Attached files

file filename
EX-32.2 - EXHIBIT 32.2 - CHINA SHIANYUN GROUP CORP., LTD.ex322.htm
EX-31.1 - EXHIBIT 31.1 - CHINA SHIANYUN GROUP CORP., LTD.ex311.htm
EX-32.1 - EXHIBIT 32.1 - CHINA SHIANYUN GROUP CORP., LTD.ex321.htm
EX-31.2 - EXHIBIT 31.2 - CHINA SHIANYUN GROUP CORP., LTD.ex312.htm

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF T SECURITIES
EXCHANGE ACT OF 1934

Commission File No. 333-147084

CHINA GREEN CREATIVE, INC.
(Exact name of Registrant as specified in its charter)

Nevada
83-0506099
(State or Other Jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

24/F., Unit 3 Great China International Square, No. 1 Fuhua Rd., Futian District, Shenzhen
  
  
Guandong Province, China
  
n/a
(Address of principal executive offices)
  
(Zip Code)

86-755-23998799
(Registrant’s telephone number, including area code)

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                                                                       Yes T   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 £ 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.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Ruble 12b-2 of the Exchange Act.
   
Large accelerated filer   £
Accelerated filer  £
Non-accelerated filer  £ (Do not check if a smaller reporting company)
Smaller reporting company  T

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  £ No T

State the number of shares outstanding of each of the issuer’s classes of common equity, as of November 16, 2012, are as follows:
   
Class of Securities
Shares Outstanding
Common Stock, $0.001 par value
155,350,052 shares
China Green Creative, Inc. effected a 60-to-1 reverse stock split July 23, 2012. All per share amounts and calculations in this Quarterly Report and the accompanying consolidated condensed financial statements have been retroactively adjusted to reflect the effects of the reverse stock split.

 
1

 

CHINA GREEN CREATIVE, INC. AND SUBSIDIARIES

 
     
  
Part I – Financial Information
 
  
  
  
  
     
 
Part II – Other Information
 
     
     
PART I – FINANCIAL IFORMATION

CHINA GREEN CREATIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
September 30,
2012
   
December 31,
2011
 
   
(Unaudited)
   
(Audited)
 
Assets
           
Current assets
           
      Cash and cash equivalents (inclusive of cash held by an escrow agent of US$1,503,500 as of September 30, 2012)
  $ 1,973,813     $ 97,522  
      Accounts receivable
    1,787,686       1,297,635  
      Inventories
    414,807       14,080  
      Amount due from a director
    47,188       57,460  
      Prepaid expenses and other receivables
    1,036,813       848,718  
Total current assets
    5,260,307       2,315,415  
                 
Property, plant and equipment, net
    3,115,674       3,146,914  
Land use rights, net
    99,239       100,155  
Other intangible assets, net
    14,742       24,434  
                 
Total assets
  $ 8,489,962     $ 5,586,918  
                 

Liabilities and stockholders’ equity
           
Liabilities
           
Current liabilities
           
Accounts payable
  $ 1,149,005     $ 959,326  
Accrued expenses and other payables
    1,935,927       2,037,437  
Receipt in advance
    1,047,331       732,390  
Short term debts
    955,200       1,734,807  
Taxes payable
    2,074,347       1,808,484  
Amount due to a director
    851,116       876,814  
                 
Total liabilities
  $ 8,012,926     $ 8,149,258  
                 
Stockholders’ equity
               
Common stock: Par value $0.001 per share; 400,000,000 shares authorized, 155,350,052 and 5,000,052 shares issued and outstanding at  September 30, 2012 and December 31, 2011
    155,350       50,000  
Additional paid in capital
    3,280,839       1,882,689  
Accumulated deficits
    (3,082,377 )     (4,615,313 )
Accumulated other comprehensive income
    123,224       120,284  
Total stockholders’ equity
  $ 477,036     $ (2,562,340 )
                 
Total liabilities and stockholders’ equity
  $ 8,489,962     $ 5,586,918  
                 

See accompanying notes to condensed consolidated financial statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
 
   
For the three months
 ended September 30,
   
For the nine months
ended September 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Revenues
  $ 2,375,941       322,767       4,767,897       1,448,868  
                                 
Cost of sales
    957,737       73,708       2,062,420       387,096  
                                 
Selling and distribution
    99,412       19,786       302,013       238,024  
                                 
General and administrative expense (inclusive of depreciation and allowances)
    292,864       243,134       786,707       754,340  
                                 
Operating profit/(loss)
    1,025,928       (13,861 )     1,616,757       69,408  
                                 
Other expenses
                               
Other expenses
    -       190       -       3,959  
Interest expense
    39,936       7,312       83,821       17,550  
Total other expenses
    39,936       7,502       83,821       21,509  
                                 
Profit/(loss) from operations before provision for income taxes
    985,992       (21,363 )     1,532,936       47,899  
                                 
Provision for income taxes
    -       -       -       -  
                                 
Net income/(loss) for the period
  $ 985,992       (21,363 )     1,532,936       47,899  
                                 
Other comprehensive income
                               
Gain/(loss) on foreign currency translation
    (11,666 )     (100,967 )     2,940       (152,958 )
                                 
Total comprehensive income/(loss) for the period
  $ 974,326       (122,330 )     1,535,876       (105,059 )
                                 
                                 
Earnings per share, basic and diluted
  $ 0.04       (0.00 )     0.13       (0.00 )
                                 
Weighted average number of shares outstanding, basic and diluted
    24,610,922       5,000,052       11,584,724       5,000,052  

See accompanying notes to condensed consolidated financial statements
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
Nine months ended September 30,
 
   
2012
   
2011
 
             
Cash flows from operating activities
           
Net income
  $ 1,532,936     $ 47,899  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation expense
    107,681       104,313  
Amortization expense of land use rights
    1,223       1,193  
Amortization expense of other intangible assets
    9,702       7,748  
Changes in operating assets and liabilities:
               
Increase in accounts receivable
    (490,051 )     (759,895 )
(Increase)/decrease in inventories
    (400,727 )     331,586  
(Increase)/decrease in prepaid expenses and other receivables
    (188,095 )     276,526  
Decrease /(increase) in amount due from a director
    10,272       (44,227 )
Increase in accounts payable
    189,679       250,607  
(Decrease) /increase in accrued expenses and other payables
    (101,510 )     46,605  
Increase/(decrease) in receipt in advance
    314,941       (273,757 )
Increase in taxes payable
    265,863       27,796  
                 
Net cash provided by operating activities
  $ 1,251,914     $ 16,394  
                 
Cash flows from investing activities
               
Additions to property, plant and equipment
  $ (66,810 )     (26,685 )
              -  
Net cash used in investing activities
  $ (66,810 )   $ (26,685 )
                 
Cash flows from financing activities
               
Issuance of shares
    1,503,500       -  
(Decrease)/increase in amount due to a director
    (25,698 )     49,040  
(Decrease)/increase in other borrowings
    (779,648 )     181,621  
                 
Net cash provided by financing activities
  $ 698,154     $ 230,661  
                 
Net increase in cash and cash equivalents
  $ 1,883,258     $ 220,370  
                 
Effect of foreign exchange rate changes
  $ (6,967 )   $ (253,561 )
                 
Cash and cash equivalents at January 1
  $ 97,522     $ 43,895  
                 
Cash and cash equivalents at September 30
  $ 1,973,813     $ 10,704  
                 
An analysis of cash and cash equivalents as of period end date
               
Cash and bank balances
    470,313       10,704  
Cash held by an escrow agent
    1,503,500       -  
      1,973,813       10,704  
                 
Supplement disclosure of cash flows information:
               
Cash paid for interest
  $ 83,821     $ 8,460  
Cash paid for income taxes
  $ -     $ -  
 
See accompanying notes to condensed consolidated financial statements
 
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2012


NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES

China Green Creative, Inc. (“CGC”), a Nevada Corporation, was incorporated on August 17, 2006 under the name of Glance, Inc. On January 21, 2009, we changed our name to China Green Creative, Inc. CGC and its subsidiaries (collectively known as the “Company”) and we are principally engaged in the distribution of consumer goods in the People’s Republic of China (“China” or the “PRC”).
 
As of September 30, 2012, the details of the Company’s subsidiaries are summarized as follows:

 
Name
 
Domicile and date of incorporation
 
 
Paid-in capital
 
Effective ownership
 
 
Principal activities
                 
Plenty Fame Holding, Limited (“Plenty Fame”)
 
British Virgin Islands (the “BVI”)
January 18, 2008
 
$50,000
 
100%
 
Investment holding
                 
Prospect Hong Kong Development Limited (“Prospect”)
 
Hong Kong Special Administrative Region (“HKSAR”)
October 17, 2008
 
HK$10,000
 
100%
 
Investment holding
                 
Jiangxi Jien Industries Limited
 (“Jiangxi Jien”)
 
The PRC
April 8, 1997
 
RMB16,000,000
 
100%
 
Sale of consumer products in the PRC.
                 
Shenzhen Jien Electronic Commerce Company Limited (“Shenzhen Jien”)
 
The PRC
April 13, 2009
 
RMB3,000,000
 
100%
 
Management of regional distribution rights and provision of related services.
                 

NOTE 2 – PRINCIPLES OF CONSOLIDATION

The unaudited interim financial statements of the Company and the Company’s subsidiaries (see Note 1) for the three and nine months ended September 30, 2012 and 2011 have been prepared pursuant to the rules & regulations of the SEC. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading.  All significant intercompany balances and transactions have been eliminated. The functional currency for the majority of the Company’s operations is the Renminbi (“RMB”), while the reporting currency is the US Dollar.
 
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the Company’s financial position as of September 30, 2012, the results of its operations and cash flows for the three and nine months ended September 30, 2012 and 2011.
 
The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results for a full year period.


NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)  
Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.  The Company maintains bank accounts in China and Hong Kong.

 
(a)  
Inventories
 
Inventories consisting of trading goods, packing and other materials are stated at the lower of cost or net realizable value. Inventory costs are calculated using a weighted average method of accounting.

(b)  
Fair Value of Financial Instruments

The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, prepaid expenses and other receivables, amount due from/(to) directors, receipt in advance, debts, accounts payable, accrued expenses and other payables, and taxes payable.
 
The estimated fair value amounts have been determined by the Company, using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
 
As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented, due to the short maturities of these instruments and the fact that the interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profiles at respective period ends.

(c)  
Revenue Recognition

We generate revenues mainly from the sale of consumer products and also revenue from the sale of regional distribution rights.
 
The Company recognizes trading revenue when products are delivered and customers take ownership and assume risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and selling price is fixed or determinable.
 
Revenues from regional distribution rights include initial fees and continuing management fee income. All amounts received will be initially recognized as receipt in advance, and will be recognized as revenues when the following criteria are met:

(i)
Initial fee income is generally recorded upon completion of admission procedures, when the rights to use the trademarks are granted to the users, and when collectability is reasonably assured.  
(ii)
Continuing management fee income represents regular contractual payments received for the use of the “GEN+Me” trademarks plus our supporting services, which are recognized as revenue when earned, generally on a straight line basis.
(iii)
Brand usage fee income is recognized when service has been rendered and the rights to receive payment have been established.

(d)  
Earnings Per Share

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of September30, 2012 and 2011, there were no dilutive securities outstanding.

(a)  
Foreign Currency Translation

The accompanying consolidated financial statements are presented in United States Dollars (US$). The functional currency of the Company is the Renminbi (RMB). Capital accounts of the consolidated financial statements are translated into United States dollars from RMB at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the period.  The translation rates are as follows:

   
September 30,
2012
   
December 31,
2011
   
September 30,
2011
 
 
                 
Period/year end RMB : US$ exchange rate
    0.1592       0.1587       0.1569  
Average yearly RMB : US$ exchange rate
    0.1581       0.1550       0.1542  
                         
 
On July 21, 2005, the PRC changed its foreign currency exchange policy from a fixed RMB/US$ exchange rate into a flexible rate under the control of the PRC’s government.
 
The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions.  No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.

(b)  
Recent Accounting Pronouncements

The Company has adopted all recently issued accounting pronouncements.  The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.


NOTE 4 – INVENTORIES

As of the balance sheet dates, the Company’s inventories are summarized as follows:

   
September 30,
2012
   
December 31,
 2011
 
             
Trading inventories
  $ 414,807     $ 14,080  
                 

NOTE 5 – PREPAID EXPENSES AND OTHER RECEIVABLES

As of the balance sheet dates, the Company’s prepaid expenses and other receivables are summarized as follows:

   
September 30,
2012
   
December 31,
 2011
 
             
Prepaid expenses
  $ 880,767     $ 731,749  
Other receivables
    156,046       116,969  
                 
Total
  $ 1,036,813     $ 848,718  
                 
Prepaid expenses as of September 30, 2012 include prepaid promotion and advertising expenses of $75,487 to Beijing Shanghan International Cultural Creative Development Company Limited and prepaid conference expenses of $364,410 for the organization of a meeting in November 2012. The amount will be charged to expense when the related services have been provided by the vendor.
 
The Company evaluates prepaid expenses and other receivables on a periodic basis and records a charge to the current operations of the Company when the related expense has been incurred or when the amounts reported as other receivables is no longer deemed to be collectible by the Company.


NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment of the Company consist primarily of manufacturing facilities and equipment in the PRC. As of the balance sheet dates, property, plant and equipment are summarized as follows:

   
Depreciable
lives
   
September 30,
2012
   
December 31,
 2011
 
                   
At cost:
                 
Plant
 
40 years
    $ 1,905,105     $ 1,899,122  
Machinery
 
15 years
      193,303       192,696  
Motor vehicle
 
10 years
      44,144       44,005  
Office equipment
 
5 years
      292,118       224,138  
Leasehold improvements
 
2 years
      364,779       363,634  
Construction in progress
    N/A       1,364,311       1,360,026  
              4,163,760       4,083,621  
                         
Less: Accumulated depreciation
            (1,048,086 )     (936,707 )
                         
Property, plant and equipment, net
          $ 3,115,674     $ 3,146,914  
                         
Depreciation expense for the nine months ended September 30, 2012 and 2011 was $107,681 and $104,313, respectively.
 

NOTE 7 – LAND USE RIGHTS, NET

The Company’s land use rights represent the cost of purchasing the rights to use the leasehold land in the PRC for the production facilities of Jiangxi Jien. According to the law of the PRC, the government owns all the land in the PRC. Companies or individuals are only authorized to possess and use the land through land use rights granted by the PRC government.
 
As of the balance sheet dates, the Company’s land use rights are summarized as follows:

 
Useful lives
 
September 30,
2012
   
December 31,
 2011
 
At cost:
             
Land use rights
59 – 60 years
  $ 121,040     $ 120,660  
                   
Less: Accumulated amortization
      (21,801 )     (20,505 )
                   
Land use rights, net
    $ 99,239     $ 100,155  
                   
Amortization expense of land use rights for the nine months ended September 30, 2012 and 2011 was $1,223 and $1,193, respectively.


NOTE 8 – OTHER INTANGIBLE ASSETS, NET

The Company’s other intangible assets represent the cost of setting up information systems to provide franchising services. As of the balance sheet dates, the Company’s other intangible assets are summarized as follows:


 
 
Useful lives
 
September 30,
2012
   
December 31,
 2011
 
At cost:
             
Information systems
5 years
  $ 45,211     $ 45,069  
                   
Less: Accumulated amortization
      (30,469 )     (20,635 )
                   
Other intangible assets, net
    $ 14,742     $ 24,434  
                   
Amortization expense of other intangible assets for the nine months ended September 30, 2012 and 2011 was $9,702 and $7,748, respectively.


NOTE 9 – AMOUNT DUE FROM/(TO) DIRECTORS

As of the balance sheet dates, the Company’s current accounts with the directors are summarized as follows:

   
September 30,
2012
   
December 31,
 2011
 
             
Ye Xin Zhang
  $ 47,188     $ 57,460  
                 
Chen Xing Hua
  $ (851,116 )   $ (876,814 )
                 
The amount due from Mr. Ye Xin Zhang represents temporary advances to the director for the Company’s daily operating expenses.  The balances are unsecured, interest free, and have no fixed terms of repayments.
 
 
The amount due to Mr. Chen Xing Hua represents temporary advances from the director for the Company’s working capital use. The balance is unsecured, interest free, and has no fixed terms of repayment.
 

NOTE 10– DEBTS

The Company’s debts are summarized as follows:

           
Effective
interest rate
   
Outstanding balance
 
Name of parties
 
Due date
 
Nature
 
September 30,
2012
   
December 31,
 2011
   
September 30,
2012
   
December 31,
 2011
 
                                 
Qin Jianguo
    N/A  
Unsecured
    N/A    
Nil
    $ -     $ 187,482  
Shu Jian
    N/A  
Unsecured
    N/A       5.85 %     -       238,050  
Shenzhen Datang Hexie Investments Limited
    N/A  
Unsecured
    N/A    
Nil
      -       39,675  
China Construction Bank
 
Novemebr, 2012
 
Secured
    7.544 %     7.544 %     955,200       1,269,600  
                                           
Short term debt                             $ 955,200     $ 1,734,807  
                                           
 
Total interest expense related to these debts for the nine months ended September 30, 2012 and 2011 was $83,821 and $17,550,
respectively.
 
As of 30 September 2012, the bank loans were secured by pledges of certain fixed assets and land use rights held by of Jiangxi Jien.


NOTE 11 – ACCRUED EXPENSES AND OTHER PAYABLES

As of the balance sheet dates, the Company’s accrued expenses and other payables are summarized as follows:

   
September 30,
2012
   
December 31,
 2011
 
             
Accrued operating expenses
  $ 11,797     $ 80,577  
Accrued interest expense
    -       265,943  
Amount due to Shenzhen Hanhong – (i)
    867,640       855,246  
Other payables – (ii)
    1,056,490       835,671  
                 
    $ 1,935,927     $ 2,037,437  
                 

(i)  
The amount represents consultancy fee payable to Shenzhen Hanhong. Shenzhen Hanhong is a related party as Mr. Chen Xing Hua is a common director of the Company and Shenzhen Hanhong. The amount is interest free, unsecured and has no fixed terms of repayment.

(ii)  
Included in other payables as of September 30, 2012, is an amount payable for office decoration in the amount of $254,720, and an amount payable for marketing and promotional expenses of $429,863. The remaining balance consists of amounts


(iii)  
owed by the Company to various entities that are incurred by the Company in daily business operations other than trading nature.  These liabilities and accrued operating expenses are non-interest bearing and are payable within one year.


NOTE 12 – RECEIPT IN ADVANCE

As of the balance sheet dates, the Company’s accrued expenses and other payables are summarized as follows:

   
September 30,
2012
   
December 31,
 2011
 
             
Receipt in advance
  $ 1,047,331     $ 732,390  
                 
Receipt in advance consists of money received from customers for regional distribution rights which are yet to be performed. Revenues from regional distribution rights include initial fees and continuing management fee income. All amounts received will be initially recognized as receipt in advance, and will be recognized as revenues when the following criteria are met:

(i)  
Initial fee income is generally recorded upon completion of admission procedures, when the rights to use the trademarks are granted to the users, and when collectability is reasonably assured.  
(ii)  
Continuing management fee income represents regular contractual payments received for the use of the “GEN+Me” trademarks plus our supporting services, which is recognized as revenue when earned, generally on a straight line basis.


NOTE 13 – TAXES PAYABLE

As of the balance sheet dates, the Company’s taxes payable are summarized as follows:

   
September 30,
2012
   
December 31,
 2011
 
             
Income tax payable
  $ 289,970     $ 289,059  
Value added tax payable
    1,661,307       1,519,425  
Business sales tax
    37,969       -  
Others
    85,101       -  
                 
Total
  $ 2,074,347     $ 1,808,484  
                 

NOTE 14 – COMMON STOCK

As of the balance sheet dates, the Company has authorized 400,000,000 shares of common stock, par value $0.001 per share.   In addition, the Company has authorized 10,000,000 shares of preferred stock, none of which has been issued as of September 30, 2012.
 
On July 23, 2012, we effected a reverse stock split at 1:60 to reduce our issued and outstanding shares of common stock from 300,000,000 to approximately 5,000,052, which was approved by our majority shareholders (the “Reverse Split”). The Reverse Split has been retroactively reflected in this interim report on Form 10-Q for the period ended September 30, 2012.
 
On September 19, 2012, we issued a total of 150,350,000 shares of our common stock, par value $0.001 per share at a purchase price of $0.01 per share in reliance upon the exemption from securities registration afforded by Regulation S as promulgated under the Securities Act of 1933 (the “Reg. S Offering”). Total consideration of $1,503,500 was fully paid, held by an escrow agent prior to the closing, and will be released to the Company upon the closing of Reg. S Offering.
 
NOTE 15 – SEGMENT REPORTING

The Company’s reportable segments of business include sale of consumer products and regional distribution rights.  Each of these segments is conducted in a separate corporation and each functions independently. The Company has no sales between segments.


Financial information of the Company’s business segments is as follows:

   
Nine months ended September 30,
 
   
2012
   
2011
 
             
Revenues from:
        $    
Sale of consumer products
    4,055,992       1,048,418  
Regional distribution rights
    711,905       400,450  
      4,767,897       1,448,868  
                 
Segment profit/(loss) from:
               
Sale of consumer products
    1,279,734       81,588  
Regional distribution rights
    669,404       301,083  
Corporate
    (416,202 )     (334,772 )
      1,532,936       47,899  
                 
Depreciation and amortization expenses:
               
Sale of consumer products
    73,784       56,467  
Regional distribution services
    44,726       56,787  
Corporate
    96       -  
      118,606       113,254  
                 
Segment assets:
               
Sale of consumer products
    5,177,272       4,477,416  
Regional distribution services
    1,809,190       777,645  
Corporate
    -       -  
      6,986,462       5,255,061  
                 
Capital expenditure
               
Sale of consumer products
    -       8,032  
Regional distribution services
    66,810       18,653  
Corporate
    -       -  
      66,810       26,685  
                 

NOTE 16 – PROVISION FOR INCOME TAXES

Reconciliation of the expected tax with the actual tax expense is as follows:

   
Nine months ended September 30,
 
   
2012
   
2011
 
   
Amount
   
%
   
Amount
   
%
 
                         
Income from continuing operations before provision for income taxes
  $ 1,532,936             47,899        
                             
Expected PRC income tax expense at statutory tax rate of 25%
    383,234       25.0       11,974       25.0  
              (25.0 )                
Utilization of tax loss brought forward
    (383,234 )     (25.0 )     (11,974 )     (25.0 )
                                 
Provision for Income Taxes
  $ -       -     $ -       -  

(i)  
Both Jiangxi Jien and Shenzhen Jien are subject to PRC tax. The provision for PRC income tax is based on a statutory rate of 25% of the assessable income of the PRC subsidiaries as determined in accordance with the relevant income tax rules and regulations of the PRC.
(ii)  
Plenty Fame is not subject to tax in accordance with the relevant tax laws and regulations of the BVI.


(iii)  
Prospect did not generate any assessable profits since its incorporation and therefore is not subject to HKSAR tax.


NOTE 17 –EARNINGS PER SHARE

The calculation of weighted average number of shares for the three months and nine months ended September 30, 2012, respectively is illustrated as follows:

   
Three months ended September 30, 2012
   
Nine months ended September 30, 2012
 
   
Number of shares
   
Weighted average number of shares
   
Number of shares
   
Weighted average number of shares
 
                         
At beginning of period
    5,000,052       5,000,052       5,000,052       5,000,052  
Issue of shares on September 19, 2012
    150,350,000       19,610,870       150,350,000       6,584,672  
                                 
At end of period
    155,350,052       24,610,922       155,350,052       11,584,724  
                                 

NOTE 18 – RELATED PARTY TRANSACTIONS

In addition to the transactions detailed elsewhere in these financial statements, the Company entered into the following significant transactions with related parties:

   
Nine months ended September 30,
 
   
2012
   
2011
 
             
Chen Xing Hua
           
Rental expenses payable for the Company’s office premises in Shenzhen, the PRC
  $ 53,309     $ 9,724  
                 
Mr. Chen Xing Hua, the director of Shenzhen Hanhong, is also a director of the Company. Please refer to note 9 to the consolidated financial statements.
 
In the opinion of the directors, the above transactions were entered into by the Company in the normal course of business.
 
On September 19, 2012, we issued a total of 150,350,000 shares of our common stock at a total consideration of $1,503,500 in the Reg. S Offering. The investors in this Reg. S Offering except Han Sing Investment Incorporated (“Han Sing”) are individuals and regional independent third-party distributors of the Company. None of these individual distributors held any shares of the Company prior to the closing of Reg. S Offering or was issued more than 5% of the shares of the Company in the Reg. S offering. Han Sing is a Cayman company wholly owned by Mr. Chen Xinghua. Mr. Chen is a director of the Company and is actively involved in the Company’s daily operation and management. Prior to the Reg. S. Offering, Han Sing held approximately 245,417 shares of our Common Stock, representing 4.9% of the shares of issued and outstand Common Stock before the closing of Reg. S offering on September 19, 2012. Han Sing purchased 88,700,000 shares of our Common Stock in the Reg. S Offering, resulting in its holding of approximately 57.1% of our Common Stock. Through his ownership of Han Sing, Mr. Chen became a controlling shareholder of the Company.


NOTE 19 – CAPITAL COMMITMENT

Capital Commitment:
 
As of the balance sheet dates, the Company’s capital commitments are summarized as follows:

   
September 30,
2012
   
December 31,
 2011
 
             
Construction-in-progress:
           
Contracted but not provided for
  $ 1,554,883     $ 1,550,000  
                 


NOTE 20 – GOING CONCERN

Generally accepted accounting principles in the United States of America contemplate the continuation of the Company as a going concern. Since 2010, the Company has modified its sales and marketing strategies in order to diversify its concentration of credit risk, leading to a decrease in working capital and incurred significant losses. As of September 30, 2012, the Company has accumulated deficits of $3,082,377, and a negative working capital of $2,752,619. 
 
As of September 30, 2012 the Company may need additional cash resources to operate during the upcoming 12 months, and the continuation of the Company may be dependent upon the continuing financial support of investors, directors and/or stockholders of the Company. However, there is no assurance that equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.


ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward Looking Statements

This Form 10−Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of financial condition and results of operations relates to the operations and financial condition reported in the financial statements of China Green Creative, Inc.. for the periods ended September 30, 2012 and 2011 and should be read in conjunction with such financial statements and related notes included in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.

Overview

We are formulating and distributing consumer goods such as herbal teas and beverages, health liquors and meal replacement products in China. In order to satisfy our customer demands for high quality products, we enter with contracts with factories in China to produce the products with our design, formula, standards and distribute those products under our registered brand names.  All our registered brands have obtained nation-wide product certifications. During the past fiscal year, we mainly used “GEN + ME” for our own product lines. We sell products under our registered brand name primarily through our regional independent third-party distributors in the PRC to customers mainly in Beijing, Shandong, Zhejiang, Fujian and Guangdong Provinces. To keep up in such a competitive industry, we constantly adjust our manufacture and distribution strategies in China according to current economic conditions, consumer preference, government policy and social climate in the marketplace.

In addition to the sales of consumer products, we also grant regional distribution rights for the use of our trademarks and provide continuing support services to our distributors.
 
Jiangxi Jien, a subsidiary of the Company, is developing a storage and logistic base in Anyi County, Jiangxi Province, China. As of September 30, 2012, the amount of approximately $1.8 million has been incurred toward the construction of a storage and logistics base with a total budgeted cost of $3.3 million. The Company expects to spend approximately an additional $1.5 million for the completion of the base.  The completion of the project, however, relies on  the Company obtaining sufficient funds in the next 12 months, of which there can be no guarantee.
 
We expect to continue to invest primarily in marketing, and in recruiting new regional distributors. We believe this will not only expand our regional distribution network, but increase our market acceptance and customer satisfaction.
 
In addition to the immediate risks relating to our ability to continue as a going concern and to obtain funding under the current market conditions, we are subject to certain risks common to customer products distributors in similar stages of development. See “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, file number 333-147084 12758068. Principal risks include risks relating to the uncertainty of our organic growth strategy, our ability to implement our strategy, a reliance on third party to supply products that comply with safety requirements, the concentration of our sales in a limited number of customers, our ability to remain competitive in the market, our dependence on key members of our management, and our ability to obtain adequate capital to fund future operations.


Recent Developments

On September 19, 2012, we closed an offering ( the “Reg. S Offering”) of $1,503,500 in which we issued a total of 150,350,000 shares of our common stock , par value $0.001 per share (“Common Stock”) to 236 investors at a purchase price of $0.01 per share  in reliance upon the exemption from securities registration afforded by Regulation S (“Regulation S”) as promulgated under the Securities Act of 1933. Pursuant to the Purchase Agreement in the Reg. S Offering, the Investors agree not to offer, sell, contract to sell, assign, transfer, hypothecate, gift, pledge or grant a security interest in, or otherwise dispose of, or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition of (whether by actual disposition or effective economic disposition due to cash settlement or otherwise, directly or indirectly) (each, a “Transfer”), any of the shares until a date that is two years following the closing date.
 
The Investors in the Reg. S Offering except Han Sing Investment Incorporated (“Han Sing”) are individuals and regional independent third-party distributors of the Company. None of these individual distributors held any shares of the Company prior to the Closing Date or was issued more than 5% of the shares of the Company in the Reg. S offering.Han Sing is a Cayman company wholly owned by Mr. Xinghua Chen. Mr. Chen is a director of the Company and is actively involved in the Company’s daily operation and management. Prior to the Reg. S. Offering, Han Sing held approximately 245,417 shares of our Common Stock, representing 4.9% of the shares of issued and outstand Common


Stock before the closing of the Reg. S Offering. Han Sing purchased 88,700,000 shares of our Common Stock in the Reg. S Offering, resulting in its holding of approximately 57.1% of our Common Stock. Through his ownership of Han Sing, Mr. Xinghua Chen became a controlling shareholder of the Company.
 
On July 23, 2012, we affected a reverse stock split at 1:60 to reduce our issued and outstanding shares of common stock from 300,000,000 to approximately 5,000,052 including rounded up fractional shares. The reverse split was approved by a majority of our shareholders and is retroactively reflected in this interim report on Form 10-Q for the period ended September 30, 2012.
 
In an effort to stay competitive, as an adjustment of our distribution strategy, we started developing direct sales via internet and other electronic mediums. We have been advised that certain PRC regulatory restrictions over foreign invested internet content providers may apply to our business. As a result, we have been communicating with our PRC legal advisor to explore the appropriate approach to adjust or restructure our operating businesses in China to accommodate our business development.  As we are currently evaluating the feasibility and costs of such adjustment, we are not yet able to estimate the timeline and costs related to the process or whether we will be able to obtain all necessary governmental approvals in order to complete such adjustment or restructure.

Results of Operations

Three Months Ended September 30, 2012 as Compared to Three Months Ended September 30, 2011

                         
   
Three months ended
             
   
September 30
   
Increase/
   
%
 
   
2012
   
2011
   
(decrease)
   
change
 
                         
Revenue
  $ 2,375,941     $ 322,767     $ 2,053,174       636.1  
Cost of sales
    957,737       73,708       884,029       1199.4  
Selling and distribution expenses
    99,412       19,786       79,626       402.4  
General and administrative expenses
    292,864       243,134       49,730       20.5  
Income/(loss) before income taxes
    985,992       (21,363 )     N/A       N/A  
Provision for income taxes
    -       -       N/A       N/A  
Net income/(loss)
  $ 985,992     $ (21,363 )   $ N/A       N/A  

Revenues
Revenue for the three months ended September 30, 2012 amounted to $2,375,941, represents a $ 2,053,174 or 636.1% increase, compared to the same period in 2011.  Revenues for the three months ended September 30, 2012 and 2011 are analyzed as follows:

                         
   
Three months ended
September 30,
   
Increase/
   
%
 
   
2012
   
2011
   
(decrease)
   
change
 
                         
Sale of consumer products
  $ 1,944,227     $ 140,101       1,804,126       1287.7  
Regional distribution rights
    431,714       182,666       249,048       136.3  
      2,375,941     $ 322,767     $ 2,053,174       636.1  

(i)  
Sale of consumer products

Our sales of consumer products consist of providing herbal teas and beverages, sauces, healthy blend oils, health liquors and meal replacement products. Sales significantly increased by $1,804,126, or 1287.7%, from $140,101 for the three months period ended September 30, 2011 to $1,944,227 for the three months period ended September 30, 2012.  This substantial increase is a result of distribution of a series of new health care products and our marketing efforts to recruit new distributors in different provinces.
 
The market for health care products in China is growing rapidly, driven by China’s economic growth, a growing urban population and improved general health consciousness among the people.  Our main health care products include liquors rich in selenium and trace elements, wine and meal replacement products etc. These products are well received by the market and significantly boosted our sales in the third quarter of 2012.


Since 2011, we began to modify our sales strategies to improve the efficiency of our distribution network and expand the customer base. During the nine months ended September 30, 2012, we designed and developed two electronic commerce platforms. The platforms enable end use customers to purchase products distributed by us directly through internet and provide new supply chain models to efficiently respond to market demands. As a result, we recruited several new major distributors and developed our existing agents in this quarter of 2012.
 
We expect to continue to devote substantial resources to consummate the new business models, focus our efforts towards discovering new products to meet the needs of our market and improve food safety supervision.
 
During this quarter, we were authorized by China National Food Industry Association to host the 1st China Custom Food Safety Care Expo which was held from November 1 to 3, 2012. The purpose of the conference was to introduce and promote the new concept of custom food in China. With quick expansion of China's economy and extensive improvements in living conditions in China, people in PRC have been paying  more attention to food safety and quality than in the past. Observing the potential opportunity of the huge market for custom food in China, we intend to establish a nationwide platform via the internet to link up the whole custom food industrial chain including producers, distributors and end-users.  We expect our business will develop rapidly along with the acceptance and recognition of custom food by the market in China.

(ii)  
Regional distribution rights

Since the third quarter of 2010, the Company has granted regional distribution rights in the PRC for using “GEN+Me” trademark.
 
Revenues from regional distribution rights include initial fees and continuing management fee income. All amounts received will be initially recognized as receipt in advance, and will be recognized as revenues when the following criteria are met:

(i)
Initial fee income is generally recorded upon completion of admission procedures, when the rights to use the trademarks are granted to the users, and when collectability is reasonably assured.  
(ii)
Continuing management fee income represents regular contractual payments received for the use of the “GEN+Me” trademarks plus our supporting services, which are recognized as revenue when earned, generally on a straight line basis.
(iii)
Brand usage fee income is recognized when service has been rendered and the rights to receive payment have been established.

The continuing support services included adverting campaign, band promotion activities and training services provided to the distributor for the next three years after distribution rights are granted. The continuing management fee will be recognized on a yearly basis.
 
Revenues from regional distribution rights increased by $249,048 or 136.3% from $182,666 for the three months ended September 30, 2011 to $431,714 in the same period of 2012. We made some adjustments in our regional distribution rights policy and provided more comprehensive and diversified terms to different level distributors. Our revenues from regional distribution rights improved after implementation of the new policy.  We expect our revenue from regional distribution rights will continue to grow after the new one-line platforms are introduced.
 
Cost of sales
Cost of sales represents cost of consumer products sold. The cost for regional distribution rights business are expenses incurred to recruit new agents, promote the brand image and implement strategic advertising campaigns, all of which are included in selling and marketing expenses.
 
Cost of sales mainly represents the cost from subcontractors, which increased significantly by $884,029 or 1199.4% from $73,708 for the third quarter of 2011 to $957,737 for the same period in 2012. This increase was primarily attributable to increasing sales of consumer products in the three months period ended September 30, 2012. The increase in cost of sales was a greater percentage increase than our sales of consumer products mainly due to general increases in raw material costs, costs of packing materials and increased labor costs since the year of 2011.
 
Selling and distribution expenses
Selling and distribution expenses for the three months period ended September 30, 2012 and 2011 amounted to $99,412 and $19,786, respectively. The significant increase of $79,626 or 402.4% was mainly attributable to our proactive marketing effort. There were more promotion activities and advertising campaigns held during the third quarter of 2012 to promote our own brand network and improve product recognition .
 
General and administrative expenses
General and administrative expenses increased by $49,730 or 20.5% from $243,134 for the third quarter of 2011 to $292,864 for the same quarter of 2012. We plan to organize a conference to introduce the customized food industry in November 2012.  Some preparation expenses incurred in the three months period ended September 2012, and majority of the conference expenses will be charged in the next quarter. In addition, we continued to strictly implement our cost saving plan in the three months period ended September 30, 2012.
 
 
Income/(loss) before income taxes and provision for income taxes
The Company recorded a pretax gain $985,992 for the three months ended September 30, 2012, compared to a loss of $21,363 for the comparative period last year. The difference was mainly due to the dramatic increase of sales from consumer products business and revenue from regional distribution rights business.
 
There was no PRC income tax provision for the second quarter of 2012 and 2011 as substantial amounts of pretax income were off-set by substantial accumulated losses incurred in previous years.
 
 
Net income/(loss)
We recorded net income of $985,992 for the third quarter of 2012, as compared to a loss of $21,363 for the same period in 2011. The increase in net income mainly resulted from the increasing operating revenue partially offset by an increase in purchase price of trading inventories and marketing expenses.
 
Nine Months Ended September 30, 2012 as Compared to Nine Months Ended September 30, 2011

   
Nine months ended
             
   
September 30,
   
Increase/
   
%
 
   
2012
   
2011
   
(decrease)
   
change
 
                         
Revenue
  $ 4,767,897       1,448,868       3,319,029       229.1  
Cost of sales
    2,062,420       387,096       1,675,324       432.8  
Selling and distribution expenses
    302,013       238,024       63,989       26.9  
General and administrative expenses
    786,707       754,340       32,367       4.3  
Income before income taxes
    1,532,936       47,899       1,485,037       3100.4  
Provision for income taxes
    -       -       N/A       N/A  
Net income
  $ 1,532,936       47,899       1,485,037       3100.4  

Revenues
Revenue for the nine months ended September 30, 2012 amounted to $4,767,897, which represents a $3,319,029 or 229.1% increase when compared to $1,448,868 for the same period last year.  Revenues for the nine months ended September 30, 2012 and 2011 are analyzed as follows:

                         
   
Nine months ended September 30,
   
Increase/
   
%
 
   
2012
   
2011
   
(decrease)
   
change
 
                         
Sale of consumer products
  $ 4,055,992       1,048,418       3,007,574       286.9  
Regional distribution rights
    711,905       400,450       311,455       77.8  
      4,767,897       1,448,868       3,319,029       229.1  
                                 

(a)  
Sale of consumer products

Sales increased by $3,007,574, or 286.9%, from $1,048,418 for the nine months period ended September 30, 2011 to $4,055,992 for the nine months period ended September 30, 2012.  The significant increase in sales revenue was mainly due to a series of heath care products developed and introduced in the market. The heath care products met the rapid growing market demand and improved our brand awareness, which also enabled us to increase our market share. Moreover, we designed and developed a new supply chain model to integrate the distribution network and expand the product varieties, which we believe will lead to a new growing point of our business in the future.

(b)  
Regional distribution rights

 
Revenue arising from the regional distribution rights operations for the nine months ended September 30, 2012 and 2011 amounted to $711,905 and $400,450, respectively. The increase of $311,455 or 77.8% mainly represented the brand usage fee received from the new agents. As a result of our new marketing strategies and our increasing band awareness and product acceptance, we were able to recruite new distributors.

Cost of sales
Cost of sales represents cost of consumer products sold. The amount increased from $387,096 for nine months ended September 30, 2011 to $2,062,420 for the same period in 2012. The increase in cost of sales of $1,675,324 or 432.8% was in line with the increase in sales revenue from consumer products.
 
Selling and distribution expenses
Selling expenses for the nine months ended September 30, 2012 and 2011 amounted to $302,013 and $238,024, respectively. The increase in selling and distribution expenses of $63,989 or 26.9% was primarily attributed to more promotion and advertising expenses incurred the third quarter of 2012 in order to promote our newly developed on-line electronic commerce platforms.
 
General and administrative expenses
General and administrative expenses slightly increased by $ 32,367or 4.3% from $754,340 for the nine months ended September 30, 2011 to $786,707 for the nine months ended September 30, 2012. Although the pace of our business has increased , we were able to limit the  increase of our general and administrative expense mainly as a result of our cost saving plan, which was implemented more efficiently in the nine months ended September 30, 2012, and primarily represented the reduction in payroll, travelling expensese and office expenses
 
Income before income taxes and provision for income taxes
The Company recorded a pretax income of $1,532,936 and $47,899 for the nine months ended September 30, 2012 and 2011, respectively. The rapid increase was mainly due to the incremental income generated from our sales of consumer products and revenue from regional distribution rights.  
 
There was no PRC income tax provision for the nine months ended September 30, 2011 and 2012 as a substantial amount of pretax income was off-set by accumulated losses incurred in previous years.  
 
Net income
We recorded net income of $1,532,936 for the nine months ended September 30, 2012, as compared to net income of $47,899 for the same period in 2011, an increase of $1,485,037 or 3100.4%. The change was mainly due to our growing operating income and effective cost management plan.
 
Cash and cash equivalents
As of September 30, 2012, the Company had a total cash and cash equivalents of $470,313 compared to $97,522 as of December 31, 2011. The cash was mainly used to fund our operations. The Company’s cash flows for the nine months ended September 30, 2012 are analyzed as follows:
 
Cash Flow from Continuing Operations

   
Nine months ended
 
   
September 30,
 
   
2012
   
2011
 
             
Net cash provided by operating activities
  $ 1,251,914     $ 16,394  
Net cash used in investing activities
    (66,810 )     (26,685 )
Net cash provided by financing activities
    698,154       230,661  
Net increase in cash and cash equivalents
  $ 1,883,258     $ 220,370  

During the nine months ended September 30, 2012, we had net cash provided by operating activities of $1,251,914, as compared to net cash provided by operating activities of $16,394 for the same period in 2011. The significant increase in cash inflow from operating activities was primarily due to the substantial growth in our operating revenue, which was offset in part by increasing purchase of trading inventories with the business developed.

Our cash flow used in investing activities for the nine months ended September 30, 2012 and 2011 amounted to $66,810 and $26,685, respectively. The net cash used in investing activities mainly represents purchase of equipment and machinery during the both periods.


Our cash flows provided by financing activities for the nine months ended September 30, 2012 amounted to $698,154, as compared to net cash provided by financing activities of $230,661 for the comparative period in 2011. The difference is mainly due to our issuance of an aggregate of 150,350,000 shares of common stock for $1,503,500 in cash, which offset in part by the repayment of borrowing amounted to $779,648.
 
Working Capital
As of September 30, 2012, the Company recorded a working capital deficit of $4,256,119, as compared to a deficit of $5,833,843 as of December 31, 2011. The significant improvement in working capital was mainly due to more net income generated from our operation for the nine months ended March 31, 2012 as our business growing rapidly. The Company is developing a storage and logistics base in Anyi County, Jiangxi Province, China, with an expected cost of approximately $3.3 million.  As of September 30, 2012, an amount of $1.8 million has been incurred and the Company intends to spend another $1.5 million for the storage and logistic base in the next 12 months.
 
Going Concern
Generally accepted accounting principles in the United States of America contemplate the continuation of the Company as a going concern. Since 2010, the Company has modified its sales and marketing strategies in order to diversify its concentration of credit risk, leading to a decrease in working capital and incurred significant losses. As of September 30, 2012, the Company has accumulated deficits of $3,082,377, and a negative working capital of $2,752,619.
 
As of September 30, 2012 the Company may need additional cash resources to operate during the upcoming 12 months, and the continuation of the Company may dependent upon the continuing financial support of investors, directors and/or stockholders of the Company. However, there is no assurance that equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

Off-Balance Sheet Transactions

We do not maintain any off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on our financial condition, cash flows, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.


Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are 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.
 
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimates are made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur, could materially impact the consolidated financial statements.
 
We believe that the following critical accounting policy reflect the significant estimates and assumptions which are used in the preparation of the consolidated financial statements and affect our financial condition and results of operations.

Revenue Recognition
We generate revenues mainly from sale of consumer products and also revenue from regional distribution rights.


The Company recognizes trading revenue when products are delivered and customers take ownership and assume risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and selling price is fixed or determinable.
 
Revenues from regional distribution rights include initial fees and continuing management fee income. All amounts received will be initially recognized as receipt in advance, and will be recognized as revenues when the following criteria are met:

(i)
Initial fee income is generally recorded upon completion of admission procedures, when the rights to use the trademarks are granted to the users, and when collectability is reasonably assured.  
(ii)
Continuing management fee income represents regular contractual payments received for the use of the “GEN+Me” trademarks plus our supporting services, which are recognized as revenue when earned, generally on a straight line basis.
(iii)
Brand usage fee income is recognized when service has been rendered and the rights to receive payment have been established.

Recent Accounting Pronouncements

The Company does not expect that the adoption of any recent accounting pronouncements will have any material impact on its condensed consolidated financial statements.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures
 
Disclosure controls and procedures (as defined in Rules 13a – 15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. This information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report.
 
Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2012.  However, based on our review as of that date, our management has identified what they believe to be significant deficiencies, which are discussed below.  A significant deficiency is a deficiency, or a combination of deficiencies, that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.
 
Our management identified significant deficiencies related to 1) Insufficient knowledge regarding U.S. GAAP reporting by our existing accounting staff; 2) Insufficient accounting staff which results in a lack of segregation of duties necessary for an efficient internal control system; and 3) Insufficient documentation with our existing financial processes, risk assessment and internal controls. However, management believes that these deficiencies do not amount to a material weakness. A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
 
Our management is not aware of any material weaknesses in our internal control over financial reporting, and nothing has come to the attention of management that causes them to believe that any material inaccuracies or errors exist in our financial statements as of September 30, 2012. The reportable conditions and other areas of our internal control over financial reporting identified by us as needing improvement have not resulted in a material restatement of our financial statements, and we are not aware of any instance where such reportable conditions or other identified areas of weakness have resulted in a material misstatement of omission in any report we have filed or submitted.
 
In order to correct the foregoing deficiencies, we engaged consultants who are familiar with PRC GAAP and US GAAP to assist us in the preparation of financial statements in accordance with US GAAP, and, while our cash flows from operations improves to a level where we are able to, we intend to recruit experienced professionals to augment our financial staff for sufficient US GAAP, financial reporting, which would improve our controls and procedure, with the regard to the financial statements preparation; and improve the knowledge of U.S. accounting standards for our current accounting staff.
 
Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible.  However, to the extent possible, we intend to implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals.
 
We believe that the foregoing steps, if effectively implemented and maintained, will remediate the significant deficiencies identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.

Changes in Internal Control Over Financial Reporting
 
Other than as set forth above, there have been no changes in the Company’s internal control over financial reporting during the nine months ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


OTHER INFORMATION

   
ITEM 1.
LEGAL PROCEEDINGS

None.

   
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.


   
ITEM 3.
DEFAULT UPON SENIOR SECURITIES

None.

   
ITEM 4.
[REMOVED AND RESERVED]

None.

   
ITEM 5.
OTHER INFORMATION

None.

   
ITEM 6.  
EXHIBITS
 
Exhibits
 
     
Exhibit
Number
Description
31.1
 
Certification of Chief Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
 
Certification of Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
 
Certification of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
 
Certification of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

   
   
   
   
 
CHINA GREEN CREATIVE, INC.
   
   
Dated: November 19, 2012
/s/ Ye Xing Zhang
 
Ye Xing Zhang
 
Chief Executive Officer
   
   
   
Dated: November 19, 2012
/s/ Deng Lin
 
Deng Lin
 
Chief Financial Officer

 
24