Sino Green Land Corp. 10-K

ITEM 9A . CONTROLS AND PROCEDURES Disclosure Controls and Procedures We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. As required by Rule 13a-15 under the Exchange Act, our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2010. Based on that evaluation, our chief executive officer and chief financial officer concluded that as of December 31, 2010, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were effective to satisfy the objectives for which they are intended, as reflected in our financial statements for the years ended December 31, 2010 and 2009 which are included in this annual report, and for each of the quarters in the year ended December 31, 2010. Internal Controls over Financial Reporting Management’s Annual 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 Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting are effective as of December 31, 2010. On August 23, 2010, we concluded, after a review of the pertinent facts, that the previously issued financial statements originally contained in our annual report on Form 10-K for the years ended December 31, 2009 should not be relied upon due to the following: · We improperly allocated, for financial statement purposes, the proceeds received in connection with the April 2008 debt financing transaction and the August and December 2009 preferred stock financing transactions (collectively, “the financings”). The restated financial statements include the effects of properly allocating the financing proceeds between (1) the debt or preferred stock, as applicable, (2) any derivative liabilities associated with warrants for the purchase of common stock, and (3) any beneficial conversion features (“BCF”), as a component of additional paid-in capital, which allow the debt and preferred stockholders to convert their investment into the Company’s common stock on favorable terms. · Due to the improper allocation of proceeds on the April 2008 debt financing which resulted in an incorrect basis for the debt, we improperly reported the loss on debt extinguishment upon its settlement in August 2009. The debt settlement is now reported in the 2009 income statement. · Certain warrants containing variable exercise terms associated with the financings were reported as a component of paid-in capital instead of properly reflecting them as a derivative liability at fair value, with changes in fair value reported in the income statement each period. The restated financial statements include the effects of reporting the derivative liabilities and their associated changes in value correctly. 39 · A BCF was inappropriately recorded as a debt discount on the April 2008 financing in addition to being amortized over the subsequent 12 months with a charge to expense. Furthermore, separate BCFs associated with the December 2009 preferred stock financings were erroneously omitted due to a misallocation of proceeds for financial statement purposes. The restated financial statements include the effects of allocating financing proceeds to the applicable BCFs by recording a preferred stock discount with a credit to additional paid-in capital. The discounts were then charged immediately to retained earnings as deemed preferred stock dividends pursuant to the terms of the agreement which provide immediate conversion rights. · Earnings per share has been restated to include the effects of the restated financial statements We intend to take such steps as are necessary, including the engagement of accounting personnel with experience in US GAAP, in order that its financial controls and disclosure controls are effective. Changes in Internal Controls over Financial Reporting. During the fiscal year ended December 31, 2010, there were no changes in our internal control over financial reporting identified in connection with the evaluation performed during the fiscal year covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, subsequent to year end, we determined that we need to improve our internal controls relating to the issuance of equity and financial instruments to insure that such transactions are properly accounted for. Attestation Report This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm. ITEM 9B. Other Information None. PART III Item 10. Directors and Executive Officers Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships And Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services Information required under Part III (Items 10, 11, 12, 13 and 14) is incorporated by reference to our definitive proxy statement or information statement which will be filed within 120 days of our fiscal year end. 40 PART IV Item 15. Exhibits, Financial Statement Schedules (c) Exhibits 2.1 (1) Share Exchange Agreement, dated January 15, 2009, among the registrant, Organic Region Group Limited and its subsidiaries and stockholders. 3.1(2) Articles of Incorporation of the registrant, as amended. 3.2 (1) Bylaws of the registrant adopted on March 11, 2008. 3.3 (5) Certificate of Designation of the Series A Convertible Preferred Stock. 4.1 (1) Piggyback Registration Rights Agreement, dated January 15, 2009, by and among the registrant, Michael Friess and Sanford Schwartz. 4.2 (1) Redemption Agreement, dated January 15, 2009, by and among the registrant, Michael Friess and Sanford Schwartz. 4.3 (1) Form of Convertible Promissory Note issued by the registrant, dated January 15, 2009. 4.4 (1) Form of Convertible Promissory Note issued by Organic Region Group Limited, dated April 23, 2008. 4.5 (1) Form of Warrant issued by Organic Region Group Limited, dated April 23, 2008. 4.6 (4) Form of Warrant issued by Sino Green Land Corporation, dated August 3, 2009. 4.7 (5) Form of Series A Warrant issued by Sino Green Land Corporation, dated August 7, 2009. 4.8 (5) Form of Series B Warrant issued by Sino Green Land Corporation, dated August 7, 2009. 10.1 (1) Indemnification Agreement, dated January 15, 2009, by Michael Friess and Sanford Schwartz in favor of the registrant and Organic Region Group Limited and its subsidiaries and stockholders. 10.2 (1) Form of Securities Purchase Agreement, dated April 23, 2008. 10.3 (1) Guangxi Tangerine Land Lease Cooperation Development Contract, dated October 12, 2005, between Guangzhou Organic Region Agriculture Ltd. and Guangxi Wanshanhong Fruits Co., Ltd. (English Translation). 10.4(1) Guangzhou City Panyu District Premises Lease Contract, dated December 12, 2007, between Guangzhou Panyu District Guang Lv Industrial Co. Ltd. and Guangzhou Organic Region Agriculture Ltd. (English Translation). 10.5(1) Supplementary Agreement to Premises Lease Agreement between Guangzhou Panyu District Guang Lv Industrial Co. Ltd. and Guangzhou Organic Region Agriculture Ltd. (English Translation). 10.6 (1) Transfer Agreement of Patent Application Right, January 10, 2009, by and among Guangzhou Organic Region Agriculture Ltd., Mr. XiongLuo and Mr. Anson Yiu Ming Fong (English Translation). 10.7(3) Director Agreement, between Sino Green Land Corporation and Jeremy Goodwin, dated February 2, 2009. 10.8(4) Form of Common Stock and Warrant Purchase Agreement, dated as of August 3, 2009, between Sino Green Land Corporation and the investors. 10.9(4) Form of Common Stock and Warrant Purchase Agreement, dated as of August 3, 2009, between Sino Green Land Corporation and the investors. 10.10(5) Form of Common Stock and Warrant Purchase Agreement, dated as of August 7, 2009, between Sino Green Land Corporation and the investors. 10.11(6) Form of Warrant Purchase Agreement, dated November 30, 2010, by and between the Company and the warrant holder 10.12(7) Employment agreement dated October 8, 2010 between Xiong Luo and the Company. 10.13(7) Employment agreement dated November 5, 2010 between Huasong Sheen Shen and the Company 10.14(7) Employment agreement dated October 1, 2010 between Yan Pan and the Company 10.15(8) Common stock purchase agreement dated December 12, 2010 between the Company and Nemeth Chang Discretionary Trust 10.16(9) Agreement among the Company and certain contractors, dated January 31,2011 10.17(10) Two forms of common stock purchase agreements dated May 27, 2010 between the Company and certain investors 10.18(11) Director agreement dated July 1, 2010 between the Company and Chan Kin Hang Danvil 10.19(11) Director agreement dated July 1, 2010 between the Company and Karen Tse. 21 Subsidiaries of the registrant.* 31.1 Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 * 31.2 Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 * 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * *Included herewith (1) Incorporated by reference to the Company’s Current Report on Form 8-K filed on January 21, 2009. (2) Incorporated by reference to the Company's Registration Statement on Form 8-K/A filed on April 21, 2009. (3) Incorporated by reference to the Company's Current Report on Form 8-K filed on February 5, 2009. (4) Incorporated by reference to the Company's Current Report on Form 8-K/A filed on August 7, 2009. (5) Incorporated by reference to the Company's Current Report on Form 8-K filed on August 13, 2009. (6) Incorporated by reference to the Company’s Current Report on Form 8-K filed on December 10, 2010 (7) Incorporated by reference to the Company’s Current Report on Form 8-K filed on November 12, 2010 (8) Incorporated by reference to the Company’s Current Report on Form 8-K filed on December 28, 2010 (9) Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 4, 2010 (10) Incorporated by reference to the Company’s Current Report on Form 8-K filed on May 28, 2010 (11) Incorporated by reference to Amendment No. 3 to the Company’s registration statement on Form S-1, File No. 333-164006, which was filed on August 4, 2010 41 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: March 31, 2011 SINO GREEN LAND CORPORATION /s/ Xiong Luo Xiong Luo Chief Executive Officer and President Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. The person whose signature appears below constitutes and appoints Xiong Luo his true and lawful attorney-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this registration statement and to sign a registration statement pursuant to Section 462(b) of the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Signature Title Date /s/ Xiong Luo Chief Executive Officer and President March 31, 2011 Xiong Luo (Principal Executive Officer) /s/ Huasong Sheena Shen Chief Financial Officer March 31, 2011 Huasong Sheena Shen (Principal Financial and Accounting Officer) Director March 31, 2011 Jeremy Goodwin /s/ Danvil Kin Hang Chan Director March 31, 2011 Danvil Kin Hang Chan /s/ Karen Tse Director March 31, 2011 Karen Tse SINO GREEN LAND CORPORATION AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Accounting Firm F-2 Consolidated Balance Sheets as at December 31, 2010 and December 31, 2009 (Restated) F-3 Consolidated Statements of Income for the years ended as at December 31, 2010 and 2009 (Restated) F-4 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2010 and 2009 (Restated) F-5 Consolidated Statements of Cash Flows for the years ended as at December 31, 2010 and 2009 (Restated) F-6 Notes to Consolidated Financial Statements F-7 F-1 Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders of Sino Green Land Corporation and Subsidiaries We have audited the accompanying consolidated balance sheets of Sino Green Land Corporation and Subsidiaries as of December 31, 2010 and 2009 (restated), and the related consolidated statements of income, stockholders' equity, and cash flows for the two years period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sino Green Land Corporation and Subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for the two years period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. As discussed in Note 13, the 2009 consolidated financial statements have been restated to correct misstatements. /s/ Kabani & Company, Inc. Certified Public Accountants Los Angeles, California March 31, 2011 F-2 SINO GREEN LAND CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2010 AND 2009 (RESTATED) 2010 2009 (Restated) ASSETS Current Assets Cash and cash equivalents $ 925,329 $ 1,987,616 Accounts receivable, net 261,403 171,143 Due from related parties - 1,006 Inventories 8,684 9,934 Advances-current portion - 256,225 Other current assets 114,026 343,169 Total Current Assets 1,309,442 2,769,093 Property and Equipment, net 6,238,784 547,727 Intangible Assets, net 9,515,732 - Deposit 487,916 365,647 Advances 4, 816,467 4,355,829 Long-term Prepayments 21,955,769 18,961,869 Total Assets $ 44,324,110 $ 27,000,165 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses $ 2,719,724 $ 1,186,923 Advances from customers 15,125 48,690 Due to related parties 120,840 3,364 Shares to be issued as stock compensation 384,817 - Shares to be issued 70,000 - Derivative liability 908,142 5,206,567 Total Current Liabilities 4,218,648 6,445,544 Stockholders' Equity Preferred stock, par value $0.001 per shares, 20,000,000 shares authorized, of which 2,000,000 are designated as series A preferred stock, with 1,409,858 and 1,650,000 shares issued and outstanding December 31, 2010 and 2009, respectively 1,410 1,650 Common stock, $0.001 par value, 780,000,000 shares authorized, 157,793,840 and 104,943,337 issued and outstanding as of December 31, 2010 and 2009, respectively 157,794 104,944 Additional Paid-in capital 19,438,509 7,735,406 Other comprehensive income 1,883,058 762,504 Retained earnings 18,624,692 11,950,117 Total stockholders' equity 40,105,462 20,544,621 Total Liabilities and Stockholders' Equity $ 44,324,110 $ 27,000,165 The accompanying notes are integral part of these consolidated financial statements. F-3 SINO GREEN LAND CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (RESTATED) 2010 2009 (Restated) Sales $ 140,059,507 $ 108,045,437 Cost of goods sold 124,965,427 96,308,289 Gross profit 15,094,080 11,737,148 Operating expenses Selling expenses 3,407,559 2,581,330 General and administrative expenses 3,132,049 1,603,189 Salary and wages 1,003,979 613,227 Stock compensation 1,288,021 - Total operating expenses 8,831,608 4,797,746 Operating income 6,262,472 6,939,402 Other income(expense) Interest expenses, net 2,538 (63,882 ) Loss on debt extinguishment - (139,289 ) Change in derivative liability (770,305 ) (3,866,300 ) Others, net (10,740 ) 154,404 Total other expense 762,103 (3,915,067 ) Net income 7,024,575 3,024,334 Deemed preferred stock dividend (350,000 ) (650,000 ) Net income applicable to common stockholders 6,674,575 2,374,334 Comprehensive income: Net income 7,024,575 3,024,334 Other comprehensive income (loss): Foreign currency translation gain (loss) 1,120,554 (313,469 ) Comprehensive income $ 8,145,129 $ 2,710,865 Net income per share Basic $ 0.05 $ 0.03 Diluted $ 0.05 $ 0.03 Weighted average number of shares outstanding Basic 128,757,864 89,772,302 Diluted 153,174,651 117,579,469 The accompanying notes are integral part of these consolidated financial statements. F-4 SINO GREEN LAND CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (RESTATED) Preferred Stock Common Stock Shares Amount Shares Amount Additional Paid In Capital Other Comprehensive Income Retained Earnings Total Stockholders’ Equity Balance as of December 31, 2008 (Restated) – $ – 81,648,554 $ 81,649 $ 4,919,351 $ 1,075,973 $ 9,575,783 15,652,756 Recapitalization due to reverse acquisition – – 5,832,039 5,832 (5,832 ) – – – Issuance of preferred stock 1,650,000 1,650 – – 553,350 – – 555,000 Issuance of common stock – – 17,462,744 17,463 1,618,537 – – 1,636,000 Foreign currency translation gain – – – – – (313,469 ) – (313,469 ) Deemed dividend for preferred stock – – 650,000 – (650,000 ) – Net income for the year ended December 31, 2009 – – – – – – 3,024,334 3,024,334 Balance as of December 31, 2009 (Restated) 1,650,000 1,650 104,943,338 104,944 7,735,406 762,504 11,950,117 20,554,621 Issuance of preferred stock 350,000 350 - - 349,650 350,000 Issuance of common stock - - 41,676,500 41,677 6,932,936 – – 6,974,612 Warrant repurchased - - - - (363,515) - - (363,515) Stock compensation - - 4,470,000 4,470 912,026 916,496 Preferred stock conversion to common (590,142) (590) 6,704,003 6,704 (6,113) - - - Derivative liability relass - - - - 3,528,120 - - 3,528,120 Foreign currency translation gain – – – – – 1,120,554 - 1,120,554 Deemed dividend for preferred stock – – 350,000 – (350,000 ) – Net income for the year ended December 31, 2009 – – – – – – 7,024,575 7,024,575 Balance as of December 31, 2010 1,409,858 $ 1,410 157,793,841 $ 157,794 $ 19,438,509 $ 1,883,058 $ 18,642,692 $ 40,105,462 The accompanying notes are integral part of these consolidated financial statements. F-5 SINO GREEN LAND CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (RESTATED) 2010 2009 (Restated) Cash flows from operating activities Net income $ 7,024,575 $ 3,024,334 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation 123,572 79,178 Amortization 1,076,171 627,304 Loss on debt extinguishment - 139,289 Gain from debt forgiveness - (162,949 ) Change in derivative liability (770,305 ) 3,866,300 Debt discount (part of interest expense) - (32,948 ) Shares issued as stock compensation 1,288,021 - Decrease / (Increase) in current assets : Accounts receivable (82,346 ) 29,140 Other receivable 651,384 - Inventories 1,549 6,957 Other current assets 133,762 (285,095 ) Deposit (122,269 ) (365,450 ) Advances (5,194,509 ) (4,113,619 ) Long-term prepaid expense (3,330,672 ) (3,363,950 ) Increase / (Decrease) in current liabilities: Accounts payable & accrued expense 94,225 (367,118 ) Advances from customer (34,357 ) (7,629 ) Tax payables 1,424 156 Shares to be issued 83,291 - Other payables 1,365,422 128,410 Net cash provided by (used in) operating activities 2,308,939 (797,689 ) Cash flows from investing activities Acquisition of plant, property, and equipment (5,660,944 ) (487,221 ) Acquisition of intangible assets (4,697,845 ) - Net cash used in investing activities (10,358,789 ) (487,221 ) Cash flows from financing activities Repayment of convertible notes - (502,684 ) Net proceeds from issuance of preferred stock 350,000 1,555,000 Net proceeds from issuance of common stock 6,974,612 1,636,000 Repurchase of warrants (363,515 ) - Proceeds from related parties 4,987 226,405 Net cash provided by financing activities 6,966,084 2,914,721 Effect of exchange rate change on cash and cash equivalents (21,480 ) (187,055 ) Net increase / (decrease) in cash and cash equivalents (1,062,287 ) 1,442,756 Cash and cash equivalents, beginning balance 1,987,616 544,860 Cash and cash equivalents, ending balance $ 925,329 $ 1,987,616 Supplement disclosure of cash flow information Interest expense paid $ $ 104,800 Income taxes paid $ – $ – Non-cash transactions from financing and investing activities Conversion of Preferred stock into common stock $ 590,142 $ - Reclassification of derivative liability to equity $ 3,528,120 $ – The accompanying notes are integral part of these consolidated financial statements. F-6 SINO GREEN LAND CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND DESCRIPTION OF BUSINESS Organization Sino Green Land Corporation (the “Company”) was incorporated in Nevada in March 2008 under the name of Henry County Plywood Corporation, as the successor by merger to a Virginia corporation organized in May 1948 under the same name. On March 23, 2009, the Company’s corporate name was changed to Sino Green Land Corporation. The Company, through its Chinese operating subsidiaries and a variable interest entity, is engaged in the wholesale distribution, marketing and sales of premium fruits in China. On January 15, 2009, the Company entered into a share exchange agreement with Organic Region Group Limited (“Organic Region”), its stockholders and its wholly owned subsidiaries, Zhuhai Organic Region Modern Agriculture Ltd. (“Zhuhai Organic”), and Guangzhou Organic Region Agriculture Ltd. (“Guangzhou Organic”), Fuji Sunrise International Enterprises Limited (“Fuji Sunrise”), Southern International Develop Limited (“Southern International”) and HK Organic Region Limited (“HK Organic”). Pursuant to the share exchange agreement and a related agreement with the Company’s two former principal stockholders: · The Company issued to the former stockholders of Organic Region a total of 81,648,554 shares of common stock, constituting approximately 98% of its outstanding stock, in exchange for all of the capital stock of Organic Region; and · Our former majority stockholders sold to the Company 1,666,298 shares of common stock, representing 50% of the outstanding shares, for $500,000 non-interest bearing convertible promissory notes, which were paid in 2009. The Company has no further obligations to the former majority stockholders. Prior to the closing of these transactions, the Company, then known as Henry County Plywood Corporation, was not engaged in any business activity. The Company is the sole stockholder of Organic Region, a British Virgin Islands corporation which was incorporated on January 30, 2003. Organic Region is the sole stockholders of five limited liability companies organized under the laws of the People’s Republic of China, each of which is a wholly foreign-owned entity, known as a WFOE: Zhuhai Organic, Guangzhou Organic, Fuji Sunrise, Southern International, HK Organic, and Guangzhou Metro Green Trading Ltd. Guangzhou Metro Green Trading Ltd, wholly owned by Southern International, was formed on March 31, 2010 and is engaged in the wholesale distribution, marketing and sales of grocery products, and real estate and consulting services in China. Under generally accepted accounting principles, the acquisition by the Company of Organic Region is equivalent to the acquisition by Organic Region of the Company, then known as Henry County Plywood Corporation, with the issuance of stock by Organic Region for the net monetary assets of the Company. This transaction is reflected as a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition. Under reverse acquisition accounting, the comparative historical financial statements of the Company, as the legal acquirer, are those of the accounting acquirer, Organic Region. The accompanying financial statements reflect the recapitalization of the stockholders’ equity as if the transactions occurred as of the beginning of the first period presented. Thus, only the 81,648,554 shares of common stock issued to the former Organic Region stockholders are deemed to be outstanding for all periods reported prior to the date of the reverse acquisition. As a result of the reverse acquisition effected by the share exchange agreement, the Company’s business has become the business of the Organic Region. The 1,666,297 shares of common stock that were outstanding on January 15, 2009, net of the 1,666,298 shares that were purchased by the Company and cancelled, are treated as if they were issued on January 15, 2009, as part of a recapitalization. The Company has an exclusive agreement with Xiong Luo, who was, at the time the Company entered into the agreement, one of the Company’s senior executive officers and is now the chief executive officer. Mr. Luo is and the owner and holder of the business license for Guangzhou Greenland Co. Ltd. (“Guangzhou Greenland”). Pursuant to this agreement, Organic Region provides consulting services, including business operations, human resources and research and development services, to Mr. Luo with respect to Guangzhou Greenland to enable Guangzhou Greenland to operate the fruit trading business in China. In exchange for such services, Mr. Luo agreed to pay a consulting services fee to Organic Region equal to all of the revenues obtained by Guangzhou Greenland. The agreement gave the Company the ability to substantially influence Guangzhou Greenland’s daily operations and financial affairs, appoint its senior executives and approve all matters requiring stockholder approval. Mr. Luo also irrevocably granted the Company an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Guangzhou Greenland and agreed to entrust all the rights to exercise voting power to the person appointed by the Company. Guangzhou Greenland is considered a variable interest entity, and its financial statements are included in our consolidated financial statements. Substantially all of the Company’s revenue is derived from the business of Guangzhou Greenland. F-7 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Zhuhai Organic and Guangzhou Organic, Fuji Sunrise, HK Organic, Southern International, and Guangzhou Metro Green Trading Ltd, together with its 100% Variable Interest Entity (VIE), Guangzhou Greenland. All significant inter-company accounts and transactions have been eliminated in consolidation. Variable interest entities (VIE) are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. On January 1, 2005, Organic Region entered into exclusive arrangements with Mr. Xiong Luo, who was then the Company’s chief operating officer and has since become the Company’s chief executive officer and president, and who holds the business license for Guangzhou Greenland, that give the Company the ability to substantially influence Guangzhou Greenland’s daily operations and financial affairs, appoint its senior executives and approve all matters requiring stockholder approval. As a result, the Company consolidates the financial results of Guangzhou Greenland as variable interest entity pursuant to ASC 810. a. Guangzhou Greenland holds the licenses necessary to operate its fruit trading business in China. b. The Company has the exclusive right to purchase the fruit and vegetables from and it provides other general business operation services to Guangzhou Greenland in return for a consulting services fee which is equal to Guangzhou Greenland’s revenue. c. Mr. Luo irrevocably granted the Company an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Guangzhou Greenland and agreed to entrust all the rights to exercise his voting power to the person appointed by the Company. Use of estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results. Cash and cash equivalents The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. Accounts receivable The Company’s policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of December 31, 2010 and December 31, 2009, the Company had accounts receivable, of $261,403 and $171,143, net of allowance for bad debts in the amount of $9,559 and $9,244, respectively. Other current assets Other current assets as of December 31, 2010 and December 31, 2009 were valued at $114,026 and $343,169 respectively. The other current assets mainly comprise of advances to employees and a deposit to an unrelated party in the PRC. Advances As of December 31, 2010, advances of the Company amounted to $4,816,467, of which $112,929 represents advance payment to an unrelated party for Guangzhou Metro Green’s farm reconstruction and $4,703,538 represents advance payments to several unrelated parties for the decoration and equipment of the building for the Company’s proposed distribution hub (MetroGreen) . See Note 4. F-8 As of December 31, 2009, the Company advances amounted to $4,612,054, which represents advances to one unrelated party in return for 18 years lease starting 2010. The advances are required to be used to construct a multi-level distribution center the Company intends to lease. Deposit As of December 31, 2010 and December 31, 2009, the Company had lease deposits in the amounts of $487,916 and $365,647, respectively. In 2010, $378,112 was the deposit related to the lease for the Company’s distribution warehouse (MetroGreen) and $109,804 was the deposit related to the lease of a cold storage facility. The deposits were paid to unrelated parties and are refundable after the expiration of the term of the lease. Inventories Inventories are valued at the lower of cost (determined on a weighted average basis) or market value. Management compares the cost of inventories with market value and an allowance is provided to reduce the value of inventories to their net market value. Inventories consisted of produce in the amount of $8,684 and $9,934 as of December 31, 2010 and December 31, 2009, respectively. Property and equipment Property and equipment are recorded at cost. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life of plant, property, and equipment are capitalized. These capitalized costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred. Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets: 20 years for building, 5 years for manufacturing machinery, 3 to 5 years for office equipment, and 5 years for motor vehicles. Impairment The Company reviews long-lived for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. The Company tests long-lived assets, including property, plant and equipment, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimate of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available in making whatever estimates, judgments and projections are considered necessary. There was no impairment of long-lived assets for the year ended December 31, 2010 and 2009. Derivative liability The derivative liability represents the value of warrants to purchase common stock that were issued in connection with certain debt and preferred stock offerings in 2008 and 2009. The warrants are reported at fair value using the Black-Scholes model with changes in value reflected in earnings for the period. Stock based compensation Stock-based payment compensation to employees and consultants is based on the grant-date fair value of the equity instrument issued and recognized as compensation expense when issued unless the right to the shares vests over a period of time, in which case the compensation expense is recognized as the shares vest. Stock-based compensation to directors is accrued ratably over the term of the applicable agreement. Please see Note 8. Preferred Stock On May 14, 2010, the certificate of designation relating to the series A preferred stock was amended and restated to increase the number of authorized shares of series A preferred stock from 1,000,000 to 2,000,000 shares. The financial statements at December 31, 2009 give retroactive effect to this amendment. Deemed Preferred Stock Dividend The Company records a deemed preferred stock dividend for the amortization of any discount arising from beneficial conversion features associated with its preferred shares. Upon issuance, this discount is offset by a credit to additional paid-in capital, and is generally amortized over its earliest conversion period. Due to the perpetual nature of the preferred stock and the immediate conversion rights, the full discount is reflected as a deemed preferred stock dividend upon issuance. F-9 Revenue recognition Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are treated as unearned revenue and recorded as Advance from customers. Discounts provided to customers by the Company at the time of sale are recognized as a reduction in sales as the products are sold. Sales taxes are not recorded as a component of sales. Cost of Goods Sold Cost of goods sold includes produce costs and the amortization of the long-term leases on which the produce is grown and for which the full payment was made at the commencement of the lease. Discounts provided to the Company by vendors at the time of purchase are recognized as a reduction in inventory cost as the products are delivered. All other costs, including warehousing costs, transportation costs, salaries, rent expense and depreciation expense, are shown separately in selling expense or general and administrative expense in the Consolidated Statements of Income. Income taxes The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company records a valuation allowance for deferred tax assets, if any, based on its estimates of its future taxable income as well as its tax planning strategies when it is more likely than not that a portion or all of its deferred tax assets will not be realized. If the Company is able to utilize more of its deferred tax assets than the net amount previously recorded when unanticipated events occur, an adjustment to deferred tax assets would increase the Company net income when those events occur. The Company does not have any significant deferred tax asset or liabilities in the PRC tax jurisdiction. Interest income (expense) The following table sets forth interest income and expense for the year ended December 31, 2010 and 2009. Year ended December 31, Year ended December 31, 2010 2009 Interest income $ 2,538 $ 0 Interest expense 0 (63,882 ) Interest income (expense) net $ 2,538 $ (63,882 ) Earnings per share Basic earnings per share is based upon the weighted average number of shares common stock outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Potentially dilutive common shares consist of common stock issuable upon the conversion of the outstanding shares of Series A preferred stock (using the if-converted method) and common stock warrants (using the treasury stock method). The following table presents a reconciliation of basic and diluted earnings per share: F-10 Years ended December 31, 2010 2009 Net Income available to common shareholders $ 6,674,575 $ 2,374,335 Add : Deemed Preferred Stock Dividend 350,000 650,000 Net income available to common shareholders plus assumed conversions $ 7,024,575 $ 3,024,335 Weighted average shares of common stock outstanding 128,757,864 89,772,302 Diluted effect of warrants, options, and preferred stock 24,416,787 27,807,167 Weighted average shares of common stock – diluted 153,174,651 117,579,469 Earnings per share – basic $ 0.05 $ 0.03 Earnings per share – diluted $ 0.05 $ 0.03 The warrants that were issued by Organic Region in April 2008 were assumed by the Company in connection with the reverse acquisition, and are reflected as 3,215,738 shares in the number of diluted shares for the year ended December 31, 2010. Pursuant to purchase agreements, in August 3, 2009, the Company issued warrants to purchase 10,145,454 shares of common stock at an exercise price of $0.11 per share and warrants to purchase 3,466,666 at an exercise price of $0.15 per share. The warrants are exercisable through August 3, 2011. On December 4, 2010, the Company repurchased and cancelled outstanding warrants to purchase an aggregate of 18,175,757 shares of common stock for a total consideration of $363,515 pursuant to warrant purchase agreements dated November 30, 2010 with the warrant holders. The warrants had an average exercise price of $0.13 per share and expire from August 2011 to July 2012. Pursuant to a purchase agreement dated on August 7, 2009, the Company , for a total consideration of $1,000,000 (i) issued an aggregate of 1,000,000 shares of series A preferred stock, (ii) issued five-year warrants to purchase 10,000,000 shares of common stock at an exercise price of $0.14 per share and 10,000,000 shares of common stock at an exercise price of $0.25 per share, and (iii) granted the investors an option to purchase up to 1,000,000 additional shares of series A preferred stock at a purchase price of $1.00 per share of series A preferred stock. The preferred stock had a dilutive effect of 16,015,987 shares and 18,774,000 shares for the years ended December 31, 2010 and 2009. The warrants with $0.14 exercise price and $0.25 exercise price had a dilutive effect of 4,681,817 shares and 503,245 shares respectively for the years ended December 31, 2010 and 2009, respectively. The preferred stock option had no dilutive effect for the year ended December 31, 2010 since the option had been exercised as to 650,000 shares in December 2009 and as to the remaining 350,000 shares on January 5, 2010. Foreign currency translation The Company uses the United States dollar for financial reporting purposes and the United States dollar is the functional currency of the Company. The Company’s subsidiaries maintain their books and records in their functional currency - Chinese Yuan Renminbi (RMB), being the primary currency of the economic environment in which their operations are conducted. All assets and liabilities are translated at the current exchange rate, stockholder’s equity is translated at the historical rates and income statement and statement of cash flows items are translated at the average exchange rate for the period. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet. The resulting translation adjustments are reported under other comprehensive income as a component of shareholders’ equity. Fair values of financial instruments The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, other receivables, advances to suppliers, accounts payable and other payables. As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheet. This is attributed to the short maturities of the instruments and that interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective balance sheet dates. Statement of cash flows Cash flows from the Company's operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet. F-11 Segment reporting ASC 280 requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. ASC 280 has no effect on the Company’s consolidated financial statements as the Company operates in one reportable business segment. Recent Accounting Pronouncements In December 2010, the FASB issued amended guidance related to Business Combinations. The amendments affect any public entity that enters into business combinations that are material on an individual or aggregate basis. The amendments specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. The Company will assess the impact of these amendments on its consolidated financial statements if and when an acquisition occurs. In December 2010, the FASB issued amended guidance related to intangibles—goodwill and other. The amendments modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that impairment may exist. The qualitative factors are consistent with the existing guidance and examples, which require that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. The Company does not believe that this guidance will have a material impact on its consolidated financial statements. The FASB has issued amended guidance for subsequent events. The amendment removes the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of U.S. GAAP. The FASB also clarified that if the financial statements have been revised, then an entity that is not an SEC filer should disclose both the date that the financial statements were issued or available to be issued and the date the revised financial statements were issued or available to be issued. The FASB believes these amendments remove potential conflicts with the SEC's literature. All of the amendments were effective upon issuance (February 24, 2010). The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. Reclassifications Certain prior year amounts have been reclassified to conform with the current year's presentation, none of which had an impact on total assets, stockholders' equity, net income, or net earnings per share. 3. PROPERTY AND EQUIPMENT, NET Property and equipment consist of the following as of December 31, 2010 and December 31, 2009: December 31, December 31, 2010 2009 Building $ 5,535,558 $ - Manufacturing machinery 420,935 403,822 Office equipment 110,199 40,591 Motor vehicle 18,149 24,143 Software 5,521 - Leasehold Improvement 693,630 484,848 Total 6,778,471 953,044 Less: Accumulated Depreciation (545,208 ) (405,677 ) Property and Equipment, net $ 6,238,784 $ 547,727 F-12 Depreciation expense for the years ended December 31, 2010 and 2009 were $123,572 and $79,178, respectively. On July 1, 2010, the Company entered into a contract with an unrelated party to construct a cold storage. As of December 31, 2010, the construction of the cold storage was completed for which the Company paid $5,535,558. 4. INTANGIBLE ASSETS As of December 31, 2010, the construction of the building for the Company’s proposed distribution center was completed. The building is leased from an unrelated party for an 18-year lease term commencing upon completion of the building. Intangible assets represent payments made by the Company to the holder of the land use rights for the construction of the building in accordance with the terms of the lease. The details of intangible assets are listed below as of December 31, 2010 and 2009: December 31, December 2010 31, 2009 Intangible assets –cost $ 9,563,549 $ - Accumulated amortization (47,817 ) - Net $ 9,515,732 $ - The amortization expense was $47,817 for the year ended December 31, 2010. 5. DUE FROM/(TO) RELATED PARTIES Amounts due from related parties amounted to $1,006 as of December 31, 2009. The amount due was interest free, unsecured and due on demand and was paid during 2010. Amounts due to related parties amounted to $120,840 and $3,364 as of December 31, 2010 and 2009, respectively. The Company has a balance due to one shareholder and former chief executive officer and chairman of the Company amounting to $83,486 and due to one shareholder and chief executive officer of the Company amounting to $37,354 as of December 31, 2010. The amounts due are interest free, unsecured and due on demand. 6. LONG-TERM PREPAYMENTS There is no private ownership of land in the PRC. All land is owned by the government, which grants land use rights for a specified period of time. Guangzhou Greenland has entered into seventeen land lease and developing agreements with a number of farming cooperatives since 2005. The farming cooperatives are authorized to manage and plant the lands by Guangzhou Greenland who, during the term of the lease, has the priority right to purchase the agricultural products at fair market price. The agreements have terms of 25 years with various due dates. The payments for the entire 25-year term are payable, and were paid, in full at the inception of the agreements. The Company acquired one new land lease during the year ended December 31, 2010 by paying $3,403,007. Guangzhou Greenland uses the straight-line method to amortize the long-term prepayments over the life of the land leases. As of December 31, 2010 and 2009, the Company has long-term prepayments (net) in the amount of $21,955,769 and $18,961,869, respectively. The details of long-term prepayments are listed below as of December 31, 2010 and 2009: December 31, December 2010 31, 2009 Long-term prepayment –cost $ 25,115,165 $ 20,996,380 Accumulated amortization (3,159,396 ) (2,034,511 ) Net $ 21,955,769 $ 18,961,869 Amortization expenses for the years ended December 31, 2010 and 2009 were $1,029,531 and $627,304. F-13 Amortization expenses are approximately as follows: Year ended December 31, 2011 $ 1,029,531 2012 1,029,531 2013 1,029,531 2014 1,014,779 2015 968,815 Thereafter 16,883,582 Total $ 21,955,769 7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses comprised the following as of December 31, 2010 and 2009: December 31, December 31, 2010 2009 Accounts payable $ 336,687 $ 385,726 Accrued payroll 203,466 130,542 Accrued expenses 576,187 465,895 Advance subscription - 180,526 Other payable 1,603,383 24,234 $ 2,719,724 $ 1,186, 923 8. EQUITY TRANSACTIONS Issuance of Shares as Compensation Pursuant to an agreement with an independent director, the Company agreed to pay the director 12,500 shares of common stock every fiscal quarter. As of December 31, 2010, the Company had issued 37,500 shares and had accrued the value of 12,500 shares, reflecting the shares that were due to such director, but had not been issued, as of December 31, 2010. For the year ended December 31, 2010, $14,500 was recorded as an expense for the 50,000 shares payable to the director for that period. On July 1, 2010, in connection with the election of two directors, pursuant to the director agreements, the Company is to issue 25,000 shares of common stock to each of these directors for each three month period of their directorship. As of December 31, 2010, the Company had issued 50,000 shares and had accrued the value of 50,000 shares, reflecting the shares that were due to such directors, but had not been issued. For the year ended December 31, 2010, $26,000 was recorded as an expense for 100,000 shares to be issued to the directors. On November 5, 2010, the Company entered into an employment agreement with the chief financial officer. Pursuant to the agreement, the chief financial officer is to receive 500,000 shares of common stock, which vest in quarterly installments of 125,000 shares on each of October 15, 2010, January 15, 2011, April 15, 2011, and July 15, 2011, provided that the chief financial officer is employed by the Company on those dates, except that, in certain cases, including her death or termination of her employment without cause, the unvested shares vest immediately. As of December 31, 2010, the Company had issued 125,000 shares to the chief financial officer. For the year ended December 31, 2010, $26,250 was recorded as an expense for 125,000 shares issued to the chief financial officer. On November 18, 2010, the Company entered into an employment agreement with the corporate secretary, who is not an executive officer. Pursuant to the agreement, the corporate secretary is to receive 250,000 shares of common stock, which vest in quarterly installments of 62,500 shares on each of December 1, 2010, February 1, 2011, May 1, 2011, and August 1, 2011, provided that he is employed by the Company on those dates, except that, in certain cases, including his death or termination of his employment without cause, the unvested shares vest immediately. As of December 31, 2010, the Company had issued 62,500 shares to the corporate secretary. For the year ended December 31, 2010, $15,625 was recorded as an expense for 62,500 shares issued. On June 21, 2010, the Company authorized the issuance of an aggregate of 7,195,000 shares of its common stock to employees and advisors for services. Of the shares that were issued, the rights to 5,945,000 shares had vested as of December 31, 2010. The 5,000,000 shares issuable to three senior executives were issuable in four quarterly installments provided, that in the event of the death of a senior executive or certain other terminations of employment, the unvested shares are immediately issuable. As of December 31, 2010, 5,945,000 shares were issuable, of which 4,470,000 shares had been issued. For the year ended December 31, 2010, $1,205,646 was recorded as an expense for 5,945,000 shares vested to the officers and employees. The total stock compensation expense for the year ended December 31, 2010 was $1,288,021, F-14 Issuance of Shares pursuant to Financing Agreement During the year ended December 31, 2010, the Company issued, for $779,822, pursuant to an option granted in connection with an August 2009 financing, (a) 6,500,000 shares of common stock and (b) warrants to purchase 5,200,000 shares of common stock at an exercise price of $0.15 per share were exercised. During the year ended December 31, 2010, the Company issued 6,704,003 shares of common stock upon conversion of 590,142 shares of series A preferred stock which were issued as part of one of the August 2009 financings. In May 2010, the Company raised $3.4 million from the sale of 17,000,000 shares of common stock at $0.20 per share pursuant to agreements with two sets of investors. One group of investors purchased a total of 3,375,000 shares for $675,000 (the “group A investors”) and the other group purchased 13,625,000 shares of common stock for $2,725,000 (the “group B investors”). On August 30, 2010, the Company entered into an agreement with two investors pursuant to which the Company issued 1,250,000 shares of common stock for $250,000. In connection with the May 2010 and August financings, the Company agreed with the investors that: · If, as any time as long as any of the group A investors holds any of the shares of common stock purchased in the financing, the Company sells shares of common stock or issue convertible securities with an exercise price or conversion price which is less than the price paid in the financing, which was $0.20 per share, the Company is to issue additional shares to the investors so that the effective price per share is equal to such lower price. The group B investors and the August 2010 investors have no comparable provision. · The Company would hire a finance manager or chief financial officer with United States public company experience, within 45 days after the closing. If the Company fails to meet this covenant, the Company must pay the group A investors liquidated damages of 1% per month in cash or stock (based on the closing price of the transaction) to the investors until the position is filled. The Company satisfied this covenant. · Within 45 of closing, the Company shall have a majority of independent directors of which two are to be English-speaking and have prior experience with United States public companies. If the Company fails to meet this covenant, the Company must pay the group A investors liquidated damages of 1% per month in cash or stock (based on the closing price of the transaction) to the investors until the covenant is met. The Company has satisfied this requirement. · Within 180 days of closing with respect to the group A investors and 120 days of closing with respect to the group B investors and the August 2010 investors, the Company must have sent in the necessary paperwork to apply for a listing on the American Stock Exchange. If the Company fails to meet this covenant, the Company must pay the investors liquidated damages of 1% per month in cash or stock (based on the closing price of the transaction) to the investors until the covenant is met. Liquidation damages of $39,208 have been accrued as of December 31, 2010. · Within 90 days of closing, the Company agreed with the group A investors to “conduct a minimum of an eight (8) for one (1) and maximum of ten (10) for one (1) reverse stock split” and the Company agreed with the group B investors and the August 2010 investors to “conduct a minimum of a six (6) for one (1) and maximum of eight (8) for one (1) reverse stock split.” If the Company fails to meet this covenant, the Company must pay the group A investors liquidated damages of 1% per month in cash or stock (based on the closing price of the transaction) to the investors until the covenant is met. Liquidation damages of $121,613 have been accrued as of December 31, 2010. On September 29, 2010, the Company entered into an agreement to sell 5,000,000 shares of common stock for $0.20 per share, for a total of $1,000,000. The offering costs were $31,000. Pursuant to the purchase agreement, the Company agreed with the investors that: · If, as any time as long as any investor holds any of the shares of common stock purchased in the financing, the Company sells shares of common stock or issues convertible notes or convertible preferred stock at a price or with a conversion price which is less than the $0.20 price paid in the financing, the Company is to issue additional shares to the investors so that the effective price per share is equal to such lower price. · Within 120 days of closing, the Company must have sent in the necessary paperwork to apply for a listing on the American Stock Exchange. If the Company fails to meet this covenant, the Company must pay the investors liquidated damages of 1% per month in cash or stock (based on the closing price of the transaction) to the investors until the covenant is met. · Within 90 days of closing, the Company agreed to “conduct a minimum of an eight (8) for one (1) and maximum of ten (10) for one (1) reverse stock split.” If the Company fails to meet this covenant, the Company must pay the investors liquidated damages of 1% per month in cash or stock (based on the closing price of the transaction) to the investors until the covenant is met. Liquidation damages of $12,500 have been accrued as of December 31, 2010. On December 12, 2010, the Company sold 7,759,500 shares of common stock to an investor at $0.20 per share, for total gross proceeds of $1,551,900 pursuant to a common stock purchase agreement dated as of December 12, 2010. F-15 Warrants Weighted Average Average Remaining Warrants Warrants Exercise Contractual Outstanding Exercisable Price Life Outstanding, December 31, 2009 38,727,210 38,727,210 $ 0.16 2.85 Granted 5,200,000 5,200,000 $ 0.15 1.62 Repurchased and cancelled (18,175,757) ) (18,175,757 ) 0.13 Exercised (636,363 ) (636,363 ) 0.11 Outstanding, December 31, 2010 25,115,090 25,115,090 $ 0.16 3.73 On December 4, 2010, the Company repurchased outstanding warrants to purchase an aggregate of 18,175,757 shares of common stock for a total consideration of $363,515 pursuant to warrant purchase agreements with the warrant holders. The warrants were issued in the past as a part of sale of common stock and had an average exercise price of $0.13 per share and expired from August 2011 to July 2012 and were cancelled by the Company. Stock options The preferred stock option activity was as follows: Weighted Average Aggregate Options Exercise Intrinsic outstanding Price Value Outstanding, December 31, 2009 350,000 $ 1.00 $ 318,182 Exercised 350,000 1.00 318,182 Outstanding, December 31, 2010 - - - The exercise of the option to purchase the series A preferred stock was made, and the exercise price was received, subject to an amendment to the certificate of amendment to the certificate of designation for the series A convertible preferred stock, which was filed on May 14, 2010. Fair Value of Financial Instruments Fair value is determined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels: Level one — Quoted market prices in active markets for identical assets or liabilities; Level two — Inputs other than level one inputs that are either directly or indirectly observable; and Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use. Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. Assets and liabilities measured at fair value on a recurring basis are summarized as follows: Fair value measurement using inputs Carrying amount at Financial instruments Level 1 Level 2 Level 3 12/31/2010 Liabilities: Derivative instruments - Warrants $ — $ 908,141 $ — $ 908,141 Total $ — $ 908,141 $ — $ 908,141 F-16 The fair value of warrants associated with the April 2008 debt issuance (Organic Region Warrants) that are reported as a liability was developed using the Black Scholes model using the following significant assumptions: Organic Region Warrants December 31, December 31, 2010 2009 Market price of common stock: $ 0.25 $ 0.25 Exercise price: $ 0.098 $ 0.098 Expected term (years): 3.6 4.6 Dividend yield: – – Expected volatility: 65.22 % 120.82 % Risk-free interest rate: 1.50 % 1.50 % As of December 31, 2010, none of these warrants has been exercised. The risk-free rate of return reflects the interest rate for United States Treasury Note with similar time-to-maturity to that of the warrants. None of the other warrants are treated as derivatives. As a result of an agreement dated September 24, 2010, the August 7, 2009 purchase agreement relating to the issuance of the series A preferred stock and warrant and the warrants were modified to eliminate the provisions which provided for an adjustment in the exercise or conversion price in the event that the Company issued shares at a price less than the exercise price or conversion price. As a result, at December 31, 2010, the warrants were no longer deemed derivative securities and were treated as indexed to the Company's own stock and therefore meet the scope exceptions of ASC Topic 815, and were eligible to be reclassified as equity. In accordance with ASC Topic 815, the classification of a contract should be reassessed at each balance sheet date. If the classification required under this ASC changes as a result of events during the period, the contract should be reclassified as of the date of the event that caused the reclassification. If a contract is reclassified from an asset or a liability to equity, gains or losses recorded to account for the contract at fair value during the period that the contract was classified as an asset or a liability should not be reversed. Therefore, the Company re-measured the fair value of the warrants as of September 24, 2010, the date of the event that caused the re-classification, which was approximately $3,528,120 and reclassified the amount to equity as additional paid-in capital. The income from the changes in fair value during the period that the warrants were classified as a derivative liability was approximately $567,916 was recorded as change in derivative liability on the statements of income for the year ended December 31, 2010. 9. INCOME TAXES Peoples Republic of China The Company’s operations are conducted solely within the PRC. Under the current PRC enterprise income tax law, which became effective January 1, 2008, there is a standard enterprise income tax rate of 25%. The tax holidays that were granted under the former tax law, will continue in effect until they expire. The Company benefited with a two year income tax exemption in 2008 and 2009 and is subject to a 50% tax reduction from 2010 to 2012. Guangzhou Greenland, which had net income from operations for the years ended December 31, 2010 and 2009, is exempt from income tax in accordance with PRC tax regulations as these operations are that of a variable interest entity of a self-employed individual operating in the agriculture products industry. The remaining subsidiaries subject to PRC income taxes generated an aggregate net loss for the year ended December 31, 2010. Accordingly, the Company has no provision for income taxes for the year-ended December 31, 2010. The Company has net operating losses available to offset future taxable income for PRC entities of 603,532 and nil as of December 31, 2010 and 2009, respectively. The Company believes that it is more likely than not that these net accumulated operating losses generated in these entities will not be utilized in the future. Therefore, the Company has provided for a full valuation allowance for the deferred tax assets arising from the losses at these locations as of December 31, 2010. Accordingly, the Company has no net deferred tax assets. United States Sino Green Land, Inc. is incorporated in Nevada, United States and currently generates no revenue. The Company has net operating losses available to offset future taxable income for Sino Green Land, Inc. of 3,941,778 and 2,756,158 as of December 31, 2010 and 2009, respectively. The Company believes that it is more likely than not that these net accumulated operating losses generated in these entities will not be utilized in the future. Therefore, the Company has provided for a full valuation allowance for the deferred tax assets arising from the losses at these locations as of December 31, 2010. Accordingly, the Company has no net deferred tax assets. F-17 Consolidated pre-tax income (loss) consists of the following: 2010 2009 U.S. operations $ (1,955,925 ) $ (5,362,120 ) Foreign operations 8,980,503 8,386,455 $ 7,024,578 $ 3,024,335 The Components of the provision for income taxes for the years ended December 31, 2010 and 2009 are as follows: 2010 2009 Current: Federal $ - $ - Foreign - - Deferred: Federal (403,111 ) (508,579 ) Foreign (205,201 ) - Change in valuation allowance 608,312 508,579 $ - $ - The following tables reconcile the U.S. statutory rates to the Company’s effective tax rate as of December 31, 2010 and 2009: For the year-ended December 31, 2010 PRC USA Total Pretax income $ 8,980,503 $ (1,955,925 ) $ 7,024,578 Expected income tax expense (benefit) 1,122,563 12.5% (665,015 ) 34.0% 457,548 Non-taxable income (1,327,764 ) 12.5% - (1,327,764 ) Change in derivative liability 261,904 34.0% 261,904 Change in valuation allowance 205,201 12.5% 403,111 34.0% 608,312 $ - $ - $ - For the year-ended December 31, 2009 PRC USA Total Pretax income $ 8,386,454 $ (5,362,120 ) $ 3,024,335 Expected income tax expense (benefit) - (1,823,121 ) 34.0% (1,823,121 ) Non-taxable income - - - Change in derivative liability 1,314,542 34.0% 1,314,542 Change in valuation allowance - 508,579 34.0% 508,579 $ - $ - $ - The Components of deferred income taxes as of December 31, 2010 and 2009 are as follows: 2010 2009 Net operating losses $ 1,545,405 $ 937,094 Less: valuation allowance (1,545,405 ) (937,094 ) $ - $ - The Company has cumulative undistributed earnings of foreign subsidiaries of approximately $18,624,694 as of December 31, 2010, is included in consolidated retained earnings and will continue to be indefinitely reinvested in international operations. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of these earnings, nor is it practicable to estimate the amount of income taxes that would have to be provided if the Company concluded that such earnings will be remitted in the future. The Company has cumulative undistributed earnings of foreign subsidiaries of approximately $24,548,459 as of December 31, 2010, is included in consolidated retained earnings and will continue to be indefinitely reinvested in international operations. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of these earnings, nor is it practicable to estimate the amount of income taxes that would have to be provided if the Company concluded that such earnings will be remitted in the future. 10. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS The Company’s operations are conducted exclusively in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC’s economy. F-18 Operations of the Company in the PRC are subject to specific considerations and significant risks. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. Results of operations of the company may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Since a significant amount of the company future revenues will be denominated in Renminbi, the existing and any future restrictions on currency exchange may limit the company’s ability to utilize revenues generated in Renminbi to fund any business activities outside China or fund expenditures denominated in foreign currencies. Almost all of the Company’s products are sold at the Guangdong Yun Cheng Wholesale Market and the Beijing Xin Fadi Agricultural Products Wholesale Market, two major markets for the sale of agricultural products in their respective areas where the Company leases space to sell its produce. No customers accounted for more than 10% of the total net revenue for the years ended December 31, 2010 and 2009. The Company has long-term arrangements to purchase its produce from a limited number of farming cooperatives. If the Company is not able to purchase the produce from these farmers, in the event of a product shortage, and it is necessary for the Company to purchase from other suppliers, the costs may be greater due to this kind of short-term nature of arrangements. Five vendors provided 76.9%, 10.8%, 5.6%, 6.2%and 0.5% of the goods to the Company during the year ended December 31, 2010. Accounts payable to these vendors amounted $0 as of December 31, 2010. Two vendors provided 52% and 27% of the goods to the Company during the year ended December 31, 2009. Accounts payable to these vendors amounted $0 on December 31, 2009. The Company extends credit to its customers based upon its assessment of their credit worthiness and generally does not require collateral. Credit losses have not been significant. 11. COMMITMENT Operating Leases The Company leases various office facilities under operating leases that terminate on various dates. The future rent expense for these leases is as follows: Year Ended December 31 2011 $ 95,960 2012 99,297 2013 101,756 2014 102,075 2015 97,666 Thereafter 500,801 $ 997,556 In 2009, the Company entered an agreement with an unrelated party to lease the land for the Company’s proposed distribution hub in Guangzhou Yuncheng wholesale market for an 18-year term. The rent expenses for this lease is as follows: Year ended December 31 2011 $ 1,068,421 2012 1,068,421 2013 1,068,421 2014 1,068,421 2015 1,068,421 Thereafter 13,444,297 $ 18,786,402 In 2010, the Company entered an agreement with an unrelated party to lease the land for the Company’s cold storage in Guangzhou Yuncheng wholesale market for an 20-year term. F-19 The rent expenses for this lease is as follows: Year ended December 31 2011 $ 471,252 2012 471,252 2013 471,252 2014 471,252 2015 471,252 Thereafter 6,833,152 $ 9,189,411 12. SUBSEQUENTS EVENTS On January 15, 2011, the Company sold a total of 13,000,000 shares of common stock to a number of investors at $0.20 per share, for total gross proceeds of $2,600,000 pursuant to certain common stock purchase agreements dated as of January 15, 2011. In connection with the sales of common stock, the Company paid or is to pay commissions of $182,000 to Jirong Wu and $52,000 to Hickey Freihofner Capital. On January 12, 2011, one investor in the August 7, 2009 financing (see Note 8) converted 150,000 shares of convertible preferred stock into 1,704,000 shares of Common Stock. On January 31, 2011, the Company entered into an agreement with three persons (the “contractors”), who constructed a 25,528 square meter (approximately 275,000 square foot) building for the Company to provide the Company additional space at its distribution hub. Pursuant to the agreement, the Company agreed to issue common stock, valued at $0.21 per share, in full payment of the verified costs incurred by the contractors to construct the building. The Company issued 40,015,084 shares of common stock pursuant to the agreement. The cost of the building was RMB 55,708,800, or $8,403,168 based on a current exchange ratio. None of the contractors has any relationship with the Company or its officers or directors. On March 3, 2011, the Company issued 1,000,000 shares to executives and directors pursuant to agreements and authorizations described in Note 8(a). 13. RESTATEMENT OF FINANCIAL STATEMENTS On August 23, 2010, the Company concluded, after a review of the pertinent facts, that the previously issued financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2009, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010, September 30, June 30 and March 31, 2009, respectively, should not be relied upon due to the following: The Company improperly allocated, for financial statement purposes, the proceeds received in connection with the April 2008 debt financing transaction and the August and December 2009 and January 2010 preferred stock financing transactions (collectively, “the financings”). The restated financial statements include the effects of properly allocating the financing proceeds between (1) the debt or preferred stock, as applicable, (2) any derivative liabilities associated with warrants for the purchase of common stock, and (3) any beneficial conversion features (“BCF”), as a component of additional paid-in capital, which allow the debt and preferred shareholders to convert their investment into the Company’s common stock on favorable terms. · Due to the improper allocation of proceeds on the April 2008 debt financing which resulted in an incorrect basis for the debt, the Company improperly reported the loss on debt extinguishment upon its settlement in August 2009. The debt settlement is appropriately reported in the restated annual financial statements for 2009. The settlement occurred in August 2009, and therefore does not affect the income statements presented. However, the accompanying balance sheets appropriately reflect the impact of settlement. · Certain warrants containing variable exercise terms associated with the financings were reported as a component of paid-in capital instead of properly reflecting them as a derivative liability at fair value, with changes in fair value reported in the income statement each period. The restated financial statements include the effects of reporting the derivative liabilities and their associated changes in value correctly. · A BCF was inappropriately recorded as a debt discount on the April 2008 financing in addition to being amortized over the subsequent 12 months with a charge to expense. Furthermore, separate BCFs associated with the December 2009 and January 2010 preferred stock financings were erroneously omitted due to a misallocation of proceeds for financial statement purposes. The restated financial statements include the effects of allocating financing proceeds to the applicable BCFs by recording a preferred stock discount with a credit to additional paid-in capital. The discounts were then charged immediately to retained earnings as deemed preferred stock dividends pursuant to the terms of the agreement which provide immediate conversion rights. · Earnings per share has been restated to include the effects of the restated financial statements The Company’s management has determined that as a result of such accounting matters, its reported net income applicable to common shareholders was overstated by $2,935,083for the year ended December 31, 2009. Set forth below is a comparative presentation of the consolidated balance sheet and consolidated statements of income as of and for the year ended December 31, 2009 as restated and as initially reported in the Company’s annual report on Form 10- K and as restated. F-20 SINO GREEN LAND CORPORATION AND SUBSIDIARIES For the year ended December 31, 2009 Year ended December 31, 2009 As Reported As Restated INCOME STATEMENT: General and administrative expenses 2,249,364 2,216,416 Total operating expenses 4,830,694 4,797,746 Operating income 6,906,454 6,939,402 Other income/(expense): Loss on debt extinguishment (139,289) Other income (expense), net 154,404 ) 154,404 Interest expense (353,973 ) (63,882 Beneficial conversion feature expense (153,425 ) - Change in derivative liability (3,866,300) Total other income/(expense) (352,994 ) (3,915,068 Net income 6,553,460 3,024,334 Deemed preferred dividend (1,244,043 ) (650,000) Net income applicable to common shareholders 5,309,417 2,374,334 Comprehensive income: Net income 6,553,460 3,024,334 Other comprehensive loss: Foreign currency translation gain/(loss) (313,469 ) (313,469) Comprehensive income (loss) $ 4,995,948 2,710,865 Net income (loss) per share: Basic $ 0.07 $ 0.03 Diluted $ 0.06 $ 0.02 Weighted average number of shares outstanding Basic 89,772,302 89,772,302 Diluted 117,579,469 117,579,469 As of December 31, 2009 As Reported As Restated 12/31/2009 12/31/2009 BALANCE SHEET: Derivative liability $ 5,206,567 Preferred stock $ 1,650 650 Additional Paid-in Capital 10,119,540 7,736,406 Retained earnings $ 14,772,550 $ 11,950,117 F-21 Statement of stockholders’ equity (restated) for the year ended December 31, 2009 Preferred Stock Common Stock Shares Amount Shares Amount Additional Paid In Capital Other Comprehensive Income Retained Earnings Total Stockholders’ Equity Balance as of December 31, 2008 (Restated) – – 81,648,554 81,649 4,919,351 1,075,973 9,575,783 15,652,756 Recapitalization due to reverse acquisition – – 5,832,039 5,832 (5,832 ) – – – Issuance of preferred stock 1,650,000.00 650 – – 554,350 – – 555,000 Issuance of common stock – – 17,462,744 17,463 1,618,537 – – 1,636,000 Foreign currency translation gain – – – – – (313,469 ) – (313,469 ) Deemed dividend for preferred stock – – 650,000 – (650,000 ) – Net income for the year ended December 31, 2009 – – – – – – 3,024,334 3,024,334 Balance as of December 31, 2009 (Restated) 1,650,000 $ 650 104,943,338 $ 104,944 $ 7,736,406 $ 762,504 $ 11,950,117 $ 20,554,621 Statement of cash flow 2009 As Reported 2009 As Restated Cash flows from operating activities Net income $ 6,553,460 $ 3,024,334 Adjustments to reconcile net income to net cash provided by operating activities Warrant expense 290,091 - Beneficial conversion feature 153,425 - Loss on debt extinguishment - 139,289 Change in derivative liability - 3,866,300 Debt discount (part of interest expense) - (32,948 ) F-22