UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO FORM 10-K
ON FORM 10-K/A
| x | Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended November 30, 2008 |
| ¨ | Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______to ______ |
Commission file number: 000-25591 |
| |
| CHINA ELITE INFORMATION CO., LTD. |
| (Exact name of Registrant as Specified in its Charter) |
| BRITISH VIRGIN ISLANDS | | 11-3462369 |
| (State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification No.) |
| c/o DeHeng Chen, LLC, 225 Broadway, Suite 1910, NY, NY | | 10007 |
| (Address of Principal Executive Offices) | | (Zip Code) |
| (212) 608-6500 |
| (Registrant’s telephone number, including area code) |
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.01 par value
Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. ¨
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. x
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes x No ¨
Revenues for the year ended November 30, 2008: $0
As of September 29, 2009, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $0.
As of September 29, 2009, there were 11,200,000 shares of common stock outstanding.
Documents Incorporated by Reference:
None.
Transitional Small Business Disclosure Format (Check one): Yes ¨ No x
EXPLANATORY NOTES
This Amendment No. 1 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended November 30, 2008 (the “2008 Annual Report”), is being filed because the Registrant’s prior auditor, Clancy and Co., P.L.L.C. (“Clancy”), had its registration with the Public Company Accounting Oversight Board revoked on March 31, 2009. As a result, the Registrant may not include Clancy’s audit report in its 2008 Annual Report. The Registrant is amending the 2008 Annual Report to replace Clancy’s audit report with an audit report from the Registrant’s current auditor, Lynda R. Keeton CPA, LLC (“Keeton”). Keeton has re-audited all periods presented in the financial statements contained in the 2008 Annual Report. There was no material changes in the financial statements (including the notes thereto) contained in the 2008 Annual Report as a result of the re-audit by Keeton.
Except as so amended by this Amendment No. 1, the Registrant’s 2008 Annual Report remains as originally filed on March 13, 2009.
AMENDMENT NO. 1 TO FORM 10-K ON FORM 10-K/A
FOR THE YEAR ENDED NOVEMBER 30, 2008
INDEX
PART II
INDEX TO FINANCIAL STATEMENTS
| | |
| | |
| | |
| Report of Independent Registered Public Accounting Firm | F-1 |
| | |
| Balance Sheets | F-2 |
| | |
| Statements of Operations | F-3 |
| | |
| Statements of Changes in Stockholders’ Deficiency | F-4 |
| | |
| Statements of Cash Flows | F-6 |
| | |
| Notes to Financial Statements | F-7 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
China Elite Information Co., Ltd.:
We have audited the accompanying balance sheets of China Elite Information Co., Ltd. as of November 30, 2008 and 2007, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the two years ended November 30, 2008 and 2007, and the period from inception (December 19, 1997) to November 30, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 financial statements referred to above present fairly, in all material respects, the financial position of China Elite Information Co., Ltd. as of November 30, 2008 and 2007, and the results of its operations and its cash flows for the two years ended November 30, 2008 and 2007, and the period from inception (December 19, 1997) to November 30, 2008, in conformity with generally accepted accounting principles in the United States.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has limited operations and continued net losses. This raises substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Lynda R. Keeton CPA, LLC
Lynda R. Keeton CPA, LLC
Henderson, NV
October 7, 2009
CHINA ELITE INFORMATION CO., LTD.
(a development stage company)
BALANCE SHEETS
NOVEMBER 30, 2008 AND 2007
| (Expressed in U.S. Dollars) | | 2008 | | | 2007 | |
| | | | | | | |
| ASSETS | | | | | | |
| Current Assets | | | | | | |
| Prepayment | | $ | 26 | | | $ | 28 | |
| Total current assets | | | 26 | | | | 28 | |
| | | | | | | | | |
| Total assets | | $ | 26 | | | $ | 28 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 14,138 | | | $ | 14,185 | |
| Loans from shareholder | | | 446,733 | | | | 400,612 | |
| Total current liabilities | | | 460,871 | | | | 414,797 | |
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| Stockholders’ Deficiency | | | | | | | | |
| Preferred stock: $0.01 par value; 10,000,000 shares authorized; issued and outstanding: none | | | - | | | | - | |
| Common stock: $0.01 par value; 50,000,000 shares authorized; issued and outstanding: 11,200,000 | | | 112,000 | | | | 112,000 | |
| Additional paid in capital | | | 154,465 | | | | 154,465 | |
| Deficit accumulated during the development stage | | | (727,310 | ) | | | (681,234 | ) |
| Total stockholders’ deficiency | | | (460,845 | ) | | | (414,769 | ) |
| | | | | | | | | |
| Total liabilities and stockholders’ deficiency | | $ | 26 | | | $ | 28 | |
The accompanying notes are an integral part of these financial statements.
CHINA ELITE INFORMATION CO., LTD.
(a development stage company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED NOVEMBER 30, 2008 AND 2007, AND
FOR THE PERIOD FROM INCEPTION (DECEMBER 19, 1997) TO NOVEMBER 30, 2008
| (Expressed in U.S. Dollars) | | Cumulative from inception | | | 2008 | | | 2007 | |
| | | | | | | | | | |
| Revenues | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | |
| General and administrative expenses | | | | | | | | | | | | |
| Salaries and benefits | | | 181,888 | | | | - | | | | - | |
| General and administrative | | | 474,554 | | | | 46,076 | | | | 68,322 | |
| Consulting fees – related party | | | 150,000 | | | | - | | | | - | |
| Total general and administrative expenses | | | 806,442 | | | | 46,076 | | | | 68,322 | |
| | | | | | | | | | | | | |
| Operating loss | | | (806,442 | ) | | | (46,076 | ) | | | (68,322 | ) |
| | | | | | | | | | | | | |
| Other income (expense) | | | | | | | | | | | | |
| Loss on disposal of property and equipment | | | (1,473 | ) | | | - | | | | - | |
| Interest expense | | | (53,956 | ) | | | - | | | | - | |
| Interest income | | | 134,561 | | | | - | | | | - | |
| Total other income (expense) | | | 79,132 | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Net loss | | $ | (727,310 | ) | | $ | (46,076 | ) | | $ | (68,322 | ) |
| | | | | | | | | | | | | |
| Basic and diluted net loss per share | | | | | | $ | (0.00 | ) | | $ | (0.01 | ) |
| | | | | | | | | | | | | |
| Weighted average shares outstanding | | | | | | | 11,200,000 | | | | 11,200,000 | |
The accompanying notes are an integral part of these financial statements.
CHINA ELITE INFORMATION CO., LTD.
(a development stage company)
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
FOR THE PERIOD FROM INCEPTION (DECEMBER 19, 1997) TO NOVEMBER 30, 2008
| (Expressed in U.S. Dollars) | | Common Shares | | | Common Stock At Par Value | | | Additional Paid In Capital | | | Deficit Accumulated During the Development Stage | | | Total | |
| | | | | | | | | | | | | | | | |
| Issuance of common shares on August 24, 1999 | | | 66 | | | $ | - | | | $ | 250 | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Balance – November 30, 1999 | | | 66 | | | | - | | | | 250 | | | | - | | | | 250 | |
| | | | | | | | | | | | | | | | | | | | | |
| Issuance of shares in private placement and merger on January 26, 2000: | | | | | | | | | | | | | | | | | | | | |
| Private placement in cash ($0.29 per share) | | | 5,175,000 | | | | 51,750 | | | | 1,452,500 | | | | - | | | | 1,504,250 | |
| Deferred offering costs | | | - | | | | - | | | | (25,927 | ) | | | - | | | | (25,927 | ) |
| Conversion of shares in merger | | | 11,599,934 | | | | 116,000 | | | | (114,233 | ) | | | - | | | | 1,767 | |
| Redemption of original shares | | | (4,100,000 | ) | | | (41,000 | ) | | | (109,000 | ) | | | - | | | | (150,000 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | - | | | | - | | | | - | | | | (204,348 | ) | | | (204,348 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance – November 30, 2000 | | | 12,675,000 | | | | 126,750 | | | | 1,203,590 | | | | (204,348 | ) | | | 1,125,992 | |
| | | | | | | | | | | | | | | | | | | | | |
| Purchase of treasury stock, (7,065,000 shares) during January 2001, from initial investors with cash ($0.16 per share) | | | - | | | | - | | | | (1,151,672 | ) | | | - | | | | (1,151,672 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Issuance of shares as stock compensation for the shares of NCTN Preferred Stock and all common shares and warrants held in the Company by original investors and in consideration of accrued services fees, February 7, 2001 ($0.01 per share) | | | 4,200,000 | | | | 42,000 | | | | - | | | | - | | | | 42,000 | |
| | | | | | | | | | | | | | | | | | | | | |
| Issuance of shares as stock compensation for legal fees, February 7, 2001 ($0.01 per share) | | | 140,000 | | | | 1,400 | | | | - | | | | - | | | | 1,400 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | - | | | | - | | | | - | | | | (27,370 | ) | | | (27,370 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance – November 30, 2001 | | | 17,015,000 | | | | 170,150 | | | | 51,918 | | | | (231,718 | ) | | | (9,650 | ) |
The accompanying notes are an integral part of these financial statements.
CHINA ELITE INFORMATION CO., LTD.
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY – CONTINUED
FOR THE PERIOD FROM INCEPTION (DECEMBER 19, 1997) TO NOVEMBER 30, 2008
| (Expressed in U.S. Dollars) | | Common Shares | | | Common Stock At Par Value | | | Additional Paid In Capital | | | Deficit Accumulated During the Development Stage | | | Total | |
| | | | | | | | | | | | | | | | |
| Issuance of shares in private placement for cash Reg D, Rule 506, September 7, 2002 ($0.025 per share) | | | 1,000,000 | | | | 10,000 | | | | 15,000 | | | | - | | | | 25,000 | |
| | | | | | | | | | | | | | | | | | | | | |
| Issuance of shares as stock compensation for legal fees, September 7, 2002 ($0.02 per share) | | | 250,000 | | | | 2,500 | | | | 2,500 | | | | - | | | | 5,000 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | - | | | | - | | | | - | | | | (15,780 | ) | | | (15,780 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance – November 30, 2002 | | | 18,265,000 | | | | 182,650 | | | | 69,418 | | | | (247,498 | ) | | | 4,570 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | - | | | | - | | | | - | | | | (18,427 | ) | | | (18,427 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance – November 30, 2003 | | | 18,265,000 | | | | 182,650 | | | | 69,418 | | | | (265,925 | ) | | | (13,857 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Cancellation of treasury shares in connection with May 21, 2004 Merger Agreement | | | (7,065,000 | ) | | | (70,650 | ) | | | 70,650 | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Loans payable converted to additional paid in capital | | | - | | | | - | | | | 14,397 | | | | - | | | | 14,397 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | - | | | | - | | | | - | | | | (229,598 | ) | | | (229,598 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance – November 30, 2004 | | | 11,200,000 | | | | 112,000 | | | | 154,465 | | | | (495,523 | ) | | | (229,058 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | - | | | | - | | | | - | | | | (53,088 | ) | | | (53,088 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance – November 30, 2005 | | | 11,200,000 | | | | 112,000 | | | | 154,465 | | | | (548,611 | ) | | | (282,146 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | - | | | | - | | | | - | | | | (64,301 | ) | | | (64,301 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance – November 30, 2006 | | | 11,200,000 | | | | 112,000 | | | | 154,465 | | | | (612,912 | ) | | | (346,447 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | - | | | | - | | | | - | | | | (68,322 | ) | | | (68,322 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance – November 30, 2007 | | | 11,200,000 | | | | 112,000 | | | | 154,465 | | | | (681,234 | ) | | | (414,769 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | - | | | | - | | | | - | | | | (46,076 | ) | | | (46,076 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance – November 30, 2008 | | | 11,200,000 | | | $ | 112,000 | | | $ | 154,465 | | | $ | (727,310 | ) | | $ | (460,845 | ) |
The accompanying notes are an integral part of these financial statements.
CHINA ELITE INFORMATION CO., LTD.
(a development stage company)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30, 2008 AND 2007, AND
FOR THE PERIOD FROM INCEPTION (DECEMBER 19, 1997) TO NOVEMBER 30, 2008
| (Expressed in U.S. Dollars) | | Cumulative from inception | | | 2008 | | | 2007 | |
| | | | | | | | | | |
| Cash flows from operating activities | | | | | | | | | |
| Net loss | | $ | (727,310 | ) | | $ | (46,076 | ) | | $ | (68,322 | ) |
| Adjustments to reconcile net loss to net cash flows used in operating activities | | | | | | | | | | | | |
| Depreciation | | | 11,492 | | | | - | | | | - | |
| Loss on disposal of property and equipment | | | 1,473 | | | | - | | | | - | |
| Common stock issued for services | | | 48,400 | | | | - | | | | - | |
| Changes in assets and liabilities | | | | | | | | | | | | |
| (Increase) decrease in interest receivable | | | (1,483 | ) | | | - | | | | - | |
| (Increase) decrease in prepayment | | | (26 | ) | | | 2 | | | | (28 | ) |
| Increase (decrease) in accounts payable and accrued expenses | | | 14,138 | | | | (47 | ) | | | (12,721 | ) |
| Net cash flows used in operating activities | | | (653,316 | ) | | | (46,121 | ) | | | (81,071 | ) |
| | | | | | | | | | | | | |
| Cash flows from investing activities | | | | | | | | | | | | |
| Cash paid for note receivable | | | (1,117,602 | ) | | | - | | | | - | |
| Cash received from note receivable | | | 1,117,602 | | | | - | | | | - | |
| Cash paid for equipment | | | (11,465 | ) | | | - | | | | - | |
| Net cash flows used in investing activities | | | (11,465 | ) | | | - | | | | - | |
| | | | | | | | | | | | | |
| Cash flows from financing activities | | | | | | | | | | | | |
| Loans from shareholder | | | 461,130 | | | | 46,121 | | | | 81,071 | |
| Proceeds from issuance of stock | | | 1,531,250 | | | | - | | | | - | |
| Cash paid for stock redemption | | | (150,000 | ) | | | - | | | | - | |
| Deferred offering costs against capital | | | (25,927 | ) | | | - | | | | - | |
| Acquisition of treasury stock | | | (1,151,672 | ) | | | - | | | | - | |
| Net cash flows provided by financing activities | | | 664,781 | | | | 46,121 | | | | 81,071 | |
| | | | | | | | | | | | | |
| Increase (decrease) in cash and cash equivalents | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Cash and cash equivalents, beginning of period | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Cash and cash equivalents, end of period | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | |
| Cash paid for interest and income taxes | | | | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | |
| Supplemental noncash investing and financing activities: | | | | | | | | | | | | |
| Common stock issued for services | | $ | 48,400 | | | $ | - | | | $ | - | |
| Loans payable converted to additional paid in capital | | $ | 14,397 | | | $ | - | | | $ | - | |
The accompanying notes are an integral part of these financial statements.
CHINA ELITE INFORMATION CO., LTD.
(a development stage company)
Notes to Financial Statements
November 30, 2008
(Expressed in U.S. Dollars)
1. Business Formation and Continuance of Operations
Business Formation
China Elite Information Co., Ltd. (formerly known as “Relocate411.com, Inc.” and “Stateside Fundings, Inc.”) was originally organized under the laws of the State of Delaware on December 19, 1997.
On January 26, 2000, the stockholders of Relocate411.com, Inc., a New York corporation incorporated on August 24, 1999 (“Relocate”), completed a merger and stock exchange with Stateside Fundings, Inc., a Delaware Corporation (“Stateside”), resulting in a recapitalization of Stateside, the acquirer. Relocate merged into Stateside and Stateside acquired all of the assets and liabilities of Relocate. Under the terms of the Merger Agreement, each share of Relocate common stock converted into one hundred thousand shares of Stateside common stock. Contemporaneously with the merger, Stateside issued 5,175,000 shares of its common stock pursuant to a private placement offering and received net proceeds of $1,354,250. The net proceeds received were after a payment of $150,000 to redeem 4,100,000 shares of common stock from the founder of Stateside. As part of the merger and stock exchange, Stateside issued 6,600,000 shares of common stock to the shareholders of Relocate in exchange for receiving all of the shares (66 shares) held by the shareholders of Relocate and Relocate became the Company’s wholly-owned subsidiary. For accounting purposes, the financial statements became that of Stateside, the entity that survived the merger. On January 27, 2000, Stateside filed a certificate of amendment changing the Company’s name to “Relocate411.com, Inc.”
On May 21, 2004, Jandah Management Limited (“Jandah”), Glory Way Holdings, Limited (“GWH”) and Good Business Technology Limited (“GBT”), each a corporation organized under the laws of the British Virgin Islands, entered into privately negotiated transactions with the stockholders of Relocate to purchase an aggregate of 10,976,000 shares of common stock of the Company, representing 98% of the issued and outstanding shares, for an aggregate purchase price of $350,000. In connection with, and as a condition to the closing of these stock purchase transactions, Darrell Lerner, the Company’s former Director and President, resigned as the sole officer of the Company effective as of May 21, 2004, and pursuant to the Company's Bylaws and applicable SEC regulations, Mr. Lerner appointed Li Kin Shing (“Mr. Li”), the sole shareholder of Jandah, as the President of the Company and, effective as of June 4, 2004, as sole director of the board.
Jandah acquired 9,276,000 shares of common stock from the three largest shareholders of the Company, Darrell Lerner, Byron Lerner and James Tubbs, for an aggregate purchase price of $307,500. Darrell Lerner retained 224,000 shares of common stock. As a condition to closing, the Company and Mr. Darrell Lerner entered into a six-month consulting agreement pursuant to which Mr. Darrell Lerner assisted the Company with various transition issues and provided other business consulting services. Under the consulting agreement, Mr. Darrell Lerner was paid an aggregate consulting fee of $150,000. Mr. Li is considered to be the indirect beneficial owner of the shares held by Jandah Management Limited, since he is the sole shareholder of Jandah Management Limited and as such, possesses sole investment and voting power over the Company's shares held by it. GWH acquired 846,000 shares of common stock for an aggregate purchase price of $21,150, and GBT acquired an aggregate of 854,000 shares of common stock for an aggregate purchase price of $21,350 from certain shareholders pursuant to various selling shareholder agreements.
CHINA ELITE INFORMATION CO., LTD.
(a development stage company)
Notes to Financial Statements – (Continued)
On July 21, 2004, the Company’s Board of Directors approved the change of the jurisdiction under which the Company was incorporated from the State of Delaware to the British Virgin Islands (“BVI”) and to reincorporate as a British Virgin Islands International Business Company, pursuant to Section 390 of the Delaware General Corporations Law and the applicable laws of the BVI. In connection with this reincorporation, the Company changed its name from “Relocate 411.com, Inc.” to “China Elite Information Co., Ltd.” As a result of the reincorporation, the Company adopted new corporate governance documents consisting of a Memorandum of Association, Articles of Incorporation and Articles of Continuation. Accordingly, the par value of the Company’s preferred stock and common stock increased from $0.0001 to $0.01. All shares and per share information have been adjusted retroactively to reflect the change in par value. All shares (i) have one vote each, (ii) are subject to redemption, purchase or acquisition by the Company for fair value, and (iii) carry the right to participate equally in the assets of the Company, including any dividends, and distributions of the Company on a winding up. The rights attached to any class or series of shares may not be varied without the consent in writing of the holders of not less than three-fourths of the issued shares of that class or series and of the holders of not less than three-fourths of the issued shares of any other class or series of shares which may be affected by such variation.
Going Concern
These financial statements have been prepared in accordance with generally accepted accounting principles in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has not generated any revenue and requires additional funds to maintain its operations. The Company’s cash requirements for working capital have been satisfied through loans from its majority shareholder and the Company expects to obtain additional capital through shareholder loans and / or a debt or equity financing to continue its operations. There is no assurance the Company will be successful in raising the needed additional capital or that such additional funds will be available for the Company on acceptable terms, if at all. The continued existence of the Company is dependent upon its ability to meet its financing requirements on a continuing basis and to succeed in its future operations. The Company’s President, who is also the majority shareholder, has verbally agreed to fund its operations for the next twelve months, based on the Company’s current level of expenditures, as necessary. However, the Company’s need for capital may change dramatically if it acquires a suitable business opportunity during that period.
Management plans to identify and pursue profitable business opportunities through mergers and acquisitions, so as to diversify the business risks and maximize the returns to stockholders. The Company has not yet entered into any agreement, nor does it have any commitment to enter into or become engaged in any transaction as of the date of issuance of these financial statements.
Management believes that actions presently taken to revise the Company's operating and financial requirements provide the opportunity for the Company to continue as a going concern. The Company's ability to achieve these objectives cannot be determined at this time. If the Company is unsuccessful in its endeavors, it may be forced to cease operations. These financial statements do not include any adjustments that might result from this uncertainty.
CHINA ELITE INFORMATION CO., LTD.
(a development stage company)
Notes to Financial Statements – (Continued)
2. Significant Accounting Policies
Development Stage Company
The Company is considered a development stage company which is defined as such if it is devoting substantially all of its efforts to establishing a new business and its planned principal operations either (i) have not commenced or (ii) have commenced, but have not produced any significant revenues.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company did not have any cash or cash equivalents for any of the periods presented.
Property and Equipment
Property and equipment is recorded at cost and is depreciated by the straight-line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense as incurred. When property and equipment is sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. For the years ended November 30, 2008 and 2007, the Company did not have any property and equipment or related depreciation expenses.
Income Taxes
The Company accounts for income taxes under the liability method of accounting for income taxes in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes and related interpretations and guidance including FIN 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (“FIN 48”). The liability method, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company’s management determines if a valuation allowance is necessary to reduce any tax benefits when the available benefits are more likely than not to expire before they can be used. The Company is not obligated for U.S. federal income taxes because it is a British Virgin Islands company, which is not subject to U.S. Federal income tax. The British Virgin Islands also does not have a corporate income tax. If the Company merges with a U.S. based company, historical net operating losses may not be available for future net income offset.
CHINA ELITE INFORMATION CO., LTD.
(a development stage company)
Notes to Financial Statements – (Continued)
Loss Per Share
Basic loss per share is computed as net loss divided by the weighted average number of shares outstanding during the period in accordance with SFAS No. 128, Earnings Per Share. Diluted EPS includes the effect from potential dilutive securities and is equal to basic loss per share for all periods presented because there are no potential dilutive securities. All per share and per share information is adjusted retroactively to reflect stock splits and changes in par value.
Fair Value of Financial Instruments
For certain of the Company’s financial instruments such as amounts due to shareholders, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their short maturities. Fair value of financial instruments is made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.
Stock-based Compensation
The Company accounts for stock-based compensation in accordance with SFAS No. 123R, Share-Based Payment, which requires the Company to record as an expense in its financial statements the fair value of all stock-based compensation awards. There were no outstanding awards during the years ended November 30, 2008 and 2007.
Accounting for Derivative Instruments and Hedging Activities
The Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which requires companies to recognize all derivatives contracts as either assets or liabilities in the balance sheet and to measure them at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. The Company has not entered into derivative contracts either to hedge existing risks or for speculative purposes.
Related Party Transactions
A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
CHINA ELITE INFORMATION CO., LTD.
(a development stage company)
Notes to Financial Statements – (Continued)
Recent Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, or SFAS No. 141R, which replaces SFAS No. 141. SFAS No. 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree, the goodwill acquired and the expenses incurred in connection with the acquisition. SFAS No. 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008. The nature and magnitude of the impact, if any, of SFAS No. 141(R) on our financial statements will be limited to the nature, terms and size of any acquisitions consummated after the effective date.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an Amendment of Accounting Research Bulletin No. 51, which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. The adoption of SFAS No. 160 is not expected to have a material impact on our financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133, or SFAS No. 161, which amends and expands the disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, to require qualitative disclosure about objectives and strategies in using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about the underlying credit-risk-related contingent features in derivative agreements. SFAS No. 161 requires additional disclosures concerning the impact of derivative instruments reflected in an entity’s financial statements; the manner in which derivative instruments and related hedged items are accounted for under SFAS No. 133; and the impact that derivative instruments and related hedged items may have on an entity’s financial position, performance and cash flows. SFAS No. 161 is effective for financial statements issued in fiscal years beginning after November 15, 2008 and requires only additional disclosures concerning derivatives and hedging activities. The adoption of SFAS No. 161 is not expected to have a material impact on our financial statements.
In April 2008, the FASB issued Staff Position No. FAS 142-3, Determination of the Useful Life of Intangible Assets, or FSP FAS 142-3. FSP FAS 142-3 amends the factors considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets, in order to improve the consistency between the useful life of the recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. FSP FAS 142-3 applies to: (1) intangible assets that are acquired individually or with a group of other assets, and (2) intangible assets acquired both in business combinations and asset acquisitions. FSP FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of FSP FAS 142-3 is not expected to have a material impact on our financial statements.
In May 2008, the FASB issued Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), or FSP APB 14-1. FSP APB 14-1 requires that issuers of certain convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement, separately account for the liability and equity components (i.e. the embedded conversion option) and recognize the accretion of the resulting discount on the debt as interest expense. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 and for interim periods within those fiscal years. It is required to be applied retrospectively to convertible debt instruments within its scope that were outstanding during any period presented in the financial statements issued after the effective date. The adoption of FSP APB 14-1 is not expected to have a material impact on our financial statements.
CHINA ELITE INFORMATION CO., LTD.
(a development stage company)
Notes to Financial Statements – (Continued)
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles." SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of non-governmental entities that are presented in conformity with generally accepted accounting principles in the United States of America. SFAS No. 162 will be effective 60 days after the Securities and Exchange Commission approves the Public Company Accounting Oversight Board's amendments to AU Section 411. The Company not expect that the adoption the adoption of SFAS No. 162 will have an impact on its financial statements.
In April 2009, the FASB issued FASB Staff Positions 115-2 and 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP 115-2 and 124-2”). FSP 115-2 and 124-2 amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP 115-2 and 124-2 does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. The Company adopted FSP 115-2 and 124-2 in the second quarter of 2009. FSP 115-2 and 124-2 did not have a material impact on the financial statements.
In April 2009, the FASB issued FASB Staff Position 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” (“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157, “Fair Value Measurements,” when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009. The Company adopted FSP 157-4 in the second quarter of 2009. FSP 157-4 did not have a material impact on the financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 165, “Subsequent Events,” (“SFAS 165”). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 applies to both interim financial statements and annual financial statements. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009. SFAS 165 does not have a material impact on our financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, “Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140,” (“SFAS 166”). SFAS 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. SFAS 166 is effective for fiscal years beginning after November 15, 2009. The Company will adopt SFAS 166 in fiscal 2010. The Company does not expect that the adoption of SFAS 166 will have a material impact on the consolidated financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R),” (“SFAS 167”). The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS 167 is effective for the first annual reporting period beginning after November 15, 2009 and for interim periods within that first annual reporting period. The Company will adopt SFAS 167 in fiscal 2010. The Company does not expect that the adoption of SFAS 167 will have a material impact on the consolidated financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles,” (“SFAS 168”). SFAS 168 replaces FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles”, and establishes the FASB Accounting Standards Codification (“Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”). SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The Company will begin to use the new Codification when referring to GAAP in its annual report on Form 10-K for the fiscal year ending November 30, 2009. This will not have an impact on the consolidated results of the Company.
CHINA ELITE INFORMATION CO., LTD.
(a development stage company)
Notes to Financial Statements – (Continued)
3. Note receivable
On May 25, 2000, the Company loaned $1,117,602 to Teltran International Group, Ltd. (“Teltran”), a publicly held company that at the time traded on the Pink Sheets (an electronic quotation and trading system in the over-the-counter securities). At that time, some of Teltran's stockholders and officers owned approximately 42% of the Company. The loan bore interest at 9.5% annually and was secured by a promissory note. Teltran pledged its one share of Teltran Web Factory, Ltd. a wholly-owned foreign subsidiary of Teltran as well as issuing 250,000 warrants exercisable from May 25, 2000 to May 24, 2005 to purchase Teltran common stock at a price of $1.10 per share.
On March 2, 2001, the Company received preferred shares in NCTN Networks, Inc. in full settlement of the note receivable and the outstanding interest. The Company retained the warrants it received and returned all Teltran share certificates, which were held as security for the note receivable. Simultaneously, these preferred shares were exchanged as consideration for all outstanding shares and warrants in the Company held by the Company's investors. This resulted in the Company issuing 4,200,000 shares of its common stock valued at $42,000.
4. Related Party Transactions
Consulting agreement – The Company and Mr. Darrell Lerner, former director and President, entered into a six-month consulting agreement pursuant to which Mr. Darrell Lerner assisted the Company with various transition issues and provided other business consulting services. Under the consulting agreement, Mr. Darrell Lerner was paid an aggregate consulting fee of $150,000, payable in equal monthly installments. The Consulting Agreement expired on November 21, 2004, and, by its terms, was not renewed.
Loans from shareholders – Loans from shareholders represent a series of advances from the majority stockholder to fund working capital requirements. There is no note and the amounts are unsecured, interest-free, and repayable on demand. The Company’s President has orally agreed to fund the Company’s operations for at least the next twelve months.
Control of Company – The Company’s President, Chief Executive Officer and majority shareholder owns approximately 83% of the Company’s shares of common stock outstanding as of November 30, 2008 and 2007, and as of the date of issuance of these financial statements.
CHINA ELITE INFORMATION CO., LTD.
(a development stage company)
Notes to Financial Statements – (Continued)
5. Conflicts of Interest, Litigation and Contingencies
Certain conflicts of interest have existed and will continue to exist between management, their affiliates and the Company. Management has other interests including business interests to which he devotes his primary attention. Management may continue to do so notwithstanding the fact that management time should be devoted to the business of the Company and in addition, management may negotiate an acquisition resulting in a conflict of interest.
From time to time, in the normal course of business the Company may be involved in litigation. The Company's management is not aware of any asserted or unasserted claims and therefore, feels any such proceedings to have an immaterial effect on the financial statements.
The Company's management has not bound the Company with any contingencies other than those through the normal course of business.
During the fiscal years ended November 30, 2008 and 2007, and to date, the Company uses office space in a building located at 225 Broadway, Suite 1910, New York, New York 10007. The Company does not have a formal lease and does not pay any rent. The fair market value of the rent has not been included in the financial statements because the amount is immaterial.
6. Stockholders’ equity
The Company’s authorized common stock is 50,000,000 common shares with $0.01 par value. The Company’s authorized preferred stock is 10,000,000 preferred shares with $0.01 par value. The common and preferred shares have the same rights, which is allowed under the laws of the British Virgin Islands.
All stock transactions are disclosed in footnote 1 and 3 above except the following:
| · | During the year ended November 30, 2001 the Company repurchased 7,065,000 shares of its common stock from its' initial investors with a payment of a stock offering for a total consideration value of $1,151,672. In 2004, these shares where repurchased by the Company, cancelled and then held as treasury shares in connection with the May 21, 2004 Merger Agreement. |
| · | 140,000 shares were issued for legal services valued at $1,400, or $0.01 per share, in February 2001. |
| · | In September 2002 the Company issued a total of 1,250,000 shares of its common stock in a private placement, for a total consideration of $30,000 ($.025 per share). Of this, 250,000 shares represented a $5,000 payment for legal fees. |
| · | In 2004, loans in the amount of $14,397 that were payable to the Company’s former director and President, Mr. Darrell Lerner, were contributed to capital by Mr. Lerner. |
The Company has had no stock transactions since the fiscal year ending November 30, 2004.
END OF FINANCIAL STATEMENTS
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | CHINA ELITE INFORMATION CO., LTD. |
| | | |
| | | |
| Date: October 9, 2009 | By: | /s/ Li Kin Shing |
| | | Li Kin Shing |
| | | President and Chief Executive Officer |
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 and in the capacities and on the date indicated.
| Signature | | Title | | Date |
| | | | | |
| | | | | |
| /s/ Li Kin Shing | | President, CEO and Director | | October 9, 2009 |
| Li Kin Shing | | (Principal Executive Officer and Principal Financial and Accounting Officer) | | |
15
