SUNFLOWER USA LTD, 10QSB/A, 2000-08-07

SUNFLOWER USA LTD
10QSB/A, 2000-08-07
STEEL WORKS, BLAST FURNACES & ROLLING & FINISHING MILLS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

#5 FORM 10-QSB/A
AMENDMENT NO. 2

QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended February 29, 2000

Commission file number 0-28239

SUNFLOWER (USA), LTD.
-------------------------------------
(Exact name of small business issuer as specified in its charter)

Nevada 82-0349651
----------------------------------------------------------------------------
(State of incorporation) (I.R.S. Employer I.D. Number)

764 Industry Drive, Building 16, Tukwila, Washington 98188
--------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

(206)-394-9701 or 394-9702
--------------------------------------------------------------------------------
(Issuer's telephone number)

Not applicable
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS

Not applicable

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 4,555,166 shares, May 28, 2000
-------------------------------

Transitional Small Business Disclosure Format: Yes X , No
----- -----

<PAGE>
PART I- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
The following reports of consolidated financial statements of the Company are
filed with this report.

CONTENT PAGE
------- ----

INDEPENDENT AUDITOR REPORT (FROM JUNE 1, 1998 TO MAY 31, 1999). . . . . 2

UNAUDITED INTERIM FINANCIAL STATEMENTS (FOR NINE MONTHS) ENDED ON FEBRUARY
29,2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. . . . . . . . . . . 38

<PAGE>
SUNFLOWER (USA), LTD.

INDEPENDENT AUDITOR'S REPORT

Period from June 1, 1998 to May 31, 1999

CONTENT PAGE
------- ----

Independent Audit Report on consolidated financial statements. . . . . . 3

Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . 5

Consolidated Statements of Operations. . . . . . . . . . . . . . . . . . . .6

Consolidated Statements of Changes in Stockholders' Equity. . . . . . . .7

Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . . . 8

Notes to the consolidated financial statements. . . . . . . . . . . .9 - 20

<PAGE>
DICKSON V. LEE
CERTIFIED PUBLIC ACCOUNTANTS, L.L.C.
--------------------------------------------------------------------------------
Main Address : 110 East 59th Street, 6th Floor, New York, New York 10022
------------- Telephone: (212) 909-0397 Fax: (212) 909-0322

China Address : Suite 2503, United Plaza, Shenzhen, China
------------- Telephone : (755) 271-0062 Fax: (755) 271-0389

--------------------------------------------------------------------------------

INDEPENDENT AUDIT REPORT

To The Board of Directors of
SunFlower (USA), Ltd.
764 Industry Drive,
Tukwila, WA 98188

We have audited the accompanying consolidated balance sheets of SunFlower (USA),
Ltd. as of May 31, 1999, 1998 and 1997 and the related consolidated statements
of operations, changes in stockholders' equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with U.S. generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above are
presented fairly, in all material respects, the financial position of SunFlower
(USA), Ltd. as of May 31, 1999, 1998 and 1997 and the results of its operations
and its cash flows for the years then ended in conformity with U.S. Generally
Accepted Accounting Principles (GAAP).

Dickson V. Lee, Certified Public Accountants, LLC
New York, New York
August 2, 1999

3
<PAGE>

<TABLE>
<CAPTION>
#1 SUNFLOWER (USA), LTD.
Consolidated Balance Sheets
As of May 31

ASSETS 1999 1998 1997
--------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 902,755 $ 795,340 $ 1,603,695
Accounts receivable (Note 2c) 3,635,170 783,610 236,038
Inventories less allowance (Note 2g) 4,730,353 6,849,204 2,329,987
Deposits and other advances (Note 2d) 4,706,128 9,080,256 9,690,123
------------ ------------ ------------
Due from affiliated companies(Note 2d & 10) 2,640,802 4,610,191 5,245,863
--------------------------------------------- ------------ ------------ ------------
Total current assets 16,615,208 22,118,601 19,105,706
Fixed Assets (Note 2e)
Land & Building 11,644,072 2,158,563 2,034,188
Machine & Others 19,007,197 3,653,536 3,200,129
Less: Acc depreciation (Note 2e)
Land & Building (611,121) (241,801) (171,425)
Machine & Others (1,544,760) (1,564,085) (1,132,508)
------------ ------------ ------------
Fixed assets (net) 28,495,388 4,006,213 3,930,384
Other Assets
Construction in progress (Note 2f) 619,370 5,028,174 4,996,019

Total Assets $45,729,966 $31,152,988 $28,032,109
============ ============ ============

LIABILITIES 1999 1998 1997
--------------------------------------------- ------------ ------------ ------------
Current liabilities
Accounts payable $ 1,232,262 $ 1,669,014 $ 1,821,828
Bank Loans (Note 4) 4,952,705 7,032,273 11,508,096
Other payables (Note 2h) 1,346,947 3,568,608 4,086,455
Due to affiliated companies (Note 2h & 10) 8,172,693 0 0
--------------------------------------------- ------------ ------------ ------------
Total current liabilities 15,704,607 12,269,895 17,416,379

Long Term Liabilities (Note 4) 12,561,744 2,959,259 61,022
------------ ------------ ------------
Total Liabilities 28,266,351 15,229,154 17,477,401

Common Stock at par of $0.001(Note 5) 4,167 12,500 12,500
Paid in Capital (Note 6) 15,040,964 15,040,964 8,530,120
Retained earnings 2,366,983 815,932 1,998,111
---------------------------------------------
Cumulative Translation adjustments (Note 2i) 51,501 54,438 13,977
--------------------------------------------- ------------ ------------ ------------
Total stockholders' equity 17,463,615 15,923,834 10,554,708

Total Liabilities
and Owners' Equity $45,729,966 $31,152,988 $28,032,109
============ ============ ============
</TABLE>

The notes attached form an integral part of the consolidated financial
statements.

4
<PAGE>
<TABLE>
<CAPTION>
SUNFLOWER (USA), LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended May 31

1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Sales (Note 2j) $18,238,345 $15,889,587 $11,662,980
Cost of sales 14,393,203 13,188,836 10,024,493
------------ ----------- -----------
Gross profit 3,845,142 2,700,751 1,638,487
Selling expenses 146,590 180,155 76,154
General & administrative expenses 745,598 402,456 397,313
------------ ----------- -----------
Operating profit 2,952,954 2,118,140 1,165,020
Financial expenses (Note 2k) 121,854 300,319 118,747
Other income (Note 2l) 913,508 0 0
------------ ----------- -----------
Income before tax 3,744,608 1,817,821 1,046,273
Provision for income tax (Note 2m) 627,292 0 0
------------ ----------- -----------
Net Income 3,117,316 1,817,821 1,046,273
Other Comprehensive Income/(Loss)
(Note 2n) (2,937) 40,461 13,977
------------ ----------- -----------
Comprehensive Income $ 3,114,379 $ 1,858,282 $ 1,060,250
============ =========== ===========

Weighted average common
Shares outstanding -
basic and diluted 4,166,667 12,500,000 12,500,000
------------ ----------- -----------

Earnings per share -
basic and diluted $ 0.75 $ 0.15 $ 0.08
------------ ----------- -----------
</TABLE>

The notes attached form an integral part of the consolidated financial
statements.

5
<PAGE>
<TABLE>
<CAPTION>
SUNFLOWER (USA), LTD.
-----------------------

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the years ended May 31, 1997, 1998 and 1999

COMMON COMMON PAID IN RETAINED CUMULATIVE STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS TRANSLATION EQUITY
(SHARES) (DOLLAR ADJUSTMENT
AMOUNT)
----------- --------- ----------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>

Balance as of 12,500,000 $ 12,500 $ 412,807 $ 951,838 $ 0 $ 1,377,145
May 31, 1996

Capital Increase 0 0 8,117,313 0 0 8,117,313

Net Income for 0 0 0 1,046,273 0 1,046,273
the year
Translation
Adjustment 0 0 0 0 13,977 13,977
----------- --------- ----------- ------------ ------------- ---------------

Balance as of
May 31, 1997 12,500,000 12,500 8,530,120 1,998,111 13,977 10,554,708

Capital Increase 0 0 3,510,844 0 0 3,510,844

Net Income for 0 0 0 1,817,821 0 1,817,821
the year

Recapitalization 0 0 3,000,000 (3,000,000) 0 0

Translation
Adjustment 0 0 0 0 40,461 40,461
----------- --------- ----------- ------------ ------------- ---------------

Balance as of
May 31, 1998 12,500,000 12,500 15,040,964 815,932 54,438 15,923,834

Distribution 0 0 0 (1,566,265) 0 (1,566,265)

Reverse Split (8,333,333) (8,333) 0 0 0 (8,333)

Net Income for
the year 0 0 0 3,117,316 0 3,117,316
Translation
Adjustment 0 0 0 0 (2,937) (2,937)
----------- --------- ----------- ------------ ------------- ---------------

Balance as of
May 31, 1999 4,166,667 $ 4,167 $15,040,964 $ 2,366,983 $ 51,501 $ 17,463,615
=========== ========= =========== ============ ============= ===============
</TABLE>

The notes attached form an integral part of the consolidated financial
statements.

6
<PAGE>
<TABLE>
<CAPTION>
SUNFLOWER (USA), LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MAY 31

CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Net Income $ 3,114,379 $ 1,858,282 $ 1,060,250
Adjustments to reconcile net income to cash provided by operating activities:
(Increase)/decrease in accounts receivable (2,851,560) (547,573) (89,519)
Decrease/(increase) in deposits, prepayments and other receivables 4,374,129 609,867 (1,802,993)
Decrease/(increase) in inventories (net) 2,118,851 (4,519,217) (710,025)
(Decrease)/increase in accounts payable (436,752) (152,814) 1,012,206

Decrease in other payable and charges (2,221,662) (517,847) (2,675,873)
Depreciation expenses 1,111,457 501,953 441,500
------------- ------------ ------------
Net cash provided by operating activities 5,208,842 (2,767,349) (2,764,454)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and machinery (21,490,568) (577,783) (554,732)
Sale of property, plant and machinery 298,740 0 0
Increase in construction in progress 0 (32,155) (75,157)
------------- ------------ ------------
Net cash flows from investing activities (21,191,828) (609,938) (629,889)

CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease/(Increase) in amount due from affiliated companies 1,969,389 635,672 (5,245,863)
Increase in amount due to affiliated companies 8,172,693 0 0
Reverse split (8,333) 0 0
Increase in long term debt 9,602,484 2,898,238 0
Reduction in short term bank loan (2,079,567) (4,475,822) (614,460)
Paid Up Capital 0 6,510,844 8,117,313
Profit Distribution (1,566,265) (3,000,000) 0
------------- ------------ ------------
Net cash flows from financing activities 16,090,401 2,568,932 2,256,990

Net increase/(decrease) in cash and cash equivalent 107,415 (808,355) (1,137,353)
Cash and cash equivalents at beginning of the period (June 1) 795,340 1,603,695 2,741,048
------------- ------------ ------------
Cash and cash equivalents at end of the period (May 31) $ 902,755 $ 795,340 $ 1,603,695
============= ============ ============
</TABLE>

The notes attached form an integral part of the consolidated financial
statements.

7
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1) GENERAL
-------

SunFlower (USA), Ltd. ("the Company") is incorporated in the State of Nevada on
October 5, 1998. The Company, with place of business located at 764 Industry
Drive, Building 16, Tukwila, Washington 98188, was established to develop and
market its copper and alloy products in the United States. It owns 100% of
subsidiary - SunFlower Industry (BVI) Co. Ltd. ("SunFlower (BVI)"), which is
incorporated in British Virgin Islands on September 1, 1998. SunFlower (BVI) is
a shell company, has no activities except that it owns 100% of its subsidiary -
SunFlower Industry Co. Ltd. ("SunFlower"), located in Sheng Yang City, People's
Republic of China (PRC). The PRC subsidiary is incorporated in PRC in 1992, as a
sino- Hong Kong joint venture.

Currently, the Company's main business activities are operated by the PRC
subsidiary, SunFlower Industry Co. Ltd. The subsidiary engages in the
manufacturing and marketing of different types of alloys and copper products,
such as copper pipes, sheets, wires, plates, belts, white copper, yellow copper
and nickel alloy, etc in PRC. The Company receives its sales orders mainly from
the utility and power generating industries in PRC. Its products are used in the
high-voltage power transmission, turbines, electrical cables, heat exchangers,
refrigerators and air conditioners. Some products are sold to the Germany and
Japan in the current year. Based on an initial market steady, the Management
believes that its copper pipes products can be used in the U.S. household/ home
improvement markets.

Management is confident that the financial statements include all adjustments
necessary in order to make them not misleading.

2) PRINCIPAL ACCOUNTING POLICIES AND PRACTICE
----------------------------------------------

a) FISCAL YEAR ENDING MAY 31

The Company's fiscal year ends on May 31 of the following year. This
fiscal year policy has been adopted consistently in the past years.

b) BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of the
Company and its subsidiaries (See Note 1, General). All material
intra-company balances and transactions, if any, have been eliminated
on consolidation.

8
<PAGE>
c) ACCOUNTS RECEIVABLE

Accounts receivable is the sales amount to be received. The balance of
this account is recorded net of provisions for bad debt amounts.

d) DEPOSITS AND OTHER ADVANCES AND DUE FROM AFFILIATED COMPANIES

The balance of Deposits and Other Advance includes deposits made for
the purchase of raw materials and fixed assets, short term
advances/loans by the Company, prepayments and notes receivable and
advances to company's employees for business travels and conferences

The detailed composition of Deposits and Other Advances account and
Due From Affiliated Companies, on the balance sheets for the three (3)
years are disclosed as follows:

<TABLE>
<CAPTION>
MAY 31, 1999 MAY 31, 1998 MAY 31, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Deposits, advances &
loans to non-related
parties 4,552,108 7,067,300 8,903,593
Prepayments 93,487 1,310,683 858,665
Notes receivables 60,533 702,273 127,865
------------- ------------- -------------
Total Deposit & Other
Advances $ 4,706,128 $ 9,080,256 $ 9,890,123
============= ============= =============

Deposits, advances &
loans to affiliated
companies $ 2,640,802 $ 4,610,191 $ 5,245,863
============= ============= =============
</TABLE>

The advances & loans from the Company to affiliates were short-term in
nature and were charged with no interest. The loans did not have a
specific repayment date. The loans were unsecured and due on demand.
The affiliated companies are controlled by Mr. Edward Liu. (See Note
10, Related Party Transactions).

e) PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION EXPENSES

Company constructs major factory buildings and purchases equipment to
expand its manufacturing facilities in the current year. Consequently,
the balance of its fixed assets increased materially as of May 31,
1999 (See Note 4, Bank Loans).

In 1999, the Company elected to update the useful lives of Machinery
and Equipment from 8 years to 18 years, to better reflect the lives of
assets. The resulting depreciation effect of this accounting policy
does not materially change the Company's operational results.

9
<PAGE>
Detailed depreciation expenses of the Company for the past three years
are as follows:

May 31, 1999 May 31, 1998 May 31, 1997
------------- ------------ ------------
- Building $347,446 $70,413 $64,676
- Machinery and Equipment $764,011 $431,540 $376,824

f) CONSTRUCTION IN PROGRESS

The amount of expansion while in progress is recorded under the
Construction In Progress account. When the construction is completed,
the balance of the Construction In Progress account is then
transferred to the Property, Plant & Equipment account.

g) INVENTORIES

Inventories are stated at a predetermined manufacturing cost for each
product during the year. The inventory cost includes direct materials,
direct labor and manufacturing overheads. Costs are then adjusted at
the year end to reflect the actual value of the inventories.
Inventories are recorded on the "first-in first-out" basis, which is
in compliance with the Generally Accepted Accounting Principle. The
components of inventories are as follows:

May 31, 1999 May 31, 1998 May 31, 1997
------------- ------------ ------------
- Raw Materials $ 108,729 $3,535,748 $1,356,057
- Work In Progress $3,640,358 $2,257,946 $ 447,190
- Finished Goods $ 981,266 $1,055,510 $ 526,740
------------- ------------ ------------
$4,730,353 $6,849,204 $2,329,987

h) OTHER PAYABLES AND DUE TO AFFILIATED COMPANIES

The balance of other payable includes accrued expenses, notes payables
and tax payables. The details composition of other payables on the
balance sheets for the three (3) years are disclosed as follows:

<TABLE>
<CAPTION>
May 31, 1999 May 31, 1998 May 31, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Notes payable 523,987 2,671,100 3,611,291
Accruals 170,975 133,859 103,378
Salary payable 24,693 38,488 45,440
Tax payable 627,292 - -
Other payable - 725,161 326,346
------------- ------------- -------------
Total other payables $ 1,346,947 $ 3,568,608 $ 4,086,455
------------- ------------- -------------
</TABLE>

Payables from affiliated companies in the amount of US$8,172,693,
which were unsecured, interest-free and without fixed terms of
repayment. Please refer to Note10.

i) FOREIGN CURRENCY TRANSLATION

The following are the Company's policy on Foreign Currency
Translation, in accordance with SFAS No.52.

10
<PAGE>

The translation of financial statements of a subsidiary into United
States dollars is performed for balance sheet accounts using the
closing exchange rate in effect at the balance sheet dates, and for
revenue and expense accounts using an average exchange rate during
each reporting period. The gains or (losses) resulting from
translation are included in the stockholders' equity separately as
cumulative translation adjustments. While the cumulative translation
adjustments for the fiscal years ended May 31, 1999, 1998 and 1997
were $51,501, $54,438, and $13,977, respectively. #2 Transactions
denominated in a currency other than the functional currency are
translated into the functional currency at the applicable exchange
rates at the time of the transactions.#2 Aggregate losses (gains) from
foreign currency transactions included in the results of operations
for the fiscal years ended May 31, 1999, 1998, and 1997 were
approximately US$507, US$211 and Nil, respectively.

j) SALES/REVENUE RECOGNITION

Product sales/revenue is recognized upon transfer of title of goods,
this is in accordance with the Generally Accepted Accounting
Principle.

k) FINANCIAL EXPENSES

The total amount of interest costs incurred and charged to expense
during the periods, which excludes the amount of interest cost has
been capitalized as fixed assets, (i.e. interest expenses necessary to
bring the assets to the condition and location for its intended use
during the periods, which has future value are capitalized and
depreciated over the useful life of such fixed assets) are as follows:

May 31, 1999 May 31, 1998 May 31, 1997
------------- ------------ ------------
Interest Expense $121,854 $300,319 $118,747
Interest Capitalized $928,996 $319,017 $546,358

l) OTHER INCOME

The Company's business is to purchase raw materials (such as ingots)
and manufacture them into finished products (such as pipes). The
Company sells finished products to its customers. The sales of raw
materials are not the main business of the Company. The sales of raw
materials are not common for the Company and is infrequent in the
occurrence. In 1999, an income of $845,980 occurred from sales of raw
materials through a copper commodity market with cost of $1,033,987
and sales price of $1,882,243, was classified as Other Income in the
statement of operations.

While in the past, no such sale was incurred. The Company management
believes that the activity is infrequent. It may occur, if practical,
to maximize the Company's profitability. (See Note 2g, Inventories).

m) INCOME TAX

11
<PAGE>
The Company accounts for income tax under the provisions of Statement
of Financial Accounting Standards No. 109, which requires recognition
of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial
statements or tax returns. Deferred income taxes are provided using
the liability method. Under the liability method, deferred income
taxes are recognized for all significant temporary differences between
the tax and financial statement bases of assets and liabilities.

The Company and its subsidiaries are subject to income taxes on an
entity basis on income arising in or derived from the tax
jurisdictions in which they operate. The current provision for income
tax is provided at the applicable tax rates in accordance with the
relevant income tax laws and tax credits when applicable, may be
applied.

Currently, the Company has no sales in the United States, receives no
income repatriated from its overseas subsidiary, nor is engaged in
sales of properties or received passive income as defined under
Section 952(a) and Section 954(a). Therefore, the Company is not
subject to US tax liability under Section 951 of Subpart F, Income of
Controlled Foreign Corporation. Therefore, income generated from the
overseas subsidiary is recognized for the accounting purposes, while
not recognized for the U.S. tax purposes. However, when a profit is
incurred or profit distribution is received in the US, the Company is
subject to US taxes and a US tax provision is to be provided.

Normally, the Company's PRC subsidiary is subject to income tax at a
rate of 33% (30% state income tax and 3% local income tax). The
Company registered as a joint venture in PRC, is entitled to a special
tax exemption for the first two years of profitable operations in 1997
and 1998. Therefore, no PRC tax liability was recorded in 1997 and
1998. During the 1999, a provision of approximate 33% tax (or
$1,254,584) was made as income tax liability for the PRC subsidiary.
As the subsidiary entitles a special 50% reduced tax rate on the
income for the following three years, starting1999 to 2001under the
Preferential Tax Policies. Consequently, the 33% provision made during
the finical year 1999, may result in an over provision of income
taxThe Company reduced its overstated tax liability and adjusted the
tax provision to US$627,292 for the fiscal year ended May 31, 1999.
The above tax adjustment is to reduce over tax provision made during
the year. It is not due to the changes in tax laws or rates.

The Company accounts for income taxes under the Financial Accounting
Standards Board of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". Under the Statement, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
No tax benefits has been recognized in the financial statements. No
other significant reconciling items exist between the actual effective
tax rates and the expected effective tax rate. #3 As of May 31, 1999,
the Company has no deferred tax asset or liability in the U.S. as the
Company have no operation in the United States, nor in its PRC
subsidiary, as there were no significant differences between the tax
and financial statements bases of assets and liabilities in the PRC.
The reconciliation of the United States federal income tax rate to the
effective income tax based on income before income taxes stated in the
consolidated statements of operations as follows.

12
<PAGE>
<TABLE>
<CAPTION>
Years Ended May 31
------------------
1997 1998 1999
---- ---- -----
<S> <C> <C> <C>
United States federal income tax rate 0 0 0
Effect of tax rate in foreign jurisdictions 0 0 16.5%
---- ---- -----
Effective income tax rate 0 0 16.5%
==== ==== =====
</TABLE>

Provision for income taxes comprised:

<TABLE>
<CAPTION>
Years Ended May 31
---------------------
1997 1998 1999
----- ----- --------
<S> <C> <C> <C>
PRC taxes $ 0 $ 0 $627.292
U.S. federal taxes 0 0 0
----- ----- --------
Total $ 0 $ 0 $627.292
===== ===== ========
</TABLE>

As of May 31, 1999, the company has no deferred tax assets or
liabilities in the U.S. nor in its overseas subsidiary. Therefore, no
disclosure is needed.

There are no changes in tax laws or rates as of May 31, 1999.
Therefore, no disclosure on changes in tax laws or rates is needed.

13
<PAGE>
n) COMPREHENSIVE INCOME - FOREIGN CURRENCY TRANSACTION

In accordance with SFAS No.130 - Reporting Comprehensive Income, an
entity issuing a full set of financial statements must prepare an
income statement using a comprehensive income approach. Comprehensive
income is the increase or decrease in equity of an entity for an
accounting period from all sources other than from owners. If gains or
losses incurred from the translation of foreign currency exchange, the
gains or losses is to be recorded under other comprehensive income on
the statement of operations. (refer to Note 2 i - Foreign Currency
Translations ).

o) USE OF ESTIMATES

The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
necessary estimates and assumptions. The management believes that the
estimates used in preparing the financial statements are reasonable
and accurate to properly reflect the operations of the Company. In
addition, the estimates used are not subject to near term risk of
change, if any.

3) SEGMENTED GEOGRAPHIC SALES
----------------------------

Presently, a 100% of sales is generated from its Chinese subsidiary and no sales
is made by the Company in the United States (See Note 2j).

During the fiscal year ended May 31, 1999, sales to 10 major customers accounted
for over approximate 60% of the Company's sales. However, none of these
individual customer purchases over 10% of the Company's sales. The dollar value
of sales to these customers is expected to maintain or increase steadily over
the next several years due to the fact that the Company is the only
privately-owned alloy manufacturer in the PRC, which can produce certain
products to meet the specifications and quality of its customers. The management
indicated that it will continue to provide alloy products to meet the demands of
its customers.

14
<PAGE>
4) BANK LOANS
-----------

As a result of a major expansion of the Company's factory building and
manufacturing facilities, loans from banks were secured as a way to finance the
expansion. The outstanding loan balance amounted to US$4,928,837, being the
portion repayable within one year, is reflected under the Current Liabilities.
The remaining loan balance of US$12,501,205 is shown under the Long Term
Liabilities. Details of the terms of bank loans:

<TABLE>
<CAPTION>
Principle Denominate Interest Name of Banks Maturity Collateral Nature
Currency Rate Date
----------- ---------- -------------- ------------- --------- ---------- ------
<C> <S> <C> <C> <C> <C> <C>
$ 460,048 RMB 0.693% Shenyang June, No Short
monthly. Corporation 1999 Term
Bank
----------- ---------- -------------- ------------- --------- ---------- ------
$ 3,874,092 RMB 0.765% Shenyang June, No Short
monthly Credit Bank 1999 Term
----------- ---------- -------------- ------------- --------- ---------- ------
$ 117,433 RMB 0.63525% Bank of October, No Short
monthly Communication 1999 Term
----------- ---------- -------------- ------------- --------- ---------- ------
$ 501,123 US$ Floating Bank of November, No Short
Rate Communication 1999 Term
----------- ---------- -------------- ------------- --------- ---------- ------
$12,561,744 RMB 1.035% Shenyang April, Yes Long
monthly Credit Bank 2001 Term
----------- ---------- -------------- ------------- --------- ---------- ------
</TABLE>

All bank loans are charged with a fixed interest rate, except the US$498,717
loan, which is based on a "LIBOR plus" floating interest rate. The long-term
debt of US$ 12,561,744 is secured by the affiliate's assets with an fixed
interest rate at 12.42% annually (or 1.035% monthly). Banks loans may subject to
credit risk. Management believes that the short-term loans are to be extended or
renewed when a bank application is made on the maturity of date.

5) STOCK AND SHAREHOLDERS
------------------------

The Company has 50,000,000 shares of authorized common stock with par value of
US$0.001 per share. No preferred stock is authorized and outstanding. During
the second quarter of the current year, the outstanding common shares of
12,500,000 were reduced to 4,166,667 common shares.

The Company's shares are listed and traded on the OTC "BB" (or NASDAQ), under
the symbol "SFLW" on and about October 5, 1998. Signature Stock Transfer, Inc.
in Dallas, Texas, serves as transfer agent and registrar for the Company's
common stock.
Principal shareholding of the Company before the US$1 million fund raising is as
follows:

Name Title Shares Percentage
Owned Owned
Edward LIU Chairman/Secretary 2,200,000 52.800%
Paul MENG Director/President 240,000 5.760%
Witty LIU Director 240,000 5.760%
Joy King ZHANG Director 120,000 2.880%
Virginia TONG Director 80,000 1.920%
Christina ZHANG Director 80,000 1.920%
Nathan GOLDENTHAL Director 333 0.008%

Total officers and directors as a group 2,960,333 71.050%

15
<PAGE>
6) PAID-IN-CAPITAL
---------------

The total paid in capital of the Company as of May 31, 1999 is US$15,040,964,
which is the same in 1998. In 1998, the Company increased its Paid In Capital
from $8,530,120 to $15,040,964 through additional shareholders contributions and
plough in of $3,000,000 of its retained earning.

7) COMMITMENT AND CONTINGENCIES
------------------------------

No other material commitments and contingencies were noted as at May 31, 1999.

8) YEAR 2000 ISSUES
------------------

The Company has implemented a Year 2000 (Y2K) program aimed at ensuring that its
Company systems, applications and equipment will function properly beyond 1999.
As a part of this program, the Company conducted an assessment of its equipment
and machinery during August, 1998. The Company's machinery do not have timers
or date counters and, therefore, are not subject to Year 2000 problems. The
Company continuously seeks to upgrade and improve its computer systems and
software to better service customers and to support its growth. As a result,
all of the Company's computer systems and software have been recently acquired
or upgraded and the Company believes they are Year 2000 compliant, though there
can be no assurance in this regard.

Because the Company replaced or upgraded its computer systems and software in
conjunction with its normal business practices, it has not allocated additional
resources or attributed additional costs to Year 2000 compliance. The Company
will continue to assess and test newly purchased machinery and computer-related
hardware and software to ensure such items comply with Year 2000.

9) INFLATION
---------

The Management believed that inflation will not have a material impact of the
Company's operation, in the near future. The inflation has not had a material
impact on the Company's business in recent years.

10) RELATED PARTY TRANSACTIONS
----------------------------

There are related party borrowings between the Company and its affiliated
Parties The related party transactions are summarized as follows:

<TABLE>
<CAPTION>
MAY 31, 1999 MAY 31, 1998 MAY 31, 1997
-------------- ------------- -------------
<S> <C> <C> <C>
Receivables from an affiliate
- Jo Fong Hotel $ 2,640,802 $ 4,610,191 $ 5,245,863
-------------- ------------- -------------

Payable to a Director (788,290) -0- -0-
Payables to Affiliates
- Shenfa Development Co. (814,282) -0- -0-
- Shenfa Interior Decorating Co. (5,491,438) -0- -0-
- Shenfa Transportation Co. (1,078,683) -0- -0-
-------------- ------------- -------------
Payables to Affiliates (8,172,693) -0- -0-
-------------- ------------- -------------
</TABLE>

16
<PAGE>
Mr. Edward Liu, Chairman, is a Director and major shareholder of the related
companies. The amounts loaned or borrowed with the related companies were short
term in nature and charged with no interests. The borrowings were unsecured and
had no specified repayment dates. They were due on demand. It is management's
opinion that the related parties transactions are considered to be favorable to
the company as those loans, which could have been obtained from unrelated
parties.

The Company has some facilities, which are shared by its affiliated companies.
The financial effects of the shared facilities are not material. There are no
proposed transactions between the company and any of its officers or directors
or affiliates. All other related party transactions are disclosed when material,
in accordance with FASB No.57.

11) OPERATING RISKS
----------------

The Company's main operations are conducted in the PRC. Accordingly, the
business, financial conditions and results on operations may be influenced by
the political, economic and legal environment in the PRC. The Company's
operations may be subjected to special considerations and risks not typically
associated with Companies in North America.

12) FOREIGN CORRUPT PRACTICES ACT
--------------------------------

The Company is subject to the U.S. Foreign Corrupt Practices Act of 1977, which
generally prohibits U.S. companies from engaging in bribery or other prohibited
payments to foreign officials for the purpose of obtaining or retaining
business. Foreign companies, including some that may compete with the Company,
are not subject to these prohibitions. During the audit, no violation of the
Foreign Corrupt Practices Act by the Company is noted.

13) RETIREMENT PLAN
----------------

The Company's employees in the PRC are all hired on a contractual basis, which
Company has no obligations for pension liabilities to the employees. In
addition, Company has not adopted post-retirement or post-employment benefit
plans.

14) SHORTAGE OF LABOR
-------------------

The Company does not experience any labor shortage or labor disputes in the
past. It is expected that labor resources are abundant to fulfill company's
manufacturing and operating needs.

15) SHORTAGE OF SUPPLIES/COPPER PRICE FLUCTUATION
-------------------------------------------------

The Company purchases raw materials and supplies from various sources and
suppliers (e.g. used coppers, copper ingots, other non-ferrous metals) to
manufacture its products. The Company does not experience any shortage of raw
materials and supplies. It is expected that under a normal business
environment, there is no shortage of raw material and supplies in the near
future.

17
<PAGE>
The Company purchases copper raw materials and manufactures them to finished
products. The prices of copper raw materials may fluctuate from time to time. It
has been low for the past few years, but prices may rise, resulting in increased
material prices for operations.

16) RELIANCE ON KEY PERSONNEL
----------------------------

Despite that most of the key personnel and employees have been with the Company
for over four (4) years, the operation of the Company is dependent on the
services of its top ranking officers and employees. The possible loss of their
services or the inability to attract qualified personnel will have a material
adverse effect on the Company. The Company indicated that it will be able to
retain or attract qualified personnel in the future to maintain its operations.

17) ACCOUNTING FOR STOCK OPTIONS
-------------------------------

In October 1995, the FASB issued Statement of Financial Accounting Standards
No.123 "Accounting for Stock Based Compensation" (FASB No.123), which
established the "fair value" method of accounting for stock based compensation
arrangements. The Company has not adopted any Stock Option Plan as of May 31,
1999. The Board of Directors intends to adopt a stock option plan in the
future to reward its management and employees of exceptional contributions to
the Company.

18) IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
---------------------------------------------------

Statement of Financial Accounting Standards No.133 - Accounting for Derivative
Instruments and Hedging Activities (FASB No.133) was recently issued. FASB
No.133 established accounting and reporting standards for derivative financial
instruments and for hedging activities. The Company does not currently engage
in any activities that would be covered by FASB No.133.

18
<PAGE>
SunFlower (USA), Ltd.
---------------------

Unaudited Interim Financial Statements
--------------------------------------

For Third Quarter Ended February 29, 2000

Contents Pages
-------- -----

Accountants' Review Opinion. . . . . . . . . . . . . . . . . . . . . . . . . .22

Unaudited Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . .23

Unaudited Consolidated Statements of Operations. . . . . . . . . . . . . . . .24

Unaudited Consolidated Statements of Changes in Stockholders' Equity. . . . . 25

Unaudited Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . .26

Notes to the unaudited consolidated financial statements . . . . . . . . . 27-37

19
<PAGE>
DICKSON V. LEE
CERTIFIED PUBLIC ACCOUNTANTS, L.L.C.
______________________________________________________________________________
Main Address :110 Wall Street, Suite 15C, New York, NY 10005 PMB 100
------------- Telephone: (212) 701-8587 Fax: (212) 701-8543
China Address :Suite 2503, United Plaza, Shenzhen, China
-------------- Telephone : (755) 271-0062 Fax: (755) 271-0389
______________________________________________________________________________

Accountants' Review Opinion

SunFlower (USA), Ltd.
Stockholders and Board of Directors

We have made a review of the consolidated balance sheets of SunFlower (USA),
Ltd. as of February 29, 2000, 1999 and 1998, which is the end of the third
quarter of the 2000, 1999 and 1998 fiscal years and the related consolidated
statements of income and expenses, consolidated statements of changes in
stockholders' equity and consolidated statement of cash flows for the
three-month periods then ended, in accordance with standards established by the
American Institute of Certified Public Accountants. These consolidated interim
financial statements are the responsibility of the Company's management.

A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an examination in accordance with the U.S.
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.

On the basis of our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with the U.S. Generally Accepted Accounting Principles.

Dickson V. Lee, Certified Public Accountants, LLC
New York, New York
April 8, 2000

20
<PAGE>

<TABLE>
<CAPTION>
SunFlower (USA), Ltd.
Unaudited Consolidated Balance Sheets
-------------------------------------

For The Third Quarter Ended February 29

Assets
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents 3,726,620 941,922 1,490,838
Accounts receivable (Net) (Note 2c) 2,519,691 1,378,827 227,667
Inventories less allowance (Note 2g) 5,145,691 4,414,454 3,668,204
Deposits, other advances (Note 2d) 11,755,913 19,462,034 7,151,785
Due from affiliated companies (Note 2d) 0 4,610,191 5,245,863
----------- ----------- -----------
Total current assets 23,147,915 30,807,428 17,784,357

Fixed assets (Note 2e)
Land & buildings 11,587,955 2,468,820 2,220,315
Machine & others 18,915,596 3,501,496 3,396,498
Less: Acc depreciation (2,864,820) (2,805,126) (1,803,076)
----------- ----------- -----------

Fixed assets (net)
27,638,731 3,165,190 3,813,737

Other Assets
Construction in progress 2,735,539 5,039,266 4,947,992
----------- ----------- -----------
Total assets
53,522,185 39,011,884 26,546,086
=========== =========== ===========

Liabilities & stockholders' equity

2000 1999 1998
----------- ----------- -----------
Current liabilities
Accounts payables 2,008,257 908,699 1,635,393
Short term loans (Note 4) 12,994,661 5,433,657 5,388,115
Other payables (Note 2h) 4.715.695 923,853 5,826,602
----------- ----------- -----------
Total current liabilities 17,817,613 7,266,209 12,850,110

Long term liabilities 12,501,205 13,208,847 1,760,949
----------- ----------- -----------
Total liabilities 32,219,818 20,475,056 14,611,059

Stockholders' equity
Common stock, par value $0.001
Authorized shares- 50,000,000, Issued
and outstanding shares- 4,555,166 (Note 5) 4,555 12,500 12,500
Additional capital (Note 6) 15,880,594 15,040,964 8,530,120
Retained earnings
5,292,010 3,569,112 3,443,620
Translation adjustments (Note 2i) 125,208 (85,748) (51,213)
----------- ----------- -----------
Total stockholders' equity 21,302,367 18,536,828 11,935,027

Total liabilities and stockholders' equity
53,522,185 39,011,884 26,546,086
=========== =========== ===========

The notes on pages 95 to 105 form an integral part of these consolidated interim
financial statements.
</TABLE>

21
<PAGE>
<TABLE>
<CAPTION>
SunFlower (USA), Ltd

Unaudited Consolidated Statements of Operations
-----------------------------------------------

For The Third Quarter Ended February 29

2000 1999 1998
----------------------------- ------------------------------ ------------------------------
Third Three Quarters Third Three Quarters Third Three Quarters
Quarter Accumulated Quarter Accumulated Quarter Accumulated
----------- ---------------- ------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Sales (Note 2j) $5,626,095 $ 20,405,787 $ 4,890,169 $ 14,598,700 $ 3,732,035 $ 11,172,853
Cost of Sales 3,812,506 14,936,573 3,423,133 10,708,725 3,106,307 8,981,994
----------- ---------------- ------------ ---------------- ------------ ----------------
Gross Profit 1,813,589 5,469,214 1,467,036 3,889,975 625,728 2,190,859
Selling expenses 26,353 82,168 29,072 93,675 62,956 133,945
General & administration expenses 220,822 890,178 102,894 510,953 107,346 309,136
----------- ---------------- ------------ ---------------- ------------ ----------------
Operating profit 1,566,414 4,496,868 1,335,070 3,285,347 455,426 1,747,778
Financial expenses (Note 2k) 136,231 451,688 408,740 485,849 54,192 271,139
Other Income/(expense) (38,557) (44,413) (7,812) (46,318) 14,570 (31,130)
----------- ---------------- ------------ ---------------- ------------ ----------------
Income before tax 1,391,626 4,000,767 918,518 2,753,180 415,804 1,445,509
Tax (Note 2l) 417,488 1,075,740 - - - -
----------- ---------------- ------------ ---------------- ------------ ----------------
Net Income 974,138 2,925,027 918,518 2,753,180 415,804 1,445,509
Other Comprehensive income
/(loss) (Note 2n) 60,539 73,707 (97,112) (140,186) (57,210) (65,190)
----------- ---------------- ------------ ---------------- ------------ ----------------
Comprehensive income $1,034,677 $ 2,998,734 $ 821,406 $ 2,612,994 $ 358,594 $ 1,380,319
=========== ================ ============ ================ ============ ================

Weighted Average number of common
shares - basic and diluted 4,555,166 4,555,166 12,500,000 12,500,000 12,500,000 12,500,000
Earnings Per Share
- basic $ 0.23 $ 0.66 $ 0.07 $ 0.21 $ 0.03 $ 0.11
----------- ---------------- ------------ ---------------- ------------ ----------------

- diluted $ 0.23 $ 0.66 $ 0.07 $ 0.21 $ 0.03 $ 0.11
----------- ---------------- ------------ ---------------- ------------ ----------------
</TABLE>

22
<PAGE>
<TABLE>
<CAPTION>
SUNFLOWER (USA), LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------------------------------

FOR THE THIRD QUARTER ENDED FEBRUARY 29

COMMON COMMON PAID IN RETAINED CUMULATIVE STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS TRANSLATION EQUITY
(SHARES) (DOLLAR ADJUSTMENT
AMOUNT)
----------- -------- ---------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>

Balance as of
May 31, 1997 12,500,000 12,500 8,530,120 1,998,111 13,977 10,554,708

Capital Increase 0 0 3,510,844 0 0 3,510,844

Net Income for
the year 0 0 0 1,817,821 0 1,817,821

Recapitalization 0 0 3,000,000 (3,000,000) 0 0
Translation
Adjustment 0 0 0 0 40,461 40,461
----------- -------- ---------- ----------- ------------ --------------

Balance as of
May 31, 1998 12,500,000 12,500 15,040,964 815,932 54,438 15,923,834

Distribution 0 0 0 (1,566,265) 0 (1,566,265)

Reverse Split (8,333,333) (8,333) 0 0 0 (8,333)

Net Income for
the year 0 0 0 3,117,316 0 3,117,316
Translation
Adjustment 0 0 0 0 (2,937) (2,937)
----------- -------- ---------- ----------- ------------ --------------

Balance as of
May 31, 1999 4,166,667 4,167 15,040,964 2,366,983 51,501 17,463,615
Issue common
Shares 378,499 378 839,630 840,008
Issue common
Shares 10,000 10 10
Net income for
the First Qtr 0 0 0 2,925,027 2,925,027
Translation
Adjustment 73,707 73,707
----------- -------- ---------- ----------- ------------ --------------
Balance as of
Feb 29, 2000 4,555,166 4,555 15,880,594 5,292,010 125,208 21,302,367
----------- -------- ---------- ----------- ------------ --------------

The notes on the following pages form an integral part of the financial statements.

The notes on pages 95 to 105 form an integral part of these consolidated interim
financial statements.
</TABLE>

23
<PAGE>
<TABLE>
<CAPTION>
#4 SunFlower (USA), Ltd.

Unaudited Consolidated Statement of Cash Flows
----------------------------------------------

#8 For The (Third Quarter) Nine Month Period Ended February 29

2000 1999 1998
------------ ------------- ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:

Net Income $ 2,998,734 $ 2,612,994 1,380,319
Adjustments to reconcile net income to cash provided by
operating activities:
(Increase)/Decrease in accounts receivable 1,115,479 (595,217) 8,371

(Increase)/Decrease in deposits, prepayments and other receivables (7,049,785) (10,381,778) 2,538,338
(Increase)/Decrease in inventories (net) (415,338) 2,434,750 (1,338,217)
Increase/(Decrease) in accounts payable 775,995 (760,315) (186,435)
Increase/(decrease) in other payable and charges 3,368,748 (2,644,755) 1,745,070
Depreciation expenses 856,657 923,137 448,240
------------ ------------- ------------
Net cash provided by operating activities 1,650,490 (8,411,184) 4,595,686

Cash Flows from Investing Activities:
Purchase of property, plant and machinery - (324,420) (288,489)
Proceeds from sales of plan and machinery - 141.610 -
Increase in construction in progress (2,116,169) (11,092)
------------ ------------- ------------
Net cash flows from investing activities (2,116,169) (193,902) (288,489)

Cash Flows from Financing Activities:
Decrease in amounts due from affiliated companies 2,640,802 - -
Decrease in amounts due to affiliated companies (8,172,693) - -
Common shares issued 840,018 9,548,554 0

(Reduction)/Increase in long term debt -(60,539) 801,730 1,699,927
Increase in short term bank loan 8,041,956 -
Reduction in short term bank loan - (1,598,616) (6,119,981)
------------ ------------- ------------
Net cash flows from financing activities 3,289,544 8,751,668 (4,420,054)

Net (decrease)/increase in cash and cash equivalent 2,823,865 146,582 (112,857)
Cash and cash equivalents at beginning of the period(June 1) 902,755 795,340 1,603,695
------------ ------------- ------------
Cash and cash equivalents at end of the period (February 29) $ 3,726,620 $ 941,922 $ 1,490,838
============ ============= ============

</TABLE>

The notes on pages 95 to 105 form an integral part of these consolidated interim
financial statements.

24
<PAGE>
1) GENERAL
-------

SunFlower (USA), Ltd. (the Company) is incorporated in the State of Nevada on
October 5, 1998, with the place of business located at 764 Industry Drive,
Building 16, Tukwila, Washington 98188. It owns 100% of its subsidiary -
SunFlower Industry (BVI) Co. Ltd. (SunFlower (BVI)), which is incorporated in
British Virgin Islands. SunFlower (BVI) is a shell company, has no activities
except that it owns 100% of its subsidiary - SunFlower Industry Co. Ltd.
(SunFlower), located in Sheng Yang City, People's Republic of China (PRC),
Sunflower Industry Co. Ltd. is incorporation in the PRC as a sino-Hong Kong
joint venture in 1992.

The Company's main activities are operated by its PRC subsidiary SunFlower,
which has been in operation since 1992. The Company engages in the
manufacturing and marketing of different types of alloys and copper products,
such as copper pipes, sheets, wires, plates, belts, white copper, yellow copper
and nickel alloy, etc. The Company receives its sales orders mainly from the
utility and power generating industries in PRC. Its products are used in the
high-voltage power transmission, turbines, electrical cables, heat exchangers,
refrigerators and air conditioners.

The Company establishes an US executive office in the suburban area of Seattle,
located at 764 Industry Drive, Tukwila, Washington 98188 to expand its U.S.
presence in July 1999. So that the Company can 1) secure copper raw materials
from the U.S. for the use by its Chinese manufacturing facilities and 2) start
sales activities of its copper pipes, wires and brass products in America, which
can be used in the U.S. household/ house improvement markets.

The Company retains Graves Group & Company of Seattle, Washington as its public
relations consultant to assist the Company to generate news coverage in both
industry trade press releases as well as the business media and to produce a
marketing brochure of the Company.

The Company has filed the Form 10SB with the Securities and Exchange Commission
(SEC) according to the Section 12(g) of the Securities Exchange Act of 1934. The
SEC is currently reviewing company's filing of Form 10-SB.The Company made an
announcement that it intends to apply for the listing at the American Stock
Exchange (AMEX) after the SEC filing is accepted. The upgrading of its stock
listing is an integral part of the Company's objective to expand into the North
American market. The AMEX filing is in process and is expected to complete, upon
the clearance from the SEC and AMEX reviews. #6 Management is confident that the
financial statements include all adjustments necessary in order to make them not
misleading.

The Company executed an agreement with Mr. Daniel S. Mckinney, to appoint Mr.
Mckinney as its (non-executive) director to promote the Company's business and
growth objective in North America in September, 1999. The duration of the
agreement lasts for a period of three years. Mr. Mckinny is entitled to certain
amount of stock and stock options of the Company for his service to be rendered
to the Company.

2) PRINCIPAL ACCOUNTING POLICIES AND PRACTICE
----------------------------------------------

a) FISCAL YEAR ENDING MAY 31

The Company's fiscal year ends on May 31 of the following year. This
fiscal year policy has been adopted consistently in the past years.

25
<PAGE>
b) BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of the
Company and its subsidiaries (See Note 1, General). All material
inter-company balances and transactions, if any, have been eliminated
on consolidation.

c) ACCOUNTS RECEIVABLE

Accounts receivable is the sales amount to be received. The balance of
this account is recorded net of provisions for bad debt amounts.

d) DEPOSITS, ADVANCES AND OTHER RECEIVABLES

The balance includes deposits paid for purchase of raw materials &
fixed assets, advances given to company's employees for business
travels and conferences. No related parties borrowings exist in the
account. No related party borrowings exist.

e) PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION EXPENSES

Fixed assets are recorded at historical costs. Depreciation expenses
are calculated to write off asset costs after deducting the scrap
values on a straight line basis over the expected useful lives. The
Company's policy requires proper maintenance to ensure the useful
lives of the fixed assets. The Company has been in the expansion phase
since 1997, to construct its new factory building and install
manufacturing equipment in order to increase production quantity and
quality. The expansion of production is mainly financed by debt
facilities (see Note 4, Bank Loans).

f) CONSTRUCTION IN PROGRESS

g) INVENTORIES

h) OTHER PAYABLES

The balance includes various payables including deposits received,
accrued expenses and notes payables.

i) FOREIGN CURRENCY TRANSLATION

26
<PAGE>
The Company prepares its financial statements using US dollars as the
reporting currency. However, its overseas operation in PRC is
conducted in PRC currency (RMB) (the functional currency).
Transactions in RMB are translated into United States dollars (the
reporting currency) for consolidation.

The following are the Company's policy on Foreign Currency
Translation, in accordance with SFAS No.52.

- Transactions denominated in a currency other than the functional
currency are translated into the functional currency at
applicable exchange rates at the time of the transactions.

- Gains and losses resulting from transaction conducted in a
currency other than the functional currency are recorded in
current operations. Aggregate losses (gains) from foreign
currency transactions included in the results of operations for
the periods ended November 30, 1999, 1998, and 1997 were
approximately US$142, US$29 and Nil, respectively.

- Period end balances of assets and liabilities of subsidiaries
whose functional currency is other than the US dollar are
translated at period end exchange rates, and for revenue and
expenses accounts using an average exchange rate during each
reporting period. The resulting translation gains and losses are
recorded as other comprehensive income, which is a component of
stockholders' equity.

j) SALES/REVENUE RECOGNITION

Product sales/revenue is recognized upon transfer of title of goods,
this is in accordance with the American Generally Accepted Accounting
Principle. For each period cover, the increase of net sales are mainly
due to sales volume (not due to an increase of product). It is a
result of the Company's expansion of plant facilities.

k) FINANCIAL EXPENSES

The total amount of interest costs incurred and charged to expense
during the periods, which excludes the amount of interest cost, been
capitalized as fixed assets, (i.e. interest expenses necessary to
bring the assets to the condition and location for its intended use
during the periods, which has future value are capitalized and
depreciated over the useful life of such fixed assets) are as follows:

<TABLE>
<CAPTION>
February 29, 2000 February 28, 1999 February 28, 1998
------------------ ------------------ ------------------
<S> <C> <C> <C>
- Interest Expense $ 136,231 $ 408,740 $ 54,192
- Interest capitalized $ 450,230 $ 204,223 $ 71,466
</TABLE>

l) INCOME TAX

27
<PAGE>
#11 Normally, the Company's PRC subsidiary is subject to income tax at
a rate of 33% (30% national income tax and 3% local income tax). The
Company registered as a Sino- Hong Kong joint venture in PRC, is
entitled to a special tax exemption for its entire profits in the
first two years of profitable operations incurred in 1997 and 1998.
Therefore, no PRC tax liability was recorded in 1997 and 1998. The PRC
tax laws stipulate that the joint venture subsidiary entitles a
special 50% reduced tax rate on 33% normal tax of 16.5% on the income
for the following three years, starting 1999 to 2001. Currently, a
provision of tax in the amount of $1,075,740 was made conservatively,
for the PRC subsidiary income tax liabilities. The management is
confident that the conservative approach on the tax provision is able
to cover its interim tax liabilities. The difference between the
actual tax liabilities and the tax provision made during the interim
year will be adjusted at the year end when a detail tax analysis is to
be made, to properly reflect the actual liabilities incurred at the
year end.

The Company accounts for income taxes under the Financial Accounting
Standards Board of Financial Accounting Standard No, 109, "Accounting
for Income Taxes". Under the Statements, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to difference between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured at an enacted
rate to recovered or settled. As of February 29, 2000, the Company has
no deferred tax assets or liabilities in the U.S. as the Company has
not generated any income in the U.S., nor in its PRC subsidiary as
there were no significant difference between the tax and financial
statement basis of assets and liabilities in the PRC. Therefore, no
disclosure is needed.

The Company's (100%)wholly owned subsidiary located in the PRC has not
repatriated any profit nor distributed earnings to the Company in the
US since its incorporation in October, 1998. Since there is no profit
incurred in the United States, nor income received from its overseas
subsidiary as defined under Section 951 of Subpart F, Income of
Controlled Foreign Corporation. Therefore, the profits are recognized
for the accounting purposes, while profits are deferred and not
recognized for the US tax purposes, the difference is permanent and
may not be revised.

The Company has filed its US Corporate tax return timely. The Company
management believes that the Company may not have U.S. tax liabilities
at the present time. However, when profit is incurred in the United
States or income received from its overseas subsidiary, the Company
may be subject to U.S. taxes. Consequently a U.S. tax provision is to
be made.

The reconciliation of the United States federal income tax rate to the
effective income tax based on income before income taxes stated in the
consolidated statements of operations as follows.

Periods Ended February 29
----------------------------
1998 1999 2000
---- ---- -----
United States federal income tax rate 0 0 0
Effect of tax rate in foreign jurisdictions 0 0 16.5%
---- ---- -----
Effective income tax rate 0 0 16.5%
==== ==== =====

28
<PAGE>
Provision for income taxes comprised:

Periods Ended February 29
----------------------------
1998 1999 2000
----- ----- ----------
PRC taxes $ 0 $ 0 $1,075,740
U.S. federal taxes 0 0 0
----- ----- ----------
Total $ 0 $ 0 $1,075,740
===== ===== ==========

There are no changes in tax laws or rates as of February 29, 2000.
Therefore, no disclosure on changes in tax laws or rates is needed.

m) USE OF ESTIMATES

n) #7 COMPREHENSIVE INCOME - FOREIGN CURRENCY TRANSACTION

In accordance with SFAS No.130 - Reporting Comprehensive Income, an
entity issuing a full set of financial statements must prepare an
income statement using a comprehensive income approach. Comprehensive
income is the increase or decrease in equity of an entity for an
accounting period from all sources other than from owners. If gains or
losses incurred from the translation of foreign currency exchange, the
gains or losses is to be recorded under other comprehensive income on
the statement of operations. (Refer to Note 2 i - Foreign Currency
Translations ).

3) SEGMENTED GEOGRAPHIC SALES
----------------------------

Presently, a 100% of sales is generated from its Chinese subsidiary and no sales
is made by the Company in the United States (See Note 2j).

During the third quarter ended February, 2000, sales to 10 major customers
accounted for over approximate 60% of the Company's sales. However, none of
these individual customer purchases over 10% of the Company's sales. The dollar
value of sales to these customers is expected to maintain or increase steadily
over the next several years due to the fact that the Company is the only
privately owned alloy manufacturer in the PRC, which can produce certain
products to meet the technical specifications and quality requirements of its
customers. The management indicated that it will continue to provide alloy
products to meet the demands of its customers.

4) BANK LOANS
-----------

As a result of a major expansion of the Company's factory building and
manufacturing facilities, loans from banks were secured as a way to finance the
expansion. The outstanding loan balance amounted to US$12,994,661, being the
portion repayable within one year, is reflected under the Current Liabilities.
The remaining loan balance of US$12,501,205 is shown under the Long Term
Liabilities. Details of the terms of bank loans:

29
<PAGE>
<TABLE>
<CAPTION>
=========== ========== ================ ========================== =========== ========== ==========
Principle Denominate Interest Name of Maturity
Currency Rate Banks Date Collateral Nature
----------- ---------- ---------------- -------------------------- ----------- ---------- ----------
<C> <S> <C> <C> <C> <C> <C>
$ 58,489 RMB 0.5115% monthly Bank of Communications April, 2000 No Short Term
$ 706,831 RMB 0.5445% monthly Shenyang Corporation Bank April, 2000 No Short Term
$ 3,313,253 RMB 0.536% monthly Shenyang Credit Bank April, 2000 No Short Term
$ 498,717 USD Libor plus Bank of Communications May, 2000 No Short Term
$ 2,176,528 RMB 0.5625% monthly Shenyang Credit Bank May, 2000 No Short Term
$ 3,253,012 RMB 0.702% monthly Agricultural Bank of China May, 2000 No Short Term
$ 2,987,831 RMB 0.792% monthly Construction Bank of China May, 2000 No Short Term
$12,501,205 RMB 1.035% monthly Shenyang Credit Bank April, 2001 Yes Long Term
=========== ========== ================ ========================== =========== ========== ==========
</TABLE>

All bank loans are charged with a fixed interest rate, except the US$498,717
loan, which is charged with a "LIBOR plus" floating interest rate. Bank loans
are subject to potential credit risk. The management expects continuing
availability of these short- term funds in the future. It is the general
practice of the banking institutes in the PRC to grant loans on a short term
basis. The short term loans will be renewed at the end of the maturity date. The
long term loan was secured by an affiliated company, which Mr. Edward LIU,
chairman of the Company, has a controlling interest.

5) STOCK AND SHAREHOLDERS
------------------------

The Company has 50,000,000 shares of authorized common stock with par value of
US$0.001 per share. No preferred stock is authorized and outstanding. During
the second quarter of 1998, the outstanding common shares of 12,500,000 were
reduced to 4,166,667 common shares.

The Company's shares are listed and traded on the OTC "BB" (or NASDAQ), under
the symbol "SFLW" on and about October 5, 1998. Signature Stock Transfer, Inc.
in Dallas, Texas, serves as transfer agent and registrar for the Company's
common stock. During the forth quarter of the 1998, approximate 378,500
additional common shares were authorized to issue to the public in order to
raise US$1million. The Company also entered into a 3 year contract with a
director (non-executive), in which 10,000 shares and small amount of options are
awarded each year (see Note 1). As a result, the total common shares
outstanding is approximate 4,555,166 shares.

Principal shareholding of the Company after the US$1 million fund raising, is as
follows:

<TABLE>
<CAPTION>
Name Title Shares Percentage
Owned Owned
----------------- -------------------- --------- -----------
<S> <C> <C> <C>

Edward LIU Chairman/Secretary 2,200,000 48.387%
Paul MENG Director/President 240,000 5.279%
Witty LIU Director 240,000 5.279%
Joy King ZHANG Director 120,000 2.639%
Virginia TONG Director 80,000 1.760%
Christina ZHANG Director 80,000 1.760%
Nathan GOLDENTHAL Director 333 0.007%

Total officers and directors as a group 2,960,333 65.11%
</TABLE>

6) PAID-IN-CAPITAL
---------------

30
<PAGE>
Referred to " the Unaudited Consolidated Statements of Changes in Stockholders'
Equity". The total additional paid in capital of the Company as of February 29,
2000 is US$15,880,594. The amount is in line with the paid in capital amount in
1999 of US$15,040,964.

7) COMMITMENT AND CONTINGENCIES
------------------------------

No other material commitments and contingencies other than doing business were
noted as of February 29, 2000.

31
<PAGE>
8) YEAR 2000 ISSUES
------------------

9) INFLATION
---------

Inflation has not had a material impact on the Company's business in recent
years. It is management belief that the inflation will not have material impact
of the Company operations in the near future.

10) RELATED PARTY TRANSACTIONS
----------------------------

The Company has some facilities which are shared by its affiliated companies.
The financial effects of the shared facilities are not material. All other
related party transactions are reviewed and disclosed when material, in
accordance with FASB No.57.

11) OPERATING RISKS
----------------

The Company is currently in compliance with applicable environmental protection
regulations of the regulatory agency.

12) FOREIGN CORRUPT PRACTICES ACT
--------------------------------

The Company is subject to the U.S. Foreign Corrupt Practices Act of 1977, which
generally prohibits U.S. companies from engaging in bribery or other prohibited
payments to foreign officials for the purpose of obtaining or retaining
business. Foreign companies, including some that may compete with the Company,
are not subject to these prohibitions. During the review, no violation of the
Foreign Corrupt Practices Act by the Company is noted.

32
<PAGE>
13) RETIREMENT PLAN
----------------

The Company's employees in the PRC and the United States are all hired on
contractual basis, which Company has no obligations for pension liabilities to
the employees. In addition, Company has not adopted post-retirement or
post-employment benefit plans. Discussions were made to established a qualified
pension plan to include all United States employees, after meeting certain
requipments in the plan. However, no final decision was made as of February 29,
2000.

14) SHORTAGE OF LABOR
-------------------

The Company does not experience any labor shortage or labor disputes in the
past. It is expected that labor resources are abundant to fulfill company's
manufacturing and operating needs.

15) SHORTAGE OF SUPPLIES / COPPER PRICES FLUCTUATION
------------------------------------------------------

The Company purchases raw materials and supplies from various sources and
suppliers (e.g. used coppers, copper ingots, other non-ferrous metals) to
manufacture its products. The Company does not experience any shortage of raw
materials and supplies. It is expected that under a normal business environment,
there is no shortage of raw material and supplies in the near future.

The Company purchases copper raw materials and processes them to finished
products. The prices of copper raw materials may fluctuate from time to time. It
has been low for the past few years, but prices may rise, resulting in increased
material prices for operations.

16) RELIANCE ON KEY PERSONNEL
----------------------------

17) ACCOUNTING FOR STOCK OPTIONS
-------------------------------

In October 1995, the FASB issued Statement of Financial Accounting Standards No.
123 "Accounting for Stock Based Compensation" (FASB No.123), which established
the "fair value" method of accounting for stock based compensation arrangements.
The Company has adopted a Stock Option Plan to its director (non-executive).
The amount involved is not material, taking the total shares outstanding as a
whole (see Note 1). The Board of Directors intends to adopt more stock option
plans in the future to reward its management, directors and employees of
exceptional contributions to the Company.

33
<PAGE>
18) IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
---------------------------------------------------

34
<PAGE>
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANT

SunFlower (USA), Ltd.
Tukwila, Washington

We hereby consent to the incorporation by reference of our audit report dated
August 2,1999 relating to the consolidated financial statement of SunFlower
(USA), Ltd. appearing in the Company's Annual Report on Form 10-SB for the year
ended May 31,1999. We also consent to the reference to us under the caption
"Experts" in your financial statements. In addition, we consent to the
incorporation of our review reports dated November 18, 1999, January 3, 2000 and
April 24 relating to the first, second and third quarter financial statements of
your company in the content of Form 10-SB12(G)/A.

/s/ Dickson V. Lee, CPAs, L.L.C.
-------------------------------------
Dickson V. Lee, CPAs, L.L.C.

New York, New York
April 28, 2000

35
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The statements contained in this quarterly report on Form 10-QSB concerning the
Company's business outlook or future economic performance; anticipated
profitability, billings, commissions and expenses or other financial items; and
statements concerning assumptions made or exceptions as to any future events,
conditions, performance or other matter are "forward-looking statements" as that
term is defined under the Federal Securities Laws. Forward-looking statements
are subject to risks, uncertainties and other factors, which would cause actual
results to differ materially from those stated in such statements. Such risks,
uncertainties and other factors include, but are not limited to, (i) the
uncertain acceptance of the Company's products in the United States, (ii) the
uncertain result of the Company's merger of a US company to its vertical
integration strategy, (iii) that the Company has expanded and grown rapidly and
there can be no assurance that the Company will continue to be able to grow
profitably or manage its growth, (iv) risks associated with the political,
economic situation in PRC and the currency exchange rates between the PRC
currency (RMB) and US Dollars, (v) competition, (vi) the Company lack of
experience in doing business in the United States, (vii) the loss of services of
key executives, individuals could have a material adverse effect on the
Company's business, financial condition or operating results, (viii) litigation
and labor disputes because of operations and /or transactions in both US and
overseas and (ix) possible tax exposures, as the Company may be subject to
various taxes from more than one tax authorities and (x) the control of the
Company by Edward Liu, Chairman & CEO.

RESULTS OF OPERATIONS

The following tables set forth selected operational data for the periods of: 1)
fiscal year ended May 31, 1999 and 1998 and 2) the accumulative amounts for the
most recent three quarters (nine months) of the Company operations, which ended
on February 29, 2000 and 1999.

1) FOR THE TWELVE MONTH OPERATIONAL RESULTS:
---------------------------------------------

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31 INCREASED IN
1999 1998 AMOUNT PERCENTAGE
------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>

Net Sales $ 18,238,345 $ 15,889,587 $ 2,348,758 14.78%
Cost of goods sold 14,393,203 13,188,836 1,204,367 9.13%
Gross profit 3,845,142 2,700,751 1,144,391 42.37%
Selling Expenses 146,590 180,155 (33,565) (18.63%)
General & Administration 745,598 402,456 343,142 85.26%
Other income (expenses) 791,654 (300,319) 1,091,973 363.60%
Provision for income taxes 627,292 0 627,292 --
------------- -------------- -------------- -----------
Net income $ 3,117,316 $ 1,817,821 $ 1,299,495 71.49%
Other Comprehensive
Income - Foreign Currency
Translation Gain/(Loss) (2,937) 40,461 (43,398) (107.26%)
------------- -------------- -------------- -----------
Comprehensive Income $ 3,114,379 $ 1,858,282 $ 1,256,097 67.59%
</TABLE>

DIVIDENDS

Since inception, the Company has not paid or declared any cash dividends on its
common stock. The Company's Board of Directors currently does not plan to issue
a cash dividend. However, the Company may consider distributing profit through
cash dividends, when the financial situations justify such a practice.

36
<PAGE>
NET SALES

The Company's net sales for fiscal year of 1999 increased by $2,348,758 (or
14.78%) to $18,238,345 from $15,889,587 for fiscal year of 1998. The increase
of net sales was due to sales volume, not due to an increase of product price.
The increase was primarily due to continuing high customer acceptance of the
products, effective sales effort, supported by the expansion of manufacturing
capacity and continuing economic growth in the PRC. It is to be noted that all
of the sales were made in the PRC and no sales was incurred in the US. Despite
that it is the Company's intent to establish marketing presence and sales in
America.

COST OF GOODS SOLD

The Company's cost of goods sold for the fiscal year of 1999 was $14,393,203 an
increase of $1,204,367, or approximately 9% from $13,188,836 for 1998. Such a
9% increase is line with the (14.78%) higher sales volume recorded in 1999.

GROSS MARGIN

Due to increase of sales and manufacturing efficiency arising through larger
value of sales, the gross margin improved from 17% of 1998 to 21% of 1999.

SELLING EXPENSES

The Company's selling expenses totaled $146,590 in 1999, which represents a
decrease of $33,565 (or approximately 18.63%) from 182,155 in 1998. The decrease
of cost was primarily a result of continuing strong demand for the Company's
high quality products by its existing customers. The high acceptance of the
Company's products in the market resulted in a lower marketing and selling
expense of the Company.

GENERAL & ADMINISTRATIVE EXPENSES

The Company's general and administrative expenses totaled $745,598 in 1999, an
increase of $343,142 or approximately 85%. The increase was primarily due to
expansion of its operations in both US and its subsidiary in PRC and the
NASDAQ-BB listing related expenses.

OTHER INCOME /EXPENSES

Due to the price of copper raw materials, the Company leveraged on the price
fluctuations and sold some of its copper raw materials (e.g., copper ingots) and
realized a profit of $842,922 (i.e. with sale of $1,873,172 and cost of
$1,030,250) during the current year. This income is recorded under the other
expenses account together with various small expenses. While in the past years,
no such sales activities were incurred. The Company management believes that
the activity is not its main business of operation and is infrequent in nature.
However, it may continue, if practical, to maximize the Company's profitability.

37
<PAGE>
THE EFFECTS OF METAL PRICES ( I.E., COPPER RAW MATERIALS)

The Company purchases copper raw materials (such as ingots) and manufactures
them to finished products (such as pipes). The prices of copper raw materials
may fluctuate from time to time. It has been low for the past few years, but
prices may rise, resulting in increased material prices for operations.

PROVISION FOR INCOME TAXES

The tax provision of $1,250,051 (or approximately 33%) was made for the 1999
income before tax of $3,731,073 for its subsidiary's profit incurred in the PRC.
While in 1998 and 1997, no such a tax provision was made, as the Company was
entitled to a tax exemption status in accordance with the PRC income tax rules
and regulations. During the fiscal year of 1999, Management took a conservative
approach and recorded the 1999 income tax expenses to discharge its potential
tax liabilities in the PRC. At the year end, the Company reduced its overstated
tax liability and adjusted the tax provision to $627,292 as the subsidiary
entilites a 50% reduced tax rate (See Note 2m; Income tax to the audited
financial statements. No U.S. income tax liability provision is made a the
present time, since the Company has not incurred operational profit nor has
income repatriated from its overseas subsidiary as defined under the Section 951
of Subpart F, Income of Controlled Foreign Corporation. However, when the profit
is made in the U.S. or an income distribution is repatriated, a U.S. tax
provision is to be made.

NET INCOME

The after tax net income increased 71% (or $1,299,485) from $1,817,821 in 1998
to $3,117,316 in 1999, despite the additional income tax provision of $627,292
made in 1999. The increase of net income reflects the strong growth and profit
of the Company.

COMPREHENSIVE INCOME

The 1999 current (net) comprehensive income increased by 67% to $3,114,379 of
1999 from $1,858,282 of 1998. The increase was in line with the 71% increase of
net income of 1999, with some immaterial foreign currency translation loss in
the current year.

EARNINGS PER SHARE

Earnings per share computations were made for the twelve (12) months fiscal year
ended on May 31, 1999. The calculation of the basic and diluted earnings per
share for the twelve (12) months fiscal year is as follow:

<TABLE>
<CAPTION>
YEAR ENDED MAY 31
-----------------------
1999 1998
<S> <C> <C>
EARNINGS
Profit attribute to shareholders for the purpose of
basic and diluted earning per share (for 12 months) $3,114,379 $ 1,858,282

NUMBER OF SHARES
Weighted Average number of common shares 4,166,667 12,500,000
Effect of diluted potential common shares
Share option 0 0
Warrants 0 0
Weighted Average number of common shares
for the purpose of diluted earnings per share 4,166,667 12,500,000
</TABLE>

38
<PAGE>
2) ACCUMULATIVE RESULTS FOR THE FIRST THREE QUARTERS (NINE MONTHS) OPERATIONS
--------------------------------------------------------------------------
Accumulative results for the first three quarters operations ended February
29, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
THREE QUARTERS ENDED INCREASED IN
FEBRUARY 29
2000 1999 AMOUNT PERCENTAGE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 20,405,787 $ 14,598,700 $5,807,087 40%
Cost of goods sold 14,936,573 10,708,725 4,227,848 39%
Gross profit 5,469,214 3,889,975 1,579,239 40%
Selling Expenses 82,168 93,675 11,507 12%
General & Administration 890,178 510,953 379,225 74%
Other expenses 407,275 532,167 (124,892) 23%
Provision for income taxes 1,075,740 - - -
--------------------- -------------- ----------- -----------
Net income 2,925,027 2,753,180 171,847 6%
#7 Other Comprehensive
Income- Foreign Currency
Translation Gain/ (Loss) 73,707 (140,186) 213,893 150%
--------------------- -------------- ----------- -----------
Comprehensive income 2,998,734 2,612,994 385,743 15%
</TABLE>

SALES

The Company's net sales for the first three quarters ended February 29, 2000 is
increased $5,807,087 or 40% from $14,598,700 for 1999 to $20,405,787 for 2000.
The increase of net sales was due to sales volume, not due to an increase of
product price. The increase was primarily due to continuing high customer
acceptance of the products, supported by the expanding manufacturing capacity in
the PRC. The expansion is shown on the balance sheet, as the Company's fixed
asset, including property, plant and equipment, has been increased from $3.7
million in February 29, 1999 to $27.7 million in the same period in year 2000.
It is to be noted that all of the sales were made in the PRC and no sales was
incurred in the US, it is the Company's intent to establish a marketing and
sales presence in America.

COST OF GOODS SOLD

The Company's cost of goods sold for the first three quarters ended February 29,
2000 was $14,936,573, an increase of $4,227,848, or approximately 39% from
$10,708,725 for1999. Such an increase reflects the higher sales volume (i.e. an
increase of 40%) recorded in the first three quarters ended February 29, 2000.

SELLING EXPENSES

39
<PAGE>
The Company's selling expenses totaled $82,168 for the first three quarters
ended February 29, 2000, which represents a decrease of $11,507, or 12% from
$93,675 for the same period of 1999. The decrease was primarily the result of
continuing strong customer demand for the Company's high quality products. The
high acceptance of the Company's product in the market resulted in lower selling
expenses of the Company.

GENERAL & ADMINISTRATIVE EXPENSES

The Company's general and administrative expenses totaled $890,178 for the first
three quarters ended February 29, 2000, an increase of $379,225 or approximately
74%. The expense increase was due to startup expenses for the U.S. expansion
and the NASDAQ-BB listing related expenses.

OTHER EXPENSES

The Company's other expenses totaled $407,275 for the first three quarters ended
February 29, 2000, a decrease of $124,892 or approximately 23%. Other expenses
are mainly composed of financial expenses and other miscellaneous expenses. The
decrease was mainly due to the decrease of interest cost incurred for loans from
banks. As the expansion of manufacturing facilities approach its completion,
some contraction related interest expenses were capitalized as assets.

PROVISION FOR INCOME TAXES

The Company made an income tax provision for its subsidiary's profit incurred in
the PRC in the current year. The temporary PRC income tax provision of
$1,075,740 was made for the first three quarters ended February 29, 2000 on the
income before tax of $4,000,767. While in the past no such a tax provision was
made in the interim financial reports for the PRC operations, as the Company was
entitled to a tax exemption status in accordance with the PRC income tax rules
in fiscal year of 1999. Management believes that an income tax provision of
$1,075,740 in the interim periods is sufficient to discharge its potential tax
liabilities in the PRC. No income tax provision was made in the U.S., as the
Company has not made any profit in the American operation, or received an income
from its overseas subsidiary as defined under Section 951 of Subpart F, Income
of Controlled Foreign Corporation, as of February 29, 2000. when and if the
profit is generated in the U.S., a tax provision will be made to cover the U.S.
federal tax liabilities.

NET INCOME

The first three quarters net income after tax is about the same in both periods
for 2000 and 1999, with a small increase in the current period ended February
29, 2000. Since in the current year an income tax provision of $1,075,740 was
made to cover tax liabilities, while no such provision was adopted in the prior
year. Had no such tax expenses been made in the current year, its net income
would have increased at a 45% (or to $1,247,587) in the current year as compared
to the prior year. This increase is in line of the sales increase percentage.

The continuing increase of sales volume and customer demands of its products
lead to the Company's profitable operational results.

40
<PAGE>
EARNINGS PER SHARE

Earnings per share computations were made for the nine (9) months fiscal year
ended on February 29, 2000. The calculation of the basic and diluted earnings
per share for the nine (9) months fiscal year is as follow:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------
FEBRUARY 29
2000 1999
<S> <C> <C>

EARNINGS
Profit attribute to shareholders for the purpose of
basic and diluted earning per share (for 6 months) $2,998,734 $ 2,612,994

NUMBER OF SHARES
Weighted average number of common shares 4,555,166 12,500,000
Effect of diluted potential common shares
Share option 0 0
Warrants 0 0
Weighted average number of common shares
for the purpose of diluted earnings per share 4,555,166 12,500,000
EARNINGS PER SHARE
Basic (for 9 months) $ 0.66 $ 0.21
Diluted (for 9 months) $ 0.66 $ 0.21
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

The Company has been profitable for its operations for the past three years. It
is expected that the Company's net income after tax will reach over US$3 million
in the current year, ended May 31, 2000. Historically, the Company financed its
operations through a combination of cash generated from the operations and bank
financings.

As the company expanded its factory facilities in 1998 and 1999, financial
resources were utilized for the support of the expansion. As the expansion
approaches its completion in 1999, the investment activities on the
manufacturing facilities were gradually reduced. For the fiscal year ended May
31, 1999, the Company's operating activities provided cash in the amount of
$3,114,379 as its source of fund. While the nine months period ended February
29, 2000, its operating activities provided cash in the amount of $2,998,734.
In addition, the Company's changes in the financial positions of operating
assets and liabilities provided additional cash of $4,447,381 for the fiscal
year ended May 31, 1999 as an additional source of cash for the expansion. The
nine months period ended on February 29, 2000, the Company's changes in its
financial positions of operating assets such as absorbed cash in the amount of
$1,650,490. During the fiscal year ended May 31, 1999, the Company's investing
activities absorbed $10,288,285 of cash. While for the nine months period ended
on February 29, 2000, the Company's investing activities was reduced to
$7,648,060. During the fiscal year ended May 31, 1999, the Company's financing
activities provided cash in the amount of $5,948,319. The nine months period
ended on February 29, 2000, the Company's financial activities provided cash in
the amount of $8,821,435. As a result of the above, the Company resulted in a
net in-flow of $107,415 in the fiscal year ended May 31, 1999. While the net
cash in-flow as of the third quarter ended February 29, 2000 increased to
$2,823,865

41
<PAGE>
For a major expansion of the Company's factory building and manufacturing
facilities in 1999, loans from banks were secured as a way to finance the
expansion. As of May 31, 1999 total bank loans reached $17,514,449. Of which,
the outstanding bank loan balance amounted to $4,952,705, being the portion
repayable within one year, is reflected under the Current Liabilities. The
remaining loan balance of $12,561,744 is shown under the Long Term Liabilities.
Bank loans are normally subject to credit risk. However, the Company's
management believes the continuing availability of short-term bank funds in the
future. It is a general practice of the banking institutes in PRC to grant loans
on a one-year basis. The short-term loans will be renewed at a maturity date,
after a bank application is made.

The Company had a major expansion in its Chinese subsidiary in 1998 and 1999.
The expansion has been completed, except for some minor finishing touches. The
estimated amount to be spent on capital expenditures during the next fiscal year
is minimal, approximately US$0.9 million. The following schedule details for
the estimated quarterly capital expenditures:

CAPITAL QTR 1 QTR 2 QTR 3 QTR 4 TOTAL
EXPENDITURES ----- ----- ----- ----- -----
$400,000 $300,000 $225,000 $170,000 $995,000

The Company management is expected to make over US$3 million in net profit after
taxes for the current year, ended May 31, 2000. The Company's profits will
finance its capital expenditure during the next fiscal year, as sales expect to
continue to increase in the year 2000 and beyond. Some sales and profits
increases have been reflected in the 3rd Quarter interim financial report
which, ended February 29, 2000. Sun Flower's past success has established an
excellent reputation with the banks, which if needed, will provide additional
liquidity and capital resources to the Company.

The Company management believes that it has the ability to generate more profits
in the future. For the Company's funds ability in 2000 and its long term
liquidity position, Management is confident that fund will be adequate to meet
its operating requirements and its expansion needs. As discussed in ITEM 9 that
the Company has started it's equity capital raising activities. The Company may
continue to use its equity financing, operating profit and debt financing to
expand its operations both in the U.S. and PRC to meet its growth objective.

The Company has been making profits for the past three years. The Company does
not intend to have any major capital expansion in the next 12 months and beyond.
Consequently, the Company's long-term liquidity position will continue to
improve beyond the next 12 months. The Management believes that following
factors will contribute to the improvements of the Company's long-term liquidity
position:

- Continuing increase of net profits. The Company has been making profits
consistently in the past three years. With the expanded manufacturing capacity
already in place, the Company will be able to increase its sales, due to
production capacity increase, while Cost of Goods Sold will remain constant or
be slightly reduced due to production volume efficiency. Consequently, the
Company expects to generate more profits resulting in a better long-term
liquidity position.

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<PAGE>
- The Company does not plan to incur any major capital expenditures in the
near future. As a result, there will be no need to incur any further debt to
finance such a capital expenditure.

- The Company plans to raise additional equity capital via sales of its
common shares in the United States, after the Company's successfully listing
with the American Stock Exchange. An increase of Company equity shares provides
additional long-term liquidity.

Other than the foregoing and the risk factors discussed below, Management knows
no trends, demands, or uncertainties that are reasonably likely to have a
material impact on the Company's liquidity or capital resources.

INFLATION

It is believed that inflation has not had a material impact on the Company's
business in recent years. If severe inflations incurred in the future, the
Company's operational results and its financial positions may be affected.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

Statement of Financial Accounting Standards 133 - Accounting for Derivative
Instruments and Hedging Activities (SFAS No.133) was recently issued. SFAS No.
133 established accounting and reporting standards for derivative financial
instruments and for hedging activities. The Company does not currently engage
in any activities that would be covered by SFAS No.133.

YEAR 2000 COMPLIANCE

The Company has implemented a Year 2000 (Y2K) program aimed at ensuring that its
Company systems, applications and equipment will function properly beyond 1999.
As a part of this program, the Company conducted an assessment of its equipment
and machinery during August of 1998. The Company's machinery does not have
timers or date counters; therefore, are not subject to Year 2000 problems. The
Company continuously seeks to upgrade and improve its computer systems and
software to better service customers and to support its growth. As a result, all
of the Company's computer systems and software have been recently acquired or
upgraded and the Company believes they are Year 2000 compliant, though there can
be no assurance in this regard.

Because the Company replaced or upgraded its computer systems and software in
conjunction with its normal business practices, it has not allocated additional
resources or attributed additional costs to the Year 2000 compliance. The
Company will continue to assess and test newly purchased machinery and
computer-related hardware and software to ensure such items comply with Year
2000.

OPERATING RISKS

The Company's main operations are conducted in the PRC. Accordingly, the
business, financial conditions and operations may be influenced by the
political, economic and legal environment in the PRC. The Company's operations
maybe subjected to special considerations and risks not typically associated
with companies in North America. The risk are specified as follows:

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POLITICAL CONSIDERATIONS

The Company's business may be adversely affected by political, economic and
social uncertainties in China. A change in policies by the Chinese government
could adversely affect the Company's interest by, among other things, changes in
laws, regulations, or the interpretation thereof, confiscatory taxation,
restrictions on currency conversion, imports and sources of suppliers, or the
expropriation of private enterprises. Although the Chinese government has been
pursuing economic reform policies for the past ten years, no assurance can be
given that the Chinese government will continue to pursue such policies or that
such policies may not be significantly altered, especially in the event of a
change in leadership, social or political disruption or unforeseen circumstances
affecting China's political, economic and social life.

ECONOMIC CONSIDERATIONS

The economy of China differs significantly from the United States economy in
such respects as structure, level of development, gross national product, growth
rate, capital reinvestment, resource allocation and self-sufficiency, rate of
inflation and balance of payments position, among others. Since the early 1950s,
the economy of China has been a planned economy subject to five-year and annual
plans adopted by central authorities, which set forth production goals. Only
recently the Chinese government encouraged substantial private economic
activities. The Chinese economy has experienced significant growth in the past
five years, but such growth has been uneven among various sectors of the
economy. There can be no guarantee that the government's pursuit of economic
reforms will be consistent or effective. Action by the central government of
China could have a significant adverse effect on economic conditions in China.
Further, much of the economic activity is export driven and, therefore, affected
by developments in the economies of China's principal trading partners.

LEGAL SYSTEMS

In December 1982, the National People's Congress of China amended the
Constitution of China to authorize foreign investment and to guarantee the
"lawful rights and interest" of foreign investors in China. Despite the
subsequent activity and progress in developing the legal system, China does not
have a comprehensive system of laws. Enforcement of existing laws may be
uncertain and sporadic and implementation and interpretation thereof
inconsistent. The Chinese judiciary is relatively inexperienced in enforcing the
laws that exist, leading to a higher than usual degree of uncertainty as to the
outcome of any litigation. Even where adequate law exists in China, it may be
impossible to obtain swift and equitable enforcement of such law or to obtain
enforcement of a judgment by a court of another jurisdiction.

While Chinese law expressly protects the status and rights of Sino-foreign joint
venture enterprises, including their right to use land during the term of their
respective joint venture contracts, the states reserves the right, in extreme
and exceptional circumstances, to terminate the joint venture and provide
compensation. In such an event, a joint venture's right to use land would
terminate and all plant and facilities would revert to the state in exchange for
just compensation.

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GOVERNMENT CONTROL OF CURRENCY CONVERSION AND EXCHANGE RATE RISKS

The Company receives its revenues in the PRC in Renminbi (RMB), which is not
freely convertible into foreign exchange. However, the Company requires foreign
currency to fund a portion of its operations. For example, the Company requires
and expects to require in the future, U.S. dollars to purchase equipment for
expansion projects and to fund its U.S. executive office. In addition, revenues
will need to be converted into United States dollars, Hong Kong dollars and
other currencies in the amounts needed for the Company to discharge obligations
denominate in foreign currency. The PRC Government imposes control over its
foreign currency reserves in part through direct regulation of the conversion of
RMB into foreign exchange and through restriction on foreign imports.
In general, domestic enterprises operating in the PRC must price and sell their
goods and services in the PRC in RMB. They are also required with certain
exceptions, to sell all their foreign exchange revenues to designated foreign
exchange banks in the PRC. In addition, domestic enterprises much provide
satisfactory evidence of their need for foreign currency before converting RMB
to foreign currency through designated foreign exchange banks. However,
according to regulations, which took effect on July 1, 1996, foreign investment
enterprises may be able to access foreign exchange from both designated foreign
exchange banks and swap center, provided that such foreign exchange will be used
for current account transactions.

Prior to January 1, 1994, there was significant volatility in the exchange rate
of RMB to U.S. dollars Although the RMB to U.S. dollar exchange rate has been
relatively stable since January 1, 1994 and the PRC government has stated its
intention to intervene in the future to support the value of the RMB, there can
be no assurance that exchange will not again become volatile or that the RMB
will not devalue significantly against the U.S. dollar. Exchange rate
fluctuations may adversely affect the Company's financial performance and
ability to meet its obligations because of its current and future foreign
currency denominated liabilities and may materially adversely affect the value,
translated into U.S. dollars, of the Company's net fixed assets, earnings and
any declared dividends.

The current restrictions and uncertainties relating to the currency conversion
system in the PRC give rise to risks affecting the ability of the Company to
obtain adequate foreign exchange at acceptable rates to meet its foreign
exchange needs.

ENVIRONMENTAL LIABILITY EXPOSURE

The Company's manufacturing facilities are subject to PRC national and local
environmental protection regulations which currently impose fees for the
discharge of waste substances, require the payment of fines for pollution and
provide for the closure by the PRC Government of any facility that fails to
comply with orders requiring it to cease of improve upon certain activities
causing environmental damage. The company is currently in compliance with
applicable environmental protection regulations. However, there can be no
assurance that the PRC national, provincial, or local authorities will not
impose additional or more stringent regulations which would require additional
expenditure on environmental matters or changes in the Company's processes or
systems.

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<PAGE>
FOREIGN CORRUPT PRACTICES ACT OF 1977

The Company management is aware that it is subject to the U.S. Foreign Corrupt
Practices Act of 1977. The Act generally prohibits U.S. companies from engaging
in bribery or other prohibited payments to foreign officials for the purpose of
obtaining or retaining business. Foreign companies, including some that may
compete with the Company, are not subject to these prohibitions. It is
Directors and executive officers best believe that no violation of the Foreign
Corrupt Practices Act by the Company is incurred.

DEPENDENCE ON PRINCIPAL CUSTOMERS

During the fiscal year ended May 31, 1999 and the latest three quarters ended
February 29, 2000, sales to 10 major customers accounted for over 60% of the
Company's sales. However, no single customer represents over 10% of company's
total sales. The dollar value of sales to these customers is expected to
increase steadily over the next several years due to the fact that the Company
is the only alloy manufacturer in the PRC, which can produce certain products to
meet the specifications and quality of its customers. The Company believes that
it maintains excellent relationships with its customers and provides a high
level of customer service. Upon completion of its expansion, the Company will
be in a position to continue to meet the demands of its customers and, in
addition to supplying its present line of products, will be able to expand its
offering of types of products.

RELIANCE ON KEY PERSONNEL

Despite that most of the key personnel and employees have been with the Company
for over four years, the operation of Company is dependent on the services of
its top ranking officers and key employees. The possible loss of their services
or the inability to attract qualified personnel will have a material adverse
affect on the Company. No assurances can be given that the Company will be able
to continue to retain or attract such qualified personnel in the future.

ACCOUNTING FOR STOCK OPTIONS

In October 1995, the FASB issued Statement of Financial Accounting Standards no.
123 "Accounting for Stock Based Compensation" (SFAS123), which established the
"fair value" method of accounting for stock based compensation arrangements. The
company has adopted compensation package for a recently appointed a
(non-executive) Director; Mr. Daniel Mckinney in September 1999, which includes
a stock option plan. However, the stocks involved were small and were not
material to the total stock available and outstanding. But the Board of
Directors may plan to adopt a stock option plan in the future to reward the
exceptional contributions to the Company by its management and employees.

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<PAGE>
PART II- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is not currently involved in any litigation and is not aware of any
threatened litigation involving the Company.

ITEM 2. CHANGES IN SECURITIES

THE TITLE AND CLASS OF ISSUER'S SECURITIES

The Company has only one (1) class of equity securities authorized, which is
50,000,000 shares designated common stock. The par value of the Issuer's Common
Stock is $0.001. As of February 29, 2000, the Company has approximately
4,555,166 shares of common stock outstanding.

REVERSE STOCK SPLITS

On March 1, 1999, the Board of Directors of the Company approved a 3 (old)-for-1
(new) reverse stock split on its common stocks of 12,500,000 shares. As a
result, it reduced the stock outstanding to approximately 4,166,666 common
shares. The Board of Directors also approved an issuance of maximum of 400,000
new common shares, described below, to raise one million dollars ($1,000,000) of
equity capital. Consequently, the Company's common shares outstanding were
increased to approximate 4,555,166 shares as of February 29, 2000.

ISSUING NEW COMMON STOCK

The transactions of common stock of the Company are summarized as follows:

The Company offered for sale approximately 390,000 shares of Common Stock to
raise a maximum of $1,000,000 in 1999. In the deal, two separate offerings were
made: 1) The first offering was for the sale of approximately 210,000 shares at
$2.50 per share; and 2) the second offering was for the sale of approximately
180,000 shares at $2.80 per share. Total fund receipts for these two offerings
are approximate $1,000,000. These offerings were made to non-related parties.
They were in reliance upon and exemption from registration under the federal and
state securities laws provided by Regulation D; Rule 504 of the Securities and
Exchange Commission. In the offerings, the net proceeds after deduction of
sales commission, professional fees, are approximately $820,000. These proceeds
are used to acquire equipment and inventory. Mr. John P Boesel, III, Syndication
Manager, of Yee, Desmond, Schroder & Allen, is the lead broker for the two
offerings. Company also appointed Mr. Daniel Mckinney as a (non-executive)
Director in September, 1999. In the agreement, Mr. Mckinney is entitled to
10,000 shares of the Company's common shares each year for a period of three
years. He is also entitled to some stock purchase options after achieving
specific objectives. However, the shares involved are small and not material.
As a result, the Company has approximately 4,555,166 shares outstanding as of
February 29, 2000.

MARKET PRICES

The Common Stock of the Company is traded over the counter and quoted on the OTC
Bulletin Board under the symbol "SFLW". The prices presented in the following
table are the bid and ask prices which represent prices between broker-dealers
and do not include retail mark-ups or mark-downs or any commission to the
broker-dealer. The prices do not necessarily reflect actual transactions.

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<PAGE>
<TABLE>
<CAPTION>
BID ASK
--- ---
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
1998
Oct. 5 - Dec. 31 $2.125 $ 0.25 $3.125 $ 0.25
1999
Jan. 1 - Mar. 31 $ 2.25 $ 0.75 $ 2.25 $ 1.25
Apr. 1 - Jun. 30 $ 2.75 $ 2.25 $ 3.00 $ 2.25
Jul. 1 - Sep. 30 $ 4.00 $ 2.75 $ 4.25 $ 2.875
Oct. 1 - Nov. 30 $ 4.125 $ 3.125 $ 4.75 $ 3.75
Nov. 1 - Dec. 31 $ 4.375 $ 3.00 $ 5.00 $ 3.125
2000
Jan. 1 - Feb. 29 $ 4.375 $ 3.00 $ 5.00 $ 3.25
</TABLE>

The bid and asking prices of the Common Stocks have been rising steadily and on
February 29, 2000 were approximately $3.75 and $4.25, respectively, as quoted on
the Bulletin Board under the symbol "SFLW". As of February 29, 2000, there were
approximately 1,051 stockholders of the Common Stock.

EARNINGS PER SHARE

Four earnings per share computations were made for:
1. The twelve months fiscal year ended on May 31, 1999.
2. The three months first quarter ended August 31, 1999.
3. The six months period second quarter ended November 30, 1999.
4. The nine months period third quarter ended February 29, 2000.

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<PAGE>
1. The calculation of the basic and diluted earning per share for the twelve
months fiscal year is based on the following data:

<TABLE>
<CAPTION>
YEAR ENDED MAY 31
1999 1998
---------- -----------
<S> <C> <C>
EARNINGS
Profit attribute to shareholders for the purpose of
basic and diluted earning per share (for 12 months) $3,114,379 $ 1,858,282

NUMBER OF SHARES
Weighted average number of common shares 4,166,667 12,500,000
Effect of diluted potential common shares
Share option 0 0
Warrants 0 0
Weighted average number of common shares
for the purpose of diluted earnings per share 4,166,667 12,500,000

EARNINGS PER SHARE
Basic (for 12 months) $ 0.75 $ 0.15
Diluted (for 12 months) $ 0.75 $ 0.15
</TABLE>

2. The calculation of the basic and diluted earning per share for the three
months period is based on the following data:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31
1999 1998
---------- -----------
<S> <C> <C>
EARNINGS
Profit attribute to shareholders for the purpose of
basic and diluted earning per share (for 3 months) $ 713,360 $ 856,700

NUMBER OF SHARES
Weighted average number of common shares 4,166,667 12,500,000
Effect of diluted potential common shares
Share option 0 0
Warrants 0 0

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<PAGE>
Weighted average number of common shares
for the purpose of diluted earnings per share 4,166,667 12,500,000
EARNINGS PER SHARE
Basic (for 3 months) $ 0.17 $ 0.07
Diluted (for 3 months) $ 0.17 $ 0.07
</TABLE>

3. The calculation of the basic and diluted earning per share for the six
months period is based on the following data:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30
1999 1998
---------- -----------
<S> <C> <C>
EARNINGS
Profit attribute to shareholders for the purpose of
basic and diluted earning per share (for 6 months) $1,964,057 $ 1,791,588

NUMBER OF SHARES
Weighted average number of common shares 4,555,166 12,500,000
Effect of diluted potential common shares
Share option 0 0
Warrants 0 0
Weighted average number of common shares
for the purpose of diluted earnings per share 4,555,166 12,500,000
EARNINGS PER SHARE
Basic (for 6 months) $ 0.43 $ 0.15
Diluted (for 6 months) $ 0.43 $ 0.15
</TABLE>

4. The calculation of the basic and diluted earnings per share for the nine
months period is based on the following data:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FEBRUARY 29
2000 1999
---------- -----------
<S> <C> <C>
EARNINGS
Profit attribute to shareholders for the purpose of
basic and diluted earning per share (for 9 months) $2,998,734 $ 2,612,994

50
<PAGE>
NUMBER OF SHARES
Weighted average number of common shares 4,555,166 12,500,000
Effect of diluted potential common shares
Share option 0 0
Warrants 0 0
Weighted average number of common shares
for the purpose of diluted earnings per share 4,555,166 12,500,000
EARNINGS PER SHARE
Basic (for 9 months) $ 0.66 $ 0.22
Diluted (for 9 months) $ 0.66 $ 0.22
</TABLE>

DIVIDENDS

Since the inception, the Company has not paid or declared any cash
dividends on its Common Stock. The Company's Board of Directors does not
currently plan to issue a cash dividend. However, the Company may consider
distributing profit through cash dividends, when the financial situations
justify such a practice.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

No Form 8-K was filed

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SIGNATURES

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

SUNFLOWER (USA), LTD.

By: /s/ Edward Ai Dong Liu
--------------------------
Edward Ai Dong Liu
Chairman of the Board and Chief Executive Officer
Dated: April 23, 2000

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

SIGNATURE TITLE DATE
----------------------- ------------------------- -------------

/s/ Edward Liu Chairman of the Board, April 21,2000
----------------------- & Chief Executive Officer
Edward A.D. Liu

/s/ Paul X. B. Meng President and Director April 21,2000
-----------------------
Paul X. B. Meng

/s/JoyKing Zhang Vice President April 21,2000
----------------------- & Director
JoyKing, Zhang Xiao Jun

/s/ Virginia Tong Vice President April 21,2000
----------------------- & Director of Finance
Virginia Z.Q. Tong

/s/ Whitty Liu Director, Treasury April 21,2000
----------------------- & Secretary
Whitty H.D. Liu

/s/ Christina Zhang Director & April 21,2000
----------------------- VP-Marketing
Christina X.M. Zhang

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