China Liaoning Dingxu Ecological Agriculture Development, Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - China Liaoning Dingxu Ecological Agriculture Development, Inc.	Financial_Report.xls
EX-31.1 - CERTIFICATION - China Liaoning Dingxu Ecological Agriculture Development, Inc.	clad_ex311.htm
EX-32.2 - CERTIFICATION - China Liaoning Dingxu Ecological Agriculture Development, Inc.	clad_ex322.htm
EX-32.1 - CERTIFICATION - China Liaoning Dingxu Ecological Agriculture Development, Inc.	clad_ex321.htm
EX-31.2 - CERTIFICATION - China Liaoning Dingxu Ecological Agriculture Development, Inc.	clad_ex312.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 September 30, 2013

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE EXCHANGE ACT

For the transition period from ___________ to _____________

CHINA LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT, INC.

(Exact name of small business issuer as specified in its charter)

Commission File No. 333-170480

Nevada	80-0638212
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Room 2119 Mingyong Building, No. 60 Xian Road.

Shahekou District, Dalian, China 116021

(Address of Principal Executive Offices)

0086-13909840703

(Issuer’s telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. YES x 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. See the definitions of “large accelerated filer, “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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 ¨ NO x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 46,450,000 Shares of Common Stock, as of November 7, 2013.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements	3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3. Quantitative and Qualitative Disclosures About Market Risk	29
Item 4. Controls and Procedures	29

PART II - OTHER INFORMATION

Item 1. Legal Proceedings	31
Item 1A. Risk Factors	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3. Defaults Upon Senior Securities	31
Item 4. Submissions of Matters to a Vote of Security Holders	31
Item 5. Other Information	31
Item 6. Exhibits	31

SIGNATURES	32

As used in this Form 10-Q Quarterly Report, unless the context requires or is otherwise indicated, the terms “we,” “us,” “our,” the “Registrant,” the “Company,” “our company” and similar expressions include the following entities (as defined below):

(i) China Liaoning Dingxu Ecological Agriculture Development, Inc., formerly known as

Hazlo! Technologies, Inc., a Nevada corporation (“Company”, “we”, or “us”), which is a publicly traded company;

(ii) China Liaoning DingXu Ecological Agriculture Development Co, Ltd., a BVI company ( “DingXu BVI”)

(iii) Panjin Hengrun Biological Technology Development Co., Ltd. 盘锦恒润生物技术开发有限公司, a limited liability company organized under the laws of the People’s Republic of China and a ninety-nine percent owned subsidiary of DingXu BVI (“Panjin Hengrun”)

(iv) Liaoning Dingxu Ecological Agriculture Development Co., Ltd.辽宁鼎旭生态农业发展有限公司, a limited liability company organized under the laws of the People’s Republic of China and an affiliated entity of Panjin Hengrun through contractual arrangements (“Liaoning Dingxu”).

“China” or “PRC” refers to the People’s Republic of China, excluding Hong Kong, Macau and Taiwan. “RMB” or “Renminbi” refers to the legal currency of China and “$” or “U.S. Dollars” refers to the legal currency of the United States. We make no representation that the RMB or U.S. Dollar amounts referred to in this report could have been or could be converted into U.S. Dollars or RMB, as the case may be, at any particular rate or at all. “GAAP” unless otherwise indicated refers to accounting principles generally accepted in the United States.

Item 1. Financial Statements

CHINA LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(AMOUNTS EXPRESSED IN US DOLLARS)


	As of		As of
	September 30, 2013		December 31, 2012
	(Unaudited)
ASSETS

Cash and cash equivalents		574,404		21,245
Inventories		189,629		139,915
Advances to suppliers		137,590		148,895
Other receivables, net		9,987		8,662
Other current assets		89,556		85,914
Total Current Assets		1,001,166		404,631

Property and equipment, net		10,853,295		11,090,729
Construction in progress		1,107,850		1,083,604
Land use right		5,731,233		5,768,262
Prepaid lease for land		858,937		879,470
Total Assets	$	19,552,481	$	19,226,696

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Account payable		3,812		3,729
Accrued expenses		17,703		18,519
Other payable		940		2,879,287
Due to related parties		3,257,620		5,301,552
Total Current Liabilities		3,280,075		8,203,087

Long term payable		1,548,644		1,548,644

Total Liabilities		4,828,719		9,751,731

Stockholders' Equity:

Common stock ($0.001 par value; 75,000,000 shares authorized; 46,450,000 and 66,450,000 shares issued and outstanding at September 30, 2013 and December 31, 2012)		46,450		66,450
Additional paid-in capital		8,490,565		8,215,126
Retained earnings		5,364,775		806,192
Accumulated other comprehensive income		677,653		296,297
Non-controlling interests		144,319		90,900

Total Stockholders' Equity		14,723,762		9,474,965

Total Liabilities and Stockholders' Equity	$	19,552,481	$	19,226,696

See accompanying notes to unaudited consolidated financial statements

CHINA LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(AMOUNTS EXPRESSED IN US DOLLARS)


	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
	(Unaudited)			(Unaudited and Restated)			(Unaudited)			(Unaudited and Restated)

NET REVENUES	$	3,118,017		$	1,881,049		$	9,582,529		$	5,487,003

COST OF REVENUES		1,184,850			1,442,763			3,752,063			4,187,448

GROSS PROFIT		1,933,167			438,286			5,830,466			1,299,555

OPERATING EXPENSES:
Depreciation and amortization		177,969			91,532			529,479			387,099
General and administrative		32,932			102,307			436,600			333,116
Total Operating Expenses		210,901			193,839			966,079			720,215

INCOME FROM OPERATIONS		1,722,266			244,447			4,864,387			579,340

OTHER INCOME (EXPENSE):
Other income		-			(1,319	)		-			372,845
Impairment loss		-			(91,468	)		-			(91,468	)
Interest expense		(42,097	)		(100,841	)		(257,573	)		(292,794	)

INCOME BEFORE PROVISION FOR INCOME TAX		1,680,169			50,819			4,606,814			567,923

PROVISION FOR INCOME TAXES		-			-			-			-

NET INCOME (LOSS) BEFORE NON-CONTROLLING INTERESTS	$	1,680,169		$	50,819		$	4,606,814		$	567,923

LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		17,212			780			48,231			6,531

NET INCOME (LOSS)	$	1,662,957		$	50,039		$	4,558,583		$	561,392

OTHER COMPREHENSIVE INCOME:
Unrealized foreign currency translation gain(loss)		123,293			(19,079	)		385,208			(65,463	)

LESS: OTHER COMPREHENSIVE INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		1,233			(191	)		3,852			(654	)

COMPREHENSIVE INCOME	$	1,785,017		$	31,151		$	4,939,939		$	496,583

NET INCOME PER COMMON SHARE:
Basic	$	0.04		$	-		$	0.10		$	0.01
Diluted	$	0.04		$	-		$	0.10		$	0.01

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		46,450,000			66,450,000			46,962,821			66,450,000
Diluted		46,450,000			66,450,000			46,962,821			66,450,000

See accompanying notes to unaudited consolidated financial statements

CHINA LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS EXPRESSED IN US DOLLARS)


	Nine Months Ended September 30,
	2013			2012
	(Unaudited)			(Unaudited and Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		4,558,583			561,392
Net income attributable to non-controlling interests		48,231			6,531
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		669,473			558,854
Imputed interest		256,775			267,930
Changes in assets and liabilities:
Account receivables		-			(23,965	)
Inventories		(49,714	)		(319,227	)
Other receivables		(1,325	)		-
Other current assets		(3,642	)		-
Prepaid expense		31,838			423,767
Accounts payable and accrued liabilities		(3,298,336	)		(843,500	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		2,211,883			631,782

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		-			(26,118	)
Construction in progress		-			(55,381	)
Acquisition of land use right		-			(1,217,162	)
Software		-			(91,701	)
NET CASH USED IN INVESTING ACTIVITIES		-			(1,390,362	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank loan		-			(3,011	)
Proceeds from related parties advances		-			2,261,109
Repayment to related parties		(2,043,932	)		-
NET CASH PROVIDED BY (USDED IN) FINANCING ACTIVITIES		(2,043,932	)		2,258,098

EFFECT OF EXCHANGE RATE ON CASH		385,208			(65,463	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		553,159			1,434,055

CASH AND CASH EQUIVALENTS - beginning of period		21,245			31,863

CASH AND CASH EQUIVALENTS - end of period		574,404			1,465,918

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for Interest		-			26,603

NON-CASH INVESTING AND FINANCING ACTIVITIES
Shares cancelled by shareholder	$	20,000		$	-

See accompanying notes to unaudited consolidated financial statements.

CHINA LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013 AND 2012

NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

China Liaoning Dingxu Ecological Agriculture Development Inc. (the "Company") was incorporated under the laws of State of Nevada on August 19th, 2010. The Company is primarily engaged in the growing and selling of agriculture products in People’s Republic of China (“PRC”).

On December 12, 2011, the Company entered a Share Exchange Agreement with DingXu BVI Shareholder (Chin Yung Kong) under which the Company issued 60,000,000 shares of common stock to Chin Yung Kong to acquire 100% of the issued and outstanding shares of DingXu BVI.

China Liaoning DingXu Ecological Agriculture Development Co, Ltd., a BVI company (the “DingXu BVI”) was incorporated under the laws of British Virgin Islands on April 15, 2011. Chin Yung Kong was the sole shareholder and director of DingXu BVI.

On July 5, 2011, DingXu BVI formed Panjin Hengrun Biological Technology Development Co, Ltd., a limited liability company organized under the laws of the People’s Republic of China (“Panjin Hengrun”). DingXu BVI owns 99% of the total ownership of Panjing Hengrun.

On November 28, 2011, Panjin Hengrun entered into a set of contractual arrangements with Liaoning Dingxu Ecological Agriculture Development Co., Ltd., a limited liability company organized under the laws of the People’s Republic of China and an affiliated entity of Panjin Hengrun through contractual arrangements (“Liaoning Dingxu”). The contractual arrangements are comprised of a series of agreements, including a Consulting Service Agreement and an Operating Agreement, through which Panjin Hengrun has the right to advise, consult, manage and operate Liaoning Dingxu to collect and own all of Liaoning Dingxu’s net profits and net losses. Additionally, under a Proxy Agreement, the shareholders of Liaoning Dingxu have vested their voting control over Liaoning Dingxu to Panjin Hengrun. In order to further reinforce Panjin Hengrun’s rights to control and operate Liaoning Dingxu. Liaoning Dingxu and its shareholders have granted Panjin Hengrun, under an Option Agreement, the exclusive right and option to acquire all of their equity interests in Liaoning Dingxu, or, alternatively, all of the assets of Liaoning Dingxu. Further, the shareholders of Liaoning Dingxu agreed to pledge all of their rights, titles and interests in Liaoning Dingxu under an Equity Pledge Agreement.

Upon entry of these contractual arrangements, Liaoning Dingxu became the Variable Interest Entities (“VIE”) of Panjin Hengrun pursuant to FIN 46 (R) and Panjin Hengrun was able to carry out business operations through Liaoning Dingxu.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The company maintains its books and accounting records in Renminbi (“RMB”), and its reporting currency is United States dollars.

ACCOUNTING METHOD

The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a fiscal year ending on December 31.

USE OF ESTIMATES

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. The Company recroded cash balance of $574,404 and $21,245 as of September 30, 2013 and December 31, 2012, respectively. Company did not have cash equivalent as of September 30, 2013 and December 31, 2012.

INVENTORIES

Inventories are stated at the lower of cost or market value. Cost is determined using moving weighted average method. Inventories consist of raw materials, finished goods and growing crops. Cost of finished goods comprises direct material and direct production cost based on normal operating capacity.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost less accumulated depreciation and impairment. Depreciation on property, plant and equipment is calculated on the straight-line method after taking into account their respective estimated residual values over the estimated useful lives of the assets as follows:

Building	20 years
Plant equipment	5-10 years
Office equipment	3-5 years
Vehicles	4 years

Maintenance and repair costs are expensed as incurred, whereas significant renewals and betterments are capitalized.

Construction in progress represents capital assets under construction or being installed and is stated at cost. Cost comprises original cost of plant and equipment, installation, construction and other direct costs prior to the date of reaching the expected usable condition. Construction in progress is transferred to the property, plant and equipment and depreciation commences when the asset has been substantially completed and reaches the expected usable condition.

LAND USE RIGHTS

The Company states land use right at cost less accumulated amortization. The land use right is amortized on straight line method during the contract period.

The Company has land use rights to 24,806 square meters of land. The term of the land use rights is 50 years, starting in March 2011. The land use right in the amount of $579,580 was fully paid during 2011. For the nine months ended September 30, 2013 and 2012, the Company recorded amortization expense of $8,910 and $8,639, respectively. The Company recorded the land use right net value of $564,294 and $560,664 as of September 30, 2013 and December 31, 2012 respectively.

The Company has land use rights to 56,139 square meters of land. The term of the land use rights is 46 years, starting in March 2011. The land use right in the amount of $2,698,027 was not yet fully paid for as of December 31, 2012. The outstanding balance due was fully paid as of September 30, 2013. Company recorded liabilities related to this land use right in the amount of $nil and $491,926 as of September 30, 2013 and December 31, 2012, respectively. For the nine months ended September 30, 2013 and 2012, the Company recorded amortization expense of $44,519 and $43,164, respectively. The Company recorded the land use right net value of $2,616,730 and $2,603,032 as of September 30, 2013 and December 31, 2012 respectively.

The Company has land use rights to 428,214 square meters of land. The term of the land use rights is 18 years, starting in January 2012. The Company recorded amortization expense of $116,034 and $114,908 for the nine months ended September 30, 2013 and 2012, respectively. The Company recorded the land use right net value of $2,550,209 and $2,757,776 as of September 30, 2013 and December 31, 2012, respectively. As the land use right was not yet fully paid for as of September 30, 2013, the Company recorded long term liabilities related to this land use right in the amount of $1,548,644 as of September 30, 2013 and December 31, 2012.

LONG TERM PREPAID LEASE

Leases where substantially all the risks and rewards of ownership of assets remain with the lessor are accounted for as operating leases. Payments made under operating leases net of any incentives received from the lessor are charged to the consolidated statements of operations on a straight-line basis over the terms of the underlying lease.

The Company records lease payments at cost less accumulated. The Company entered into long term agreements with certain unrelated parties to rent land. The lease payments are recorded as operating lease expenses using the straight line method during the contract period of 20 years. The lease payments for the entire contract period in the amount of $1,030,900 were prepaid during 2011. For the nine months ended September 30, 2013 and 2012, the Company recorded lease expense of $41,734 and $40,463, respectively. Company recorded prepaid lease expenses at net, in the amount of $858,937 and $879,470 as of September 30, 2013 and December 31, 2012, respectively.

REVENUE RECOGNITION

Sales revenue is recognized at the date of shipment from the Company’s facilities to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, ownership has passed, no other significant obligations of the Company exist and collectibility is reasonably assured.

The Company’s revenue consists of the invoiced value of goods, net of value-added tax (“VAT”).

The Company currently has no warranty or return policy as all sales are final.

TAXATION

Taxation on profits earned in the PRC has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the PRC where the Company operates after taking into effect the benefits from any special tax credits or “tax holidays” allowed in the county of operations.

The Company does not accrue United States income tax since it has no operating income in the United States. The operating subsidiary is organized and located in the PRC and do not conduct any business in the United States.

Enterprise income tax

In accordance with the relevant tax laws in the PRC, as an agriculture growing enterprise, the operating subsidiary is exempted from enterprise income tax from 2010 to 2012 and sequentially exempted from enterprise income tax from 2013 to 2015. Accordingly, the Company statutory rate was 0% and 0% for the nine months ended September 30, 2013 and 2012, respectively.

Value added tax

The Provisional Regulations of The People’s Republic of China Concerning Value Added Tax promulgated by the State Council came into effect on January 1, 1994. Under these regulations and the Implementing Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value added tax is imposed on goods sold in or imported into the PRC and on processing, repair and replacement services provided within the PRC.

In accordance with the relevant tax laws in the PRC, as an agriculture growing enterprise, the Company is exempted from VAT from 2010 to 2012 and sequentially exempted from VAT from 2013 to 2015.

FOREIGN CURRENCY TRANSLATION

The reporting currency of the Company is the U.S. dollar. The functional currency of the parent company is the U.S. dollar and the functional currency of the Company’s operating subsidiaries and variable interest entities is the RMB. For the subsidiaries and variable interest entities whose functional currencies are the RMB, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. All of the Company’s revenue transactions are transacted in the functional currency. The Company does not enter any material transaction in foreign currencies and accordingly, transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.

In accordance with ASC Topic 230, cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.

ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income represents the change in equity of the Company during the periods presented from foreign currency translation adjustments.

NEW ACCOUNTING PRONOUNCEMENTS

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” This ASU does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, this guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement, where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. For public entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2012. For nonpublic entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2013. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

In July 2012, the FASB issued ASU 2012-02, “Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment.” This ASU simplifies how entities test indefinite-lived intangible assets for impairment, which improves consistency in impairment testing requirements among long-lived asset categories. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of indefinite-lived intangible assets is less than their carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

NOTE 3. ADVANCE TO SUPPLIER

Advance to supplier was mainly used to record the advance paid as deposit on equipments and raw materials being purchased. Advance to supplier at September 30, 2013 and December 31, 2012 consisted of the following:

	September 30, 2013		December 31, 2012

LanZhou LinMeiKe machine manufacture Co, LTD	$	28,261	$	27,643
PanJin JingZe Rice Co, LTD		81,327		79,548
Others		28,002		41,704
		137,590		148,895

NOTE 4. INVENTORIES

Inventories consist of raw materials, finished goods, and growing crops.

Raw materials that were not put into production as of period end were stated at lower cost or market. Company recorded raw material of $70,314 and $16,781 as of September 30, 2013 and December 31, 2012, respectively.

Finished goods consisted of dried mushroom and rice that was purchased from third parties. Company recorded dried mushroom finished goods of $nil and $63 as of September 30, 2013 and December 31, 2012, respectively. Company recorded rice inventories of $18,813 and $nil as of September 30, 2013 and December 31, 2012 respectively.

Growing crops are valued at the lower of cost or market and are deferred and charged to cost of goods sold when the related crop is harvested and sold. The deferred growing costs included in inventory in the consolidated balance sheets consist primarily of raw material of the crops, direct labor, depreciation of fixed assets used directly in growing, land lease payment for the field used to grow crops, and utilities used in the production site. Cost included in growing crops related to the current crop year.

Inventories at September 30, 2013 and December 31, 2012 consisted of the following:

	September 30, 2013		December 31, 2012

Raw materials and supplies	$	70,314	$	16,781
Growing crops		100,502		123,071
Finished goods		18,813		63
		189,629		139,915

NOTE 5. PROPERTY, PLANT AND EQUIPMENT

Property, Plant and Equipment at September 30, 2013 and December 31, 2012 consisted of the following:

	September 30, 2013		December 31, 2012

Building	$	11,383,318	$	11,134,288
Plant		536,538		524,805
Vehicles		34,119		33,372
Office equipment		75,227		73,580
		12,029,202		11,766,045

Less: Accumulated depreciation		1,175,907		675,316
Property, plant and equipment, net		10,853,295		11,090,729

For the nine months ended September 30, 2013 and 2012, the Company recorded depreciation expense of $500,591 and $405,953, respectively.

NOTE 6. CONSTRUCTION IN PROGRESS

Construction in progress movement for the nine months ended September 30, 2013 and the year ended December 31, 2012 consisted of the following:

	September 30, 2013		December 31, 2012
The beginning balance:
Greenhouse and Planting structures	$	354,943	$	314,400
Factory workshop		728,661		711,010
		1,083,604		1,025,410
Changes:
Add : Investments during the period		-		4,088,199
Unrealized foreign currency translation gain		24,246
Less: Transfer to fixed assets		-		(4,030,005	)
		24,246		58,194
The ending balance:
Greenhouse and Planting structures		362,883		354,943
Factory workshop		744,958		728,661
		1,107,850		1,083,604

NOTE 7. OTHER PAYABLE

Company acquired land use right and engaged contractors to build various factories, outstanding balances due to these third parties were recorded in other payable. Other payable balances as of September 30, 2013 and December 31, 2012 consisted of the following:

	September 30, 2013		December 31, 2012

Land use right	$	-	$	491,926
Factory construction		-		2,386,445
Others		940		916
		940		2,879,128

NOTE 8. LOAN PAYABLE

The Company became indebted to Bank of China in December 2011 for $476,122, payable in December 2012, interest at 8.46% per annum. The loan was repaid in full as of December 31, 2012.

For the nine months ended September 30, 2013 and 2012, the Company recorded interest expense of nil and $24,863 respectively.

NOTE 9. RELATED PARTY TRANSACTIONS

Due to related party: The total amount of due to related parties consisted of the borrowing of the shareholders. The balance was $3,257,620 and $5,301,552 as of September 30, 2013 and December 31, 2012, respectively. The Company makes payments to shareholders from time to time as the loans are due on demand with no stated term.

Imputed interest: The stockholders lent money without interest to the Company, the interest was valued at $256,775 and $267,930 for the nine months ended September 30, 2013 and 2012, respectively. The total interest was reflected in the statement of operations as interest expenses in the nine months ended September 30, 2013 and 2012 with a corresponding amount recorded as a contribution of paid-in capital and Non-controlling interests.

NOTE 10. COMMON STOCK

During the nine months ended September 30, 2013 and 2012, Company recorded imputed interest on outstanding due to related party balance as a contribution of paid-in capital in the amount of $255,439 and $266,065, respectively.

On January 8, 2013, majority shareholder, Chin Yung Kong cancelled 20,000,000 common shares.

The Company’s capitalization is 75,000,000 common shares with a par value of $0.001 per share. 46,450,000 and 66,450,000 common shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively. No preferred shares have been authorized or issued. The Company has not granted any stock options and has not recorded any stock-based compensation since inception.

NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheet are estimated by management to approximate fair value primarily due to the short term nature of the instruments. The Company had no other items that required fair value measurement on a recurring basis.

The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

The following table provides a summary of the fair values of assets and liabilities:

Fair Value Measurements at

Balance as of September 30, 2013

Balance as of December 31, 2012

Level 1

Level 2

Level 3

NOTE 14. NON-CONTROLLING INTEREST

Non-controlling interest represents the 1% interest in the subsidiaries. The net income, unrealized foreign currency translation gain attributable and imputed interest to the non-controlling interest were total $53,419 and $7,742 in the nine months ended September 30, 2013 and 2012, respectively. The Company recorded $144,319 and $90,900 non-controlling interest as of September 30, 2013 and December 31, 2012, respectively.

NOTE 15. COMMITMENT AND CONTINGENCIES

The Company had a long term payable for the acquisition of land use right. Based on the contract agreement, the future minimum rental payments required for the coming years are as follows:

Years ending December 31:
2019		16,544
2020		153,210
2021		153,210
2022		153,210
2023		153,210
Remaining payments		919,260
Total future minimum payments	$	1,548,644

The Company did not have other significant capital commitments or significant guarantees as of September 30, 2013.

NOTE 16. BUSINESS COMBINATION

Per ASC-805-50-45,”Transactions Between Entities Under Common Control”, the presentation of the financial statements pertain to financial statements of all consolidating subsidiaries for the period January1, 2012 through December31, 2012 for fiscal year 2012, January1, 2012 through September 30, 2012 for the nine month of 2012, and for the period January1, 2013 through September 30, 2013 for nine months of 2013.

NOTE 17. RESTATEMENT OF THE PERIOD ENDED SEPTEMBER 30, 2012

The Company has restated its financial statements from amounts previously reported for the nine months ended September 30, 2012.

CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2012

	Sept 30, 2012 ( As reported)		Adjustment				As restated
ASSETS
Cash and cash equivalents		1,477,809		(11,891	)	(a)		1,465,918
Inventories		357,568		28,517		(b)		386,085
Advances to suppliers		79,756		(71,214	)	(c)		8,542
Other receivables, net		89,436		(60,345	)	(c)		29,091
Total Current Assets		2,004,569		(114,933	)			1,889,636
Property and equipment, net		4,764,667		2,215,350		(d)		6,980,017
Construction in progress		5,017,901		(3,016,812	)	(d)		2,001,089
Land use right		4,351,823		1,433,735		(e)		5,785,558
Prepaid lease for land		953,140		(68,479	)	(f)		884,661
Total Assets	$	17,092,100	$	448,861			$	17,540,961

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Other payables		1,241,895		(31,350	)	(g,l)		1,210,545
Short-term loan		473,111		-				473,111
Due to related parties		5,745,837		144,724		(g,m)		5,890,561
Total Current Liabilities		7,460,843		113,374				7,574,217

Long term payable		-		1,548,644		(e)		1,548,644

Total Liabilities		7,460,843		1,662,018				9,122,861

Stockholders' Equity:
Common stock ($0.001 par value; 75,000,000 shares authorized; 66,450,000 shares issued and outstanding at September 30, 2012)		66,450		-				66,450
Additional paid-in capital		7,659,544		466,895		(h)		8,126,439
Statutory reserve		185,268		(185,268	)	(i)		-
Retained earnings		1,531,313		(1,573,284	)	(j)		(41,971	)
Accumulated other comprehensive income		188,682		(1,830	)			186,852
Non-controlling interests		-		80,330		(k)		80,330

Total Stockholders' Equity		9,631,257		(1,213,157	)			8,418,100
				-
Total Liabilities and Stockholders' Equity	$	17,092,100	$	448,861			$	17,540,961

CONSOLIDATED STATEMENTS OF OPERATION AND COMPREHENSIVE IMCOM AS OF SEPTEMBER 30, 2012

	Sept 30, 2012 (As reported)			Adjustments				Restated

NET REVENUES	$	5,466,599		$	20,404		(l)	$	5,487,003

COST OF REVENUES		4,008,185			179,263		(m)		4,187,448

GROSS PROFIT		1,458,414			(158,859	)			1,299,555

OPERATING EXPENSES:
Depreciation and amortization		274,586			112,513		(d)		387,099
General and administrative		260,986			72,130		(n)		333,116

Total Operating Expenses		535,572			184,643				720,215

INCOME FROM OPERATIONS		922,842			(343,502	)			579,340

OTHER INCOME(EXPENSE):
Other income		372,845			-				372,845
Impairment loss		(91,468	)						(91,468	)
Interest expense		(24,863	)		(267,931	)	(h)		(292,794	)

INCOME BEFORE PROVISION FOR INCOME TAX		1,179,356			(611,433	)			567,923

PROVISION FOR INCOME TAXES		-			-				-

NET INCOME (EXPENSE) BEFORE NON-CONTROLLING INTERESTS	$	1,179,356		$	(611,433	)		$	567,923

LESS: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		-			6,531		(k)		6,531

NET INCOME (LOSS)	$	1,179,356		$	(617,964	)		$	561,392

OTHER COMPREHENSIVE INCOME:
Unrealized foreign currency translation gain(loss)		(65,370	)		(93	)			(65,463	)

LESS: OTHER COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS	$	-		$	(654	)	(k)	$	(654	)

COMPREHENSIVE INCOME	$	1,113,986		$	(617,403	)		$	496,583

NET INCOME PER COMMON SHARE:
Basic	$	0.02						$	0.01
Diluted	$	0.02						$	0.01

WEIGHTED AVERAGE COMMON SHARES :
Basic		66,450,000							66,450,000
Diluted		66,450,000							66,450,000

a. Company has determined that bridge construction that was completed and fully paid in 2010, and recorded adjustment to reflect this payment.

b. Company has determined that growing crops inventory as of September 30, 2012 was included in cost of revenue. An adjustment was recorded to reclassify a portion of growing crops inventory from cost of revenue to inventory.

c. Company has determined that a portion of other receivable and Advances to suppliers which should be amortized. An adjustment was recorded to write off these assets.

d. Company has determined that certain construction projects were completed during 2011, but didn’t get reclassified to fixed assets and were not depreciated properly. An adjustment was recorded to appropriately reflect the assets placed into use from the construction in progress account.

e. Company recorded the payment portion of the purchased land use right in 2012. An adjustment was recorded to reflect the unpaid portion.

f. Company has determined the lease commenced on January 1, 2010, but prepaid expenses for the lease did not reflect amortization of the lease payment for fiscal year 2010 and for the period January 1, 2011 – April 30, 2011. An adjustment was recorded to reflect this amortization.

g. Company has reclassified a portion of other payables into due to related party. Company also has recorded omitted expenses that were paid by related parties on behalf of the Company.

h. Company has determined that certain equipments were contributed by existing shareholders. Company also has determined that imputed interest was necessary on outstanding balance due to related parties. Adjustments were recorded to reflect these changes.

i. Company has determined that statutory reserve was not necessary for consolidating financial statement presentation and has reflected this change.

j. This adjustment pertains to the net effect of adjustments that impact profit and loss.

k. Company has determined that non-controlling interest held 1% interest in the subsidiaries, Panjin Hengrun Bilogical Technology Development Co., Ltd. and Liaoning DingXu Ecological Agriculture Development Co., Ltd. and the financial statements have been adjusted to reflect this non-controlling interest.

l. Company has determined that the fund received for sales of mushroom gift set should be reclassified from other payable to revenue.

m. Company has determined certain direct cost was omitted and/or recorded in operating expenses and this error was corrected by recording an adjustment.

n. Company has recorded adjustment related omitted payroll expense and part of amortization of other receivable and Advances to suppliers.

NOTE 18. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date these financial statements were issued.

Overview

We mainly engage in the business of growing and marketing fresh mushroom, dried mushroom and mushroom crops and mushroom seeds through our affiliated variable interest entity LiaoNing DingXu.

We mainly produce and sell two types of products:

(1)

Fresh mushrooms. We grow fresh mushrooms in our greenhouse and sell them to markets. Our fresh mushrooms include oyster mushroom, king oyster mushroom, king trumpet mushroom, and button mushroom. The revenues from the sales of fresh mushrooms constitute approximately 62.8% and 63.0% of our total revenues in the nine months ended on September 30, 2013 and 2012, respectively.

(2)	Mushroom crops and mushroom seeds. The revenues from the sales of mushroom crops and mushroom seeds approximately 10.8% and 37.0% of our total revenues in the nine months ended on September 30, 2013 and 2012, respectively.

(3)	As the manufacture workshop completed in 2012, the Company began to produce the dried mushroom from fourth quarter in 2012. The revenues from the sales of dried mushroom approximately 26.4% of our total revenues in the nine months ended on September 30, 2013.

History

We were incorporated under the name “Hazlo! Technologies, Inc.” on August 19, 2010 in the State of Nevada. Our initial business plan was to modify and translate software and web applications originally written in English into Spanish and to focus on the needs of the Arizona business community to better serve the Spanish-speaking population. We did not generate any revenue from the said. IT services and data translation services.

On December 12, 2011, we entered a Share Exchange Agreement with DingXu BVI Shareholder (Chin Yung Kong) under which we issue 60,000,000 shares of common stock to Chin Yung Kong to acquire 100% of the issued and outstanding shares of DingXu BVI. Upon closing of the Share Exchange transaction, DingXu BVI became the wholly owned subsidiary of Hazlo! Technologies, Inc.

On July 5, 2011, DingXu BVI formed Panjin Hengrun Biological Technology Development Co., Ltd. 盘锦恒润生物技术开发有限公司, a limited liability company organized under the laws of the People’s Republic of China (“Panjin Hengrun”). DingXu BVI owns 99% of the total ownership of Panjing Hengrun.

On November 28, 2011, Panjin Hengrun entered into a set of contractual arrangements with Liaoning Dingxu Ecological Agriculture Development Co., Ltd.辽宁鼎旭生态农业发展有限公司, a limited liability company organized under the laws of the People’s Republic of China and an affiliated entity of Panjin Hengrun through contractual arrangements (“Liaoning Dingxu”). The contractual arrangements are comprised of a series of agreements, including a Consulting Service Agreement and an Operating Agreement, through which Panjin Hengrun has the right to advise, consult, manage and operate Liaoning Dingxu to collect and own all of Liaoning Dingxu’s net profits and net losses. Additionally, under a Proxy Agreement, the shareholders of Liaoning Dingxu have vested their voting control over Liaoning Dingxu to Panjin Hengrun. In order to further reinforce Panjin Hengrun’s rights to control and operate Liaoning Dingxu. Liaoning Dingxu and its shareholders have granted Panjin Hengrun, under an Option Agreement, the exclusive right and option to acquire all of their equity interests in Liaoning Dingxu, or, alternatively, all of the assets of Liaoning Dingxu. Further, the shareholders of Liaoning Dingxu agreed to pledge all of their rights, titles and interests in Liaoning Dingxu under an Equity Pledge Agreement.

Upon entry of these contractual arrangements, Liaoning Dingxu became the Variable Interest Entities (“VIE”) of Panjin Hengrun pursuant to FIN 46(R) and Panjin Hengrun was able to carry out business operations through Liaoning Dingxu.

Set forth below is our organizational chart upon completion of the share exchange transaction:

Liaoning Dingxu Ecological Agriculture Development Co., Ltd.辽宁鼎旭生态农业发展有限公司 (“Liaoning Dingxu”) was formed as a limited liability company organized under the laws of the People’s Republic of China on August 6, 2009. It mainly engages in the business of growing mushrooms and marketing mushroom and related agricultural products.

Since the completion of the share exchange transaction, our business operations are carried out through Panjin Hengrun and its affiliated operating entity Liaoning Dingxu. On December 12, 2011, we ceased the business of development stage IT service and data translation services and started to engage in the business of growing mushrooms and marketing mushroom and related agricultural products through Liaoning Dingxu.

Financial condition as of September 30, 2013 and December 31, 2012

The following table presents an overview of assets, liabilities and shareholders’ equity as of September 30, 2013 and December 31, 2012.

	September 30,	December 31,		Increase
	2013	2012		(decrease)

Current assets
Cash	574,404		21,245		553,159

Other Receivables	9,987		8,662		1,325

Advance to suppliers	137,590		148,895		(11,305)

Inventory	189,629		139,915		49,714

Other current assets	89,556		85,914		3,642

Total current assets	1,001,166		404,631		596,535

Non-current assets
Property, plant and equipment - net of accumulated depreciation	10,853,295		11,090,729		(237,434)

Construction in progress	1,107,850		1,083,604		24,246

Land use rights	5,731,233		5,768,262		(37,029)

Long term prepaid lease	858,937		879,470		(20,533)

Total non-current assets	18,551,315		18,822,065		(270,750)

Total assets	19,552,481		19,226,696		325,785

Current liabilities
Account payable	3,812		3,729		83

Accrued expenses	17,703		18,519		(816)

Other payables	940		2,879,287		(2,878,347)

Due to Related Parties	3,257,620		5,301,552		(2,043,932)

Total current liabilities	3,280,075		8,203,087		(4,923,012)

Long term payable	1,548,644		1,548,644		-

Total liabilities	4,828,719		9,751,731		(4,923,012)

Shareholders’ equity
Common stock	46,450		66,450		(20,000)

Paid-in capital	8,490,565		8,215,126		275,439

Retained earnings	5,364,775		806,192		4,558,583

Accumulated comprehensive income - foreign currency	677,653		296,297		381,356

Non-controlling interests	144,319		90,900		53,419

Total shareholders’ equity of the Company	14,723,762		9,474,965		5,248,797

Total liabilities and shareholders’ equity	19,552,481		19,226,696		325,785

Liquidity and Capital Resources:

To date, our operations have been funded by contributions to “due to related parties” and the net cash provided by our fast developing operations. As a result, at September 30, 2013 we had $1,001,166 current assets, and $3,280,075 current liabilities mainly consisted of the $3,257,620 due to related party and others. We had working capital deficit of $2,278,909 as of September 30, 2013, which contains liquidity risk for the coming period. Although we believe management will continue to fund the Company on an as needed basis, we do not have a written agreement requiring such funding. For the due to related party, the shareholders promise that they would not demand repayment from the Company with in next fiscal year.

We believe that our operation would have fast development in future which would provide sufficient net cash to fund our business. During the nine months ended September 30, 2013, we got a net profit $4,606,714 and our operating activities provided $2,211,883 in net cash. Over the long term, our expectation is to see a trend of growing sales for our mushroom series products, including fresh mushrooms, dried mushroom and mushroom crops and seeds, resulting from the improving of general agriculture industry, improving of the planting skills and the quality of our products, and the continuing encouragement from local government.

Assets:

1. Inventory

The balance at the end of this period consisted of raw materials, growing crops and finished goods.

Inventories at September 30, 2013 and December 31, 2012 consisted of the following:

	September 30, 2013		December 31, 2012

Raw materials and supplies	$	70,314	$	16,781
Growing crops		100,502		123,071
Finished goods		18,813		63
		189,629		139,915

2. Property, plant and equipment and Construction in progress

Our property, plant and equipment are stated at cost less accumulated depreciation and impairment. Depreciation on property, plant and equipment is calculated on the straight-line method after taking into account their respective estimated residual values over the estimated useful lives of the assets as follows:

Building	20 years
Plant equipment	5-10 years
Office equipment	3-5 years
Vehicles	4 years

As consistent with the policies, maintenance and repair costs are expensed as incurred, whereas significant renewals and betterments are capitalized.

Property, Plant and Equipment consists of the following:

	September 30, 2013		December 31, 2012
	USD		USD
Building	a	$ 11,383,318		11,134,288
Plant equipment	b	536,538		524,805
Vehicles	c	34,119		33,372
Office equipment	d	75,227		73,580
Less: Accumulated depreciation	e	1,175,907		675,316
Property, plant and equipment, net		10,853,295		11,090,729
Construction in progress	f	1,107,850		1,083,604
Total property, plant & equipment		11,961,145		12,174,333

a. The building mainly represented the greenhouses, manufacturing workshops, warehouse, office building and supporting facilities, most of which were transferred from the construction in progress (CIP).

b. The plant equipment represented the production equipment purchased from third parties.

c. The vehicles were the truck for transporting raw materials or finish goods.

d. The office equipment represented for office computers, printers, desks and other office appliances.

e. For the nine months ended September 30, 2013 and 2012, the Company recorded depreciation expense of $500,591 and $405,953, respectively.

f. The detailed information of the construction projects in progress which was not yet transfer to fixed assets is as below:

	September 30, 2013		December31, 2012
	USD		USD
Factory workshop		744,958		728,661
Greenhouse and Planting structures		362,883		354,943
Total amount of Construction In Progress		1,107,850		1,083,604

3. Land use right

The Company states land use rights at cost less accumulated amortization. The land use right was used to build up greenhouse and planting structures, manufacturing workshop and other buildings. As of September 30, 2013 and December 31, 2012, the net values of land use rights are $5,731,233 and $5,768,262, respectively.

The land use rights are amortized using the straight line method during the contract period. For the nine months ended September 30, 2013 and 2012, amortization expense amounted to $169,463 and $166,711, respectively.

4. Long-term prepaid lease

The Company records lease payments at cost less accumulated amortization and amount that to be amortized within one year. The amount to be amortized within one year is recorded as current portion of prepaid leases. The Company entered into long term agreements with local government to rent land. The rental payments of $1,030,900 for the entire contract period are prepaid in 2011. The rental payments are recorded as operating lease expenses using the straight line method during the contract period of 20 years.

Lease expense of $41,734 and $40,463 were recorded for the nine months ended September 30, 2013 and 2012.

Liabilities:

5. Short-term loan

The Company became indebted to Bank of China in December 2011 for $476,122, payable in December 2012, interest at 8.46% per annum. The loan was repaid in full as of December 31, 2012.

For the nine months ended September 30, 2013 and 2012, the Company recorded interest expense of nil and $24,863, respectively.

6. Other payables

The balance at the end of this period is $940. Outstanding balance as of December 31, 2012 mainly consisted of the $2,386,445 factory seed cultivation workshop construction and $491,926 land use right, and others. The Company made payments to the seller of the land use right and to contractor for factory construction during the nine months ended on September 30, 2013 for the outstanding balances, which resulted in the decrease of other payables balance.

7. Due to related parties

The total amount of due to related parties consisted of the borrowing of the shareholders. The balance was $3,257,620 and $5,301,552 as of September 30, 2013 and December 31, 2012, respectively.

The stockholders lent money without interest to the Company, the interest was valued at $256,775 and $267,930 for the nine months ended September 30, 2013 and 2012, respectively. The total interest was reflected in the statement of operations as interest expenses in the nine months ended September 30, 2013 and 2012 with a corresponding amount recorded as a contribution of paid-in capital and Non-controlling interests.

8. Long term payable

The Company had a long term payable for the acquisition of land use right. Based on the contract agreement, the future minimum rental payments required for the coming years are as follows:

Years ending December 31:
2019		16,544
2020		153,210
2021		153,210
2022		153,210
2023		153,210
Remaining payments		919,260
Total future minimum payments	$	1,548,644

Shareholders’ equity

9. Additional paid-in capital

Additional paid-in capital increased from the imputed interest was necessary on outstanding balance due to related parties and the cancelled shares reclassified to additional paid-in capital.

10. Retain earnings

The retain earnings increased from net profit in the nine months as of September 30, 2013.

Results of Operations for the nine months ended September 30, 2013 and 2012

The following table presents an overview of our results of operation for the nine months ended September 30, 2013 and 2012.

	Nine months ended			Nine months ended			Increase
	September 30,2013			September 30,2012			(decrease)
					(Restated)
Total revenue		9,582,529			5,487,003			4,095,526
Total cost of revenue		(3,752,063	)		(4,187,448	)		435,385
Gross profit		5,830,466			1,299,555			4,530,911
General and administrative		(436,600	)		(333,116	)		(103,484	)
Depreciation and amortization		(529,479	)		(387,099	)		(142,380	)
Income from operations		4,864,387			579,340			4,285,047
Other income		-			372,845			(372,845	)
Impairment loss		-			(91,468	)		91,468
Interest expense		(257,573	)		(292,794	)		35,221
Income before income taxes		4,606,814			567,923			4,038,891
Income taxes		-			-			-
Net income		4,606,814			567,923			4,038,891

1. Revenue

The following table sets forth the breakdown of our revenue for the nine months ended September 30, 2013 and 2012, respectively:

	2013					2012
	USD		%			USD		%
Fresh mushrooms sales		6,018,925		62.81	%		3,465,992		63.17	%
Mushroom crops and seeds sales		1,034,974		10.80	%		2,021,011		36.83	%
Dried mushroom		2,528,630		26.39	%		-		-
Total revenue		9,582,529		100	%		5,487,003		100	%

We derived our revenues predominantly from sales of our fresh mushrooms, mushroom crops and seeds and dried mushroom. For the nine months ended September 30, 2013 and 2012, revenues from sales of our fresh mushrooms sales were $6,018,925 and $3,465,992 respectively representing an increase of $2,552,933. Revenues from sales of our mushroom crops and seeds were $1,034,974 and $2,021,011 for the nine months ended September 30, 2013 and 2012, respectively, which indicated $986,037 decrease. Revenues from sales of our dried mushroom were 2,528,630 for the nine months ended September 30, 2013, which also resulted in a sales significant increase.

The increase of the fresh mushroom and dried mushroom was primarily due to the increase of the sales volume and price. To be specific, the increase in our revenue was attributable to the following reasons:

a.	As most of the greenhouse and planting structures under construction are completed in second half of 2012, productions in the nine months of 2013 was higher than that in the same period of 2012.

b.	The company got the Organic products identification by the authorized government institution in the fourth quarter of 2012, the fresh mushroom price increased significantly, which resulted in a sales increase.

c.	As the manufacture workshop completed in 2012, the Company began to produce the dried mushroom in the fourth quarter of 2012. Dried mushroom production was further expanded during the nine months of 2013.

We expect to see a trend of growing sales for our mushroom series products, including fresh mushroom dried mushroom, resulting from the growing market share and demand, improvement of the general agriculture industry, improvement of our planting technique and our product quality, and the continuing encouragement from local government.

The decrease of the mushroom crops and seeds sales was primarily due to the business model changed. The business model was cooperation with local farmers and farming organizations. The company sold mushroom crops and seeds to local farmers and farming organization, then bought back the grown fresh mushroom from these parties for ultimate distribution in the market. As most of the greenhouse and planting structures under construction were completed, the company increased in house fresh mushroom production, most of the mushroom crops and seeds were used to produce fresh mushroom instead of selling as it is, which result in decrease of the mushroom crops and seeds sales.

2. Cost of revenue

The following table presents a breakdown of our cost of revenue of fresh mushrooms, mushroom crops and seeds and dried mushrooms for the nine months ended September 30, 2013 and 2012.

	2013		2012
	USD		USD
Cost of fresh mushrooms sales		2,929,068		2,766,136

Cost of mushroom crops and seeds sales		390,804		1,421,312

Cost of dried mushrooms sales		432,191		-

Total		3,752,063		4,187,448

Cost of fresh mushrooms sales: Our cost of fresh mushrooms sales consists primarily of costs associated with purchased materials, growing cost and purchased fresh mushroom from farmers or farming organizations. Cost of fresh mushrooms sales are allocated to each kind of mushroom using the specific identification method. Costs are allocated to specific units within a product based on the ratio of the sales quantities of the specific units to the total sellable quantities of the product.

Cost of mushroom crops and seeds sales: Our cost of mushroom crops and seeds sales mainly represented the costs of purchased and cultivate seeds or crops. We used our workshop to cultivate mushroom seeds or crops and sold them to local farmers or farming organizations. We also purchased some good quality mushroom seeds from third party and sold them to our customers after our selection. The costs are allocated to specific units within a product based on the ratio of the sales quantities of units to the total saleable quantities of the product.

Cost of dried mushrooms sales: Our cost of dried mushrooms sales consists primarily of costs associated with fresh mushroom and manufacture expense. Cost of dried mushrooms sales are allocated to each kind of mushroom using the specific identification method. Costs are allocated to specific units within a product based on the ratio of the sales quantities of the specific units to the total sellable quantities of the product.

3. Gross profit

The following table presents the gross profit of our businesses for the nine months ended September 30, 2013 and 2012:

	2013				2012
		Gross Profit	Gross Margin		Gross Profit	Gross Margin
Production Category		USD	%		USD	%

Fresh mushrooms sales		3,089,857	51.34	%	699,855	20.19	%

Mushroom crops and seeds sales		644,170	62.24	%	599,670	29.67	%

Dried Mushroom sales		2,096,439	82.91	%	-	-

Total gross profit		5,830,466	60.84	%	1,299,555	23.68	%

Gross profit from our mushroom growing business increased by $ 4,530,911 for the nine months ended September 30, 2013 compared to the same period of 2012. The increase was a primary result from cumulative effect of our business development and sales volume increase. The gross margin of our fresh mushrooms and mushroom crops and seeds increased because that we began to produce fresh mushroom and mushroom seeds instead of purchasing from third parties as the most of the green house and the mushroom seed cultivation workshop completed in the fourth quarter of 2012, which reduced our cost significantly and improved our gross margin. In addition, the dried mushrooms, the purpose of which is usually used as gift, have large added value and high gross margin.

4. Depreciation and amortization

For the nine months ended September 30, 2013, our depreciation and amortization pertained to operating expenses were $529,479, representing an increase of $142,380, as compared to that for the period of 2012. The increase was primarily a result of increased in fixed assets during second half of the year 2012.

5. Other income

Other income is used to record the company’s non operating income, such as government grant. For the nine months ended September 30, 2012, the other income included the USD $374,164 from the government grant to encourage developing local agriculture. The Company did not receive any government grant for the nine months ended September 30, 2013.

6. Income taxes

The Company does not accrue United States income tax since it has no operating income in the United States. The Operating subsidiary is organized and located in the PRC and do not conduct any business in the United States.

In accordance with the relevant tax laws in the PRC, as an agriculture growing enterprise, the Operating subsidiary is exempted from corporate income tax from 2010 to 2012 and sequentially exempted from enterprise income tax from 2013 to 2015. Accordingly, the Company statutory rate was 0% and 0% for the nine months ended September 30, 2013 and 2012, respectively.

Cash flow for the nine months ended September 30, 2013 and 2012

The following table presents selected cash flow data from our cash flow statements for the nine months ended September 30, 2013 and 2012, respectively.

	2013		2012
			(Restated)
Net cash provided by operating activities	$	2,211,883	$	631,782

Net cash used in investing activities		-		(1,390,362)

Net cash provided by (used in) financing activities		(2,043,932)		2,258,098

Effect of exchange rate changes on cash and cash equivalents		385,208		(65,463)

Net increase in cash and cash equivalents		553,159		1,434,055

Cash and cash equivalents, beginning of period		21,245		31,863

Cash and cash equivalents, end of period	$	574,404	$	1,465,918

Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2013 was $2,211,883 which was primarily due to (i) an increase of the net income $4,606,814 and (ii) a total increase of $669,473 of the depreciation and amortization of fixed assets, land use right and (iii)an increase of the imputed interest $256,775 and (iv) a total decrease of $3,321,179 of the changes in assets and liabilities.

Net cash provided by operating activities for the nine months ended September 30, 2012 was $631,782, which was primarily due to (i) a increase of the net income $567,923 and (ii) a total increase of $558,854 of the depreciation and amortization of fixed assets, land use right and (iii)an increase of the imputed interest $267,930 a (iv) a total decrease of $762,925 of the changes in assets and liabilities.

Investing Activities

No investing activity took place for the nine months ended September 30, 2013.

Net cash used in investing activities was $1,390,362 for the nine months ended September 30, 2012, which was primarily attributable to (i) an investment of $26,118 for the fixed assets and (ii) an investment of $55,381 for the construction in progress to build greenhouse and (iii)an investment of $1,217,162 for the acquisition of land use right and (iv)an investment of $91,701 for the software.

Financing activities

Net cash used in financing activities was $2,043,932 for the nine months ended September 30, 2013, which was mainly attributable to the paid back to related party.

Net cash provided by financing activities was $2,258,098 for the nine months ended September 30, 2012, which was mainly attributable to (i) a total $2,261,109 of the current account from a related party and (ii) a total payment of $3,011 to short-term bank loan.

Significant Accounting Policies

USE OF ESTIMATES

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents.

INVENTORIES

Inventories are stated at the lower of cost or market value. Cost is determined using moving weighted average method. Inventories consist of raw materials, finished goods and growing crops. Cost of finished goods comprises direct material, direct production cost based on normal operating capacity.

REVENUE RECOGNITION

The Company’s revenue consists of the invoiced value of goods, net of value-added tax (“VAT”).

FOREIGN CURRENCY TRANSLATION

The functional currency of the Company is the RMB and the RMB is not freely convertible into foreign currencies. The Company maintains its financial statements in the functional currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet date. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

For financial reporting purposes, the financial statements of the Company, which are prepared using the functional currency, have been translated into United States dollars. Assets and liabilities translated at exchange rates at the balance sheet date, revenue and expenses are translated at the average exchange rates for the period, and members' equity is translated at historical exchange rates. Translation adjustments are included in accumulated other comprehensive income, a component of members’ equity.

ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income represents the change in equity of the Company during the periods presented from foreign currency translation adjustments.

TAXATION

The Company does not accrue United States income tax since it has no operating income in the United States. The Company is organized and located in the PRC and do not conduct any business in the United States.

Enterprise income tax

Value added tax

In accordance with the relevant tax laws in the PRC, as an agriculture growing enterprise, the Company is exempted from VAT from 2010 to 2012 and sequentially exempted from VAT from 2013 to 2015.

PROPERTY, PLANT and EQUIPMENT

Building	20 years
Plant equipment	5-10 years
Office equipment	3-5 years
Vehicles	4 years

Maintenance and repair costs are expensed as incurred, whereas significant renewals and betterments are capitalized.

LAND USE RIGHTS

The Company states land use rights at cost less accumulated amortization. The land use rights are amortized on straight line method during the contract period.

LONG TERM PREPAID LEASE

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act.

Based upon the required evaluation, our CEO and CFO concluded that as of September 30, 2013, the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Company has identified the following weaknesses in internal control:

●	The Company does not have an independent board of directors or audit committee or adequate segregation of duties;

●	All of our financial reporting is carried out by our financial consultant.

●	We do not have an independent body to oversee our internal controls over financial reporting and lack segregation of duties due to the limited nature and resources of the Company.

●	Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on our assessment, we believe that, as of September 30, 2013, the Company’s internal control over financial reporting was not effective due to the following weakness:

●	The Company does not have an independent board of directors or audit committee or adequate segregation of duties;

●	All of our financial reporting is carried out by our financial consultant.

●	We do not have an independent body to oversee our internal controls over financial reporting and lack segregation of duties due to the limited nature and resources of the Company.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Controls

We have also evaluated our internal controls for financial reporting, and there has been no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Currently we are not aware of any litigation pending or threatened by or against the Company.

Item 1A. Risk Factors

Not required for Smaller Reporting Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On August 29, 2011, Chin Yung Kong acquired 4,700,000 shares of common stock from Michael Klinicki and Alejandra De La Torre and subsequently Chin Yung Kung took control of the Company. The sales of 4,700,000 shares of common stock were pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933.

On December 12, 2011, we entered a Share Exchange Agreement with DingXu BVI Shareholder (Chin Yung Kong) under which we issue 60,000,000 shares of common stock to Chin Yung Kong to acquire 100% of the issued and outstanding shares of DingXu BVI. The sales of 60,000,000 shares of common stock were pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities

None

Item 4. Submissions of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits

Exhibit No.		Description
3.1		Articles of Incorporation*
3.2		Bylaws*
10.1		Share Exchange Agreement**
10.2		Consulting Service Agreement (Panjin Hengrun and Liaoning Dingxu)**
10.3		Operating Agreement (Panjin Hengrun and Liaoning Dingxu)**
10.4		Equity Pledge Agreement (Panjin Hengrun and Liaoning Dingxu)**
10.5		Option Agreement (Panjin Hengrun and Liaoning Dingxu)**
10.6		Proxy Agreement (Panjin Hengrun and Liaoning Dingxu)**
31.1 31.2 32.1 32.2		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (6) Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (6) Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (6) Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (6)



101***		The following materials from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated Financial Statements.
		101.INS**** XBRL Instance
		101.SCH*** XBRL Taxonomy Extension Schema
		101.CAL*** XBRL Taxonomy Extension Calculation
		101.DEF*** XBRL Taxonomy Extension Definition
		101.LAB*** XBRL Taxonomy Extension Labels
		101.PRE*** XBRL Taxonomy Extension Presentation

* Incorporated by reference to our Registration Statement on Form S-1, filed on November 9, 2010

**Incorporated by reference to the Form 8-K Current Report filed on December 13, 2011.

*** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	China Liaoning Dingxu Ecological Agriculture Development, Inc.

Date: November 13, 2013	By:	/ S / Chin Yung Kong
		Chin Yung Kong
		President
		Chief Executive Officer,
		Chief Financial Officer

China Liaoning Dingxu Ecological Agriculture Development, Inc. - FORM 10-Q - November 13, 2013

Attached files

China Liaoning Dingxu Ecological Agriculture Development, Inc. Reports