CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LTD - FORM 10-K

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EX-32.2 - EXHIBIT 32.2 - CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LTD	exhibit32-2.htm
EX-32.1 - EXHIBIT 32.1 - CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LTD	exhibit32-1.htm
EX-31.2 - EXHIBIT 31.2 - CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LTD	exhibit31-2.htm
EX-31.1 - EXHIBIT 31.1 - CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LTD	exhibit31-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended: December 31, 2016

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

For the transition period from __________ to ____________

Commission File Number: 000-30183

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
(Exact name of registrant as specified in its charter)

New York	13-3874771
(State or other jurisdiction of	(I.R.S. Employer Identification Number)
incorporation or organization)

8/F East Area
Century Golden Resources Business Center
69 Banjing Road
Haidian District
Beijing, People’s Republic of China, 100089
(Address of principal executive office and zip code)

86-10-884-52568
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $0.01

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)
Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

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

Large Accelerated Filer [ ]	Accelerated Filer [ ]
Non-Accelerated Filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

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

As of June 30, 2016 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the shares of the registrant’s common stock held by non-affiliates (based upon the closing price of such shares as reported on the Over-the-Counter Bulletin Board) was approximately $0.04 million. Shares of the registrant’s common stock held by each executive officer and director and by each person who owns 10% or more of the outstanding common stock have been excluded from the calculation in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

There were a total of 77,655,862 shares of the registrant’s common stock outstanding as of April 12, 2017.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED

FORM 10-K
For the Fiscal Year Ended December 31, 2016

	Page

PART I

ITEM 1. BUSINESS	2

ITEM 1A. RISK FACTORS	5

ITEM 1B. UNRESOLVED STAFF COMMENTS	13

ITEM 2. PROPERTIES	13

ITEM 3. LEGAL PROCEEDINGS	13

ITEM 4. MINE SAFETY DISCLOSURES	13

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	14

ITEM 6. SELECTED FINANCIAL DATA	14

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	14

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	19

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	19

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	19

ITEM 9A. CONTROLS AND PROCEDURES	19

ITEM 9B. OTHER INFORMATION	20

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	21

ITEM 11. EXECUTIVE COMPENSATION	22

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS	23

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	25

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	25

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES	26

SPECIAL NOTES REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K, including the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains “forward-looking statements” relating to the business of China Longyi Group International Holdings Limited and its subsidiary companies. The forward-looking statements include, among others, statements concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. These statements are based on assumptions and are subject to known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Risks and uncertainties include risks related to new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; any statements of belief or intention; and any of the factors mentioned in the “Risk Factors” section of this annual report on Form 10-K. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

USE OF CERTAIN DEFINED TERMS

Except as otherwise indicated by the context, references in this report to:

“Beijing SOD” are references to Beijing Longyi Biology Technology Co. Ltd., our indirect, 90% owned subsidiary, a PRC company;
“China” and “PRC” are references to the People’s Republic of China;
“China Longyi,” “we,” “us,” “our,” or the “Company” are references to the combined business of China Longyi Group International Holdings Limited (formerly known as Minghua Group International Holdings Limited) and/or its consolidated subsidiaries, as the case may be;
“Chongqing SOD” are references to Chongqing JiuZhou Dismutase Biology Technology Co., Ltd., our indirect, majority-owned subsidiary, a PRC company;
“Exchange Act” means the Securities Exchange Act of 1934, as amended;
“RMB” refers to Renminbi, the legal currency of China;
“Securities Act” means the Securities Act of 1933, as amended;
“Top Time” are references to Top Time International Limited, our indirect wholly-owned subsidiary, a Hong Kong company; and
“U.S. dollar,” “$” and “US$” are to the legal currency of the United States.

PART I

ITEM 1. BUSINESS

Overview of Our Business

We are a holding company that only operates through our indirect Chinese subsidiaries Beijing SOD and Chongqing SOD. Through our Chinese subsidiaries, we develop, manufacture and market our SOD products in China. SOD is a naturally occurring enzyme which may act as a potent antioxidant defense in cells that are exposed to oxygen. Certain research has shown that under certain biological conditions, SOD revitalizes cells and reduces the rate of cell destruction. It neutralizes the most common free radical—superoxide radical—by converting it into hydrogen peroxide and water. Because superoxide is harmful to human cells, and certain forms of SOD exist naturally in most humans, many studies show that SOD is valuable in protecting human cells from the harmful effects of superoxide. SOD is thought to be more powerful than antioxidant vitamins as it activates the body's productions of its own antioxidants. As a result, SOD is referred to as the “enzyme of life.” Commercially, SOD has a wide range of applications and is widely applied in foods, drinks, skin care productions, pharmaceuticals, to combat ailments ranging from sunburn to rheumatoid arthritis.

History and Corporate Structure

We are a New York corporation that was incorporated on February 29, 1996, as United Network Technologies, Inc. and we changed our name to Panagra International Corporation on October 2, 1998. From our inception until 2001, we were relatively inactive with limited operations. On August 2, 2001 we changed our name to Minghua Group International Holdings Limited and at that time we also increased the authorized common shares of our common stock from 40,000,000 shares to 200,000,000 shares. On October 16, 2007, we effectuated a 1-for-20 reverse stock split of all our issued and outstanding shares of common stock, or the Reverse Split, and changed our name to China Longyi Group International Holdings Limited.

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

Our Industry

The health supplements industry in China is currently made up of many small- and medium-sized companies that manufacture and distribute products generally intended to, or marketed for the purpose of maintaining, and sometimes improving, the body’s health and general well being. China is one of the fastest growing health supplements markets in the world. With rapid economic growth and continued improvement of its peoples’ livelihoods, the demand for health supplements from China’s 1.4 billion people has expanded tremendously over the last 20 years. Today the Chinese health supplements industry is estimated to be worth approximately $6 billion in annual sales, according to the China Health Care Association, which is an association attached to China's Ministry of Health. Given China’s current annual per capita consumption of health supplements is approximately $10—which is far below that of many western countries.

Ever since American scientists Joe McCord and Irwin Fridovich discovered SOD in cattle erythrocytes in 1969 and hypothesized that it can protect life molecules from oxygenation and retrogradation, experts in the fields of biology and medicine and many entrepreneurs and industrialists have been engaged in research, study, development, application and transformation of SOD into products that we believe will provide human beings with certain health and longevity benefits.

Research into the functions and applications of SOD in China began in the late 1970’s. Since then, various centers of research in China, including universities, the military and private companies, have researched food, medicinal, and cosmetic applications for SOD. In the 1990’s, SOD foods began to be sold in China, including SOD soy milk, SOD dairy milk, and SOD beer. Due to technical problems with these first-generation SOD food products and limited public knowledge of the health benefits of SOD, many were discontinued. Technical difficulties relating to the commercialization of SOD products in China have included: (1) lack of methods for efficient harvesting of SOD from animal and human blood and plants; (2) problems with the maintenance and stabilization of harvested SOD, the longest shelf life so far being only two years in China; and (3) technical problems in the effectiveness of SOD in products, particularly food and other products to be consumed orally. More recently, however, various SOD food products have reappeared in China, including SOD milk, SOD wine, and SOD vegetables and fruits. We believe that these and other types of SOD products will become extremely popular due in part to innovations in the SOD industry; recognition of SOD technologies as proprietary intellectual property; government policies encouraging healthier food; the higher awareness of consumers in China of the health benefits of consuming products containing SOD; and the growth of the spending power of Chinese citizens.

In addition, China Science and Technology Institute has recognized that SOD product technologies are proprietary intellectual property. SOD companies, including us, have instituted strict measures to protect their SOD product technologies from being misappropriated. As such, the SOD product technologies may be protected by Chinese intellectual property law even if they are not patented. As a result, companies are encouraged to develop and commercialize SOD technologies.

The growing wealth of the Chinese public and its related greater interest in better health and nutrition are also trends in SOD industry’s favor. SOD production and distribution companies have been working hard to develop innovations to best exploit the commercial potential of SOD, including our subsidiary, Chongqing SOD. Since 1993, various types of SOD products have been sold in China, such as Beijing Dabao SOD skin care series, Wuhan Jiutouniao SOD liquid nutrition drink series, Guizhou Laolaifu SOD liquid nutrition drink series, Zhejiang SOD beer, SOD toothpaste, SOD soy milk. We believe that the SOD industry in China should expand as Chinese consumers grow more able and willing to purchase SOD products.

Our Products

Historically we manufactured one product, which was Jiuzhou SOD plant wine which we marketed under the name “Jiuzhou Holy Wine.” Our Jiuzhou SOD plant wine was a product developed from the zymolysis of natural wide berries with an alcohol level of 21%. We currently produce and sell SOD Lifeblood, the mixture of SOD and Enzymes (natural plant extract essence) as an antioxidant. Our SOD Lifeblood is an important source of SOD, vitamins and trace elements, all the raw materials of which are extracted from the wild plants and fruits grown on the mountains at elevations between 1,000 and 4,000 meters in south and southwest China. Our SOD Lifeblood is particularly rich in amino acids, several trace elements and Vitamin C, E, D, B1, B2, B12 and A. It is believed that the product is also an excellent source of polysaccharides, flavonoids, glycosides, phenolics, lysozyme, polyphenols, allicin and monophosphate. All of the raw materials of our fruit enzyme are extracted from the wild plants and fruits of the south Taihang Mountain with at least 3-5 years brewing. The fruit sugars are converted into enzymes with two procedures of anaerobic fermentation and aerobic fermentation without additives. In 2008, we received the certificate of “China Spark Program” issued by the Ministry of National Science and Technology for our SOD Lifeblood. Our SOD Lifeblood also passed the cordial test conducted by National Sports Bureau in 2014.

Sales & Marketing Strategy

Our sales and marketing department currently consists of 8 employees. We are developing a diversified sales network which allows us to effectively market products and services to our customers. In addition to sales efforts conducted directly by our internal sales team and other employees, we also use sales agents. Currently we have 15 sales agents selling our products.

In terms of geographic area, our sales network covers 21 cities in China. Our SOD Lifeblood has been listed on the governmental procurement list of Chongqing City, which will grant us a priority to sell our SOD products to various governmental agencies in Chongqing City. We also expect that our SOD products will be listed on the governmental procurement list of Beijing City. We plan to expand our sales network to cover more Chinese cities, including Shenzhen, Guangzhou, Nanjing, Shanghai, Shijiazhuang, Lhasa and Nanchang.

We also plan to employ an online order system, which will cover four major metropolitan areas, such as Beijing, Chengdu, Kunming and Chongqing, within the next 12 months. Through our website http://www.jiuzhoushengjiu.com/index.asp, we will be able to offer a complete line of our products to our customers 24 hours a day, seven days a week. This additional sales channel will enable us to market and sell our products in regions where we do not have retail operations or have limited operations.

Competition

The health supplementary business both within China and globally is highly fragmented and intensely competitive. Many of our competitors, both domestic and international, have significant research and development capabilities and financial, scientific, manufacturing, marketing and sales resources. Although our marketing and sales efforts of SOD products are very limited, we believe that we will compete with our competitors based upon the price and quality of our products, ability to produce a diverse range of products and customer services.

In China, we compete principally with Chengdu New Asia Bioengineering Co., Ltd., Zhuhai Zixing Biological Engineering Co., Ltd. and Liaoyuan Jinchang Bioengineering Co., Ltd.

We believe that our SOD Lifeblood, made from more than 10 kinds of wild plants, is more efficient to remove superoxide free radicals than SOD liquid products made by our competitors. In addition, we believe that our SOD plant compound enzyme can be stored under the normal atmospheric temperature for more than 10 years, much longer than the life span of many other SOD products made from animal blood or a single plant.

Intellectual Property

In 2009 we registered patent relating to our SOD Lifeblood products. Furthermore, we have registered a trademark for our SOD products which we sell under the name “Longyi Lifeblood”.

In addition, we protect our know how technologies through confidentiality agreements we entered into with our employees in our production department.

Research and Development

We did not incur expenditures for research and development for the years ended December 31, 2016 and 2015.

Regulation

Based on different potential uses, SOD products in China are classified into three types under the Chinese law and accordingly are subject to different Chinese laws and regulations.

If the SOD products are sold for manufacturing food, they are considered as food additives. Under current Chinese law, a company may not produce SOD products for food additives use without two licenses, the Food Hygiene License issued by the provincial Administration of Health, or AOH, and the Food Production License issued by the provincial Administration of Quality Supervision, Inspection and Quarantine, or AQSIQ. If the SOD products are sold as raw materials for drugs, the Company should first obtain the Pharmaceutical Producer License from the provincial AOH and the approval from the provincial Food and Drug Administration, or FDA.

We have already obtained both the Food Hygiene License issued by the Chongqing AOH and the Food Production License issued by the local AQSIQ. Since we also plan to produce and sell SOD medicines and skin care products, we plan to apply for the Pharmaceutical Producer License from the provincial AOH and the approval from the provincial FDA.

In addition, we are also subject to PRC’s foreign currency regulations. The PRC government has control over RMB reserves through, among other things, direct regulation of the conversion or RMB into other foreign currencies. Although foreign currencies which are required for “current account” transactions can be bought freely at authorized Chinese banks, the proper procedural requirements prescribed by Chinese law must be met. At the same time, Chinese companies are also required to sell their foreign exchange earnings to authorized Chinese banks and the purchase of foreign currencies for capital account transactions still requires prior approval of the Chinese government.

Employees

As of December 31, 2016, we had a total of 47 full-time employees. The following table illustrates the allocation of these employees among the various job functions conducted at our Company.

Department		Number of Employees

Sales		8

Administration		10

Finance		8

SOD Production Center		6

Research and Development		15

Total		47

We believe that our relationship with our employees is good. The remuneration payable to employees includes basic salaries and allowances. We have not experienced any significant problems or disruption to our operations due to labor disputes, nor have we experienced any difficulties in recruitment and retention of experienced staff.

As required by applicable Chinese laws, we have entered into employment contracts with all of our officers, managers and employees.

Our employees in China participate in a state pension scheme organized by Chinese municipal and provincial governments. We are required to contribute to the scheme at a rate of 28% of the average monthly salary. In addition, we are required by Chinese laws to cover employees in China with various types of social insurance. We have purchased social insurances for all of our employees.

ITEM 1A. RISK FACTORS

You should carefully consider the risks described below, which constitute all of the material risks facing us. If any of the following risks actually occur, our business could be harmed. You should also refer to the other information about us contained in this report, including our financial statements and related notes.

RISKS RELATED TO OUR BUSINESS

Our independent registered auditors have expressed substantial doubt about our ability to continue as a going concern.

Our audited consolidated financial statements included in this report include an explanatory paragraph that indicates that they were prepared assuming that we would continue as a going concern. As discussed in Note 1 to the consolidated financial statements included with this report, we had a working capital deficiency, accumulated deficit from recurring net losses incurred for the current and prior years as of December 31, 2016. These conditions raise substantial doubt about our ability to continue as a going concern.

We have earned only insignificant revenues and it is uncertain whether we will earn any revenues in the future or whether we will ultimately be profitable.

We only started generating meaningful amount of revenues recently and our future operations are subject to all of the risks inherent in the establishment of a new business enterprise. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the development of SOD products, the utilization of unproven technology and the competitive environment in which we operate. There can be no assurance that we will be able to develop, manufacture or market any products in the future, that future revenues will be significant, that any sales will be profitable or that we will have sufficient funds available to complete our marketing and development programs or to market any products which we may develop. In addition, as a result of our limited operating history even though we do currently have a marketable product, we expect to incur substantial operating losses until we can generate sufficient revenues from the sales of our SOD products to cover our operating costs. We currently have limited sources of potential operating revenue and there can be no assurance that we will be able to develop revenue sources or that our operations will ever become profitable.

Our industry is highly fragmented and competitive, and increased competition could reduce our operating income.

The health supplement business both within China and globally is highly fragmented and intensely competitive. We compete with a number of domestic and international manufacturers and distributors that are producing and marketing products in China that are similar to our products. We may not be able to effectively compete against them because our existing or potential competitors may have superior financial, technical, distribution, marketing, sales and other resources, as well as more significant name recognition and established positions in the market we serve. Increased competition could force us to lower our prices or offer services at a higher cost to us, which could reduce our operating income.

Our products could be subject to product liability claims by consumers, which would adversely affect our profit margins, results from operations and stockholder value.

We are exposed to risks inherent in the packaging and distribution of health supplement products, such as with respect to adequacy of warnings, mislabeling and contamination. As a result, there is a risk that someone using our products may experience significant negative side effects which may permanently harm them and we could be subject to claims for damages based on theories of product liability and other legal theories. The costs and resources to defend such claims could be substantial and, if such claims are successful, we could be responsible for paying some or all of the damages. Also, our reputation could be adversely affected, regardless of whether such claims are successful. We currently intend to obtain product liability insurance at the appropriate time; however, there can be no assurance that we will be able to obtain or maintain insurance on acceptable terms for our products or that such insurance would be sufficient to cover any potential product liability claim or recall. Any of these results would adversely affect our profit margins, results from operations and stockholder value.

We may not be able to adequately protect our proprietary intellectual property and technology, which may harm our competitive position and result in increased expenses incurred to enforce our rights.

We rely on a combination of copyright, trademark and trade secret laws, non-disclosure agreements and other confidentiality procedures and contractual provisions to establish, protect and maintain our proprietary intellectual property and technology and other confidential information. Some of these technologies, especially the technology to extract SOD and SOD related enzyme from wild plants, are important to our business and are not protected by patents. Despite our efforts, the steps we have taken to protect our proprietary intellectual property and technology and other confidential information may not be adequate to preclude misappropriation of our proprietary information or infringement of our intellectual property rights. Protecting against the unauthorized use of our products, trademarks and other proprietary rights is also expensive, difficult and, in some cases, impossible. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of management resources, either of which could harm our business, operating results and financial condition.

Compliance with environmental regulations can be expensive, and our failure to comply with these regulations may result in adverse publicity and may have a material adverse effect on our business.

As a manufacturer, we are subject to various Chinese environmental laws and regulations on air emission, waste water discharge, solid wastes and noise. Although we believe that our operations are in substantial compliance with current environmental laws and regulations, we may not be able to comply with these regulations at all times as the Chinese environmental legal regime is evolving and becoming more stringent. Therefore, if the Chinese government imposes more stringent regulations in the future, we will have to incur additional and potentially substantial costs and expenses in order to comply with new regulations, which may negatively affect our results of operations. If we fail to comply with any of the present or future environmental regulations in any material aspects, we may suffer from negative publicity and may be required to pay substantial fines, suspend or even cease operations. Failure to comply with Chinese environmental laws and regulations may materially and adversely affect our business, financial condition and results of operations.

We depend heavily on key personnel, and turnover of key employees and senior management could harm our business.

Our future business and results of operations depend in significant part upon the continued contributions of our key technical and senior management personnel, including Jie Chen, our Chief Executive Officer and Xinmin Pan, our Chief Financial Officer. They also depend in significant part upon our ability to attract and retain additional qualified management, technical, marketing and sales and support personnel for our operations. If we lose a key employee or if a key employee fails to perform in his or her current position, or if we are not able to attract and retain skilled employees as needed, our business could suffer. Significant turnover in our senior management could significantly deplete our institutional knowledge held by our existing senior management team. We depend on the skills and abilities of these key employees in managing the manufacturing, technical, marketing and sales aspects of our business, any part of which could be harmed by further turnover.

We may be exposed to potential risks relating to our internal controls over financial reporting and our ability to have the operating effectiveness of our internal controls attested to by our independent auditors.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404, the SEC adopted rules requiring public companies to include a report of management on the Company’s internal controls over financial reporting in their annual reports on Form 10-K. We are subject to this requirement commencing with our fiscal year ended December 31, 2008 and a report of our management is included under Item 9A of this Annual Report on Form 10-K. In the event we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner, investors and others may lose confidence in the reliability of our financial statements.

Our holding company structure may limit the payment of dividends to our stockholders.

We have no direct business operations, other than our ownership of our subsidiaries. While we have no current intention of paying dividends, should we decide in the future to do so, as a holding company, our ability to pay dividends and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries and other holdings and investments. In addition, our operating subsidiaries, from time to time, may be subject to restrictions on their ability to make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions as discussed below. If future dividends are paid in RMB, fluctuations in the exchange rate for the conversion of RMB into U.S. dollars may reduce the amount received by U.S. stockholders upon conversion of the dividend payment into U.S. dollars.

Chinese regulations currently permit the payment of dividends only out of accumulated profits as determined in accordance with Chinese accounting standards and regulations. Our subsidiaries in China are also required to set aside a portion of their after tax profits according to Chinese accounting standards and regulations to fund certain reserve funds. Currently, our subsidiaries in China are the only sources of revenues or investment holdings for the payment of dividends. If they do not accumulate sufficient profits under Chinese accounting standards and regulations to first fund certain reserve funds as required by Chinese accounting standards, we will be unable to pay any dividends.

RISKS RELATED TO DOING BUSINESS IN CHINA

Changes in the economic and political policies of the PRC government could have a material and adverse effect on our business and operations.

We conduct substantially all our business operations in China. Accordingly, our results of operations, financial condition and prospects are significantly dependent on economic and political developments in China. China’s economy differs from the economies of developed countries in many aspects, including the level of development, growth rate and degree of government control over foreign exchange and allocation of resources. While China’s economy has experienced significant growth in the past 30 years, the growth has been uneven across different regions and periods and among various economic sectors in China. We cannot assure you that China’s economy will continue to grow, or that if there is growth, such growth will be steady and uniform, or that if there is a slowdown, such slowdown will not have a negative effect on its business and results of operations.

The PRC government exercises significant control over China’s economic growth through the allocation of resources, control over payment of foreign currency-denominated obligations, implementation of monetary policy, and preferential treatment of particular industries or companies. Certain measures adopted by the PRC government may restrict loans to certain industries, such as changes in the statutory deposit reserve ratio and lending guidelines for commercial banks by the People’s Bank of China, or PBOC. These current and future government actions could materially affect our liquidity, access to capital, and ability to operate our business.

The global financial markets experienced significant disruptions in 2008 and the United States, Europe and other economies went into recession. Since 2012, growth of the Chinese economy has slowed down. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall PRC economy but may also have a negative effect on us. Our financial condition and results of operation could be materially and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us. In addition, any stimulus measures designed to boost the Chinese economy, may contribute to higher inflation, which could adversely affect our results of operations and financial condition..

Our business is largely subject to the uncertain legal environment in China and your legal protection could be limited.

The Chinese legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which precedents set in earlier legal cases are not generally used. The overall effect of legislation enacted over the past 20 years has been to enhance the protections afforded to foreign invested enterprises in China. However, these laws, regulations and legal requirements are relatively recent and are evolving rapidly, and their interpretation and enforcement involve uncertainties. These uncertainties could limit the legal protections available to foreign investors, such as the right of foreign invested enterprises to hold licenses and permits such as requisite business licenses. In addition, all of our executive officers are residents of China and not of the U.S., and substantially all the assets of these persons are located outside the U.S. As a result, it could be difficult for investors to effect service of process in the U.S., or to enforce a judgment obtained in the U.S. against us or any of these persons.

The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.

China only recently has permitted provincial and local economic autonomy and private economic activities. The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.

Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties or joint ventures.

Future inflation in China may inhibit our ability to conduct business in China.

In recent years, the Chinese economy has experienced periods of rapid expansion and highly fluctuating rates of inflation. During the past ten years, the rate of inflation in China has been as high as 3% and as low as -0.7% . These factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products and our company.

If consumer spending power in China declines, our ability to market SOD products may weaken.

The success of our SOD products relies in part on the perception of consumers of the relative necessity of SOD, which is largely dependent on Chinese consumers’ financial ability to afford SOD-enriched products. If Chinese consumers’ spending power declines, whether because of the reversal of China’s economic growth or other causes, then our SOD products may become less profitable if companies that use its product to enrich their products stop ordering it.

If health problems relating to SOD products made in China emerge, then SOD sales may fall or be banned entirely.

In light of recent news pieces about the health problems and risks of products made in China, the global market and foreign and Chinese health authorities may be especially sensitive about health problems caused by or relating to SOD products made in China. If health problems relating to SOD products made in China become evident, then the market demand for Chinese SOD producers may be particularly susceptible to a fall. Likewise, such problems become evident, foreign or Chinese health authorities may ban or impose other controls or regulations on such SOD products that could harm or eliminate SOD product sales. As a producer of a SOD product in China, we would be subject to these risks.

Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.

The majority of our revenue will be settled in RMB and U.S. Dollars, and any future restrictions on currency exchanges may limit our ability to use revenue generated in RMB to fund any future business activities outside China or to make dividend or other payments in U.S. dollars. Although the Chinese government introduced regulations in 1996 to allow greater convertibility of the RMB for current account transactions, significant restrictions still remain, including primarily the restriction that foreign-invested enterprises may only buy, sell or remit foreign currencies after providing valid commercial documents at those banks in China authorized to conduct foreign exchange business. In addition, conversion of RMB for capital account items, including direct investment and loans, is subject to governmental approval in China, and companies are required to open and maintain separate foreign exchange accounts for capital account items. We cannot be certain that the Chinese regulatory authorities will not impose more stringent restrictions on the convertibility of the RMB.

We may be unable to complete a business combination transaction efficiently or on favorable terms due to complicated merger and acquisition regulations which became effective on September 8, 2006.

On August 8, 2006, six PRC regulatory agencies, including the CSRC, promulgated the Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors, which became effective on September 8, 2006. This new regulation, among other things, governs the approval process by which a PRC company may participate in an acquisition of assets or equity interests. Depending on the structure of the transaction, the new regulation will require the PRC parties to make a series of applications and supplemental applications to the government agencies. In some instances, the application process may require the presentation of economic data concerning a transaction, including appraisals of the target business and evaluations of the acquirer, which are designed to allow the government to assess the transaction. Government approvals will have expiration dates by which a transaction must be completed and reported to the government agencies. Compliance with the new regulations is likely to be more time consuming and expensive than in the past and the government can now exert more control over the combination of two businesses. Accordingly, due to the new regulation, our ability to engage in business combination transactions has become significantly more complicated, time consuming and expensive, and we may not be able to negotiate a transaction that is acceptable to our stockholders or sufficiently protect their interests in a transaction.

The new regulation allows PRC government agencies to assess the economic terms of a business combination transaction. Parties to a business combination transaction may have to submit to the Ministry of Commerce and other relevant government agencies an appraisal report, an evaluation report and the acquisition agreement, all of which form part of the application for approval, depending on the structure of the transaction. The regulations also prohibit a transaction at an acquisition price obviously lower than the appraised value of the PRC business or assets and in certain transaction structures, require that consideration must be paid within defined periods, generally not in excess of a year. The regulation also limits our ability to negotiate various terms of the acquisition, including aspects of the initial consideration, contingent consideration, holdback provisions, indemnification provisions and provisions relating to the assumption and allocation of assets and liabilities. Transaction structures involving trusts, nominees and similar entities are prohibited. Therefore, such regulation may impede our ability to negotiate and complete a business combination transaction on financial terms that satisfy our investors and protect our stockholders’ economic interests.

Failure to comply with PRC regulations relating to the investment in offshore special purpose companies by PRC residents may subject our PRC resident stockholders to personal liability, limit our ability to acquire PRC companies or to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute profits to us or otherwise materially adversely affect us.

On July 14, 2014, SAFE issued the Circular on Relevant Issues Relating to Domestic Residents’ Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or Circular 37, which replaced the Circular 75, promulgated by SAFE on October 21, 2005. Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in Circular 37 as a “special purpose vehicle.”

We have notified substantial beneficial owners of our company who we know are PRC residents to comply with the registration obligation. However, we may not be aware of the identities of all our beneficial owners who are PRC residents. In addition, we do not have control over our beneficial owners and cannot assure you that all of our PRC resident beneficial owners will comply with Circular 37. The failure of our beneficial owners who are PRC residents to register or amend their SAFE registrations in a timely manner pursuant to Circular 37 or the failure of future beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in Circular 37 may subject such beneficial owners or our PRC subsidiaries to fines and legal sanctions. Failure to register or amend the registration may also limit our ability to contribute additional capital to our PRC subsidiaries or receive dividends or other distributions from our PRC subsidiaries or other proceeds from disposal of our PRC subsidiaries, or we may be penalized by SAFE. These risks may have a material adverse effect on our business, financial condition and results of operations.

The value of our securities will be affected by the foreign exchange rate between U.S. dollars and RMB.

The value of our common stock will be affected by the foreign exchange rate between U.S. dollars and RMB, and between those currencies and other currencies in which our sales may be denominated. Currently, RMB is stronger than U.S. Dollars. For example, to the extent that we need to convert U.S. dollars into RMB for our operational needs and should RMB appreciate against the U.S. dollar at that time, our financial position, the business of the Company, and the price of our common stock may be harmed. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of declaring dividends on our common stock or for other business purposes and the U.S. dollar appreciates against RMB, the U.S. dollar equivalent of our earnings from our subsidiaries in China would be reduced.

The Security Review Rules may make it more difficult for us to make future acquisitions or dispositions of our business operations or assets in China.

The Security Review Rules, effective as of September 1, 2011, provides that when deciding whether a specific merger or acquisition of a domestic enterprise by foreign investors is subject to the national security review by MOFCOM, the principle of substance-over-form should be applied and foreign investors are prohibited from circumventing the national security review requirement by structuring transactions through proxies, trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. If the business of any target company that we plan to acquire falls within the scope subject to national security review, we may not be able to successfully acquire such company by equity or asset acquisition, capital increase or even through any contractual arrangement.

Under the Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders.

On March 16, 2007, the National People’s Congress of China passed a new Enterprise Income Tax Law, or the EIT Law, and on November 28, 2007, the State Council of China passed its implementing rules, which took effect on January 1, 2008. Under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise.

On April 22, 2009, the State Administration of Taxation issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice, further interpreting the application of the EIT Law and its implementation non-Chinese enterprise or group controlled offshore entities. Pursuant to the Notice, an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group will be classified as a “non-domestically incorporated resident enterprise” if (i) its senior management in charge of daily operations reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) its substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept in China; and (iv) at least half of its directors with voting rights or senior management often resident in China. A resident enterprise would be subject to an enterprise income tax rate of 25% on its worldwide income and must pay a withholding tax at a rate of 10% when paying dividends to its non-PRC shareholders. However, it remains unclear as to whether the Notice is applicable to an offshore enterprise incorporated by a Chinese natural person. Nor are detailed measures on imposition of tax from non-domestically incorporated resident enterprises are available. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.

We may be deemed to be a resident enterprise by Chinese tax authorities. If the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on financing proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the EIT Law and its implementing rules dividends paid to us from our PRC subsidiaries would qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC stockholders from transferring our shares.

If we were treated as a “resident enterprise” by PRC tax authorities, we would be subject to taxation in both the U.S. and China, and our PRC tax may not be creditable against our U.S. tax.

We face uncertainty from China’s Circular on Strengthening the Administration of Enterprise Income Tax on NonResident Enterprises’ Share Transfer that was released in December 2009 with retroactive effect from January 1, 2008.

The Chinese State Administration of Taxation, or SAT, released a circular on December 15, 2009 that addresses the transfer of shares by nonresident companies, generally referred to as Circular 698. Circular 698, which is effective retroactively to January 1, 2008, may have a significant impact on many companies that use offshore holding companies to invest in China.

Circular 698, which provides parties with a short period of time to comply with its requirements, indirectly taxes foreign companies on gains derived from the indirect sale of a Chinese company. Where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise by selling the shares in an offshore holding company, and the latter is located in a country or jurisdiction where the effective tax burden is less than 12.5% or where the offshore income of his, her, or its residents is not taxable, the foreign investor is required to provide the tax authority in charge of that Chinese resident enterprise with the relevant information within 30 days of the transfers. Moreover, where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise through an abuse of form of organization and there are no reasonable commercial purposes such that the corporate income tax liability is avoided, the PRC tax authority will have the power to re-assess the nature of the equity transfer in accordance with PRC’s “substance-over-form” principle and deny the existence of the offshore holding company that is used for tax planning purposes. There is uncertainty as to the application of Circular 698. For example, while the term “indirectly transfer” is not defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax in the country or jurisdiction and to what extent and the process of the disclosure to the tax authority in charge of that Chinese resident enterprise. In addition, there are not any formal declarations with regard to how to decide “abuse of form of organization” and “reasonable commercial purpose,” which can be utilized by us to balance if our Company complies with the Circular 698. As a result, we may become at risk of being taxed under Circular 698 and we may be required to expend valuable resources to comply with Circular 698 or to establish that we should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations.

We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination that we violated these laws could have a material adverse effect on our business.

We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining or retaining business. We have operations, agreements with third parties, and make most of our sales in China. The PRC also strictly prohibits bribery of government officials. Our activities in China create the risk of unauthorized payments or offers of payments by the employees, consultants, sales agents, or distributors of our Company, even though they may not always be subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents, or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA or Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the U.S. government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.

If we become directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price and reputation and could result in a loss of your investment in our stock, especially if such matter cannot be addressed and resolved favorably.

Recently, U.S. public companies that have substantially all of their operations in China, particularly companies like us which have completed so-called reverse merger transactions, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on our Company, our business and our stock price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from growing our company.

The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC. Accordingly, our public disclosure should be reviewed in light of the fact that no governmental agency that is located in China where substantially all of our operations and business are located have conducted any due diligence on our operations or reviewed or cleared any of our disclosure.

We are regulated by the SEC and our reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities Act and the Exchange Act. Unlike public reporting companies whose operations are located primarily in the United States, however, substantially all of our operations are located in China. Since substantially all of our operations and business takes place in China, it may be more difficult for the staff of the SEC to overcome the geographic and cultural obstacles that are present when reviewing our disclosure. These same obstacles are not present for similar companies whose operations or business take place entirely or primarily in the United States. Furthermore, our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review of the China Securities Regulatory Commission, a PRC regulator that is tasked with oversight of the capital markets in China. Accordingly, you should review our SEC reports, filings and our other public pronouncements with the understanding that no local regulator has done any due diligence on our company and with the understanding that none of our SEC reports, other filings or any of our other public pronouncements has been reviewed or otherwise been scrutinized by any local regulator.

RISKS RELATED TO THE MARKET FOR OUR STOCK

Our common stock is quoted on the OTC Market which may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on the OTC Market. The OTC Market is a significantly more limited market than the New York Stock Exchange or Nasdaq system. The quotation of our shares on the OTC Market may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.

We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.

The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our common stock is a “penny stock” and as a result, we may become subject to Rule 15g-9 under the Exchange Act, or the “Penny Stock Rule”. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.

Our controlling stockholder, Wei Wang, holds a significant percentage of our outstanding voting securities and accordingly may make decisions regarding our daily operations, significant corporate transactions and other matters that other stockholders may believe are not in their best interests.

Ms. Wei Wang, our Director, is the beneficial owner of approximately 80.81% of our outstanding voting securities. As a result, she possesses significant influence over the election of our Board of Directors and significant corporate transactions. Her ownership may also have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination or discourage a potential acquirer from making a tender offer. Other stockholders may believe that these future decisions made by Ms. Wang are not in their best interests.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

All land in China is owned by the State or collectives. Individuals and companies are permitted to acquire rights to use land or land use rights for specific purposes. In the case of land used for industrial purposes, the land use rights are granted for a period of 50 years. This period may be renewed at the expiration of the initial and any subsequent terms according to the relevant Chinese laws. Granted land use rights are transferable and may be used as security for borrowings and other obligations.

Our executive offices are located at 8/F East Area, Century Golden Resources Business Center, 69 Bangjing Road, Haidian District, Beijing, People’s Republic of China 100089. Our executive offices consist of approximately 130 square meters consisting entirely of administrative office space. This lease expired on December 31, 2005 and we continue to rent this property on a month-to-month basis.

Our main production facilities are located at Sanjie Village, Huangpu Town, Jiangjin City, Chongqing. The total site area is approximately 20,000 square meters. We lease this facility under a lease agreement with Huangpu Town Government. The term of the lease is 20 years. We plan to buy the facility when the lease expires.

In May 2015 we entered into an investment agreement with Guizhou Biology Technology Ltd. (“Guizhou”), under which the Company invested RMB 500,000 in Guizhou. Some of our SOD products sold in 2015 were made in Guizhou. We also intend to invest in a production facility located at Tianjie Mountain, Xinxiang of Henan. The investment has not been made as of the date of this report. Once the investment is made, we expect that some of our products will be manufactured from this facility.

We believe that all our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is quoted and traded from time to time on the OTC Market under the symbol “CGYG”. The CUSIP number is 16942Q109. The transfer agent of our common stock is Securities Transfer Corporation whose address is at 2591 Dallas Parkway, Suite 102 Frisco, TX 75034, (469) 633-0101.

The following table sets forth, for the periods indicated, the high and low bid prices for the common stock as reported on Yahoo.com. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

		Closing Prices ⁽¹⁾
		High		Low

*Year Ended December 31, 2016*

1^stQuarter	$	0.005	$	0.003
2^ndQuarter	$	0.005	$	0.005
3^rdQuarter	$	0.005	$	0.0025
4^thQuarter	$	0.04	$	0.0025

*Year Ended December 31, 2015*

1^stQuarter	$	0.20	$	0.03
2^ndQuarter	$	0.07	$	0.05
3^rdQuarter	$	0.05	$	0.05
4^thQuarter	$	0.05	$	0.00

________________________
(1)The above tables set forth the range of high and low closing bid prices per share of our common stock as reported by www.otcmarkets.com for the periods indicated.

Holders

On April 12, 2017, there were approximately 310 stockholders of record of our common stock, which does not include the number of stockholders holding shares of our common stock in “street name”.

Dividends

We have not paid any cash dividends with respect to our common stock in the last two fiscal years. We presently intend to retain future earnings to finance our development and expansion and therefore do not anticipate the payment of any cash dividends in the foreseeable future. Payment of future dividends, if any, will depend upon our future earnings and capital requirements and other factors that our board of directors considers appropriate.

Securities Authorized for Issuance under Equity Compensation Plans

None.

ITEM 6. SELECTED FINANCIAL DATA

Not Applicable.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

This subsection of MD&A is an overview of the important factors that management focuses on in evaluating our businesses, financial condition and operating performance, our overall business strategy and our earnings for the periods covered.

General

We are a holding company that only operates through our indirect Chinese subsidiaries. Through our Chinese subsidiaries, we develop and manufacture SOD in China, with a wide range of applications, especially in foods, medicines and cosmetic products. We plan to market, sell and service our products nationally through a combination of company-owned offices and independent sales agents. Currently we have two sales offices, one located in Chengdu, and the other located in Chongqing, and we plan to establish agents in additional offices across China. We have targeted our approach to meet local market conditions which we believe provides the best possible products for our customers throughout China. In recent years, more and more people are choosing to eat or drink healthier foods and beverages.

Industry Wide Factors that are Relevant to Our Business

We expect several key demographic, healthcare, and lifestyle trends to drive the growth of our business in the coming future:

Increased Focus on Healthy Living: Our management believes that as China becomes more affluent, its citizens are becoming more health conscious. They are leading more active lifestyles and becoming increasingly focused on healthy living, nutrition, and supplementation. According to the Nutrition Business Journal, a higher percentage of today’s global population is involved to some degree in health and wellness than a few years ago. We believe that growth in the health supplements industry will continue to be driven by consumers who increasingly embrace health and wellness as a critical part of their lifestyles.
Aging Population: According to the U.S. Census Bureau, China's population age 60 and above was more than 142 million in 2005. The bureau estimates that by 2025 this demographic will more than double in size to approximately 290 million. We believe that these consumers are significantly more likely to use health supplements than younger persons and have higher levels of disposable income to pursue healthy lifestyles.
Rising Healthcare Costs and Use of Preventive Measures: Healthcare related costs have increased substantially in China. To reduce medical costs and avoid the complexities of dealing with the healthcare system, and given increasing incidence of medical problems and concern over the use and effects of prescription drugs, many consumers take preventive measures, including alternative medicines and nutritional supplements.
Food and Beverage Security: Since 2007, food and beverage security has become more important to PRC regulators. The PRC government regulates and enforces strict food and beverage testing procedures and we are required to obtain licenses for the sale of any new food and beverage products from the relevant authorities. We currently sell SOD products (SOD WINE) for manufacturing food, and we have already obtained both the Food Hygiene License issued by the Chongqing AOH and the Food Production License issued by the local AQSIQ. We also plan to produce and sell SOD medicines and skin care products, and we have applied for the Pharmaceutical Producer License from the provincial AOH and the approval from the provincial State Food and Drug Administration, or SFDA. It will take more than half year to get the license from AOH and the approval from SFDA for us to sell SOD medicines and skin care products.

Weaknesses and Uncertainties that Affect our Financial Condition

We face certain challenges and risks that may affect our financial condition. In recent years, low quality products and false advertisements have given the Chinese cosmetic and health products market a bad reputation. Consumers are often suspicious of the effects of cosmetics and health products. Some consumers think that these products cannot induce substantial beautification or health improvements, while others think these products may actually be harmful. In a market where efficient and inefficient markets are mixed up, and consumers have a distrust of the market, we will keep up our research and development of products, while strengthening our quality control at the same time. Based on our past high quality control, we believe that the reputation of our products will be strong.

For accounting purposes, the acquisition of Top Time was treated as a reorganization of entities under common control. When we refer in this report to business and financial information for periods prior to the consummation of the acquisition, we are referring to the business and financial information of China Longyi on a consolidated basis unless the context suggests otherwise.

Results of Operations
Before November 12, 2007, we had limited operations and our purpose was to acquire an operating business or the valuable assets of an unidentified company. As a result of the acquisition of Top Time, we changed our business to the development, manufacture and sale of SOD products.

Fiscal Year Ended December 31, 2016 Compared to December 31, 2015

The following table summarizes the results of our operations during the fiscal years ended December 31, 2016 and 2015 and provides information regarding the dollar and percentage increase or (decrease) from the 2015 fiscal year to the 2016 fiscal year.

				Percentage
			Increase	Increase
Line Item	December 31, 2016	December 31, 2015	(Decrease)	(Decrease)
Revenues	$ 1,745,363	$ 160,349	$ 1,585,014	988.48%
Cost of Sales	$ 738,883	$ 8,838	$ 730,045	8260.30%
Gross Profit	$ 1,006,480	$ 151,511	$ 854,969	564.30%
Operating Expenses	$ 768,765	$ 516,912	$ 251,853	48.72%
Income Taxes	$ -	$ -	$ -	-
Net profit	$ 177,492	$ (370,586)	$ 548,078	147.89%

Revenue

Our revenues are derived primarily from sales of our SOD products. Our revenues in fiscal year 2016 amounted to $1,745,363, as compared with $160,349 of fiscal year 2015. The increase in revenues was due to more SOD products being sold for the twelve months ended December 31, 2016 compared with the same period of 2015. Our new products were gradually known and accepted by our customers due to our marketing efforts, therefore more and more our new products were sold during the year of 2016.

Cost of Sales

Our cost of sales is primarily comprised of the costs of our raw materials, labor, processing materials and overhead. Our cost of sales in fiscal years 2016 and 2015 was $738,883 and $8,838, respectively, which accounts for approximately 42.33% and 5.51%, respectively, as a percentage of total revenues. Cost of sales as a percentage of annual revenues increased by about 36.82% in 2016 as compared with 2015. In 2015, we sold our new products at lower prices in order to introduce our products to customer. In 2016, we sold our products at regular prices since our new SOD products were known by our customer. The significant increase in cost of revenues was due to more SOD products being sold for the twelve months ended December 31, 2016 compared with the same period of 2015.

Furthermore, when we acquired our Chongqing and Beijing subsidiaries, the procedure of purchasing raw material of inventory was not recognized by US GAAP and accordingly the inventory was included in our assets. Although such inventory was not recognized by us, it was recognized by our Chongqing and Beijing subsidiaries due to the differences between US and Chinese accounting policies.

Before 2015, we recorded such used unrecognized inventory as other income. Since 2015, we have used such unrecognized inventory to reduce the cost of sales.

Gross Profit

Our gross profit increased by $854,969, or 564.30%, to $1,006,480 in fiscal year 2016 from $151,511 in 2015. Gross profit as a percentage of revenues was 57.67% in fiscal year 2016, a decrease of 36.82% from 94.49% in 2015.

Operating Expenses

Our operating expenses for the fiscal year ended December 31, 2016 were $768,765, as compared to $516,912 for 2015. This increase of $251,853 or 48.72% is primarily due to the fact that we paid more office expenses, rental, sales tax and advertising expenses in the year of 2016 as compared with 2015.

Income taxes

We are currently subject to income taxes according to applicable tax laws in the PRC. The tax rates are 25% for both Beijing SOD and Chongqing SOD.

In addition to the changes to the current tax structure, under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a resident enterprise and will normally be subject to an EIT of 25.0% on its global income. The Implementing Rules define the term “de facto management bodies” as “an establishment that exercises, in substance, overall management and control over the production, business, personnel, accounting, etc., of a Chinese enterprise”. If the PRC tax authorities subsequently determine that we should be classified as a resident enterprise, then the organization’s global income will be subject to PRC income tax of 25.0% .

We incurred no income taxes in either 2016 or 2015.

Net Income.

As a result of the factors described above, our net profit increased $548,078, or 147.89%, to 177,492 for the year ended December 31, 2016, from $(370,586) for 2015.

Liquidity and Capital Resources

General

As of December 31, 2016, we had cash and cash equivalents of approximately $33,976. The following table provides detailed information about our net cash flow for all financial statement periods presented in this report.

Cash Flow

	For the Fiscal Year Ended December 31,
	2016	2015
Net cash provided by (used in) operating activities	$(24,361)	$(18,057)
Net cash provided by (used in) investing activities	$(12,169)	$(85,913)
Net cash provided by (used in) financing activities	$32,526	$78,615
Net cash flow	$4,547	$(16,937)

Operating Activities

Net cash used in operating activities was $(24,361) for the fiscal year ended December 31, 2016 which is an increase of $6,304 from $(18,057) net cash used in operating activities for 2015. The increase of the cash used in operating activities was mainly attributed to the change of the number of account of Net income, Account receivables, Deposits and prepayment, and other payables.

Cash flows provided by Net Income increased $548,078 to $177,492 for the twelve months ended December 31, 2016, from ($370,586) for the same period in 2015.

Cash flow used in Account receivables increased $71,295 to $ 49,903 for the twelve months ended December 31, 2016, from $(21,392) for the same period in 2015.

Cash flows used in Deposits and prepayment increased $30,575, to $30,575 for twelve months ended December 31, 2016, from $0 for the same period in 2015.

Cash flow used in other payables increased $602,693, to $324,486 for twelve months ended December 31, 2016, from $(278,207) for the same period in 2015.

Investing Activities

Our primary uses of cash for investing activities are payments for the acquisition of property, plant and equipment.

Net cash used in investing activities for the fiscal year ended December 31, 2016 was $12,169 which is a decrease of $73,744 from net cash used in investing activities of $85,913 for 2015. Such change was mainly because we had paid RMB 500,000 to Guizhou Biology as investment in 2015.

Financing Activities

Net cash provided by financing activities for the fiscal year ended December 31, 2016 was $32,526, while in 2015 we had $78,615 net cash provided by financing activities. Such change was attributable to the fact that we repaid certain short term loans and loans from directors in an amount of $89,754 and $17,593, respectively, for the twelve months ended December 31, 2016.

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

Critical Accounting Policies

Foreign Currencies
The company has determined that RMB to be its functional currency. The accompanying audited consolidated financial statements are presented in U.S. dollars. The audited consolidated financial statements are translated into US dollars from RMB at period-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

	December 31,
	2016		2015
	RMB	HK$	RMB	HK$

Balance sheet items, except for equity accounts	6.9370	7.7551	6.4936	7.7510

Items in the statements of income and comprehensive income, and the statements of cash flows	6.6401	7.7621	6.2272	7.7522

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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

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

Inflation

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

Seasonality

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

Off-Balance Sheet Arrangements

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The full text of our audited consolidated financial statements as of December 31, 2016 and 2015 begins on page F-1 of this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, Ms. Jie Chen and Mr. Xinmin Pan, respectively, evaluated the effectiveness of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this report, that it 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. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, Ms. Chen and Mr. Pan concluded that as of December 31, 2016, our disclosure controls and procedures were effective at the reasonable assurance level.

(b) Management’s annual report on internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refers to the process designed by, or under the supervision of, our chief executive officer and chief financial officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP, and includes those policies and procedures that:

(1)	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

(2)	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and

(3)	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, management used the framework set forth in the report entitled Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting is effective, as of December 31, 2016.

(c) Changes in internal control over financial reporting

There were no changes in our internal controls over financial reporting during the fourth quarter of our fiscal year ended December 31, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The following sets forth the name and position of each of our current executive officers and directors:

Name	Age	Position

Changde Li	60	Chairman of the Board

Jie Chen	61	Chief Executive Officer and Director

Xinmin Pan	71	Chief Financial Officer

Hui Chen	47	Director

Hongliang Li	55	Director

Wei Wang	46	Director

Changde Li was appointed Chairman of the Board of Directors on May 10, 2004. Mr. Li has also served as the President of our subsidiary, Beijing SOD, since November 8, 2007 and the chairman of the Board of Directors of our stockholder, Qiang Long, since 1993. During his tenure as chairman, he has led the Company to develop many holiday villages, hotels and business centers throughout China.

Jie Chen was appointed Chief Executive Officer of the Company on September 22, 2006. Prior to her appointment, Ms. Chen served as Vice President of Public Relations and has been a member of the Board of Directors of the Company since February 2004. Upon being appointed as Chief Executive Officer of the Company, Ms. Chen resigned from the office of Vice President of Public Relations. Ms. Chen is the Vice Secretary of the Zhang Xue-Liang Fund Association and has held such position and other positions with such Association over the past five years. The Zhang Xue-Liang Fund Association is in the business of arranging meetings, conferences and exhibitions. It also provides public relations and investor relations support to its clients. Prior to joining the Zhang Xue-Liang Fund Association, Ms. Chen held various key positions with television stations and public relations companies in China. Ms. Chen holds a Master’s degree in International Finance from Beijing University.

Xinmin Pan became the Company’s Chief Financial Officer on December 4, 2006. Prior to his appointment, Mr. Pan has worked as an accountant with the Company since October 2006. Before joining the Company Mr. Pan served as the General Accountant for ZhongFang Investment Holding Ltd. from March 2006 to October 2006, as the Chief Financial Officer of the Beijing JinLang Hotel from January 2002 to March 2006, as the Chief Financial Officer of the Beijing Happy Holiday Hotel from January 2001 to January 2002, and as Chief Accountant and Chair of the Financing Department of North China Jinghai Industry Corporation, from November 1990 to January 2001.

Hui Chen was appointed to the Board of Directors on and effective December 2, 2005. Since 1999, Mr. Chen has also served as the Assistant General Manager of our stockholder, Qiang Long, a real estate development and investment company. Mr. Chen graduated from Xi’an University of Architecture and Technology in 1991.

Honliang Li became our director on May 10, 2004. Prior to joining us, Mr. Li acted as vice general manager of Beijing JiuFa Industry Ltd., a company engaged in commerce and trade, from 1994 to 2003 and served as Assistant General Manager of one of our stockholders, China Cardinal Limited, from 2003 to 2004. China Cardinal Limited is engaged in the business of acting as an investment company.

Wei Wang became a director on November 12, 2007. Ms. Wang has also served since 2005, as the Chairperson of China Cardinal Limited, since January 2007. In addition, Ms. Wang has served as the Chairperson of Daykeen and Top Time since 2006 and as the President and Chairperson of Beijing SOD from January 2007 until November 8, 2007. Prior to joining our Company, Ms. Wang served as a director of Manchuria Tianrui Investment Co., Ltd from 1999 to 2005. Ms. Wang graduated from Saint Petersburg National Technology University of Russia in 1998.

There are no agreements or understandings for any of our executive officers or directors to resign at the request of another person and no officer or director is acting on behalf of nor will any of them act at the direction of any other person. Our current director holds no directorships in any other reporting companies.

Board Composition and Committees

The board of directors is currently composed of five members, Mr. Changde Li, Ms. Jie Chen, Mr. Hui Chen, Mr. Hongliang Li and Ms. Wei Wang. All board action requires the approval of a majority of the directors in attendance at a meeting at which a quorum is present.

We currently do not have standing audit, nominating or compensation committees. Our entire board of directors handles the functions that would otherwise be handled by each of the committees. We intend, however, to establish an audit committee, a nominating committee and a compensation committee of the board of directors as soon as practicable. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls. The nominating committee would be primarily responsible for nominating directors and setting policies and procedures for the nomination of directors. The nominating committee would also be responsible for overseeing the creation and implementation of our corporate governance policies and procedures. The compensation committee will be primarily responsible for reviewing and approving our salary and benefit policies (including stock options), including compensation of executive officers.

None of our directors is an audit committee financial expert. Upon the establishment of an audit committee, the board will determine whether any of the directors qualify as an audit committee financial expert.

Family Relationships

There are no family relationships among our directors or officers.

Section 16(A) Beneficial Ownership Reporting Compliance

Under U.S. securities laws, directors, certain executive officers and persons holding more than 10% of our common stock must report their initial ownership of the common stock, and any changes in that ownership, to the SEC. The SEC has designated specific due dates for these reports. Based solely on our review of copies of such reports filed with the SEC by and written representations of our directors and executive offers, we believe that our directors and executive offers filed the required reports on time in 2016 fiscal year.

Involvement in Certain Legal Proceedings

To the best of our knowledge, except as set forth in our discussion below in “Certain Relationships and Related Transactions”, none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC. None of the directors, director designees or executive officers to our knowledge has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement.

Code of Ethics

On March 8, 2004, our board of directors adopted a code of ethics that our principal financial officer, principal accounting officer or controller and any person who may perform similar functions are subject to. A copy of the code of ethics has been filed as Exhibit 14 to our Annual Report on Form 10-KSB for the fiscal year ending December 31, 2003 filed on April 15, 2004.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table – 2016 and 2015

The following table sets forth information concerning all compensation awarded to, earned by or paid to Our Chief Executive Officer for services rendered in all capacities during 2016 and 2015. No other executive officers received total annual salary and bonus compensation in excess of $100,000 in either fiscal year.

Name and Principal Position	Year	Salary ($)	Bonus ($)	Total ($)
Jie Chen, CEO and Director	2016	5,190	-	5,190
Jie Chen, CEO and Director	2015	5,544	-	5,544

Outstanding Equity Awards at Fiscal Year End

There was no unexercised option, stock that has not vested or equity incentive plan award for any named executive officer as of December 31, 2016.

Additional Narrative Disclosure

We have an employment agreement with Mr. Xinmin Pan who became our Chief Financial Officer in December 2006 after serving as our accountant from October 2006 to December 2006. We are obligated to pay him an annual salary of RMB 72,000, or $13,500. However, in 2007, we changed the employment agreement with Mr. Pan to pay him an annual salary of RMB 36,000 or $4,732 due to our limited revenue in the fiscal year 2007. We paid to Mr. Pan RMB 36,000 or $5,544 as his annual salary of the fiscal year 2015 and RMB 36,000 or $5,190 as his annual salary of the fiscal year 2016.

We have a verbal understanding with our Chief Executive Officer and Director, Jie Chen, regarding her annual salary of $5,544 and $5,190 for the fiscal years 2015 and 2016, respectively.

Although we have a verbal understanding with our Chairman, Chang-de Li regarding the payment to him of an annual salary in amount of $100,809, Mr. Li did not receive any compensation in 2015 and 2016.

Compensation of Directors

There have been no fees earned or paid in cash for services to our directors. No stock or stock options or other equity incentives were awarded to our directors for their services as directors during the fiscal year ended December 31, 2016. In the future, we may adopt a policy of paying independent directors a fee for their attendance at board and committee meetings. However, we do reimburse each director for reasonable travel expenses related to such director's attendance at board of directors and committee meetings.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

Security Ownership of Certain Beneficial Owners

The following table sets forth information regarding beneficial ownership of our common stock as of April 12, 2017 (i) by each person who is known by us to beneficially own more than 5% of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group.

Unless otherwise specified, the address of each of the persons set forth below is in care of China Longyi Group International Holdings Limited, 8B 8/F East Area, Century Golden Resources Business Center, 69 Banjing Road, Haidian District, Beijing, and People’s Republic of China 100097.

			Amount &Nature of
	Name & Address		Beneficial		Percent of
Title of Class	of Beneficial Owner	Office, If Any	Ownership⁽¹⁾		Class⁽²⁾
Directors and Officers

Common Stock	Chang-de Li No. 95 Kangxi Road Ba Da Xia Industrial Development Zone Yanqing County, Beijing People’s Republic of China	Chairman	6,034,695	⁽³⁾	7.77%

Common Stock	Jie Chen	CEO and Director	0		*

Common Stock	Xinmin Pan	CFO	0		*

Common Stock	Hui Chen	Director	0		*

Common Stock	Hongling Li	Director	0		*

Common Stock	Wei Wang	Director	62,750,000	^{(4) (8)}	80.81%

Common Stock	All officers and directors as a group (5 persons named above)		68,784,695		88.58%

5% Security holders

Common Stock	Daykeen Investment Limited 19th Floor, Beverly House, Nos. 93- 107 Lockhart Road, Wanchai, Hong Kong		62,250,000	⁽⁴⁾	80.16%

Common Stock	Jolly Concept Management Limited 19th Floor, Beverly House, Nos. 93- 107 Lockhart Road, Wanchai, Hong Kong		5,134,000		6.61%

* Less than 1%

	(1)	Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.

	(2)	A total of 77,655,862 shares of our common stock are considered to be issued and outstanding pursuant to SEC Rule 13d-3(d) (1) as of April 12, 2017. For each beneficial owner above, any options exercisable within 60 days have been included in the denominator.

	(3)	Includes 750,001 shares owned by Beijing Qiang Long Real Estate Development Co. Ltd., or Qiang Long, 150,694 shares owned by Chinese Dragon Heritage Investment Management Limited, 5,134,000 shares owned by Jolly Concept Management Limited. Chang-de Li owns 100% of the equity interests of each of Beijing Qiang Long Real Estate Development Co., Ltd., Chinese Dragon Heritage Investment Management Limited and Jolly Concept Management Limited and exercises voting and investment power over the shares owned by each such entity.

	(4)	Wei Wang exercises voting and investment power over the shares owned by Daykeen Investment Limited.

	(5)	Includes 500,000 shares owned by China Cardinal Limited, or China Cardinal and 62, 250,000 shares owned by Daykeen Investment Limited. Wei Wang has controlling interests and exercises voting and investment power over the shares owned by China Cardinal and Daykeen Investment Limited.

Changes in Control

There are no arrangements known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Certain Relationships and Related Transactions

The following includes a summary of transactions since the beginning of the 2014 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under Item 11, “Executive Compensation”):

As of December 31, 2016, we had borrowed an aggregate of approximately $573,587 from our directors to be used as working capital. The loans do not have maturity dates and are non-interest bearing and unsecured.

Promoters and Certain Persons

We did not have any promoters at any time during the past five years.

Director Independence

Our Board is currently composed of five members, none of whom are “independent” directors, as that term is defined under the NASDAQ listing standards. All actions of the board of directors require the approval of a majority of the directors in attendance at a meeting at which a quorum is present. Our directors have a duty of to act in good faith with a view to our interests. In fulfilling their duty of care to us, our directors must ensure compliance with our Certificate of Incorporation, as amended and our Bylaws. Board action requires the approval of a majority of the directors in attendance at a meeting at which a quorum is present.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Independent Auditors’ Fees

The following table represents fees billed for 2016 and 2015 for professional audit services rendered by our independent registered public accounting firms:

		2016		2015

Audit fees⁽¹⁾	$	50,000	$	50,000
Audit-related fees⁽²⁾		17,000		17,000
Tax fees		-		-
All other fees		-		-
Total		67,000		67,000

(1)	“Audit Fees” consisted of the aggregate fees billed for professional services rendered for the audit of our annual financial statements and the reviews of the financial statements included in our Forms 10-Q and for any other services that were normally provided in connection with our statutory and regulatory filings or engagements.

(2)	“Audit Related Fees” consisted of the aggregate fees billed for professional services rendered for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements and were not otherwise included in Audit Fees.

Pre-Approval Policies and Procedures

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our Board to assure that such services do not impair the auditors’ independence from us. In accordance with its policies and procedures, our Board pre-approved the audit and non-audit service performed by Tao Su, CPA for our consolidated financial statements as of and for the year ended December 31, 2016.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES

(a)	The following documents are filed as part of this report:
	(1) Financial Statements are set forth beginning on page F-1 of the Report

•	Report of Independent Registered Public Accounting Firm	F-2

•	Consolidated Balance Sheets	F-3

•	Consolidated Statements of Operations and Comprehensive Income (Loss)	F-4

•	Consolidated Statements of Cash Flows	F-5

•	Consolidated Statements of Changes in Stockholders’ Equity (Deficit)	F-6

•	Notes to Consolidated Financial Statements	F-7

(2) Financial Statement Schedules: All Schedules are omitted because the information called for is not applicable, is not required, or because the financial information is set forth in the financial statements or notes thereto.

(3) Exhibits

Exhibits (including those incorporated by reference). The following exhibits are filed as part of this report or incorporated by reference:

Exhibit Number	Description

3.1	Certificate of Incorporation of the Company [Incorporated by reference to Exhibit 3.1 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183]

3.2	Certificate of Amendment of Certificate of Incorporation of the Company [Incorporated by reference to Appendix A of the Definitive Proxy Statement of the Company filed on July 3, 2001 in Commission file number 0-30183]

3.3	Amended and Restated Bylaws of the Company [Incorporated by reference to Exhibit 3.3 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183 in Commission file number 0-30183]

3.4	Certificate of Amendment of Certificate of Incorporation of the Company filed with the Secretary of State of the State of New York on October 16, 2007 [Incorporated by reference to Exhibit 3.4 of the Form 8-K filed on December 5, 2007 in Commission file number 0-30183]

14	Code of Ethics [incorporated by reference to Exhibit 14 of the Annual Report on Form 10- KSB of the Company for the fiscal year ended December 31, 2003]

21	A description of the subsidiaries of the registrant. [Incorporated by reference to Exhibit 21of the Form 10-K filed on April 15, 2011 in Commission file number 0-30183]

31.1	Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.

31.2	Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit Number	Description

32.2	Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	Interactive data files pursuant to Rule 405 of Regulation S-T

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED

	By: /s/ Jie Chen
	Jie Chen
	Chief Executive Officer

	Date: April 17, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company in the capacities and on the dates indicated.

Each person whose signature appears below hereby authorizes Jie Chen and Xinmin Pan, or any of them, as attorneys-in-fact to sign on his behalf, individually, and in each capacity stated below, and to file all amendments and/or supplements to this annual report on Form 10-K.

SIGNATURE	CAPACITY	DATE


/s/Chang-de Li	Chairman
		April 17, 2017
Chang-de Li


/s/Jie Chen	Chief Executive Officer and Director
		April 17, 2017
Jie Chen


/s/Xinmin Pan	Chief Financial Officer
		April 17, 2017
Xinmin Pan


/s/Hui Chen	Director
		April 17, 2017
Hui Chen


/s/Hongliang Li	Director
		April 17, 2017
Hongliang Li


/s/Wei Wang	Director
		April 17, 2017
Wei Wang

EXHIBITS

Exhibit Number	Description

3.1	Certificate of Incorporation of the Company [Incorporated by reference to Exhibit 3.1 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183]

3.2	Certificate of Amendment of Certificate of Incorporation of the Company [Incorporated by reference to Appendix A of the Definitive Proxy Statement of the Company filed on July 3, 2001 in Commission file number 0-30183]

3.3	Amended and Restated Bylaws of the Company [Incorporated by reference to Exhibit 3.3 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183 in Commission file number 0-30183]

3.4	Certificate of Amendment of Certificate of Incorporation of the Company filed with the Secretary of State of the State of New York on October 16, 2007 [Incorporated by reference to Exhibit 3.4 of the Form 8-K filed on December 5, 2007 in Commission file number 0-30183]

14	Code of Ethics [incorporated by reference to Exhibit 14 of the Annual Report on Form 10- KSB of the Company for the fiscal year ended December 31, 2003]

21	A description of the subsidiaries of the registrant. [Incorporated by reference to Exhibit 21of the Form 10-K filed on April 15, 2011 in Commission file number 0-30183]

31.1	Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.

31.2	Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	Interactive data files pursuant to Rule 405 of Regulation S-T

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 and 2015

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2
CONSOLIDATED BALANCE SHEETS	F-3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)	F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS	F-5
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)	F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
China Longyi Group International Holding Ltd.
8/F, East Area, Century Golden Resources Business Center,
69 Banjing Road, Haidian District, Beijing,
People's Republic of China, 10089

We have audited the accompanying consolidated balance sheets of China Longyi Group International Holding Ltd. (the “Company”) as of December 31, 2016 and 2015 and the related consolidated statements of operations, changes in shareholders' deficit and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company was not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of China Longyi Group International Holding Ltd. as of December 31, 2016 and 2015 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s accumulated deficit and lack of assets raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Anton & Chia, LLP
Newport Beach, California
April 17, 2017

F-2

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS

		December 31,			December 31,
ASSETS		2016			2015
Current assets
Cash and cash equivalents	$	33,976		$	29,429
Inventories		440,643			359,194
Account receivables		52,957			5,544
Other receivables		56,461			26,508
Deposits and prepayments		42,790			14,447
Total current assets		626,827			435,122

Investments		81,919			87,512
Property, plant and equipment (net)		285,149			320,386
	$	993,895		$	843,020

LIABILITIES AND DEFICIT
Current liabilities
Short-term loan	$	-		$	58,519
Accounts payable		1,413			4,869
Accrued liabilities		315,237			192,306
Due to directors		573,587			627,832
Due to related parties		813,665			417,653
Other payables		179,278			660,868
Total current liabilities		1,883,180			1,962,047

Commitments and contingencies	$	-		$	-

Deficit
Common stock: par value $.01; 200,000,000 shares authorized; 77,655,862 shares issued and outstanding		776,558			776,558
Additional paid-in capital		28,877,540			28,877,540
Accumulated Deficit		(30,839,409	)		(30,996,907	)
Accumulated other comprehensive income		248,955			204,099
Total China Longyi stockholders' deficit		(936,356	)		(1,138,710	)
Noncontrolling interest		47,071			19,683
Total Deficit		(889,285	)		(1,119,027	)
	$	993,895		$	843,020

See notes to consolidated financial statements

F-3

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (INCOME) LOSS

		For the year ended
		December 31,
		2016			2015
Revenues
Sales	$	1,745,363		$	160,349
Cost of sales		738,883			8,838
Gross margin	$	1,006,480		$	151,511
Operating expenses
General and administrative expenses	$	768,765		$	516,912
	$	768,765		$	516,912
Income (Loss) from operations	$	237,715		$	(365,401	)
Other income (expense)
Interest income	$	155		$	64
Other income (expense)		(25,561	)		8,861
Foreign transaction exchange gain (loss)		(25,958	)		(14,110	)
Interest expense		(8,859	)		-
	$	(60,223	)	$	(5,185	)
Income (Loss) before income tax expense and noncontrolling interest	$	177,492		$	(370,586	)
Net income (loss)	$	177,492		$	(370,586	)
Less: Net income (loss) attributable to noncontrolling interest		(19,994	)		27,854
Net income (loss) attributable to China Longyi	$	157,498		$	(342,732	)

Basic and diluted loss per share	$	0.0020		$	(0.0044	)
Weighted average number of shares outstanding-basic and diluted	$	77,655,862		$	77,655,862
Comprehensive income (loss)
Net income (loss)	$	177,492		$	(370,586	)
Foreign currency translation adjustment	$	52,250		$	49,252
Comprehensive income (loss)	$	229,742		$	(321,334	)
Comprehensive income (loss) attributable to noncontrolling interest	$	27,388		$	(20,446	)
Comprehensive income (loss) attributable to China Longyi	$	202,354		$	(300,888	)

See notes to consolidated financial statements

F-4

CHINALONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS

		For the year ended December 31,
		2016			2015
Cash flows from operating activities:
Net income (loss)	$	177,492		$	(370,586	)
Adjustments to reconcile net income (loss) to net cash used in operations:
Depreciation and amortization		27,588			23,828
Changes in operating assets and liabilities:
Accounts receivables		(49,903	)		21,392
Other receivables		(33,062	)		(21,440	)
Deposits and prepayment		(30,575	)		-
Inventory		(109,077	)		8,037
Account payable and accrued liabilities		(3,285	)		(482	)
Other payables		(324,486	)		278,207
Due to related parties		428,275			42,987
Due to director		(107,328	)		-
Net cash used in operations		(24,361	)		(18,057	)

Cash flows from investing activities:
Purchase of investment		-			(80,293	)
Purchases of property and equipment		(12,169	)		(5,620	)
Net cash provided by (used in) investing activities		(12,169	)		(85,913	)

Cash flows from financing activities:
Proceeds (repayments) from short term loans		(57,228	)		61,022
Proceeds (repayments) from directors		89,754			17,593
Net cash provided by financing activities		32,526			78,615
Effect of foreign exchange rate fluctuation		8,551			8,418
Increase(decrease) in cash and cash equivalents		4,547			(16,937	)
Cash and cash equivalents, beginning of period		29,429			46,366
Cash and cash equivalents, end of period	$	33,976		$	29,429

Supplemental disclosures of cash flow information:
Cash paid for interest	$	-		$	-
Cash paid for income taxes	$	-		$	-

See notes to consolidated financial statements

F-5

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

										Accumulated
					Additional					Other
	Common Stock				Paid In		Accumulated			Comprehensive		Noncontrolling
	$.01 Par Value				Capital		Deficit			Income		Interest			Total

Balance December 31, 2014	77,655,862	$	776,558	$	28,877,540	$	(30,654,175	)	$	162,255	$	40,129		$	(797,693	)

Net income (loss)	-		-		-		(342,732	)		-		(27,854	)		(370,586	)
Foreign currency translation	-		-		-		-			41,844		7,408			49,252
Balance December 31, 2015	77,655,862	$	776,558	$	28,877,540	$	(30,996,907	)	$	204,099	$	19,683		$	(1,119,027	)

Net income (loss)	-		-		-		157,498			-		19,994			177,492
Foreign currency translation	-		-		-		-			44,856		7,394			52,250
Balance December 31, 2016	77,655,862	$	776,558	$	28,877,540	$	(30,839,409	)	$	248,955	$	47,071		$	(889,285	)

See notes to consolidated financial statements

F-6

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

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

1.	BUSINESS DESCRIPTION AND ORGANIZATION

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

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

CONTROL BY PRINCIPAL STOCKHOLDERS

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

GOING CONCERN

These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. During the year ended December 31, 2016, the Company incurred a net income of $177,492. As at December 31, 2016, the Company has a working capital deficiency of $1,256,353 and accumulated deficit from recurring net losses of $30,839,409 incurred for the current and prior years as of December 31, 2016. As at December 31, 2016, the Company has cash and cash equivalents of $33,976. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholder, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

F-7

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

	PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

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

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

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

	NONCONTROLLING INTEREST IN SUBSIDIARIES

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

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

	USE OF ESTIMATES

	The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

	SIGNIFICANT ESTIMATES

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

	REVENUE RECOGNITION

	Revenue is recognized when persuasive evidence of an arrangement exists, the price is fixed and determinable, delivery has occurred and there is a reasonable assurance of collection of the sales proceeds. The Company generally obtains purchase authorizations from its customers for a specified amount of products at a specified price and considers delivery to have occurred when the customer takes title of the products.

F-8

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

	CASH AND CASH EQUIVALENTS

	Cash equivalents consist of highly liquid investments that are readily convertible to cash generally with maturities of three months or less when purchased.

	Cash and Cash Equivalents as of December 31, 2016 were $33,976 and $29,429 in December 31, 2015.

	PROPERTY, PLANT AND EQUIPMENT

	Property, plant and equipment are recorded at cost. Significant additions and improvements are capitalized, while repairs and maintenance are charged to expenses as incurred. Equipment purchased for specific research and development projects with no alternative uses are expensed. Assets under construction are not depreciated until construction is completed and the assets are ready for their intended use. Gains and losses from the disposal of property, plant and equipment are recorded in loss on disposal and impairment of property, plant and equipment included in the consolidated statements of comprehensive income (loss).

	Depreciation and amortization are provided for financial reporting purposes primarily on the straight-line method over the estimated useful lives of the respective assets as follows:

	*Estimated*
	*Useful Life*

*Transportation equipment*	*5 years*
*Furniture and fixtures*	*5 years*
*Production equipment*	*10 years*
*Building and improvements*	*20 years*

INVENTORY

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

Inventories as of December 31, 2016 were $440,643 and $359,194 in December 31, 2015.

FOREIGN CURRENCY TRANSLATION

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

F-9

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

	FOREIGN CURRENCY TRANSLATION (Continued)

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

	The relevant exchange rates are listed below:

	December 31,
	2016		2015
	RMB	HK$	RMB	HK$
Balance sheet items, except for equity accounts	6.9370	7.7551	6.4936	7.7510

Items in the statements of income and comprehensive income, and the statements of cash flows	6.6401	7.7621	6.2272	7.7522

FINANCIAL INSTRUMENTS ETC

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

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

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

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

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

The Company analyzes all financial instruments with features of both liabilities and equity under ASC Topic 480, Distinguishing Liabilities from Equity, and ASC Topic 815, Derivatives and Hedging. As of December 31, 2016 and 2015, the Company did not identify any assets and liabilities required to be presented on the balance sheet at fair value.

F-10

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

	INCOME TAXES

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

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

	The corporate income tax rate applicable to the company is from 15% to 35%. As of December 31, 2016, the Company had a Net Operating Loss of $30,839,409 to be carried forward into future years and will expire in 2037 if not utilized. A full valuation allowance is established against all deferred tax assets relating to NOL carry forwards based on estimates of recoverability. While the Company has optimistic plans for its business, it is determined that such a valuation allowance was necessary given the uncertainty with respect to its ability to generate sufficient profits from its new business model.

	EARNINGS (LOSS) PER SHARE

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

	The numerator and denominator used in the basic and diluted LPS of common stock computations are presented in the following table:

	Year ended December 31,
	2016	2015
NUMBERATOR FOR BASIC AND DILUTED EPS
Net income (loss) attributable to common stockholders	$ 157,498	$ (342,732)
DENOMINATOR FOR BASIC AND DILUTED EPS
Weighed average shares of common stock outstanding	77,655,862	77,655,862
EPS – Basic and diluted	$ 0.0020	$ (0.0044)

There were no potentially dilutive securities outstanding at December 31, 2016 and 2015 as the result would be anti-dilutive.

COMPARATIVE FIGURES

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

COMPREHENSIVE INCOME (LOSS)

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

F-11

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

	RECENTLY ADOPTED ACCOUNTING STANDARDS

	There were no changes to the new accounting pronouncements as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 except for the following:

	In February 2016, the Financial Accounting Standards Board ("FASB") issued guidance which amends the existing accounting standards for leases. Consistent with existing guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification. Under the new guidance, a lessee will be required to recognize right-of-use assets and lease liabilities on the balance sheet. The new guidance is effective for us from November 1, 2020, and interim periods in the following year. Early adoption of this guidance is permitted and we will be required to adopt using a modified retrospective approach. We are evaluating the timing and the impact of adopting this guidance on our audited consolidated financial statements and disclosures.

	In January 2016, FASB issued amendments to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The standard requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. The provisions under this amendment are effective for us from November 1, 2018, and for interim periods in the following year and early adoption is not permitted. We are evaluating the impact of adopting this guidance to our audited consolidated financial statements.

	In November 2015, FASB issued guidance intended to simplify accounting for deferred taxes. Beginning on November 1, 2017 and including the interim periods following that date, we will be required to present all deferred tax balances as non-current. Existing GAAP guidance requires us to record deferred tax balances as either current or non-current in accordance with the classification of the underlying attributes. Early adoption of this guidance is permitted and may be applied either prospectively or retrospectively to all periods presented.

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

3.	STOCKHOLDERS' DEFICIT

	The Company's capital structure as of December 31, 2016 and 2015 was as follows:

*Common stock – par value $0.01*	*Authorized*	*Issued and outstanding*

*December 31, 2016*	*200,000,000*	*77,655,862*

*December 31, 2015*	*200,000,000*	*77,655,862*

As of December 31, 2016, the Company had accumulated deficit of $30,839,409.

F-12

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

4.	INVESTMENTS

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

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

	The amount of investment as of December 31, 2016 and December 31, 2015 was $81,919 and $87,512, respectively.

5.	INVENTORIES

	Inventories at December 31, 2016 and December 31, 2015 consisted of:

		December 31,		December 31,
		2016		2015
Raw Materials	$	46,254	$	12,639
Low value consumables		12,623		13,485
Work in progress		208,292		266,717
Finished goods		83,908		66,353
Processing materials		142,582		-
Subtotal		493,659		359,194
Less: reserve for obsolescence		53,016		-
	$	440,643	$	359,194

6.	ACCOUNT RECEIVABLES

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

	The allowance for doubtful accounts recognized as of December 31, 2016 and 2015 was Nil and Nil, respectively.

	Account receivables at December 31, 2016 and December 31, 2015 consisted of:

		December 31,		December 31,
		2016		2015
Chongqin wuji Limited.	$	36,327	$	-
Ruipu Ruisen Limited.		11,504		-
Tang sanbao		186		-
Bai dachun		4,844		-
Wang aiping		97		-
Beijing Chanping Yanhuan Lingyuan		-		5,544
Total	$	52,957	$	5,544

F-13

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

7.	PROPERTY AND EQUIPMENT

	Property and equipment at cost consisted of:

		December 31,			December 31,
		2016			2015
Transportation equipment	$	53,317		$	52,892
Furniture and office equipment		61,239			57,043
Production equipment, buildings and improvements		352,277			376,331
Subtotal		466,833			486,266
Less: impairment provision		(44,523	)		(47,563	)
accumulated depreciation		(310,990	)		(304,015	)
		111,320			134,688
Construction in progress		173,829			185,698
	$	285,149		$	320,386

	Depreciation expense for the years ended December 31, 2016 and 2015 was $27,588 and $23,288, respectively. Impairment for the year ended December 31, 2016 and 2015 was $44,523 and $47,563,

8.	COMMITMENTS AND CONTINGENCIES

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

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

9.	SHORT-TERM LOAN

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

	The principal amount for the years ended December 31, 2016 and 2015 was $0 and $58,519 respectively, and were recorded on the balance sheet as short-term loan.

10.	OTHER PAYABLES

	Other payables as of December 31, 2016 and December 31, 2015 consist of the following:

		December		December
		31,2016		31, 2015
Tailong Zhongrui International Corporation		-	$	35,419
Beijing De Qiuhong Investment Ltd.		-		486,116
Xinxiang Tianjieshan Biotechnology Co., Ltd.		56,281		-
Qingdao cooperation win - win Trading Company		15,396
Educational funds		7,903		9,754
Wage payable		70,069		86,740
Project payment		21,623		23,100
Other payable		8,006		19,739
Total	$	179,278	$	660,868

F-14

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

11.	RELATED PARTY TRANSACTIONS AND STOCKHOLDER’S LOAN

	The caption “Due to Related Company” are loans that are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. The Company rents office space from the related company.

	The related party transactions list:

Related Party Transactions	Due from related parties	Due to related parties	Due to directors
*Related parties*	Due from related parties	Due to related parties	Due to directors
2016.12.31
Chen Jie			128,418
Li Changde			216,755
Wang Wei			9,205
Li, Hongliang			219,209
Beijing De Reng Sheng Limited		194,573
Shandong Cangshan Duoha Vegetables
company		458
SiChuan Longyi Limited		19,576
Liu, Guizhi		216,092
Beijing De Qiu HongLimited		382,967
Total	-	813,665	573,587
2015.12.31
Chen Jie			131,771
Li Changde			240,454
Wang Wei			9,210
Li, Hongliang			246,396
Beijing De Reng Sheng Limited		210,938
Shandong Cangshan Duoha Vegetables Company		489
SiChuan Longyi Limited		20,913
Liu, Guizhi		185,313
Total	-	417,653	627,832

F-15

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
Notes to consolidated financial statements

12.	RELATED PARTY TRANSACTIONS AND STOCKHOLDER’S LOAN (Continued)

Related Party Transactions	Rental	Inventories Purchase from related party	Due to directors	Payment for related party
Related parties	Rental	Inventories Purchase from related party	Due to directors	Payment for related party
2016.1-2016.12
Liu, Guizhi	43,246
Total	43,246
2015.1-2015.12
Chen Jie			16,197
Liu, Guizhi	46,199
Total	46,199		16,197

13.	MAJOR SUPPLIERS AND CUSTOMERS

The Company purchases the majority of its SOD material from two suppliers which accounted for 100% of our total purchases in 2016. One of the suppliers is Xinxiang Tianjie Mountain Biological Technology Co., Ltd. Another is Guizhou Shengxin Biological Technology Co., Ltd. As of December 31, 2016, other payables due to Xinxiang Tianjie Mountain Biological Technology Co., Ltd. was $ 56,281, which accounts for 31% of the total other payables.

The Company had two major customers for the years ended December 31, 2016: Dingli Yiwu Electronic Business Co., Ltd., and Chongqing Wuji Industrial Co., Ltd. These two companies accounted for 95% of revenue for the years ended December 31, 2016. As of December 31, 2016, accounts receivable due from Chongqing Wuji Industrial Co., Ltd. was $ 36,327, which accounts for 69% of the total accounts receivable.

F-16


14.	INCOME TAX

At December 31, 2016 and 2015, based on the weight of available evidence, management determined that it was unlikely that the Company's deferred tax assets would be realized and have provided for a full valuation allowance associated with the net deferred tax assets.

The Company periodically analyzes its tax positions taken and expected to be taken and has determined that since inception there has been no need to record a liability for uncertain tax positions. The Company classifies income tax penalties and interest, if any, as part of selling, general and administrative expenses in the accompanying statements of operations. There was no accrued interest or penalties as of December 31, 2016 and 2015.

The Company is neither under examination by any taxing authority, nor has it been notified of any impending examination. The Company's tax years for its Federal and State jurisdictions which are currently open for examination are the years of 2012 - 2016.

China
Under the Law of People’s Republic of China on Enterprise Income Tax (“EIT Law”), which was effective from January 1, 2008, domestically-owned enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%. As of December 31, 2016, the PRC entities have net operating losses carry forward of $30 million that begin expiring in 2035. The potential benefit of the company’s net operating losses has not been recognized in these financial statements because it is more likely-than-not it will not utilize the net operating losses carried forward as it does not expect to generate sufficient taxable income in future or the amount involved is not significant.

		Year Ended December 31,
		2016			2015
Income tax at U.S. statutory rate (34%)	$	(34%	)	$	(34%	)
Tax rate difference		8.0%			8.0%
Valuation allowance		2.6%			2.6%
	$	-		$	-


15.	SUBSEQUENT EVENT

	The management assessed there were no events occurring after balance date as of December 31, 2016 and prior to the time of annual report completion which might affect the financial report.

F-17

Attached files

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LTD Reports

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