CN Dragon Corp - FORM 10-Q - August 23, 2010

Attached files

file	filename
EX-32.1 - EX 32.1 - CN Dragon Corp	ex321.htm
EX-32.2 - EX 32.2 - CN Dragon Corp	ex322.htm
EX-31.2 - EX 31.2 - CN Dragon Corp	ex312.htm
EX-31.1 - EX 31.1 - CN Dragon Corp	ex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

	For the quarterly period ended
	or

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

	For the transition period from April 1, 2010 to June 30, 2010

Commission File Number: 000-53771

CN DRAGON CORPORATION

(Exact Name of registrant as specified in its charter)

Nevada		98-0358149
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


8/F Paul Y Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong (Address of principal executive offices)


	(+852) 2772 9900
(Registrant’s telephone number, including area code )

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such period that the registrant was required to submit and post such files).

[ ] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]		Accelerated filer [ ]

Non-accelerated filer [ ] (Do not check if a smaller reporting company)		Smaller reporting company [X]

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. [ ] Yes [ ] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of June 30, 2010, there were 45,158,291 shares of our common stock [par value $0.001] issued and outstanding.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

CN DRAGON CORPORATION (FORMERLY WAVELIT, INC.)

CONSOLIDATED BALANCE SHEETS

AS AT JUNE 30, 2010 AND APRIL 30, 2010

(Stated in US Dollars)

			As at
	Note		June 30, 2010		April 30, 2010
ASSETS			(Unaudited)		(Audited)
Current assets
Cash and cash equivalents	2(l)	$	4,604	$	1,000
Trade receivables			156,066		-
Inventory			-		-
Deposits and prepaid expense			252,405		-
Other receivables			1,428,950		1


Total current assets			1,842,025		1,001
Property, plant and equipment, net	4		39,592		-
Intangible asset, net			-		-
Goodwill			-		-


TOTAL ASSETS		$	1,881,617	$	1,001


LIABILITIES AND
STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable		$	1,050	$	-
Amount due to the related companies	5		104,124		42,016
Bank overdraft			6,339		-
Loans Payable to Shareholders			1,792,610		-


Total current liabilities			1,904,123		42,016

Non-current liabilities
Convertible Debentures to Shareholders			-		-


TOTAL LIABILITIES		$	1,904,123	$	42,016

See accompanying notes to consolidated financial statements

CN DRAGON CORPORATION (FORMERLY WAVELIT, INC.)

CONSOLIDATED BALANCE SHEETS (Continued)

AS AT JUNE 30, 2010 AND APRIL 30, 2010

(Stated in US Dollars)

			As at
	Note		June 30, 2010		April 30, 2010
			(Unaudited)		(Audited)
STOCKHOLDERS’ EQUITY

Preferred Stock, $0.001 par value,
375,000,000 shares authorized,
no share issued and outstanding		$	-	$	-

Common stock - $0.001 par value
250,000,000 shares authorized; 1,804,791 and
80,469,940 shares issued and outstanding as of
June 30, 2010 and 2009	6	$	45,159	$	1,805

Additional paid-in capital			5,190,686		5,206,969
Accumulated deficits			(5,220,396)		(5,244,919)
Accumulated other comprehensive loss			(37,955)		(4,870)


		$	(22,056)	$	(41,015)



TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY		$	1,881,617	$	1,001

See accompanying notes to consolidated financial statements

CN DRAGON CORPORATION (FORMERLY WAVELIT, INC.)

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE PERIODS ENDED JUNE 30, 2010 AND 2009

(Stated in US Dollars)

			Periods ended June 30
	Note		2010		2009
			(Unaudited)		(Proforma)
Net revenues		$	363,524	$	-
Cost of net revenues			(153,996)		-


Gross profit/(loss)			209,528		-
Operating expenses:
Selling and distribution			(54,596)
General and administrative			(130,409)		(15,480)


Income/(Loss) before income taxes			24,523		(15,480)

Income taxes	7		-


Net income/(Loss)			24,523		(15,480)
Other comprehensive income:
Foreign currency translation adjustment			12,543		-
Debt Forgiveness			-		-

Discontinued operations
Loss of disposal, net of tax			-		-


Comprehensive gain/(loss)		$	37,066	$	(15,480)


Basic and diluted loss per share	6	$	0.00054	$	(0.00034)


Weighted average number of share
Outstanding	6		45,158,291		45,158,291

See accompanying notes to consolidated financial statements

CN DRAGON CORPORATION (FORMERLY WAVELIT, INC.)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

AND ACCUMULATED OTHER COMPREHENSIVE INCOME

FOR THE PERIODS ENDED JUNE 30, 2010 AND YEAR ENDED APRIL 30, 2010

(Stated in US Dollars)

															Accumulated
									Additional						other
	Preferred stock		Common stock						paid-in			Accumulated			comprehensive
	Number of	Number of			Amount			capital			deficit			income			Total
	share		Share
Balance, May 1, 2008	-		46,319,945	$		46,320	$		3,386,759	$		(5,420,252)	$		(27,172)	$		(1,841,143)
Issuance of share capital	-		42,650,000			42,650			1,298,985			-			-			1,341,635
Share Cancelation	-		(8,500,000)			(8,500)			(694,635)			-			-			(703,135)
Net loss	-		-			-			-			(1,219,417)			-			(1,219,417)
Foreign currency
translation adjustment	-		-			-			-			-			(41,419)			(41,419)
Comprehensive Gain	-		-			-			-			-			-			175,951


Balance, April 30, 2009	-		80,469,945	$		80,470	$		3,991,109	$		(6,639,669)	$		(68,591)	$		(2,287,528)



Balance, April 1, 2009	-		80,469,945	$		80,470	$		3,991,109	$		(6,639,669)	$		(68,591)	$		(2,287,528)
Issuance of share capital	-		100,000,000			100,000			1,679,708			-			-			1,779,708
Reverse split	-		(178,665,154)			(178,665)			178,665			-			-			-
Discontinued operations?	-		-			-			(642,513)			2,286,773			-			1,644,260
Net income	-		-			-			-			(892,023)			-			(892,023)
Foreign currency
translation adjustment	-		-			-			-			-			63,721			63,721
Comprehensive Loss	-		-			-			-			-			-			(349,153)


Balance, April 301, 2010	-		1,804,791	$		1,805	$		5,206,969	$		(5,244,919)	$		(4,870)	$		(41,015)

Balance, May 1, 2010	-	1,804,791	$	1,805	$	5,206,969	$	(5,244,919)	$	(4,870)	$	(41,015)
Issuance of share capital		43,353,500		43,354		(16,283)						27,071
Net income	-	-		-		-		24,523		-		24,523
Foreign currency
translation adjustment	-	-		-		-		-		(33,085)		(33,085)
Comprehensive Loss



Balance, June 30, 2010	-	45,158,291	$	45,159	$	5,190,686	$	(5,220,396)	$	(37,955)	$	(22,506)

See accompanying notes to consolidated financial statements

CN DRAGON CORPORATION (FORMERLY WAVELIT, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE PERIODS ENDED JUNE 30, 2010 AND 2009

(Stated in US Dollars)

		For the periods ended June 30,
		2010		2009
Cash flows from operating activities		(Unaudited)		(Proforma)
Net income (loss)	$	30,900	$	(15,480)
Depreciation		3,311		-
Discontinued operations		-		-

Adjustments to reconcile net income to net cash provided
by operating activities:
Accounts receivable		(156,066)		-
Deposits and prepaid expense		(252,405)		-
Bank overdraft		6,339		-
Amounts due to the related companies		62,108		15,480
Other receivables		(1,428,949)		-
Accrued liabilities		-		-
Loans from shareholders		1,792,610		-
Other payable		(24,384)		-


Net cash used in operating activities		57,848		0


Cash flows from investing activities
Purchase of plant and equipment		(2,028)		-
Disposal of intangible asset		-		-
Disposal of plant and equipment		-		-


Net cash used in investing activities		(2,028)		0


Cash flows from financing activities
Loans payable to stockholders		-		-
Proceeds from issuance of common stock		-		-


Net cash provided by financing activities		-		-



Net cash and cash equivalents sourced		55,820		0

Effect of foreign currency translation on cash and cash				-
equivalents		(52,216)		-

Cash and cash equivalents – beginning of year		1,000		0


Cash and cash equivalents – end of year	$	4,604	$	0

See accompanying notes to consolidated financial statements

CN DRAGON CORPORATION (FORMERLY WAVELIT, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2010 AND 2009

(Stated in US Dollars)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

CN DRAGON CORPORATION (formerly Wavelit, Inc.) (“the Company”) was incorporated under the laws of the State of Nevada on August 30, 2001, under the name Infotec Business Systems, Inc. On June 8, 2007, we changed our name to Wavelit, Inc. On September 14, 2009, we changed our name to CN DRAGON CORPORATION (formerly Wavelit, Inc.) and began new business operations in the PRC. On May 17, 2010, pursuant to the terms of the Agreement for Share Exchange, the Company acquired CNDC Corporation (“CNDC BVI”), and its wholly-owned subsidiaries, CN Dragon Holdings Limited (“CN Dragon Holdings”) and Zhengzhou Dragon Business Limited (“Zhengzhou Dragon”). This transaction was accounted for as a “reverse merger” with CNDC BVI deemed to be the accounting acquirer and the Company as the legal acquirer. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements for periods prior to the Share Exchange will be those of CNDC BVI, recorded at its historical cost basis. After completion of the Share Exchange, the Company’s consolidated financial statements will include the assets and liabilities of both the Company and CNDC BVI, the historical operations of CNDC BVI and the operations of the Company and its subsidiaries from the closing date of the Share Exchange.

CNDC BVI was established under the laws of the British Virgin Islands on March 26, 2008. The Company currently operates through itself and two subsidiaries, CN Dragon Holdings Limited and Zhengzhou Dragon Business Limited which were incorporated in Hong Kong and the People’s Republic of China (the PRC) respectively.

The Company and its subsidiaries (hereinafter, collectively referred to as (the “Group”)) are engaged and specialized in investment, development and fund management in hospitality properties, as well as advisory and consulting services to the hospitality, tourism and real estate industries in the PRC.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)	Method of Accounting

The Group maintains its general ledger and journals with the accrual method of accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by the Group conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of financial statements.

(b)	Principles of consolidation

The consolidated financial statements are presented in US Dollars and include the accounts of the Company and its subsidiaries. All significant inter-company balances and transactions are eliminated in consolidation.

The Company owned its subsidiaries soon after its reverse merger and continued to own the equity’s interests through June 30, 2010. The following table depicts the identity of the subsidiaries:

			Share capital/
	Place & date of Incorporation	Attributable equity Interest %	registered
Name of subsidiary	incorporation	interest %	capital

CNDC Corporation	British Virgin Islands/
	March 26, 2008	100	US$1

CN Dragon Holdings Limited	Hong Kong/Mar 5, 2008	100	HK$1

Zhengzhou Dragon Business Limited	PRC/Sep 12, 2008	100	HK$3,000,000

The Company prepared the consolidated financial statements in accordance with ASC 805-40 Reverse Acquisition. The Company changed its accounting year ended from April 30 to March 31 starting from 2011. The prior period is adjusted accordingly to reflect the proforma result of presentation.

(c)	Economic and political risks

The Group’s operations are conducted in Hong Kong and the PRC. Accordingly, the Group’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The Group’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Group’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

(d)	Property, plant and equipment

Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method.

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.

(e)	Trade receivables

Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for uncollectible accounts is maintained for all customers in considering with a variety of factors, including the length of past due, significant one-time events and the Group’s historical experience. Bad debts are written off as incurred.

(f)	Accounting for the impairment of long-lived assets

The Group periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets subject to amortization, when events and circumstances warrant such a review, pursuant to the guidelines established in ASC 360. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognised based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the cost to dispose.

During the reporting period, there was no impairment loss.

(g)	Foreign currency translation

The accompanying financial statements are presented in United States dollars. The functional currency of the Group is the Hong Kong dollars (HKD) and Renminbi (RMB). The financial statements are translated into United States dollars from HKD and RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

Year ended	June 30, 2010	June 30, 2009
RMB : USD exchange rate	6.8086	6.8448
Average period ended
RMB : USD exchange rate	6.8335	6.8339

Year ended	June 30, 2010	June 30, 2009
HKD : USD exchange rate	7.7847	7.7504
Average period ended
HKD : USD exchange rate	7.7794	7.7513

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.

(h)	Cash and cash equivalents

The Group considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Group maintains bank accounts only in the PRC and Hong Kong. The Group does not maintain any bank accounts in the United States of America.

(i)	Revenue recognition

Revenue is recognized when all of the following criteria are met:

- Persuasive evidence of an arrangement exists;

- Delivery has occurred or services have been rendered;

- The seller’s price to the buyer is fixed or determinable; and

- Collection is reasonably assured.

(j)	Operating lease rental

The Group did not have leases which met the criteria of a capital lease. Leases which do not qualify as capital leases are classified as operating leases. Operating lease rental payment has nil included in general and administrative expenses for the years ended June 30, 2010 and 2009.

(k)	Income taxes

The Group accounts for income taxes using an asset and liability approach and allows for recognition of deferred 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 Group is able to realize their benefits, or that future realization is uncertain.

(l) Cash and concentration of risk

Cash includes cash on hand and demand deposits in bank accounts maintained within PRC and Hong Kong. Total cash at June 30, 2010 amounted to $4,604 and Bank OD $6,339, of which no deposits are covered by Federal Depository Insured Commission. The Group has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

(m) Comprehensive income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. The Group’s current component of comprehensive income is net income and foreign currency translation adjustment.

(n) Recent accounting pronouncements

ASC 105, Generally Accepted Accounting Principles (“ASC 105”) (formerly Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162) reorganized by topic existing accounting and reporting guidance issued by the Financial Accounting Standards Board (“FASB”) into a single source of authoritative generally accepted accounting principles (“GAAP”) to be applied by nongovernmental entities. All guidance contained in the Accounting Standards Codification (“ASC”) carries an equal level of authority. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Accordingly, all other accounting literature will be deemed “non-authoritative”. ASC 105 is effective on a prospective basis for financial statements issued for interim and annual periods ending after September 15, 2009. The Company has implemented the guidance included in ASC 105 as of July 1, 2009. The implementation of this guidance changed the Company’s references to GAAP authoritative guidance but did not impact the Company’s financial position or results of operations.

ASC 855, Subsequent Events (“ASC 855”) (formerly Statement of Financial Accounting Standards No. 165, Subsequent Events) includes guidance that was issued by the FASB in May 2009, and is consistent with current auditing standards in defining a subsequent event. Additionally, the guidance provides for disclosure regarding the existence and timing of a company’s evaluation of its subsequent events. ASC 855 defines two types of subsequent events, “recognized” and “non-recognized”. Recognized subsequent events provide additional evidence about conditions that existed at the date of the balance sheet and are required to be reflected in the financial statements. Non-recognized subsequent events provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date and, therefore; are not required to be reflected in the financial statements. However, certain non-recognized subsequent events may require disclosure to prevent the financial statements from being misleading. This guidance was effective prospectively for interim or annual financial periods ending after June 15, 2009. The Company implemented the guidance included in ASC 855 as of April 1, 2009. The effect of implementing this guidance was not material to the Company’s financial position or results of operations.

ASC 944, Financial Services – Insurance (“ASC 944”) contains guidance that was previously issued by the FASB in May 2008 as Statement of Financial Accounting Standards No. 163, Accounting for Financial Guarantee Insurance Contracts – an interpretation of FASB Statement No. 60 that provides for changes to both the recognition and measurement of premium revenues and claim liabilities for financial guarantee insurance contracts that do not qualify as a derivative instrument in accordance with ASC 815, Derivatives and Hedging (formerly included under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities). This financial guarantee insurance contract guidance also expands the disclosure requirements related to these contracts to include such items as a company’s method of tracking insured financial obligations with credit deterioration, financial information about the insured financial obligations, and management’s policies for placing and monitoring the insured financial obligations. ASC 944, as it relates to financial guarantee insurance contracts, was effective for fiscal years beginning after December 15, 2008, except for certain disclosures related to the insured financial obligations, which were effective for the third quarter of 2008. The Company does not have financial guarantee insurance products, and, accordingly, the implementation of this portion of ASC 944 did not have an effect on the Company’s results of operations or financial position.

ASC 805, Business Combinations (“ASC 805”) (formerly included under Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations) contains guidance that was issued by the FASB in December 2007. It requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in a transaction at the acquisition-date fair value, with certain exceptions. Additionally, the guidance requires changes to the accounting treatment of acquisition related items, including, among other items, transaction costs, contingent consideration, restructuring costs, indemnification assets and tax benefits. ASC 805 also provides for a substantial number of new disclosure requirements. ASC 805 also contains guidance that was formerly issued as FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies which was intended to provide additional guidance clarifying application issues regarding initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. ASC 805 was effective for business combinations initiated on or after the first annual reporting period beginning after December 15, 2008. The Company implemented this guidance effective January 1, 2009. Implementing this guidance did not have an effect on the Company’s financial position or results of operations; however it will likely have an impact on the Company’s accounting for future business combinations, but the effect is dependent upon acquisitions, if any, that are made in the future.

ASC 810, Consolidation (“ASC 810”) includes new guidance issued by the FASB in December 2007 governing the accounting for and reporting of noncontrolling interests (previously referred to as minority interests). This guidance established reporting requirements which include, among other things, that noncontrolling interests be reflected as a separate component of equity, not as a liability. It also requires that the interests of the parent and the noncontrolling interest be clearly identifiable. Additionally, increases and decreases in a parent’s ownership interest that leave control intact shall be reflected as equity transactions, rather than step acquisitions or dilution gains or losses. This guidance also requires changes to the presentation of information in the financial statements and provides for additional disclosure requirements. ASC 810 was effective for fiscal years beginning on or after December 15, 2008. The Company implemented this guidance as of January 1, 2009. The effect of implementing this guidance was not material to the Company’s financial position or results of operations.

ASC 825, Financial Instruments (“ASC 825”) includes guidance which was issued in February 2007 by the FASB and was previously included under Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115. The related sections within ASC 825 permit a company to choose, at specified election dates, to measure at fair value certain eligible financial assets and liabilities that are not currently required to be measured at fair value. The specified election dates include, but are not limited to, the date when an entity first recognizes the item, when an entity enters into a firm commitment or when changes in the financial instrument causes it to no longer qualify for fair value accounting under a different accounting standard. An entity may elect the fair value option for eligible items that exist at the effective date. At that date, the difference between the carrying amounts and the fair values of eligible items for which the fair value option is elected should be recognized as a cumulative effect adjustment to the opening balance of retained earnings. The fair value option may be elected for each entire financial instrument, but need not be applied to all similar instruments. Once the fair value option has been elected, it is irrevocable. Unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. This guidance was effective as of the beginning of fiscal years that began after November 15, 2007. The Company does not have eligible financial assets and liabilities, and, accordingly, the implementation of ASC 825 did not have an effect on the Company’s results of operations or financial position.

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) (formerly included under Statement of Financial Accounting Standards No. 157, Fair Value Measurements) includes guidance that was issued by the FASB in September 2006 that created a common definition of fair value to be used throughout generally accepted accounting principles. ASC 820 applies whenever other standards require or permit assets or liabilities to be measured at fair value, with certain exceptions. This guidance established a hierarchy for determining fair value which emphasizes the use of observable market data whenever available. It also required expanded disclosures which include the extent to which assets and liabilities are measured at fair value, the methods and assumptions used to measure fair value and the effect of fair value measures on earnings. ASC 820 also provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. The emphasis of ASC 820 is that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants, under current market conditions. ASC 820 also further clarifies the guidance to be considered when determining whether or not a transaction is orderly and clarifies the valuation of securities in markets that are not active. This guidance includes information related to a company’s use of judgment, in addition to market information, in certain circumstances to value assets which have inactive markets.

Fair value guidance in ASC 820 was initially effective for fiscal years beginning after November 15, 2007 and for interim periods within those fiscal years for financial assets and liabilities. The effective date of ASC 820 for all non-recurring fair value measurements of nonfinancial assets and nonfinancial liabilities was fiscal years beginning after November 15, 2008. Guidance related to fair value measurements in an inactive market was effective in October 2008 and guidance related to orderly transactions under current market conditions was effective for interim and annual reporting periods ending after June 15, 2009.

The Company applied the provisions of ASC 820 to its financial assets and liabilities upon adoption at January 1, 2008 and adopted the remaining provisions relating to certain nonfinancial assets and liabilities on January 1, 2009. The difference between the carrying amounts and fair values of those financial instruments held upon initial adoption, on January 1, 2008, was recognized as a cumulative effect adjustment to the opening balance of retained earnings and was not material to the Company’s financial position or results of operations. The Company implemented the guidance related to orderly transactions under current market conditions as of April 1, 2009, which also was not material to the Company’s financial position or results of operations.

In August 2009, the FASB issued ASC Update No. 2009-05, Fair Value Measurements and Disclosures (Topic 820): Measuring Liabilities at Fair Value (“ASC Update No. 2009-05”). This update amends ASC 820, Fair Value Measurements and Disclosures and provides further guidance on measuring the fair value of a liability. The guidance establishes the types of valuation techniques to be used to value a liability when a quoted market price in an active market for the identical liability is not available, such as the use of an identical or similar liability when traded as an asset. The guidance also further clarifies that a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are both Level 1 fair value measurements. If adjustments are required to be applied to the quoted price, it results in a level 2 or 3 fair value measurement. The guidance provided in the update is effective for the first reporting period (including interim periods) beginning after issuance. The Company does not expect that the implementation of ASC Update No. 2009-05 will have a material effect on its financial position or results of operations.

In September 2009, the FASB issued ASC Update No. 2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent) (“ASC Update No. 2009-12”). This update sets forth guidance on using the net asset value per share provided by an investee to estimate the fair value of an alternative investment. Specifically, the update permits a reporting entity to measure the fair value of this type of investment on the basis of the net asset value per share of the investment (or its equivalent) if all or substantially all of the underlying investments used in the calculation of the net asset value is consistent with ASC 820. The update also requires additional disclosures by each major category of investment, including, but not limited to, fair value of underlying investments in the major category, significant investment strategies, redemption restrictions, and unfunded commitments related to investments in the major category. The amendments in this update are effective for interim and annual periods ending after December 15, 2009 with early application permitted. The Company does not expect that the implementation of ASC Update No. 2009-12 will have a material effect on its financial position or results of operations.

In June 2009, FASB issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (“Statement No. 167”). Statement No. 167 amends FASB Interpretation No. 46R, Consolidation of Variable Interest Entities an interpretation of ARB No. 51 (“FIN 46R”) to require an analysis to determine whether a company has a controlling financial interest in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as the enterprise that has a) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and b) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. The statement requires an ongoing assessment of whether a company is the primary beneficiary of a variable interest entity when the holders of the entity, as a group, lose power, through voting or similar rights, to direct the actions that most significantly affect the entity’s economic performance. This statement also enhances disclosures about a company’s involvement in variable interest entities. Statement No. 167 is effective as of the beginning of the first annual reporting period that begins after November 15, 2009. Although Statement No. 167 has not been incorporated into the Codification, in accordance with ASC 105, the standard shall remain authoritative until it is integrated. The Company does not expect the adoption of Statement No. 167 to have a material impact on its financial position or results of operations.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, Accounting for Transfers of Financial Assets an amendment of FASB Statement No. 140 (“Statement No. 166”). Statement No. 166 revises FASB Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Extinguishment of Liabilities a replacement of FASB Statement 125 (“Statement No. 140”) and requires additional disclosures about transfers of financial assets, including securitization transactions, and any continuing exposure to the risks related to transferred financial assets. It also eliminates the concept of a “qualifying special-purpose entity”, changes the requirements for derecognizing financial assets, and enhances disclosure requirements. Statement No. 166 is effective prospectively, for annual periods beginning after November 15, 2009, and interim and annual periods thereafter. Although Statement No. 166 has not been incorporated into the Codification, in accordance with ASC 105, the standard shall remain authoritative until it is integrated. The Company does not expect the adoption of Statement No. 166 will have a material impact on its financial position or results of operations.

3. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

Financial instruments which potentially expose the Group to concentrations of credit risk, consists of cash and trade receivables as of June 30, 2010 and 2009. The Group performs ongoing evaluations of its cash position and credit evaluations to ensure collections and minimize losses.

For the years ended June 30, 2010 and 2009, all of the Group’s sales were generated from Hong Kong.

The maximum amount of loss due to credit risk that the Group would incur if the counter parties to the financial instruments failed to perform is represented the carrying amount of each financial asset in the balance sheet.

Normally the Group does not obtain collateral from customers or debtors.

As of June 30, 2010 and 2009, no customer accounted for 10% of the Group’s trade receivables.

4. PROPERTY, PLANT AND EQUIPMENT, NET

Details of property, plant and equipment, net are as follows:

		2010		2009
At cost
Computer equipment and software	$	-	$	301,419
Demonstration equipment		-		2,635
Studio Equipment		-		71,690
Office equipment Motor Vehicle		11,974.13 36,353.36		5,215


		48,327.49		380,959
Less: accumulated depreciation		(8,735.55)		(162,207)


	$	39,591.94	$	218,752

Depreciation expenses are included in the statements of income as follows:

		2010		2009

General and administrative expenses	$	3,311.29	$	33,588

5. AMOUNT DUE TO THE RELATED COMPANY

The amount due to the related company, is unsecured, interest free and repayable on demand.

CN DRAGON CORPORATION (FORMERLY WAVELIT, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2010 AND 2009

(Stated in US Dollars)

6. SHARE CAPITAL

The Company was incorporated in Nevada on August 30, 2001. The Company performed a reverse merger on May 17, 2010. After the reverse merger, the Company has a total common stock of 45,158,291 shares at 0.001 par value. The Company has an authorized share capital of $250,000 divided into 250,000,000 shares of $0.001 each. CNDC Group Ltd (formerly known as CN Dragon Holdings Ltd) has 100% equity ownership of its subsidiaries.

The calculation of the basic and diluted earnings per share attributable to the share capital holder is based on the following data:

		For the periods ended June 30,
		2010		2009
Earnings:
Earnings for the purpose of basic earnings (loss) per share	$	24,523	$	(15,480)
Effect of dilutive potential share capital


Earnings for the purpose of diluted earnings (loss) per
share	$	24,323	$	(15,480)


Number of shares:
Weighted average number of share capital for the purpose		45,158,291		45,158,291
of basic earnings (loss) per share
Effect of dilutive potential share capital		-		-


Weighted average number of share capital for the purpose
of dilutive earnings (loss) per share		45,158,291		45,158,291

7. INCOME TAXES

The Company is not subject to any income tax as there are no estimated profitable or assessable profits for the years ended June 30, 2010 and 2009.

Pursuant to Hong Kong tax law, CN Dragon Holdings Limited is subjected to profits tax imposed at the rate of 16.5%. No Hong Kong profits tax is provided as there are no estimated assessable profits for the years ended June 30, 2010 and 2009.

Zhengzhou Dragon Business Limited, being registered in the PRC, is subject to PRC’s Corporate Income Tax (“CIT”) at a rate of 25%. No taxable income was derived from the subsidiary for the years ended June 30, 2010 and 2009.

No deferred tax has been provided as there is no material temporary difference arising for the years ended June 30, 2010 and 2009.

8. UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN

The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not generated significant revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain necessary equity financing to continue operations and the attainment of profitable operations. The management will seek to raise funds from shareholders.

For the period ended June 30, 2010, the Company has generated revenue of $363,524 and has incurred an accumulated deficit $5,220,396. As of June 30, 2010, its current liabilities exceed its current assets by $22,506, which may not be sufficient to pay for the operating expenses in the next 12 months. These financial statements do not include any adjustments relating 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. These factors noted above raise substantial doubts regarding the Company's ability to continue as a going concern.

9. SUBSEQUENT EVENT

The Company has evaluated all other subsequent events through August 23, 2010, the date these consolidated financial statements were issued, and determined that there were no other subsequent events or transactions that require recognition or disclosures in the financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

THE COMPANY

Cautionary Statement Concerning Forward-Looking Statements

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included in this report. This report contains “forward-looking statements.” The statements contained in this report that are not historic in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable terminology are forward-looking statements based on current expectations and assumptions.

Various risks and uncertainties could cause actual results to differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from expectations include, but are not limited to, those set forth under the section “Risk Factors” set forth in this report.

The forward-looking events discussed in this report, the documents to which we refer you and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. For these statements, we claim the protection of the “bespeaks caution” doctrine. All forward-looking statements in this document are based on information currently available to us as of the date of this report, and we assume no obligation to update any forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

Business

Corporate History Overview

CN Dragon Corporation was incorporated under the laws of the State of Nevada on August 30, 2001, under the name Infotec Business Systems, Inc. On June 8, 2007, we changed our name to Wavelit, Inc. On September 14, 2009, we changed our name to CN Dragon Corporation and began new business operations in the PRC. On May 17, 2010, we acquired CNDC Corporation (“CNDC”), as our wholly-owned subsidiary. All operations of CNDC have become the operations of CN Dragon Corporation. The following business discussion relates to the current operations of CNDC.

Business of CNDC

CNDC is a hotel management, development and consulting group. CNDC was incorporated under the laws of the British Virgin Islands on March 26, 2008. CNDC operates through its wholly-owned subsidiaries, CN Dragon Holdings Ltd and Zhengzhou Dragon Business Ltd, which were incorporated in Hong Kong and People’s Republic of China (“PRC”) respectively. From our inception, we have been engaged in providing consulting and management services to hotel investors and owners in the PRC. Our services have focused on covering major aspects of hotel development from the initial planning stages of a project to enhancing the management of a fully operating hotel asset. Specifically, we offer hospitality development, operations management and financial advisory services to clients. Over the years, we have specialized in assisting a number of clients in redeveloping unused idle buildings into fully operating hotel assets.

Hospitality Development

CNDC offers initial consultation, planning and development services to aspiring hotel owners. We will discuss with owners ideas and options to help quickly formulate a course of action and identify steps that need to be taken. Our experienced team will devise a solid project development plan, investing many hours in feasibility work and assisting owners in executing the plan. We believe a clear project development schedule is critical for owners to successfully develop a hotel on time and within budget. CNDC’s comprehensive hospitality development services include:

·	Project appraisal

·	Market feasibility studies

·	Formulating master development plan

·	Investment analysis, financial projections, risk analysis, and recommendations;

·	Pre-opening management, including planning, design and facility mix for hotels, resorts and spas, and support facilities;

·	Engagement of professionals such as master planners, architects, interior designers, landscape and services engineers

·	Training and staff development, including personalized services culture and guest recognition;

Operations Management

CNDC’s underlying goal is to enhance the efficiency and value of our client’s hotel assets, providing professional and candid consultant & management services. Our operations management services include:

·	Restructuring operations & procedures

·	Supplies procurement

·	Implement enhanced management systems, including financial reporting system;

·	Human resource management & training

·	Marketing & promotions

Financial Advisory

CNDC’s financial advisory services provides integrated investment and added-value solutions for businesses involved in the hospitality industry. Services offered includes customized investment advice, business consultation, mentorship programs, and capital raising strategies (debt & equity). Individual advice is tailored having conducted due diligence on the venture and the range of financial instruments available for closing a deal.

Business Strategy of CNDC

Anticipating the fast and continuous growth of the PRC economy, CNDC is directing and predominately focusing its business into the development and operation of luxury hotels & resorts in the PRC’s second-tier city holiday destinations. Under this new direction, CNDC plans to derive the majority of its earnings and revenue from the development of hotels & resorts; which includes management and other revenue generated from hotel investments. CNDC’s hotels & resorts business will specialize in the upscale segment of the hospitality sector, offering luxury accommodation and hospitality services to savvy business and leisure travelers. Our long term strategy is to build an asset based portfolio of hotel businesses, aiming to cater for the demand of consumers in the growing premium segment in the PRC.

CNDC presently does not have any ongoing hotel & resorts or other lodging developments. It current business involves actively seeking to procure interests in respect to properties in this segment through CNDC’s established network in the PRC hotel industry. CNDC’s procurement strategy involves identifying high growth second-tier cities in the PRC and examining whether they exhibit a strong demand for luxury hospitality services and facilities. We carry this out by thoroughly analyzing tourism figures, the supply of upper scale lodging and other industry related data. Additional factors we evaluate includes the locality, population, GDP, infrastructure and the major industries of each target city.

Market Analysis

One of CNDC’s key strategies is to target investments in the PRC’s second-tier cities that have been experiencing a sustained period of economic growth. This growth has attracted business and investment interests from around the world fuelling an increase in demand for travel and lodging services. Further, tourism in the PRC has greatly expanded over the last few decades. The emergence of a newly emerging middle class and an easing of restrictions on movement by the Chinese authorities are also fueling this travel increase. The PRC’s long history and diverse tourism resources will attract both international and domestic leisure tourists to visit different parts of the country, creating a high demand for hotel products and services.

In 2008, the PRC was the world’s second largest economy with its GDP registering US$ 7.9 trillion (IMF). According to the IMF, this figure will be eclipsed in 2009 with the PRC’s GDP already registering US$ 8.7 trillion in Oct 2009. In comparison with the US (1.1%) and Europe (0.80%), the PRC was the fastest growing economy last year with a GDP real growth rate of 9%. CNDC believes that the PRCs’ emerging second-tier cities have prospered along with that growth, attracting major investment and developments; with such markets evidencing a strong demand for modernization and presenting investors with comfortable room for growth.

In addition, CNDC believes the PRC has witnessed a rapid development of its hotel properties over the past two decades. The strengths of the PRC’s hotel industry rest in (1) the growing popularity of the PRC as a major international business market and tourism destination, (2) the diversity and quality of the PRC’s hotel products, (3) the efforts to standardize operations and improve service quality, and (4) increased development by global hotel corporations. The World Tourism Organization estimates that the PRC will become the leading tourist destination in the world by 2020. Therefore, CNDC believes that sustained economic development and the PRC’s rising popularity will provide a hotel market conducive to development.

Competition

CNDC faces significant competition from other hotel developers and operators, most of which have recognized trade names, and greater resources. In the event that CNDC are able to operate hotels & resorts in the PRC, competition may limit CNDC’s ability to attract and retain guests and may reduce room rates we are able to charge, which could ultimately reduce any future revenues. Further, since the PRC’s accession to the World Trade Organization (WTO) on December 11, 2001, the PRC has been gradually opening its hotel market to international development and competition. The Intensified competition from international developers and operators will pose great challenges to domestic hotel operations.

Employees

CNDC has 6 full time employees. CNDC intends to hire additional full time employees to implement its plans to expand its business into the development and operation of hotels & resorts.

Results of Operations

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to software development expenses, financing operations and contingencies and litigation. We base these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Critical Accounting Policies

Method of Accounting

The Company maintains its general ledger and journals with the accrual method of accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of financial statements.

Consolidation

The Company owned its subsidiaries soon after its reverse merger and continued to own the equity’s interests through June 30, 2010. The following table depicts the identity of the subsidiaries:

Name of Entities	Date of Incorporation	Place of Incorporation	Attributable Equity Interest	Registered Capital
CNDC Corporation	Mar 26, 2008	BVI	100%	US$ 1
CN Dragon Holdings Ltd	Mar 5, 2008	Hong Kong	100%	HK$ 1
Zhengzhou Dragon Business Ltd	Sep 12, 2008	PRC	100%	HK$ 3,000,000

Property, plant and equipment

Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives of the property, plant and equipment are as follows:

Office equipment:	5 years
Motor vehicles:	3 years

Trade receivables

Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for uncollectible accounts is maintained for all customers in considering with a variety of factors, including the length of past due, significant one-time events and the Company’s historical experience. Bad debts are written off as incurred.

Accounting for the impairment of long-lived assets

The Company periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets subject to amortization, when events and circumstances warrant such a review, pursuant to the guidelines established in FSAB ASC 360. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognised based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the cost to dispose.

Cash and cash equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Group maintains bank accounts only in the PRC and Hong Kong. The Company does not maintain any bank accounts in the United States of America.

Revenue recognition

Revenue represents the invoiced value of goods sold recognized upon the delivery of goods to customers. Revenue is recognized when all of the following criteria are met:

- Persuasive evidence of an arrangement exists;

- Delivery has occurred or services have been rendered;

- The seller’s price to the buyer is fixed or determinable; and

- Collection is reasonably assured.

Income taxes

The Company accounts for income taxes using an asset and liability approach and allows for recognition of deferred 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 realization is uncertain.

The Company is operating through its subsidiaries in Hong Kong and PRC, and in accordance with the relevant tax laws and regulations, the enterprises income tax rate are 16.5% for Hong Kong and 25% for PRC respectively.

Comparison of the periods ended June 30, 2010 and 2009

The following table sets forth key components of our results of operations for CN Dragon Corporation and subsidiaries, for the periods indicated (Stated in US Dollars).

	Period ended June 30, 2010 US$	Period ended June 30, 2009 US$
Net Revenues	363,542	-
Cost of Net Revenue	(153,996)	-
Gross Profit	209,528	-
Operating Expenses: Selling and Distribution General and administrative	(54,596) (130,409)	(15,480)
Income (Loss) Before Income Taxes	24,523	(15,480)
Income Taxes	-
Net Profit (Loss)	24,523	(15,480)

Net Revenues

Our revenue is mainly generated from providing consulting and advisory services to our clients in regards to their hotel assets. Our net revenue was $353,542. This increase in our net revenue during the period ended June 30, 2010, was mainly due to an increase in the number of hotel development projects we consulted on.

Cost of Net Revenue

Our cost of revenue includes engaging third party professionals to augment our consultation services by providing expertise in areas such as interior design, architecture and market research. Our cost of net revenue was $153,996. The increases were primarily due to the costs associated with the overall increase in the number of the projects we were consulting on, as more third party professionals were engaged and for longer periods.

Gross Profit

Our gross profit is equal to the difference between our revenue and our cost of revenue. Our gross profit was $209,528. The increase was primarily a result of improvement in economy of scale in our growing business volume, as well as the additional efficiency the company gained from enhanced hotel consultancy experience.

Selling and Distribution Expenses

Our selling and distribution expenses consist primarily of compensation and benefits to marketing staff, cost of advertising, promotion, business travel and other sales related costs. Our selling and distribution expenses was $54,596. This was primarily attributable to the cost control on business travel and other sales related costs.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation and benefits to our general management, finance and administrative staff, and other expenses incurred in connection with general operations. Our general and administrative expenses rose to $130,409. This increase was primarily attributable to increases in accounting and legal fees incurred for regulatory filings, due to the acquisition of our wholly-owned subsidiary, CNDC Corporation.

Net Profit (Loss)

We generated a net income of $24,523. This increase was primarily attributable to the business stemming from our consultancy services.

Liquidity and Capital Resources

Comparison of the periods ended June 30, 2010 and 2009

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. The following table sets forth a summary of our cash flows for the periods indicated (stated in U.S. dollars):

	Period ended June 30, 2010	Period ended June 30, 2009
	US$	US$
Net cash (used in)/provided by operating activities	(57,848)	0
Net cash provided by/ (used in) investing activities	(2,028)	0
Net cash provided by financing activities	-	-
Net cash and cash equivalents sourced	55,820	0
Effect of foreign currency translation on cash and cash equivalents	(52,216)	-
Cash and cash equivalents – beginning of year	1,000	0
Cash and cash equivalents – end of year	4,604	0

We believe that our cash on hand and cash flow from operations will meet part of our present cash needs and we will require additional cash resources, including loans, to meet our expected capital expenditure and working capital for the next 12 months. We may, however, in the future, require additional cash resources due to changed business conditions, implementation of our strategy to establish our hotels & resorts business, 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.

Off-balance Sheet Arrangements

We maintain no significant off-balance sheet arrangements.

Foreign Currency Transactions

The accompanying financial statements are presented in United States dollars. The functional currency of the Company and its subsidiaries is the Hong Kong dollar (HKD) and Renminbi (RMB). The financial statements are translated into United States dollars from HKD and RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when capital transactions occurred.

Exchange Rates	Period ended June 30, 2010	Period ended June 30, 2009
Year-end RMB: USD exchange rate	6.8086	6.8448
Average yearly RMB: US$ exchange rate	6.8335	6.8339
Year end HKD: USD exchange rate	7.7847	7.7504
Average yearly HKD: USD exchange rate	7.7794	7.7513

Recent Accounting Pronouncements

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We currently do not utilize sensitive instruments subject market risk in our operations. In the event that we borrow money for our operations, our principal exposure to financial market risks is the impact that interest rate changes could have on our loans.

Item 4. Controls and Procedures.

Disclosure controls and procedures

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934, as of the end of the period covered by this Transition Report on Form 10-Q, our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as such defined in Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Disclosure controls and procedures are defined as those controls and other procedures of an issuer that are designed to ensure that the information required to be disclosed by the issuer in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer and principal financial officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation of these disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer has concluded that our disclosure controls and procedures are effective.

Item 4T.Controls and Procedures.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles generally accepted in the United States of America. The Company's internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorization of management and directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the Company's financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting at June 30, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control--Integrated Framework. Based on that assessment under those criteria, management has determined that, at June 30, 2010, the Company's internal control over financial reporting was effective.

This Transition Report on Form 10-Q does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this annual report.

Inherent Limitations of Internal Controls

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

●		pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
●		provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
●		provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Our management does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in internal control over financial reporting

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer has not identified any change in our internal control over financial reporting in connection with its evaluation of the three months ended June 30, 2010, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We are not a party to any pending or ongoing legal proceedings responsive to this item number.

Item 1.A Risk Factors.

Not applicable.

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

Share issuance for acquisition

On March 14, 2010, we entered into a share exchange agreement (the “Exchange Agreement”) with CNDC Group Ltd (“CNDC Group”), a privately held corporation incorporated under the laws of the British Virgin Islands. The Exchange Agreement provided for our acquisition of CNDC Corporation (“CNDC”), a wholly-owned subsidiary of CNDC Group.

On May 17, 2010 (the Closing Date of the Exchange Agreement), we issued 42,000,000 restricted shares of our common stock [par value $0.001] to CNDC Group. In exchange, we acquired one (1) issued and fully paid ordinary share representing 100% equity interest in CNDC. Accordingly, CNDC became our wholly-owned subsidiary.

There were no underwritten offerings employed in connection with the transaction between CN Dragon Corporation and CNDC Group.

The issuance of 42,000,000 shares of our common stock to CNDC Group was deemed to be exempt from registration under the Securities Act, in reliance on Section 4(2) of the Securities Act of 1933 and Regulation D as transactions by an issuer not involving any public offering. CNDC Group represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and other instruments issued in the transaction. The sales of these securities were made without general solicitation or advertising.

Share issuance for consultant engagement

On June 1, 2010, we entered into a consulting agreement (the “Consultant Agreement”) with Investgold Ltd (“Investgold”), a privately held corporation incorporated under the laws of the British Virgin Islands. The Consultant Agreement provides for the provision of consultancy services by Investgold to the Company, specifically in relation to advising management on strategic planning, capital structure and financing strategies.

On June 16, 2010, we issued 1,353,500 restricted shares of our common stock [par value $0.001] to Investgold for compensation for the provision of one (1) year consulting services provided by Investgold, beginning June 1, 2010.

There were no underwritten offerings employed in connection with the transaction between CN Dragon Corporation and CNDC Group.

The issuance of 1,353,500 shares of our common stock to Investgold was deemed to be exempt from registration under the Securities Act, in reliance on Section 4(2) of the Securities Act of 1933 and Regulation D as transactions by an issuer not involving any public offering. Investgold represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and other instruments issued in the transaction. The sales of these securities were made without general solicitation or advertising.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other information.

None.

Item 6. Exhibits.

Statements



Balance Sheets at June 30, 2010 and 2009

Statements of Operations for the periods ended June 30, 2010 and 2009

Statement of Changes in Shareholders' Deficit for the periods ended June 30, 2010 and 2009

Statements of Cash Flows for the periods ended June 30, 2010 and 2009

Notes to Financial Statements

Schedules

All schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or notes thereto.

	Exhibit	Form	Filing	Filed with
Exhibits	#	Type	Date	This Report

Articles of Incorporation filed with the Secretary of State of Nevada on August 30, 2001	3.1	SB-2	6/17/2002

Certificate of Change effective March 18, 2003	3.2	8-K	3/7/2003

Certificate of Change effective May 30, 2007	3.3	8-K	6/13/2007

Certificate of Amendment filed with the Secretary of State of Nevada on May 30, 2007	3.4	8-K	6/13/2007

Certificate of Amendment filed with the Secretary of State of Nevada on September 14, 2009	3.5	10-K	8/12/2010

Certificate of Amendment filed with the Secretary of State of Nevada on November 20, 2009	3.6	DEF 14C	11/20/09

Bylaws dated August 30, 2001	3.3	SB-2	6/17/2002

Share Exchange Agreement between CN Dragon Corporation and CNDC Group Ltd	10.1	8-K	5/21/10

Certification of Teck Fong Kong, pursuant to Rule 13a-14(a)	31.1			X

Certification of Chong Him Lau, pursuant to Rule 13a-14(a)	31.2			X

Certification of Teck Fong Kong , pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	32.1			X

Certification of Chong Him Lau, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	32.2			X

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant

has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CN DRAGON CORPORATION


Date: August 23, 2010	By:	/s/ Teck Fong Kong
	(Teck Fong Kong, President, Director, CEO)


	By:	/s/ Chong Him Lau
	(Chong Him Lau, Director, CFO)

Exhibit 31.1

Certification of Chief Executive Officer

I, Teck Fong Kong, certify that:

1. I have reviewed this Transition Report on Form 10-Q of CN Dragon Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Signatures	Title	Date

/s/ Teck Fong Kong Teck Fong Kong	Chief Executive Officer Director	August 23, 2010

Exhibit 31.2

Certification of Chief Financial Officer

I, Chong Him Lau, certify that:

1. I have reviewed this Transition Report on Form 10-Q of CN Dragon Corporation;

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Signatures	Title	Date

/s/ Chong Him Lau Chong Him Lau	Chief Financial Officer Principal Accounting Officer Director	August 23, 2010

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Transition Report of CN Dragon Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies the following pursuant to Section 18, U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Signatures	Title	Date

/s/ Teck Fong Kong Teck Fong Kong	Chief Executive Officer Director	August 23, 2010

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Signatures	Title	Date

/s/ Chong Him Lau Chong Him Lau	Chief Financial Officer Principal Accounting Officer Director	August 23, 2010

CN Dragon Corp - FORM 10-Q - August 23, 2010

Attached files

CN Dragon Corp Reports