China Green, Inc. - FORM 10-Q - February 11, 2011

Attached files

file	filename
EX-31.1 - CERTIFICATIONS PURSUANT TO SECTION 302 OF SARBANES OXLEY ACT OF 2002 - China Green, Inc.	f10q1210ex31i_grnsol.htm
EX-32.2 - CERTIFICATIONS PURSUANT TO SECTION 906 OF SARBANES OXLEY ACT OF 2002 - China Green, Inc.	f10q1210ex32ii_grnsol.htm
EX-31.2 - CERTIFICATIONS PURSUANT TO SECTION 302 OF SARBANES OXLEY ACT OF 2002 - China Green, Inc.	f10q1210ex31ii_grnsol.htm
EX-32.1 - CERTIFICATIONS PURSUANT TO SECTION 906 OF SARBANES OXLEY ACT OF 2002 - China Green, Inc.	f10q1210ex32i_grnsol.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

FORM 10-Q

_______________

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

For the quarterly period ended December 31, 2010

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

For the transition period from ______to______.

GREEN SOLUTIONS CHINA, INC.

(Exact name of registrant as specified in Charter

DELAWARE		333-166747		75-3269182
(State or other jurisdiction of incorporation or organization)		(Commission File No.)		(IRS Employee Identification No.)

Room 3601, the Centre, Queen’s Road no.99

Central, Hong Kong

(Address of Principal Executive Offices)

_______________

(852) 3691-8831

(Issuer Telephone number)

_______________

CHINA GREEN, INC.

(Former Name or Former Address if Changed Since Last Report)

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

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

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

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o 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 o No x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of as of February 11, 2011: 6,514,750 shares of Common Stock.

Index

GREEN SOLUTIONS CHINA, INC.

FORM 10-Q

December 31, 2010

INDEX

PART I-- FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and results of Operations	20
Item 3	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4T.	Control and Procedures	32

PART II--OTHER INFORMATION

Item 1	Legal Proceedings	34
Item 1A	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	(Removed and Reserved)	34
Item 5.	Other Information	34
Item 6.	Exhibits	34

SIGNATURE		35

Index

Item 1. Financial Information

GREEN SOLUTIONS CHINA, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2010 AND 2009 (UNAUDITED)

(Stated in US dollars)

GREEN SOLUTIONS CHINA, INC.

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

Page(s)


CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME	1

CONDENSED CONSOLIDATED BALANCE SHEETS	2

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	3

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	4-19

Index

GREEN SOLUTIONS CHINA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED DECEMBER 31, 2010 AND 2009 (UNADUITED)

(Stated in US dollars)

		Three months ended			Three months ended			Six months ended			Six months ended
	Note	December 31, 2010			December 31, 2009			December 31, 2010			December 31, 2009

Service income	9	$	2,641,134		$	3,952,395		$	5,245,841		$	7,449,119

Cost of services	9		(1,690,933	)		(1,591,337	)		(3,221,779	)		(3,175,379	)

Gross profit	9		950,201			2,361,058			2,024,062			4,273,740

General and administrative expenses			(94,160	)		(28,384	)		(212,929	)		(51,316	)

Income before taxation	10		856,041			2,332,674			1,811,133			4,222,424

Income tax	10		-			(10,243	)		-			(48,666	)

Net income			856,041			2,322,431			1,811,133			4,173,758

Other comprehensive income - Foreign currency translation adjustments			234,379			(19,883	)		512,783			(40,135	)

Total comprehensive income		$	1,090,420		$	2,302,548		$	2,323,916		$	4,133,623

Net income per share – basic and diluted		$	0.13		$	0.37		$	0.28		$	1.01

Weighted average number of shares		$	6,514,750		$	6,249,750		$	6,514,750		$	4,183,167

The annexed notes form an integral part of these financial statements.

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Index

GREEN SOLUTIONS CHINA, INC.

CONDENSED CONSOLIATED BALANCE SHEETS

AS OF DECEMBER 31, 2010 AND JUNE 30, 2010

(Stated in US dollars)

			As of			As of
			December 31, 2010			June 30, 2010
	Note		(Unaudited)			(Audited)
ASSETS
Current assets
Cash and cash equivalents		3		$	911,148		$	1,141,108
Accounts receivables		4			3,764,437			3,898,480
Deposit paid for labor services					2,700,485			2,228,619
Deposit paid for contract procurements		5			3,735,744			2,629,028
Deposit paid for hotel investment negotiation		6			5,511,875			3,963,761
Rental deposit					35,244			35,244

Total current assets					16,658,933			13,896,240

Plant and equipment, net		7			2,272,924			2,697,473

Total non-current assets					2,272,924			2,697,473


TOTAL ASSETS				$	18,931,857		$	16,593,713

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities
Accrued expenses				$	51,728		$	41,484
Accrued share-based compensation					-			-
Tax payable					137,160			133,196

TOTAL LIABILITIES					188,888			174,680

CONTINGENCIS AND COMMITMENTS

STOCKHOLDERS’ EQUITY
Preferred stock ($0.00001 par value, 100,000,000 share shares authorized, none issued and outstanding)					-			-
Common stock ($0.00001 par value, 500,000,000 shares; shares authorized, 6,514,750 shares issued and outstanding)		8			65			65
Additional paid-in capital		8			4,008,511			4,008,511
Accumulated comprehensive income					1,395,799			883,016
Retained earnings					13,338,594			11,527,441

TOTAL STOCKHOLDERS’ EQUITY					18,742,969			16,419,033

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY				$	18,931,857		$	16,593,713

The annexed notes form an integral part of these financial statements.

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Index

GREEN SOLUTIONS CHINA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2010 AND 2009 (UNAUDITED)

(Stated in US dollars)

	Three months ended			Three months ended			Six months ended			Six months ended
	December 31, 2010			December 31, 2009			December 31, 2010			December 31,, 2009

Cash flows from operating activities
Net income	$	856,041		$	2,322,431		$	1,811,133		$	4,173,758
Depreciation		250,329			133,079			496,486			265,193
Decrease / (Increase) in accounts receivables		284,298			(552,566	)		134,044			(2,760,820	)
Increase in deposit paid for labor service		(684,988	)		-			(471,866	)		-
Increase in contract procurements		(466,112	)		-			(1,106,717	)		-
Increase in deposit paid for hotel investment negotiation		(444,181	)		(1,898,265	)		(1,548,112	)		(1,898,265	)
Increase in accrued expenses		1,607			54,518			10,243			59,402
Increase in tax payable		-			10,249			-			48,556
Decrease in amount due to a shareholder		-			(24,638	)		-			(23,899	)
Decrease in amount due to a director		-			(64,376	)		-			(64,499	)

Net cash from operating activities	$	(203,007	)	$	(19,568	)	$	(674,790	)	$	(200,574	)

Cash flows from investment activities
Purchase of plant and equipment		-			(17,339	)		-			(17,339	)

Net cash used in investment activities	$	-		$	(17,339	)	$	-		$	(17,339	)


Cash flows from financing activities
Proceeds from issuance of common stock		-			-			-			497,997
Repayment of short-term loan		-			-			-			20

Net cash used in financing activities	$	-		$	-		$	-		$	498,017


Net increase in cash and cash equivalents	$	(203,006	)	$	(36,907	)	$	(674,790	)	$	280,104

Effect of foreign currency translation on cash and cash equivalents		205,755			(20,164	)		444,830			(29,924	)
Cash and cash equivalents - beginning of period		908,399			1,156,708			1,141,108			849,457

Cash and cash equivalents - end of period	$	911,148		$	1,099,637		$	911,148		$	1,099,637

The annexed notes form an integral part of these financial statements.

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GREEN SOLUTIONS CHINA, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2010 AND 2009

(Stated in US dollars)

1.	ORGANIZATION AND DESCRIPTION OF BUSINESS

Effect from November 29, 2010, the company changed its name from China Green, Inc. to Green Solutions China, Inc. (“Green Solutions” or the “Company”).

Green Solutions China, Inc. consists of Green Solutions China, Inc., Glorious Pie Limited (the “Glorious Pie”) and Earn Bright Development Limited (the “Earn Bright”) (Collectively named as the “Group”). Green Solutions China, Inc. was incorporated in the State of Delaware on July 11, 2008. Glorious Pie Limited was incorporated in the British Virgin Islands on 12 June, 2006, under the International Business Companies Act, British Virgin Islands. Earn Bright Development Limited, a wholly owned subsidiary of Glorious Pie, was incorporated in Hong Kong on December 17, 2008.

In connection with private placement of the Company completed in July 2009, the Company issued 166,000 shares of our common stock to 296 Investors at $3.00 per share for an aggregate purchase price of $498,000.

On August 13, 2009, the Company closed a share exchange and stock purchase transaction by issuing 10,355,000 shares of its common stock in exchange for 100% of the outstanding common stock of Glorious Pie. This transaction was accounted for as a reverse acquisition and resulted in Glorious Pie becoming the accounting acquirer, whereby the historical financial statements of Green Solutions have become those of Glorious Pie.

On March 10, 2010, the Board of Directors of the Company adopted resolutions approving a Reverse Stock Split on the basis of one share for every two outstanding shares. The number of shares of the Company’s common stock issued and outstanding had been reduced from 13,029,500 to 6,514,750.

The Group is engaged in developing its model in the areas of hospitality facilities and large scale landscape architecture and engineering. The Group is specialized on providing greenery services to greenery construction projects in China, including, but not limited to, design advice, trading and quality control service of seed, provision of seedling and performance arrangement of greenery engineering and plantation.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of presentation and consolidation

The accompanying consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America for consolidated financial information.

The consolidated financial statements are prepared on the basis with assumption the reverse merger was undergone at the beginning of July 1, 2007. The historical consolidated financial statements of the Company will be those of Green Solutions China, Inc. and of the consolidated entities from the July 1, 2007, the date of merger, and subsequent.

The consolidated financial statements for the Company for the six months ended December 31, 2010 and 2009, includes the financial statements of Green Solutions China, Inc., its 100% owned subsidiary, Glorious Pie Limited, and its wholly owned subsidiary, Earn Bright Development Limited. Inter-company transactions and balances are eliminated in consolidation.

In connection with the reverse acquisition and recapitalization, all share and per share amounts will be retroactively restated.

As of December 31, 2010, the particulars of the subsidiaries are as follows:

Name of company	Place of incorporation	Date of incorporation	Attributable equity interest	Issued capital

Glorious Pie Limited	British Virgin Islands	June 12, 2006	100%	US$100

Earn Bright Development Limited	Hong Kong	December 17, 2008	100%	US$1,285 (HK$10,000)

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b) Use of estimates

In preparing of the financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting year. These accounts and estimates include, but are not limited to, the valuation of accounts receivable, inventories, deferred income taxes and the estimation on useful lives of plant and machinery. Actual results could differ from those estimates.

c) Cash and Cash Equivalents

The Group considers all cash and other highly liquid investments with initial maturities of three months or less to be cash equivalents. As of December 31, 2010 and June 30, 2010, there were cash and cash equivalents of $911,148 and $1,141,108 respectively.

d) Accounts Receivable

Accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts. The Group recognizes an allowance for doubtful accounts to ensure accounts receivable are not overstated due to uncollectibility. An allowance for doubtful accounts is maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. An additional reserve for individual accounts is recorded when the Group becomes aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted.

e) Accounting for the Impairment of Long-Lived Assets

In accordance with ASC 360, Property Plant and Equipment, the Group tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. At December 31, 2010, the Group did not recognize any impairment loss.

f) Plant and Equipment

Plant and equipment, other than construction in progress, are stated at cost less depreciation and amortization and accumulated impairment loss.

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 plant and equipment are as follows:

Furniture, fixtures and equipment

5 years

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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.

Management considers that we have no residual value for plant and equipment.

g) Fair value of Financial Instruments

The carrying values of the Group’s financial instruments, including cash and cash equivalents, accounts receivables, other receivables and prepayments, accounts payables, and other accrued liabilities their fair values due to the short-term maturity of such instruments.

h) Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar. Occasional transactions may occur in Hong Kong dollar and Renminbi (RMB). Management has adopted ASC 740 Foreign Currency Translation Matters. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

The functional currency of the wholly-owned subsidiaries is the RMB and Hong Kong dollar respectively. The financial statements of the subsidiary are translated to United States dollars in accordance with ASC 740 using period-end rates of exchange for assets and liabilities, and average rates of exchange for the year for revenues and expenses. Translation gains (losses) are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Foreign currency translation gains and losses are included in current operations.

	Three months ended December 31, 2010		Three months ended December 31, 2009	Six months ended December 31, 2010		Six months ended December 31, 2009
Period ended RMB : US$ exchange rate		6.6118	6.837		6.6118	6.837
Average period RMB : US$ exchange rate		6.6667	6.836		6.7237	6.839

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.

i) Revenue Recognition

Greenery construction revenue

The Group accepts contracts on a fixed price basis. Revenue from fixed price construction contracts are recognized on the percentage-of-completion method measured by the ratio of costs incurred to date to the estimated total cost s to be incurred for each contract. Revenue from unit price contracts and service agreements are recognized as services are performed.

Contract costs include all direct material, direct labor, subcontractor costs and other indirect costs related to contract performance, such as supplies, tools and equipment maintenance. General and administrative costs are charged to expense as incurred.

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Greenery maintenance revenue

The Group accepts contracts on a fixed price basis. Revenue are recognized on fixed price greenery maintenance contracts in straight-line basis over the contracted period except in those circumstances in which sufficient historical evidence indicated that the costs of performing services under the contract are incurred on other than a straight-line basis.

Hotel management revenue

The Group accepts contracts on service agreement basis. Revenue from service agreements are billed monthly based on certain percent of gross revenue generated by operating activity of the client.”

j) Cost of revenue

Greenery construction and maintenance

Regarding the trading of seeding and provision of greenery construction and greenery maintenance projects, the respective cost of revenue consists primarily of material costs, labor cost, subcontracting expenses, and related expenses, which are directly attributable to the greenery construction projects.

Hotel management

Regarding the design and consultancy services to the hotel facilities, the respective cost of revenue includes the consultancy expenses in professional staff involved and the design and consultancy fee with other third-party experts, and also the depreciation expenses on those fixtures and movable assets being placed with the hotel by the Group.

k) Income Taxes

The Group adopts ASC Topic 740, “Income Taxes”, regarding accounting for uncertainty in income taxes which prescribes the recognition threshold and measurement attributes for financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return. In addition, the guidance requires the determination of whether the benefits of tax positions will be more likely than not sustained upon audit based upon the technical merits of the tax position. For tax positions that are determined to be more likely than not sustained upon audit, a company recognizes the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not determined to be more likely than not sustained upon audit, a company does not recognize any portion of the benefit in the financial statements. The guidance provides for de-recognition, classification, penalties and interest, accounting in interim periods and disclosure.

For the six months ended December 31, 2010 and 2009, the Company did not have any interest and penalties associated with tax positions. As of December 31, 2010 and June 30, 2010, the Company did not have any significant unrecognized uncertain tax positions.

l) Comprehensive Income

ASC 220, “Reporting Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying statement of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

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m) Commitments and contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

n) Segment reporting

ASC 280, "Disclosure about Segments of an Enterprise and Related Information" requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

During the six months ended December 31, 2010 and 2009, the Company is organized into three main business segments: greenery construction consultancy, greenery maintenance and hotel management.

Greenery consulting services generally include landscape planning and design, concept applications, selection and provision of seedling, performance targeting and benchmarking, plantation management and quality control. Based on our assessment of a potential project’s sophistication, we would either directly implement our project plans or outsource services to selected subcontractors.

Greenery maintenance consulting services includes maintaining environment condition of the projects which has been completed by us in the past.

Hotel management services include applying eco-engineering concepts to renovate the Carnival City Hotel, Health City Hotel and Yu Zu Tang located in Dongguan into eco-friendly hotels. The Group’s consultancy plans generally include site assessment, energy optimization applications, resource efficiency planning, material selection and equipment installation.

The detail disclosure on segment information is set out in note 9 in the financial statement.

o) Earnings per share

The Group computes net earnings (loss) per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of December 31, 2010 and June 30, 2010, the Group had no common stock equivalents that could potentially dilute future earnings per share.

p) Share base compensation

In accordance with ASC 718, Compensation – Stock Based Compensation, the Group accounts for share-based payments using the fair value method. Common shares issued to third parties for non-cash consideration are valued based on the fair market value of the good or services provided or the fair market value of the common stock on the measurement date, whichever is more readily determinable.

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3.	CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of the following:

	As of		As of
	December 31, 2010		June 30, 2010

Cash at bank	$	530,639	$	1,002,875
Cash on hand		380,509		138,233
	$	911,148	$	1,141,108

4.	ACCOUNTS RECEIVABLES

Accounts receivables consist of the following:

	As of			As of
	December 31, 2010			June 30, 2010
Accounts receivables related to:

Hotel facilities		$	221,742		$	121,227
Greenery construction projects			3,424,358			3,645,067
Greenery maintenance projects			118,337			132,186
		$	3,764,437		$	3,898,480

At the balance sheet date, most of the accounts receivables were related to greenery construction projects and their credit year is usually ranged from 90 days to 180 days.

5.	DEPOSIT PAID FOR CONTRACT PROCUREMENTS

Main contractors require the Company to put escrow money during negotiation of contract. Once the contract is successfully bided, the escrow money will be kept by the contractors until the contract has been completed. If the bid is fail, the escrow money will be refunded immediately.

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6.	DEPOSIT PAID FOR HOTEL INVESTMENT NEGOTIATION

The Group has placed the following amount of deposit being held in escrow by the counter-party for the negotiation for acquiring certain equity interest of the hotel facilities located hereunder as of December 31, 2010 and June 30, 2010 which gives comfort to the negotiating party that the Group shows its financial strength and capability to get the acquisition closed if the acquisition deal is reached:

	As of			As of
Deposit for hotel investment negotiation	December 31, 2010			June 30, 2010

Dongguan City, Changan Town,		$	302,187		$	293,746
Xin Min Administration Region, Jianan Road Section

Shanghai Huaxun Holding Limited			1,382,529			1,343,798
No. 258, Mei Yuen Road, Jia Ding Area, Shanghai

Kang Zu Yuan Hotel	-					901,978
Dongguan City, Changan Town,
Zhen An Zhong Road, Section No. 269

Jiansu Dong'an Hotel			537,222			522,261
Jiansu Dong'an Technopark

Carnival City Club Hotel			931,919			901,978
No. 358, Sha Tau Management Zone,
Chengan, Dongguan

Shan Tou City Long Hu District Bai Le Hotel Limited			989,953			-
Floor 1 and 2, West Unit of Xin Bao Carkpark,
Chang Jang Road Central, Long Hu District, Shan Tou

Shanghai Qingqiu Huaxun Investment Holding Limited			1,368,065			-
No. 258, Mei Yuen Road, Jia Ding Area, Shanghai

		$	5,511,875		$	3,963,761

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7.	PLANT AND EQUIPMENT, NET

Plant and equipment and being part of hotel facilities and consist of the following:

	As of			As of
	December 31, 2010			June 30, 2010
At cost
Plant and equipment		$	4,902,462		$	2,648,609
Acquisition for the period / year			-			2,247,523
Exchange difference			145,921			6,330
			5,048,383			4,902,462
Aggregated depreciation
Beginning for the year			2,204,989			1,565,598
Charge for the year			496,486			633,062
Exchange difference			73,984			6,329
			2,775,459			2,204,989

Net book value		$	2,272,924		$	2,697,473

All of them depreciation charge were included in the cost of service. Management considers that there are no residual value for plant and equipment.

8.	COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL

The number of shares of common stock outstanding and additional paid-in capital at December 31, 2010 and June 30, 2010 is as follows:

	Common Stock				Additional paid-in
	Number		Amount		Capital		Amount

As of the date of inception 1		50,000	$	0.5	$	0.5	$	1
Private placement on August 2009 2		166,000		1.5		497,998.5		498,000
Share issued for compensation on August 2009 3		856,250		8.5		2,568,741.5		2,568,750
Share issued for takeover a subsidiary 4		5,177,500		52.0		52.0		104
Share issued for compensation on for the three months ended March 31, 2010 5		265,000		2.5		794,997.5		795,000
		6,514,750	$	65.0	$	3,861,790.0	$	3,861,855
Reversal of accrued compensation to an executive officer and shareholder for the year ended June 30, 2008		-		-		50,000.0		50,000
Reversal of accrued compensation to an executive officer and shareholder for the year ended June 30, 2009		-		-		50,000.0		50,000
Reversal of accrued compensation to an executive officer and shareholder for the year ended June 30, 2010		-		-		46,721.0		46,721
As of June 30, 2010 and December 31, 20106		6,514,750	$	65.0		4,008,511.0		4,008,576

1 On July 17, 2008, Green Solutions China, Inc. issued 50,000 shares of common stock to Mr. Wa Kei Anthony Wong, former president and director, at par value USD0.00001 as the founder shares as compensation for the services that he rendered in connection with the Company’s incorporation.

2 In connection with the Company’s private placement completed in July 2009, the Company issued 166,000 shares of its common stock to 296 investors at USD$3.00 per share for an aggregate purchase price of USD$498,000.

3 On August 12, 2009, the Company has issued 127,083 shares of share-based compensation at par value USD0.00001 to its director as compensation for services that he rendered. Furthermore, the Company also issued 729,167 shares of non-employee stock based compensation at par value USD0.00001 to third parties as compensation for their consulting services rendered. The total number of 856,250 shares had been compensated.

4 On August 12, 2009, Green Solutions China, Inc. acquired all of the issued and outstanding common stock of Glorious Pie Limited by issuing 5,177,500 common shares to the Glorious Pie Limited Shareholder under a Share Exchange and Stock Purchase Agreement with Glorious Pie Limited.

5 For the three months ended March 31, 2010, the Company has newly issued total 265,000 shares of comment stock at par value as compensation for non-employees.

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6 The Company effectuated a 2:1 reverse stock split during the quarter ended March 31, 2010. The Company has 500,000,000 shares of common stock authorized and 6,514,750 shares of common stock issued and outstanding. All statements are reversely stated in accordance with SAB Topic 4C.

As of December 31, 2010 and June 30, 2010, the Company has 500,000,000 shares of common stock authorized and 6,514,750 shares of common stock issued and outstanding.

9.	BUSINESS SEGMENT

The Group is engaged in provision of designing and consultancy services in hotel facilities and also involved in provision of engineering services to greenery construction and maintenance projects, which include, but is not limited to, provision of seedling and skillful workers to those construction projects.

Segment information is disclosed in accordance to ASC 250, “Disclosures about Segments of an Enterprise and Related Information” as below:

	Greenery Construction Project				Greenery Maintenance Works			Hotel Facilities			Total
	Three months ended				Three months ended			Three months ended			Three months ended
	December 31, 2010				December 31, 2010			December 31, 2010			December 31, 2010

Revenue from external customers		$	1,904,852		$	117,357		$	618,925		$	2,641,134

Cost of sales			(1,330,869	)		(82,737	)		(277,327	)		(1,690,933	)

Gross profit		$	573,983		$	34,620		$	341,598		$	950,201

	Greenery Construction Project				Greenery Maintenance Works			Hotel Facilities			Total
	Three months ended				Three months ended			Three months ended			Three months ended
	December 31, 2009				December 31, 2009			December 31, 2009			December 31, 2009

Revenue from external customers		$	2,633,107		$	604,481		$	714,807		$	3,952,395

Cost of sales			(1,166,347	)		(274,357	)		(150,633	)		(1,591,337	)

Gross profit		$	1,466,760		$	330,124		$	564,174		$	2,361,058

	Greenery Construction Project				Greenery Maintenance Works			Hotel Facilities			Total
	Six months ended				Six months ended			Six months ended			Six months ended
	December 31, 2010				December 31, 2010			December 31, 2010			December 31, 2010

Revenue from external customers		$	3,913,440		$	117,357		$	1,215,044		$	5,245,841

Cost of sales			(2,593,434	)		(82,737	)		(545,608	)		(3,221,779	)

Gross profit		$	1,320,006		$	34,620		$	669,436		$	2,024,062

	Greenery Construction Project				Greenery Maintenance Works			Hotel Facilities			Total
	Six months ended				Six months ended			Six months ended			Six months ended
	December 31, 2009				December 31, 2009			December 31, 2009			December 31, 2009

Revenue from external customers		$	4,841,085		$	1,208,514		$	1,399,520		$	7,449,119

Cost of sales			(2,329,503	)		(548,511	)		(297,365	)		(3,175,379	)

Gross profit		$	2,511,582		$	660,003		$	1,102,155		$	4,273,740

	Greenery Construction Project			Greenery Maintenance Works		Hotel Facilities		Total
	As of			As of		As of		As of
	December 31, 2010			December 31, 2010		December 31, 2010		December 31, 2010

Segment non - current assets		$	-	$	-	$	2,272,924	$	2,272,924

Segment current assets
(excluding cash and cash equivalents and rental deposit)		$	9,689,740	$	289,187	$	5,733,614	$	15,712,541

Segment current liability		$	-	$	-	$	-	$	-

	Greenery Construction Project			Greenery Maintenance Works		Hotel Facilities		Total
	As of			As of		As of		As of
	Jun 30, 2010			Jun 30, 2010		Jun 30, 2010		Jun 30, 2010

Segment non - current assets		$	-	$	-	$	2,697,473	$	2,697,473

Segment current assets
(excluding cash and cash equivalents)		$	8,502,714	$	132,186	$	4,084,988	$	12,719,888

Segment current liability		$	-	$	-	$	-	$	-

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10.

TAXATION

Income/ (loss) before tax consisted of the following:

	Three months ended				Three months ended
	December 31, 2010				December 31, 2009

United States (a)		$	(40,230	)		$	(6,129	)
PRC (b)			896,271				2,338,803
Hong Kong (c)			-				-
BVI (d)							-
		$	856,041			$	2,332,674

Component subjected to tax expense (benefit) consisted of the following:

	Three months ended			Three months ended
	December 31, 2010			December 31, 2009

United States		$	-		$	-
PRC (b) (i)			-			197,385
Hong Kong			-	-
BVI			-	-
		$	-		$	197,385

Tax expense consisted of the following:

	Three months ended			Three months ended
	December 31, 2010			December 31, 2009

United States		$	-		$	-
PRC (b) (iv)			-			10,243
Hong Kong			-			-
BVI			-			-
		$	-		$	10,243

a.	United States Tax

The Company has a net operating loss carry forward at December 31, 2010 for tax purposes totaling $3,782,338, expiring through the year 2028. Internal Revenue Code Section 382 places a limitation on the amount of taxable income that can be offset by carry forwards after a change in control (generally greater than a 50% change in ownership). Temporary differences, which give rise to a net deferred tax asset, are as follows:

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	Three months ended				Year ended
	December 31, 2010				June 30, 2010

Gross deferred tax assets:
Net tax loss carry forwards		$	1,285,995			$	1,204,154

Total deferred tax assets			1,285,995				1,204,154
Less: valuation allowance			(1,285,995	)			(1,204,154	)

Net deferred tax asset recorded		$	-			$	-

The valuation allowance at December 31, 2010 was $1,285,995. The net change in valuation allowance during the six months ended December 31, 2010, was an increase of $81,841. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December 31, 2010.

The actual tax benefit differs from the expected tax benefit for the six months ended December 31, 2010 and year ended June 30, 2010 (computed by applying the U.S. Federal Corporate tax rate of 34% to income before taxes) as follows:

	Three months ended				Year ended
	December 31, 2010				June 30, 2010

Expected tax expense (benefit) – Federal		$	1,285,995			$	1,204,154
Change in valuation allowance			(1,285,995	)			(1,204,154	)

Actual tax expense (benefit)		$	-			$	-

PRC Tax

PRC’s legislative body, the National People’s Congress, adopted the unified Enterprise Income Tax (“EIT”) Law on March 16, 2007. This new tax law replaces the existing separate income tax laws for domestic enterprises and foreign-invested enterprises and became effective on January 1, 2008. However, there will be a transition year for enterprises, whether foreign-invested or domestic, that are currently receiving preferential tax treatments granted by relevant tax authorities. Enterprises may continue to enjoy the lower rate and will transit into the new rate over a five year beginning on the effective date of the EIT Law. Enterprises that are currently entitled to exemptions for a fixed term may continue to enjoy such treatment until the exemption term expires. Preferential tax treatments may continue to be granted to industries and projects that qualify for such preferential treatments under the new law.

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The tax exemption was terminated on January 2, 2009. The estimated tax savings for the six months ended December 31, 2008 amounted to $107,108. If the income tax had been applied, the basic and diluted earnings per share would have been decreased by $Nil and $Nil per share for the six months ended December 31, 2010 and 2009 respectively.

Under the new EIT Law, the withholding tax mechanism for non-resident enterprises was retained from the previous separate income tax laws. It was stated that EIT payable by non-resident enterprises on its PRC-sourced income should be withheld at source and the payer shall be the withholding agent. The withholding agent shall withhold the tax from the amount paid or payable at the time the amount is paid or becomes due. As a general business practice for non-resident enterprises that generate PRC-sourced income, Glorious Pie Limited has received its revenues from its clients (which include government landscaping contractors and hotel operators) on a net of withholding tax basis.

(i) The components subjected to tax expense (benefit) consisted of the following:

	Three months ended			Three months ended
	December 31, 2010			December 31, 2009

Business Tax (b) (ii)		$	-		$	8,935
Enterprises Income Tax (b) (ii)			-			1,308

		$	-		$	10,243

(ii) Calculation for component subjected to Business Tax and Enterprises Income Tax consisted of followings:

	Three months ended				Three months ended
	December 31, 2010				December 31, 2009

Turnover for the period		$	2,641,134		$	3,952,395
Less: Net of withholding turnover by greenery projects (1,2)			(2,022,209	)		(3,237,588	)
Net of withholding turnover by hotel consulting (1,3)			(618,925	)		(536,107	)

Turnover subject to provision for Business Tax (3)			-			178,700
Less: Costs and expenses (4)			-			(160,014	)

Income subject to provision for Enterprises Income Tax		$	-		$	18,686

	Three months ended		Three months ended
	December 31, 2010		December 31, 2009

Business Tax at 5% of (b) (ii)	$	-	$	8,935
Enterprises Income Tax at 7% of (b) (iii)		-		1,308

Income tax expense	$	-	$	10,243

1Under PRC Tax Law, when a non-resident enterprises, that doesn’t have any establishment or place of business in the PRC, EIT payable by a non-resident enterprise on the income sourced from China shall be withheld at source, and the payer shall be withholding agent. The withholding agent shall withhold the tax from the amount paid or payable at the time the amount is paid or becomes due.

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2 For period ended June 30, 2010, Glorious Pie Limited has assigned the whole set of methodology and the know-how on the co-ordination and supervision of the progress and milestone of greenery project management with direct contact of those subcontractors (‘Intellectual Property’) to its Hong Kong subsidiary, Earn Bright Development Limited, which has licensed this set of Intellectual Property to the same group of clients of Glorious Pie Limited in PRC as Glorious Pie Limited be the agent of Earn Bright.. Such business activities has resulted in the licensing for use of intellectual property in China and any income derived from the use of such intellectual property licensing in China is deemed to be a ‘royalty’ in nature and such passive income sourced from China would be subject to PRC EIT being withheld at source by PRC payor. Under above circumstance, all revenue generated from greenery projects were net of tax revenue as its customers withhold all PRC tax liability derived by a Company’s revenue and profit from each project, including Business Tax and EIT, which resulted Company was not necessary to bear tax obligation.

3 Referring to previous paragraph, Glorious Pie Limited was deemed a non-resident enterprises and its’ customers were deemed a payer and further identified as tax withholding agent as well for any kind of income being sourced from China. The original hotel consulting agreement by itself does not give rise to any PRC taxable income for the period ended June 30, 2010.

However, since certain assets originated from the performance of hotel consultancy work of Glorious Pie Limited were transferred from Glorious Pie Limited to Earn Bright Development Limited over the reporting period to facilitate the management’s intention to seek for external funding in Hong Kong. Earn Bright Development Limited was entitled to certain percentages of revenues generated by Glorious Pie Limited through its hotel consultancy operations over the corresponding periods. Coupled with the transfer of such assets to Earn Bright Development Limited as described above, there is a new contract executed between the hotel and Earn Bright Development Limited to allow Earn Bright to receive certain amount of investment return on the placement of such asset with the hotel as being retained therein. Such activity is deemed to have Earn Bright derives ‘income sourced from China’ which is of a investment return in nature and being passive income. Therefore, Earn Bright Development Limited receives net of withholding tax revenues from the hotel operators via Glorious Pie Limited, the lack of direct contractual relationship between Earn Bright Development Limited and the hotel operators may lead to the view by PRC tax authorities that Earn Bright Development Limited may directly subject to PRC taxes on its PRC-sourced income since March 8, 2009. For the sake of prudence, we determined that it was necessary to include tax provisions for Earn Bright Development Limited’s PRC-sourced income. As all businesses in Earn Bright Development Limited operate under the Closer Economic Partnership Arrangement (CEPA) between the PRC and Hong Kong, its PRC-sourced income was subject to a 5% Business Tax and a 7% Enterprises Income Tax.

Therefore, the withholding tax amount of turnover from hotel consulting amount was difference between PRC-source income of Glorious Pie Limited and Earn Bright Development Limited.

4Costs and expenses include depreciation, repair and maintenance, legal and professional costs, and miscellaneous.

(iii) Income Tax Expense and provision for tax liability stated in balance sheet for the year at the statutory tax rate of applicable under PRC tax jurisdiction

	As of		As of
	December 31, 2010		June 30, 2010

Tax at the statutory tax rate of applicable in jurisdictions:

- Business Tax	$	-	$	38,105
- Enterprises Income Tax		-		22,367
		-		60,472
Balance brought forward		133,196		72,303
Foreign exchange translation		3,964		421

Tax payable	$	137,160	$	133,196

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c.	Hong Kong Tax

Earn Bright Development Limited has not been carrying out any business activity in Hong Kong and Earn Bright Development Limited is not subjected to Hong Kong profit tax as there is no assessable profit for the three months ended December 31, 2010 and year ended June 30, 2010.

BVI Tax

Glorious Pie Limited is subjected to British Virgin Island (BVI) tax law. The Management of Glorious Pie Limited determined that the company did not operate in BVI and therefore is not subject to BVI tax. Therefore, Glorious Pie Limited did not incur any BVI tax during the years presented.

A reconciliation of the statutory U.S. federal tax rate and effective tax rate is as follows:

	Six months ended			Six months ended
	December 31, 2010			December 31, 2009

Tax expense at statutory rate – US		34.00	%		34.00	%
Earning in jurisdictions taxed at rate different from statutory rate in US		(22.00	%)		(22.00	%)
Income withheld under PRC Tax jurisdiction		(12.00	%)		(11.60	%)
Effective tax rate		0.00	%		0.40	%

The deferred tax asset and liability has not been recognized because no valuation allowance to be established for the six months ended December 31, 2010 and year ended June 30, 2010.

11.	COMMITMENTS AND CONTINGENCIES

(a)	Operating lease commitments

The Company leased certain office space under a non-cancellable operating lease agreement with a term of 1 year with fixed monthly rentals, expiring on March 31, 2011, and generally did not contain significant renewal options. Total rent expenses for the six months ended December 31, 2010 and 2009 was $46,722 and $Nil, respectively. Future minimum rental payments due under the non-cancelable operating lease agreement are as follows:

Year ended June 30, 2011

37,378

(b) Contingencies

There are no foreseeable contingencies for the three months ended December 31, 2010 and 2009.

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12. SIGNIFICANT CONCENTRATION

The Group’s revenue derived from major customers for the three months ended December 31, 2010 and 2009 are as follows:

	Six months ended December 31, 2010
				Percentage of
		Revenue		total revenue

Dongguan Garden Project Co.		$	3,913,440		75	%
Dongguan Carnival City Hotel			888,582		17	%
		$	4,802,022		92	%

	Six months ended December 31, 2009
				Percentage of
		Revenue		total revenue

Fujian Tingli Construction Group Co., Ltd.		$	3,232,536		43	%
Henam District Huanghe River Garden Greenery Engineering Co. Ltd			1,608,594		22	%
Dongguan Carnival City Hotel			694,724		9	%
		$	5,535,853		74	%

13. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In July 2010, the FASB issued an accounting standards update to require further disaggregated disclosures that improve financial statement users’ understanding of (1) the nature of an entity’s credit risk associated with its financing receivables and (2) the entity’s assessment of that risk in estimating its allowance for credit losses as well as changes in the allowance and the reasons for those changes. This update will be effective for the Company in the second quarter of fiscal 2011, except for the disclosures relating to activity that occurred during a reporting period which is effective for the Company in the third quarter of fiscal 2011. Since this update addresses only disclosures related to credit quality of financing receivables and the allowance for credit losses, it is not expected that the adoption of this update will have a material impact on the Company’s financial position, results of operations or cash flows.

In April 2010, the FASB issued Accounting Standard Update 2010-17, “Revenue Recognition—Milestone Method (Topic 605): Milestone Method of Revenue Recognition” or ASU 2010-17. This Update provides guidance on the recognition of revenue under the milestone method, which allows a vendor to adopt an accounting policy to recognize all of the arrangement consideration that is contingent on the achievement of a substantive milestone (milestone consideration) in the period the milestone is achieved. The pronouncement is effective on a prospective basis for milestones achieved in fiscal years and interim periods within those years, beginning on or after June 15, 2010. The Company does not expect the adoption of ASU 2010-17 to have a significant impact on its consolidated financial statements.

In February 2010, the Financial Accounting Standards Board (“FASB”) issued an accounting pronouncement that amended the subsequent events pronouncement issued in May 2009. The amendment removed the requirement to disclose the date through which subsequent events have been evaluated. This pronouncement became effective immediately upon issuance and is to be applied prospectively. The adoption of this pronouncement did not have a material impact on Group’s consolidated financial statements.

In January 2010, the FASB issued ASU 2010-06, “Improving Disclosures about Fair Value Measurements,” which requires additional disclosures about transfers between Levels 1 and 2 of the fair value hierarchy and disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. This guidance was effective for the Company in the current quarter, except for the Level 3 activity disclosures, which are effective for fiscal years beginning after December 15, 2010. The adoption of this guidance, which is related to disclosure only, will not have a material impact on the Group’s consolidated financial position, results of operations or cash flows.

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In December 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” (“ASU 2009-17”). ASU 2009-17 changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance. The new standard requires a number of new disclosures, including additional disclosures about the reporting entity’s involvement with variable interest entities and any significant changes in risk exposure due to that involvement. A reporting entity is required to disclose how its involvement with a variable interest entity affects the reporting entity’s financial statements. ASU 2009-17 is effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009, or January 1, 2010, for a calendar year-end entity. Based on the Group’s evaluation of ASU 2009-17, the adoption of this statement did not impact the Group’s consolidated financial statements.

In October 2009, the FASB issued EITF 08-1, “Revenue Arrangements with Multiple Deliverables”, which is also known as Accounting Standards Update (ASU) No. 2009-13, “Revenue Recognition (ASC 605): Multiple-Deliverable Revenue Arrangements (ASU 2009-13). ASU 2009-13 addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services separately rather than as a combined unit and modifies the manner in which the transaction consideration is allocated across the separately identified deliverables. ASU 2009-13 significantly expands the disclosure requirements for multiple-deliverable revenue arrangements. ASU 2009-13 will be effective for the first annual reporting period beginning on or after June 15, 2010, and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the adoption date. Early adoption is permitted, provided that the guidance is retroactively applied to the beginning of the year of adoption. The Group is currently evaluating the impact this update will have on the Group’s consolidated financial statements.

In September 2009, the EITF reached final consensus on a new revenue recognition standard, Issue No. 09-3, “Applicability of AICPA Statement of Position 97-2 to Certain Arrangements That Contain Software Elements”, as codified in FASB Accounting Standards Update (ASU) 985. ASU 985 amends the scope of AICPA Statement of Position 97-2, Software Revenue Recognition to exclude tangible products that include software and non-software components that function together to deliver the product’s essential functionality. This Issue shall be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted, provided that the guidance is retroactively applied at the beginning of the year of adoption. The Group is currently evaluating the potential impact of ASU 985 on the Group’s results of operations or financial condition.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

Green Solutions China, Inc. (formerly known as China Green, Inc., formerly known as China Eco-Hospitality Operations, Inc.) is a blank check company formed on July 11, 2008 as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business that has its principal operations in an eco-friendly industry. On August 13, 2009, we entered into a Share Exchange and Stock Purchase Agreement with Glorious Pie, the Glorious Pie Shareholder and the Representative of our Investors. At the Closing, pursuant to the terms of the Share Exchange and Stock Purchase Agreement, we acquired all of the issued and outstanding common stock of Glorious Pie from the Glorious Pie Shareholder in exchange for our issuance of 10,355,000 common shares to the Glorious Pie Shareholder (the “Exchange Shares”). The Exchange Shares represented approximately 82.84% of our common stock issued and outstanding after the closing of the Share Exchange. As a result of the Share Exchange, Glorious Pie became our wholly-owned subsidiary.

Operating through Glorious Pie, our British Virgin Islands subsidiary, and Earn Bright, our Hong Kong operating subsidiary, we engage in providing eco-friendly project consulting services. We are currently focused on the areas of eco-friendly property consulting and eco-friendly construction projects. Our services can be applied to development or reconstruction projects in social facilities, parks, outdoor public areas, corporate buildings, hotels, commercial and residential properties. Our mission is to create an eco-friendly environment that can benefit both humans and nature. We actively seek for opportunities to apply ecological engineering (eco-engineering) concepts, the integration of ecological and engineering applications, in design, monitoring and construction of ecosystems, in both landscaping projects and property management to integrate human society with the natural environment. We advise our clients on overall project planning, selection and supervision of external consultants, and coordination of labor services and materials supplies. As such, we focus our business in three interrelated business segments: (i) Greenery Construction Consulting, (ii) Greenery Maintenance Consulting, and (iii) Eco-friendly Property Consulting and Development. Our target clients include landscaping contractors and property owners or operators who seek to construct or develop eco-friendly establishments.

As an eco-friendly project consulting company, the key to our future growth and success will be our ability to procure more profitable projects and build upon our reputation. We are focused on deepening our existing relationships as well as building new relationships to expand our project channels. We integrate our understanding in the dynamics of the local industries with our financial capital to formulate strategic ways to procure new consulting and management services contracts. Our capability to build professional project teams to provide quality advice and execute project plans is important to us. We maintain a broad network of contacts of external consultants, labor service subcontractors and materials suppliers which serves as a platform for us to build project teams based on the required knowledge and expertise. We continue to identify and develop new relationships with different professionals and experts to optimize our platform.

Currently, our main source of revenue is generated through contracts in Greenery Construction Consulting and Greenery Maintenance Consulting with government landscaping contractors. We generate net income from the difference between the consulting fees paid to us by the government contractors and our total subcontracting costs. Our subcontracting costs are typically paid to subcontracted consultants, labor service subcontractors and materials suppliers.

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We also generate revenues from three eco-friendly hotels in our Eco-friendly Property Consulting and Development segment. We have entered into separate revenue-sharing contracts with each of these hotels which includes providing consulting services and investments of eco-friendly designs and practices for these hotels. We have invested in certain equipments and fixtures in these hotels, such as furniture and fixtures, and electrical appliances. Pursuant to our revenue-sharing contracts, we possess full ownership over all of these assets and can remove them from the hotels at our discretion at any time. To the extent that an asset is not able to be removed from the hotel without damage, we are entitled to be paid the undepreciated balance of the asset. The equipment and fixtures that we purchase have a useful life equal to five years and do not have salvage values. The nature of these investments is to introduce eco-friendly designs and changes into the hotels as well as improve the look and feel to attract or retain customers.

We have been subject to 5% PRC business tax and 7% PRC profit tax since January 2, 2009.

Our Services

Greenery Construction Consulting

Our Greenery Construction Consulting business has mainly been focused on large-scale outdoor PRC government projects such as public infrastructure and social facilities development; however, we have been engaged to conduct private real estate development projects in the past. We develop budgetary plans for each project and arrange for and subcontract the necessary technical and labor services needed to execute our plan, including horticultural planning and design, concept applications, selection and provision of agriculture, performance targeting and benchmarking, plantation management and quality control.

We have managed many notable public and private construction projects in Dongguan, Guangdong Province, China’s third largest exporting city and one of the fastest growing regions in China. Such projects include Dongguan’s Songshan Lakes Science & Technology Industrial Park, a province-level development zone for new and high-tech industries. Our services have been extended to other locations in the Guangdong province, such as Guangzhou city.

We obtain construction projects from nine different government contractors, including Dongguan Xinyue’an Garden Co., Ltd., Dongguan Urban Garden Project Co., Ltd., Dongguan Bimanyuan Garden Project Co., Ltd., Dongguan Luyi Garden Project Co., Ltd., Dongguan Green World Industry Co., Ltd., Chang’an Construction Project Co., Dongguan Jiaye Garden Project Co., Dongguan Garden Project Co., and Foshan Shunde Tianyi Garden Co., Ltd. The contracts have a ten year term and provide for the external consultants to provide various landscaping and ecological improvement work in the PRC in consideration for an agreed upon fee. These contracts account for a material portion of our revenue. These contractors participate in the government project bidding process on a regular basis, and typically outsource their projects to project consulting and management companies such as our Company. During the government project bidding process, contractors are required to deposit with municipal governments a specified amount of fund to prove their financial ability to fully complete projects. We work closely with these contractors to improve their competitive status in the government project bidding process by providing funding to these contractors to meet the deposit requirements. These funds are locked up at the municipal governments overseeing the bidding process until the completion of the projects, but may remain in the contractors’ accounts from time to time when no projects are available for bidding, which may be subject to our demand for return with a 60-day written notice. This business arrangement has not only allowed us to maintain our business connections with the contractors but has provided us with information regarding the financial conditions of the contractors. The contractors and we are bound by master agreements which define the scope of our services and contain individual project term sheets, each party’s rights and obligations, completion arrangements, quantity and quality of materials. When we engage with a government contractor, we enter into an Agreement for Greenery Consulting. In the past, we entered into a second agreement with the governmental contractor for the purchasing of materials. The Trading Agreements require our subcontractors to purchase materials from us. We purchase the materials required from a third party vendor, and sell them to our subcontractors. We no longer require a Trading Agreement with our subcontractors to conduct business. Upon completion of a project, the contractor will receive payments from the municipal government, who then deliver payments to us within 30 days for material-related services and within 90 days for construction-related services.

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We outsource the labor related to our project construction work to subcontractors. A deposit is required by the Chinese government during the contract bidding process. We provide the funding needed for the required deposit. We reserve the right to recall these deposits in the event that we have decreased demand for labor services or other business or liquidity reasons with a 45-day written notice. We subcontract project managers in the PRC who monitor and oversee the progress of each project. We currently have six such subcontractors under contract. Three of these subcontractors have entered into services agreements and three have entered into suppliers agreements. The following are the subcontractors:

–	Liming He, entered into a Suppliers Agreement on September 4, 2006;
–	Shuangceng Wang, entered into a Suppliers Agreement on September 4, 2006
–	Qinlin Zhang, entered into a Suppliers Agreement on September 4, 2006
–	Xuhua Yang, entered into a Services Agreement on September 11, 2006
–	Bin Li, entered into a Services Agreement on March 28, 2010;
–	Shuangnan Lo, entered into a Services Agreement on March 28, 2010

We enter into supplier agreements with the subcontractors whereby such subcontractors are to supply our client with greenery materials, including plants, soil, and other related items that are necessary for us to carry out our intended project. The suppliers agreements typically have a term of 10 years. Our services agreements provide that the subcontractor provide us with on-site execution guidance and advisory services for certain greenery construction consulting and greenery maintenance consulting projects and on-site safety and security. The services agreements have a term of ten years.

Over the past year, we completed eight large-scale landscape consulting and development projects and are currently working on three large-scale landscape consulting and development projects. We are seeking more large-scale landscaping projects stimulated by the RMB 4 trillion economic stimulus plan launched by the PRC government, and are working with existing customers to secure more maintenance service contracts.

According to the National Development and Reform Commission (NDRC), approximately RMB 2.14 trillion is allocated to infrastructure and public facility. We believe this will lead to a significant increase in government construction projects in China. The construction duration of most government infrastructure projects is approximately two to three years and landscaping normally takes place at the latter stage of construction projects. As a result, we expect higher demand for landscaping consulting services in late 2010 and early 2011. We are planning to allocate more capital resources to take advantage of this growing trend and to increase our consulting service income in the coming years. We will also focus on retaining our clients from new and existing landscaping consulting projects to further increase our long-term revenue from maintenance services.

Greenery Maintenance Consulting

We offer consulting services to the same group of government contractors for Greenery Construction Consulting as for Greenery Maintenance Consulting projects. We work with external consultants to conduct site reviews and develop maintenance plans with our clients who outline all assessment criteria and performance targets. The external consultant acts as the site supervisor and we select subcontractors to execute the maintenance work. We conduct periodic performance and quality assessments to ensure the sites are maintained appropriately. The maintenance plans typically include soil quality analysis and renovation, root evaluation, plantation disease and strength analysis, pruning, pest control, weed control, floral treatments, earth surface treatment and restoration, maintenance and reconstruction of structural elements. In addition to working with subcontractors who perform maintenance on existing elements, our internal and external consultants recommend structural upgrades and development ideas to our clients.

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Eco-friendly Property Consulting and Development

Our Eco-friendly Property Consulting and Development business, also known as “ECHOO,” an acronym for eco-hospitality operations, applies eco-engineering concepts to real properties and manages the subcontracted labor necessary for the renovations needed to become more eco-friendly. Our current customer base for this business segment is three hotels. Our consulting services generally include site assessment, energy optimization applications, resource efficiency planning, material selection and equipment installation. Our management performs all of the consulting services for this business segment. However, we outsource the labor necessary to institute our consulting recommendations. In return, we enter into fixed-term revenue-sharing agreements with the hotel owners to receive a portion of the hotel’s future monthly revenue or a guaranteed minimum monthly amount as consulting fees for services we provided. We believe this business arrangement benefits both, our Company and the hotels. The hotels may enjoy an increase in revenue as a result of being an eco-friendly hotel.

When we begin a new project with a hotel, we enter into an Investment Negotiation Memorandum with such hotel. This memorandum is a letter of intent whereby we agree to enter into negotiations to provide environmental design consulting and planning and investment in hotels.

Since our inception, we have applied our services and eco-engineering applications to the Carnival City Hotel, the Health City Hotel (formerly known as the Kancheng Massage Centre) located in Dongguan and the Yu Zu Tang Hotel. Our consulting plans generally include site assessment, energy optimization applications, resource efficiency planning, material selection and equipment installation. In return, we signed two separate seven-year term revenue-sharing consulting agreements to receive 35% of the revenues from the Carnival City Hotel and the Health City Hotel, respectively, with a guaranteed monthly minimum of RMB 300,000 and RMB 100,000 or approximately $45,373 and $15,124, respectively, through June 2013. To date, each hotel has generated revenue each month which has provided us with cash in excess of the monthly minimums each month since we entered into them. To date, we have generated $8,647,884 and $3,170,822 in revenue attributed to Carnival City Hotel and Health City Hotel, respectively. The new revenue-sharing consulting agreement that we have entered into with Yu Zu Tang Hotel will entitle us to 20% of Yu Zu Tang’s revenues with a guaranteed monthly minimum of RMB 100,000 through April 2017. We began recording revenue from Yu Zu Tang in July 2010 and have recorded accumulated revenue of $190,320 as of December 31, 2010.

We may purchase new property, plant and equipment as an investment into our business in accordance with the needs of our customers. To date, we have purchased an aggregate of $2,247,523 in new assets for the Yu Zu Tang, Carnival City Hotel and Health City Hotel locations for the twelve months ended June 30, 2010,. We retain ownership of all new and previously purchased assets through revenue sharing agreements we enter into with the hotels. The revenue sharing agreements stipulate that we retain ownership of any property, plant and equipment we purchase for the hotel for the time period covered by the agreement. Therefore, if a revenue sharing agreement prematurely expires, or is terminated, all assets previously purchased by us in conjunction with the agreement, are returned to us. In the event that the asset is a leasehold improvement, and cannot be physically returned to us, the hotel is required to pay us the asset’s undepreciated balance as of the date the contract ceases. The purchasing of such assets is necessary for the transformation of the hotel and we believe we will be compensated for our investment through the increase in revenue the hotel will generate as a result of our investment.

Property, plant and equipment we purchase supports the transformation of the hotels into eco-friendly hotels in a number of ways. For example, heatproof glasses that we installed can maintain the building’s warmth and allow natural lighting to penetrate so as to reduce indoor heating and lighting. Additionally, we selected blinds and curtains to reduce indoor temperature fluctuation. We also assisted in designing the construction of walls with insulated materials to prevent heat loss. Indoor walls were painted to reflect sunlight penetrated through windows and reduce energy consumption on lighting. In anticipation of the summer season, we have replaced old air conditioners with new air conditioning systems to reduce electricity costs. Some old electrical appliances that were owned by the hotel owners, such as CRT televisions, were energy inefficient. We replaced the old CRT televisions with LCD televisions to reduce heat generation in the indoor areas. These upgrades not only make the hotels eco-friendly but also help improve the look and feel of the hotels.

Fees are paid monthly within 5 days after the hotels’ monthly revenues are booked. The hotels are obligated to keep full and accurate books and records which shall be available to us and our agents for inspections and audits. We believe this business arrangement has benefited both our Company and the hotels, with the implementation of our ECHOO program.

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In our Eco-friendly Property Consulting and Development business, we continue to receive recurring and growing revenues from three completed ECHOO hotels and are currently seeking to identify suitable targets in Guangdong, Shanghai and other cities in PRC. Although the economy of Guangdong province was severely affected by the financial crisis in 2008 and 2009, the province continues to be a key focus of the Chinese government. The long-term sustainability of the economic conditions of Guangdong province is expected to support a long-term demand for hotel services.

The World Expo took place in Shanghai from May 1, 2010 thru October 31, 2010. In preparation for the World Expo, many hotels increased their capacity in order to meet temporary customer demands. Since the World Expo has ended, these hotels are experiencing an oversupply of available rooms. We are currently targeting these Shanghai hotels to expand our hotel consulting services by providing hotel owners with consulting services as a way to improve profitability and competitiveness of their hotels. As Shanghai continues to be a fast-growing city in China, the long-term demand for hotels is expected to remain strong. We believe that Shanghai residents and travelers will be receptive to eco-friendly hotel concepts given the local pollution problems, relatively higher education levels and increasing awareness of environmental issues both locally and globally.

In the future, we aim to become an industry leader in eco-engineering consulting and position ourselves as a full service company with a dual focus in landscaping and eco-property development. We will develop our Greenery Construction Consulting business into a balanced portfolio that includes public sector projects, private sector projects, and landscape maintenance and services. In our Eco-friendly Property Consulting and Development business, we intend to expand our business by providing services to commercial and residential properties major cities and provinces in PRC.

Sales & Marketing

Greenery Construction and Greenery Maintenance Consulting

We primarily obtain our Greenery Construction and Greenery Maintenance Consulting projects from nine government prime contractors and other private contractors, as set forth in the table below. These contractors are based in Guangdong and other provinces. The contracts have a ten year term and provide for the external consultants to provide various landscaping and ecological improvement work in the PRC in consideration for an agreed upon fee. We recommend proposal bids to the contractors which in turn use our estimates to bid for government and private landscaping projects.

1	东莞市新粵安园林绿化有限公司 Dongguan Xinyue’an Garden Co., Ltd.
2	东莞市城区园林绿化工程公司 Dongguan Urban Garden Project Co., Ltd.
3	东莞市碧滿园园林绿化工程有限公司 Dongguan Bimanyuan Garden Project Co., Ltd.
4	东莞市绿怡园林工程有限公司 Dongguan Luyi Garden Project Co., Ltd.
5	东莞市绿色世界实业有限公司 Dongguan Green World Industry Co., Ltd.
6	长安鎮建筑安裝工程公司 Chang’an Construction Project Co.
7	东莞市嘉业园林绿化工程公司 Dongguan Jiaye Garden Project Co.
8	东莞市园林绿化工程公司 Dongguan Garden Project Co.
9	佛山市順德區添艺园林绿化有限公司 Foshan Shunde Tianyi Garden Co., Ltd.

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Eco-friendly Property Consulting and Development

We continuously seek to identify unprofitable and financially distressed hotels that can potentially be converted into ECHOO hotels. We target hotels with scalable structures located in visible and high traffic areas. We enter into multi-stage discussions with these hotel owners and offer them our services in exchange for a future revenue-sharing fee. We work in tandem with the hotel owners throughout the ECHOO hotel conversion process from initial site assessment to identifying areas of improvement to development of green practices and other changes.

Our marketing strategy is focused on positioning our company as a leader in eco-engineering that specializes in landscaping and eco-friendly development. We execute our strategy by further improving our reputation in construction consulting and developing our ECHOO brand in eco-property consulting. At present, our management is responsible for marketing our services through regional channels and industry events. We also leverage cross-selling opportunities between our three business segments. In the future, we plan to hire professional marketing and public relations staff and external agencies to increase awareness of our ECHOO brand. We will allocate resources on regional exhibitions, conferences, educational events, to broaden our brand exposure.

RESULTS OF OPERATIONS

Three Months ended December 31, 2010 Compared to the Three Months ended December 31, 2009

The following tables set forth key components of our results of operations for the periods indicated, in U.S. dollars, and key components of our revenue for the period indicated, in dollars.

	Three months			Three month
	Ended			Ended
	December 31,				December 31,
	2010				2009

Service Income	$	2,641,134			$	3,952,395
Cost of services		(1,690,933	)			(1,591,337	)
Gross profit		950,201				2,361,058
General and administrative expenses		(94,160	)			(28,384	)
Income before taxation		856,041				2,332,674
Income tax		-				(10,243	)
Net income	$	856,041			$	2,322,431

Service Income. Our service income for the three months ended December 31, 2010 was $2,641,134 as compared to $3,952,395 for the three months ended December 31, 2009, a decrease of $1,311,261 or approximately 33.2%. Decrease in our service income was mainly attributable to Greenery Construction Consulting segment, which decreased by $728,255 and Greenery Maintenance Consulting segment, which decreased by $487,124 for the three months ended December 31, 2010 as compared with the same period in 2009. It was because we had less greenery construction and maintenance projects conducted during the period.

Income from our greenery construction consulting segment decreased by $728,255 for the three months ended December 31, 2010, as compared with the same period in 2009. For the three months ended December 31, 2010, we had two completed carried-over projects from last quarter and two new on-going Greenery Construction Consulting projects. The two completed projects are Shahe River Greenery Project Phase II and Gaobu Town Plaza Project Part III Phase II with revenues $584,404 and $300,823 respectively. The two new on-going projects are Shahe River Greenery Project Phase III and Gaobu Town Plaza Project Part III Phase III with revenues of $447,597 and $572,028 respectively. These projects had contributed to 100% of our greenery construction consulting revenue. We had focused our efforts on a smaller number of larger scale projects as compared with focusing on volume in the prior year. Typically larger projects require us to be on site for a longer period of time, thus allowing us to build strong long term relationships with our customers. Further, the profit margin on a larger project is typically greater than the margins yielded on completing many smaller projects. Our revenue per project was $476,213 for the three months ended December 31, 2010.

Income from our greenery maintenance consulting segment decreased by $487,124 for the three months ended December 31, 2010, as compared with the same period in 2009. It was because we found less profitable greenery maintenance projects as labour cost and material cost increased for the three months ended December 31, 2010. For the three months ended December 31, 2010, we had one new Greenery Maintenance Consulting project. It is Garden Road Upgrade Maintenance Project with revenue of $117,357.

Income from our hotel consulting segment decreased by $95,882 for the three months ended December 31, 2010, as compared with the same period in 2009. The decrease in hotel consulting and facilities was mainly attributable to the reduced revenue of Health City Hotel in October and November. The hotel was closed in August and September due to renovation. Fewer customers to come in the three months ended Dec 31, 2010 because they were not noticed about the hotel reopening. Management expects the total revenue to improve as the hotel starts to operate in full capacity.

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Cost of Services. Our cost of services for the three months ended December 31, 2010 was $1,690,933 as compared to $1,591,337 for the three months ended December 31, 2009, a increase of $99,596 or approximately 6.3%. The increase of our cost of services was mainly attributable to the increased labour cost and material cost of Greenery Construction Consulting projects. Depreciation expenses of hotel equipment also increased with more property, plant, and equipment invested in hotels.

Cost of sales of our greenery construction projects increased from $1,166,347 to $ 1,330,869. The increase in cost was attributable to the increase in labor costs and material costs.

Cost of sales of our greenery maintenance projects decreased from $274,357 to $82,737. The decrease was attributed to less profitable projects conducted in which labour and material cost increased during the three months ended December 31, 2010.

The major cost of services of our hotel consulting business is the depreciation of hotel equipment. There was a $117,250 or 88.1% increase in depreciation of hotel equipment compared to the same period last year, as we acquired $2,247,523 of new equipment, fixtures, and furniture in the twelve months ended June 30, 2010.

Gross Profit. For the three months ended December 31, 2010 as compared to the three months ended December 31, 2009, we generated gross profit of $950,201 and $2,361,058, respectively, reflecting a decrease of $1,410,857 or approximately 59.8%. Our gross profit margin (gross profit divided by revenue) decreased from approximately 59.7% for the three months ended December 31, 2009 to approximately 36.0% for the same period ended 2010, representing a decrease of 23.7%. This was attributed to a decrease in profit margin in Greenery Construction Consulting which decreased from 55.7% to 30.1%. Our gross profit margin in this business segment decreased as labor and material costs increased. The Management believes that the profit margin will maintain at this level as the Company is likely to face high labor and material costs in a near future.

The gross profit margin on our Eco-friendly Property Consulting and Development business decreased from 78.9% to 55.2% due to the decrease in hotel consulting revenue and increase in depreciation expense. Management expects profit margins to decrease as depreciation expense increases due to our new investment on new property, plant, and equipment for the twelve months ended June 30, 2010.

General and Administrative Expenses. We incurred general and administrative expenses of $94,160 for the three months ended December 31, 2010, an increase of $65,776 or 231.7%. Our general and administrative expenses increased as our rental expense and salaries expense increased by $34,805, and $28.513 respectively.

Net Income. We had net income of $856,041 for the three months ended December 31, 2010 as compared to net income $2,322,431 for the three months ended December 31, 2009, representing a decrease of $1,466,390 or approximately 63.1%. The decrease in our net income was largely due to decrease of gross profit and increase of administrative expenses.

Six Months ended December 31, 2010 Compared to the Six Months ended December 31, 2009

The following tables set forth key components of our results of operations for the periods indicated, in U.S. dollars, and key components of our revenue for the period indicated, in dollars.

	Six months			Six month
	Ended			Ended
	December 31,				December 31,
	2010				2009

Service Income	$	5,245,841			$	7,449,119
Cost of services		(3,221,779	)			(3,175,379	)
Gross profit		2,024,062				4,273,740
General and administrative expenses		(212,929	)			(51,316	)
Income before taxation		1,811,133				4,222,424
Income tax		-				(48,666	)
Net income	$	1,811,133			$	4,173,758

Service Income. Our service income for the six months ended December 31, 2010 was $5,245,841 as compared to $7,449,119 for the six months ended December 31, 2009, a decrease of $2,203,278 or approximately 29.6%. Decrease in our service income was mainly attributable to Greenery Construction Consulting segment, which decreased by $927,645 and Greenery Maintenance Consulting segment, which decreased by $1,091,157 for the six months ended December 31, 2010 as compared with the same period in 2009. It was because we had less greenery construction and maintenance projects conducted during the period.

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Income from our greenery construction consulting segment decreased by $927,645 for the six months ended December 31, 2010, as compared with the same period in 2009. For the six months ended December 31, 2010, we had six new Greenery Construction Consulting projects. They are Shahe River Bank Greenery Project Phase I, Shahe River Bank Greenery Project Phase II, Shahe River Bank Greenery Project Phase III, Gaobu Town Plaza Project Part III Phase I, Gaobu Town Plaza Project Part III Phase II, and Gaobu Town Plaza Project Part III Phase III with revenues of $335,221, $1,350,623, $447,597, $207,066, $1,000,905, and $572,028, respectively. These projects have contributed to 100% of our greenery construction consulting revenue. We have focused our efforts on a smaller number of larger scale projects as compared with focusing on volume in the prior year. Typically larger projects require us to be on site for a longer period of time, thus allowing us to build strong long term relationships with our customers. Further, the profit margin on a larger project is typically greater than the margins yielded on completing many smaller projects. Our revenue per project has decreased to $652,240 for the six months ended December 31, 2010, as compared with the same period in 2009.

Income from our greenery maintenance consulting segment decreased by $1,091,157 for the six months ended December 31, 2010, as compared with the same period in 2009. It was because we found less profitable greenery maintenance projects for the three months ended December 31, 2010. For the six months ended December 31, 2010, we had one new Greenery Maintenance Consulting project. It is Garden Road Upgrade Maintenance Project with revenue of $117,357.

Income from our hotel consulting decreased by $184,476 for the six months ended December 31, 2010, as compared with the same period in 2009. The decrease in hotel consulting and facilities was mainly attributable to the close of Health City Hotel in August and September due to renovation. Fewer customers to come in the three months ended Dec 31, 2010 because they were not noticed about the hotel reopening. Management expects the total revenue to improve as the hotel starts to operate in full capacity.

Cost of Services. Our cost of services for the six months ended December 31, 2010 was $3,221,779 as compared to $3,175,379 for the six months ended December 31, 2009, a increase of $46,400 or approximately 1.5%. The increase of our cost of services was mainly attributable to the increased labour cost and material cost of Greenery Construction Consulting projects. Depreciation expenses of hotel equipment also increased with more property, plant, and equipment invested in hotels.

Cost of sales of our greenery construction projects increased from $2,329,503 to $ 2,593,434. The increase in cost is attributable to the increase in labor costs and material costs. Our gross margin in this segment decreased from 51.9% to 33.7% for the six months ended December 31, 2010.

Cost of sales of our greenery maintenance projects decreased from $548,511 to $82,737. The decrease was attributed to less profitable projects conducted and higher labour and material cost for each project engaged during the three months ended December 31, 2010.

The major cost of services of our hotel consulting business is the depreciation of hotel equipment. There was a $231,293 or 187.2% increase in depreciation of hotel equipment compared to the same period last year, as we acquired $2,247,523 of new equipment, fixtures, and furniture in the twelve months ended June 30, 2010.

Gross Profit. For the six months ended December 31, 2010 as compared to the six months ended December 31, 2009, we generated gross profit of $2,024,062 and $4,273,740, respectively, reflecting a decrease of $2,249,678 or approximately 52.6%. Our gross profit margin (gross profit divided by revenue) decreased from approximately 57.4% for the six months ended December 31, 2009 to approximately 38.6% for the same period ended 2010, representing a decrease of 18.8%. This was attributed to a decrease in profit margin in Greenery Construction Consulting which decreased from 51.9% to 33.7%. Our gross profit margin in this business segment decreased as labor and material costs increased. The Management believes that the profit margin will maintain at this level as the Company is likely to face high labor and material costs in a near future.

The gross profit margin on our Eco-friendly Property Consulting and Development business decreased from 78.8% to 55.1% due to the decrease in hotel consulting revenue and increase in depreciation expense. Management expects profit margins to decrease as depreciation increases due to our new investment on new property, plant, and equipment for the twelve months ended June 30, 2010.

General and Administrative Expenses. We incurred general and administrative expenses of $212,929 for the six months ended December 31, 2010, an increase of $161,613 or 314.9%. Our general and administrative expenses increased as our rental expense and salaries expense increased by $60,204, and $55,869 respectively.

Net Income. We had net income of $1,811,133 for the three months ended December 31, 2010 as compared to net income $4,173,758 for the six months ended December 31, 2009, representing a decrease of $2,362,625 or approximately 56.6%. The decrease in our net income was largely due to decrease of gross profit and increase of administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2010, we had cash and cash equivalents of $911,148, and incurred an accumulated net income of $13,338,594.

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The following table sets forth a summary of our cash flows for the periods indicated:

	For the three months ended
	December 31, 2010			December 31, 2009

Net Cash used in Operating Activities	$	(206,221	)	$	(19,568	)
Net Cash used in Investment Activities		-			(17,339	)
Net Cash generated from Financing Activities		-			-
Net (decrease)/increase in Cash and Cash Equivalents		(206,221	)		(36,907)
Effect of Foreign Currency Translation		208,970			(20,164	)
Cash, Beginning of Period		908,399			1,156,708
Cash, End of Period	$	911,148		$	1,099,637

Comparison of the three months ended December 31, 2010 to the three months ended December 31, 2009

Net cash used in operating activities was $206,221 for the three months ended December 31, 2010, compared to net cash used in operations of $19,568 for the three months ended December 31, 2009. The $186,653 increase was primarily due to smaller sales coupled with an increase in deposit paid for labor service. Our deposit paid for labor service increased by $684,988 in the three months ended December 31, 2010. It was because the labor and material cost increased during the period. We deposited $408,490, $399,299, $577,497, $494,998, $170,849 and $649,352 for Gaobu Town Plaza Project Part III Phase II, Gaobu Town Plaza Project Part III Phase III, Shahe River Bank Greenery Project Phase II, Shahe River Bank Greenery Project Phase III, Garden Road Upgrade Maintenance Project and Plaza North Road Upgrade Project.

The following table sets forth a summary of our cash flows for the periods indicated:

	For the six months ended
	December 31, 2010			December 31, 2009

Net Cash used in Operating Activities	$	(678,003	)	$	(200,574	)
Net Cash used in Investment Activities		-			(17,339	)
Net Cash generated from Financing Activities		-			498,017
Net (decrease)/increase in Cash and Cash Equivalents		(678,003	)		280,104
Effect of Foreign Currency Translation		448,043			(29,924	)
Cash, Beginning of Period		1,141,108			849,457
Cash, End of Period	$	911,148		$	1,099,637

Comparison of the six months ended December 31, 2010 to the six months ended December 31, 2009

Net cash used in operating activities was $678,003 for the six months ended December 31, 2010, compared to net cash used in operations of $200,574 for the six months ended December 31, 2009. The $477,429 increase was primarily due to smaller sales coupled with an increase in deposit paid for hotel investment negotiation. Our deposit paid for hotel investment negotiation increased by $1,548,112 in the six months ended December 31, 2010. Our management would like to expand our greenery hotel consulting business by cooperating with more hotels, and thus decided to increase deposits on hotel investment negotiation. We deposited $5,511,873 for new investment negotiations, which includes $302,187, $1,382,528, $537,221, $931,919, $989,953, and $1,368,065 to Dongguan City, Shanghai Huaxun Holding Limited, Jiansu Dong’an Hotel, Carnival City Club Hotel, Shan Tou City Long Hu District Bai Le Hotel Limited and Shanghai Qingqiao Huaxun Investment Holding Limited respectively. These deposits will be returned to us in the earlier of our request or at the end of the three month period, regardless of the negotiation results, unless our management extends the negotiation period. If the hotel fails to perform as stated in the Investment Negotiation Memorandum, they will be subjected to a penalty, equal to 20% of the deposit, and pay interest at the prime interest rate. Depending on the progress of the negotiations and our liquidity condition, the Company may increase or withdraw the deposits for hotel investment negotiation. Meanwhile, we have attempted to negotiate with Kang Zu Yuan Hotel but have later recalled $901,978 of deposits from Kang Zu Yuan Hotel, as our management decided to terminate the negotiations after thorough analysis of the risks and profitability associated with these projects.Our outstanding accounts receivable related to greenery construction projects at December 31, 2010 was $3,764,437. The balance was mainly contributed by Dongguan Garden Project Co. for four new Greenery Construction Consulting projects. They were Shahe River Bank Greenery Project Phase II, Shahe River Bank Greenery Project Phase III, Gaobu Town Plaza Project Part III Phase II, and Gaobu Town Plaza Project Part III Phase III. The balances are $1,363,609, $447,597, $1,012,770 and $572,027, respectively. Both amounts will be fully paid within 90 days after the completion of the projects.

All the government contractors have paid us within terms and we do not have any records of bad debt since our incorporation. Therefore, we do not see there is any necessity to introduce the provision of bad debt to our account. In addition, we have regularly conducted reviews on our account receivable along with our outstanding projects, and any overdue payments from our clients would be acknowledged to our company immediately. Since all the clients are bounded with contracts legally, the legal procedures would be enforced eventually in case of any amount overdue being discovered during the regular review. Moreover, we can at any time impose an inspection of our clients’ books and records. In light of the potential detrimental affects non-payment would have on our clients, we are confident that our clients will continue to pay us on time and in accordance with the terms of our contracts.

Our outstanding accounts receivable related to hotel consulting as of December 31, 2010 was $219,906. This is the total amount that we are entitled to receive from the hotels as stated in the revenue-sharing consulting agreements. The amount is outstanding as both hotels are required to pay us within 15 days after the end of every month. Both hotels have paid us within the terms and on time since inception of both consulting agreements. Therefore, we do not believe it is necessary to introduce any provision of bad debt for these accounts. We also possess the rights to perform inspection on their sites and books of records. We can also remove the equipments and fixtures on their sites that are owned by us if we identify any adverse changes to the hotel owners’ ability and willingness to comply with the contract terms. At the moment, we are confident that the hotel owners will continue to pay us within the terms and on time.

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Net cash used in investment activities was Nil for the six months ended December 31, 2010, and December 31, 2009. The net cash used in investing activities was unchanged because we did not purchase any new property, plant and equipment for our ECHOO hotel projects for three months ended December 31, 2010.

Net cash used in financing activities was Nil for the six months ended December 31, 2010, compared to net cash used in financing activities of $498,017 for the six months ended December 31, 2009. The decrease of net cash from financing activities was primarily due to a $497,997 decrease in proceeds from issuance of common stock for the three months ended December 31, 2010 compared to the same period in 2009.

Subsequent to December 31, 2010, we have collected a total amount of $205,259 from our accounts receivable due as of December 31, 2010. The following is a breakdown of the accounts receivable that we have collected for amounts outstanding as of December 31, 2010:

Counterparty		Amount Collected		Date Amount Collected

Hotel Management
Carnival City Hotel	$	157,566	January 15, 2010
Healthy City Hotel	$	15,124	January 15, 2010
Yu Zu Tang Hotel	$	32,569	January 15, 2010

Critical Accounting Policies and Estimates

Revenue Recognition

Greenery construction revenue

The Company accepts contracts on a fixed price basis. Revenue from fixed price construction contracts are recognized on the percentage-of-completion method measured by the ratio of costs incurred to date to the estimated total costs to be incurred for each contract. Revenue from unit price contracts and service agreements are recognized as services are performed.

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Greenery maintenance revenue

The Company accepts contracts on a fixed price basis. Revenue are recognized on fixed price greenery maintenance contracts in straight-line basis over the contracted period except in those circumstances in which sufficient historical evidence indicated that the costs of performing services under the contract are incurred on other than a straight-line basis.

Hotel management revenue

The Company accepts contracts on a service agreement basis. Revenue from service agreements are billed monthly based on a certain percent of gross revenue generated by operating activity of the client.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts. The Company recognizes an allowance for doubtful accounts to ensure accounts receivable are not overstated due to uncollectibility. An allowance for doubtful accounts is maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. An additional reserve for individual accounts is recorded when the Company becomes aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted.

Plant and Equipment

Plant and equipment, other than construction in progress, is stated at cost less depreciation and amortization and accumulated impairment loss.

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

Furniture, fixtures & equipment

5 year useful life

The costs 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.

Our management considers that we have no residual value for plant and equipment.

Cost of revenue

Regarding the design and consulting services to the hotel facilities, the respective cost of revenue includes the consulting expenses in professional staff involved and the design and consulting fee with other third-party experts, and also the depreciation expenses on those fixtures and movable assets being placed with the hotel by the Company.

Regarding the trading of seeding and provision of greenery engineering projects, the respective cost of revenue consists primarily of material costs, labor cost, subcontracting expenses, and related expenses, which are directly attributable to the greenery construction projects.

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Income Taxes

For the years ended December 31, 2010 and 2009, the Company did not have any interest and penalties associated with tax positions. As of December 31, 2010 and 2009, the Company did not have any significant unrecognized uncertain tax positions.

Recently Issued Accounting Pronouncements

In January 2010, the FASB issued ASU 2010-06, “Improving Disclosures about Fair Value Measurements,” which requires additional disclosures about transfers between Levels 1 and 2 of the fair value hierarchy and disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. This guidance was effective for the Company in the current quarter, except for the Level 3 activity disclosures, which are effective for fiscal years beginning after December 15, 2010. The adoption of this guidance, which is related to disclosure only, will not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In December 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” (“ASU 2009-17”). ASU 2009-17 changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance. The new standard requires a number of new disclosures, including additional disclosures about the reporting entity’s involvement with variable interest entities and any significant changes in risk exposure due to that involvement. A reporting entity is required to disclose how its involvement with a variable interest entity affects the reporting entity’s financial statements. ASU 2009-17 is effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009, or January 1, 2010, for a calendar year-end entity. Based on the Company’s evaluation of ASU 2009-17, the adoption of this statement did not impact the Company’s consolidated financial statements.

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In October 2009, the FASB issued EITF 08-1, “Revenue Arrangements with Multiple Deliverables”, which is also known as Accounting Standards Update (ASU) No. 2009-13, “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (ASU 2009-13). ASU 2009-13 addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services separately rather than as a combined unit and modifies the manner in which the transaction consideration is allocated across the separately identified deliverables. ASU 2009-13 significantly expands the disclosure requirements for multiple-deliverable revenue arrangements. ASU 2009-13 will be effective for the first annual reporting period beginning on or after June 15, 2010, and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the adoption date. Early adoption is permitted, provided that the guidance is retroactively applied to the beginning of the year of adoption. The Company is currently evaluating the impact this update will have on the Company’s consolidated financial statements.

In September 2009, the EITF reached final consensus on a new revenue recognition standard, Issue No. 09-3, “Applicability of AICPA Statement of Position 97-2 to Certain Arrangements That Contain Software Elements”, as codified in FASB Accounting Standards Update (ASU) 985. ASU 985 amends the scope of AICPA Statement of Position 97-2, Software Revenue Recognition to exclude tangible products that include software and non-software components that function together to deliver the product’s essential functionality. This Issue shall be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted, provided that the guidance is retroactively applied at the beginning of the year of adoption. The Company is currently evaluating the potential impact of ASU 985 on the Company’s results of operations or financial condition.

Inflation and Seasonality

Inflation and seasonality did not significantly impact our operations during the last two fiscal years.

Off-Balance Sheet Arrangements

As of the date hereof, we do not have any off-balance sheet debt, nor do we have any transactions, arrangements or relationships with any special purpose entities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to certain market risks, including changes in interest rates and currency exchange rates. The Company does not undertake any specific actions to limit those exposures.

Item 4T. Controls and Procedures

(a) Evaluation of Disclosure Controls. Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

(b) Management’s report on internal control over financial reporting. Based on this evaluation, our President and Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were, due to certain factors, not effective to ensure that material information is recorded, processed, summarized and reported by our management on a timely basis in order to comply with our disclosure obligations under the Exchange Act and the rules and regulations promulgated thereunder.

During the quarter ended December 31, 2010, in response to comments we received from the staff of the SEC, we restated our financial statements and related Management’s Discussion and Analysis of Financial Conditions of Operations for the fiscal ended June 30, 2009, which restatements are more fully described on Form 8-K filed with the SEC on August 4, 2010.

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In light of such restatements, our Chief Executive Officer and our Chief Financial Officer and our board of directors are assessing the effect of such restatements on our internal control over financial reporting and its disclosure controls and procedures.

A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness: yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.

The Certifying Officers assessed the effectiveness of our internal control over financial reporting as of June 30, 2010. Management identified a significant deficiency related to the following:

1. Lack of internal audit functions – Although we maintain certain internal audit functions, the scope and effectiveness goals of internal audit function have not been identified. Due to this weakness, we may be ineffective in timely prevention or detection of errors in the recording of accounting transactions, which may have a material impact on our financial statements.

The Certifying Officers assessed the effectiveness of our internal control over financial reporting during the fourth quarter of financial year ended June 30, 2010. Management identified a material weakness related to the following:

1. Share-based compensation – There was a material weakness in the process related to the evaluating certain equity based transaction and the accounting treatment for these non-frequent transactions. We have restated our consolidated financial statements for the year ended June 30, 2009 and for the period ended March 31, 2010 as a result of accounting treatment for our provision and settlement of share-based compensation for employee and non-employee which were issued on August 13, 2009

(c) Changes in internal controls over financial reporting. In order to correct the foregoing deficiencies, we have taken the following remediation measures:

1. We have appointed a new financial controller with sufficient knowledge and experience in the application of US GAAP, to evaluate the accounting for our share-based compensation and equity transactions, and making it directly responsible for accounting and financial reporting functions.

2. We will continue to establish and modify specific processes and controls to provide reasonable assurance with respect to the accuracy and integrity of accounting entries.

3. We expect to establish our internal audit department functions by providing staffs internal audit training.

4. We had appointed Members of Audit Committee on June 7, 2010 which have responsibility to direct management to develop a detailed plan and timetable for the implementation of the foregoing remedial measures (to the extent not already completed) and will monitor their implementation. In addition, under the direction of the Audit Committee, management will continue to review and make necessary changes to the overall design of our internal control environment, as well as policies and procedures to improve the overall effectiveness of internal control over financial reporting.

We believe that the foregoing steps will remediate the significant deficiency and material weakness identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.

Subject to the foregoing disclosure, there were no other changes in our internal control over financial reporting during our fiscal year ended June 30, 2010 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

(d) Limitation on the effectiveness of internal controls. Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A. Risk Factors

Not applicable to smaller reporting companies.

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

None.

Item 3. Defaults Upon Senior Securities

None

Item 4. (Removed and Reserved)

None

Item 5. Other Information

None

Item 6. Exhibits

(a)	Exhibits

	31.1 Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002

	31.2 Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002

	32.1 Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002

	32.2 Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 11, 2011	GREEN SOLUTIONS CHINA, INC.

	By:	/s/ Chi Yip Tai
		Name: Chi Yip Tai
		Title: President, Chief Executive Officer

	By:	/s/ Wei Guo Wang
		Name: Wei Guo Wang
		Title: Chief Financial Officer

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Attached files

China Green, Inc. Reports

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