As Filed with the Securities and Exchange Commission on December 26, 2007 File No.333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CHINA BEAUTY GROUP, INC. | ||
(Name of small business issuer in its charter) | ||
Florida | 5040 and 5122 | 26-1317680 |
(State or jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
Block B, 10th Floor, Fuk On Factory Building 1123 Canton Road Mongkok, Kln. Hong Kong Tel: 852-2543-2727 Fax: 852-2543-2033 (Address and telephone number of principal executive offices and principal place of business)
Diane J. Harrison, Esq. Harrison Law, P.A. 6860 Gulfport Blvd. South, #162 South Pasadena, FL 33707 941-723-7564
(Name, address and telephone number of agent for service)
Copies to: Harrison Law, P.A. Diane J. Harrison, Esq. 6860 Gulfport Blvd. South No. 162, So. Pasadena, FL 33707 Telephone: 941-723-7564 Facsimile: 941-531-4935 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ]
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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered | Amount To Be Registered | Proposed Maximum Offering Price Per Unit | Proposed Maximum Aggregate Offering Price1 | Amount of Registration Fee |
Common Stock par value $0.0012 | 1,000,000 | $1.00 | $1,000,000.00 | $30.70 |
Total | 1,000,000 | $1.00 | $1,000,000.00 | $30.70 |
1Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. 21,000,000 shares of common stock relate to the Offering by twenty-eight (28) selling security holders. |
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The information in this prospectus is not complete and may be changed. The securities offered by this prospectus may not be sold until the Registration Statement filed with the Securities and Exchange Commission is effective. This prospectus is neither an offer to sell these securities nor a solicitation of an offer to buy these securities in any state where an offer or sale is not permitted.
PRELIMINARY PROSPECTUS
Dated December 26, 2007
CHINA BEAUTY GROUP, INC. | |
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The Securities Being Offered by Selling Security Holders of China Beauty Group, Inc. Are Shares of Common Stock | |
Shares offered by Security Holders: | 1,000,000 |
The selling security holders named in this prospectus are offering to sell 1,000,000 shares of China Beauty Group, Inc.’s (“China Beauty”) common stock through this prospectus and are not considered “underwriters” as that term is defined in Section 2(a)(11) of the Securities Act of 1933. Upon execution of a stock subscription agreement each purchaser specifically acknowledged that he/she was acquiring the shares for their personal investment and not with a view to resale.
China Beauty’s common stock is presently not traded on any market or securities exchange. Accordingly, the sales price to the public is fixed at $1.00 per share until our offering period ends or until our stock becomes quoted on the Over-The-Counter-Bulletin-Board (“OTCBB”) or other securities exchange and then stock may be sold at prevailing market prices. Our CUSIP number for our common stock is 16936A 102.
China Beauty is not selling any shares of its common stock in this offering and therefore will not receive any proceeds from this offering. The shares of China Beauty common stock being offered through this prospectus will be offered by the selling security holders from time to time for a period ending nine months after the date the registration statement has been declared effective by the SEC, or until the date on which we otherwise terminate the offering prior to the expiration of nine months. The actual number of shares sold will vary depending upon the individual, future decisions of the selling security holders. None of the proceeds from the sale of stock by the selling security holders will be placed in escrow, trust or similar account.
Our common stock is not currently listed or quoted on any quotation medium and involves a high degree of risk. You should read the "RISK FACTORS" section beginning on page 3 before you decide to purchase any of our common stock.
Neither the Securities and Exchange Commission nor any state commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Nor have they made, nor will they make, any determination as to whether anyone should buy these securities. Any representation to the contrary is a criminal offense.
| Per Share | Total |
Price to Public, Offering | $1.00 | $1,000,000.00 |
Underwriting Discounts and Commissions, Offering | -0- | -0- |
Proceeds to China Beauty Group, Inc. | -0- | -0- |
The date of this prospectus is December 26, 2007
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Dealer Prospectus Delivery Instructions
Until , 2007 all dealers that effect transactions in these shares of common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
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PART I – Information Required In Prospectus
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information regarding China Beauty Group, Inc. (“Us,” “We,” “Our,” "China Beauty,” the “Company,” or "the Corporation") and our financial statements and the related notes appearing elsewhere in this prospectus.
The Corporation |
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Our Business | Since inception in 1999, China Beauty Group, Inc. has engaged in the import of health and beauty products from Italy and wholesales them to health and beauty stores, aestheticians, and cosmetics related businesses in Hong Kong. The Company also imports clinical cosmetic devices from Italy that are sold to health and beauty stores, aestheticians, and cosmetics related businesses in Hong Kong. Our products are sold business to business under the trade name First Lotus. China Beauty Group, Inc. hopes to continue to capitalize on its expertise and experience to be competitive in the importing of health and beauty products and equipment. China Beauty has developed its operations around its expertise in the importation of various beauty products and equipment such as anti-aging treatments, hyperkeratosis treatment, skin protection and hydration, and various skin protection products. To support that intention, our Company is continually developing suppliers of the best possible products and equipment for delivery to its customers. Our target market is currently centered on the business market in Hong Kong. The majority of our business is in Hong Kong due to the high demand for health and beauty products and equipment. While our key employees have experience in this area of business, we are at a distinct competitive disadvantage with larger competitors. Our competitors have the benefit of more years experience in operations; they have a larger capital base and our business has less capital for any expansion. We do compete with international firms such as Olay, Aveda, Sephia, and Veria. These firms have the experienced personnel, years in business, capitalization, and reputation that will make it difficult for us to compete on a larger scale. As a result of such competition, we will continue to concentrate our efforts on the large amount of business available in Hong Kong. We will try to expand into the market in mainland China when we have the financial resources |
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Our State of Organization | The Company was originally formed in Hong Kong in 1999. On September 27, 2007 we became a British Virgins Islands corporation using the name Beautylink Corporation. We were then incorporated in Florida on October 29, 2007 to re-domicile as a United States domestic corporation. Our principal executive offices are located at Block B, 10th Floor, Fuk On Factory Building, 1123 Canton Road, Mongkok, Kln, Hong Kong. Our phone number is: 011 852-2543-2727. |
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The Offering |
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Number of Shares Being Offered | The selling security holders want to sell up to 1,000,000 shares of common stock at $1.00 per share. Issuance of these shares to the selling security holders was exempt from the registration and prospectus delivery requirements under Regulation S and Sections 4(2) and 4(6) of the 1933 Securities Act, as amended. The selling security holders must sell their shares at the fixed price of $1.00 per share for the duration of this offering unless or until our shares become quoted on the OTCBB or other exchange and thereafter at prevailing market prices. Selling shareholders are not underwriters as defined under the Securities Act of 1933. Each purchaser executed a stock subscription agreement confirming that he/she was purchasing for their personal investment and not with a view to resell. |
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Number of Shares Outstanding After the Offering | 4,000,000 shares of our common stock are issued and outstanding. We have no other securities issued. |
Use of proceeds | We will not receive any proceeds from the sale of shares of common stock by the selling security holders. |
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Plan of Distribution | The Offering is made by the selling security holders named in this Prospectus to the extent they sell shares. We intend to seek quotation of our common stock on the Over-the-Counter-Bulletin-Board (“OTCBB”). However, no assurance can be given that our common stock will be approved for quotation on the OTCBB. Selling security holders must sell at $1.00 for the duration of this offering unless or until our shares become quoted on the OTCBB or other exchange and thereafter at prevailing market prices. |
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Risk Factors | You should carefully consider all the information in this Prospectus including the information set forth in the section of the Prospectus entitled “Risk Factors” beginning on page 3 before deciding whether to invest in our common stock. |
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Lack of Liquidity in our common stock | Our common stock is not presently quoted on or traded on any securities exchange or automatic quotation system and we have not yet applied for listing or quotation on any public market. We can provide no assurance that there will ever be an established pubic trading market for our common stock. We must obtain a market maker to file an application with the Financial Industry Regulatory Authority (FINRA) on our behalf. There is a risk that we may not be able to obtain a market maker to file such an application. If a market maker does file an application on our behalf, it may take as long as nine (9) months to one (1) year to be approved by the FINRA. |
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RISK FACTORS
Before you invest in our common stock, you should be aware that there are risks, as described below. You should carefully consider these risk factors together with all of the other information included in this prospectus before you decide to purchase shares of our common stock. Any of the following risks could adversely affect our business, financial condition and results of operations. We have incurred substantial losses from inception while realizing limited revenues and we may never generate substantial revenues or be profitable in the future.
Risks Associated with the Company
(1) The Beauty Business Is Highly Competitive, And If We Are Unable To Compete Effectively Our Results Will Suffer.
We face vigorous competition from companies throughout the world, including multinational consumer product companies. Some of these competitors have greater resources than we do and may be able to respond to changing business and economic conditions more quickly than us. Competition in the beauty business is based on pricing of products, innovation, perceived value, service to the consumer, promotional activities, advertising, special events, new product introductions, electronic commerce initiatives and other activities. It is difficult for us to predict the timing and scale of our competitors’ actions in these areas. In particular, the skin care category in Hong Kong is influenced by the high volume of new product introductions by diverse companies across several different distribution channels. Also, the trend toward consolidation in the retail trade, particularly in developed markets such as the United States and Western Europe, has resulted in us becoming increasingly dependent on key retailers, including large-format retailers, who have increased their bargaining strength. This trend has also resulted in an increased risk related to the concentration of our customers. A severe adverse impact on their business operations could have a corresponding material adverse effect on us. Our ability to compete also depends on the continued strength of our brands, our ability to attract and retain key talent and other personnel, the efficiency of our manufacturing facilities and distribution network, and our ability to protect our intellectual property. Our inability to continue to compete effectively in Hong Kong in particular and China in the future could have an adverse impact on our business.
(2) Our Dependence On A Small Number Of Sales Agents To Distribute Our Products May Affect Our Profitability.
Most of our sales are currently made through sales agents that are distributors of our products and equipment. Our profitability might be negatively affected if our present relationship with our key sales agents were disrupted or became unstable. Furthermore, alternatives to the present distribution process could impose on us substantial costs.
(3)Our Inability To Anticipate And Respond To Market Trends And Changes In Consumer Preferences Could Adversely Affect Our Financial Results.
Our continued success depends on our ability to anticipate, gauge and react in a timely and cost-effective manner to changes in consumer tastes for skin care, makeup, fragrance and beauty equipment as well as to where and how consumers shop for those products. We must continually work to develop, produce and market new products, maintain and enhance the recognition of our brands, achieve a favorable mix of products, and refine our approach as to how and where we market and sell our products. While we devote considerable effort to shape, analyze and respond to consumer preferences, we recognize that consumer tastes cannot be predicted with certainty and can change rapidly. If we are unable to anticipate and respond to trends in the market for our products and changing consumer demands, our financial results will suffer.
(4) Our Future Success Depends On Our Ability To Achieve Our Long-Term Strategy.
Our long-term strategy is based on five strategic imperatives:
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Optimize brand portfolio
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Strengthen product categories
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Strengthen and expand geographic presence
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Diversify and strengthen distribution channels
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Achieve operational and cost excellence
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Achieving our long-term objectives may require investment in new brands, categories, distribution channels, technologies and geographic markets. These investments may result in short-term costs without any current revenues and, therefore, may be dilutive to our earnings, at least in the short-term. In addition, we may dispose of our brands and incur costs in doing so. Although we believe that our strategic imperatives will lead to long-term growth in revenue and profitability, we may not realize, in full or in part, the anticipated benefits. The failure to realize benefits, which may be due to our ability to execute plans or other risks described herein, could have a material adverse effect on our business, financial condition and operating results.
(5)Any Future Acquisitions May Expose Us To Additional Risks.
We continuously review acquisition opportunities that would expand our current product offerings, our distribution channels, increase the size and geographic scope of our operations, or otherwise offer growth and operating efficiency opportunities. If required, the financing for any of these acquisitions could result in an increase in our indebtedness, dilute the interests of our stockholders, or both. Acquisitions may entail numerous risks, including:
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Difficulties in assimilating acquired operations or products, including the loss of key employees from or customers of acquired businesses;
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Diversion of management’s attention from our core businesses;
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Adverse effects on existing business relationships with suppliers and customers; and
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Risks of entering distribution channels, categories or markets in which we have limited or no prior experience.
Our failure to successfully complete the integration of any acquired business could have a material adverse effect on our business, financial condition and operating results. In addition, there can be no assurance that we will be able to identify suitable acquisition candidates or consummate acquisitions on favorable terms.
(6)A General Economic Downturn Or Sudden Disruption In Business Conditions May Affect Consumer Purchases Of Discretionary Items, Which Could Adversely Affect Our Financial Results.
The general level of consumer spending is affected by a number of factors, including general economic conditions, inflation, interest rates, energy costs, and consumer confidence generally, all of which are beyond our control. Consumer purchases of discretionary items tend to decline during recessionary periods, when disposable income is lower, and may impact sales of our products. In addition, sudden disruptions in business conditions, for example, as a consequence of events such as the outbreak of SARs in 2003 or those that are currently taking place in the Middle East, or as a result of a terrorist attack, retaliation and the threat of further attacks or retaliation, or as a result of adverse weather conditions, such as Hurricane Katrina, can have a short and, sometimes, long-term impact on consumer spending.
Events that impact consumers’ willingness or ability to travel and/or purchase our products while traveling may impact our travel retail business, which is a significant contributor to our overall results.
A downturn in the economies in which we sell our products or a sudden disruption of business conditions in those economies could adversely affect our sales.
(7) Changes In Laws, Regulations And Policies That Affect Our Business Could Adversely Affect Our Financial Results.
Our business is subject to numerous laws, regulations and policies. Changes in the laws, regulations and policies, including the interpretation or enforcement thereof, that affect, or will affect, our business, including changes in accounting standards, tax laws and regulations, trade rules and customs regulations, and the outcome and expense of legal or regulatory proceedings, and any action we may take as a result could adversely affect our financial results.
(8) Our Success Depends, In Part, On The Quality And Safety Of Our Products.
Our success depends, in part, on the quality and safety of our products. If our products are found to be defective or unsafe, or if they otherwise fail to meet our consumers’ standards, our relationships with customers or consumers could suffer, the appeal of one or more of our brands could be diminished, and we could lose sales and/or become subject to liability claims, any of which could result in a material adverse effect on our business, results of operations and financial condition.
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(9) Our Success Depends, In Part, On Our Key Personnel.
Our success depends, in part, on our ability to retain our key personnel, including our executive officers and senior management team. The unexpected loss of one or more of our key employees could adversely affect our business. Our success also depends, in part, on our continuing ability to identify, hire, train and retain other highly qualified personnel. Competition for these employees can be intense. We may not be able to attract, assimilate or retain qualified personnel in the future, and our failure to do so could adversely affect our business. This risk may be exacerbated by the stresses associated with the implementation of SMI (Strategic Modernization Initiative).
(10)We Are Subject To Risks Related To Our International Operations.
We operate on a global basis with our major suppliers located outside Hong Kong. Our foreign operations are subject to many risks and uncertainties, including:
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fluctuations in foreign currency exchange rates, which can affect our results of operations, the relative prices at which we and foreign competitors sell products in the same markets and the cost of certain inventory and non-inventory items required in our operations;
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changes in foreign laws, regulations and policies, including restrictions on trade, import and export license requirements, and tariffs and taxes, as well as changes in Italian laws and regulations relating to foreign trade and investment; and
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adverse weather conditions, social, economic and geopolitical conditions, such as terrorist attacks, war or other military action.
These risks could have a material adverse effect on our business, prospects, results of operations, and financial condition.
(11)A Disruption In Operations Could Adversely Affect Our Business And Financial Results.
As a company engaged in the importing of and distribution of our products and equipment on an international scale, we are subject to the risks inherent in such activities, including environmental events, strikes and other labor disputes, disruptions in logistics or information systems, loss or impairment of key manufacturing sites, product quality control, safety, licensing requirements and other regulatory issues, as well as natural disasters and other external factors over which we have no control. If such an event were to occur, it could have an adverse affect on our business and financial results.
(12)The Company Generally Collects Prepayment From Its Customers.
While our prepayments are good for cash flow, they lead to high operating leverage since prepayments are recorded as deferred revenue on the balance sheet. Management may use the cash flow for funding capital expenditures. In the event the Company cannot continue to charge its customers by prepayment, our cash flow position may be adversely affected.
(13)We May Not Be Able To Maintain Present Favorable Tax Treatment Or Exemptions From Certain Tax Payments In Certain Jurisdictions In Which We Operate.
One driving force behind some of our efforts has been the goal of achieving more favorable tax treatment in certain jurisdictions in which we operate. It is possible that local governments in certain municipalities may levy higher taxes on us or our products in the future. In addition, we may not be able to maintain important exemptions from certain tax regimes in the various jurisdictions in which we operate. Unfavorable tax treatment of our Company in the future or an increase in the taxes levied on us may cause an adverse effect on our results of operations.
(14)Political Developments May Adversely Affect Us.
Our business strategies, financial condition and results of operations could be adversely affected by changes in policies of the Italian or Chinese government, other political developments in or affecting Italy and China, and regulatory and legal changes or administrative practices of the Italian and Chinese authorities, over which we have no control.
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(15)Energy Shortages And Increased Energy Costs Could Adversely Affect Our Business.
Any shortage of energy could cause disruptions in our manufacturers operations as well as our operations. Higher electricity costs or disruptions in the supply of electricity or natural gas could adversely affect our financial condition and results of operations. Any power outage for an extended period could have an impact on our product which must be stored at a constant temperature below 27º Celsius.
(16)The Significant Share Ownership Of Our Controlling Shareholders May Have An Adverse Effect On The Future Market Price Of Our Shares Should They Become Traded On An Exchange.
Chris Lai Fong Ng beneficially owns directly in the aggregate 75% of our outstanding shares. A disposition by Ms. Ng of a significant number of our shares, or the perception that such a disposition might occur, could adversely affect the trading price of our shares should they become traded on an exchange.
(17)Our Controlling Shareholders Are Able To Exercise Significant Control Over Our Company.
Ms. Ng is in a position to direct our management and to determine the result of substantially all matters to be decided by majority vote of our shareholders, including the election of a majority of the members of our board of directors, determining the amount of dividends distributed by us, adopting certain amendments to our by-laws, enforcing or waiving our rights under existing agreements, leases and contractual arrangements, and entering into agreements.
Such a concentration of control may have an adverse effect on the holders of stock in our Company as their interests may be adverse to those of the controlling shareholders.
(18)Small Public Companies Are Inherently Risky And We May Be Exposed To Market Factors Beyond Our Control. If Such Events Were To Occur It May Result In A Loss Of Your Investment.
Managing a small public company involves a high degree of risk. Few small public companies ever reach market stability and we will be subject to oversight from governing bodies and regulations that will be costly to meet. Our present officers and directors have limited, if any, experience in managing a fully reporting public company so we may be forced to obtain outside consultants to assist with our meeting these requirements. These outside consultants are expensive and can have a direct impact on our ability to be profitable. This will make an investment in our Company a highly speculative and risky investment.
(19) We Currently Rely On One Major Supplier of Our Products And Equipment.
We currently rely on one (1) major supplier of our health and beauty products and equipment, Mavi Sud. We are currently the sole distributor of Mavi products in Hong Kong. In the event we lost the exclusive rights to this territory as the sole distributor, our sales and net income would be dramatically affected and investors would be at a high risk to lose all or a part of their investment.
Risks Associated with this Offering
(20) There Is No Public Market For Our Shares, And There Is No Assurance That One Will Develop Due To The Limited Demand For Stocks In The Business Services We Offer.
Purchasers of these shares are at risk of no liquidity for their investment. Prior to this registration, there has been no established trading market for our securities, and we do not know that a regular trading market for our securities will develop after completion of this offering. Our shareholders are offering shares for sale in a company that has very limited offering of products to the U.S. Due to the limited product offering we anticipate that demand for our shares will not be very high. If a trading market does develop for the securities offered hereby, we do not know if it will be sustained. We plan to seek to obtain the services of a market maker to file an application with the Financial Industry Regulatory Authority (“FINRA”) for quotation on the “OTCBB” (“Over-the-Counter Bulletin Board”). We do not know if such quotation will be obtained or if an established market for our common stock will be developed.
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(21) There Has Been No Independent Valuation Of The Stock, Which Means That The Stock May Be Worth Less Than The Purchase Price.
The per share purchase price has been determined by us without independent valuation of the shares. We established the offering price based on management’s estimate of the value of the shares. This valuation is highly speculative and arbitrary. There is no relation to the market value, book value, or any other established criteria. We did not obtain an independent appraisal opinion on the valuation of the shares. The shares may have a value significantly less than the offering price and the shares may never obtain a value equal to or greater than the offering price.
(22) Investors May Never Receive Cash Distributions Which Could Result In An Investor Receiving Little Or No Return On His Or Her Investment.
Distributions are payable at the sole discretion of our board of directors. We do not know the amount of cash that we will generate, if any, once we have more productive operations. Cash distributions are not assured, and we may never be in a position to make distributions.
(23) Without A Public Market There Is No Liquidity For Our Shares, And Our Shareholders May Never Be Able To Sell Their Shares, Which May Result In A Total Loss Of Their Investment.
Our common shares are not listed on any exchange or quotation system. There is no market for our shares. Consequently, our shareholders will not be able to sell their shares in an organized market place unless they sell their shares privately. If this happens, our shareholders might not receive a price per share which they might have received had there been a public market for our shares. Once this registration statement becomes effective, it is our intention to apply for a quotation on the Over-the-Counter-Bulletin-Board (“OTCBB”) whereby:
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We will have to be sponsored by a participating market maker who will file a Form 211 on our behalf since we will not have direct access to the FINRA personnel; and
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We will not be quoted on the OTCBB unless we are current in our periodic reports filed with the SEC.
From the date of this prospectus, we estimate that it will take us between nine to twelve months to be approved for a quotation on the OTCBB. However, we cannot be sure we will be able to obtain a participating market maker or be approved for a quotation on the OTCBB, in which case, there will be no liquidity for the shares of our shareholders.
(24) Even If A Market Develops For Our Shares, Our Shares May Be Thinly Traded With Wide Share Price Fluctuations, Low Share Prices, And Minimal Liquidity.
If a market for our shares develops, the share price may be volatile with wide fluctuations in response to several factors, including:
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Potential investors’ anticipated feeling regarding our results of operations;
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Increased competition;
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Our ability or inability to generate future revenues; and
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Market perception of the future of beauty products and equipment.
In addition, if our shares are quoted on the OTCBB, our share price may be affected by factors that are unrelated or disproportionate to our operating performance. Our share price might be affected by general economic, political, and market conditions, such as recessions, interest rates, or international currency fluctuations. In addition, even if our stock is approved for quotation by a market maker through the OTCBB, stocks traded over this quotation system are usually thinly traded, highly volatile and not followed by analysts. These factors, which are not under our control, may have a material effect on our share price.
(25) We Anticipate The Need To Sell Additional Authorized Shares In The Future. This Will Result In A Dilution To Our Existing Shareholders And A Corresponding Reduction In Their Percentage Ownership In China Beauty.
We may seek additional funds through the sale of our common stock. This will result in a dilution effect to our shareholders whereby their percentage ownership interest in China Beauty is reduced. The magnitude of this dilution effect will be determined by the
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number of shares we will have to issue in the future to obtain the funds required. The sale of additional stock to new shareholders will reduce the ownership position of the current shareholders. The price of each share outstanding common share may decrease in the event we sell additional shares.
(26) Since Our Securities Are Subject To Penny Stock Rules, You May Have Difficulty Reselling Your Shares.
Our shares are "penny stocks" and are covered by Section 15(g) of the Securities Exchange Act of 1934 which imposes additional sales practice requirements on broker/dealers who sell China Beauty Group, Inc.’s securities including the delivery of a standardized disclosure document; disclosure and confirmation of quotation prices; disclosure of compensation the broker/dealer receives; and, furnishing monthly account statements. For sales of our securities, the broker/dealer must make a special suitability determination and receive from its customer a written agreement prior to making a sale. The imposition of the foregoing additional sales practices could adversely affect a shareholder's ability to dispose of his stock.
A NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and uncertainties. We use words such as "anticipates," "believes," "plans," "expects," "future," "intends," and similar expressions to identify these forward-looking statements. Prospective investors should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by China Beauty Group, Inc. described in "Risk Factors" and elsewhere in this prospectus. For example, a few of the uncertainties that could affect the accuracy of forward-looking statements include:
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an abrupt economic change resulting in an unexpected downturn in demand;
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governmental restrictions or excessive taxes on our products;
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over-abundance of companies supplying health and beauty products;
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economic resources to support the promotion of new products;
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expansion plans, access to potential clients, and advances in technology; and
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a lack of working capital that could hinder the promotion and distribution of products and services to a broader based population.
USE OF PROCEEDS
Upon registration with the U.S. Securities and Exchange Commission, 1,000,000 of our outstanding shares of common stock will be eligible for sale under the 1933 Securities Act. We will not receive any proceeds from the sale of the common stock offered through this prospectus by the selling stockholders. We will however incur all costs associated with this registration statement and prospectus.
DETERMINATION OF OFFERING PRICE
The price of the shares we are offering was arbitrarily determined. The offering price bears no relationship whatsoever to our assets or earnings. Among factors considered were:
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Our prior operating history and company value,
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Our current share book value and previous sale prices, and
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DILUTION
The common stock to be sold by the selling security holders is common stock that is currently issued and outstanding. Accordingly, there will be no dilution of equity interests to our existing stockholders.
IMPACT OF THE "PENNY STOCK" RULES ON BUYING OR SELLING OUR COMMON STOCK
The SEC has adopted penny stock regulations which apply to securities traded over-the- counter. These regulations generally define penny stock to be any equity security that has a market price of less than $5.00 per share or an equity security of an issuer with net tangible assets of less than $5,000,000 as indicated in audited financial statements, if the corporation has been in continuous operations for less than three years. Subject to certain limited exceptions, the rules for any transaction involving a penny stock require the delivery, prior to the transaction, of a risk disclosure document prepared by the SEC that contains certain information describing the nature and level of risk associated with investments in the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Monthly account statements must be sent by the broke r-dealer disclosing the estimated market value of each penny stock held in the account or indicating that the estimated market value cannot be determined because of the unavailability of firm quotes. In addition, the rules impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and institutional accredited investors (generally institutions with assets in excess of $5,000,000). These practices require that, prior to the purchase, the broker-dealer determined that transactions in penny stocks were suitable for the purchaser and obtained the purchaser's written consent to the transaction. If a market for our common stock does develop and our shares trade below $5.00 per share, it will be a penny stock. Consequently, the penny stock rules will likely restrict the ability of broker-dealers to sell our shares and will likely affect the ability of purchasers in the offering to sell our shares in the secondary market.
Trading in our common stock will be subject to the "penny stock" rules.
SELLING SECURITY HOLDERS
This prospectus will be used for the offering of shares of our common stock owned by selling security holders. The selling security holders may offer for sale up to 1,000,000 of the 4,000,000 shares of our common stock issued to them. Selling security holders, both non-affiliates and affiliates, must sell their shares at the fixed price of $1.00 per share for the duration of this offering. We will not receive any proceeds from such sales. The sale of the securities by the selling security holders is subject to the prospectus delivery and other requirements of the Securities Act. All selling security holders have been advised to notify any purchaser of their shares that none of the proceeds from the sale of their stock will go to the Company. All expenses of this offering are being paid for by us on behalf of selling security holders. The following table sets forth information on our selling security shareholders.
Table 1.0 Selling Security Holders
Name of security holder | Shares beneficially owned as of the date of this prospectus1 | Percent owned as of the date of this prospectus | Maximum number of shares to be sold pursuant to this prospectus | Percent owned after offering is complete2 | Position, office or other material relationship to the Company within last three years |
Chris Lai Fong Ng | 2,056,000 | 51.4% | 000 | 51.4% | CEO, President, Secretary, Treasurer, Director |
Lu Weiwen | 756,000 | 18.90% | 000 | 18.90% |
|
Sai Wing Wong | 188,000 | 4.70% | 000 | 4.70% |
|
Callie T. Jones | 60,000 | 1.50% | 60,000 | 0.00% |
|
Chase Chandler | 60,000 | 1.50% | 60,000 | 0.00% |
|
David M. Reese | 40,000 | 1.00% | 40,000 | 0.00% |
|
Wai Kau Winnie Lo | 40,000 | 1.00% | 40,000 | 0.00% |
|
Chan Tsz King | 40,000 | 1.00% | 40,000 | 0.00% |
|
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Chi Ming Alvin Chan | 40,000 | 1.00% | 40,000 | 0.00% |
|
Hoi Wah Hui | 40,000 | 1.00% | 40,000 | 0.00% |
|
Yi Lam Yau | 40,000 | 1.00% | 40,000 | 0.00% |
|
Hong Nei Connie Lum | 40,000 | 1.00% | 40,000 | 0.00% |
|
Yu Fan Cherlia Cheung | 40,000 | 1.00% | 40,000 | 0.00% |
|
Roger Chi-him Yip | 40,000 | 1.00% | 40,000 | 0.00% |
|
Hon Kau Wan | 20,000 | 0.50% | 40,000 | 0.00% |
|
Chun Wa Wong | 20,000 | 0.50% | 40,000 | 0.00% |
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Ching Ting Law | 40,000 | 1.00% | 40,000 | 0.00% |
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Chi Wa Ng | 40,000 | 1.00% | 40,000 | 0.00% |
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Yuet Ha Wong | 40,000 | 1.00% | 40,000 | 0.00% |
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Kam Lan Ho | 40,000 | 1.00% | 40,000 | 0.00% |
|
Chi Chung Yip | 40,000 | 1.00% | 40,000 | 0.00% |
|
Ka Man Ho | 40,000 | 1.00% | 40,000 | 0.00% |
|
Kam Lam Law | 40,000 | 1.00% | 40,000 | 0.00% |
|
Wai Man Florence Yip | 40,000 | 1.00% | 40,000 | 0.00% |
|
Lau Shing Ip | 40,000 | 1.00% | 40,000 | 0.00% |
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Michael J. Daniels | 40,000 | 1.00% | 40,000 | 0.00% |
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Lynnette Harrison | 40,000 | 1.00% | 40,000 | 0.00% |
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Lau Pui Yip | 40,000 | 1.00% | 40,000 | 0.00% |
|
| 4,000,000 | 100.0% | 1,000,000 | 75% |
|
1On October 29, 2007, the Company incorporated in the State of Florida to re-domicile as a domestic corporation. The par value of the shares was established at $.001 per share. 2 The percentage held in the event the Selling Security Holders sell all of their 1,000,000 shares in the Offering. |
All of the shares offered by this prospectus may be offered for sale, from time to time, by the selling shareholders, pursuant to this prospectus, in one or more private or negotiated transactions, in open market transactions in the over-the-counter market, or otherwise, or by a combination of these methods, at fixed prices for the duration of this offering. The selling shareholders may effect these transactions by selling their shares directly to one or more purchasers or to or through broker-dealers or agents. The compensation to a particular broker-dealer or agent may be in excess of customary commissions. Each of the selling shareholders has not been declared an "underwriter" within the meaning of the Securities Act in connection with each sale of shares. Upon execution of a stock subscription agreement each purchaser specifically acknowledged that he/she was acquiring the shares for their personal investment and not with a view to resale. The selling shareholders will pay all commissions, transfer taxes and other expenses associated with their sales. In the event the selling security holders sell all of their shares in the secondary offering they will own no shares in the Company upon completion of the secondary offering.
Each selling shareholder acquired their shares under the exemption provided by Rule 4(2) or Rule 4(6) of the Securities Act of 1933, as amended or exempt under Regulation S of the Securities Act of 1933, as amended. The shares were not a part of a public offering.
PLAN OF DISTRIBUTION
This prospectus is part of a registration statement that enables the selling security holders to sell their shares on a continuous basis for a period of nine months after this registration statement is declared effective. The selling security holders may sell some or all of their common stock in one or more transactions, including block transactions:
·
On such public markets as the common stock may from time to time be trading,
·
In privately negotiated transactions,
·
Through the writing of options on the common stock,
·
In short sales, or
·
In any combination of these methods of distribution.
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The sales price to the public is fixed at $1.00 per share for nine months after our registration statement is declared effective. In the event the shares of our common stock are traded on the OTCBB or other such exchange prior to the nine-month period, the shares will continue to be sold at the fixed price of $1.00 per share or at currently prevailing market prices if and when our shares are traded on an exchange. Although we intend to apply to have our common stock traded on the OTCBB, a public market for our common stock may never materialize.
Upon effectiveness of this registration statement, the selling security holders named in this prospectus may also sell their shares directly to market makers acting as agents in unsolicited brokerage transactions. Any broker or dealer, participating in such transactions as agent, may receive a commission from either the selling security holder or, if they act as agent for the purchaser of such common stock, from the purchaser. The selling security holders will likely pay the usual and customary brokerage fees for such services. The maximum commission or discount to be received by any member of the Financial Industry Regulatory Authority or independent broker-dealer will not be greater than eight percent (8%) for the sale of any securities being registered.
We can provide no assurance that all or any of the common stock offered will be sold by the selling security holders named in this prospectus.
As of December 15, 2007, we have expended approximately $70,100 of the estimated $104,030.70 cost of this offering. We are bearing all costs relating to the registration of the common stock. The selling security holders, however, will pay any commissions or other fees payable to brokers or dealers in connection with any sale of the common stock.
The selling security holders named in this prospectus must comply with the requirements of the Securities Act and the Exchange Act in the offer and sale of shares of our common stock. The selling security holders are not underwriters as defined in the 1933 Securities Act, as amended and any broker-dealers who execute sales for the selling security holders are "underwriters" within the meaning of the Securities Act in connection with such sales. Upon execution of a stock subscription agreement each purchaser specifically acknowledged that he/she was acquiring the shares for their personal investment and not with a view to resale. In particular, during such times as the selling security holders sell their common stock, they must comply with applicable law and may, among other things, be required:
·
Not to engage in any stabilization activities in connection with our common stock;
·
Furnish each broker or dealer through which shares of our common stock may be offered, such copies of this prospectus, as amended from time to time, as may be required by such broker or dealer; and
·
Not to bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities other than as permitted under the Exchange Act.
The selling security holders should be aware that the anti-manipulation provisions of Regulation M under the Exchange Act will apply to purchases and sales of shares of common stock by the selling security holders, and that there are restrictions on market-making activities by persons engaged in the distribution of shares. Under Regulation M, the selling security holders or their agents may not bid for, purchase, or attempt to induce any person to bid for or purchase, shares of our common stock while such selling security holder is distributing shares covered by this prospectus. Accordingly, the selling security holders are not permitted to cover short sales by purchasing shares while the distribution is taking place. The selling security holders are advised that if a particular offer of common stock is to be made on terms constituting a material change from the information set forth above with respect to the Plan of Distribution, then, to the extent req uired, a post-effective amendment to the accompanying registration statement must be filed with the SEC.
LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings nor are any contemplated by us at this time.
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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
The names and ages of our directors and executive officers are set forth below. Our By-Laws provide for not less than one and not more than fifteen directors. All directors are elected annually by the stockholders to serve until the next annual meeting of the stockholders and until their successors are duly elected and qualified.
Table 2.0 Directors and Executive Officers
Name | Age | Position |
Chris Lai Fong Ng | 37 | President/CEO/CFO/Chairman of the Board of Directors/Secretary/Treasurer1 |
1This is the first Directorship of a reporting company held by Ms. Ng. |
Background of Executive Officers and Directors
-Chris Lai Fong Ng has served as our President and Chairwoman since 1999. Ms. Ng received her education in Hong Kong during the 80's. Ms. Ng is fluent in Chinese (both Cantonese and Mandarin). Ms. Ng has traveled on a regular basis for China Beauty handling purchasing, negotiations with client companies, logistics, and the Company administration and finance. She has more than eight (8) years of entrepreneurial experience in Business to Business import/wholesale business.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial ownership of shares of our common stock with respect to stockholders who were known by us to be beneficial owners of more than 5% of our common stock as of September 30, 2007, and our officers and directors, individually and as a group. Unless otherwise indicated, the beneficial owner has sole voting and investment power with respect to such shares of common stock.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission ("SEC") and generally includes voting or investment power with respect to securities. In accordance with the SEC rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the table are deemed beneficially owned by the optionees, if applicable. Subject to community property laws, where applicable, the persons or entities named in Table 1.0 (See "Selling Security Holders") have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by them.
Table 3.0 Beneficial Ownership
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DESCRIPTION OF SECURITIES
General
We are authorized to issue up to 500,000,000 shares of common stock, $0.001 par value per share, of which 4,000,000 shares are issued and outstanding.
Common Stock
Subject to the rights of holders of preferred stock, if any, holders of shares of our common stock are entitled to share equally on a per share basis in such dividends as may be declared by our Board of Directors out of funds legally available therefore. There are presently no plans to pay dividends with respect to the shares of our common stock. Upon our liquidation, dissolution or winding up, after payment of creditors and the holders of any of our senior securities, including preferred stock, if any, our assets will be divided pro rata on a per share basis among the holders of the shares of our common stock. The common stock is not subject to any liability for further assessments. There are no conversion or redemption privileges or any sinking fund provisions with respect to the common stock and the common stock is not subject to call. The holders of common stock do not have any pre-emptive or other subscription rights.
Holders of shares of common stock are entitled to cast one vote for each share held at all stockholders' meetings for all purposes, including the election of directors. The common stock does not have cumulative voting rights.
All of the issued and outstanding shares of common stock are fully paid, validly issued and non-assessable as determined by our legal counsel, Diane J. Harrison, Esq. whose opinion appears elsewhere as an exhibit to this prospectus.
Preferred Stock
We currently have a class of blank check preferred stock that may be issued by the Board of Directors according to terms established by the Board. However, we have no provisions to issue preferred stock at this time.
Debt Securities
We currently have no provisions to issue debt securities.
Warrants
We currently have no provisions to issue warrants.
Dividend
We have paid no cash dividends on our common stock in the years 2006 and 2007. We anticipate that any earnings, in the foreseeable future, will be retained for development and expansion of our business and we do not anticipate paying any further cash dividends in the near future. Our Board of Directors has sole discretion to pay cash dividends with respect to our common stock based on our financial condition, results of operations, capital requirements, contractual obligations, and other relevant factors.
Shares Eligible for Future Sale
Upon the effectiveness of the registration statement, of which this prospectus forms a part, we will have 1,000,000 outstanding common shares registered for sale by the selling shareholders in accordance with the Securities Act of 1933.
Prior to this registration, no public trading market has existed for shares of our common stock. The sale or availability for sale of substantial amounts of common stock in the public trading market could adversely affect the market prices for our common stock.
Transfer Agent and Registrar
We have engaged the services of Island Stock Transfer Inc., 100 2nd Avenue South, Suite 300N, St. Petersburg, Florida, 33701, to act as transfer agent and registrar.
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INTEREST OF NAMED EXPERTS AND COUNSEL
Madsen & Associates, C.P.A., Inc., independent certified public accountant, whose reports appear elsewhere in this registration statement, was paid in cash for services rendered. Therefore, they have no direct or indirect interest in us. Madsen's report is given based on their authority as an expert in accounting and auditing. Madsen & Associates, C.P.A., Inc. has provided audited financials for China Beauty Group, Inc. for March 31, 2006 and 2007 and reviewed for September 30, 2007.
Diane J. Harrison, Esq., of Harrison Law, P.A., is the counsel who has given an opinion on the validity of the securities being registered which appears elsewhere in this registration statement has no direct interest in the Company.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Amended and Restated Articles of Incorporation, Article X does include a provision for indemnifying a director, officer or control person of the corporation or its stockholders for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such.
Our By-Laws, Article X, Section 3, also permit us to indemnify any Director, Officer, agent or employee as to those liabilities and on those terms and conditions as appropriate and to purchase and maintain insurance on behalf of any such persons whether or not the corporation would have the power to indemnify such person against the liability insured against.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of China Beauty Group, Inc. pursuant to the foregoing provisions, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is unenforceable.
ORGANIZATION WITHIN LAST FIVE YEARS
The Company was incorporated under the laws of the State of Florida on October 29, 2007 under the name China Beauty Group, Inc. The Company originally filed incorporation in Hong Kong in 1998. In early 2007 the Company did a share exchange with a British Virgins Islands corporation formed by China Beauty to domicile in the British Virgin Islands, Beautylink Corporation for purposes of filing a registration statement with the U.S. Securities and Exchange Commission. After diligent discussions with its counsel and accountants the Company formed a U.S. corporation in Florida. A share exchange between the British Virgin Islands Corporation Beautylink Corporation and the Florida Corporation China Beauty Group, Inc. was completed to re-domicile the Company to the United States as a domestic corporation.
We have not been involved in any bankruptcy, receivership or similar proceedings since inception nor have we been party to a reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business. We do not foresee any circumstances that would cause us to alter our current business plan within the next twelve months. In the event we need to raise additional capital, we will seek funds from private sources.
The Company has had no related transactions with any related persons, promoters or control persons that have had an interest in our business.
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DESCRIPTION OF BUSINESS
Business Development
China Beauty began operations in September of 1999. The Company was incorporated on March 14, 2000 under the Companies Ordinance Chapter 32 in Hong Kong under the name Lotus & Company. On the 27th day of September 2007 the Company formed a British Virgin Islands corporation under the name of Beautylink Corporation for the purposes of a share exchange to begin the process of re-domiciling to Florida to be a domestic company in the United States. On October 29, 2007 the Company formed China Beauty Group, Inc., a Florida corporation to complete a share exchange for purposes of completing the re-domiciling to the United States.
In its early stages China Beauty spent a great deal of time developing relationships with major suppliers of health and beauty products and equipment. These relationships are a necessary part of our import process. The health and beauty products and equipment we import are sold to our customers located mainly in Hong Kong. We operate our business under the trade name of First Lotus in Hong Kong.
During the early years of the development of the Company our CEO Ms. Ng spent a great deal of time traveling and learning the different beauty products and equipment that were available for importation into Hong Kong. It was this dedication to locating what the Company believes to be the best products and equipment that has allowed us to remain in business and grow to a company with $1mm in sales annually.
Since inception, China Beauty Group, Inc. has engaged in the import of health and beauty products and equipment mainly from Italy. Health and beauty products and equipment are available from many companies. We spend time researching the various products that will best fit the needs of our customers and the availability of products and equipment for importation into Hong Kong. Different products have differences that may not be suitable for our Asian customers so selection of the right products and equipment is necessary. The decisions we made regarding these three differences are crucial to our business.
China Beauty collects information from its customers and their demands for health and beauty products and equipment and our buyer then determines the best source to obtain the products. Since health and beauty products and equipment have historically been susceptible to trends that may last a short time it is necessary for us to keep abreast of the current market trends in the demand for our products. As a result of the ever changing trend in demand for our products, negotiation of prices and the terms of trade must be completed prior to the execution of any purchase.
We currently have fifteen (15) regular paid employees. Our staff includes our CEO as well as sales & marketing, purchasing, training staff, finance and accounting and administrative personnel. For the years ended March 31, 2006 and 2007 our CEO Ms. Ng received a total of $126,038.
Our Business
(1) Principal Products or Services and Their Markets
We import health and beauty products and equipment from various countries with our main supplier being located in Italy. Currently we import approximately 95% of our products from our supplier in Italy. The products and equipment from our main supplier represent approximately 98% of our total revenue. The remainder of our importing of products and equipment is from approximately 10 customers located throughout the world. These customers represent approximately 5% of our total revenue. The sale of our health and beauty products represents approximately 65% of our total sales due to the higher profit margins. The remaining 35% of our sales are in our equipment product line.
(2) Distribution Methods of our products
The primary delivery of our products is through our office location in Hong Kong. Shipping and delivery of our products to locations within geographical driving distance are shipped via truck or our customer comes to our location to pick up their product. We have a small product storage room at our corporate offices as well as a separate small warehouse for product storage where customers pick up their product.
When we have overstocked product we store this product in a warehouse in Southern China. This warehouse is owned by one of our distributors and we are charged by the cubic meter on a daily basis for any storage charges.
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Our training staff is certified by our main supplier, MaviSud in the application of product and the use of the equipment we sell. Our lead trainer, Ng, Lai Fan Agnes, has qualified under the City & Guilds of London and received her International Diploma in Teaching and Training. She has also studied at the I-Best International Beauty Training Institute for laser use in aesthetics; body therapy; facial therapy; and make-up. She has also received her certificate in International Professional Beauty Management sponsored by the International Senior Professional Beautician Society.
As a result of the specialized training received by Ms. Ng our Company is able to provide the same specialized training to each of the new clients that we obtain. In addition to the training received from the City & Guilds of London, I-Best International Beauty Training Institute, and the International Senior Professional Beautician Society Ms. Ng receives specialized training from our main supplied of products and equipment MaviSud.
The training by Mavi® is specialized and directly related to their products and equipment. We believe that it is this training that sets our Company apart from the many suppliers of products and equipment in the Hong Kong market.
The following figures present the types of certificates that are issued upon completion of training.
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Figure 1
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Figure 2
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Figure 3
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Figure 4
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Figure 5
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Figure 6
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Figure 7
In addition to the above certificates that are issued upon successful training, the Company receives certification forthe products and equipment that it sells. The following figures are certificates that have been received by the Company.
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Figure 8
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Figure 9
Our Company has also received numerous awards from various publications that have featured our Company in its magazines. The following figures are from various publications that have highlighted both our Company and its products.
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Figure 10
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Figure 11
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Figure 12
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Figure 13
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These various articles present a picture of our Company and its products that we believe is recognized as a leader in our industry in Hong Kong.
(3) Status of Any Publicly Announced New Product or Service.
Since we do not manufacture our own products, we have not developed any new or unique products or services that would make us stand above our competition. Instead, we have chosen to locate what we believe is the availability of the best health and beauty products and equipment that fall within our capability to import. We have developed a reputation for finding the finest products available for our customers.
(4) Our Competition
In order to compete effectively in the health and beauty products and equipment industry a company must understand and then respond to the needs of the customers. Many of our competitors have greater financial resources than we have, enabling them to finance acquisition and development opportunities or develop and support their own operations. In addition, many of these companies can offer additional products and services not provided by us. Many may also have greater name recognition. Our competitors may have the luxury of sacrificing profitability in order to capture a greater portion of the market. They may also be in a position to accept lower prices than we would for the same customer. Consequently, we may encounter significant competition in our efforts to achieve our internal and external growth objectives. Our competitors have methods of operation that have been proven over time to be successful.
While our business model has been successful over time, we continue to build upon our Company’s success with its current customer base. Our competitors operate from other cities with well developed communication infrastructure and banking systems.
(5) Sources and Availability of Raw Materials
At this time we do have a critical dependence on one (1) supplier that could adversely effect our operations. Over the last eight years we have developed relationships with many suppliers. However, 95% of our sales are due to the products we distribute from our main supplier Mavi Sud. While we do not manufacture our products from raw materials, only import for wholesale distribution, the raw materials used by our supplier are critical. In the event raw materials used in the products we receive are tainted and causes harm to our customers our operations would be severely tested. The Hong Kong Quality Management Assurance Agency controls the certification of our Company for compliance with the requirements of ISO 9001 and our quality management system standard applicable to Design and Provision of the training courses we use to teach users of the products and equipment we sell.
(6) Dependence on Limited Customers
We do not have to rely on any one or a limited number of customers for our business. While 95% of our products and equipment come from one (1) manufacturer in Italy these products and equipment are sold to hundreds of customers in Hong Kong. We expect to increase our customer base as we continue to grow our business. Our target market is currently limited geographically so we do have to rely on just a relatively small geographical area for business. This geographical limitation will change as we begin to expand into mainland China. We have been granted the distributor rights to this territory and we hope to begin expanding into this market as soon as is practical. The Company has steadily increased its revenues due to an expanding client base. We believe that our client base will continue to expand.
(7) Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts
At the present time we own and operate the domain namewww.firstlotus.com.hk, and we have a trademark registered in the Trade Mark Registry Intellectual Property Department of the Hong Kong Special Administrative Region:
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This trademark is for pre-defined sets of massage gestures respectively for various cosmetic therapies while applying appropriate cosmetic products on the skin during massage. This registration was complete on December 21, 2005. In addition we own the tradenames and marks for Dr. Me Body Spa”, “Dr. Me Lotus Spa,” and “First Lotus”:
We also have an exclusive distribution agreement with Mavi Sud of Italy. In the future, our success may depend in part upon our ability to preserve our trade secrets, obtain and maintain patent protection for any new technologies, products and processes, and operate without infringing upon the proprietary rights of other parties. However, we may rely on certain proprietary technologies, trade secrets, and know-how that are not patentable. Although we may take action to protect our unpatented trade secrets and our proprietary information, in part, by the use of confidentiality agreements with our employees, consultants and certain of our contractors, we cannot guaranty that:
(a)
these agreements will not be breached;
(b)
we would have adequate remedies for any breach; or
(c)
our proprietary trade secrets and know-how will not otherwise become known or be independently developed or discovered by competitors.
We cannot guaranty that our actions will be sufficient to prevent imitation or duplication of our products and services by others or prevent others from claiming violations of their trade secrets and proprietary rights.
Our website is currently operational in Chinese and is being converted to have available and English version.
(8) Need for Government Approval of Principal Products or Services
None of the products we import require specific governmental approval. We must maintain the necessary governmental permits for importing and our products must meet any safety standards set. The products we sell do comply with ISO standards as eveidenced by the following figures.
(9) Government Regulation
In Hong Kong today, there is no specific legislation regulating the operation of the beauty industry, including the qualification of the employed personnel or the devices used. There is also no specific legislation regulating the import or sale of beauty-related and medical devices, except for those containing pharmaceutical or radioactive ingredients. However, there are general regulations on
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health and safety. The Hong Kong Consumer Council monitors the quality of products and services through listening to complaints by consumers. In China, both the central and local governments have regulations on the beauty salons and fitness centers. The Board of Health has regulations on beauty products and devices. The Board requires licensing by companies before they start their business in China. There is also a consumer council in China that handles complaints of consumers, and can impose fines on companies in violation of consumer laws.
Once we have commenced operations in mainland China, we will need to comply with all central and local government regulations.
(10) Research and Development During Last Two Fiscal Years
During the last two fiscal years, no money was spent directly on research and development since we do not manufacture our own products. We have, however, spent minimal monies on travel expenses for our CEO to research health and beauty products from different potential suppliers.
(11) Cost and Effects of Compliance with Environmental Laws
As an import company of health and beauty products and equipment we are not directly subject to any federal, state or local environmental laws.The companies that ship us the products we ship to our customers do have a duty to comply with any environmental impact rules and regulations pertaining to the products that we import.
(12) Our Employees
As of September 30, 2007, we have fifteen (15) regular paid employees. We currently have no key employees, other than Ms. Ng our CEO/President/Director, who are not receiving pay or other stock benefits for their performance. There are no key consulting contracts with any individuals or companies at this time.
Reports to Security Holders
We will file reports and other information with the U.S. Securities and Exchange Commission (“SEC”). You may read and copy any document that we file at the SEC's public reference facilities at 100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information about its public reference facilities. Our SEC filings will be available to you free of charge at the SEC's web site at <www.sec.gov>.
We are not required by the Florida Revised Statutes to provide annual shareholder reports, but we are required to file annual reports with the Secretary of State. At the request of a shareholder, we will send a copy of an annual report to include audited financial statements. In the event we become a reporting company with the SEC, we will file all necessary quarterly and annual reports.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following management's discussion, analysis of financial condition, and results of operations should be read in conjunction with our financial statements and notes thereto contained elsewhere in this prospectus. This section of our prospectus includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this prospectus. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
We are an operating company that is seeking to continue to grow its operations. We have an operating history and have generated revenues from our activities that have produced net incomes and losses in years in which it has been fully operational. We have yet to undertake any direct expansion activity. Any growth that is achieved by the Company is done so through the skill of our management and sales team. We do not have a specific business plan for expansion. Our growth is a natural progression of our business gaining customers and sales.
Our Board of Directors believes that we can continue as an on-going business during the next twelve months since we are generating profits from our operations that can pay for our operations. We may raise cash from sources other than our operations. Our only other source for cash at this time is investment by others in the Company. We have not solicited investment from any investment banks, private equity firms or venture capital firms at this time.
Our future financial success will be dependent on the continued success of our operations. Our future cash flows, if any, are impossible to predict at this time. The realization value from any growth is largely dependent on factors some of which are in our control and others that are beyond our control such as the availability of health and beauty products available to us from our main supplier.
Results of Operations
General
The following table shows our revenues, expenditures and net income for the years from 2006, 2007 & 2007 YTD.
Table 4.0 Revenues, Expenditures and Net Income
YEAR | REVENUE | EXPENSES | NET INCOME (LOSS) |
September 30, 2007 YTD | $ 655,604 | $ 639,127 | $16,477 |
March 31, 2007 | $1,077,740 | $1,059,998 | $17,742 |
March 31, 2006 | $ 904,413 | $ 901,801 | $ 2,612 |
Results of Operations for the Period Ended September 30, 2007
For the period ended September 30, 2007 our revenues of $655,604 were a significant increase of 28% over the same period in 2006. Our largest revenue increase was in the sale of our equipment which was an increase of $132,954 or approximately 68%. We attribute this increase to our sales staff devoting more time to the continued development of our business model thus increasing our client base and the quality of the equipment being recognized by our customer base. Expenses during the period ended September 30, 2007 compared to the same period ending September 31, 2006 reflect an increase of $29,054. While the actual dollar amount of our expenses increased, the percentage increase actually decreased from 99% to 97%. We do expect our expenses to remain below the level of expenses incurred in 2006. This is due to the fact that we have been able to decrease our advertising and exhibition expenses. We anticipate that o nce our registration is complete our President will be able to concentrate more on business development and our revenues will increase along with our expenses at or below the percentage level in the six month period ending September 30, 2007. Although we will have the SEC reporting requirements, we believe our legal expenditures will not change our expense percentages due to our revenues continuing to increase. Since we have paid the costs of this registration statement as they came due, our expenses should remain constant. We expect that when an officer/director compensation plan is developed that our expenses will rise. Our cash flow showed a net increase in cash and cash equivalents of $17,328. This increase relates directly to the acquisition of new customers. The Company believes that our cash and cash equivalents will remain stable and we will increase our cash and cash equivalents as we continue to develop more business.
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Results of Operations for the Year Ended March 31, 2007
During the year ended March 31, 2007, we had revenues of approximately $1,077,740. While we had a net income of $17,742 our expenses before taxes were $1,057,156 or 98% of our revenue before income taxes. Our provision for income taxes of $3,180 allowed our expenses percentage of revenue to remain at 98%. We had an actual decrease in expenses compared to revenues from 2006 to 2007 of 1%. We had ($50,427) total cash used by operating activities.
We did not have positive cash flows from investing activities for the year ended March 31, 2007. Our investing activities used ($8,495) of cash.
The result of the above activities was a total decrease in cash of $64,006 for the year ended March 31, 2007. When this decrease was added to the Company’s cash and cash equivalents of $8,141at the beginning of the year, the result was a total of ($55,865) of cash and equivalents as of the Company’s March 31, 2007 year-end. We do not foresee any circumstances or events that will have an adverse impact on our operations. We do anticipate an increase in our business based on our current method of operation and the activities of our officers and directors. Thus, we expect to satisfy our current cash requirements indefinitely. However, in the event we need additional cash we will continue to exercise our ability to use our credit facilities. During the year ending March 31, 2008 the Company is on a pace to exceed the revenues generated in 2007 as well as hold expenses in line to increase our net income at the end of the year.
Results of Operations for the Year Ended March 31, 2006
During the year ended March 31, 2006, we had revenues of approximately $904,413. While we had a net income of $2,612 our expenses before taxes were $901,801 or 99% of our revenue before income taxes. We had no provision to make for income taxes allowing our expenses percentage of revenue to remain at 99%. We had $69,690 total cash provided by operating activities.
We did not have positive cash flows from investing activities for the year ended March 31, 2006. Our investing activities used ($49,273) of cash.
The result of the above activities was a total increase in cash of $18,088 for the year ended March 31, 2006. When this increase was added to the Company’s cash and cash equivalents of $($9,947) at the beginning of the year, the result was a total of $8,141 of cash and equivalents as of the Company’s March 31, 2006 year-end. We do not foresee any circumstances or events that will have an adverse impact on our operations. We anticipated an increase in our business based on our current method of operation and the activities of our officers and directors. Thus, we continued to satisfy our cash requirements through our year ended. However, when we needed additional cash we exercised our ability to use our credit facilities. Management believes that revenues in 2007 will increase and expenses will decrease permitting the Company to remain operational for at least the next twelve (12) months.
Liquidity & Capital Resources
Our internal liquidity is provided by our operations. Our assets exceed our liabilities by over $70,000.00 with cash and cash equivalents of $6,473 and receivables of $244,315 respectively. Management believes that its current revenues are sufficient to cover our monthly operating expenses of approximately $106,523. Management believes that in the fiscal year ending March 31, 2008 the Company will show a profit close to $33,000 and operations should be sustainable in the long-term of at least twelve (12) months as a result of this net income and increased improvement in our cash flow. In the event the Company needs additional funds, the Company will continue to use its credit facilities.
While the capital resources of the Company are stable from a cash perspective, the credit of the Company for debt financing if necessary is extremely strong. The Company has established lines of credit with banks. In the event we are unable to generate sufficient funds to continue our business efforts or if the Company is pursued by a larger Company for a business combination we will analyze all strategies to continue the Company and increase shareholder value. Only under these circumstances would we consider a merger, acquisition, joint venture, strategic alliance, a roll-up, or other business combination to increase business and potentially increase the shareholder value of the Company. Management believes its responsibility to increase shareholder value is of paramount importance, which means the Company should consider the aforementioned alternatives in the event funding is not available on favorable terms to the Company when and if nee ded.
The following table sets forth information relative to each banks terms.
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Table 5.0 Bank Credit Facilities
Name of Bank | Amount of Credit Line | Terms of Repayment | Current Balance |
Hitachi Capital (Hong Kong) Limited | $545,584 HKD1 | 24 Months | $525,780 HKD |
Standard Chartered Bank | $800,000 HKD1 | 12 Months | $738,467 HKD |
1HKD represents Hong Kong Dollars.
For the exact amount owed in USD a currency translation would need to be done on a particular date for the amount due in USD.
DESCRIPTION OF PROPERTY
Our principal business location is at Block B, 10th Floor, Fuk On Factory Building, 1123 Canton Road, Mongkok, Kln, Hong Kong. Our phone number is: 011 852-2543-2727. We own our furniture, computers, ancillary equipment, and office supplies. Our offices are located on the 10th floor of a commercial office building in Hong Kong. We occupy approximately 4,500 square feet that cost $20,000 Hong Kong dollar per month or $2,564.00 USD per month. We have approximately 2,500 of office space that contains our corporate offices and our training center; 500 square feet of product storage space; and 1,500 at a separate warehouse location.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
To the best of our knowledge there are no transactions involving any director, executive officer, or any security holder who is a beneficial owner or any member of the immediate family of the officers and directors other than the following.
AUDIT COMMITTEE
We do not have an audit committee that is comprised of any independent director. As a company with less than $25,000,000 in revenue we rely on our CEO/President Chris Lai Fong Ng for our audit committee financial expert as defined in Item 401(e) of Regulation S-B promulgated under the Securities Act. Our Board of Directors acts as our audit committee. The Board has determined that the relationship of Ms. Ng as both our Company CEO/President and our audit committee financial expert is not detrimental to the Company. Ms. Ng has an understanding of GAAP and financial statements; the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves in a fair and impartial manner; has experience analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to or exceed the breadth and complexity of issues that can reasonably be expected to be raised by the small business issuer’s financial statements; an understanding of internal control over financial reporting; and an understanding of audit committee functions. Ms. Ng has gained this expertise through her experience with over eight years of business experience. She has specific experience coordinating the financials of the Company with public accountants with respect to the preparation, auditing or evaluation of the Company’s financial statements.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is not quoted or traded on any quotation medium at this time. We intend to apply to have our common stock included for quotation on the NASD OTC Bulletin Board. There can be no assurance that an active trading market for our stock will develop. If our stock is included for quotation on the NASD OTC Bulletin Board, price quotations will reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
Should a market develop for our shares, the trading price of the common stock is likely to be highly volatile and could be subject to wide fluctuations in response to factors such as actual or anticipated variations in quarterly operating results, announcements of technological innovations, new sales formats, or new services by us or our competitors, changes in financial estimates by securities analysts, conditions or trends in Internet or traditional retail markets, changes in the market valuations of other equipment and furniture leasing service providers or accounting related business services, announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, capital commitments, additions or departures of key personnel, sales of common
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stock and other events or factors, many of which are beyond our control. In addition, the stock market in general, and the market for instant messaging business services in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. These broad market and industry factors may materially adversely affect the market price of the common stock, regardless of our operating performance.
Consequently, future announcements concerning us or our competitors, litigation, or public concerns as to the commercial value of one or more of our products or services may cause the market price of our common stock to fluctuate substantially for reasons which may be unrelated to operating results. These fluctuations, as well as general economic, political and market conditions, may have a material adverse effect on the market price of our common stock.
At the present time we have no outstanding options or warrants to purchase securities convertible into common stock. There are 3,000,000 shares of common stock that could be sold by a shareholder according to Rule 144. The 3,000,000 shares that are considered 144 eligible will only qualify once our Company has been fully reporting for at least ninety (90) days. A brief description of Rule 144 follows:
The common stock sold in this offering will be freely transferable without restrictions or further registration under the Securities Act, except for any shares purchased by an “affiliate.” An “Affiliate” is a person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control of the issuer. The definition of an "Affiliate" is critical to the operation of Rule 144, promulgated under the Securities Act. Rule 144 provides for restrictions on the amount of securities that can be sold by an affiliate during a given period of time. In general, pursuant to Rule 144, a shareholder who has satisfied a one year holding period may, under certain circumstances, sell within any three month period a number of securities which does not exceed the great of 1% of the then outstanding shares of common stock or the average week ly trading volume of the class during the four calendar weeks prior to such sale. Further, Rule 144 permits, under certain circumstances, the sale of securities, without any quantity limitation, by our shareholders who are not affiliates and who have satisfied a one year holding period.
Cash dividends have not been paid during the last three (3) years. In the near future, we intend to retain any earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. The declaration and payment of cash dividends by us are subject to the discretion of our board of directors. Any future determination to pay cash dividends will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant at the time by the board of directors. We are not currently subject to any contractual arrangements that restrict our ability to pay cash dividends.
We have twenty-seven (27) stockholders of record of our common stock as of September 30, 2007.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long-term compensation of our Chief Executive Officer, and the most highly compensated employees and/or executive officers who served at the end of the fiscal years December 31, 2005 and 2006, and 2007 Year-to-Date and whose salary and bonus exceeded $100,000 for the fiscal years ended December 31, 2005 and 2006, and 2007 Year-to-Date for services rendered in all capacities to us. The listed individuals shall be hereinafter referred to as the "Named Executive Officers."
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Table 6.0 Summary Compensation
Name and principal position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Com-pensation ($) | Non-Qualified Deferred Compen-sation Earnings ($) | All Other Compen-sation ($) | Total ($) |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
Chris Lai Fong Ng,1 President and CEO, CFO, Director | 2007 YTD | 40,000 |
|
|
|
|
|
| 40,000 |
2007 | 60,000 | 5,000 | -0- | -0- | -0- | -0- | -0- | 65,000 | |
2006 | 60,000 | 1,038 | -0- | -0- | -0- | -0- | -0- | 61,038 | |
1There is no employment contract with Ms. Ng at this time. Nor are there any agreements for compensation in the future. A salary and stock options and/or warrants program may be developed in the future. |
Table 7.0 Outstanding equity awards for 2006
Option Awards | Stock Awards | ||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value Of Shares Of Units Of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
Chris Lai Fong Ng, CEO/President/ Director | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- |
Compensation of Directors
We have no standard arrangement to compensate directors for their services in their capacity as directors. Directors are not paid for meetings attended. All travel and lodging expenses associated with corporate matters are reimbursed by us, if and when incurred.
Table 8.0 Director Compensation for 2006
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-Equity incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All other Compensation ($) | Total ($) |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) |
Chris Lai Fong Ng, CEO/President/Director | -0- | -0- | -0- | -0- | -0- | -0- | -0- |
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Additional Compensation of Directors
All of our directors are unpaid. Compensation for the future will be determined when and if additional funding is obtained.
Board of Directors and Committees
Currently, our Board of Directors consists of Ms. Chris Lai Fong Ng. We are not actively seeking additional board members. At present, the Board of Directors has not established any committees.
Employment Agreements
Currently, we have no employment agreements with any of our Directors or Officers.
DISCLOSURE CONTROLS AND PROCEDURES
Our Board of Directors believes that our Chairman/President, Chris Lai Fong Ng, has developed disclosure controls and procedures that are in keeping with the intent of the regulations. As our CEO/President with over eight (8) years of business experience and experience in coordinating financial information for statements with company accountants, Ms. Ng as the full Board of Directors find the Company’s disclosure controls and procedures to meet or exceed those required. Management has the responsibility for establishing and maintaining adequate controls over the financial reporting of our Company. Our controls and procedures include, without limitation, those designed to ensure that information to be disclosed is recorded, processed, summarized and reported within the appropriate time periods and that the information is communicated to management, including its principal executive officer and principal financial officer, as appropriate, regarding timely disclosure.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Our CEO/President, Chris Lai Fong Ng will be providing a full financial reporting and accounting of the Company according to the Generally Accepted Accounting Principles and guidelines established by the American Institute of Certified Public Accountants. The Board of Directors has found no weakness in the controls that have been established and believes that the semi-annual monitoring by the full Board of Directors will keep those who invest in our Company fully informed of the true financial status of the Company at all times. Should there be a change in our internal control over financial reporting, this change or changes will be made available in our reports filed with the Securities and Exchange Commission.
CODE OF ETHICS
We have adopted a code of ethics as of September 30, 2007 that applies to our principal executive officer, principal financial officer, and principal accounting officer as well as our employees. Our standards are in writing and will be posted on our website once our site is operational. Our complete Code of Ethics has been attached to this registration statement as an exhibit. Our annual report filed with the Securities Exchange Commission will set forth the manner in which a copy of our code may be requested at no charge. The following is a summation of the key points of the Code of Ethics we adopted:
·
Honest and ethical conduct, including ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
·
Full, fair, accurate, timely, and understandable disclosure reports and documents that a small business issuer files with, or submits to, the Commission and in other public communications made by our Company;
·
Full compliance with applicable government laws, rules and regulations;
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·
The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
·
Accountability for adherence to the code.
CORPORATE GOVERNANCE
As a small business issuer we are not listed on a national securities exchange or in an inter-dealer quotation system that has requirements that a majority of the board of directors be independent. Further, we have not applied for a listing with a national exchange or in an inter-dealer quotation system which has requirements that a majority of the board of directors be independent. We are not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act respecting any director. We have conducted regular Board of Director meetings on the last business Friday of each quarter for the last calendar year. Each of our directors has attended all meetings. We have no standing committees regarding compensation, audit or other nominating committees. At our annual shareholders meetings, each shareholder is given specific information on how he/she can direct communications to the officers and directors of the corp oration. All communications from shareholders are relayed to the members of the Board of Directors.
EXPERTS
Certain of the financial statements of China Beauty Group, Inc. included in this prospectus and elsewhere in the registration statement, to the extent and for the periods indicated in their reports, have been audited by Madsen & Associates, C.P.A., Inc., independent certified public accountant, whose reports thereon appear elsewhere herein and in the registration statement.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On December 4, 2007, we engaged Madsen & Associates, C.P.A., Inc., ("Madsen ") as our independent auditor. They are our first auditor and we have had no disagreements with Madsen on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, in connection with its reports.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for China Beauty Group, Inc. by Harrison Law, P.A., 6860 Gulfport Blvd. South, No. 162, South Pasadena, Florida, 33707.
WHERE YOU CAN FIND FURTHER INFORMATION
China Beauty Group, Inc. will be subject to the informational requirements of the Securities Exchange Act of 1934, and in accordance therewith files reports, or information statements and other information with the Securities and Exchange Commission. Such reports and other information can be inspected and copied at the public reference facilities maintained by the Commission at 100 F Street N. E., Washington, D.C. 20549, at prescribed rates. In addition, the Commission maintains a web site that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the Commission. The address of the Commission’s web site ishttp://www.sec.gov.
China Beauty Group, Inc. has filed with the Commission a registration statement on Form SB-2 under the Securities Act of 1933, as amended with respect to the common stock being offered hereby. As permitted by the rules and regulations of the Commission, this prospectus does not contain all the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to China Beauty Group, Inc. and the common stock offered hereby, reference is made to the
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registration statement, and such exhibits and schedules. A copy of the registration statement, and the exhibits and schedules thereto, may be inspected without charge at the public reference facilities maintained by the Commission at the addresses set forth above, and copies of all or any part of the registration statement may be obtained from such offices upon payment of the fees prescribed by the Commission. In addition, the registration statement may be accessed at the Commission’s web site. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete and, in each instance, reference is made to the copy of such contract or document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference.
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Link to Financial Statements Contents
FINANCIAL STATEMENTS
CONTENTS
F-1
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MADSEN & ASSOCIATES CPA’S, INC.
684 EAST VINE STREET STE 3
SALT LAKE CITY, UTAH 84107
(801) 268-2632
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of China Beauty Group, Inc.
We have reviewed the accompanying balance sheet of China Beauty Group, Inc. as of September 30, 2007, and the related statements of income, stockholders’ equity, and cash flows for the six months ended September 30, 2007. These financial statements are the responsibility of the company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), 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.
Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
s/Madsen & Associates CPA’s, Inc.
Madsen & Associates CPA’s, Inc.
Salt Lake City, Utah 84107
December 20, 2007
F-2
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CHINA BEAUTY GROUP, INC.
BALANCE SHEET
At September 30, 2007
|
|
|
| September 30, 2007 | ||||
ASSETS |
|
|
|
| ||||
CURRENT ASSETS |
|
|
|
| ||||
Cash and cash equivalent |
|
| $ | 6,473 | ||||
Accounts receivable |
|
|
| 244,315 | ||||
Inventories |
|
|
| 175,017 | ||||
Deposits and prepayment |
|
|
| 32,192 | ||||
Total current assets |
|
|
| 457,997 | ||||
|
|
|
|
| ||||
PLANT & EQUIPMENT |
|
|
|
| ||||
At cost: |
|
|
|
| ||||
Furniture, fixtures and equipment |
|
|
| 56,099 | ||||
Leasehold improvements |
|
|
| 34,685 | ||||
Less: Accumulated depreciation |
|
|
|
| ||||
Furniture, fixtures and equipment |
|
|
| (37,757) | ||||
Leasehold improvements |
|
|
| (17,244) | ||||
Total plant & equipment, net |
|
|
| 35,783 | ||||
|
|
|
|
| ||||
DUE FROM A DIRECTOR |
|
|
| 83,192 | ||||
|
|
|
|
| ||||
TOTAL ASSETS |
|
| $ | 576,972 | ||||
|
|
|
|
| ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
| ||||
LIABILITIES |
|
|
|
| ||||
CURRENT LIABILITIES |
|
|
|
| ||||
Bank overdraft |
|
| $ | 45,010 | ||||
Bank and other loans |
|
|
| 154,074 | ||||
Accounts payable |
|
|
| 37,672 | ||||
Accrued expenses |
|
|
| 35,341 | ||||
Deferred revenue |
|
|
| 230,587 | ||||
Taxes payable |
|
|
| 3,180 | ||||
Total liabilities |
|
|
| 505,864 | ||||
|
|
|
|
| ||||
STOCKHOLDERS’ EQUITY |
|
|
|
| ||||
Common stock, par value 0.001, 500,000,000 shares authorized; 4,000,000 shares issued and outstanding as of March 31, 2007 |
|
|
| 4,000 | ||||
Additional paid in capital |
|
|
| (2,718) | ||||
Retained earnings |
|
|
| 69,826 | ||||
|
|
|
|
| ||||
TOTAL STOCKHOLDERS’ EQUITY |
|
|
| 71,108 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
| $ | 576,972 |
See the accompanying notes and accountant’s report.
F-3
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CHINA BEAUTY GROUP, INC.
STATEMENT OF INCOME
For The Six Month Period Ended September 30, 2007
|
| For the 6 months ended September 30, 2007 |
|
| For the 6 months ended September 30, 2006 |
|
|
|
|
|
|
REVENUE |
|
|
|
|
|
Beauty products | $ | 321,947 |
| $ | 315,672 |
Equipments |
| 329,163 |
|
| 196,209 |
Health products |
| 4,494 |
|
| 2,176 |
TOTAL REVENUE |
| 655,604 |
|
| 514,057 |
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
Beauty products |
| 180,823 |
|
| 85,888 |
Equipments |
| 98,382 |
|
| 59,949 |
Health products |
| 2,234 |
|
| 1,484 |
Total cost of goods sold |
| 281,439 |
|
| 147,321 |
|
|
|
|
|
|
GROSS PROFIT |
| 374,165 |
|
| 366,736 |
|
|
|
|
|
|
CONSOLIDATED OPERATING EXPENSES |
|
|
|
|
|
Selling |
|
|
|
|
|
Advertising and exhibition |
| 11,742 |
|
| 31,282 |
Commissions paid to staff |
| 23,370 |
|
| 26,852 |
Packing materials |
| 1,362 |
|
| 5,739 |
Declaration |
| 88 |
|
| 61 |
Transportation |
| 2,398 |
|
| 8,663 |
TOTAL SELLING EXPENSES |
| 38,960 |
|
| 72,597 |
|
|
|
|
|
|
GENERAL & ADMINISTRATIVE |
|
|
|
|
|
Accountancy fee |
| - |
|
| 192 |
Bank charges |
| 7,332 |
|
| 9,122 |
Building management fee and rates |
| 2,287 |
|
| 2,177 |
Office consumables |
| 5,617 |
|
| 947 |
Depreciation |
| 9,056 |
|
| 8,532 |
Director remuneration |
| 30,000 |
|
| 30,000 |
Mandatory provident fund contributions - director |
| 769 |
|
| 769 |
Donation |
| 731 |
|
| 77 |
Entertainment |
| 3,239 |
|
| 1,809 |
Insurance |
| 10,845 |
|
| 4,204 |
Legal and professional fee |
| 64 |
|
| - |
Local traveling |
| 1,730 |
|
| 2,449 |
Mandatory provident fund contributions |
| 5,624 |
|
| 5,031 |
Office supplies |
| 54 |
|
| - |
Operating lease rental expenses – land and buildings |
| 41,702 |
|
| 38,071 |
Postage and courier |
| 15,089 |
|
| 8,984 |
Printing and stationery |
| 9,264 |
|
| 10,844 |
Repair and maintenance |
| 1,133 |
|
| 31 |
Salary and allowances |
| 121,560 |
|
| 105,596 |
Company secretarial fee |
| 1,115 |
|
| 679 |
Staff training |
| 103 |
|
| 1,731 |
Staff medical |
| 62 |
|
| 1,757 |
F-4
Link to CHINA BEAUTY GROUP, INC. SB-2 Table of Contents
Link to Financial Statements Contents
Staff messing |
| 4,261 |
|
| 436 |
Sundry expenses |
| 10,591 |
|
| 19,543 |
Telephone |
| 3,538 |
|
| 3,729 |
Transportation |
| - |
|
| 8,704 |
Traveling - overseas |
| 13,977 |
|
| 14,579 |
Water and electricity |
| 5,882 |
|
| 5,358 |
TOTAL GENERAL & ADMINISTRATIVE EXPENSES |
| 305,625 |
|
| 285,351 |
|
|
|
|
|
|
NET INCOME FROM OPERATIONS |
| 29,580 |
|
| 8,788 |
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
Interest expense |
| (13,115) |
|
| (4,335) |
Interest income |
| 6 |
|
| 19 |
Sundry income |
| 6 |
|
| 163 |
TOTAL OTHER INCOME (EXPENSE) |
| (13,103) |
|
| (4,153) |
|
|
|
|
|
|
NET INCOME BEFORE INCOME TAXES |
| 16,477 |
|
| 4,635 |
|
|
|
|
|
|
PROVISION FOR TAXATION |
| - |
|
| - |
|
|
|
|
|
|
NET INCOME | $ | 16,477 |
| $ | 4,635 |
|
|
|
|
|
|
NET INCOME PER SHARE, BASIC AND DILUTED | $ | - |
| $ | - |
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES |
| 4,000,000 |
|
| 4,000,000 |
|
|
|
|
|
|
See the accompanying notes and accountant’s report.
F-5
Link to CHINA BEAUTY GROUP, INC. SB-2 Table of Contents
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CHINA BEAUTY GROUP, INC.
STATEMENT OF CHANGES IN SHAREHOLDER EQUITY
For The Six Month Period Ended September 30, 2007
|
| Share capital |
| Additional paid in capital |
| Retained earnings |
| Total equity |
|
|
|
|
|
|
|
|
|
Balance at April 1, 2007 | $ | 4,000 | $ | (2,718) | $ | 53,349 | $ | 54,631 |
|
|
|
|
|
|
|
|
|
Net profit for the 6 months ended September 30, 2007 |
| - |
| - |
| 16,477 |
| 16,477 |
|
|
|
|
|
|
|
|
|
Balance at September 30, 2007 | $ | 4,000 | $ | (2,718) | $ | 69,826 | $ | 71,108 |
See the accompanying notes and accountant’s report.
F-6
Link to CHINA BEAUTY GROUP, INC. SB-2 Table of Contents
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CHINA BEAUTY GROUP, INC.
STATEMENT OF CASH FLOW
For The Six Month Period Ended September 30, 2007
Cash Flows From Operating Activities: |
|
|
|
| |
| Net income |
|
| $ | 16,477 |
| Adjustments to reconcile net income to net cash used by operating activities: |
|
|
|
|
| Depreciation |
|
|
| 9,056 |
| Changes in operating Assets and liabilities: |
|
|
|
|
| Increase in accounts receivable |
|
|
| (87,459) |
| Increase in amount due from a director |
|
|
| (47,037) |
| Decrease in inventories |
|
|
| 105,881 |
| Increase in deposits and prepayments |
|
|
| (10,358) |
| Decrease in accounts payable |
|
|
| (10,136) |
| Decrease in accruals and provisions |
|
|
| (10,878) |
| Decrease in bank overdraft |
|
|
| (11,298) |
| Decrease in deferred income |
|
|
| (27,772) |
| Net cash used in operating activities |
|
|
| (73,524) |
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
| |
| Purchase of property, plant and equipment |
|
|
| (1,263) |
| Net cash used In investing activities |
|
|
| (1,263) |
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
| |
| Net proceeds from bank and other loans |
|
|
| 80,817 |
| Net cash generated from financing activities |
|
|
| 80,817 |
|
|
|
|
|
|
Net Increase in cash |
|
|
| 6,030 | |
|
|
|
|
| |
Cash and cash equivalents at April 1, 2007 |
|
|
| 443 | |
|
|
|
|
|
|
Cash and cash equivalents at September 30, 2007 |
|
| $ | 6,473 | |
|
|
|
|
|
|
| CCash Paid for Interest |
|
|
| (13,115) |
|
|
|
|
|
|
See the accompanying notes and accountant’s report.
F-7
Link to CHINA BEAUTY GROUP, INC. SB-2 Table of Contents
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MADSEN & ASSOCIATES CPA’S, INC.
684 EAST VINE STREET STE 3
SALT LAKE CITY, UTAH 84107
(801) 268-2632
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Directors and
Stockholders of China Beauty Group, Inc.
We have audited the accompanying balance sheets of China Beauty Group, Inc. as of March 31, 2007 and 2006, and the related statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years ended March 31, 2007 and 2006. China Beauty Group, Inc’s management is responsible for these financial statements. 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 audit 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 audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Beauty Group, Inc. as of March 31, 2007 and 2006, and the results of its operations and its cash flows for each of the years ended March 31, 2007 and 2006 in conformity with accounting principles generally accepted in the United States of America.
Madsen & Associates CPA’s, Inc.
Madsen & Associates CPA’s, Inc.
Salt Lake City, Utah
December 19, 2007
F-8
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CHINA BEAUTY GROUP, INC.
BALANCE SHEET
As of March 31, 2007
|
|
|
| March 31, 2007 |
ASSETS |
|
|
|
|
CURRENT ASSETS |
|
|
|
|
Cash and cash equivalent |
|
| $ | 443 |
Accounts receivable |
|
|
| 156,856 |
Inventories |
|
|
| 280,898 |
Deposits and prepayments |
|
|
| 21,834 |
TOTAL CURRENT ASSETS |
|
|
| 460,031 |
|
|
|
|
|
PLANT & EQUIPMENT |
|
|
|
|
At cost: |
|
|
|
|
Furniture, fixtures and equipment |
|
|
| 54,836 |
Leasehold improvements |
|
|
| 34,685 |
Less: Accumulated depreciation |
|
|
|
|
Furniture, fixtures and equipment |
|
|
| (32,170) |
Leasehold improvements |
|
|
| (13,775) |
Total plant & equipment, net |
|
|
| 43,576 |
|
|
|
|
|
DUE FROM A DIRECTOR |
|
|
| 36,155 |
|
|
|
|
|
TOTAL ASSETS |
|
| $ | 539,762 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
| |
LIABILITIES |
|
|
|
| |
CURRENT LIABILITIES |
|
|
|
| |
Bank Overdraft |
|
| $ | 56,308 | |
Bank and other loans |
|
|
| 73,257 | |
Accounts payable |
|
|
| 47,808 | |
Accrued expenses |
|
|
| 46,219 | |
Deferred revenue |
|
|
| 258,359 | |
Taxes payable |
|
|
| 3,180 | |
TOTAL LIABILITIES |
|
|
| 485,131 | |
|
|
|
|
| |
STOCKHOLDERS’ EQUITY |
|
|
|
| |
Common stock, par value 0.001, 500,000,000 shares authorized; 4,000,000 shares issued and outstanding as of March 31, 2007 |
|
|
| 4,000 | |
Additional paid in capital |
|
|
| (2,718) | |
Retained earnings |
|
|
| 53,349 | |
|
|
|
|
| |
TOTAL STOCKHOLDERS’ EQUITY |
|
|
| 54,631 | |
|
|
|
|
| |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
| $ | 539,762 | |
|
|
|
|
|
See the accompanying notes and accountant’s report.
F-9
Link to CHINA BEAUTY GROUP, INC. SB-2 Table of Contents
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CHINA BEAUTY GROUP, INC.
STATEMENT OF INCOME
For The Year Ended March 31, 2007
|
|
|
|
| For the year ended March 31, 2007 |
REVENUE |
|
|
|
|
|
Beauty products |
|
|
| $ | 657,336 |
Equipment |
|
|
|
| 416,622 |
Health products |
|
|
|
| 3,782 |
TOTAL REVENUE |
|
|
|
| 1,077,740 |
|
|
|
|
|
|
Cost Of Goods Sold |
|
|
|
|
|
Beauty products |
|
|
|
| 113,170 |
Equipment |
|
|
|
| 114,299 |
Health products |
|
|
|
| 1,689 |
Total Cost Of Goods Sold |
|
|
|
| 229,158 |
|
|
|
|
|
|
Gross Profit |
|
|
|
| 848,582 |
|
|
|
|
|
|
Consolidated Operating Expenses |
|
|
|
|
|
Selling |
|
|
|
|
|
Advertising and exhibition |
|
|
|
| 75,352 |
Commissions paid to staff |
|
|
|
| 59,596 |
Packing materials |
|
|
|
| 11,144 |
Declaration |
|
|
|
| 156 |
Transportation |
|
|
|
| 18,523 |
Total Selling Expenses |
|
|
|
| 164,771 |
|
|
|
|
|
|
General & Administrative |
|
|
|
|
|
Accountancy fee |
|
|
|
| 6,667 |
Auditor’s remuneration |
|
|
|
| 5,128 |
Bank charges |
|
|
|
| 17,027 |
Building management fee and rates |
|
|
|
| 4,925 |
Business registration fee |
|
|
|
| (333) |
Office consumables |
|
|
|
| 4,151 |
Depreciation |
|
|
|
| 17,904 |
Director remuneration |
|
|
|
| 81,015 |
Mandatory provident fund contributions - director |
|
|
|
| 2,339 |
Director quarter expenses |
|
|
|
| 22,692 |
Donation |
|
|
|
| 485 |
Entertainment |
|
|
|
| 22,591 |
Exchange difference |
|
|
|
| 8,895 |
Insurance |
|
|
|
| 5,173 |
Legal and professional fee |
|
|
|
| 5,575 |
Local traveling |
|
|
|
| 4,376 |
Mandatory provident fund contributions |
|
|
|
| 12,602 |
Office supplies |
|
|
|
| 4,252 |
Operating lease rental expenses – land and buildings |
|
|
|
| 57,081 |
Postage and courier |
|
|
|
| 19,400 |
Printing and stationery |
|
|
|
| 28,292 |
Repair and maintenance |
|
|
|
| 635 |
Salary and allowances |
|
|
|
| 219,555 |
Company secretarial fee |
|
|
|
| 981 |
Staff training |
|
|
|
| 1,349 |
F-10
Link to CHINA BEAUTY GROUP, INC. SB-2 Table of Contents
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Staff medical |
|
|
|
| 2,914 |
Staff messing |
|
|
|
| 8,267 |
Sundry expenses |
|
|
|
| 15,315 |
Telephone |
|
|
|
| 6,707 |
Testing fee |
|
|
|
| 2,513 |
Travel |
|
|
|
| 52,202 |
Water and electricity |
|
|
|
| 9,817 |
Total General & Administrative Expenses |
|
|
|
| 651,158 |
|
|
|
|
|
|
Net Income From Operations |
|
|
|
| 32,653 |
|
|
|
|
|
|
Other Income (Expense) |
|
|
|
|
|
Interest Expense |
|
|
|
| (12,069) |
Interest income |
|
|
|
| 48 |
Sundry income |
|
|
|
| 290 |
Total Other Income (Expense) |
|
|
|
| (11,731) |
|
|
|
|
|
|
Net Income Before Income Taxes |
|
|
|
| 20,922 |
|
|
|
|
|
|
Provision For Taxation |
|
|
|
| (3,180) |
|
|
|
|
|
|
Net Income |
|
|
| $ | 17,742 |
|
|
|
|
|
|
Net Income Per Share, Basic And Diluted |
|
|
| $ | - |
|
|
|
|
|
|
Weighted Average Number Of Shares |
|
|
|
| 4,000,000 |
|
|
|
|
|
|
See the accompanying notes and accountant’s report.
F-11
Link to CHINA BEAUTY GROUP, INC. SB-2 Table of Contents
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CHINA BEAUTY GROUP, INC.
STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY
For The Year Ended March 31, 2007
|
| Share capital |
| Additional paid in capital |
| Retained earnings |
| Total equity |
|
|
|
|
|
|
|
|
|
Balance at 1 April 2006 | $ | 4,000 | $ | (2,718) | $ | 35,607 | $ | 36,889 |
|
|
|
|
|
|
|
|
|
Net profit for the year |
| - |
| - |
| 17,742 |
| 17,742 |
|
|
|
|
|
|
|
|
|
Balance at 31 March 2007 | $ | 4,000 | $ | (2,718) | $ | 53,349 | $ | 54,631 |
See the accompanying notes and accountant’s report.
F-12
Link to CHINA BEAUTY GROUP, INC. SB-2 Table of Contents
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CHINA BEAUTY GROUP, INC.
STATEMENT OF CASH FLOWS
For The Year Ended March 31, 2007
|
|
|
| For the year ended March 31, 2007 | |
Cash Flows From Operating Activities: |
|
|
|
| |
| Net Income |
|
| $ | 20,922 |
| Adjustments to reconcile net income to net cash used by operating activities: |
|
|
|
|
| Depreciation |
|
|
| 17,904 |
| Changes in operating Assets and liabilities: |
|
|
|
|
| Increase in accounts receivable |
|
|
| (114,113) |
| Decrease in amount due from a director |
|
|
| 121,409 |
| Increase in inventories |
|
|
| (223,367) |
| Increase in deposits and prepayments |
|
|
| (9,968) |
| Increase in accounts payable |
|
|
| 14,375 |
| Increase in accruals and provisions |
|
|
| 13,933 |
| Increase in deferred income |
|
|
| 107,582 |
| Increase in bank overdraft |
|
|
| 56,308 |
| Decrease in tax recoverable |
|
|
| 896 |
| Net Cash Used In Operating Activities |
|
|
| (5,881) |
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
| |
| Purchase of property, plant and equipment |
|
|
| (8,495) |
| Net Cash Used In Investing Activities |
|
|
| (8,495) |
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
| |
| Net repayment of bank and other loans |
|
|
| (3,840) |
| Net repayment of obligation under finance lease |
|
|
| (1,244) |
| Net Cash Used In Financing Activities |
|
|
| (5,084) |
|
|
|
|
|
|
Net Decrease in cash |
|
|
| (7,698) | |
|
|
|
|
| |
Cash and cash equivalents at Beginning of Year |
|
|
| 8,141 | |
|
|
|
|
|
|
Cash and cash equivalents at the End of Year |
|
| $ | 443 | |
|
|
|
|
|
|
Cash Paid For Interest |
|
|
| (3,381) |
See the accompanying notes and accountant’s report.
F-13
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2007
NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES
China Beauty Group, Inc., (the “Company”) was originally incorporated under the laws of Hong Kong on November 5, 2001 as First Lotus Company Limited. On September 27, 2007 the Company formed a British Virgin Islands corporation under the name of Beautilink Corporation for the purpose of re-domiciling the Company to the United States. To complete the re-domiciling of the corporation to the United States a Florida corporation, China Beauty Group, Inc. was formed on October 29, 2007. China Beauty Group, Inc. became the legal entity of the Company while the original business of First Lotus Company Limited survives.
The principal activity of the Company is the sale of skin care products.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Economic and Political Risk
The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.
The Company’s major operations in Hong Kong are subject to considerations and significant risks typically associated with companies in Western Europe. These include risks associated with, among others, the political, economic, and legal environment. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
(b)
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
(c)
Accounts Receivable
Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. There was no bad debt written off for the year ended March 31, 2007.
(d)
Inventories
Inventories consisting of goods for resale are stated at the lower of cost or net realizable value. Inventory costs are calculated using a weighted average, first in first out (FIFO) method of accounting.
(e)
Plant and Equipment
Plant and equipment are carried at cost less accumulated depreciation. The cost of maintenance and repairs is charged to the statement of operations as incurred, whereas significant renewals and betterments are capitalized. The cost and the related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of operations.
F-14
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2007
(Continued)
(f)
Depreciation and Amortization
The Company provides for depreciation of plant and equipment principally by use of the straight-line method for financial reporting purposes. Plant and equipment are depreciated over the following estimated useful lives:
Furniture, fixtures and equipment
5 years
Leasehold improvement
Over the shorter of lease terms or 5 years
The depreciation expense for the year ended March 31, 2007 amounted to $17,904.
(g)
Accounting for the Impairment of Long-Lived Assets
The long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and used is by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. There were no impairments of long-lived assets for the year ended March 31, 2007.
(h) Income Tax
The Company has adopted the provisions of statements of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which incorporates the use of the asset and liability approach of accounting for income taxes. The Company allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.
In accordance with the relevant tax laws and regulations of Hong Kong, the corporation income tax rate applicable is 17.5%. The Company's income tax expense for year ended March 31, 2007 was $3,180.
(i) Fair Value of Financial Instruments
The carrying amounts of the Company's cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of these items. Accordingly, no computation or adjustment to fair value has been determined.
(j)
Revenue Recognition
Revenue represents the invoiced value of goods sold recognized upon the shipment of goods to customers. Revenue from the sale of skincare products and equipment is recognized on the transfer of risks and rewards ownership, which generally coincides with the time when the products and equipment are delivered to customers. Payments that are related to the purchase of skincare products and equipment not yet delivered are deferred and shown as deferred revenue in the balance sheet. Revenue is recognized when all of the following criteria are met:
a)
Persuasive evidence of an arrangement exists,
b)
Delivery has occurred or services have been rendered,
c)
The seller's price to the buyer is fixed or determinable, and
d)
Collectibility is reasonably assured.
F-15
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2007
(Continued)
(k)
Earnings Per Share
Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the year. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive. As of March 31, 2007, there were no common share equivalents outstanding.
(l)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
(m)
Retirement Benefits
Hong Kong mandates companies to operate a mandatory provident fund scheme, which is available to all employees in Hong Kong. Both the Company and the employees are required to contribute 5% (subject to an aggregate amount of $256) per month of the employees’ relevant income. Contributions from the Company are 100% vested in the employees as soon as they are paid to the scheme. Contributions to the scheme are expensed in the statement of operations as they become payable in accordance with the rules of the scheme. The assets of the scheme are held separately from those of the Company and managed by independent professional fund managers. The Company provides no other retirement benefits to its employees.
(n)
Comprehensive Income
Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income after taxation and the foreign currency translation gain
(o) Foreign Currency Translation
The accompanying financial statements are presented in United States dollars (US$). The functional currency of the Company is the Hong Kong dollar (HK$). Capital accounts of the financial statements are translated into United States dollars from HK$ at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the year. The translation rates are as follows:
|
|
|
| March 31, 2007 |
|
|
|
|
|
Year end HK$ : US$ exchange rate |
|
|
| 0.12821 |
Average yearly HK$ : US$ exchange rate |
|
|
| 0.12821 |
|
|
|
|
|
The net effect of the foreign currency exchange translations on the Balance Sheet, Statement of Income and Cash Flows is not material and has not been disclosed separately in the financial statements.
(p) Recent Accounting Pronouncements
Below is a listing of the most recent accounting standards SFAS 150-154 and their effect on the Company.
F-16
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2007
(Continued)
Statement No. 150
Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (Issued 5/03)
This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.
Statement No. 151
Inventory Costs-an amendment of ARB No. 43, Chapter 4 (Issued 11/04)
This statement amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that “…under some circumstances, items such as idle facility expense, excessive spoilage, double freight and re-handling costs may be so abnormal ass to require treatment as current period charges….” This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities.
Statement No. 152
Accounting for Real Estate Time-Sharing Transactions (an amendment of FASB Statements No. 66 and 67)
This Statement amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions.
This Statement also amends FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, states that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2.
Statement No. 153
Exchanges of Non-monetary Assets (an amendment of APB Opinion No. 29)
The guidance in APB Opinion No. 29, Accounting for Non-monetary Transactions, is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, includes certain exceptions to the principle. This Statement amends Opinion 29 to eliminate the exception for non-monetary exchanges of similar productive assts and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.
F-17
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2007
(Continued)
Statement No. 154
Accounting Changes and Error Corrections (a replacement of APB Opinion No. 20 and FASB Statement No. 3)
This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed.
The Company does not expect that the adoption of other recent accounting pronouncements to have any material impact on its financial statements.
NOTE 3 – ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
Accounts receivable as of March 31, 2007 amounted to $156,856. There was no allowance for doubtful accounts as of March 31, 2007.
The Company has no significant off-balance sheet concentration of credit risk such as foreign exchange contracts, options contracts or other foreign currency hedging arrangements. The Company does not have financial instruments which subject the Company to a concentration of credit risk. At March 31, 2007, the two largest customers accounted for 12% of the Company's accounts receivable. The Company regularly monitors the creditworthiness of its customers and believes that it has adequately provided for exposure to potential credit losses.
NOTE 4 – INVENTORIES
Inventories consisting of goods for resale are stated at the lower of weighted average cost or net realizable value.
NOTE 5 – DEPOSITS AND PREPAYMENTS
Deposits consist of payments and deposits made by the Company to third parties in the normal course of business operations with no interest being charged and no fixed repayment terms. These payments are made for the purchase of goods, utility deposits, rental deposits and building management fee deposits that are used by the Company for its current operations.
The Company evaluates the amounts recorded as deposits and prepaid expenses on a periodic basis and records a charge to the current operations of the Company when the related expense has been incurred or when the amounts reported as other receivables is no longer deemed to be collectible by the Company.
Deposits and prepayments as of March 31, 2007 were summarized as follows:
|
|
|
| As of March 31,2007 |
Deposit for goods |
|
| $ | 8,967 |
Rental deposits |
|
|
| 8,309 |
Management fees deposits |
|
|
| 352 |
Utility deposits |
|
|
| 3,256 |
Sundry deposits |
|
|
| 950 |
Total |
|
| $ | 21,834 |
F-18
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2007
(Continued)
NOTE 6 – PLANT AND EQUIPMENT
Plant and equipment of the Company consist primarily of furniture, fixtures and equipment and leasehold improvements owned and by the Company. Plant and equipment as of March 31, 2007 was summarized as follows:
|
|
|
| As of March 31, 2007 |
At cost: |
|
|
|
|
Furniture, fixtures and equipment |
|
|
| 54,836 |
Leasehold improvements |
|
|
| 34,685 |
|
|
|
| 89,521 |
|
|
|
|
|
Less: Accumulated depreciation |
|
|
|
|
Furniture, fixtures and equipment |
|
|
| 32,170 |
Leasehold improvements |
|
|
| 13,775 |
|
|
|
| 45,945 |
|
|
|
|
|
Plant and equipment , net |
|
| $ | 43,576 |
Depreciation expense for the year ended March 31, 2007 was $17,904.
NOTE 7 – INCOME TAX AND DEFERRED TAX LIABILITIES
(a) Corporation Income Tax ("CIT")
In accordance with the relevant tax laws and regulations of Hong Kong, the statutory corporate income tax rate is 17.5% for the year ended March 31, 2007.
The actual and effective corporate income tax was 15.2% for the year ended March 31, 2007.
The Company's actual tax expense differs from the "expected" tax expense for the year ended March 31, 2007 (computed by applying the CIT rate of 17.5% to net profits of the Company).
|
|
|
| For the year ended March 31, 2007 |
|
|
|
|
|
Computed "expected" expense |
|
| $ | 3,661 |
Difference due to income and expenditures not taxable or deductible in tax assessment |
|
|
| (8) |
Difference due to calculation of depreciation of plant and equipment in tax assessment |
|
|
| 1,323 |
Utilization of tax losses in tax assessment |
|
|
| (1,796) |
|
|
|
|
|
TOTAL |
|
| $ | 3,180 |
F-19
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2007
(Continued)
The provisions for income taxes for the year ended March 31. 2007 were summarized as follows:
|
|
|
| As of March 31, 2007 |
|
|
|
|
|
Current |
|
| $ | 3,180 |
Deferred |
|
|
| - |
|
|
|
|
|
TOTAL |
|
| $ | 3,180 |
There were no other material timing differences between reported book or financial income and income computed for income tax purposes for year ended March 31, 2007 and 2006. Therefore, the Company has made no adjustment for deferred tax assets or liabilities.
NOTE 8 – BANK LOANS AND OTHER LOANS
Bank loans include lines of credit and installment loans. Other loans included installment loans provided by a finance company. The Company has borrowed funds from a bank under a line of credit arrangement. The Company has reported these amounts as bank overdrafts at March 31, 2007. These overdrafts are personally guaranteed by the directors of the Company. The balance owed as of March 31, 2007 is summarized as follows:
Name of bank | Interest rate |
|
|
| As of March 31, 2007 |
|
|
|
|
|
|
HSBC | 18.00% |
|
| $ | 56,308 |
|
|
|
|
|
|
TOTAL |
|
|
| $ | 56,308 |
The bank facility drawn down by the Company as at March 31, 2007 was the overdraft used by the Company. The bank facility was personally guaranteed by the directors of the Company.
Bank loans and other loans of the Company as of March 31, 2007 were summarized as follows:
Name of banks / finance company | Interest rate |
|
|
| As of March 31, 2007 |
|
|
|
|
|
|
Standard Chartered Bank | 15.86% |
|
| $ | 53,302 |
Hitachi Capital (HK) Limited | 8.11% |
|
|
| 19,955 |
|
|
|
|
|
|
TOTAL |
|
|
| $ | 73,257 |
Less: |
|
|
|
|
|
Repayable after one year but within two years |
|
|
|
| - |
Repayable after two years but within five years |
|
|
|
| - |
|
|
|
|
|
|
Current portion |
|
|
| $ | 73,257 |
Interest expense for all outstanding debt was $12,069 for the year ended March 31, 2007.
F-20
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2007
(Continued)
NOTE 9 – RELATED PARTY TRANSACTIONS
|
|
|
|
| As of March 31, 2007 |
|
|
|
|
|
|
Amount due from a director |
|
|
|
|
|
Ng Lai Fong Chris |
|
|
| $ | 36,155 |
|
|
|
|
|
|
Purchase from a related company |
|
|
|
|
|
Perfect Mark Company |
|
|
| $ | 174,760 |
|
|
|
|
|
|
|
|
|
|
|
|
Due from a director consisted of advances to a director and payments on behalf of a director by the Company. Due from a director was unsecured and interest free with no fixed payment terms.
During the year ended March 31, 2007, the Company purchased skin care products and consumables from a related company, Perfect Mark Company, in which Ng Lai Fong, Chris is the sole-proprietor. The purchases from Perfect Mark Company were transacted at the cost of goods of Perfect Mark Company.
NOTE 10 – DEFERRED INCOME
The deferred income balance as of March 31, 2007 was $258,359. Deferred income represented amounts invoiced to its customers for sales of goods but were deferred as the sales process was deemed not completed in accordance with the accounting policy in note 2(j).
NOTE 12 – COMMON STOCK
The Company has 500,000,000 shares of common shares authorized at a par value of $.001. As of March 31, 2007, the Company has a total 4,000,000 shares of common stock issued and outstanding.
NOTE 13 – CONTINGENCIES AND COMMITMENTS
Operating lease commitments
As of March 31, 2007, the Company had arranged non-cancelable operating leases with third parties for its office and warehouse in Hong Kong. The expected annual lease payments under these operating leases were as follows:
|
|
|
| As of March 31, 2007 |
For the year ended March 31, |
|
|
|
|
2008 |
|
| $ | 35,559 |
2009 |
|
|
| - |
|
|
|
|
|
TOTAL |
|
| $ | 35,559 |
F-21
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2007
(Continued)
NOTE 14 – SUBSEQUENT EVENTS
The Company was originally incorporated under the laws of Hong Kong on November 5, 2001. On September 27, 2007 the Company formed a British Virgin Islands corporation under the name of Beautilink Corporation for the purpose of re-domiciling the Company to the United States. A share exchange was completed by and between the Hong Kong Corporation and the British Virgin Islands Corporation Beautilink Corporation.
As part of the share exchange between the two (2) shareholders of the Hong Kong Corporation and the British Virgin Islands Corporation an additional 11,800 shares of common stock were issued to the shareholders of the Hong Kong Corporation at the price of $1.00 per share. Additional 12,500 shares were issued to twenty-five (25) additional investors at the purchase price of $4.00 per share. These additional issuances of common stock brought the total issued and outstanding shares of common stock to 50,000 at September 27, 2007.
To complete the re-domiciling of the corporation to the United States a Florida corporation, China Beauty Group, Inc. was formed on October 29, 2007. China Beauty Group, Inc. is authorized 500,000,000 common shares at a par value of $.001. A share exchange by and between the Florida corporation and the British Islands corporation increased the total shares issued and outstanding to 4,000,000.
F-22
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CHINA BEAUTY GROUP, INC.
BALANCE SHEET
March 31, 2006
|
|
|
| March 31, 2006 | ||
ASSETS |
|
|
|
| ||
CURRENT ASSETS |
|
|
|
| ||
Cash and cash equivalent |
|
| $ | 8,141 | ||
Accounts receivable |
|
|
| 42,743 | ||
Inventories |
|
|
| 57,531 | ||
Taxes recoverable |
|
|
| 896 | ||
Deposits |
|
|
| 11,866 | ||
Total Current Assets |
|
|
| 121,177 | ||
|
|
|
|
| ||
PLANT & EQUIPMENT |
|
|
|
| ||
At cost: |
|
|
|
| ||
Furniture, fixtures and equipment |
|
|
| 46,835 | ||
Leasehold improvements |
|
|
| 34,190 | ||
Less: Accumulated depreciation |
|
|
|
| ||
Furniture, fixtures and equipment |
|
|
| (21,203) | ||
Leasehold improvements |
|
|
| (6,837) | ||
Total Plant & Equipment, Net |
|
|
| 52,985 | ||
|
|
|
|
| ||
DUE FROM A DIRECTOR |
|
|
| 157,564 | ||
|
|
|
|
| ||
TOTAL ASSETS |
|
| $ | 331,726 | ||
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
| ||
LIABILITIES |
|
|
|
| ||
CURRENT LIABILITIES |
|
|
|
| ||
Bank and other loans – current portion |
|
| $ | 57,206 | ||
Accounts payable |
|
|
| 33,433 | ||
Accrued expenses |
|
|
| 32,286 | ||
Obligation under finance lease |
|
|
| 1,244 | ||
Deferred revenue |
|
|
| 150,777 | ||
Total Current Liabilities |
|
|
| 274,946 | ||
|
|
|
|
| ||
LONG TERM LIABILITIES |
|
|
|
| ||
Long Term liability – Bank and other loans |
|
|
| 19,891 | ||
Total Long Term Liabilities |
|
|
| 19,891 | ||
|
|
|
|
| ||
TOTAL LIABILITIES |
|
|
| 294,837 | ||
|
|
|
|
| ||
STOCKHOLDERS’ EQUITY |
|
|
|
| ||
Common stock, par value $0.001, 500,000,000 shares authorized; 4,000,000 shares issued and outstanding as of March 31, 2006 |
|
|
| 4,000 | ||
Additional paid in capital |
|
|
| (2,718) | ||
Retained earnings |
|
|
| 35,607 | ||
|
|
|
|
| ||
TOTAL STOCKHOLDERS’ EQUITY |
|
|
| 36,889 | ||
|
|
|
|
| ||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
| $ | 331,726 |
See the accompanying notes and accountant’s report.
F-23
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CHINA BEAUTY GROUP, INC.
STATEMENT OF INCOME
For The Year Ended March 31, 2006
|
|
|
|
| For the year ended March 31, 2006 |
REVENUE |
|
|
|
|
|
Beauty products |
|
|
| $ | 513,917 |
Equipment |
|
|
|
| 385,285 |
Health products |
|
|
|
| 5,211 |
TOTAL REVENUE |
|
|
|
| 904,413 |
|
|
|
|
|
|
COST OF GOODS SOLD |
|
|
|
|
|
Beauty products |
|
|
|
| 111,676 |
Equipment |
|
|
|
| 98,567 |
Health products |
|
|
|
| 2,207 |
TOTAL COST OF GOODS SOLD |
|
|
|
| 212,450 |
|
|
|
|
|
|
GROSS PROFIT |
|
|
|
| 691,963 |
|
|
|
|
|
|
CONSOLIDATED OPERATING EXPENSES |
|
|
|
|
|
Selling |
|
|
|
|
|
Advertising and exhibition |
|
|
|
| 70,000 |
Commissions paid to staff |
|
|
|
| 66,733 |
Packing materials |
|
|
|
| 27,475 |
Declaration |
|
|
|
| 106 |
Transportation |
|
|
|
| 33,444 |
Total Selling Expenses |
|
|
|
| 197,758 |
|
|
|
|
|
|
General And Administrative |
|
|
|
|
|
Accountancy fee |
|
|
|
| 103 |
Auditor’s remuneration |
|
|
|
| 1,795 |
Bank charges |
|
|
|
| 13,937 |
Building management fee and rates |
|
|
|
| 4,526 |
Business registration fee |
|
|
|
| 333 |
Depreciation |
|
|
|
| 16,205 |
Director remuneration |
|
|
|
| 75,973 |
Mandatory provident fund contributions - director |
|
|
|
| 2,087 |
Director quarter expenses |
|
|
|
| 5,769 |
Entertainment |
|
|
|
| 604 |
Insurance |
|
|
|
| 914 |
Legal and professional fee |
|
|
|
| 5,134 |
Local traveling |
|
|
|
| 2,973 |
Mandatory provident fund contributions |
|
|
|
| 9,424 |
Medical expenses |
|
|
|
| 1,366 |
Operating lease rental expenses – land and buildings |
|
|
|
| 45,187 |
Postage and courier |
|
|
|
| 12,009 |
Printing and stationery |
|
|
|
| 27,811 |
Repair and maintenance |
|
|
|
| 391 |
Salary and allowances |
|
|
|
| 163,351 |
Company secretarial fee |
|
|
|
| 263 |
Staff training |
|
|
|
| 13,466 |
Sundry expenses |
|
|
|
| 19,619 |
Telephone |
|
|
|
| 4,735 |
Travel |
|
|
|
| 21,908 |
Water and electricity |
|
|
|
| 7,376 |
F-24
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TOTAL GENERAL AND ADMINISTRATIVE EXPENSES |
|
|
|
| 457,259 |
|
|
|
|
|
|
NET INCOME FROM OPERATIONS |
|
|
|
| 36,946 |
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
Interest Expense |
|
|
|
| (15,678) |
Loss On Disposal of Plant and Equipment |
|
|
|
| (18,718) |
Interest Income |
|
|
|
| 62 |
TOTAL OTHER INCOME (EXPENSE) |
|
|
|
| (34,334) |
|
|
|
|
|
|
NET INCOME BEFORE INCOME TAXES |
|
|
|
| 2,612 |
|
|
|
|
|
|
PROVISION FOR TAXATION |
|
|
|
| - |
|
|
|
|
|
|
NET INCOME |
|
|
|
| 2,612 |
|
|
|
|
|
|
NET INCOME PER SHARE, BASIC AND DILUTED |
|
|
|
| - |
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES |
|
|
|
| 4,000,000 |
|
|
|
|
|
|
See accompanying notes and accountant’s report.
F-25
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CHINA BEAUTY GROUP, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For The Year Ended March 31, 2006
|
| Share capital |
| Additional paid in capital |
| Retained earnings |
| Total equity |
|
|
|
|
|
|
|
|
|
Balance at 1 April 2005 (Assumes completion of re-domicile to State of Florida) | $ | 4,000 | $ | (2,718) | $ | 32,995 | $ | 34,277 |
|
|
|
|
|
|
|
|
|
Net profit for the year |
| - |
| - |
| 2,612 |
| 2,612 |
|
|
|
|
|
|
|
|
|
Balance at 31 March 2006 | $ | 4,000 | $ | (2,718) | $ | 35,607 | $ | 36,889 |
See the accompanying notes and accountant’s report.
F-26
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CHINA BEAUTY GROUP, INC.
STATEMENT OF CASH FLOWS
For The Year Ended March 31, 2006
|
|
|
| For the year ended March 31, 2006 | |
|
|
|
|
|
|
Cash Flows From Operating Activities: |
|
|
|
| |
| Net Income |
|
| $ | 2,612 |
| Adjustments to reconcile net income to net cash used by operating activities: |
|
|
|
|
| Depreciation |
|
|
| 16,205 |
| Loss on disposal of plant and equipment |
|
|
| 18,718 |
| Changes in operating Assets and liabilities: |
|
|
|
|
| Decrease in accounts receivable |
|
|
| 48,310 |
| Increase in amount due from a director |
|
|
| (138,397) |
| Decrease in inventories |
|
|
| 1,237 |
| Increase in deposits and prepayments |
|
|
| (1,252) |
| Decrease in accounts payable |
|
|
| (22,488) |
| Increase in accruals and provisions |
|
|
| 7,491 |
| Increase in deferred income |
|
|
| 138,150 |
| Increase in tax recoverable |
|
|
| (896) |
| Net Cash Provided From Operating Activities |
|
|
| 69,690 |
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
| |
| Purchase of property, plant and equipment |
|
|
| (49,273) |
| Net Cash Used In Investing Activities |
|
|
| (49,273) |
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
| |
| Net advances from bank and other loans |
|
|
| 17,133 |
| Net repayment of obligation under finance lease |
|
|
| (19,462) |
| Net Cash Used In Financing Activities |
|
|
| (2,329) |
|
|
|
|
|
|
Net increase in cash |
|
|
| 18,088 | |
|
|
|
|
| |
Cash and cash equivalents at Beginning of Year |
|
|
| (9,947) | |
|
|
|
|
|
|
Cash and cash equivalents at the End of Year |
|
| $ | 8,141 | |
|
|
|
|
|
|
Cash Paid For Interest |
|
|
| (15,678) | |
Cash Paid For Income Taxes |
|
|
| (896) | |
|
|
|
|
|
|
See the accompanying notes and accountant’s report.
F-27
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2006
NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES
China Beauty Group, Inc., (the “Company”) was originally incorporated under the laws of Hong Kong on November 5, 2001 as First Lotus Company Limited. On September 27, 2007 the Company formed a British Virgin Islands corporation under the name of Beautilink Corporation for the purpose of re-domiciling the Company to the United States. To complete the re-domiciling of the corporation to the United States a Florida corporation, China Beauty Group, Inc. was formed on October 29, 2007. China Beauty Group, Inc. became the legal entity of the Company while the original business of First Lotus Company Limited survives.
The principal activity of the Company is the sale of skin care products.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Economic and Political Risk
The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.
The Company’s major operations in Hong Kong are subject to considerations and significant risks typically associated with companies in Western Europe. These include risks associated with, among others, the political, economic, and legal environment. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
(b)
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
(c)
Accounts Receivable
Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. There were no bad debts written off for the year ended March 31, 2006.
(d)
Inventories
Inventories consisting of goods for resale are stated at the lower of cost or net realizable value. Inventory costs are calculated using a weighted average, first in first out (FIFO) method of accounting.
(e)
Plant and Equipment
Plant and equipment are carried at cost less accumulated depreciation. The cost of maintenance and repairs is charged to the statement of operations as incurred, whereas significant renewals and betterments are capitalized. The cost and the related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of operations.
F-28
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2006
(Continued)
(f)
Depreciation and Amortization
The Company provides for depreciation of plant and equipment principally by use of the straight-line method for financial reporting purposes. Plant and equipment are depreciated over the following estimated useful lives:
Furniture, fixtures and equipment
5 years
Leasehold improvement
Over the shorter of lease terms or 5 years
The depreciation expense for the year ended March 31, 2006 amounted to $16,205.
(g)
Accounting for the Impairment of Long-Lived Assets
The long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and used is by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. There was no impairment of long-lived assets for the year ended March 31, 2006.
(h) Income Tax
The Company has adopted the provisions of statements of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which incorporates the use of the asset and liability approach of accounting for income taxes. The Company allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.
In accordance with the relevant tax laws and regulations of Hong Kong, the corporation income tax rate applicable is 17.5%. The Company had no income tax expense for year ended March 31, 2006.
(i) Fair Value of Financial Instruments
The carrying amounts of the Company's cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of these items. Accordingly, no computation or adjustment to fair value has been determined.
(j) Revenue Recognition
Revenue represents the invoiced value of goods sold recognized upon the shipment of goods to customers. Revenue from the sale of skincare products and equipment is recognized on the transfer of risks and rewards ownership, which generally coincides with the time when the products and equipment are delivered to customers. Payments that are related to the purchase of skincare products and equipment not yet delivered are deferred and shown as deferred revenue in the balance sheet. Revenue is recognized when all of the following criteria are met:
a)
Persuasive evidence of an arrangement exists,
b)
Delivery has occurred or services have been rendered,
c)
The seller's price to the buyer is fixed or determinable, and
d)
Collectibility is reasonably assured.
F-29
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2006
(Continued)
(k) Earnings Per Share
Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the year. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of March 31, 2006, there were no common shares equivalents outstanding.
(l) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
(m) Retirement Benefits
Hong Kong mandates companies to operate a mandatory provident fund scheme, which is available to all employees in Hong Kong. Both the Company and the employees are required to contribute 5% (subject to an aggregate amount of $256) per month of the employees’ relevant income. Contributions from the Company are 100% vested in the employees as soon as they are paid to the scheme. Contributions to the scheme are expensed in the statement of operations as they become payable in accordance with the rules of the scheme. The assets of the scheme are held separately from those of the Company and managed by independent professional fund managers. The Company provides no other retirement benefits to its employees.
(n) Comprehensive Income
Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income after taxation and the foreign currency translation gain.
(o) Foreign Currency Translation
The accompanying financial statements are presented in United States dollars (US$). The functional currency of the Company is the Hong Kong dollar (HK$). Capital accounts of the financial statements are translated into United States dollars from HK$ at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the year. The translation rates were as follows:
|
|
|
| March 31, 2006 |
|
|
|
|
|
Year end HK$ : US$ exchange rate |
|
|
| 0.12821 |
Average yearly HK$ : US$ exchange rate |
|
|
| 0.12821 |
|
|
|
|
|
The net effect of the foreign currency exchange translations on the Balance Sheet, Statement of Income and Cash Flows is not material and has not been disclosed separately in the financial statements.
F-30
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2006
(Continued)
(p) Recent Accounting Pronouncements
Below is a listing of the most recent accounting standards SFAS 150-154 and their effect on the Company.
Statement No. 150
Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (Issued 5/03)
This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.
Statement No. 151
Inventory Costs-an amendment of ARB No. 43, Chapter 4 (Issued 11/04)
This statement amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that “…under some circumstances, items such as idle facility expense, excessive spoilage, double freight and re-handling costs may be so abnormal ass to require treatment as current period charges….” This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities.
Statement No. 152
Accounting for Real Estate Time-Sharing Transactions (an amendment of FASB Statements No. 66 and 67)
This Statement amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions.
This Statement also amends FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, states that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2.
Statement No. 153
Exchanges of Non-monetary Assets (an amendment of APB Opinion No. 29)
The guidance in APB Opinion No. 29, Accounting for Non-monetary Transactions, is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, includes certain exceptions to the principle. This Statement amends Opinion 29 to eliminate the exception for non-monetary exchanges of similar productive assts and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.
F-31
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2006
(Continued)
Statement No. 154
Accounting Changes and Error Corrections (a replacement of APB Opinion No. 20 and FASB Statement No. 3)
This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed.
The Company does not expect that the adoption of other recent accounting pronouncements to have any material impact on its financial statements.
NOTE 3 – ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
Accounts receivable as of March 31, 2006 amounted to $42,743. There was no allowance for doubtful accounts as of March 31, 2007.
The Company has no off-balance sheet concentration of credit risk such as foreign exchange contracts, options contracts or other foreign currency hedging arrangements. The Company does not have financial instruments which subject the Company to a concentration of credit risk. At March 31, 2006, the two largest customers accounted for 29% of the Company's account receivables. The Company regularly monitors the creditworthiness of its customers and believes that it has adequately provided for exposure to potential credit losses.
NOTE 4 – INVENTORIES
Inventories consisting of goods for resale are stated at the lower of weighted average cost or net realizable value.
NOTE 5 – DEPOSITS AND PREPAYMENTS
Deposits consist of deposits made by the Company to third parties in the normal course of business operations with no interest being charged and no fixed repayment terms. These payments are made for the utility deposits, rental deposits and management fee deposits that are used by the Company for its current operations.
The Company evaluates the amounts recorded as deposits on a periodic basis and records a charge to the current operations of the Company when the related expense has been incurred or when the amounts reported as other receivables is no longer deemed to be collectible by the Company.
Deposits and prepayments as of March 31, 2006 were summarized as follows:
|
|
|
| As of March 31, 2006 |
|
|
|
|
|
Rental deposits |
|
| $ | 8,309 |
Management fee deposits |
|
|
| 301 |
Utility deposits |
|
|
| 3,256 |
|
|
|
|
|
TOTAL |
|
| $ | 11,866 |
F-32
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2006
(Continued)
NOTE 6 – PLANT AND EQUIPMENT
Plant and equipment of the Company consist primarily of furniture, fixtures and equipment and leasehold improvements owned and by the Company. Plant and equipment as of March 31, 2006 was summarized as follows:
|
|
|
| As of March 31, 2006 |
|
|
|
|
|
At cost: |
|
|
|
|
Furniture, fixtures and equipment |
|
|
| 46,835 |
Leasehold improvements |
|
|
| 34,190 |
|
|
|
| 81,025 |
|
|
|
|
|
Less: Accumulated depreciation |
|
|
|
|
Furniture, fixtures and equipment |
|
|
| 21,203 |
Leasehold improvements |
|
|
| 6,837 |
|
|
|
| 28,040 |
|
|
|
|
|
Plant and equipment , net |
|
| $ | 52,985 |
Depreciation expense for the year ended March 31, 2006 was $16,205.
NOTE 7 – INCOME TAX AND DEFERRED TAX LIABILITIES
(a) Corporation Income Tax ("CIT")
In accordance with the relevant tax laws and regulations of Hong Kong, the statutory corporate income tax rate is 17.5% for the year ended March 31, 2006.
The actual and effective corporate income tax was 0% for the year ended March 31, 2006.
The Company's actual tax expense differs from the "expected" tax expense for the year ended March 31, 2006 (computed by applying the CIT rate of 17.5% to net profits of the Company).
|
|
|
| For the year ended March 31, 2006 |
|
|
|
|
|
Computed "expected" expense |
|
| $ | 457 |
Difference due to income and expenditures not taxable or deductible in tax assessment |
|
|
| (11) |
Difference due to calculation of depreciation of plant and equipment in tax assessment |
|
|
| (1,929) |
Accumulation of tax losses in tax assessment |
|
|
| 1,483 |
|
|
|
|
|
TOTAL |
|
| $ | - |
F-33
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2006
(Continued)
The provisions for income taxes for the year ended March 31 2006 were summarized as follows:
|
|
|
| As of March 31, 2006 |
|
|
|
|
|
Current |
|
| $ | - |
Deferred |
|
|
| - |
|
|
|
|
|
TOTAL |
|
| $ | - |
There were no other material timing differences between reported book or financial income and income computed for income tax purposes for year ended March 31, 2006. Therefore, the Company has made no adjustment for deferred tax assets or liabilities.
NOTE 8 – BANK LOANS AND OTHER LOANS
Bank loans include lines of credit and installment loans. Other loans included installment loans provided by a finance company. The Company has borrowed funds from a bank under a line of credit agreement. The Company has reported these amounts as bank overdrafts at March 31, 2007. These overdrafts are personally guaranteed by the Directors of the Company. The balance owed as of March 31, 2006 was summarized as follows:
Name of banks / finance company | Interest rate |
|
|
| As of March 31, 2006 |
|
|
|
|
|
|
HSBC | 7.76% |
|
| $ | 54,080 |
Hitachi Capital (HK) Limited | 8.11% |
|
|
| 23,017 |
|
|
|
|
|
|
|
|
|
| $ | 77,097 |
Less: |
|
|
|
|
|
Repayable after one year but within two years |
|
|
|
| 19,891 |
Repayable after two years but within five years |
|
|
|
| - |
|
|
|
|
|
|
Current portion |
|
|
| $ | 57,206 |
Interest expense for all outstanding debt was $15,678 for the year ended March 31, 2006.
NOTE 9 – RELATED PARTY TRANSACTIONS
|
|
|
|
| As of March 31 2006 |
Amount due from a director |
|
|
|
|
|
Ng Lai Fong Chris |
|
|
| $ | 157,564 |
|
|
|
|
|
|
|
|
|
|
|
|
Due from a director consisted of advances to a director and payments on behalf of a director by the Company. Due from a director was unsecured and interest free with no fixed payment terms.
NOTE 10 – FINANCE LEASE
As of March 31, 2006, the Company had outstanding commitments in the amount of $1,244 remaining with respect to its finance operating leases. The Company has capitalized this finance lease which was entered into for the purchase of office furniture and equipment. This amount due of $1,244 has been recorded as a current liability as the amount is repayable within one year.
F-34
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CHINA BEAUTY GROUP, INC.
Notes to Financial Statements
March 31, 2006
(Continued)
NOTE 11 – DEFERRED INCOME
The deferred income balance as of March 31, 2006 was $150,777. Deferred income represented amounts invoiced to its customers for sales of goods but were deferred as the sales process was deemed not completed in accordance with the accounting policy in Note 2(j). During the year, the Company launched more promotional campaigns to attract more customers.
NOTE 12 – COMMON STOCK
The Company has 500,000,000 shares of common shares authorized at a par value of $.001. As of March 31, 2006, the Company has a total 4,000,000 shares of common stock issued and outstanding.
NOTE 13 – CONTINGENCIES AND COMMITMENTS
Operating lease commitments
As of March 31, 2006, the Company had arranged non-cancelable operating leases with third parties for its office and warehouse in Hong Kong. The expected annual lease payments under these operating leases were as follows:
|
|
|
| As of March 31, 2006 |
For the year ended March 31, |
|
|
|
|
2007 |
|
| $ | 59,025 |
2008 |
|
|
| 35,704 |
2009 |
|
|
| - |
|
|
|
|
|
TOTAL |
|
| $ | 94,729 |
NOTE 14 – SUBSEQUENT EVENTS
The Company was originally incorporated under the laws of Hong Kong on November 5, 2001. On September 27, 2007 the Company formed a British Virgin Islands corporation under the name of Beautilink Corporation for the purpose of re-domiciling the Company to the United States. A share exchange was completed by and between the Hong Kong Corporation and the British Virgin Islands Corporation Beautilink Corporation.
As a part of the share exchange between the two (2) shareholders of the Hong Kong Corporation and the British Virgin Islands Corporation, an additional 11,800 shares of common stock were issued to the shareholders of the Hong Kong corporation at the price of $1.00 per share. An additional 12,500 shares of common stock were issued to twenty-five (25) additional investors at the purchase price of $4.00 per share. These additional issuances of common stock brought the total issued and outstanding shares of common stock to 50,000 at September 27, 2007.
To complete the re-domiciling of the corporation to the United States a Florida corporation, China Beauty Group, Inc. was formed on October 29, 2007. China Beauty Group, Inc. is authorized 500,000,000 common shares at a par value of $.001. A share exchange by and between the Florida corporation and the British Islands corporation increased the total shares issued and outstanding to 4,000,000.
NOTE E – SUBSEQUENT EVENTS
On February 28, 2007 the Company’s Board filed amended and restated articles authorizing 200,000,000 shares and changing the par value of its stock to $0.001 per share resulting in 10 shares for each share previously owned. On March 31, 2007 the Company’s board issued an additional 105,000 shares of its stock at $0.001 per share for 35 executed stock subscription agreements it received. After these stock sales there were a total of 455,000 shares issued and outstanding. The Company on March 31, 2007 further ratified and authorized a 10:1 forward stock split that will result in result in 4,550,000 issued and outstanding shares as of that date. All share amounts in these financial statements and notes reflect the retroactive effects of this 10:1 forward stock split.
F-35
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 24 Indemnification of Directors and Officers
Title XXXVI, Chapter 607 of the Florida Statutes permits corporations to indemnify a director, officer or control person of the corporation for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expense. Our Articles of Incorporation do include such a provision automatically indemnifying a director, officer or control person of the corporation or its stockholders for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such.
Article XV, Paragraph 3 of our By-Laws permits us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether or not Florida law would permit indemnification. We have not obtained any such insurance at this time.
We have been advised that it is the position of the Securities and Exchange Commission that insofar as the foregoing provisions may be invoked to disclaim liability for damages arising under the Securities Act of 1933, as amended, that such provisions are against public policy as expressed in the Securities Act and are therefore unenforceable.
Item 25 Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by China Beauty Group, Inc. in connection with the sale of the securities being registered. All amounts are estimates except the Securities and Exchange Commission registration fee and the Accounting Fees and Expenses:
Registration Fee | $30.70 |
Federal taxes, state taxes and fees | $0.00 |
Printing and Engraving Expenses | $2,000.00 |
Accounting Fees and Expenses | $40,000.00 |
Legal Fees and Expenses | $50,000.00 |
Transfer Agent's Fees and Expenses | $10,000.00 |
Miscellaneous | $2,000.00 |
Total | $104,030.70 |
We will bear all the costs and expenses associated with the preparation and filing of this registration statement including the registration fees of the selling security holders.
Item 26 Recent Sales of Unregistered Securities
Set forth below is information regarding the issuance and sales of Beautilink Corporation’s (China Beauty Group, Inc.) common stock without registration during the last three years. No sales involved the use of an underwriter and no commissions were paid in connection with the sale of any securities. The following securities of Beautilink Corporation’s (China Beauty Group, Inc.) were issued by Beautilink within the past three (3) years and were not registered under the Securities Act of 1933. Beautilink Corporation was established to allow the Company to be registered as a British Virgin Islands corporation. The corporation then incorporated China Beauty Group, Inc. in the State of Florida to re-domicile as a United States corporation so it could file a registration statement and then an application to be traded on the OTCBB.
Between October 17, 2007 and October 31, 2007 under Regulation S and under exemption claimed under Sections 4(2) and 4(6) of the Securities Act of 1933, as amended the Company sold 12,500 shares of common stock at $4.00 USD per share. The sales to the individuals listed below were for shares issued from the authorized capital stock for paid-in-capital. These shares were exempt from registration pursuant to Sections 4(2) and 4(6) of the Securities Act of 1933 as the shares were not a part of a public offering and
II-1
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Regulation S of the Securities Act of 1933, as amended. Each stock subscription agreement executed by the purchaser was formally accepted by the Company shares were issued effective upon the acceptance by the Company. The following table gives effect to the 80:1 stock exchange that occurred on October 29, 2007 when the Company re-domiciled to the State of Florida.
II-2
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Item 27 Index of Exhibits
The following Exhibits are filed as part of this Registration Statement, pursuant to Item 601 of Regulation S-B. All Exhibits are attached hereto unless otherwise noted.
Item 28 Undertakings
(1)
The undersigned Registrant hereby undertakes to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933.
(ii)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a twenty percent change in the maximum aggregate offering price set forth in the "calculation of registration fee" table in the effective registration statement.
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2)
The undersigned Registrant hereby undertakes that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3)
The undersigned Registrant hereby undertakes to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4)
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the undersigned Registrant according to the foregoing provisions, or otherwise, the undersigned Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
II-3
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with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(5)
That, for the purpose of determining liability under the Securities Act to any purchaser:
(i)
Each prospectus filed pursuant to Rule 424(b) §230.424(b) of Title 17 of the Code of Federal Regulations Chapter II, Securities and Exchange Commission) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§230.430A), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.Provided, however,that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration state ment or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in the City of Hong Kong, China on December 21, 2007.
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(Registrant) CHINA BEAUTY GROUP, INC. |
By: /s/ CHRIS LAI FONG NG |
Chris Lai Fong Ng |
President |
In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated.
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Name | Title | Date |
/s/ CHRIS LAI FONG NG Chris Lai Fong Ng | Principal Executive Officer, Principal Accounting Officer, Chief Financial Officer, Chairman of the Board of Directors | December 21, 2007 |
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