UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedMarch 31, 2006
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ______________ to _______________
COMMISSION FILE NUMBER000-16283
CATHAY MERCHANT GROUP, INC.
(Name of Small Business Issuer in Its Charter)
| DELAWARE | 04-2608713 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 3604 Tower 1, | |
| Kerry Everbright City, | |
| 218 Tian Mu Road West, | |
| Shanghai, P.R. China | 200070 |
| (Address of principal executive offices) | (Zip Code) |
Issuer's telephone number, including area code:(86) 21-6353-0012
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x YES ¨ NO
Indicate by check mark whether the registrant is a shell company (as defined in Role 12b-2 of the Exchange Act). ¨ YES x NO
The number of shares outstanding of the issuer's common stock as at May 9, 2006 was 18,890,579.
Transitional Small Business Disclosure Format (check one): ¨ YES x NO
CATHAY MERCHANT GROUP, INC. AND SUBSIDIARIES
QUARTERLY REPORT - FORM 10-QSB
THREE MONTHS ENDED MARCH 31, 2006
TABLE OF CONTENTS
Forward Looking Statements
Certain statements contained in this quarterly report and other written material and oral statements made from time to time by us do not relate strictly to historical or current facts. As such, they are considered "forward-looking statements" that provide current expectations or forecasts of future events. Such statements are typically characterized by terminology such as "believe", "anticipate", "should", "intend", "plan", "will", "expect", "estimate", "project", "strategy" and similar expressions. Our forward-looking statements generally relate to the prospects for our ability to identify new business opportunities, develop new business strategies and execute such business strategies. These statements are based upon assumptions and assessments made by our management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors our management believes to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including the following: our ability to identify and evaluate business opportunities that will achieve profitable operations while maintaining sufficient cash to operate our business and meet our liquidity requirements: our ability to obtain financing, if required, on terms acceptable to us, if at all; our ability to successfully attract strategic partners and to market both new and existing products and services domestically and internationally; exposure to lawsuits and regulatory proceedings; governmental laws and regulations affecting domestic and foreign operations; our ability to identify and complete diversification opportunities; and the impact of acquisitions, divestitures, restructurings, product withdrawals and other unusual items. Except as required by applicable law, our company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
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PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
CATHAY MERCHANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
| MARCH 31, | DECEMBER 31, | |||||
| 2006 | 2005 | |||||
| (UNAUDITED) | ||||||
| ASSETS | ||||||
| Current Assets: | ||||||
| Cash and cash equivalents | $ | 4,943 | $ | 3,843 | ||
| Restricted cash | 66 | 65 | ||||
| Receivables | 1,171 | 1,391 | ||||
| Due from affiliates | 597 | 67 | ||||
| Inventories | 9,637 | 9,554 | ||||
| Prepaid expenses and other | 81 | 41 | ||||
| Deferred tax benefits | 572 | 558 | ||||
| Total current assets | 17,067 | 15,519 | ||||
| Non-current Assets: | ||||||
| Deferred credit facility costs | 244 | 264 | ||||
| Property, plant and equipment | 1,063 | 1,011 | ||||
| Purchase option agreements | 14,907 | 14,540 | ||||
| Goodwill | 5,274 | 5,244 | ||||
| Deferred tax benefits | 59 | 58 | ||||
| Total non-current assets | 21,547 | 21,117 | ||||
| Total assets | $ | 38,614 | $ | 36,636 | ||
| LIABILITIES & STOCKHOLDERS' EQUITY | ||||||
| Current Liabilities: | ||||||
| Accounts payable and accrued expenses | $ | 14,197 | $ | 13,672 | ||
| Due to affiliates | 3.923 | 2,453 | ||||
| Debt | 121 | 237 | ||||
| Total current liabilities | 18,241 | 16,362 | ||||
| Long-term Liabilities: | ||||||
| Debt | 10,154 | 9,904 | ||||
| Other liabilities | 54 | 38 | ||||
| Total long-term liabilities | 10,208 | 9,942 | ||||
| Total liabilities | 28,449 | 26,304 | ||||
| Stockholders' Equity: | ||||||
| Common stock | 2,039 | 2,029 | ||||
| Additional paid-in capital | 28,031 | 28,008 | ||||
| Accumulated deficit | (14,642 | ) | (14,098 | ) | ||
| Treasury stock, at cost | (5,313 | ) | (5,313 | ) | ||
| Cumulative translation adjustment | 50 | (294 | ) | |||
| Total stockholders' equity | 10,165 | 10,332 | ||||
| Total liabilities and stockholders' equity | $ | 38,614 | $ | 36,636 |
See accompanying notes.
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CATHAY MERCHANT GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| THREE MONTHS ENDED | ||||||
| MARCH 31, | ||||||
| 2006 | 2005 | |||||
| (UNAUDITED) | ||||||
| Product sales, net | $ | 20,912 | $ | - | ||
| Cost of goods sold | 20,013 | - | ||||
| 899 | - | |||||
| General and administrative expenses | 965 | 544 | ||||
| Operating loss | (66 | ) | (544 | ) | ||
| Other income (expense): | ||||||
| Interest and financing charges, net | (515 | ) | (48 | ) | ||
| Miscellaneous | 41 | - | ||||
| (474 | ) | (48 | ) | |||
| Loss before income tax | (540 | ) | (592 | ) | ||
| Income tax | 4 | - | ||||
| Net loss | $ | (544 | ) | $ | (592 | ) |
| Net loss per common share, basic and diluted | $ | (0.03 | ) | $ | (0.03 | ) |
See accompanying notes.
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CATHAY MERCHANT GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(DOLLARS IN THOUSANDS)
| THREE MONTHS ENDED | ||||||
| MARCH 31, | ||||||
| 2006 | 2005 | |||||
| (UNAUDITED) | ||||||
| Net loss | (544 | ) | $ | (592 | ) | |
| Other comprehensive gain, foreign currency translation adjustment | 344 | - | ||||
| Comprehensive loss | $ | (200 | ) | $ | (592 | ) |
See accompanying notes.
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CATHAY MERCHANT GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
| THREE MONTHS ENDED | ||||||
| MARCH 31, | ||||||
| 2006 | 2005 | |||||
| (UNAUDITED) | ||||||
| OPERATING ACTIVITIES: | ||||||
| Net loss | $ | (544 | ) | $ | (592 | ) |
| Adjustments to reconcile net loss to net cash | ||||||
| provided by (used in) operating activities: | ||||||
| Depreciation and amortization | 81 | 24 | ||||
| Foreign exchange | 221 | - | ||||
| Changes in operating assets and liabilities: | ||||||
| Receivables | (38 | ) | - | |||
| Due from affiliates | (204 | ) | - | |||
| Inventories | 157 | - | ||||
| Prepaid expenses and other current assets | (39 | ) | - | |||
| Accounts payable and accrued expenses | (255 | ) | (16 | ) | ||
| Due to affiliates | 1,733 | 198 | ||||
| Net cash provided by (used in) operating activities | 1,112 | (386 | ) | |||
| INVESTING ACTIVITIES: | ||||||
| Purchase of fixed assets | (87 | ) | - | |||
| Net cash used in investing activities | (87 | ) | - | |||
| FINANCING ACTIVITIES: | ||||||
| Proceeds from exercise of stock options | 32 | - | ||||
| Net cash provided by financing activities | 32 | - | ||||
| Effects of foreign exchange on cash and cash equivalents | 43 | - | ||||
| Changes in cash and cash equivalents | 1,100 | (386 | ) | |||
| Cash and cash equivalents, beginning of period | 3,843 | 14,961 | ||||
| Cash and cash equivalents, end of period | $ | 4,943 | $ | 14,575 | ||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||
| Income taxes paid | $ | -- | $ | -- | ||
| Interest expenses paid | $ | -- | $ | -- | ||
See accompanying notes.
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CATHAY MERCHANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The notes to these consolidated financial statements are presented in United States Dollars, unless otherwise indicated. Euro (€) is a legal tender used by the majority of the member states of the European Union. With the exception of per share amounts, amounts are presented in thousands.
Description of Business
Cathay Merchant Group, Inc. (the "Company") is primarily an aluminium manufacturing and trading company.
On June 30, 2005, the Company, acting through its wholly-owned subsidiary, Cathay Merchant Group Limited (“CMG”) (a Samoan Corporation), acquired all of the shares of AWP Aluminium Walzprodukte GmbH (“AWP”) and AFM Aluminiumfolie Merseburg GmbH (“AFM”) for an aggregate purchase price of $18,500 (Euro 15,300). AWP and AFM are incorporated under the laws of Germany. We expect that AWP and AFM will serve as a trading platform for Chinese companies involved in the export of aluminium products to Europe.
Basis of Presentation
The unaudited interim period consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such SEC rules and regulations. The interim period consolidated financial statements should be read together with the audited consolidated financial statements and accompanying notes included in the Company's latest annual report on Form 10-KSB for the five months ended December 31, 2005. In the opinion of the Company, the unaudited consolidated financial statements contained herein contain all adjustments which are of a normal recurring nature necessary to present a fair statement of the results of the interim periods presented. The results for the periods presented herein may not be indicative of the results for any subsequent period or the entire year.
2. LOSS PER SHARE
Basic loss per share is based upon the weighted average number of common shares outstanding during the period. Diluted loss per share reflects the effect of dilutive securities, if any, principally stock options and warrants. Dilutive securities were not included in the calculation of diluted weighted average shares for the three months ended March 31, 2006 and 2005, due to their anti-dilutive effect.
The following table sets forth the computation of basic and diluted loss per share:
| THREE MONTHS ENDED | ||||||
| MARCH 31, | ||||||
| 2006 | 2005 | |||||
| (UNAUDITED) | ||||||
| Net loss | $ | (544 | ) | $ | (592 | ) |
| Weighted-average shares | 18,834 | 18,797 | ||||
| Net loss per share, basic and diluted | $ | (0.03 | ) | $ | (0.03 | ) |
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3. INVENTORIES
Inventories consist of raw materials, work-in-process, and finished goods. Inventories are recorded at the lower of cost (specific identification and first-in first out methods) or market and consist of the following at March 31, 2006:
| Raw Materials | $ | 2,960 | |
| Work in progress | 4,737 | ||
| Finished goods | 1,940 | ||
| $ | 9,637 |
4. BUSINESS SEGMENT INFORMATION
During the three months ended March 31, 2006, the Company operated in one reportable business segment: manufacturing and trading of aluminium products, and all sales revenues were derived from Europe.
The following tables disclose the Company’s sales by product types for the three months ended March 31, 2006:
| By product types | Amount | ||
| Sheets | $ | 2,454 | |
| Strips | 5,491 | ||
| Blanks | 2,958 | ||
| Foils | 9,605 | ||
| Other | 404 | ||
| $ | 20,912 |
As of March 31, 2006, there was no material change in total assets from December 31, 2005.
5. RELATED PARTIES TRANSACTIONS
During the three months ended March 31, 2006, the Company has the following transactions with KHD Humboldt Wedag International Ltd. (collectively with its subsidiaries, “KHD”), which was a former significant shareholder of the Company until January 31, 2006. KHD transferred all its shareholdings of the Company to Mass Financial Corporation (collectively with its subsidiaries, “Mass”) on January 31, 2006:
| a) | Accrued or paid an unused facility fee of $35 to KHD. | |
| b) | Deposited its cash and cash equivalents with KHD. Interest income on the deposit was $1. Such deposit amounted to $2,623 as at March 31, 2006. | |
| c) | Paid a management fee of $225 to KHD. | |
| d) | Sold $4,855 (representing 23% of total sales of products) and paid a net financing charge of $165 to KHD. | |
| e) | Sold $11,357 (representing 54% of total sales of products) and paid a net financing charge of $296 to Mass. |
6. RECENT ACCOUNTING PRONOUNCEMENTS
Management analyzes the recent accounting pronouncements and believes that its adoption will not have any significant impact on the Company’s financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Overview
Our primary business involves the manufacturing and trading of aluminium products.
On June 30, 2005, we acquired all of the shares of AWP Aluminium Walzprodukte GmbH and AFM Aluminiumfolie Merseburg GmbH, for consideration of $18.5 million (Euro 15.3 million).
We acquired all of the outstanding shares of AWP Aluminium Walzprodukte from Blake International Ltd., a wholly-owned subsidiary of KHD Humboldt Wedag International Ltd., pursuant to a share purchase agreement dated June 30, 2005, for consideration of $10.0 million (€ 8.3 million). AWP Aluminium Walzprodukte is based in Hettstedt, Germany, and operates an aluminium rolling mill through its wholly-owned subsidiary MAW Mansfelder Aluminiumwerke. Its products include aluminium sheets, foils, strips and blanks for use by industrial and commercial fabricators of aluminium products, principally for the European market.
We acquired all of the outstanding shares of AFM Aluminiumfolie Merseburg, pursuant to a share purchase agreement dated June 30, 2005, for consideration of $8.5 million (€ 7.0 million). AFM Aluminiumfolie Merseburg is based in Merseburg, Germany, and also operates an aluminium rolling mill. It produces aluminium foil for flexible (food and beverage) packaging, pharmaceutical packaging and technical applications. AFM Aluminiumfolie Merseburg's principal market is also Europe.
All of our revenues to date have been generated by our two aluminium rolling mills, which were acquired on June 30, 2005.
The following discussion and analysis of the results of operations and financial condition of our company for the three months ended March 31, 2006 should be read in conjunction with the consolidated financial statements and related notes included in this quarterly report, as well as our most recent annual report on Form 10-KSB for the five months ended December 31, 2005 filed with the Securities and Exchange Commission.
Results of Operations - Three Months Ended March 31, 2006 compared to Three Months Ended March 31, 2005
Net product sales for the three months ended March 31, 2006 were $20.9 million, compared to $19.8 million for the three months ended December 31, 2005, an increase of 5.6%, and $nil for three months ended March 31, 2005. The product sales were from our two new subsidiaries which operate the aluminium mills.
Cost of sales was $20.0 million for the three months ended March 31, 2006, compared to $nil in the same period in 2005. The increase was in line with the increase in sales.
General and administrative expenses for the three months ended March 31, 2006 were $1.0 million, compared to $0.5 million for the same period in 2005. We paid $0.2 million for reimbursement of expenses and administrative and management fees to KHD Humboldt Wedag International for the three months ended March 31, 2006 and 2005, respectively. This agreement was terminated effectively from after March 31, 2006.
We reported a net loss of $0.5 million, or $0.03 per common share, for the three months ended March 31, 2006, compared to $0.6 million, or $0.03 per common share, in the same period in 2005.
The primary driver of our profit margin is the price of aluminum. We are unable to effectively hedge this price in a rising market. This has caused our margins to be reduced to a point where profitability is difficult to obtain. We are unable to predict when the price of aluminum will stay in the range where our margins may increase.
Liquidity and Capital Resources
At March 31, 2006, we had working capital deficiency of $1.2 million, compared to $0.8 million at December 31, 2005.
We entered into a five-year $20 million revolving credit facility dated April 26, 2004 with MFC Merchant Bank S.A., a
9
wholly-owned subsidiary of KHD Humboldt Wedag International, which is to mature in March 2009. In August 2004, MFC Merchant Bank converted $1,575,000 of the principal that we have drawn under the credit facility into 3,150,000 shares of our common stock at the exercise price of $0.50 per share. As of March 31, 2006, we have an unused portion of a credit facility of $18,425,000. We are required to pay interest on any outstanding principal amount that we have drawn down under the credit facility on the first banking day of each calendar month, at an annual rate of Libor (being the one month London Inter-Bank Offered Rate fixed daily by the British Bankers Association) plus 3.5%, based on a 360 day year. The credit facility is secured by a first fixed and specific charge and security interest on all of our property, assets and undertakings imposed under our promissory note in the aggregate principal amount of $20,000,000, and a floating charge on all of our company's other property, assets and undertakings not specifically mortgaged and charged under the promissory note, including after-acquired assets or the proceeds of any and all assets. Our obligations under the credit facility are also secured by a pledge agreement in the aggregate principal amount of $20,000,000, pursuant to which we have pledged to MFC Merchant Bank all or our existing and future pecuniary claims against third parties.
As a result of our revenues from our aluminium rolling mills combined with the funds available for use under the MFC Merchant Bank credit facility, we believe that we have sufficient working capital to meet operating expenses during the next twelve months. Currently, we are also seeking investments in or acquisitions of companies, technologies or products. We may need additional capital if we pursue other opportunities that we may identify through such activities. Should the need arise, we will consider financing alternatives in addition to the possibility of further draws under our credit facility with MFC Merchant Bank, including the possibility of effecting private placements of our securities.
We are moving to reduce all expenses during this period of eroding earnings and have an agreement with KHD Humboldt Wedag International to cancel the management fees payable to KHD Humboldt Wedag International for the balance of the 2006 year.
There is no assurance that management will find suitable opportunities or effect the necessary financial arrangements for such investments or provide the working capital needed for the acquired activities.
Operating Activities
Operating activities provided cash of $1.1 million for the three months ended March 31, 2006, compared to used cash of $0.4 million in the same period in 2005.
Investing Activities
Investing activities used cash of $87,000 for the three months ended March 31, 2006, compared to $nil in the same period in 2005, primarily due to purchase of fixed assets in 2006.
Financing Activities
Financing activities provided cash of $32,000 for the three months ended March 31, 2006, compared to $nil in the same period in 2005.
Off-Balance Sheet Arrangements
The following table sets forth our best estimates for material long-term obligations as at December 31, 2005. Operating leases include commitments for office space, computers and office equipment. As of December 31, 2005, our principal business office is located in Shanghai, People's Republic of China. We occupy approximately 113-square-meters of leased office space, under an informal, month-to-month lease arrangement and payment under this arrangement is not included in the following table. We paid $4,027 during the five months ended December 31, 2005, under this arrangement. The table excludes commitments such as open purchase orders under long-term agreements with customers and suppliers. We have no minimum purchase or supply arrangements in place. Our contractual obligations as of December 31, 2005 were:
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| Payments Due by Period | |||||||||||||||
| (in $000's ) | |||||||||||||||
| Contractual | Less Than | 4-5 | After | ||||||||||||
| Obligations(1) | Total | One Year | 2-3 Years | Years | 5 Years | ||||||||||
| Capital Lease Obligations | $ | 82 | $ | 46 | $ | 35 | $ | 1 | $ | - | |||||
| Operating Leases | 2,760 | 569 | 1,128 | 827 | 236 | ||||||||||
| Total Contractual Obligations | $ | 2,842 | $ | 615 | $ | 1,163 | $ | 828 | $ | 236 | |||||
| (1) | There have been no material changes to the contractual obligations (summarized in the above table of contractual obligations at December 31, 2005) during the three months ended March 31, 2006 that are outside the ordinary course of our business. |
APPLICATION OF CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles requires management of our company 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 periods.
Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. As the number of variables and assumptions affecting the probable future resolution of the uncertainties increase, these judgments become even more subjective and complex. We are currently in the aluminium manufacturing and trading business and have identified certain accounting policies, described below, that are the most important to the portrayal of our current financial condition and results of operations.
Revenue Recognition
The revenue in current business primarily comes from the sales of aluminium products produced and sold, and when the amounts of the revenues are fixed, agreed or determinable and collectibility is reasonably assured.
Goodwill Impairment
A goodwill impairment loss should be recognized when the carrying amount of the goodwill exceeds the fair value of the goodwill. An impairment loss should not be reversed if the fair value subsequently increases. We consider, but such consideration is not limited to, the following factors to determine the goodwill impairment:
a significant adverse change in legal factors or in the business climate;
an adverse action or assessment by a regulator;
unanticipated competition;
loss of key personnel;
a more-likely-than-not expectation that a significant portion or all of a reporting unit will be sold or otherwise disposed of;
the testing for write-down or impairment of a significant asset group within a reporting unit; or
the recognition of a goodwill impairment loss in its separate financial statements by a subsidiary that is a component of the reporting unit.
Impairment of Long-Lived Assets
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We periodically evaluate long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review of recoverability, we estimate future cash flows expected to result from the use of the asset and its eventual disposition. The estimates of future cash flows, based on reasonable and supportable assumptions and projections, require our management to make subjective judgements. In addition, the time periods for estimating future cash flows is often lengthy, which increases the sensitivity of the assumptions made. Depending on the assumptions and estimates used, the estimated future cash flows projected in the evaluation of long-lived assets can vary within a wide range of outcomes. Our management considers the likelihood of possible outcomes in determining the best estimate of future cash flows.
ITEM 3. CONTROLS AND PROCEDURES.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of March 31, 2006, the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
There have been no significant changes in our internal controls over financial reporting that occurred during our most recent quarter that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In the ordinary course of conducting our business, we may become subject to litigation and claims regarding various matters. There was no outstanding litigation as of March 31, 2006.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS.
(a) Exhibits Required by Item 601 of Regulation SB
| Exhibit | Filed | |||
| Number | Exhibit Title | Herewith | Form | Filing Date |
| (3)(i) | Articles of Incorporation | |||
| 3.1.1 | Certificate of Incorporation of | S-1 | April 13, 1981 | |
| Cathay Merchant Group, Inc., a | ||||
| Delaware corporation | ||||
| 3.1.2 | Certificate of Amendment to | 10-Q | January 31, 1987 | |
| Certificate of Incorporation of | ||||
| Cathay Merchant Group, Inc., a | ||||
| Delaware corporation | ||||
| 3.1.3 | Certificate of Amendment to | 10-K | July 28, 1990 | |
| Certificate of Incorporation of | ||||
| Cathay Merchant Group, Inc., a | ||||
| Delaware corporation | ||||
| 3.1.4 | Certificate of Amendment to | 10-KSB | July 31, 1997 | |
| Certificate of Incorporation of | ||||
| Cathay Merchant Group, Inc., a | ||||
| Delaware corporation | ||||
| 3.1.5 | Certificate of Amendment to | 8-K | June 5, 1998 | |
| Certificate of Incorporation of | ||||
| Cathay Merchant Group, Inc., a | ||||
| Delaware corporation | ||||
| 3.1.6 | Certificate of Designations of Series | 8-K | June 5, 1998 | |
| A Convertible Preferred Stock of | ||||
| Cathay Merchant Group, Inc., a | ||||
| Delaware Corporation | ||||
| 3.1.7 | Certificate of Designations of Series | 8-K | February 9, 1999 | |
| B 5% Convertible Preferred Stock | ||||
| of Cathay Merchant Group, Inc., a | ||||
| Delaware Corporation | ||||
| 3.1.8 | Certificate of Amendment to | 8-K | January 10, 2000 | |
| Certificate of Incorporation of | ||||
| Cathay Merchant Group, Inc., a | ||||
| Delaware corporation | ||||
| 3.1.9 | Certificate of Amendment to | 8-K | October 7, 2004 | |
| Certificate of Incorporation of | ||||
| Cathay Merchant Group, Inc., a | ||||
| Delaware corporation |
13
| Exhibit | Filed | |||
| Number | Exhibit Title | Herewith | Form | Filing Date |
| 3(ii) | By-laws | |||
| 3.2.1 | Amended Bylaws of Cathay | 8-K | May 17, 2000 | |
| Merchant Group, Inc., a Delaware | ||||
| corporation | ||||
| (10) | Material contracts | |||
| 10.1 | Asset Purchase Agreement dated | 8-K | December 19, 2003 | |
| December 8, 2003, between | ||||
| Equidyne Systems, Inc. and HNS | ||||
| International Inc. | ||||
| 10.2 | Amendment Agreement dated | 8-K | December 19, 2003 | |
| December 12, 2003, between | ||||
| Equidyne Systems, Inc. and HNS | ||||
| International Inc. | ||||
| 10.3 | Patent Purchase Agreement dated | 8-K | December 19, 2003 | |
| December 8, 2003, between | ||||
| Equidyne Systems, Inc. and HNS | ||||
| International Inc. | ||||
| 10.4 | Stock Purchase Agreement dated | 8-K | April 30, 2004 | |
| April 26, 2004, between Cathay | ||||
| Merchant Group, Inc. and Raj | ||||
| Kumar. | ||||
| 10.5 | Credit Facility Agreement dated as | 8-K | April 30, 2004 | |
| of April 26, 2004, between Cathay | ||||
| Merchant Group, Inc. and MFC | ||||
| Merchant Bank S.A. | ||||
| 10.6 | Financial Advisory Agreement | 10-KSB | October 29, 2004 | |
| dated January 1, 2004, between | ||||
| Cathay Merchant Group, Inc. and | ||||
| MFC Merchant Bank S.A. | ||||
| 10.7 | Memorandum of Understanding | 10-QSB | December 15, 2004 | |
| dated September 16, 2004, among | ||||
| KHD Humboldt Wedag | ||||
| International Ltd., Weichang | ||||
| Manchu Mongolia Autonomous | ||||
| County Government of Hebei | ||||
| Province, Yudaokou County | ||||
| Government and Laowopu County | ||||
| Government. |
14
| Exhibit | Filed | |||
| Number | Exhibit Title | Herewith | Form | Filing Date |
| 10.8 | Addendum of Memorandum of | 10-QSB | December 15, 2004 | |
| Understanding dated September 26, | ||||
| 2004, among KHD Humboldt | ||||
| Wedag International Ltd., Weichang | ||||
| Manchu Mongolia Autonomous | ||||
| County Government of Hebei | ||||
| Province, Yudaokou County | ||||
| Government and Laowopu County | ||||
| Government. | ||||
| 10.11 | Memorandum of Understanding | 10-KSB | October 31, 2005 | |
| dated January 28, 2005, between | ||||
| Cathay Merchant Group (Shanghai) | ||||
| Wind Energy Co., Ltd. and | ||||
| Kangbao County Government of | ||||
| Hebei Province and Chuzhangdi | ||||
| Town Government. | ||||
| 10.12 | Wind Park Project Land Use Rights | 10-KSB | October 31, 2005 | |
| Agreement dated February 23, | ||||
| 2005, between Cathay Merchant | ||||
| Group (Shanghai) Wind Energy | ||||
| Co., Ltd. and Kangbao County | ||||
| Government. | ||||
| 10.13 | Share Purchase Agreement dated | 8-K | June 30, 2005 | |
| June 30, 2005, between Cathay | ||||
| Merchant Group Limited and Blake | ||||
| International Limited. | ||||
| 10.14 | Promissory Note dated June 30, | 8-K | June 30, 2005 | |
| 2005, between Cathay Merchant | �� | |||
| Group Limited and Cathay | ||||
| Merchant Group, Inc. | ||||
| 10.15 | Share Purchase Agreement dated | 8-K | June 30, 2005 | |
| June 30, 2005, between Cathay | ||||
| Merchant Group Limited and | ||||
| Universal Metals Limited. | ||||
| 10.16 | Promissory Note dated June 30, | 8-K | June 30, 2005 | |
| 2005, between Cathay Merchant | ||||
| Group Limited and Cathay | ||||
| Merchant Group, Inc. | ||||
| (31) | Section 302 Certifications | |||
| 31.1 | Chief Executive Officer and | X | ||
| Chief Financial Officer | ||||
| (32) | Section 906 Certifications |
15
| Exhibit | Filed | |||
| Number | Exhibit Title | Herewith | Form | Filing Date |
| 32.1 | Chief Executive Officer and | X | ||
| Chief Financial Officer |
16
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: May 15, 2006 | CATHAY MERCHANT GROUP, INC. | |
| By: | /s/ Michael J. Smith | |
| Michael J. Smith | ||
| Chief Executive Officer, President and | ||
| Chief Financial Officer | ||
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