See notes to consolidated financial statements

3

See notes to consolidated financial statements

4

See notes to consolidated financial statements

5

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of American (“US GAAP”) for financial information and with the instructions to Form 10Q and Item 310 of Regulation S. The accounts of China LongYi Group International Holdings Limited and all of its subsidiaries are included in the consolidated financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation.

We are a holding company that only operates through our indirect Chinese subsidiaries Beijing SOD and Chongqing SOD. Through our Chinese subsidiaries, we develop, manufacture and market our SOD products in China. SOD is a naturally occurring enzyme which may act as a potent antioxidant defense in cells that are exposed to oxygen.

The following chart reflects our organizational structure as of the date of this report.

CONTROL BY PRINCIPAL STOCKHOLDERS

The directors, executive officers, affiliates and related parties own, beneficially and in the aggregate, the majority of the voting power of the outstanding shares of the common stock of the Company. Accordingly, if they voted their shares uniformly, directors, executive officers and affiliates would have the ability to control the approval of most corporate actions, including increasing the authorized capital stock of China Longyi and the dissolution, merger or sale of the Company's assets.

GOING CONCERN

These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. During three months ended March 31, 2017, the Company incurred a net loss of $133,734. As at March 31, 2017, the Company has a working capital deficiency of $1,369,962 and accumulated deficit from recurring net losses of $30,964,714 incurred. As at March 31, 2017, the Company has cash and cash equivalents of $11,788. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholder, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

6

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The unaudited consolidated financial statements for all periods presented include the financial statements of China Longyi Group International Holdings Limited, and its subsidiaries: Top Team Holdings Limited, Full Ample Group Limited (Daykeen Group, BVI), Top Time International Limited (HK), Beijing SOD, and Chongqing SOD. The unaudited consolidated financial statements have been prepared in accordance with US GAAP. All significant intercompany accounts and transactions have been eliminated during consolidation.

The Company has determined the People’s Republic of China Chinese Yuan Renminbi (“RMB”) to be its functional currency. The accompanying unaudited consolidated financial statements are presented in United States (US) dollars. The unaudited consolidated financial statements are translated into US dollars from RMB at year-end exchange rates for assets and liabilities, and average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

RMB is not freely convertible into the currency of other nations. All such exchange transactions must take place through authorized institutions. There is no guarantee the RMB amounts could have been, or could be, converted into US dollars at rates used in translation.

These condensed consolidated financial statements include all of the adjustments, which, in the opinion of management, are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessary indicative of results for a full year. The condensed consolidated balance sheet information as of December 31, 2016 was derived from the audited consolidated financial statements include in the Form 10-K. These condensed consolidated financial statements should be read in conjunction with the audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on April 17, 2017.

NONCONTROLLING INTEREST IN SUBSIDIARIES

The Company owns 90% of the equity interest in the Beijing LongYi Biology Technology Co. Ltd, and the remaining 10% is owned by Miss Ran Wang. Therefore, the Company records noncontrolling interest to allocate 10% of the results of the Beijing Longyi Biology Technology limited to Miss Ran Wang, its noncontrolling shareholder.

The Company owns 81% of the equity interest in the Chongqing JiuZhou Dismutase Biology Technology Co. Ltd, and remaining 9% is owned by Miss Ran Wang, and another 10% is owned by Mr. Guoqing Tan. Therefore, the Company records noncontrolling interest to allocate 19% of the results of the Chongqing JiuZhou Dismutase Biology Technology Co. Ltd to Miss Ran Wang and Mr. Guoqing Tan, its noncontrolling shareholder.

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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

SIGNIFICANT ESTIMATES

Several areas require significant management estimates relating to uncertainties for which it is reasonably possible that there will be a material change in the near term. The more significant areas requiring the use of management estimates related to the valuation of acquired companies, inventories, allowance for doubtful accounts, equipment, patent rights, accrued liabilities and stock options, and the useful lives for amortization and depreciation.

7

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

INVENTORY

Prior to January 1, 2015, inventories are stated at the lower of cost or replacement cost with respect to raw materials and the lower of cost or market with respect to finished goods and work in progress. The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 201511 (“ASU 2015-11”), Simplifying the Measurement of Inventory, which the Company adopted on January 1, 2015. Subsequent to January 1, 2015, inventories are stated at the lower of cost or replacement cost with respect to raw materials and the lower of cost or net realizable value with respect to finished goods and work in progress. The cost of work in progress and finished goods is determined on a weighted average cost basis and includes direct material, direct labor and overhead costs. Net realizable value represents the anticipated selling price, net of distribution cost, less estimated costs to completion for work in progress.

Inventories as of March 31, 2017 were $425,834 and $440,643 in December 31, 2016.

8

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

FOREIGN CURRENCY TRANSLATION

The financial records of the Group’s subsidiaries are maintained in their local currencies. Monetary assets and liabilities denominated in currencies other than their local currencies are translated into local currencies at the rates of exchange in effect at the balance sheet dates. Transactions denominated in currencies other than their local currencies during the year are converted into local currencies at the applicable rates of exchange prevailing when the transactions occur. Transaction gains and losses are recorded in other income/ (expense), net in the statements of income.

FOREIGN CURRENCY TRANSLATION (Continued)

The reporting currency of the Group is the United States dollar (“US dollar”). When translating local financial reports of the Group’s subsidiaries into US dollar, assets and liabilities are translated at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenue, expenses, gains and losses are translated at the average rate for the period. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the statements of operations and comprehensive income.

The relevant exchange rates are listed below:

FINANCIAL INSTRUMENTS

For certain of the Company’s financial instruments, including cash and equivalents, accounts receivable, accounts payable, other receivable, short term loan and other payable, the carrying amounts approximate their fair values due to their short maturities.

ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

• Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

• Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

9

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

• Level 3 inputs to the valuation methodology use one or more unobservable inputs which are significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC Topic 480, Distinguishing Liabilities from Equity, and ASC Topic 815, Derivatives and Hedging. As of March 31, 2017 and 2016, the Company did not identify any assets and liabilities required to be presented on the balance sheet at fair value.

INCOME TAXES

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when a different tax rate is enacted.

Pursuant to the provisions of ASC No. 740, Income Taxes, the Group provides valuation allowances for deferred tax assets for which it does not consider realization of such assets to be more likely than not. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the historical taxable income generation, projected future taxable income, the reversal of existing deferred tax liabilities and tax planning strategies in making this assessment.

The corporate income tax rate applicable to the company is from 15% to 35%. As of March 31, 2017, the Company had a Net Operating Loss of $30 million to be carried forward into future years and will begin expiring in 2035 if not utilized. A full valuation allowance is established against all deferred tax assets relating to NOL carry forwards based on estimates of recoverability. While the Company has optimistic plans for its business, it is determined that such a valuation allowance was necessary given the uncertainty with respect to its ability to generate sufficient profits from its new business model.

EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per common share ("EPS") is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share is calculated by adjusting the weighted average outstanding shares, assuming conversion of all potentially dilutive stock options.

10

There were no potentially dilutive securities outstanding at March 31, 2017 and 2016 as the result would be anti-dilutive.

COMPARATIVE FIGURES

Certain comparative figures have been reclassified in order to conform to the presentation adopted in the current period.

COMPREHENSIVE INCOME (LOSS)

The Company’s comprehensive income (loss) consists of net income (loss) and foreign currency translation.

RECENTLY ADOPTED ACCOUNTING STANDARDS

There were no new accounting pronouncements that may have material impacts on the Company’s consolidated financial statements, in addition to those disclosed in our audited consolidated financial statements for the year ended December 31, 2016, except for the following:In July 2015, the FASB amended its guidance related to the measurement of inventory. The amended guidance requires inventory to be measured at the lower of cost and net realizable value and thereby simplifies the current guidance of measuring inventory at the lower of cost or market. The amended guidance is effective prospectively for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company adopted the guidance during the first quarter of 2017 and it did not have a material impact on its Consolidated Financial Statements.

11

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In March 2016, the FASB amended its guidance related to the accounting for certain aspects of share-based payments to employees. The amended guidance requires that all tax effects related to share-based payments are recorded at settlement (or expiration) through the income statement, rather than through equity. Cash flows related to excess tax benefits are no longer separately classified as a financing activity apart from other income tax cash flows. The amended guidance also allows for an employer to repurchase additional employee shares for tax withholding purposes without requiring liability accounting and clarifies that all cash payments made to tax authorities on an employee’s behalf for withheld shares should be presented as a financing activity on the Consolidated Statements of Cash Flows. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company adopted the guidance during the first quarter of 2017 and it did not have a material impact on its Consolidated Financial Statements.

Other amendments to GAAP in the U.S. that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our audited consolidated financial statements upon adoption.

3. STOCKHOLDERS' EQUITY DEFICIT

The Company's capital structure as of March 31, 2017and December 31, 2016 was as follows:

As of March 31, 2017, the Company had accumulated deficit of $30,880,527.

4. INVESTMENTS

On January 5, 2010, the Company acquired 20% equity interest in Cangshan Duoha Vegetable Food Company (“Duoha”) by issuing 50,000 shares of common stock of the Company at $0.2 per share to Duoha’s shareholders. According to the investment agreement, although we own 20% equity interest of Duoha, we do not have significant influence over Duoha’s operating and financing activities. Therefore, the Company used cost method to record the above investment.

In May of 2015, we signed an investment agreement with Guizhou Biology Technology Ltd. (“Guizhou”). According to the investment agreement, the Company invested RMB 500,000 ($74,875) to acquire 20% equity interest in of Guizhou. Although we own 20% equity of Guizhou, we do not have significant influence over Guizhou’s operating and financing activities.

The amount of investment as of March 31, 2017 and December 31, 2016was $82,366 and $81,919, respectively.

12

The amount of inventory expensed as of March 31, 2017 and 2016 were $14,809 and $(3,720), respectively.

6. ACCOUNT RECEIVABLES

Trade accounts receivable arise from the product sales in the normal course of business. Based on management’s assessment of the customer’s credit history and current relationships with them, management makes conclusions whether any balances outstanding at the end of the period will be deemed uncollectible on an individual basis and aging analysis basis. The Company reserves 5% of accounts receivable balances that have been outstanding between 1 year and 2 years, reserves 20% of accounts receivable balances that have been outstanding between 2 years and 3 years, reserves 40% of receivable balances that have been outstanding between 3 years to 5 years, and reserves 100% of receivable balances that have been outstanding more than 5 years.

The allowance for doubtful accounts recognized as of March 31, 2017 and December 31, 2016 was Nil and Nil, respectively.

Account receivables at March 31, 2017 and December 31, 2016 consisted of:

13

Depreciation expense for three months ended March 31, 2017 and 2016 were $6,547 and $7,359, respectively. Impairment for three months ended March 31, 2017and 2016 were $44,767 and $47,802,

8.        COMMITMENTS AND CONTINGENCIES

From time to time, the Company has disputes that arise in the ordinary course of its business. Currently, according to management, there are no material legal proceedings to which the Company is a party to or to which any of their property is subject that will have a material adverse effect on the Company’s financial condition.

The Company rents office space from the related company on a month to month basis.

9.        SHORT-TERM LOAN

During the year of 2015, ShilingWang provided the company an unsecured loan in an amount of RMB 380,000 ($56,905), and the interest rate of the loan is 25% per annum. As of December 31, 2016, the Company has repaid loan in full.

During the year of 2017, RanWang provided the company an unsecured loan in an amount of RMB 100,000 ($14,494), and the interest rate of the loan is 25% per annum.

The principal amount for three months ended March 31, 2017 and the year ended 2016 were $14,494 and $0 respectively, and were recorded on the balance sheet as short-term loan.

14

First Quarter of 2017 Financial Performance Highlights

The following are some financial highlights for the three months ended March 31, 2017:

• Revenue : Revenue increase by $20,811, to $37,277 for the three months ended March 31, 2017, from $16,466 for the same period in 2016.

• Expense from operations : Expense from operations increased by $29,177, or 28.19%, to $132,663 for the three months ended March 31, 2017, from $103,486 for the same period in 2016.

• Net loss : Net loss increased by $46,840, or 53.90%, to $133,734 for the three months ended March 31, 2017, from net loss of $86,894 for the same period in 2016.

• Fully diluted net income per share : Fully diluted net income per share was $0 for the three months ended March 31, 2017, as compared to $0 for the same period in 2016.

Provision for Income Taxes

• United States : China Longyi Group International Holding Limited is subject to United States tax at a tax rate of 34%. No provision for income taxes in the United States has been made as China Longyi Group International Holding Limited had no income subject to United States taxation in the first quarter of 2017.

• British Virgin Islands : Our wholly owned subsidiary Top Team Holdings Limited was incorporated in the British Virgin Islands, or the BVI, and, under the current laws of the BVI, is not subject to income taxes.

• China : Before the implementation of the enterprise income tax, or EIT, Foreign Invested Enterprises or FIEs, established in the PRC were generally subject to an EIT rate of 33%, which includes a 30% state income tax and a 3% local income tax. On March 16, 2007, the National People’s Congress of China passed the new Corporate Income Tax Law, or EIT Law, and on November 28, 2007, the State Council of China passed the Implementing Rules for the EIT Law, or Implementing Rules, which took effect on January 1, 2008. The EIT Law and Implementing Rules impose a unified EIT of 25% on all domestic- invested enterprises and FIEs, unless they qualify under certain limited exceptions. Therefore, nearly all FIEs are subject to the new tax rate alongside other domestic businesses rather than benefiting from the old tax laws applicable to FIEs, and its associated preferential tax treatments, beginning January 1, 2008.
  
  Despite these pending changes, the EIT Law gives the FIEs established before March 16, 2007, or Old FIEs, such as our subsidiaries Beijing SOD and Chongqing SOD, a five-year grandfather period during which they can continue to enjoy their existing preferential tax treatments. During this five-year grandfather period, the Old FIEs which enjoyed tax rates lower than 25% under the original EIT Law shall gradually increase their EIT rate by 2% per year until the tax rate reaches 25%. In addition, the Old FIEs that are eligible for the “two-year exemption and three-year half reduction” or “five-year exemption and five-year half-reduction” under the original EIT Law, are allowed to remain to enjoy their preference until these holidays expire. The discontinuation of any such special or preferential tax treatment or other incentives would have an adverse effect on any organization’s business, fiscal condition and current operations in China.
  
  In addition to the changes to the current tax structure, under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a resident enterprise and will normally be subject to a EIT of 25.0% on its global income. The Implementing Rules define the term “de facto management bodies” as “an establishment that exercises, in substance, overall management and control over the production, business, personnel, accounting, etc., of a Chinese enterprise.” If the PRC tax authorities subsequently determine that we should be classified as a resident enterprise, then our consolidated global income will be subject to PRC income tax of 25.0%.

19

We incurred no income taxes in either the three months ended March 31, 2017and 2016.

Revenues. Our revenues are derived primarily from sales of our SOD products. Our revenues increased $20,811, to $37,277for the three months ended March 31, 2017, from $16,466 for the same period in 2016. The increase in revenues was due to more SOD products being sold for the three months ended March 31, 2017compared with the same period of 2016.

Cost of Revenues. Our cost of revenues is primarily comprised of the costs of our raw materials, labor and overhead. Our cost of revenues increased$19,782, to $19,782 for the three months ended March 31, 2017, from $0 during the same period in 2016 due to the increase in sales revenues. No cost of revenue was recognized during the three months ended Mar 31, 2016 as a result of inventory adjustments made in previous years (refer to relevant disclosures in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on April 17, 2017).

Gross Profit. Our gross profit increased by $1,029, to $17,495 for the three months ended March 31, 2017 from $16,466 during the same period in 2016.The gross profit increased mainly due to more SOD products being sold for the three months ended March 31, 2017compared with the same period of 2016.

Operating Expenses . Our total operating expenses for the three months ended March 31, 2017 increased $29,177, or 28.19%, to $132,663, from $103,486 for the same period in 2016. This increase was mainly because we paid more office expenses, rental, sales tax and consulting fees.

Other Income (expense) Other expense was $18,566 during the three months ended March 31, 2017, an increase of $18,692 from $126 during the same period in 2016. Such increase was mainly due to the transaction exchange loss. Transaction exchange loss for three months ended March 31, 2017 and 2016 was $(20,029) and $(2,828), respectively. Such difference was due to foreign exchange rate fluctuations.

20

Net loss attributable to China Longyi. As a result of above facts, our net loss increased by $45,928, or 57.86%, to $125,305 for the three months ended March 31, 2017, from $79,377of net loss for the same period in 2016.

Liquidity and Capital Resources

We had $11,788 in cash and cash equivalents as of March 31, 2017. As of such date, we also had total current assets of $593,380 and total assets of $957,605. We had total current liabilities (consisting of accounts payable, accrued liabilities, due to directors, other payables, short-term loan and due to related parties) in the amount of $1,963,342. Our stockholders’ deficit as of March 31, 2017 was $(1,005,737). Since inception, we have accumulated a net loss of $30,964,714.

The following table summarizes the statements of cash flows from the unaudited condensed consolidated interim financial statements for the three months ended March 31, 2017compared to the three months ended March 31, 2016:

Operating Activities

Net cash provided by operating activities was $(56,843) for the three-month period ended March 31, 2017 representing a decrease of $39,415 from $(17,428) of net cash used in the operating activities for the same period of 2016. The decrease of the cash provided by operating activities was mainly attributed to the change of the number of account of Net income, Account receivables, Deposits and prepayment, and other payables.

Cash flows used in Net loss increased by $46,840 to $133,734 for the three months ended March 31, 2017, from $86,894 for the same period in 2016.

Cash flow provided by Account receivables increased by $4,493 to $10,006 for the three months ended March 31, 2017, from $5,513 for the same period in 2016.

Cash flows used in Other receivables increased by $8,675 to $10,301 for the three months ended March 31, 2017, from $1,626 for the same period in 2016.

Cash flows used in Deposits and prepayment decreased by $15,949, to $2,428 for three months ended March 31, 2017, from $18,377for the same period in 2016.

Cash flows provided by Inventory increased $19,151, to $17,252 for three months ended March 31, 2017, from $(1,899) for the same period in 2016.

Cash flow provided by other payables decreased $21,840, to $46,634 for three months ended March 31, 2017, from $68,474for the same period in 2016.

Investing Activities

21

Net cash used in investing activities for the three-month period ended March 31, 2017 was $0 as compared with $0 of net cash used in investing activities for the same period of 2016.

Financing Activities

Net cash provided by financing activities for the three-month period ended March 31, 2017was $14,392 as compared to $7,087 provided by financing activities for the same period in 2016. Such change was mainly due to repayment of loans from directors of $131, less proceeds of short-term loan of $14,523, for the three months ended March 31, 2017.

The Company did not have any bank loans as of March 31, 2017.

We expect to generate approximately $2 million to $2.5 million of revenues from the sale of our products during the next 12 months. If our cash on hand and cash flow from operations do not meet our expected capital expenditure and working capital requirements for the next 12 months, we expect that our directors will provide more cash as loans to the company. However, we may in the future require additional cash resources due to changed business conditions, implementation of our strategy to expand our production capacity or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

Critical Accounting Policies

Economic and Political Risks

The Company faces a number of risks and challenges as a result of having primary operations and marketing in the PRC. Changing political climates in the PRC could have a significant effect on the Company’s business.

Use of Estimates
The preparation of 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 financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

22

Significant Estimates
Several areas require significant management estimates relating to uncertainties for which it is reasonably possible that there will be a material change in the near term. The more significant areas requiring the use of management estimates related to determination of net realizable value of inventory, allowance for doubtful accounts, property and equipment, accrued liabilities and, the useful lives for depreciation.

Restrictions on Transfer of Assets Out of the PRC
Dividend payments by Beijing SOD are limited by certain statutory regulations in the PRC. No dividends may be paid by Beijing SOD without first receiving prior approval from the Foreign Currency Exchange Management Bureau. Dividend payments are restricted to 85% of profits, after tax.

Revenue Recognition
The Company recognizes revenue in accordance with Staff Accounting Bulletin No.104 “Revenue recognition” (“ASC Topic 605”). Revenues are recognized as earned when the following four criteria are met: (1) a customer issues purchase orders or otherwise agrees to purchase products; (2) products are delivered to the customer; (3) pricing is fixed or determined in accordance with the purchase order or agreement; and (4) collectability is reasonably assured.

Inflation

Inflation does not materially affect our business or the results of our operations.

Seasonality

We may experience seasonal variations in our future revenues and our operating costs, however, we do not believe that these variations will be material.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

23