational chart of the Company:

 

6
 

CHINA GRAND RESORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(stated in US dollars)

 

(1) DESCRIPTION OF BUSINESS AND ORGANIZATION – CONTINUED

 

(a) Organization - Continued

 

Acquisition of commercial income rights

 

On August 1, 2009, the Company entered into a subscription and asset sale agreement (the “Agreement”) with Beijing Hua Hui Hengye Investment Ltd. (“Hua Hui”), an unaffiliated PRC company. Hua Hui is an affiliate of The Beijing Hua Hui Corporation, a PRC real estate construction and development conglomerate that specializes in constructing and developing travel, resorts, hotels, and apartment properties in popular tourist and other destinations within the PRC. Under the Agreement, we received from Hua Hui the commercial income rights to 10,000 square meters of a 17 story apartment building in the Huadun Changde International Hotel’s Apartment Complex located in the city of Changde, Hunan Province (“Project”). The Project is currently under development by Hua Hui and is expected to be completed at the end of calendar year 2011

 

The Project consists of a total of 215,000 square meters located on an approximately 3.6 acre piece of land. The Project when completed, at the end of calendar year 2011, will be comprised of a total 128 apartments, of which we will have the commercial rights to approximately 64 apartments. The commercial income rights means the exclusive right to own and/or receive any and all income and proceeds derived from these apartments pursuant to this Project in any capacity These rights were valued at approximately $8,777,000 by an independent valuer and we agreed to pay a total of $7,317,000 as consideration. In this regard,, we agreed to issue to Hua Hui, 2,774,392 shares of our common stock valued at $2.4 per share (the closing price of the Company’s common stock on the transaction date, August 1, 2009 after giving effect of 20 for 1 reverse split) for a total stock value of $6,658,536 and transferred to Hua Hui certain other Company assets valued at $658,241. These assets consisted of all of our shares of the GlobStream, certain assets of both Sun New Media Transaction Services Limited and China Focus Channel Development Co., Ltd, and other miscellaneous assets of ours.

 

On September 8, 2009, we satisfied the issuance of the 2,774,392 shares by issuing 832,318 shares to Wise Gold Investment Ltd., a British Virgin Island company acting on behalf of Hua Hui. On that same date, we also issued 1,942,074 shares of common stock to Blossom Grow Holdings Limited, a British Virgin Island company, as escrow agent under an escrow agreement by and among us, the escrow agent, and Hua Hui. The escrow agent will hold the escrow shares pending completion of the Project which is expected to occur at or near the end of calendar 2010. If the escrow agent receives written instructions from the Company that the Project is completed in accordance with the terms of the Agreement, the escrow agent will release the escrow shares to Hua Hui. However, if after the projected completion date, the Project has not been completed, the escrow shares will continue to be held at escrow for one year. If after one year, the project still has not been completed, then the Company and Hua Hui will negotiate an agreement to deal with the escrow shares. Due to certain architectural change implemented by Hua Hui to improve quality, style and appearance of the Project, Hua Hui has informed us that the Project is expected to be completed near the end of calendar year 2011. All permits concerning the Project have been acquired from governmental authorities, and the construction of the Project is approximately 85% completed as the date hereof. During the escrow period, Hua Hui will be able to vote such shares provided it has reached an agreement with us on such matter(s). As a result, Hua Hui and Mr. Menghua Liu, Hua Hui’s Chairman and sole shareholder and the Company’s Chairman and Chief Executive Office, are deemed the beneficial owner of such shares. After giving effect to the transaction, Hua Hui became the Company’s majority shareholder and beneficially owns approximately 84.8% Company’s outstanding shares.

 

With respect to the Project, Hua Hui will be responsible for project marketing and perform the actual unit sales. We expect to pay Hua Hui a sales commission of not less than 0.5% and not more than 8% of the unit sales price and we will receive the remainder of the unit sales price.  As of the date of this report, we do not have any formal agreements or arrangements with any developer or Hua Hui for fees that we will earn, or fees that we will pay Hua Hui.

 

 

 

 

7
 

 

 

 

 

 

CHINA GRAND RESORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(stated in US dollars)

 

(1) DESCRIPTION OF BUSINESS AND ORGANIZATION – CONTINUED

 

(b) Nature of prior businesses

 

During most of calendar 2008, our business focus was based on the interest acquisition in Jiangxi Hongcheng Tengyi Telecommunication Company, Ltd (“JXHC”) and the Provincial Class One Full Service Operator license for the Jiangxi Province from Union Max Enterprises Ltd. We attempted to provide ancillary services for cell-phone customers in Jiangxi Province whereby customers could buy minutes on the fly using their debit card or bank account. However, in December 2008, due to third party issues which negatively affected our ability to launch that business, we determined to terminate that business which resulted in a sale of our interests to an unaffiliated third party effective in March 2009 for $100.

 

(2) BASIS OF PRESENTATION

 

The Company’s unaudited consolidated financial statements are prepared in accordance with US GAAP and applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

 

(a) Consolidation

 

The consolidated financial statements include the accounts of the Company and its subsidiaries, SNMTS, CFCD and KPH. All inter-company balances and transactions between the entities have been eliminated in consolidation.

 

(b) Going Concern and Management Plan

 

As of June 30, 2011, the Company had an accumulated deficit totaling $10,866,998 and negative working capital $716,651 The Company suffered a loss of $56,335 for the three months ended June 30, 2011 and $69,262 for the three months ended June 30, 2010. In view of the matters described above, the appropriateness of the going concern basis is dependent upon continuing operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

As a result of the transaction with Hua Hui as discussed in Note 1(a), we received the commercial income rights of the Project.

 

The Company is actively pursuing additional capital in an effort to fund its ongoing capital requirements, as well as seeking agreements with potential strategic partners to develop a new business strategy, other than its ownership of the commercial income rights to the Project.

 

(c) Use of estimates

 

The preparation of the financial statements in conformity with US GAAP requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the years presented. Actual results could differ from those estimates. The Company bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Company's consolidated financial statements include allowance for doubtful accounts, estimated useful lives and contingent liabilities.

 

 

 

 

8
 

 

 

 

 

 

CHINA GRAND RESORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(stated in US DOLLARS)

 

(2) BASIS OF PRESENTATION – CONTINUED

 

(d) Recently issued accounting standards

 

Effective January 1, 2010, the Company adopted the provisions in ASU 2010-06, “Fair Value Measurements and Disclosures (ASC Topic 820): Improving Disclosures about Fair Value Measurements, which requires new disclosures related to transfers in and out of levels 1 and 2 and activity in level 3 fair value measurements, as well as amends existing disclosure requirements on level of disaggregation and inputs and valuation techniques. The adoption of the provisions in ASU 2010-06 did not have an impact on the Company’s consolidated financial statements.

 

In February 2010, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that amends the disclosure requirements related to subsequent events. This guidance includes the definition of a Securities and Exchange Commission filer, removes the definition of a public entity, redefines the reissuance disclosure requirements and allows public companies to omit the disclosure of the date through which subsequent events have been evaluated. This guidance is effective for financial statements issued for interim and annual periods ending after February 2010. This guidance did not materially impact the Company’s results of operations or financial position, but did require changes to the Company’s disclosures in its financial statements.

 

In April 2010, the FASB issued ASU No. 2010-13 – Compensation – Stock Compensation (Topic 718), which addresses the classification of an employee share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. This Update provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The Company expects that the adoption of the amendments in this Update will not have any significant impact on its financial position and results of operations.

 

In April 2010, the EITF issued “Revenue Recognition – Milestone Method.” This issue provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. This issue is effective on a prospective basis for milestones achieved in fiscal years beginning after June 15, 2010. Early adoption is permitted. The Company is currently evaluating the potential impact of this issue.

 

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9
 

CHINA GRAND RESORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(stated in US DOLLARS)

 

(3)       PROPERTY AND EQUIPMENT, NET

 

The following is a summary of property and equipment, at cost, less accumulated depreciation:

 

  As of
 

June 30,

2011

  September 30, 2010
    (Unaudited)     (Audited)
           
      Computer software $ 1,655   $ 1,598
      Office equipment   20,897     20,181
      Leasehold improvement   19,671     18,996
    42,223     40,775
      Less: accumulated depreciation and amortization   15,750     (8,818)

Property and equipment, net

 

$

 

26,473  

$

 

31,957

 

Depreciation and amortization expenses for the three months ended June 30, 2011 and 2010 were $2,191 and $1,643 respectively.

 

(4) OTHER PAYABLES

 

Other payables consist of the following:

 

  As of
 

June 30,

2011

  September 30, 2010
  (Unaudited)     (Audited)
  $ 15,365   $ 32,554
Other Payables  
             

 

The balances of other payables mainly include audit fees and other office expense payables.

 

(5) RELATED PARTY TRANSACTIONS

 

Loan from related parties

  As of          
    June 30, 2011   September 30, 2010  
  (Unaudited)     (Audited)  
             
   Redrock Capital Venture Limited (a) $ 100,280   $ 100,280  
   Beijing Hua Hui Hengye Investment Limited (b)   660,866     496,285  
  Total $ 761,146   $ 596,565  
               

 

(a) Commencing in June 2009, we began receiving loans from time to time from Redrock Capital Venture Limited, a minority shareholder, for working capital purposes. The amount due to Redrock is due on demand and bears no interest.

 

10
 

CHINA GRAND RESORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(stated in US DOLLARS)

 

(5) RELATED PARTY TRANSACTIONS - CONTINUED

 

(b) Commencing in October 2009, we began receiving loans from time to time from Hua Hui, our largest shareholder, for working capital purposes. As of June 30, 2011, the amount due to Hua Hui is $660,866, which is due on demand and bears interest at the prevailing rate charged by the PRC Central Bank. The interest accrued for the three months amounted to approximately $7,349 and the effective interest rate of the loans was 5.19%.

 

(6) CAPITAL STOCK

 

(a) Common stock

 

On September 8, 2009, pursuant to the transaction with Hua Hui on August 1, 2009, the Company issued 832,318 shares of its common stock to Wise Gold Investment Ltd., a British Virgin Island company acting on behalf of Hua Hui. In addition, on that same date, it issued 1,942,074 shares of common stock to Blossom Grow Holdings Limited, a British Virgin Island company, as escrow agent under an escrow agreement by and among the Company, the escrow agent, and Hua Hui.

 

Effective on November 16, 2009, we effected a 20 for 1 reverse split of our issued and outstanding common stock. This reverse stock split already gave retroactive effect in the computation of basis and diluted EPS for all period presented accordingly.

As of June 30, 2011, the Company had 3,272,311 shares issued and outstanding.

 

(b) Warrants/options

 

On July 22, 2007, 60,000 common stock warrants were issued to Investors. Under the Warrant, the investors have the right, for a period of three years from the date of such warrant, to purchase a total of 60,000 shares of the Company’s common stock. The per share exercise price of the Warrant is $33. The warrants expired on July 21, 2010.

 

On July 4, 2008, pursuant to the Stock Purchase Agreement made and entered into by the Company and Her Village Limited, we issued warrants to the investor for the option to purchase 50,000 shares of Common Stock with an exercise price of $20 per share and an expiration date of 18 months from the date of issuance. The warrants expired on January 3, 2010.

 

On June 28, 2009, pursuant to the Acquisition Agreement made and entered into by the Company and GlobStream, the Company issued warrants to Mr. Luo Wenjun for the option to purchase 7,782 shares of common stock with an exercise price of $3 per share and an expiration after March 23, 2019.

 

These Warrants may be exercised, in whole or in part, by the Holder during the Exercise Period by (i) the presentation and surrender of this Warrant to the Company along with a duly executed Notice of Exercise specifying the number of Warrant Shares to be purchased, and (ii) delivery of payment to the Company of the Exercise Price for the number of Warrant Shares specified in the Notice of Exercise.

 

As of June 30, 2011, the Company had 7,782 common stock warrants outstanding.

 

(c) 2001 stock plan

 

In 2001, the Board of Directors adopted a Stock Plan (“Plan”). Under the terms and conditions of the Plan, the Board of Directors is empowered to grant stock options to employees, consultants, officers and directors of the Company. Additionally, the Board will determine at the time of granting the vesting provision and whether the options will be qualified as Incentive Stock Options under Section 422 of the Internal Revenue Code (Section 422 provides certain tax advantages to the employee recipients). The Plan was approved by the shareholders of the Company on September 15, 2001. The total number of shares of common stock available under the Plan may not exceed 100. As of June 30, 2011, no options were granted under the Plan.

 

11
 

 

CHINA GRAND RESORTS, INC.

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(stated in US DOLLARS)

 

(7) COMMITMENTS AND CONTINGENCIES

 

Operating lease obligations

 

In December 2009, we relocated our office to a new space in Beijing consisting of 192.7 square feet. The term of the old lease was from September 1, 2009 to July 31, 2011; however, we terminated the old lease on December 11, 2009 as mutually agreed with the landlord and with no penalty to us. The new office lease is from December 11, 2009 to December 10, 2011 and provides for monthly lease payment of $5,333 with two months of free rent.. Moreover, we also have entered into a second building lease for an office located in Beijing consisting of 10 square feet. The Beijing facilities lease is from July 3, 2010 to July 2, 2011 and provides for monthly lease payment of $26. As of June 30, 2011, our total future commitments for minimum lease payments are as follows:

 

Within one year   $ 28,138  

 

Rental expenses for the nine months ended June 30, 2011 and 2010 was $46,609 and $37,137 respectively.

 

(8) LOSS PER SHARE

 

The following data show the amounts used in computing loss per share and the weighted average number of shares for the three months ended June 30, 2011 and 2010.  As the Company has a loss, presenting diluted net earnings (loss) per share is considered anti-dilutive and not included in the consolidated statement of operations.

 

    For the Three Months Ended   For the Nine Months Ended
    June 30,   June 30,
    2011   2010   2011   2010
Net loss   $ (56,335)   $ (69,262)   $ (180,547)   $ (220,874)
Weighted average number of common shares outstanding – basic and diluted              3,272,311              3,272,311              3,272,311              3,272,311
Loss per share - basic and diluted     (0.02)     (0.02)     (0.05)     (0.07)

 

 

 

12
 

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the U. S. Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the U.S. Securities Exchange Act of 1934, as amended(the “Exchange Act”). Such statements relate to, among other things, our future plans of operations, business strategy, operating results and financial position and are often, though not always, indicated by words or phrases such as “anticipate,” “estimate,” “plan,” “project,” “outlook,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” and similar words or phrases. These forward-looking statements include statements other than historical information or statements of current condition, but instead represent only our belief regarding future events, many of which by their nature are inherently uncertain and outside of our control. Important factors that could cause actual results to differ materially from forward-looking statements include, but are not limited to, those described in the section titled “Risk Factors” previously disclosed in our Annual Report on Form 10-K/A for the year ended September 30, 2010, as well as the following:

 

    our ability to implement and execute our current business plan, including the ability to sell the apartment units of the Project;
       
    the economic conditions in the Changde market, the location of the apartment units and elsewhere in the PRC for our consulting and marketing business,
       
    Laws and regulations implemented by the PRC government designed to temper the real estate market in the PRC;
       
    our ability to execute key strategies;
       
    actions by our competitors;
       
    our ability to raise additional funds, including loans from affiliates, to execute our new business plan ;
       
    risks associated with assumptions we make in connection with our critical accounting estimates;
       
    potential adverse accounting related developments;
       
    other matters discussed in this Quarterly Report generally.

 

Consequently, readers of this Quarterly Report should not rely upon these forward-looking statements as predictions of future events. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we access the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We undertake no obligation to update or revise any forward-looking statement in this Quarterly Report to reflect any new events or any change in conditions or circumstances. All of the forward-looking statements in this Quarterly Report are expressly qualified by these cautionary statements.

 

Overview

 

We were organized under the laws of the State of Nevada on September 21, 1989. We engaged in a variety of business, described in part below, and effected various name changes prior to November 2009 when the name was changed to China Grand Resorts, Inc. Our subsidiary is Sun New Media Transaction Service Ltd. (“SNMTS”), a company incorporated in Hong Kong, which has a wholly owned subsidiary China Focus Channel Development Co., Ltd (“CFCD”), a company incorporated in People’s Republic of China. In December 2009, the Company incorporated Key Prosper Holdings Limited, a company incorporated in the British Virgin Islands on December 8, 2009, with 100% shareholdings.

 

During the three year period prior to December 2007, our principal business was providing marketing, brand management, advertising, media planning, public relations and direct marketing services to clients in the PRC. During December 2007 through January 2008, we re-directed our business towards providing mobile phone based services in the PRC. In January 2008, we divested ourselves of our advertising and marketing business.

 

On December 31, 2007, we acquired a 70% equity interest in Jiangxi Hongcheng Tengyi Telecommunication Company, Ltd ("JXHC"), a local reseller of top-up mobile minutes in Jiangxi Province. Effective March 31, 2009, we acquired a Provincial Class One Full Service Operator license for the Jiangxi Province, PRC. The Class One license enabled us to sell mobile phone based products within the Jiangxi province. During this period, we also acquired other mobile phone based technologies to compliment our existing technology. We sought to market these technologies in the Jiangxi Province of China through JXHC utilizing our recently acquired Class One license. However, due to a lack of operating funds and other factors beyond our control, JXHC was unable to effectively develop its business. Consequently, effective on March 31, 2009, we sold our ownership in JXHC to an unaffiliated third party for $100.

 

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On March 30, 2009, we acquired additional mobile internet software technology through our acquisition of GlobStream Technology Inc. (“Globstream”) from its shareholders for $156,000. GlobStream was founded by Dr. Wenjun Luo, one of our former directors. In May of that same year, we terminated the operations related to GlobStream. Effective on August 1, 2009, we sold our ownership in GlobStream to Hua Hui.

 

On August 1, 2009, as previously disclosed herein, we entered into a subscription agreement with Beijing Hua Hui Investment Ltd., an unaffiliated company organized under the laws of the PRC (“Hua Hui”). Hua Hui is part of The Beijing Hua Hui Corporation, a PRC real estate construction and development conglomerate that specializes in constructing and developing travel, resort, hotel, and apartment properties in popular tourist and other destinations within the PRC. Under the Agreement, we received from Hua Hui the commercial income rights (described herein) to 10,000 square meters of apartment space in the Huadun Changde International Hotel’s Apartment Complex located in the city of Changde in China’s Hunan Province (“Project”). The Project is currently under development by Hua Hui. The commercial income rights were valued by an independent appraiser at $8,777,000. As consideration, we agreed to pay a total of $7,317,000, to be satisfied by issuing Hua Hui subject to certain conditions, a total of 2,774,392 shares of our common stock which is valued at $2.40 per share (the closing price of our common stock on the transaction date (August 1, 2009) after giving effect of 20 for 1 reverse split) for a total stock value of $6,658,536. As additional consideration, Hua Hui received from us all of the shares of the GlobStream Technology Inc., our wholly owned subsidiary, certain assets of Sun New Media Transaction Services Limited and China Focus Channel Development Co., Ltd, and certain other miscellaneous assets of us which were valued at $658,241.

 

 

Our Current Business Strategy

General

Hua Hui and its affiliates, including The Beijing Hua Hui Corporation, are a PRC real estate construction and development group that specializes in constructing and developing travel, resort, hotel, and apartment properties in popular tourist and other destinations within the PRC. As a result of the transaction with Hua Hui, our initial business goal was to become a leading specialty real estate consulting and marketing company for tourism projects in the PRC. As part of that goal, we intend to market the commercial rights to the Project that we received from Hua Hui. We planned on expanding our business by using existing resources and knowhow of our affiliates and other parties to engage in providing consulting and marketing services for real estate developers. However, beginning in late 2009 and continuing through 2011, the PRC State Council adopted a number of governmental initiatives designed to cool a perceived overheated real estate market. As a result, the Company has suspended its plans to engage in consulting and marketing services for real estate developers. Presently, apart from the Project (discussed below), we are evaluating other markets and business opportunities, including subject to market conditions, its previously proposed real estate consulting business, however, as of the date of the report, it has not committed to any specific market or business opportunity.

 

With respect to the Project, Hua Hui will responsible for project marketing and perform the actual unit sales. We expect to pay Hua Hui a sales commission of not less than 0.5% and not more than 8% of the unit sales price and we will receive the remainder of the unit sales price.  As of the date of this report, we do not have any formal agreements or arrangements with any developer or Hua Hui for fees that we will earn, or fees that we will pay Hua Hui.

 

The Project

As mentioned above, the Project consists of 10,000 square meters of apartment space in the concerning Building of the Huadun Changde International Hotel’s Apartment Complex, a 17 story building, located in the city of Changde, Hunan Province (“Project”). The Project is currently under construction by Hua Hui. Changde is a popular tourist destination located in China’s central Hunan province. Upon completion, the Complex will consist of a total of 215,000 square meters located on an approximately 3.6 acre piece of land that has access roads on the North, East, and West. The city is accessible by rail and air and is in close proximity to several tourist, scenic, and commercial areas. The Project is in close proximity to several tourist, scenic, and commercial areas. Construction began on June 1, 2009 and initially was expected to be completed on December 31, 2010. However, due to certain structural and style changes implemented by Hua Hui, Hua Hui has informed us that the Project is expected to be completed at the end of calendar year 2011. All permits concerning the Project have been acquired from governmental authorities, and the construction of the Project is approximately 85% completed as the date hereof. We also have acquired the pre-sale permits for the sale of the apartments from the local real estate authority.

 

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The Project when completed will be comprised of a total 128 apartments. The units are expected to range in size from 120 square meters to 210 square meters. Under current market conditions, we expect prices of the apartment units to range from RMB5,500 ($850) per square meter to RMB 6,500 ($1,004) per square meter. The units when sold will be unfurnished. Hua Hui began pre-completion marketing efforts in the mid-calendar 2010. In this regard, it initiated advertisements in the Changde airport and has an outdoor billboard on the main road of Changde City. In addition, it also has printed sales brochures; visited with potential buyers and commenced website design for the Project. A sales center and several model units with respect to the Project were completed by Hua Hui in late November 2010. Potential buyers can tour then these models to gain appreciation of the design, structure and appearance of the units. We have actively collaborated with Hua Hui with regard to the content of information contained in the outdoor billboard and print media, as well as the design of the sales center. In addition, we have commenced independent marketing efforts for the Project on a limited basis. We expect to play an active role in Hua Hui’s future marketing plans. In any pre-completion sale, the amount of the down payment that we will be able to obtain from a buyer is subject to the housing policy of governing real estate authorities. The current policy allows for a down payment ranging from 30% to 50% of the sales price dependent on the property size. As mentioned, Hui Hua will act as the sales agent and is expected to receive a sales commission of not less than 0.5% and not more than 8% of the unit sales price. Hua Hui has informed us that in course of selling the units, it will act in good faith in selling the units and will not act preferentially toward selling its units over the units of the Company. However, at the present time, the Company does not have a formal agreement with Hua Hui regarding sales commission or the manner of sale with respect to the units. As of the date of this filing, we have not sold any of the units.

 

Our working capital budget for the next 12 months is approximately $494,000 which relate principally to costs of our executive offices. This amount is comprised of $185,000 in professional fees, $140,000 in salaries and related personnel costs, $56,000 for executive office rent, and $113,000 in miscellaneous expenses. We will not incur any costs of marketing the Project. We expect to generate revenues from the sale of the apartment units at the end of calendar year 2011. Thereafter, subject to the foregoing, we believe that revenues from the Project will be sufficient to fund our ongoing working capital needs.

 

Our business strategies are subject to certain risks and uncertainties, including our ability to raise additional funds in the future. We cannot predict whether we will be successful with any of business strategies. We do not anticipate seasonal fluctuations in our business.

 

Results of Operations

 

Unless otherwise indicated, all amounts are in U.S. Dollars.

 

Three Months Ended June 30, 2011 Compared to Three Months Ended June 30, 2010

 

Total Revenues and Gross Margin

For the three month period ended June 30, 2011, we were waiting on the completion of the Project, and as a result, we had no revenues from operations or gross margin. During the comparable period in 2010, we had no revenues and related expenses from our consulting business due to the general slowdown in economic activity in the PRC during such period.

 

Loss from Operations

During the three months ended June 30, 2011, we incurred general and administrative expenses of $46,789 compared with $64,113 for the three months ended June 30, 2010. The reduction in general and administrative expenses is primarily due to reduced overhead at the corporate level. Commencing in 2009, we made an effort to reduce our ongoing overhead expenditures, which includes personnel reductions and office expense, due to our reduced operations. We also had $2,191 in depreciation and amortization for the three months ended June 30, 2011 compared with $1,643 for the comparable three months ended June 30, 2010, the difference is due to the financial adjustments during the three months ended June 30, 2010. Our loss from operations for the three months ended June 30, 2011 was $48,980 compared to $65,756 for the three months ended June 30, 2010. The difference between the periods is due to the reduction of general and administrative expenses discussed above.

 

Other Income (Expense)

Other expense for the three months ended June 30, 2011 is $7,355, which mainly is the interest expense for the period. For the corresponding period in year 2010, other expense is $3,506 which mainly is the interest expense. The increase in interest expense is a result of higher principal loan amounts from Hua Hui during the current period.

 

Net loss

Our net loss $56,335 for the three months ended June 30, 2011 compared to a net loss of $69,262 for the three months ended June 30, 2010. The difference is due to the reasons discussed above.

 

Comprehensive Loss

During three months ended June 30, 2011, we had a foreign currency translation loss of $7,359 compared with a loss of $1,482 for the three months ended June 30, 2010. The difference is due to fluctuation of value of US dollar against RMB. As a result of all of the issues mentioned above, we had a total comprehensive loss of $63,694 for the three months ended June 30, 2011 compared with a total comprehensive loss of $70,744 for the comparable three months ended June 30, 2010.

 

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Nine Months Ended June 30, 2011 Compared to Nine Months Ended June 30, 2010

 

Total Revenues and Gross Margin

For the nine month period ended June 30, 2011, we were waiting on the completion of the Project, and as a result, we had no revenues from operations or gross margin. During the comparable period in 2010, we had no revenues and related expenses from our consulting business due to the general slowdown in economic activity in the PRC during such period.

 

Loss from Operations

 

During the nine months ended June 30, 2011, we incurred general and administrative expenses of $154,104 compared with $209,610 for the nine months ended June 30, 2010. The reduction in general and administrative expenses is primarily due to reduced overhead at the corporate level. Commencing in 2009, we made an effort to reduce our ongoing overhead expenditures, which includes personnel reductions and office expense, due to our reduced operations. We also had $6,487 in depreciation and amortization for the six months ended June 30, 2011 compared with $4500 for the comparable nine months ended June 30, 2010, the difference is due to the reduction of fixed assets during the nine months ended June 30, 2011. Our loss from operations for the nine months ended June 30, 2011 was $160,591 compared to $214,110 for the nine months ended June 30, 2010. The difference between the periods is due to the reduction of general and administrative expenses discussed above.

 

Other Income (Expense)

Other expense for the nine months ended June 30, 2011 is $19,956, which mainly is the interest expense for the period. For the corresponding period in year 2010, other expense is $6,764 which is also the interest expense. The increase in interest expense is a result of higher principal loan amounts from Hua Hui during the current period.

 

 

Net Loss

Our net loss $180,547 for the nine months ended June 30, 2011 compared to a net loss of $220,874 for the nine months ended June 30, 2010. The difference is due to the reasons discussed above.

 

Comprehensive Loss

During nine months ended June 30, 2011, we had a foreign currency translation gain of $13,573 compared with a loss of $1,591 for the nine months ended June 30, 2010. The difference is due to fluctuation of value of US dollar against RMB. As a result of all of the issues mentioned above, we had a total comprehensive loss of $166,974 for the nine months ended June 30, 2011 compared with a total comprehensive loss of $222,465 for the comparable nine months ended June 30, 2010.

 

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Liquidity and Capital Resources

 

We finance our operations primarily through cash generated from operating activities, a mixture of short and long-term loans (including loans from affiliates) and issuance of common stock.

 

The following table summarizes our cash flows for the nine months ended June 30, 2011 and 2010:

 

   

Six Months Ended

June 30,

    2011     2010
Net cash used in operating activities   $ (191,945)     $ (314,590)
Net cash provided by (used in) investing activities     -       (31,155)
Net cash provided by financing activities   $ 164,581     $ 468,661
Effect of exchange rate fluctuations on cash and cash equivalents   $ (18,554)     $ ( 1,765)
Net (decrease)/ increase in cash and cash equivalents   $ (45,918)     $ 121,152
Cash and cash equivalents (closing balance)   $ 32,455     $ 147,576

 

The net cash used in operating activities for the nine months ended June 30, 2011 was negative $191,945, compared with net cash used in operating activities of negative $314,590 for the nine months ended June 30, 2010. The difference of $122,645 is primarily due to the reduction of general and administrative expenses discussed above during the nine months ended June 30, 2011.

 

The net cash used in investing activities for the nine month ended June 30, 2011 was $0, compared with net cash provided by investing activities of negative $31,155 for the nine month ended June 30, 2010. The cash difference of $31,155 is primarily caused by the purchase of plant and equipment in the 2010 period.

 

The net cash provided by financing activities for the nine month ended June 30, 2011 was $164,581, compared with net cash provided by financing activities of $468,661 for the nine month ended June 30, 2010. The difference of $304,080 is mainly due to the reduction of loan from shareholders during the nine months ended June 30, 2011.

 

The effect of the exchange rate on cash was a loss of $18,554 for the nine months ended June 30, 2011, compared with a loss of $1,765 for the nine months ended June 30, 2010. The difference is due to fluctuation of value of US dollar against RMB.

 

The difference between the closing balance of cash and cash equivalents for the nine months ended June 30, 2011 and 2010 is due to the reasons mentioned above.

 

Capital Requirements for the Next 12 Months

 

We continue to experience significant losses from operations. We are uncertain as to when we will achieve profitable operations. We have an immediate need for capital to conduct our new business endeavors as well as our ongoing working capital needs. We anticipate raising capital through additional private placements of our equity securities, and, if available on satisfactory terms, debt financing. It is conceivable that funding of all or part of the budget required above may come from Hua Hui, our largest shareholder. However, we do not have any agreements, arrangements or commitments with or guarantees from any party, including our largest shareholder, to provide funding to us. We cannot guarantee that we will be successful in our efforts to enhance our liquidity. If we are unable to raise sufficient funds to meet our cash requirements as described above, we may be required to curtail, suspend, or discontinue our current and/or proposed operations. Our inability to raise additional funds as described above may force us to restructure, file for bankruptcy, sell assets or cease operations, any of which could adversely impact our business and business strategy, and the value of our capital stock. Due to the current price of our common stock, any common stock based financing, including transactions with affiliates which may include equity conversions of outstanding loans, will likely create significant dilution to the then existing shareholders. In addition, in order to conserve capital and to provide incentives for our employees and service providers, it is conceivable that we may issue stock for services in the future which also may create significant dilution to existing shareholders.

 

Our capital budget for the next 12 months is as follows:

 

$494,000 for our executive offices expenditures, which includes $140,000 in salaries and related costs of personnel, $185,000 in professional fees, $56,000 in executive office rent, and $113,000 in miscellaneous office expenditures. 

 

We expect to generate revenues from the sale of the apartment units at the end of calendar year 2011. Thereafter, the Company believes that revenues from the Project will be sufficient to support our ongoing capital working needs for the ensuing six to twelve month period. However, our projections are subject to certain risks and uncertainties, including our ability to raise additional funds in the near future. We cannot predict whether we will successful with any of business strategies.

 

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Contractual Obligations

 

In December 2009, we relocated our office to a new space in Beijing. The term of the old lease was from September 1, 2009 to July 31, 2011; however, we terminated the old lease on December 11, 2009 as mutually agreed with the landlord with no penalty to us. The new office lease is from December 11, 2009 to December 10, 2011 and provides for monthly lease payment of $5,333 with two months period of free rent. The leased premise consists of 192.7 square feet. Moreover, we also have entered into another building lease for the office located in Beijing. The Beijing facilities lease is from July 3, 2010 to July 2, 2011 and provides for monthly lease payment of $26. The leased premise for the second Beijing lease consists of 10 square feet. The lease expenses for the three months ended June 30, 2011 amounted to $17,239 and the total lease commitment as of June 30, 2011 is $28,138

 

CRITICAL ACCOUNTING POLICIES

 

Our significant accounting policies are described in Note 2 to our consolidated financial statements included in the annual report for the year ended September 30, 2010. We prepare our financial statements in conformity with U.S. GAAP, which requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the financial reporting period. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We consider the policies discussed below to be critical to an understanding of our financial statements as their application places the most significant demands on our management’s judgment.

 

Recently issued Accounting Pronouncements

 

FASB Establishes Accounting Standards Codification

 

Effective January 1, 2010, the Company adopted the provisions in ASU 2010-06, “Fair Value Measurements and Disclosures (ASC Topic 820): Improving Disclosures about Fair Value Measurements, which requires new disclosures related to transfers in and out of levels 1 and 2 and activity in level 3 fair value measurements, as well as amends existing disclosure requirements on level of disaggregation and inputs and valuation techniques. The adoption of the provisions in ASU 2010-06 did not have an impact on the Company’s consolidated financial statements.

 

In February 2010, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that amends the disclosure requirements related to subsequent events. This guidance includes the definition of a Securities and Exchange Commission filer, removes the definition of a public entity, redefines the reissuance disclosure requirements and allows public companies to omit the disclosure of the date through which subsequent events have been evaluated. This guidance is effective for financial statements issued for interim and annual periods ending after February 2010. This guidance did not materially impact the Company’s results of operations or financial position, but did require changes to the Company’s disclosures in its financial statements.

 

In April 2010, the FASB issued ASU No. 2010-13 – Compensation – Stock Compensation (Topic 718), which addresses the classification of an employee share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. This Update provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The Company expects that the adoption of the amendments in this Update will not have any significant impact on its financial position and results of operations.

 

In April 2010, the EITF issued “Revenue Recognition – Milestone Method.” This issue provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. This issue is effective on a prospective basis for milestones achieved in fiscal years beginning after June 15, 2010. Early adoption is permitted. The Company is currently evaluating the potential impact of this issue.

 

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

 

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OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS

 

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

 

 

Revenue Recognition

 

We rely on SEC Staff Accounting Bulletin: No. 104 "Revenue Recognition in Financial Statements" ("SAB 104") (ASC No.605) to recognize our revenue. SAB 104 in establishing our accounting policy states that revenue generally is realized or realizable and earned when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the seller's price to the buyer is fixed or determinable, and (4) collectability is reasonably assured.

 

Income Taxes

 

We account for income taxes under ASC No 740, "Income Taxes". We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of their recorded amount, an adjustment to our deferred tax assets would increase our income in the period such determination was made. Likewise, if we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to our deferred tax assets would be charged to our income in the period such determination is made. We record income tax expense on our taxable income using the balance sheet liability method at the effective rate applicable in China in our consolidated statements of operations and comprehensive loss. There is no income tax expenses in 2009 and 2010 due to net loss occurred.

 

Item 4 Controls and Procedures

 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Company’s Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the 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 the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in internal controls

 

There were no changes in our internal controls over financial reporting that occurred during the three months ended June 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

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PART II - OTHER INFORMATION

 

Item 6. Exhibits.

  

     
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
     
32.2   Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

     
  China Grand Resorts, Inc.
   
Date: August 15, 2011 By:    /s/Menghua Liu
   

Menghua Liu

Chief Executive Officer and Acting Chief Executive Officer

 

 

 

 

 

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