PINX:LWLL Linkwell Corp Quarterly Report 10-Q/A Filing - 3/31/2012

Effective Date 3/31/2012

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

FORM 10-Q /A
(Amendment No. 1)

(Mark One)


QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to __________

Commission File Number: 000-24977


LINKWELL CORPORATION
(Exact name of registrant as specified in charter)
 
FLORIDA
 
65-1053546
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
 
1104 Jiatong Road, Jiading District, Shanghai, China
 
201807
(Address of principal executive offices)
 
(Zip Code)
 
(86) 21-5566-6258
(Registrant's telephone number, including area code)
 
not applicable
(Former name, former address and former fiscal year, if changed since last report)
 

           Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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. Yesx Noo

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 during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). Yesx No o

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


Large accelerated filer o
 
Accelerated filer o
     
Non-accelerated filer o
 
Smaller reporting company x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o Nox
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
 
As of May 11, 2012, there were 119,605,475 shares of our common stock issued and outstanding.  

 
i

 
 


EXPLANATORY NOTE

In response to comments from the staff of the Securities and Exchange Commission, we are filing this Amendment No. 1 to our Quarterly Report on Form 10-Q for the period ended March 31, 2012 to provide additional disclosure in Part II, Item 1A. and in Note 13 to the financial statements contained therein.  This Amendment No. 1 also contains currently dated certifications which appear as Exhibits 31.1, 31.2 and 32.1. No other changes have been made to the original report which speaks as of the original filing date of the original report, does not reflect facts or events that may have occurred subsequent to the filing date of the original report, and does not modify or update in any way any other disclosures made in the original report, or subsequent to any periods for which disclosure was otherwise provided in the original report. Accordingly, this Amendment No. 1 should be read in conjunction with our filings with the Securities and Exchange Commission subsequent to the filing date of the original report, including any amendments thereto.
 


INDEX
 
       
Page
PART I - FINANCIAL INFORMATION
   
         
Item 1.
 
Financial Statements.
  1
         
Item 2.
 
Management's Discussion and Analysis of Financial Condition and Results of Operations.
  19
         
Item 3.
 
Quantitative and Qualitative Disclosures About Market Risk.
  21
         
Item 4.
 
Controls and Procedures.
  21
         
PART II - OTHER INFORMATION
   
         
Item 1.
 
Legal Proceedings.
  22
         
Item 1A.
 
Risk Factors.
  22
         
Item 2.
 
Unregistered Sales of Equity Securities and Use of Proceeds.
  23
         
Item 3.
 
Defaults Upon Senior Securities. 
  23
         
Item 4.
 
Mine Safety Disclosures.
  23
         
Item 5.
 
Other Information.
  23
         
Item 6.
 
Exhibits.
  24



 
ii

 
 


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION


Certain statements in this report contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to increase our revenues, develop our brands, implement our strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, U.S. and global competition, and other factors detailed from time to time in the filings we make with the Securities and Exchange Commission, including our Quarterly Reports on Form 10-Q, our Annual Reports on Form 10-K and our Current Reports on Form 8-K. Most of these factors are difficult to predict accurately and are generally beyond our control.

You should consider the areas of risk described in connection with any forward-looking statements that may be made in this Quarterly Report. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this Quarterly Report in its entirety, including the risks described in our Annual Report on Form 10-K for the year ended December 31, 2011, under Part I, Item 1A, “Risk Factors.” Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this Quarterly Report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

IMPACT OF THE ACCOUNTING TREATMENT OF THE
METAMINING NEVADA ACQUISITION ON OUR FINANCIAL STATEMENTS

As described elsewhere herein, on March 30, 2012, we acquired Metamining Nevada from Metamining Inc., an unrelated third party, in exchange for shares our Series C convertible preferred stock and Series C common stock purchase warrants.  Metamining Nevada is a development stage company formed in March 2011. Following the acquisition, we continue to own and operate our historical operations which are the development, manufacture, sale and distribution of disinfectant health care products primarily to the medical industry in China. However, because of the proportional ownership interests after the transaction, our acquisition of Metamining Nevada was accounted for as a reverse merger and Metamining Nevada is considered the acquirer for accounting purposes.  The consolidated balance sheet as of March 31, 2012 reflects our consolidated financial positions which includes the assets and liabilities Metamining Nevada and our historical operations.  The consolidated balance sheet as of December 31, 2011 reflects the historical financial position of Metamining Nevada, the accounting acquirer. The consolidated statement of operations and comprehensive income and consolidated statements of cash flows for the three months ended March 31, 2012 and 2011, respectively, reflect the historical operations of Metamining Nevada and our operations from the acquisition date. However, due to the fact that the acquisition is effective at the end of the period, none of our operations or cash flows are included in the March 31, 2012 period. -See Note 2.


 
iii

 
 


OTHER PERTINENT INFORMATION

As used herein, unless the context indicates otherwise, the terms:

“Linkwell", the “Company”, “we” and “us” refers to Linkwell Corporation, a Florida corporation, and our subsidiaries;

“Linkwell Tech” refers to our 90% owned subsidiary Linkwell Tech Group, Inc., a Florida corporation;

“LiKang Disinfectant” refers to Shanghai LiKang Disinfectant High-Tech Company, Limited, a wholly-owned subsidiary of Linkwell Tech;

“LiKang Biological” refers to Shanghai LiKang Biological High-Tech Co., Ltd., a wholly owned subsidiary of LiKang Disinfectant; and

“LiKang International” refers to Shanghai LiKang International Trade Co., Ltd., formerly a wholly owned subsidiary of LiKang Disinfectant which was sold to Linkwell International Trading Co., Limited on May 31, 2008.

“Metamining Nevada” refers to our wholly owned subsidiary Metamining Nevada, Inc., a Nevada corporation.

          We also use the following terms when referring to certain related parties:

“Shanhai” refers to Shanghai Shanhai Group, a Chinese company which previously was the minority owner of LiKang Disinfectant;
“ZhongYou” refers to Shanghai ZhongYou Pharmaceutical High-Tech Co., Ltd., a company owned by Shanghai Jiuqing Pharmaceuticals Company, Ltd.

“Shanghai Jiuqing” refers to Shanghai Jiuqing Pharmaceuticals Company, Ltd., a company whose 65% owner is Shanghai Ajiao Shiye Co. Ltd., a company of which our Chairman and Chief Executive Officer, Mr. Xuelian Bian, is a 60% shareholder.

“Metamining, Inc.”, a California company, refers to the former sole shareholder of Metamining Nevada, from which we acquired 100% ownership of Metamining Nevada on March 30, 2012.
 
 
The People's Republic of China is herein referred to as “China” or the “PRC”.

The information which appears on our web site at www.linkwell.us is not part of this report.
 

 
iv

 
 

LINKWELL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
   
March 31, 2012
(Unaudited)
   
December 31, 2011
(Audited)
 
ASSETS
           
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 669,381     $ -  
Accounts receivable, net
    2,588,599       -  
Accounts receivable - related parties, net
    10,446,862       -  
Due from related party
    1,110,103       -  
Other receivables
    5,045,772       -  
Inventories, net
    2,571,269       -  
Prepaid expenses and other current assets
    697,287       -  
Total current assets
    23,129,273       -  
              -  
NON-CURRENT ASSETS:
            -  
Deferred compensation
    401,452       -  
Investment
    1,283,231       -  
Property, plant and equipment, net
    2,450,016       -  
Real property and mineral rights
    14,250,000       14,250,000  
Prepaid for land use right
    606,898       -  
Intangible assets
    282,506       -  
Total non-current assets
    19,274,103       14,250,000  
                 
TOTAL ASSETS
  $ 42,403,376     $ 14,250,000  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES:
               
Loans payable
  $ 1,588,739     $ -  
Accounts payable and accrued expenses
    3,678,868       5,000  
Note payable – Current due
    5,625,000       5,625,000  
Advances from customers
    366,376       -  
Taxes payable
    175,318       -  
Other payables
    90,526       -  
Due to related parties
    1,743,737       -  
Total current liabilities
    13,268,564       5,630,000  
                 
Note payable – long term
    5,625,000       5,625,000  
Total liability
    18,893,564       11,255,000  
                 
COMMITMENT AND CONTINGENCY
               
                 
STOCKHOLDERS' EQUITY
               
Preferred Stock, $0.0005 par value; 10,000,000 authorized, 9,581,973 and 0 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively
    4,791       -  
Common Stock, $.0005 par value, 150,000,000  authorized, 119,605,475 and 0  shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively
    59,803       -  
Additional paid-in capital
    22,771,296       3,112,945  
  Retained earnings
    (139,615 )     (117,945 )
Total Linkwell Corporation stockholder's equity
    22,696,275       2,995,000  
                 
NONCONTROLLING INTEREST
    813,537       -  
                 
TOTAL STOCKHOLDERS' EQUITY
    23,509,812       2,995,000  
                 
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
  $ 42,403,376     $ 14,250,000  
 
See accompanying notes to these unaudited consolidated financial statements.

 
- 1 -

 
 



 LINKWELL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
 
   
Three Months Ended
March 31, 2012
   
From Inception
(March 30, 2011)
to March 31, 2011
 
             
NET SALES
  $ -     $ -  
COST OF SALES
    -       -  
                 
GROSS PROFIT
    -       -  
                 
OPERATING EXPENSES:
               
Selling expenses
    -       -  
General and administrative
    26,670       -  
Total Operating Expenses
    26,670       -  
                 
OPERATING INCOME (LOSS)
    (26,670 )     -  
                 
                 
INCOME BEFORE INCOME TAX
    (26,670 )     -  
                 
INCOME TAX EXPENSE
    -       -  
                 
NET INCOME
    (26,670 )     -  
                 
COMPREHENSIVE INCOME (LOSS):
               
Net income
    (26,670 )        
Foreign currency translation
    -       -  
                 
COMPREHENSIVE LOSS
  $ (26,670 )   $ -  
                 
BASIC AND DILUTED INCOME PER COMMON SHARE:
               
Basic earnings per shares
  $ -     $ -  
Diluted earnings per shares
  $ -     $ -  
                 
WEIGHTED AVERAGE SHARES OUTSTANDING:
               
Basic
    -       -  
Diluted
    -       -  
 
See accompanying notes to these unaudited consolidated financial statements.
 

 
- 2 -

 
 


LINKWELL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

   
Three Months Ended
March 31, 2012
   
From Inception
(March 30, 2011)
 to March 31, 2011
 
OPERATING ACTIVITIES:
           
Net loss
  $ (26,670 )   $ -  
Increase(decrease) in current assets:
               
Accounts payable, other payables and accrued expenses
    437       -  
Due to related party
    42,025       -  
                 
NET CASH PROVIDED BY OPERATING ACTIVITIES
    15,792       -  
                 
INVESTING ACTIVITIES:
               
  Cash acquired from acquisition
    653,589          
                 
NET CASH PROVIDED BY INVESTING ACTIVITIES
    653,589          
                 
EFFECT OF EXCHANGE RATE ON CASH
    -       -  
                 
NET INCREASE IN CASH AND CASH EQUIVALENTS
    669,381       -  
                 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    -       -  
                 
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 669,381     $ -  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:
               
                 
Cash paid for:
               
Interest
  $ -     $ -  
Income taxes
  $ -     $ -  
 
See accompanying notes to these unaudited consolidated financial statements.




 
- 3 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 

 
          NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 ORGANIZATION

The Company was incorporated in the State of Florida on October 11, 2000 under the name HBOA Holdings, Inc..

On May 2, 2005, the Company entered into and consummated a share exchange with all of the shareholders of Linkwell Tech . Pursuant to the share exchange, the Company acquired 100% of the issued and outstanding shares of Linkwell Tech’s common stock, in exchange for 36,273,470 shares of the Company’s common stock, which at closing represented approximately 87.5% of the issued and outstanding shares of the Company’s common stock. As a result of the transaction, Linkwell Tech became the Company’s wholly-owned subsidiary. For financial accounting purposes, the exchange of stock was treated as a recapitalization of the Company, with the former shareholders of the Company retaining 7,030,669 or approximately 12.5% of the outstanding stock. The consolidated financial statements reflect the change in the capital structure of the Company due to the recapitalization and in the operations of the Company and its subsidiaries for the periods presented.

Linkwell Tech was founded on June 22, 2004, as a Florida corporation. On June 30, 2004, Linkwell Tech acquired 90% of LiKang Disinfectant through a stock exchange. This transaction resulted in the formation of a U.S. holding company by the shareholders of LiKang Disinfectant as it did not result in a change in the underlying ownership interest of LiKang Disinfectant. LiKang Disinfectant is a science and technology enterprise founded in 1988. LiKang Disinfectant is involved in the development, production, marketing and sale, and distribution of disinfectant health care products.

On June 30, 2005, the Company’s Board of Directors approved an amendment of its Articles of Incorporation to change the name of the Company to Linkwell Corporation. The effective date of the name change was after close of business on August 16, 2005.

On March 25, 2008, the Company’s subsidiary, Linkwell Tech acquired the remaining 10% of LiKang Disinfectant that it did not own. The purchase price for the remaining 10% interest in LiKang Disinfectant was $684,057, consisting of $399,057 in cash and 1,500,000 shares of the Company’s common stock valued at $285,000. The 10% interest in LiKang Disinfectant had a value of $577,779 prior to the Company’s purchase. The $126,278 difference between purchase price and its value was deemed a dividend and deducted from retained earnings upon closing of the acquisition.

LiKang Disinfectant has developed a line of disinfectant product offerings which are utilized by the hospital and medical industry in China. LiKang Disinfectant regards hospital disinfectant products as the primary segment of its business and has developed and manufactured several series of products in the field of skin mucous disinfection, hand disinfection, surrounding articles disinfection, medical instruments disinfection and air disinfection.

On February 15, 2008, the Company entered into a stock purchase agreement with Ecolab Inc., a Delaware corporation (“Ecolab”), pursuant to which Ecolab agreed to purchase 888,889 of shares of Linkwell Tech, or 10% of the issued and outstanding capital stock of Linkwell Tech, for $2,000,000. On March 28, 2008 and June 4, 2008, Linkwell Tech received $200,000 and $1,388,559, respectively from Ecolab. Including a $400,000 loan that Linkwell Tech received from Ecolab and accrued interest thereon of $11,441, Linkwell Tech received a total investment of $2,000,000 from Ecolab. On May 31, 2008, the Company, Linkwell Tech and Ecolab entered into a Linkwell Tech Group Inc. Stockholders Agreement, whereby both the Company and Ecolab are subject to, and beneficiaries of, certain pre-emptive rights, transfer restrictions and take along rights relating to the shares of Linkwell Tech that the Company and Ecolab each hold. As of May 31, 2008, the principal and accrued interest of $11,441 on the short-term $400,000 loan became part of Ecolab’s investment and does not need to be repaid.

On March 5, 2009, the Company’s subsidiary, LiKang Disinfectant acquired 100% of LiKang Biological, a company owned by related parties. LiKang Biological is also engaged in the development, manufacture, sale and distribution of disinfectant health care products primarily in the medical industry in China.

On March 30, 2012, we acquired Metamining Nevada from Metamining, an unrelated third party. Pursuant to the terms of the Share Exchange Agreement between the parties, we acquired 100% of the capital stock of Metamining Nevada in exchange for 9,581,973 shares of our Series C convertible preferred stock and 3,000,000 Series C common stock purchase warrants. As a result of the acquisition, under reverse acquisition accounting rules pursuant to the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 805-40, Linkwell who is the legal acquirer becomes the accounting acquiree owning 8.9%, and Metamining Nevada becomes the accounting acquirer owning 91.1% of the total outstanding shares of common stock on an as converted basis after giving effect to an expected 1:200 reverse stock split (“Reverse Stock Split”) in the acquisition transaction.

 
- 4 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 
 
Metamining Nevada is a development stage company which was established in March 2011. In April 2011 Metamining entered into agreements with unrelated third parties to acquire rights to mining claims, together with certain real property rights, on approximately 4,500 acres in northern Nevada for an aggregate purchase price of $14,250,000.  

During the terms of the agreements, Metamining Nevada has the right to explore and mine the properties and the quit claim deeds for these properties are being held in escrow pending payment in full of the purchase price.  If any portion of the purchase price were not to be paid when due, subject to certain extensions as described in the agreements, all amounts paid are forfeited and the agreements are terminated. During the terms of the agreements, the seller designated Mr. Howard Fisher as a member of Metamining Nevada’s Board of Directors. Mr. Fisher’s responsibilities are to control the transfer of the properties or provide for the recovery of the properties, at the termination of the agreement, as the case may be.  He does not otherwise have any voting rights as a member of Metamining Nevada’s Board.

On March 30, 2012 we issued 9,581,973 shares of our Series C convertible preferred stock and 3,000,000 Series C common stock purchase warrants to Metamining Inc. as consideration for the purchase of Metamining Nevada. The Series C common stock purchase warrant are exercisable for five years at any time following the Reverse Stock Split into 3,000,000 shares of our post-split common stock at an exercise price of $5.00 per share. The warrant contains customary anti-dilution protection in the event of stock splits, recapitalizations and similar corporate events. The reverse stock split has not yet occurred.

BASIS OF PRESENTATION

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are expressed in US dollars. All material intercompany transactions and balances have been eliminated in the consolidation.

Certain reclassifications have been made to the prior year to conform to current year’s presentation. The consolidated financial statements of the Company include the accounts of Metamining Nevada, the Company’s 90% owned subsidiary, Linkwell Tech, and Linkwell Tech’s 100% owned subsidiaries LiKang Disinfectant and LiKang Biological. All significant inter-company balances and transactions have been eliminated.

The consolidated balance sheets as of March 31, 2012 reflected consolidated financial positions of both Metamining Nevada and Linkwell. The consolidated balance sheet as of December 31, 2011 reflected the financial position of Metamining Nevada, the accounting acquirer. The consolidated statement of operations and comprehensive income and consolidated statement of cash flows for the three months ended March 31, 2012 and 2011, respectively, reflected the operations of Metamining Nevada, in accordance with ASC 805-40 Reverse Acquisitions.

USE OF ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates for the years ended March 31, 2012 and December 31, 2011 include the allowance for doubtful accounts, useful life of property and equipment, and inventory reserve.

FAIR VALUE OF FINANCIAL INSTRUMENTS

For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, advances from customers, short-term loans payable and amounts due from or to related parties, 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.

 
- 5 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 
 
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 825.

As of March 31, 2012 and December 31, 2011, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value.

CASH AND CASH EQUIVALENTS

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents.

ACCOUNTS RECEIVABLE

The Company has a policy of reserving for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of March 31, 2012 and December 31, 2011, the Company established, based on a review of its third party accounts receivable outstanding balances, allowances for doubtful accounts in the amounts of $938,594 and $0, respectively.

INVENTORIES

Inventories, consisting of raw materials, work in process and finished goods related to the Company’s products are stated at the lower of cost or market utilizing the weighted average method. The valuation of inventory requires the Company to estimate obsolete or excess inventory based on analysis of future demand for our products. Due to the nature of the Company’s business and our target market, levels of inventory in the distribution channel, changes in demand due to price changes from competitors and introduction of new products are not significant factors when estimating the Company’s excess or obsolete inventory. If inventory costs exceed expected market value due to obsolescence or lack of demand, inventory write-downs may be recorded as deemed necessary by management for the difference between the cost and the market value in the period that impairment is first recognized.

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Depreciation is provided using the straight-line method over the estimated economic lives of the assets, which range from five to twenty years. The cost of repairs and maintenance are expensed as incurred and major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in the income statement in the year of disposition.

IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined by using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company believes that, during the three months ended March 31, 2012 and 2011, there were no significant impairment of its long-lived assets.

 
- 6 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 


ADVANCES FROM CUSTOMERS

As of March 31, 2012 and December 31, 2011, advances from customers were $366,376 and $0, respectively. These advances consisted of prepayments from third party customers to the Company for merchandise that had not yet been shipped by the Company. The Company will recognize the prepayments as revenue as customers take delivery of the goods, in compliance with its revenue recognition policy.

INCOME TAXES

The Company utilizes FASB ASC Topic 740, “Accounting for Income Taxes”, which requires recognition of deferred tax assets and liabilities for expected future tax consequences of events that were included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

BASIC AND DILUTED EARNINGS PER SHARE

The Company presents net income per share (“EPS”) in accordance with “Earnings per Share” (codified in FASB ASC Topic 740). Accordingly, basic income per share is computed by dividing income available to common shareholders by the weighted average number of shares outstanding, without consideration for common stock equivalents. Diluted net income per share is computed by dividing the net income by the weighted-average number of common shares outstanding as well as common share equivalents outstanding for the period determined using the treasury-stock method for stock options and warrants and the if-converted method for convertible notes. The Company has made an accounting policy election to use the if-converted method for convertible securities that are eligible to common stock dividends, if declared. If the if-converted method was anti-dilutive (that is, the if-converted method resulted in a higher net income per common share amount than basic net income per share calculated under the two-class method), then the two-class method was used to compute diluted net income per common share, including the effect of common share equivalents. Diluted earnings per share reflects the potential dilution that could occur based on the exercise of stock options or warrants, unless such exercise would be anti-dilutive, with an exercise price of less than the average market price of the Company’s common stock.

On March 30, 2012 the Company acquired Metamining Nevada from Metamining, an unrelated third party. Pursuant to the terms of the Share Exchange Agreement between the parties, we acquired 100% of the capital stock of Metamining Nevada in exchange for 9,581,973 shares of our Series C convertible preferred stock and 3,000,000 Series C common stock purchase warrants.   As a result of the acquisition, under reverse acquisition accounting rules pursuant to ASC 805-40, Linkwell who is the legal acquirer becomes the accounting acquiree owning 8.9%, and Metamining Nevada is the accounting acquirer owning 91.1% of the total outstanding shares of common stock on an as converted basis after giving effect to the Reverse Stock Split in the transaction. For accounting purposes, there are no weighted average shares outstanding in the earnings per share computation because the accounting acquirer, Metamining, had no common shares outstanding during the quarter ended March 31, 2012. As a result of the reverse acquisition, Linkwell’s weighted average common shares outstanding prior to March 30, 2012 are not included in the earnings per share calculation for the quarter ended March 31, 2012.

REVENUE RECOGNITION

The Company’s revenue recognition policies are in compliance with SEC Staff Accounting Bulletin (“SAB”) 104 (codified in FASB ASC Topic 605). The Company records revenue when an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria for the various revenue streams of the Company: the Company’s revenues from the sale of products are recorded when the goods are shipped, title passes, and collectability is reasonably assured.

The Company’s revenues from the sale of products to related parties are recorded when the goods are shipped to the customers from our related parties. Upon shipment, title passes, and collectability is reasonably assured. The Company receives purchase orders from our related parties on an as-needed basis from the related party customers. Generally, the related party does not hold the Company’s inventory. If the related party has inventory on hand at the end of a reporting period, the sale is reversed and the inventory is included on the Company’s balance sheet.

 
- 7 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 


CONCENTRATION OF BUSINESS AND CREDIT RISK

       Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Company places its cash with high credit quality financial institutions in the U.S. and in China. The majority of the Company’s bank accounts in banks located in the PRC are not covered by any type of protection similar to that provided by the FDIC on funds held in U.S banks. The Company has not experienced any losses in such accounts.

       Certain other financial instruments, which subject the Company to concentration of credit risk, consist of accounts and other receivables. The Company does not require collateral or other security to support these receivables. The Company conducts periodic reviews of its customers’ financial condition and customer payment practices to minimize collection risk on accounts receivable.

FOREIGN CURRENCY TRANSLATION

The Company primarily operates in the PRC. The financial position and results of operations of the subsidiaries are determined using the local currency (“Renminbi” or “RMB”) as the functional currency.

Translation from RMB into United States dollars (“USD” or “$”) for reporting purposes is performed by translating the results of operations denominated in foreign currency at the weighted average rates of exchange during the reporting periods. Assets and liabilities denominated in foreign currencies at the balance sheet dates are translated at the market rate of exchange in effect at that date. The registered equity capital denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. All translation adjustments resulting from the translation of the financial statements into USD are reported as a component of accumulated other comprehensive income in shareholders’ equity. The exchange rates used in translation from RMB to USD amount were published by People’s Bank of the People’s Republic of China.

   
March 31,
2012
 
December 31,
2011
Balance sheet items, except for the registered and paid-up capital and retained earnings as of March 31, 2012 and December 31, 2011.
 
US$1=RMB 6.2943
 
US$1=RMB 6.3009

   
Three Months Ended March 31,
   
2012
 
2011
Amounts included in the statements of operations, and statements of cash flow for the three months ended March 31, 2012 and 2011.
 
US$1=RMB6.3074
 
US$1=RMB6.5832

STOCK-BASED COMPENSATION

The Company accounts for its stock-based compensation in accordance with SFAS No. 123R, “Share-Based Payment, and an Amendment of FASB Statement No. 123” (codified in FASB ASC Topics 718 & 505). The Company recognizes in the income statement the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.

NON-EMPLOYEE STOCK BASED COMPENSATION

The cost of stock-based compensation awards issued to non-employees for services are recorded at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in Emerging Issues Task Force Issue, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”.

SEGMENT REPORTING

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" (codified in FASB ASC Topic 280) requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

SFAS 131 has no effect on the Company’s financial statements as substantially all of the Company’s operations are conducted in one industry segment. All of the Company’s assets are located in the PRC.

 
- 8 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 



RECENT ACCOUNTING PRONOUNCEMENTS

In September 2011, the FASB issued ASU 2011-08, "Testing Goodwill for Impairment." ASU 2011-08 will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. ASU 2011-08 will be effective for annual and interim goodwill impairment tests performed for annual reporting period beginning after December 15, 2011, with early adoption permitted. The adoption of this guidance did have a material impact on our consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, "Comprehensive Income: Presentation of Comprehensive Income." ASU 2011-05 will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. ASU 2011-05 does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. ASU 2011-05 will be effective for the first interim and annual periods beginning after December 15, 2011. Further, in December 2011, the FASB issued ASU 2011-12, "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05." We have adopted this guidance.

NOTE 2- PRO-FORMA FINANCIAL INFORMATION-REVERSE ACQUISITION OF METAMINING NEVADA

On March 30, 2012, the Company acquired Metamining Nevada from Metamining , an unrelated third party. Pursuant to the terms of the Share Exchange Agreement between the parties, we acquired 100% of the capital stock of Metamining Nevada in exchange for 9,581,973 shares of our Series C convertible preferred stock and 3,000,000 Series C common stock purchase warrants.  As a result of the acquisition a change in ownership interest has occurred, and under the reverse acquisition accounting rules pursuant to ASC 805-40, Linkwell who is the legal acquirer becomes the accounting acquiree owning 8.9%, and Metamining Nevada becomes the accounting acquirer owning 91.1% of the total outstanding shares of common stock on an as converted basis after giving effect to the Reverse Stock Split in the transaction.

Metamining Nevada is a development stage company, which was established in March, 2011. Since its inception to March 31, 2011, Metamining Nevada had no operations.


 
- 9 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 

The table below provides the consolidation of Linkwell and Metamining Nevada in the consolidated balance sheets as of March 31, 2012:

   
LINKWELL
   
Metamining Nevada
   
Consolidation
     
Consolidated
 
   
March 31,2012
   
March 31,2012
   
Adjustments
     
March 31,2012
 
   
(Unaudited)
   
(Unaudited)
           
(Unaudited)
 
ASSETS
                         
CURRENT ASSETS
                         
Cash and cash equivalents
 
$
653,589
   
$
15,792
 
$
-
     
$
669,381
 
Accounts receivable, net
   
2,588,599
     
-
   
-
       
2,588,599
 
Accounts receivable - related parties, net
   
10,446,862
     
-
   
-
       
10,446,862
 
Due from related party
   
1,110,103
     
-
   
-
       
1,110,103
 
Other receivables, net
   
5,045,772
     
-
   
-
       
5,045,772
 
Prepaid expenses and other current assets
   
697,287
     
-
   
-
       
697,287
 
Inventories, net
   
2,571,269
     
-
   
-
       
2,571,269
 
        Total current assets
   
23,113,481
     
15,792
     
-
       
23,129,273
 
                                   
NON-CURRENT ASSETS
                                 
Deferred compensation
   
401,452
     
-
     
-
       
401,452
 
Investment
   
1,283,231
     
-
     
-
       
1,283,231
 
Property, plant and equipment, net
   
2,450,016
     
-
     
-
       
2,450,016
 
Real property and mineral rights
   
-
     
14,250,000
     
-
       
14,250,000
 
Prepaid for land use right
   
606,898
     
-
     
-
       
606,898
 
Intangible assets
   
282,506
     
-
     
-
       
282,506
 
        Total non-current assets
   
5,024,103
     
14,250,000
     
-
       
19,274,103
 
TOTAL ASSETS
 
$
28,137,584
   
$
14,265,792
   
$
-
     
$
42,403,376
 
                                   
 LIABILITIES AND STOCKHOLDERS' EQUITY
                                 
CURRENT LIABILITIES
                                 
Loans payable
 
$
1,588,739
   
$
-
   
$
-
     
$
1,588,739
 
Accounts payable and accrued expenses
   
3,678,431
     
437
     
-
       
3,678,868
 
Note payable-Current due
   
-
     
5,625,000
     
-
       
5,625,000
 
Advances from customers
   
366,376
     
-
     
-
       
366,376
 
Taxes payable
   
175,318
     
-
     
-
       
175,318
 
Other payables
   
90,526
     
-
     
-
       
90,526
 
Due to related parties
   
1,701,712
     
42,025
     
-
       
1,743,737
 
        Total current liabilities
   
7,601,102
     
5,667,462
     
-
       
13,268,564
 
Put option liability
   
2,400,000
     
-
     
(2,400,000
(5)
(1)
 
-
 
Note payable - long term
   
-
     
5,625,000
     
-
       
5,625,000
 
TOTAL LIABILITIES
   
10,001,102
     
11,292,462
     
(2,400,000
)
     
18,893,564
 
                                   
 COMMITMENT AND CONTINGENCY
                                 
                                   
STOCKHOLDERS' EQUITY
                                 
Preferred Stock
   
4,791
     
-
     
-
       
4,791
 
Common Stock
   
59,803
     
 -
     
-
       
59,803
 
Additional paid-in capital
   
8,552,730
     
3,112,945
     
11,105,621
 
(1)
(5)
 
22,771,296
 
Statutory surplus reserve
   
802,749
     
-
     
(802,749
(3
 
-
 
Retained earnings
   
6,031,469
     
(139,615
)
   
(6,031,469
(2
 
(139,615
)
Accumulated other comprehensive income
   
1,871,403
     
-
 
   
(1,871,403
(4
 
-
 
Total Linkwell Corporation stockholder's equity
   
17,322,945
     
2,973,330
     
2,400,000
       
22,696,275
 
NONCONTROLLING INTEREST
   
813,537
     
-
     
-
       
813,537
 
TOTAL STOCKHOLDERS' EQUITY
   
18,136,482
     
2,973,330
     
2,400,000
       
23,509,812
 
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
 
$
28,137,584
   
$
14,265,792
   
$
-
     
$
42,403,376
 
 

 
- 10 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 


Note (1): Aggregate effect of the acquisition transaction:
         
A. To eliminate Linkwell retained earnings
$
6,031,469
 
See Note (2)
B. To eliminate Linkwell statutory surplus reserve
 
802,749
 
See Note (3)
C. To eliminate Linkwell accumulated other comprehensive income (AOCI)
 
1,871,403
 
See Note (4)
D. To eliminate Linkwell put option liability
 
2,400,000
 
See Note (5)
Total APIC adjustments
$
11,105,621
   
         
Note (2): Represents the elimination of Linkwell retained earnings.
$
 
6,031,469
 
 
See Note (1)
         
Note (3): Represents the elimination of Linkwell statutory surplus reserve.
$
802,749
 
See Note (1)
         
Note (4): Represents the elimination of Linkwell AOCI.
$
1,871,403
 
See Note (1)
         
Note (5): Represents the elimination of Linkwell put option liability, which was cancelled by the option holder in March 2012.
$
2,400,000
 
See Note (1)
 
The table below provides the pro forma condensed financial statements of operations (unaudited) to give effect to the acquisition of Metamining Nevada as if the transaction had occurred at the beginning of the quarter ended March 31, 2012.
 
   
Linkwell
   
 Metamining Nevada
   
Pro Forma
 Adjustments
   
Pro Forma
 Consolidated
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
 Net Sales
 
$
3,406,409
 
$
-
 
- 
   
$
3,406,409
 
Cost of Sales
   
1,873,773
   
 -
   
 -
     
1,873,773
 
     Gross Profit
   
1,532,636
   
-
   
- 
     
1,532,636
 
                             
Operating (expenses) income:
                           
       Total operating expenses
   
1,497,500
   
26,670
   
- 
     
1,524,170
 
       Operating income (loss)
   
35,136
   
(26,670
)
 
- 
     
8,466
 
Other (expenses) income:
                           
       Total other income
   
15,236
   
-
   
-
     
15,236
 
        Income (loss) before income taxes
   
50,372
   
(26,670
)
 
- 
     
23,702
 
   Income tax expense
   
(67,569
)
               
(67,569
)
   Net loss
   
(17,197
)
 
(26,670
)
 
- 
     
(43,867
)
   Net income attributable to non-controlling interests
   
(28,135
)
 
-
   
-
     
(28,135
)
      Net loss attributable to Linkwell Corp
   
(45,332
)
 
(26,670
)
 
-
     
(72,002
)
                             
Comprehensive income (loss):
                           
   Net loss
   
(17,197
)
 
(26,670
)
 
 -
     
(43,867
)
   Foreign currency translation
   
19,182
   
-
   
 -
     
19,182
 
Comprehensive loss
 
$
(26,150
)
(26,670
)
-
   
$
(52,820
)
                             
Basic and diluted income (loss) per common share
                           
   Basic
 
$
(0.09
)
 
 -
   
 -
   
$
(0.14
)
   Diluted  (2)
 
$
(0.09
)
 
 -
   
-
   
$
(0.01
)
   Basic weighted average common shares outstanding (3)
   
509,840
   
 -
   
 -
     
509,840
 
   Diluted weighted average common shares outstanding (3)
   
509,840
   
 -
   
12,581,973
(1)
   
13,091,813
 

 

 
- 11 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 

Note (1):
Represents the dilutive effect of 9,581,973 shares of Series C convertible preferred stock and 3,000,000 Series C warrants issued by Linkwell in conjunction with the acquisition of Metamining Nevada, which is treated as reverse acquisition. The dilutive effect of these shares is after giving effect to the Reverse Stock Split in the acquisition transaction.
Note (2):
The dilutive effect impacts only the dilutive EPS in the pro forma calculation.
Note (3):
The basic and dilutive weighted average shares outstanding after giving effect to the Reverse Stock Split.
 
The tables below provide the pro forma financial condensed financial statements of operations to give effect to the acquisition for the three months ended March 31, 2011:
 
   
 Linkwell Corporation
 
  Metamining Nevada, Inc.
 
Pro Forma
 Adjustments
 
Pro Forma
 Consolidated
 
   
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
Net Sales
 
$
3,223,209
         
$
3,223,209
 
Cost of Sales
   
1,679,231
           
1,679,231
 
     Gross Profit
   
1,543,978
           
1,543,978
 
                       
Operating (expenses) income:
                     
       Total operating expenses
   
984,743
           
984,743
 
       Operating income (loss)
   
559,235
           
559,235
 
Other (expenses) income:
                     
       Total other income
   
(57,366
)
         
(57,366
)
        Income (loss) before income taxes
   
501,869
           
501,869
 
   Income tax expense
   
(100,153
)
         
(100,153
)
   Net income
   
401,716
           
401,716
 
   Net income attributable to non-controlling interests
   
(42,669
)
         
(42,669
)
      Net loss attributable to Linkwell Corp
   
359,047
           
359,047
 
                       
Comprehensive income:
                     
   Net income
   
401,716
           
401,716
 
   Foreign currency translation
   
166,286
           
166,286
 
Comprehensive income
 
$
525,333
         
$
525,333
 
                       
Basic and diluted income (loss) per common share
                     
   Basic
 
$
0.83
         
$
0.83
 
   Diluted  (2)
 
$
0.83
         
$
0.03
 
   Basic weighted average common shares outstanding (3)
   
433,027
           
433,027
 
   Diluted weighted average common shares outstanding (3)
   
433,027
     
12,581,973
   
13,015,000
 

Note (1):
Represents the dilutive effect of 9,581,973 shares of Series C convertible preferred stock and 3,000,000 Series C warrants issued by Linkwell in conjunction with the acquisition of Metamining Nevada, which is treated as reverse acquisition. The dilutive effect of these shares is after the Reverse Stock Split.
Note (2):
The dilutive effect impacts only the dilutive EPS in the pro forma calculation.
Note (3):
The basic and dilutive weighted average shares outstanding are based after giving effect to the Reverse Stock Split.

NOTE 3 – INVENTORIES

A summary of inventories by major category as of March 31, 2012 and December 31, 2011 were as follows:
 
   
March 31,
2012
   
December 31,
2011
 
         
(Audited)
 
Raw materials
 
$
945,718
   
$
-
 
Work-in-process
   
37,689
     
-
 
Finished goods
   
1,587,862
     
-
 
Net inventories
 
$
2,571,269
   
$
-
 
   
 
- 12 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 
 
NOTE 4 – PROPERTY AND EQUIPMENT

At March 31, 2012 and December 31, 2011, property and equipment consisted of the following:

   
Estimated
Useful
Life
(In years)
   
March 31,
2012
   
December 31,
2011
 
                   
Office equipment and furniture
   
3-7
   
$
569,327
   
$
-
 
Autos and trucks
   
5
     
386,337
     
-
 
Manufacturing equipment
   
2-10
     
985,655
     
-
 
Building
   
5-20
     
1,909,617
     
-
 
Subtotal
           
3,850,936
     
-
 
Less: Accumulated depreciation
           
(1,400,920
)
   
-
 
Property and equipment, net
         
$
2,450,016
   
$
-
 

For the three months ended March 31, 2012 and 2011, depreciation expenses amounted to approximately $76,717 and $0, respectively.

      NOTE 5 - REAL PROPERTY and MINERAL RIGHTS

Metamining Nevada, through its parent company, Metamining,  acquired certain real property and mineral rights in the Buena Vista Hills area of the mineral district in Pershing and Churchill Counties of Nevada called “Iron Horse Project – Dodge Mine" from three separate sellers for a total purchase considerations of $14,250,000 payable by way of three installments over a period of two years from April 15, 2011 as discussed under Note 13- Notes Payable.

(1)
Seller, Little Valley Group, LLC (LVC) under Agreement No. NV01 valued 77.1930%
 
$11,000,000
(2)
Seller, Greater Nevada Ranches, LLC (GNR) under Agreement No. NV02 valued 12.2807%
 
1,750,000
(3)
Seller, Western Resources Group, LLC (WRG) under Agreement No. NV03 valued 10.5263%
 
1,500,000
 
Total Purchase Considerations
 
$14,250,000

Acquiring the following properties and Mineral Rights:

From LVC:

Township 25 North, Range 34 East, M.D.M.

Section 6
BLM Serial Number
Iron Horse
754382
Iron Horse 1-9
754383-754391
Iron Colt
862856
Iron Colt 1-6, 10
862857-862863
Iron Horse 10, 11
862864-862865

Township 26 North, Range 34 East, M.D.M

Section 32
 
Beacon Hill 1,5-7,9
862839-862843
Beacon Hill 14-21
862846-862853
Beacon Hill 12
999120
Iron Castle 8-9
862854-862855
MG-1 thru MG-4
962977-962980


 
- 13 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 


From GNR:

Pershing County APN #015-110-06

Township 25, Range 33, M.D.B.&M.
Section 1, consisting of 649.95 acres, more or less

Churchill County APN #005-211-09

Township 24, Range 34, M.D.B.&M.
Section 9: West Ѕ consisting of 278.61 acres, more or less

From WRG:

178 Unpatened Lode Mining Claims in the Pershing County:
BV-1-28, 29-35 (odd), 37-84, 91-102, 104, 106, 108-156, 163-179 (odd), 180-205

NOTE 6 - INTANGIBLE ASSETS

At March 31, 2012 and December 31, 2011, intangible assets consisted of customers’ lists arising from the acquisition of LiKang Biological, amortized over 5 years. Net intangible assets as of March 31, 2012 and December 31, 2011 totaled $282,506 and $0, respectively. Amortization expenses for the three months ended March 31, 2012 and 2011 were $25,682 and $0, respectively. Annual amortization expenses for the next five years from March 31, 2012 are expected to be: $102,730, $102,730, $77,046, and none after the third year.

NOTE 7 – INVESTMENT AND DEPOSITS

At March 31, 2012, deposits mainly represented $554,000, through the issuance of 4,000,000 shares (pre-Reverse Stock Split) of the Company’s’ stock at $0.136 per share, for the deposit of purchasing an acquisition target, Inner Mongolia Wuhai Chengtian Chemical Technology Co., Ltd., (“Wuhai Chengtian”). However, the acquisition was cancelled in 2011, Wuhai Chengtian, which changed name to Inner Mongolia Likang Biological Co., Ltd. (“Wuhai Likang”) in 2011, increased the registered capital from RMB 9 million to RMB 50 million, the deposit was not going to refund to the Company by Wuhai Likang’s selling shareholder; accordingly the deposit of $544,000 together with capital injection of $729,231 by the Company to Wuhai Chengtian which the Company initially treated it as due from related party, have been reclassified into the Company’s investment which was accounted for under the cost method as a result of the Company’s 9.18% ownership in Wuhai Likang. There was no significant impairment of this investment at March 31, 2012.

NOTE 8 - OTHER RECEIVABLES
 
At March 31, 2012 and December 31, 2011, the Company had other receivables of $5,045,772 (including $4,930,874 to Wuhai Likang) and $0, respectively. Wuhai Likang was a related party of the Company in 2011 due to the Company being in the process of acquiring a controlling position in Wuhai Likang. On December 30, 2009, the Company issued 4,000,000 shares (pre-Reverse Stock Split) of common stock (valued for $544,000) and cash RMB 3.15 million ($500,453) together with a previous capital contribution of patent of RMB 1.44 million ($228,778) in exchange for acquiring a 51% equity interest in Wuhai Likang in China which was accounted for as a deposit. However, the acquisition target has increased its registered capital to RMB 50 million by the contribution of new investors in April 2010, which resulted in a decrease of the equity interest owned by Linkwell to 9.18%. With this reduction in ownership, and reduction in influence over Wuhai Likang, the Company’s management has determined that Wuhai Likang is not deemed a related party.

Wuhai Likang is a major supplier and strategic partner to the Company. The Company has a large demand for a raw material which is produced from Wuhai Likang’s waste recycling project. Due to the need for this raw material, the Company made advances to Wuhai Likang’s to support its waste recycling project which ultimately benefits the Company. As of December 31, 2010, the Company has made advances totaling $1,567,337 to provide operating funds to Wuhai Likang. The portion of such advances to provide operating funds to Wuhai Likang was classified as due from related party as of December 31, 2010 pending approval of the acquisition.

 
- 14 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 


As of December 31, 2011, government approval for this acquisition had not occurred and is unable to be completed. Due to the existing shareholders of Wuhai Likang increased capital contribution, the Company’s ownership in Wuhai Likang decreased to approximately 9.18% and influence over Wuhai Likang has been reduced, the Company’s management has determined that Wuhai Likang is not deemed a related party. Accordingly, the due from related party of $1,567,337 as of December 31, 2010 (of which, $729,231 has been reclassified into investment in 2011) and the additional approximately $2.84 million advances made during 2011, have been classified as other receivables as of December 31, 2011. In the three months ended March 31, 2012, the Company advanced additional RMB 2,796,400 (US$ 444,275) to Wuhai Likang. The advance to Wuhai Likang was guaranteed by Wuhai LiKang’s 52,249 square meters land, 22,360 square meters building and RMB 4.73 million (US$751,474) equipment.

NOTE 9 – LOANS PAYABLE

Loans payable consisted of the following at March 31, 2012 and December 31, 2011:

   
2012
   
2011
 
Loan from Shanghai Rural Commercial Bank, Dachang Branch due on May 10, 2012 with interest rate of 6.31% per annum. Guaranteed by Shanghai Shanhai Group (a strategic partner of the Company), and Mr. Bian, Chairman of the Company (RMB 7,400,000).
 
$
1,175,667
   
$
-
 
Loan from Shanghai Rural Commercial Bank, Dachang Branch due on July 10, 2012 with interest rate of 6.56% per annum. Guaranteed by Shanghai Shanhai Group (a strategic partner of the Company), and Mr. Bian, Chairman of the Company (RMB 2,600,000)
   
413,072
     
-
 
   
$
1,588,739
   
$
-
 

NOTE 10 – RELATED PARTY TRANSACTIONS

Linkwell Tech’s wholly-owned subsidiary, LiKang Disinfectant, is engaged in business activities with three related parties, including ZhongYou Shanghai Jiuqing.

For the three months ended March 31, 2012, the Company recorded sales of $1,975,196 to ZhongYou. At March 31, 2012, accounts receivables from sales to ZhongYou (net of bad debt allowance) were $10,330,501 and $9,850,987.
During the three months ended March 31, 2012, the Company made $0 sales to Shanghai Jiuqing. At March 31, 2012 , accounts receivable from sales to Shanghai Jiuqing were $92,822.

As of March 31, 2012, $1,110,103 was due from related parties  LiKang Trading Co. Ltd (Hong Kong) (“LiKang Trading HK”), Shanghai Zhongyou Delivery Co., Ltd (“ZhongYou Delivery”), Shanghai LiKang Pharmaceutical Co., Ltd (“LiKang Pharmaceutical”), and Shanghai Lingkai International Trading Co., Ltd (“Lingkai Trading”), respectively, representing short-term advances and other receivables not including the receivables from sales for working capital purpose and receivable on demand.

As of March 31, 2012, $1,734,737 was due to related parties including the Company’s management and officer. As of March 31, 2012, the Company owed its management $54,000, ZhongYou $1,091,150 and other related parties $589,587.
 
NOTE 11 – TAXES PAYABLE

Taxes payable consisted of the following at March 31, 2012 and December 31, 2011, respectively:

   
2012
   
2011
 
             
Income tax payable (receivable)
 
$
(37,088)
   
$
-
 
Value added tax payable
   
208,733
     
-
 
Other taxes payable
   
3,673
     
-
 
   
$
175,318
   
$
-
 
 

 
- 15 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 

NOTE 12 - NOTES PAYABLE

    Pursuant to the respective purchase and sale agreements dated April 15, 2011 No. NV01, NV02 and NV03, the sellers financed buyer by carrying two notes payable $5,625,000 due April 15, 2012 and $5,625,000 due April 15, 2013 free of interest. In March 2012, we entered into an extension agreement with the sellers pursuant to which upon the payment of $300,000, of which $150,000 was due by April 15, 2012 and the balance was due by April 30, 2012, the due date of April 15, 2012 payment of $5,625,000 was extended to June 15, 2012. The $300,000 payment will be applied to the $5,625,000 installment balance due on April 15, 2013. Metamining paid, on behalf of Metamining Nevada, $150,000 on April 10, 2012 and another $150,000 payment on May 10, 2012 to the sellers of the real property and mineral rights. The sellers provided written confirmation to Metamining Nevada stating that Metamining Nevada’s ownership of the real property and mineral rights was in good standing.

Short term and long term Notes Payable:

 
(1
)
Little Valley Group, LLC
short term
 
$
4,342,106.24
 
       
Long term
   
4,342,106.24
 
           
$
8,684,212.48
 
                 
 
(2
)
Greater Nevada Ranches, LLC
short term
 
$
690,789.38
 
       
Long term
   
690,789.38
 
             
1,381,578.76
 
                 
 
(3
)
Western Resource Group, LLC
short term
 
$
592,104.38
 
       
Long term
   
592,104.38
 
             
1,184,208.76
 
       
Grand Total:
 
$
11,250,000
 


NOTE 13– STOCKHOLDERS’ EQUITY

Common Stock

On January 4, 2012, the Company, pursuant to a Legal Services Agreement, dated January 1, 2012, by and between the Company and the Shanghai Hai Mai Law Firm (“Shanghai Hai Mai”), agreed to issue to Shanghai Hai Mai the aggregate amount of 6,000,000 restricted shares (pre-Reverse Stock Split) of the Company’s common stock, $0.0005 par value per share. The shares were issued as compensation for legal services to be provided by Shanghai Hai Mai during the two-year term of the Agreement. The value of 6,000,000 restricted shares is $180,000 based on the stock price at January 4, 2012.  The Company recorded deferred stock compensation of $158,301 at March 31, 2012, which was net of stock compensation expense of $21,699 for the three months ending March 31, 2012.

On February 13, 2012, the Company’s Board of Directors adopted and approved an amendment (the “Charter Amendment”) to the Company’s Articles of Incorporation, as amended, to effect a reverse split of the Company’s common stock, par value $0.0005 per share (the “Common Stock”) of one share for every thirty outstanding shares (the “Reverse Stock Split”), so that every thirty outstanding shares of Common Stock before the Reverse Stock Split shall represent one share of Common Stock after the Reverse Stock Split. However, due to the reverse acquisition of Metamining Nevada, as described below, the Board of Directors has determined not to proceed with the 1:30 reverse stock split

On March 12, 2012 and March 29, 2012, the Company issued 5 million restricted shares (pre-Reverse Stock Split) each to a professional business consulting company for advising the Company on strategic growth, merger and acquisition, and investor relationship. The term of the service is two years. The value of 10,000,000 restricted shares is $250,000 based on the stock price at March 12 and March 29, 2012, respectively. The Company recorded deferred stock compensation of $243,151 at March 31, 2012, which was net of stock compensation expense of $6,849 for the three months ending March 31, 2012.

On March 29, 2012, the Company issued 7,000,000 (pre-Reverse Stock Split) and 2,000,000 shares of common stock to one senior officer and one employee, respectively, under the Company’s 2005 Equity Compensation Plan, as amended, for services they provided to the Company. The stock was valued at stock issuance date at $0.03 per share, and $270,000 was recorded as stock based compensation.


 
- 16 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 

In conjunction with the reverse acquisition of Metamining Nevada, the Company issued 9,000,000 shares of Series C convertible preferred stock and 3,000,000 Series C common stock purchase warrants to the shareholder of Metamining Nevada, Metamining, as part of consideration offered and 581,973 shares of Series C convertible preferred stock to China Direct Investments, Inc. for acquisition services. The shares of Series C convertible preferred stock, with a par value of $0.0005, are convertible to our common shares on a 1 to 1 basis after the completion of the planned Reverse Stock Split, and are being charged to additional paid in capital in accordance with ASC 805-40 Reverse Acquisitions. In addition, we issued  Series C common stock purchase warrants to Metamining as part of consideration offered. The Series C common stock warrants become exercisable for five years at any time, following the Reverse Stock Split of our common stock, into 3,000,000 shares of our post-split common stock at an exercise price of $5.00 per share.  The warrants contains customary anti-dilution protection in the event of stock splits, recapitalizations and similar corporate events. The warrants are accounted for as additional paid in capital.

Series C convertible stock and related Series C common stock purchase warrant.

The stated value of the Series C convertible preferred stock is $0.0005 per share and each share of Series C preferred stock entitles the holder to one vote for every share of common stock into which such Series C preferred stock is convertible.  The Series C common stock purchase warrants entitle the holder, Metamining, Inc., the right to purchase 3,000,000 shares of the Company’s common stock (after giving effect to the planned 1:200 reverse stock split) at the exercise price of $5.00 per share.

The 3,000,000 Series C common stock purchase warrants are separate from the Series C convertible preferred stock. In accordance with ASC 815 Derivatives and Hedging, Series C convertible preferred stock and purchase warrants are accounted for as equity separately and are not re-measured every reporting period as re-measurement requirement applies only to securities accounted for as liability. As a result, there is no other value contained in the Series C convertible preferred stock that requires bifurcation. The Company valued the warrant under Black-Scholes model based on historical data, as follows:

Asset Price on grant date (March 30, 2012) *
  $ 9.00  
Exercise Price
  $ 5.00  
Years until expiration
    5.00  
Volatility **
    157 %
Risk Free Rate
    1.04 %
Dividend Yield
    0 %

*           Asset price was after giving effect to the planned 1:200 reverse stock split.
**           Volatility was based on the prices of the Company’s common stock in the past five years.

NOTE 14 – COMMITMENTS

On July 16, 2008, the Company entered a two-year lease agreement for its administrative office with expiration date on July 15, 2010, for monthly rent of $4,400 (RMB 30,237) until April 2009, the monthly rent increased to $9,470 (RMB 64,669) after April 2009. The Company renewed this lease after the expiration and monthly rent increased to $11,000 (RMB 73,173). The lease expired on December 31, 2011 and renewed to December 31, 2012 with adjusted monthly rent of $12,400 (RMB 78,319).

On November 1, 2008, the Company entered another two-year lease agreement for its branch office with expiration date on October 31, 2010, for monthly rent of $3,500 (RMB 24,000). The Company renewed this lease with the same amount of rent after the expiration. The lease expired on October 31, 2011 and was renewed to October 31, 2012 with adjusted monthly rent of $4,200 (RMB 26,430).

The Company had rental expense of $87,074 and $43,500 for the three months ended March 31, 2012 and 2011, respectively. Future minimum rental payments required under these operating leases are as follows:
 
Year 2012
 
$
103,835
 



 
- 17 -

 
LINKWELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
 

NOTE 15 – SUBSEQUENT EVENTS

In March 2012 prior to when the Company entered into the Share Exchange Agreement with Metamining, Metamining entered into an extension agreement with the sellers pursuant to which upon the payment of $300,000, of which $150,000 was due by April 15, 2012 and the balance was due by April 30, 2012, the due date of April 15, 2012 payment of $5,625,000 was extended to June 15, 2012. The $300,000 payment will be applied to the $5,625,000 installment balance due on April 15, 2013. Metamining advanced Metamining Nevada the funds necessary to satisfy this extension payment. Metamining  paid, on behalf of Metamining Nevada, $150,000 in April 2011 and another $150,000 in May 2012 to the sellers of the real property and mineral rights. The sellers provided written confirmation to Metamining Nevada stating that Metamining Nevada’s ownership of the real property and mineral rights was in good standing.


 
- 18 -

 

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

           The following discussion should be read in conjunction with the preceding unaudited consolidated financial statements and our Form 10-K for the year ended December 31, 2011.

OVERVIEW

As described elsewhere herein, on March 30, 2012, we acquired Metamining Nevada in exchange for 9,581,973 shares of our Series C convertible preferred stock and 3,000,000 Series C common stock purchase warrants.  As a result of the acquisition, under reverse acquisition accounting rules pursuant to ASC 805-40, Linkwell who is the legal acquirer became the accounting acquiree owning 8.9%, and Metamining Nevada became the accounting acquirer owning 91.1% of the total outstanding shares of common stock on an as converted basis after giving effect to the transaction.

Metamining Nevada is a development stage company which was established in March 2011.  In April 2011 Metamining, its former parent company, entered into agreements with unrelated third parties to acquire rights to mining claims, together with certain real property rights, on approximately 4,500 acres in northern Nevada for an aggregate purchase price of $14,250,000. During the terms of the agreements, Metamining Nevada has the right to explore and mine the properties and the quit claim deeds for these properties are being held in escrow pending payment in full of the purchase price.  If any portion of the purchase price should not be paid when due, subject to certain extensions as described in the agreements, all amounts theretofore paid are forfeited and the agreements are terminated. During the terms of the agreements, the seller designated Mr. Howard Fisher as a member of Metamining Nevada’s Board of Directors.  Mr. Fisher’s responsibilities are to control the transfer of the properties or provide for the recovery of the properties, at the termination of the agreement, as the case may be.  He does not otherwise have any voting rights as a member of Metamining Nevada’s board.

We also own a 90% interest in our operating subsidiary, Linkwell Tech. Through Linkwell Tech’s wholly-owned subsidiaries, LiKang Disinfectant and LiKang Biological, we are engaged in the development, manufacture, sale and distribution of disinfectant health care products primarily to the medical industry in China.

RESULTS OF OPERATIONS

Metamining Nevada, as the accounting acquirer in the transaction entered on March 30, 2012, had no operations during the quarter ended March 31, 2012.

The pro forma statement of operations for the quarter ended March 31, 2012 are presented in Note 2 and describe the consolidation of Linkwell and Metamining Nevada after giving effect to the Metamining Nevada acquisition, including the Reverse Stock Split for the outstanding common shares, as if the transaction had occurred at the beginning of the period the quarter ended March 31, 2012. This proforma statement of operations also provides information on the results of operations from Linkwell Tech during the quarter.

LIQUIDITY AND CAPITAL RESOURCES

Our cash on hand was $0.7 million and working capital $9.9 million as of March 31, 2012 as compared to a working capital deficit of $5.6 million at December 31, 2011. As of March 31, 2012, we had a total of $1.6 million in outstanding short term loans, $1.2 million of which matured in early May 2012 and was renewed to May 2013; the other $0.4 million will mature in July 2012. We expect to use our existing working capital to satisfy these obligations. Other than our working capital and loans, we presently have no external sources of working capital.
 
With the diversification and expansion of our business through the transaction with Metamining Nevada, we will need to raise significant additional capital in the near future. As described elsewhere herein, Metamining Nevada owes $13,950,000 for the purchase of the mineral and real property rights, of which $5,325,000 is due by June 15, 2012 and the balance of $5,625,000 is due by April 15, 2013. We do not have the funds necessary to make the June 15, 2012 payment. If we are unable to either secure the funds necessary to make these payments or otherwise negotiate an extension of the due dates, of which there is no assurance, we will lose all rights to explore these properties and forfeit any funds paid to date. Even if we are successful in raising the funds necessary to pay the purchase price for the assets, we will need to raise an additional $15 million and $20 million of capital to explore these properties and, if the exploration results are favorable, to develop the properties. We do not, however, have any firm commitments for these funds and there are no assurances they will become available to us. If we are not able to raise these funds, either though the sale of equity or debt, or a combination thereof, we will be unable to diversify our company through the exploration of the Metamining Nevada assets.

 
- 19 -

 


CRITICAL ACCOUNTING POLICIES

The preparation of our consolidated financial statements in conformity with U.S. GAAP  requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.

We base our estimates and judgments on historical experiences and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements, we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments: allowance for doubtful accounts; income taxes; stock-based compensation; asset impairment and option value.

While our significant accounting policies are more fully described in Note 1 to our consolidated financial statements, we believe the following accounting policies are the most critical to help develop a full understanding and evaluation of our management’s discussion and analysis.

ACCOUNTS RECEIVABLE

           As is customary in the PRC, we extend relatively long payment terms to our customers as compared with those customary in the United States, with sales to both third parties and related parties generally requiring payment within four to six months.  For the year ended December 31, 2011 and for the three months ended March 31, 2012, the average time of payment on accounts receivable from related parties was about nine months.  Based upon our long-standing relationship with these related parties and their respective principals, we believe that related party receivables are collectible.  To the best of our knowledge, there is no company-related issue with respect to any related party that might be delaying payment, nor are there any negative issues impacting our relationship with any related party.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

We maintain an allowance for doubtful accounts to reduce amounts to their estimated realizable value. A considerable amount of judgment is required when we assess the realization of accounts receivable, including assessing the probability of collection and the current credit-worthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, an additional provision for doubtful accounts could be required. We initially record a provision for doubtful accounts based on our past experiences, and we then adjust this provision at the end of each reporting period based on a detailed assessment of our accounts receivable and allowance for doubtful accounts. In estimating the provision for doubtful accounts, we consider, among other factors: (i) the aging of the accounts receivable; (ii) trends within and ratios involving the age of the accounts receivable; (iii) the customer mix in each of the aging categories and the nature of the receivable; (iv) our historical provision for doubtful accounts; (v) the credit worthiness of the customer; and (vi) the economic conditions of the customer's industry as well as general economic conditions.

REVENUE RECOGNITION

Our revenue recognition policies are in compliance with SEC Staff Accounting Bulletin (“SAB”) 104 (codified in FASB ASC Topic 480). We record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria for our various revenue streams.

Our revenue from the sale of products to related parties are recorded when the goods are shipped to the customers from our related parties. Upon shipment, title passes, and collectability is reasonably assured. We receive purchase orders from our related parties on an as needed basis from the related party customers. Generally, the related party does not hold our inventory. If the related party has inventory on hand at the end of a reporting period, the sale is reversed and the inventory is included in our balance sheet.
 
IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined by using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company believes that, during the three months ended March 31, 2012 and 2011, there were no significant impairment of its long-lived assets.

 
- 20 -

 



FOREIGN CURRENCY TRANSLATION

Our functional currency is the RMB. For financial reporting purposes, RMB is translated into United States dollars as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenue and expenses are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of shareholders' equity as “Accumulated other comprehensive income.” Gains and losses resulting from foreign currency transactions are included in income. There has been no significant fluctuation in exchange rate for the conversion of RMB to United States dollars after the balance sheet date.

OFF-BALANCE SHEET ARRANGEMENTS

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties.  We have not entered into any derivative contracts that are indexed to our stocks and classified as shareholder’s equity or that are not reflected in our consolidated financial statements.  Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.  We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.


ITEM 3.                      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
We are a “smaller reporting company” (as defined by Rule 12b-2 of the Exchange Act) and are not required to provide the information requested under this item. 

ITEM 4.                      CONTROLS AND PROCEDURES.

Our management, with the participation of our principal executive officer, conducted an evaluation of the design and operation of our disclosure controls and procedures, as defined under Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of March 31, 2012.  Our disclosure controls and procedures are designed (i) to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed,  summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer who also serves as our principal financial officer and principal accounting officer, to allow timely decisions regarding required disclosure.

Based on the evaluation of our disclosure controls and procedures as of March 31, 2012, our Chief Executive officer concluded that, as of such date, our disclosure controls and procedures were not effective to ensure that (i) information required to be disclosed by our Company in reports that we file or submit under the Exchange Act is accumulated and communicated to our Company’s management, including the Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosure by our Company; and (ii) information required to be disclosed by our Company in reports that we file or submit under the Exchange Act is record, processed, summarized and reported within the time period specific in the SEC’s rules and forms as a result of continuing material weaknesses in our internal control over financial reporting as described in our Annual Report on Form 10-K for the year ended December 31, 2011.

Change in internal control

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) that occurred during the first quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



 
- 21 -

 

PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS. 

In addition to the risk factors describing the major risks to our historical business operations which can be found in our 2011 Annual Report on Form 10-K, under Item 1A, “Risk Factors”, we face certain additional risks as a result of the Metamining Nevada transaction including:

If we do not timely pay the amounts due for the purchase of the mining and real property rights we will lose our ability to explore these properties and diversify our operations .  We do not have the funds to pay these obligations and there are no assurances we will be able to raise the necessary capital.

Under the terms of the purchase agreements for the mining and real property rights, Metamining Nevada must pay the sellers $13,950,000 for the purchase of the mineral and real property rights, of which $5,325,000 is due by June 15, 2012 and the balance of $5,625,000 is due by April 15, 2013. Until such time as Metamining Nevada has made these payments, the sellers are holding the deeds in escrow. We do not have the funds necessary to make the June 15, 2012 payment.  If we fail to make this payment, we will lose these rights. In addition, if we are able to either secure the funds necessary to make these payments or otherwise negotiate an extension of the due dates, of which there is no assurance, we will lose all rights to explore these properties and forfeit any funds paid to date.
 
We will need to raise between $15 million and $20 million of additional financing to explore and possibly develop the Metamining Nevada properties. If we cannot raise additional capital as needed, our ability to diversify our company could be in jeopardy.

In addition to the funds necessary to pay for the mineral and property rights, we will also need to raise between $15 million and $20 million of capital to explore these properties and, if the exploration results are favorable, to ultimately develop these properties . We do not have any firm commitments to provide any additional capital and we anticipate that we will have certain difficulties raising capital given the risks associated with exploration of the mining assets and the history of our company. Accordingly, we cannot assure you that additional capital will be available to us upon terms acceptable to us, if at all. If we are subsequently unable to raise additional funds as needed, our ability to implement our business plan and grow our company will be in jeopardy and investors risk losing their entire investment.
 
Our management may be unable to effectively integrate our two businesses and to manage our growth and we may be unable to fully realize any anticipated benefits of the transaction with Metamining Nevada.

We are subject to various risks associated with our growth strategy, including the risk that we will be unable to effectively integrate and manage the operations of Linkwell Tech with Metamining Nevada. The two companies’ histories, the geographical location, business models and business cultures are different in many respects. Our management faces significant challenges in their efforts to integrate these businesses and to effectively manage our continued growth. There can be no assurance that our efforts to integrate these operations will be successful which may cause increased operating expenses and adversely impact our financial condition in future periods.

The feasibility of mining the various Metamining Nevada properties has not been established and there are no assurances that it will be commercially feasible to develop these properties.

While Metamining Nevada owns various mining rights, it does not record any reserves on its balance sheet.  A “reserve,” as defined by the SEC rules and regulations, is that part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination. A reserve requires a feasibility study demonstrating with reasonable certainty that the deposit can be economically and legally extracted and produced.  Although a qualified independent engineering firm has completed a pre-feasibility study that concluded there would be minimal risk in proceeding to exploration and development of the Metamining Nevada properties on the basis of estimates of mineralized material, Metamining Nevada has not commissioned nor received feasibility studies or obtained the necessary operating permits with regard to the Metamining Nevada mineral rights.  There are numerous risks associated with a pre-feasibility study, including:

•           The limited amount of drilling and geologic study completed to date,
•           The process testing is limited to historic properties, small pilot plants and bench scale testing,
•           The difficulty obtaining expected metallurgical recoveries when scaling up to production scale from pilot plant scale,
•           The preliminary nature of the mine plans and processing concepts,
•           The rough preliminary operating and capital cost estimates,

 
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•           Metallurgical flow sheets and expected recoveries are in development, and
•           The history of pre-feasibility studies typically underestimating capital and operating costs.

Substantial additional feasibility work and expenditures are required to demonstrate economic viability. The mineralized materials identified to date on these properties have not and may never demonstrate economic viability. The feasibility of mining has not been, and may never be, established. Whether a mineral deposit can be commercially viable depends upon a number of factors, including the particular attributes of the deposit, including size, grade and proximity to infrastructure; metal prices, which can be highly variable; and government regulations, including environmental and reclamation obligations.  There are no assurances Metamining Nevada will be able to establish some or all of its mineralized material as proven or probable reserves in sufficient quantities to justify commercial operations.
 
ITEM 2.                      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On January 4, 2012, the Company, pursuant to a Legal Counsel Agreement, dated January 1, 2012, by and between the Company and the Shang Hai Hai Mai Law Firm (“Shanghai Hai Mai”), agreed to issue to Shang Hai Hai Mai the aggregate amount of 6,000,000 shares of common stock as compensation for legal services valued at $180,000 to be provided by Shang Hai Hai Mai during the two-year term of the Agreement.  The recipient is an accredited investor and the issuance is exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on an exemption from registration provided by Section 4(2) of that act.

In March 2012, the Company issued 10,000,000 shares of its common stock to Cap One Resource Co., Ltd. as compensation for consulting services provided to it valued at $250,000. The recipient is an accredited investor and the issuance is exempt from registration under the Securities Act in reliance on an exemption from registration provided by Section 4(2) of that act.

On March 29, 2012, the Company issued an aggregate of 9,000,000 shares of common stock to one senior officer and one employee, under the Company’s 2005 Equity Compensation Plan, as amended, for services valued at $270,000 provided to the Company. The recipients were accredited or otherwise sophisticated investors and the issuances were exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(2) of that act.  The recipients had access to information concerning the Company.

ITEM 3.                      DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.                      MINE SAFETY DISCLOSURE.

None.

ITEM 5.                      OTHER INFORMATION.

None.


 
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ITEM 6.                      EXHIBITS.

The following documents are filed as a part of this report or are incorporated by reference to previous filings:

Exhibit No.
 
Description
 
3.10
 
Articles of Amendment to the Articles of Incorporation containing the designations, rights and preferences of the Series C Convertible Preferred Stock (Incorporated by reference to the Current Report on Form 8-K as filed on April 4, 2012).
 
4.1
 
Series C Common Stock Purchase Warrant issued to Metamining Inc. (Incorporated by reference to the Report on Form 8-K as filed on April 4, 2012).
 
10.9
 
Share Exchange Agreement dated March 30, 2012 by and among Linkwell Corporation, Metamining Nevada Inc. and Metamining Inc. (Incorporated by reference to the Report on Form 8-K as filed on April 4, 2012).
 
10.10
 
Purchase and Sale Agreement (Agreement No. NV01) dated April 15, 2011 by and between Little Valley Group, LLC and Metamining Inc. (Incorporated by reference to the Report on Form 8-K as filed on April 4, 2012).
 
10.11
 
Purchase and Sale Agreement (Agreement No. NV02) dated April 15, 2011 by and between Greater Nevada Ranches, LLC and Metamining Inc. (Incorporated by reference to the Report on Form 8-K as filed on April 4, 2012).
 
10.12
 
Purchase and Sales Agreement (Agreement No. NV03) dated April 15, 2011 by and between Western Resource Group, LLC and Metamining Inc. (Incorporated by reference to the Report on Form 8-K as filed on April 4, 2012).
 
10.13
 
Legal Counsel Agreement dated January 1, 2012 by and between Linkwell Corporation and the Shang Hai Hai Mai Legal Firm ***
 
31.1
 
Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer *
 
31.2
 
Rule 13a-14(a)/ 15d-14(a) Certification of principal financial and accounting officer *
 
32.1
 
Section 1350 Certifications of Chief Executive Officer and principal financial and accounting officer*
 
101.INS
 
XBRL INSTANCE DOCUMENT **
 
101.SCH
 
XBRL TAXONOMY EXTENSION SCHEMA **
 
101.CAL
 
XBRL TAXONOMY EXTENSION CALCULATION LINKBASE **
 
101.DEF
 
XBRL TAXONOMY EXTENSION DEFINITION LINKBASE **
 
101.LAB
 
XBRL TAXONOMY EXTENSION LABEL LINKBASE **
 
101.PRE
 
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE **
 
 
*
 
Filed herewith.
 
**
 
In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”.
 
***
 
Previously filed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
Linkwell Corporation
 
       
Date: July 25 , 2012
By: 
/s/ Xuelian Bian
 
   
Xuelian Bian,
 
   
Chief Executive Officer, President
Principal executive officer
Principal financial and accounting officer
 


 
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PINX:LWLL Linkwell Corp Quarterly Report 10-Q/A Filling

Linkwell Corp PINX:LWLL Stock - Get Quarterly Report SEC Filing of Linkwell Corp PINX:LWLL stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

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PINX:LWLL Linkwell Corp Quarterly Report 10-Q/A Filing - 3/31/2012
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