File Date:_______________ File Number: 333-_____________
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FORM SB-2
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AMERICAN METAL TECHNOLOGY GROUP
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(Name of small business issuer in its charter)
Nevada 3490 02-0715113
- ---------------------- ---------------------------- ---------------
(State or Jurisdiction (Primary Standard Industrial (I.R.S Employer
of Incorporation) Classification Code Number) Identification No.)
600 Wilshire Blvd., Suite 1253
Los Angeles, CA 90017
Phone: 213-538-1204
(Address and telephone number of principal executive offices)
GKL Resident Agents/Filings, Inc.
1000 E. William Street, #204
Carson City, NV 891701
Phone: 775-841-0644
(Name, address and telephone number of agent for service)
Copies To:
Adam U. Shaikh, Esq.
The Law Offices of Adam U. Shaikh, Chtd
7917 Autumn Gate Ave
Las Vegas, NV 89131
Phone: 702-296-3575
Facsimile: 702-549-2265
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this registration 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: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) 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(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 statement 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: [ ]
CALCULATION OF REGISTRATION FEE
Proposed maximum
Title of each class Amount to be Proposed maximum aggregate offering
of securities to be registered offering price per price Amount of
registered unit (4) registration fee
Common(1) 7,200,000 $1.00 $7,200,000 $ 912.28
Common(2) 1,800,000 $1.00 $1,800,000 $ 228.06
Common(3) 950,000 $1.00 $950,000 $ 120.37
(1) Common Shares to be distributed pursuant to a registered distribution to
the shareholders of Beijing Sande Technology (Holding) Co., Ltd.
(2) Common Shares to be distributed pursuant to a registered distribution to
the shareholders of Beijing Sande Shang Mao Co., Ltd.
(3) Common Shares to be registered for certain selling security holders of
American Metal Technology Group.
(4) Estimated pursuant to Rule 457(e) solely for the purpose of calculating the
registration fee for the shares of the selling security holders and the
securities that will be distributed as a dividend distribution to
shareholders of Beijing Sande Technology (Holding) Co., Ltd. and Beijing
Sande Shang Mao Co., Ltd.
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 or until this registration statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
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SUBJECT TO COMPLETION
The information in this preliminary prospectus is not complete and may be
changed. The securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the sale is not permitted.
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PRELIMINARY PROSPECTUS
AMERICAN METAL TECHNOLOGY GROUP
(A Nevada Corporation)
9,950,000
Shares of Common Stock
6,235,539 Shares Eligible for Resale through this Prospectus
$1.00 per share
Prior to this offering, there has been no public market for our stock.
This Prospectus relates to the registration of certain shares of common stock,
$.001 par value per share, of American Metal Technology Group, a Nevada
corporation ("AMTG", the "Company", "we", "us", "our"). Certain Selling Security
Holders ("AMTG Selling Security Holders") are offering 950,000 shares of our
common stock for resale. Beijing Sande Technology (Holding) Co., Ltd. ("BST")
shall be distributing 7,200,000 shares of common stock as a dividend
distribution to its shareholders of record as of November 30, 2004 on the basis
of one share of our common stock for every one share of BST common stock ("BST
shareholders"). Beijing Sande Shang Mao Co., Ltd. ("BSS") shall be distributing
1,800,000 shares of common stock as a dividend distribution to its shareholders
of record as of November 30, 2004 on the basis of one share of our common stock
for every one share of BSS common stock ("BSS shareholders"). Lastly, certain
BST Shareholders will be offering for resale 4,228,431 shares of our common
stock (does not include shares to be received by affiliates of AMTG in the
dividend) and certain BSS shareholders shall be offering for resale 1,057,108
shares of our common stock (does not include shares to be received by affiliates
of AMTG in the dividend).
The selling security holders named in this prospectus are offering all of the
shares of common stock offered through this prospectus. American Metal
Technology Group will not receive any proceeds from this offering and has not
made any arrangements for the sale of these securities.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offence.
We have not authorized any dealer, salesman or any other person to give any
information or to make any representations not contained in this prospectus. Any
information or representation not contained in this prospectus must not be
relied upon as having been authorized by AMTG.
The Date of this Prospectus, subject to completion, is ________.
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TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY............................................. 5
RISK FACTORS................................................... 7
RISK FACTORS RELATED TO OUR BUSINESS........................... 7
RISK FACTORS RELATED TO THE PRC................................ 11
RISK FACTORS RELATED TO THIS OFFERING.......................... 15
USE OF PROCEEDS................................................ 16
DETERMINATION OF OFFERING PRICE................................ 16
DILUTION....................................................... 17
SELLING SECURITY HOLDERS....................................... 17
PLAN OF DISTRIBUTION........................................... 26
LEGAL PROCEEDINGS.............................................. 27
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS............................. 27
EXECUTIVE COMPENSATION......................................... 30
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT..................................... 31
DESCRIPTION OF SECURITIES...................................... 32
OUR BUSINESS................................................... 33
MANAGEMENT DISCUSSION AND PLAN OF
OPERATION............................................. 40
CRITICAL ACCOUNTING POLICIES................................... 45
MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.............................. 47
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES........ 48
INTEREST OF NAMED EXPERTS AND COUNSEL.......................... 48
CERTAIN RELATIONSHIP AND RELATED
TRANSACTIONS.......................................... 48
FINANCIAL STATEMENTS........................................... 51
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus.
YOUR RELIANCE ON INFORMATION CONTAINED IN THIS PROSPECTUS
In deciding whether to invest in our securities, you should rely on the
information contained in this prospectus. We have not authorized anyone to
provide you with information different from that contained in this prospectus.
The Selling Security Holders are offering to sell, and seeking offers to buy,
shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of the securities. You must not consider that the
delivery of this prospectus or any sale of the securities covered by this
prospectus implies that there has been no change in our affairs since the date
of this prospectus or that the information contained in this prospectus is
current or complete as of any time after the date of this prospectus.
OUR BUSINESS
American Metal Technology Group, a Nevada corporation, ("AMTG", "We", "Us",
"Our" or the "Company") via its subsidiaries, Beijing Tong Yuan Heng Feng
Technology Co., Ltd. and American Metal Technology (Lang Fang) Co., Ltd., is in
the business of manufacturing and sales of high-precision investment casting and
metal fabrication products in the People's Republic of China ("China"). The
Company's production involves high-precision investment casting and machined
products, including valves, pipe fittings, etc. The Company uses a wide range of
ferrous and non-ferrous materials such as stainless steel, carbon steel, monel
alloy, hastelloy alloy, and other various types of alloys.
We were incorporated on January 13, 2004 under the laws of the state of Nevada.
Our principal executive office is located at 600 Wilshire Boulevard, Suite 1253,
Los Angeles, CA 90017. On June 1, 2004, the Company entered into an equity
purchase agreement with Beijing Sande Technology (Holding) Co., Ltd. ("BST") to
acquire 80% ownership of Beijing Tong Yuan Heng Feng Technology Co., Ltd.
("BJTY"). As a result, we issued 7,200 shares of our pre-split common stock to
BST in exchange for 80% ownership of BJTY. On August 2, 2004, the Company
incorporated American Metal Technology (Lang Fang) Co., Ltd. ("AMLF") in Hebei,
China, for the purpose of expanding the production facility of BJTY. On August
8, 2004, the Company and AMLF together entered into an equity purchase agreement
with Beijing Sande Shang Mao Co., Ltd. ("BSS") for the remaining 20% of BJTY. As
a result, we issued 1,800 shares of our pre-split common stock to BSS and our
subsidiary, AMLF, becomes the owner of 20%
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shareholder of BJTY. On November 12, 2004, the Company effected a forward split
of all the outstanding shares of common stock on a 1,000 for 1 basis. We
currently maintain a web site at http://www.amtg-usa.com. Any information
displayed on our website is not part of this prospectus.
THE OFFERING
As of November 12, 2004, we had 10,000,000 shares of common stock outstanding,
par value $.001 per share. This offering is related to a registered distribution
of 7,200,000 shares of our common stock to BST shareholders on the basis of one
share of our common stock for every one share of BST common stock, and a
registered distribution of 1,800,000 shares of our common stock to the BSS
shareholders on the basis of one share of our common stock for every one share
of BSS common stock. Furthermore, this offering covers the resale of 950,000
shares by certain AMTG Selling Security Holders, the resale of 4,228,431 shares
received through the registered dividend by certain BST Selling Security
Holders, and the resale of 1,057,108 shares received through the registered
dividend by certain BSS Selling Security Holders. Certain affiliates of AMTG,
and Beijing Tong Yuan Heng Feng Technology Co., Ltd., by virtue of their
positions as an officer, director, or by owning 10% or greater of the
outstanding shares of AMTG following the dividend distributions, shall receive
shares in the registered dividends. These shares distributed to the affiliates
in the dividends, as well as any additional shares they hold in AMTG, will not
be registered for resale under this prospectus. Such affiliates shares are
designated as restricted stock and may only be resold in compliance with Rule
144 of the Securities Act of 1933, or by registration of said shares under the
Securities Act of 1933, as amended.
There is currently no public market for our securities. The AMTG Selling
Security Holders, the BSS Selling Security Holders, and the BST Selling Security
Holders will sell their shares at a price of $1.00 until the shares are traded
on a market or exchange, at which time they will be sold at prevailing market
prices. The dividend distribution of our shares to BSS and BST shareholders may
trigger a taxable event. All BST and BSS shareholders are strongly encouraged to
consult their own tax advisor in regards to the dividend. Because of BST's and
BSS's role in the distribution, they both will likely be deemed to be "statutory
underwriters" within the meaning of Section 2(11) of the Securities Act. BST and
BSS have both advised us that they will comply with prospectus delivery
requirements that would apply to a statutory underwriter in connection with the
distribution of our shares to their shareholders. BSS and BST have acknowledged
that it is familiar with the anti-manipulation rules of the SEC, including
Regulation M. These rules may apply to sales by BSS and BST in the market if a
market develops. Neither BSS nor BST will own any shares of our company after
the distribution and has no plans for such future sales or purchases of shares
in our company.
Regulation M prohibits any person who participates in a distribution from
bidding for or purchasing any security which is the subject of the distribution
until the entire
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distribution is complete. It also prohibits purchases to stabilize the price of
a security in the distribution.
We have agreed to pay all estimated expenses of registering the securities.
Although we will pay all offering expenses, we will not receive any proceeds
from the sale of the securities.
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RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AMTG AND ITS BUSINESS. ALL
FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN AS THEY ARE BASED ON CURRENT
EXPECTATIONS AND ASSUMPTIONS CONCERNING FUTURE EVENTS OR FUTURE PERFORMANCE OF
AMTG.
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RISK FACTORS RELATED TO OUR BUSINESS
Our business and operations involve numerous risks, some of which are beyond our
control that may affect future results and the market price of our common
shares. In any such case, the market price of our common shares could decline,
and you may lose all or part of your investment. The following discussion
highlights some of the risks we face.
We may not be able to successfully implement our operation plans and growth
strategies, which would materially and adversely affect our business, financial
condition and results of operations.
The success of our operating plans depends on our ability to achieve benefits
from our manufacturing transformation, and administrative cost reduction
initiatives as well as our ongoing improvement programs, and the ability of
acquired or newly invested companies to achieve satisfactory operating results.
In order to avoid disruptions of business, we are pursuing a number of growth
strategies, including leveraging our customer base to develop new product lines
for additional sources of revenues, as well as exploring opportunities to expand
into other metal casting sectors. Some of these strategies relate to new
services or products for which there are no established markets in China, or
relate to services or products in which we lack experience and expertise. We
cannot assure you that we will be able to deliver new products or services on a
commercially viable basis or in a timely manner, or at all. If we are unable to
successfully implement our operating plans and growth strategies, our revenue
and profitability will not grow as we expect, and our competitiveness may be
materially and adversely affected.
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There are risks associated with our business strategy contemplating growth
through acquisitions and joint ventures.
As a component of our future growth strategy, we intend to enhance our business
development by acquiring other businesses that can complement our current
business or that we believe may benefit us in terms of additional product lines
or advanced technology, and by entering into strategic joint ventures with
selected industry players. However, our ability to grow through such
acquisitions and joint ventures will depend on the availability of suitable
acquisition candidates at an acceptable cost, our ability to compete effectively
to attract and reach agreement with acquisition candidates or joint venture
partners on commercially reasonable terms and conditions, the availability of
financing to complete the acquisitions or joint ventures as well as our ability
to obtain any required governmental approvals. We lack experience in
identifying, financing and completing large acquisition or joint venture
transactions. In addition, the benefits of an acquisition or joint venture
transaction may take considerable time to develop and we cannot assure you that
any particular acquisition or joint venture will produce the expected financial
benefits. Moreover, the identification and completion of these transactions may
require us to spend significant management and other resources.
We depend on our key personnel and our business and growth prospects may be
severely disrupted if we lose their services.
Our future success is heavily dependent upon the continued service of our key
executives and other key employees. In particular, we rely on the expertise and
experience of Mr. Chen Gao and Ms. Xin Yan Yuan, our founder and director,
controlling shareholders and executive officers in our business operations. We
rely on their personal relationships with our other significant shareholders,
employees, and the relevant regulatory authorities. We also rely on a number of
key engineering and technology officers and staff for the development and
operation of our metal fabrication business.
If one or more of our key personnel are unable or unwilling to continue in their
present positions, we may not be able to easily replace them and may incur
additional expenses to recruit and train new personnel. Our business operations
could be severely disrupted, and our financial condition and results of
operations could be materially and adversely affected. Furthermore, since our
industry is characterized by intense competition for talent, we may need to
offer higher compensation and other benefits in order to attract and retain key
personnel in the future. We cannot assure you that we will be able to attract or
retain the key personnel that we will need to achieve our business objectives.
Furthermore, we do not maintain key-man life insurance for any of our key
personnel.
We have a limited operating history, which may make it difficult for you to
evaluate our business, and our limited resources may affect our ability to
manage the growth we expect to achieve.
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Our business was established in December 2001, and initially focused on metal
parts fabrication. In 2002, we began commercially manufacturing high precision
metal parts, which are now our primary source of revenues. In addition, we have
recently expanded our operations by investing in the development of a new
factory in Lang Fang Development Zone in Heibei, China. Furthermore, our senior
management and employees have worked together at our Company for only a
relatively short period of time. Accordingly, we have a limited operating
history upon which you can evaluate our business and prospects. In addition,
China's metal fabrication and metal casting businesses are still in the
developmental stage. Our future revenues and profits are substantially dependent
upon the growth in the acceptance and use of metal fabrication and casting
products made in China.
Our growth to date has placed, and our anticipated further expansion of our
operations will continue to place, a significant strain on our management,
systems and resources. In addition to training and managing our workforce, we
will need to continue to develop and improve our manufacturing process and our
product lines. We cannot assure you that we will be able to efficiently or
effectively manage the growth of our operations, and any failure to do so may
limit our future growth and materially and adversely affect our business,
financial condition and results of operations.
Risks associated with major customers.
Historically, a substantial percentage of our sales have been to a small number
of customers who are related parties. During the years ended December 31, 2002
and 2003, we have two large customers who accounted for approximately 100% of
our net sales. As a result of a recently announced shift in strategy, we will
attempt to increase the number of customers for our metal fabrication
operations, thereby, trying to avoid our dependence on a small number of larger
customers. Our success will depend to a significant extent on maintaining our
major customers and our ability to increase our customer base. We could be
materially adversely affected if we lose any major customer. Our sales
transactions to all of our customers are based on purchase orders received by us
from time to time. Except for these purchase orders, we have no written
agreements with our customers for future orders of production or sales, and the
percentage of sales to any of our customers may fluctuate from time to time.
Although management believes that any one of its customers could be replaced
eventually, the loss of any one or more of our major customers or a substantial
reduction in orders from any one of them would have a material adverse effect on
our business unless and until that we are able to replace the customer or the
orders with one or more of comparable size. A substantial portion of our sales
to our major customers are made on credit, which exposes us to the risk of
significant revenue loss if a major customer is unable to honor its credit
obligations to us. While we have not, to date, experienced any difficulty in
being paid by major customers, we could be adversely affected if a major
customer is unable to pay for our products or services. During the fiscal years
ended December 31, 2002 and 2003, accounts receivable from the two customers
represented 100% of the total outstanding receivables.
We need to continuously modify and upgrade our operations.
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In order to remain competitive in the industry, we must continuously revise and
improve our operations, acquire new equipment, and anticipate and react to
market changes. The failure to anticipate, detect or react to market changes can
have severe adverse effects on our operations. During the past few years, we
have identified a number of changes in the markets in which we operate and have
attempted to react to these changes. Our actions have included investing in a
new manufacturing facility in Lang Fang Development Zone, in Heibei, China,
changes in our marketing strategies and the development of new products. These
prior changes, as well as changes that we anticipate making during the current
year, require significant financial and personnel resources. The failure to
correctly react to changes in the market could, therefore, result in a
significant drain on our resources and could adversely affect our future
operations. No assurance can be given that we will be able to detect and
correctly react to changes in our principal markets, or that our investments in
anticipation of such changes will result in improved financial returns to our
Company. We anticipate that we will invest a significant amount of our financial
resources during the current and future years to acquire new equipments and to
change our operating strategy.
We compete against a number of companies which are in a better position than us.
We compete against numerous of metal fabrication manufacturers as well as
in-house manufacturing capabilities of existing customers. To a large extent, we
compete in the metal fabrication business in terms of quality, service, price,
and the ability to deliver products on a reliable basis. Due to intense price
competition, we may have to reduce our prices and thereby adversely affecting
our operating margins in our metal fabrication operations. This will lead to
lower sales, lower gross margins, and lower net profits. During the past few
years, we have, at times, refused certain metal fabrication contracts because of
pricing pressures, which has affected our net sales. To date, we have been able
to compete based on high quality and low cost because of the cost structure of
our operations in China. However, numerous other manufacturers have now
established facilities in China, and our competitive advantage has been
significantly diminished. As a result of the increasing competition in certain
of our products, we have been forced to change our products and our operating
strategy. No assurance can be given that we will be able to compete with our
revised operation strategies.
We are dependent on our current manufacturing facility.
All our manufacturing and production is conducted at our current plant at No.
15, Shixing Street, Shijingshan Badachu, High-Tech Park, Beijing, China.
Presently, we do not maintain any insurance at this facility. Furthermore, the
lease for this facility expires on July 15, 2005. There is currently no contract
or agreement to continue the lease upon its expiry. Should we be unable to
extend the lease agreement, or should our manufacturing and production facility
be affected by fire or natural calamity, we would be severely limited in our
ability to continue operations. Furthermore, should we decide to extend the
lease, there is no guarantee that we will be able to renew the lease on terms
that are favorable or acceptable to us.
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RISK FACTORS RELATED TO THE PEOPLE'S REPUBLIC OF CHINA ("PRC")
Substantially all of our assets are located in China and substantially all of
our revenues are derived from our operations in China. Accordingly, our
business, financial condition, results of operations and prospects are subject,
to a significant extent, to economic, political and legal developments in China.
The PRC's economic, political and social conditions, as well as government
policies, could affect our business.
The PRC economy differs from the economies of most developed countries in many
respects, including the amount of government involvement, level of development,
growth rate, control of foreign exchange and allocation of resources. While the
PRC economy has experienced significant growth in the past twenty years, growth
has been uneven, both geographically and among various sectors of the economy.
The PRC government has implemented various measures to encourage economic growth
and guide the allocation of resources. Some of these measures benefit the
overall PRC economy, but may also have a negative effect on us. For example, our
financial condition and results of operations may be adversely affected by
government control over capital investments or changes in tax regulations that
are applicable to us.
The PRC economy has been transitioning from a planned economy to a more
market-oriented economy. Although the PRC government has implemented measures
since the late 1970s emphasizing the utilization of market forces for economic
reform, the reduction of state ownership of productive assets and the
establishment of sound corporate governance in business enterprises, a
substantial portion of productive assets in China is still owned by the PRC
government. In addition, the PRC government continues to play a significant role
in regulating industry development by imposing industrial policies. The PRC
government also exercises significant control over China's economic growth
through the allocation of resources, controlling payment of foreign
currency-denominated obligations, setting monetary policy and providing
preferential treatment to particular industries or companies.
Our manufacturing facilities are located in the PRC. As a result, our operations
and assets are subject to significant political, economic, legal and other
uncertainties associated with doing business in China. Changes in policies by
the Chinese government resulting in changes in laws, regulations, or the
interpretation thereof, confiscatory taxation, restrictions on imports and
sources of supply, currency devaluations or the expropriation of private
enterprise could materially adversely affect the Company. Under its current
leadership, the Chinese government has been pursuing economic reform policies,
including the encouragement of private economic activity and greater economic
decentralization. There can be no assurance; however, that the Chinese
government will continue to pursue such policies, that such policies will be
successfully pursued, that such policies will not be significantly altered from
time to time or that business operations in the PRC would not become subject to
the risk of nationalization, which could result in the
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total loss of investments in that country. Economic development may be limited
as well by other factors, such as the imposition of austerity measures intended
to reduce inflation, the inadequate development of an infrastructure, and the
potential unavailability of adequate transportation, adequate power, adequate
water supplies, satisfactory roads and communications and raw materials and
parts. If for any reason, we were required to move our manufacturing operations
outside of PRC, our favorable cost structure could be eroded, our
competitiveness and market position would be materially jeopardized, and there
would be substantial doubt as to whether we could continue our operations.
Any future outbreak of severe acute respiratory syndrome in China, or similar
adverse public health developments, may have a material adverse effect on our
business operations, financial condition and results of operations.
During December 2002 to July 2003, Severe Acute Respiratory Syndrome ("SARS")
has become a major worldwide health threat. SARS is believed to have originated
in China and, to date, most SARS infections and deaths have occurred in China.
On July 5, 2003, the World Health Organization declared that the SARS outbreak
had been contained. Since September 2003, however, a number of isolated new
cases of SARS have been reported, most recently in Guangdong province of the
PRC, in January 2004. Because SARS appears to be a highly contagious disease, a
number of countries and health organizations, including the World Health
Organization, have strongly advising people to avoid traveling to Hong Kong or
mainland China. Our offices and facilities are located in China. In addition to
travel bans, some countries and businesses have discussed limiting their
contacts, including their business relations, with these areas. To date, we have
not had an occurrence of SARS with any of our employees. No assurance can,
however, be given that SARS will not affect our workers. Any incident of SARS
with any of our employees could severely affect our operations and financial
condition. To date, the principal effect of SARS on us has been a reduction of
personal contacts with our customers and clients who have deferred visits to our
offices and facilities within China. This decrease in customer contact, and a
similar decrease in customer attendance at trade and marketing shows, may,
however, have a negative effect on future orders for our products and services.
We have not, to date, noticed any decrease in orders from our customers and no
customer has indicated that they would terminate or reduce its relations with us
as a result of the outbreak of SARS. However, since SARS is a relatively
recently discovered disease, its effects, contagiousness, and other
characteristics are still not fully understood. Any recurrence of the SARS
outbreak or a development of a similar health hazard in China may impact our
relationship with international customers and may further reduce their business
with us by shifting their manufacturing needs to manufacturers located outside
of China or by purchasing products manufactured outside of China. Any such
future shift of work orders or product purchases from us to companies based in
countries that are not so affected by SARS would have a material adverse effect
on our operations and financial condition.
The PRC's legal system and application of laws are uncertain.
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The legal system of PRC is new, unclear and continually evolving, and currently
there can be no certainty as to the application of its laws and regulations in
particular instances. PRC does not have a comprehensive system of laws, and the
existing regional and local laws are often in conflict and subject to
inconsistent interpretation, implementation and enforcement. New laws and
changes to existing laws occur quickly and sometimes unpredictably. As is the
case with all businesses operating in China, we are often required to comply
with informal laws and trade practices imposed by local and regional government
administrators. Local taxes and other charges are levied depending on the local
needs for tax revenues and may not be predictable or evenly applied. These local
and regional taxes/charges and governmentally imposed business practices often
affect our cost of doing business and require us to constantly modify our
business methods to both comply with these local rules and to lessen the
financial impact and operational interference of such policies. In addition, it
is often extremely burdensome for businesses to comply with some of the local
and regional laws and regulations. As a result, with the knowledge and tacit
approval of the local and regional agencies, most businesses fail to fully
comply with certain of these more burdensome laws and regulations. No assurance
can, however, be given that the local and regional agencies will not suddenly
commence enforcing these rules, thereby increasing the burden on us and the
other businesses operating in the region. While we have, to date, been able to
operate within these changing administratively imposed business practices and
have otherwise been able to comply with the informal enforcement rules of the
various administrative agencies, no assurance can be given that we will continue
to be able to do so in the future. Should the local or regional governments or
administrators impose new practices or levies that we cannot effectively respond
to, or should the administrators suddenly commence enforcing those rules that
they have not previously enforced, our operations and financial condition could
be materially and adversely impacted. Our ability to appeal many of the local
and regionally imposed law and regulations is limited, and we may not be able to
seek adequate redress for laws that materially damage its business. The Chinese
judiciary is relatively inexperienced in enforcing the laws that exist, leading
to a higher than usual degree of uncertainty as to the outcome of any
litigation. Even where adequate law do exists in China, it may not be possible
to obtain swift and equitable enforcement of that law.
Current favorable tax policy could change.
Our subsidiaries are enjoying favorable tax policy from the PRC government;
therefore, our business activities in China have not been subject to income
taxes. There can be no assurances, however, that we will not be subject to such
taxes in the future. If China did impose a tax upon us, the tax could materially
adversely affect our business and results of operations.
Recent turbulent relations between China and the United States may have a
material adverse effect on our business operations, financial condition and
results of operations.
During the past few years, relations between the U.S. and China have been tense
as a result of numerous events, including China's opposition to the U.S. war in
Iraq in 2003,
13
the strained relations between the U.S. and North Korea, the bombing by NATO
forces of the Chinese embassy in Belgrade, the U.S. Navy patrol aircraft that
was forced to make an emergency landing on Hainan Island in China in April 2001,
allegations by the U.S. that certain thermonuclear military technology of the
U.S. has been stolen by Chinese spies, the continuous support of Taiwan arm
sales by the U.S., and the continuous allegations by the U.S. of human rights
abuses in China. In addition, the U.S. and China have recently been involved in
controversies over the protection in China of intellectual property rights that
threatened a trade war between the countries. These strains on U.S./China
relations could affect the ability of companies operating in China, such as us,
from engaging in business with, or selling to the U.S. companies. Any disruption
of the current trade relations with the U.S. could have a material adverse
effect on our business. No assurance can be given that these and any other
future controversies will not change the status quo involving peaceful trade
relations between the U.S. and China, or that our business and operations in
China will not be materially and adversely affected. Even if trade relations
between the U.S. and China are not affected by political difficulties between
the two countries, such political friction could adversely affect the prevailing
market price for our common shares.
Labor shortages may have a material adverse effect on our business operations,
financial condition and results of operations.
We could be affected by cyclical trends and other shortages in labor supply in
China. For approximately two months each year, there are labor shortages in
China as a result of the Chinese New Year. There is also a large turnover of
employees in China each year, particularly following the Chinese New Year
holiday. We have not experienced a labor shortage in the past as a result of
road and weather conditions and natural disasters. However, we cannot guarantee
that any future changes in road and weather conditions or natural disasters
won't have material adverse effect on our business operations, financial
condition and results of operations.
Fluctuations in exchange rates could result in foreign currency exchange losses.
Substantially a majority of our revenues are denominated in Renminbi, while a
portion of our expenditures are denominated in foreign currencies, primarily the
U.S. dollar. Fluctuations in exchange rates, primarily those involving the U.S.
dollar may affect our costs and operating margins. In addition, these
fluctuations could result in exchange losses and increased costs in Renminbi
terms. Currently, there are very limited currency hedging methods available in
China to reduce our exposure to exchange rate fluctuations. To date, we have not
entered into any currency hedging transactions in an effort to reduce our
exposure to foreign currency exchange risk. While we may decide to enter into
hedging transactions in the future, the availability and effectiveness of these
hedges may be limited and we may not be able to successfully hedge our exposure
at all. In addition, our currency exchange losses may be magnified by PRC
exchange control regulations that restrict our ability to convert Renminbi into
U.S. dollars.
Significant worldwide political, economic, legal and other risks related to
international operations.
14
We were incorporated in Nevada, United States and have subsidiaries incorporated
in the PRC. Our executive and administrative officers are mainly located in PRC.
Virtually all of our products are manufactured in China, and almost all of the
net book value of our total fixed assets is located in China. We are suppliers
to customers who export finished goods to Europe, North America, Canada and
China. As a result, these international operations are subject to significant
political and economic risks and legal uncertainties, including changes in
international and domestic customs regulations, changes in tariffs, trade
restrictions, trade agreements and taxation, changes in economic and political
conditions and in governmental policies, difficulties in managing or overseeing
foreign operations, and wars, civil unrest, acts of terrorism and other
conflicts. The occurrence or consequences of any of these factors may restrict
our customers' ability to operate in the affected region and result in a
decrease in their orders to us; thus, a decrease on the profitability of our
operations.
Any future Asian financial crisis could affect our business.
The Asian financial markets have experienced significant turmoil over the past
few years with significant currency fluctuations, stock market volatility and
instability at banking and financial institutions, major corporations and
foreign governments. These factors could result in changes in the relative value
of the currencies of Asian countries, which could affect the Company's financial
condition and competitiveness. The depreciation of the currencies of other South
East Asian countries has made these markets more competitive to China for
manufacturing. We believe these countries will continue to compete strongly with
China for manufacturing business in the future. The consequences of any of these
factors may restrict our ability to operate in China and decrease the
profitability of our operations in the region.
RISK FACTORS RELATED TO THIS OFFERING
There has been no public market for our common shares prior to this offering,
and therefore the price may fall below the offering price.
Prior to this initial public offering, there has been no public market for our
common shares. The offering price for our common shares is arbitrarily and may
bear no relationship to the market price for our common stock after the initial
public offering. We cannot assure you that an active trading market will develop
or that the market price of our common shares will not decline below the
offering price. The future sales by our existing shareholders of a substantial
number of our common shares in the public market could adversely affect the
price of our common shares.
If our shareholders sell substantial amounts of our common shares, in the public
market following this offering, the market price of our common shares could
fall. Such sales also might make it more difficult for us to sell equity or
equity-related securities in the future at a time and price that we deem
appropriate. We have an aggregate of
15
10,000,000 common shares issued and outstanding. Immediately after the
completion of this offering, we will have 6,235,539 common shares represented by
Shares Eligible for Resale through this offering. Our common shares in this
offering will be eligible for immediate resale in the public market without
restrictions, and those held by our existing shareholders may also be sold in
the public market in the future subject to the restrictions contained in Rule
144 under the Securities Act and applicable lock-up agreements. If any existing
shareholder or shareholders sell a substantial amount of common shares after the
expiration of the lock-up period, the prevailing market price for our common
shares could be adversely affected.
You will not receive dividend payments.
AMTG has not paid and does not plan to pay dividends in the foreseeable future
even if our operations are profitable. Earnings, if any, will be used to expand
our operations, management salaries, hiring additional staff and operating
expenses, rather than to make distributions to shareholders. Therefore, the
future of your investment depends entirely on the development of a trading
market and the potential increase in the market price of our stock.
SPECIAL NOTE REGARDING 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. You 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 described in
"Risk factors" and elsewhere in this prospectus. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform these statements to
actual results.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock offered
through this prospectus by the selling shareholders.
DETERMINATION OF OFFERING PRICE
Due to our limited operating history, we have arbitrarily determined a price of
$1.00 per share. This was determined by arbitrarily basing it on a Price/Earning
("PE") of 10. We
16
estimate that our net income for the year end 2004 will be in the range of $1
million dollars. Based on ten times earnings, our estimate market value would be
$10,000,000, thus, the price per share is $1.00 per share. This price is simply
an estimate for use in this prospectus. Our earnings may be less than
anticipated. Should a market occur for our securities, the price may be far less
than anticipated.
DILUTION
The common stock to be sold by the selling shareholders is common stock that is
currently issued and outstanding. Accordingly, there will be no dilution to our
existing shareholders.
SELLING SECURITY HOLDERS
The first table below represents AMTG Selling Security Holders, the second table
represents BST Selling Security Holders, and the third table represents BSS
Selling Security Holders. The Selling Security Holders will be selling
securities pursuant to this prospectus. The tables also lists any relationship
selling security holders may have had with us within the past three years and
provides information regarding the shares the selling stockholders beneficially
own and may sell. The estimated securities owned after the offering assumes that
all of the shares registered under this prospectus are sold. However, we do not
have any agreements or understandings with the selling stockholders which would
require them to sell their shares.
AMTG SELLING SECURITY HOLDERS
- -------------------------------------------------------------------------------------------------------
Name, Address, and Securities Owned Prior Number Of Shares Being Securities Owned After
Relationship To Offering Registered Offering
Shares Percent Shares Percent
------ ------- ------ -------
- -------------------------------------------------------------------------------------------------------
Lui Chung Mui Hoo
Flat C 8/F, Man Hoo Court,
448-452, Nathan Road,
Kowloon, Hong Kong 475,000 4.75% 475,000 -0- -0-
- -------------------------------------------------------------------------------------------------------
Rui Lin Ding
209 W. Grand Ave #2,
Alhambra, CA 91801 475,000 4.75% 475,000 -0- -0-
- -------------------------------------------------------------------------------------------------------
17
BST SELLING SECURITY HOLDERS
The following table identifies the shareholders of Beijing Sande Technology
(Holding) Co., Ltd. as of November 30, 2004. Each person listed will receive a
one share of AMTG common stock for each share held in BST. None of these persons
has had any position, office, or other material relationship with AMTG since its
inception other than those footnoted.
- -------------------------------------------------------------------------------------------------------------
Name, Address, and Securities Owned Prior Number Of Shares Being Securities Owned After
Relationship To Offering(1) Registered Offering
Shares Percent Shares Percent
------ ------- ------ -------
- -------------------------------------------------------------------------------------------------------------
Mei Si Gao
No. 601, 1st Door, 14th
Floor, ShuangYu Shu Bei Li, 495,261 3.7% 396,209 -0- -0-
Haidian District, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Ran Song
No. 601, 1st Door, 14th
Floor, Shuang Yu Shu Bei 495,261 3.7% 369,209 -0- -0-
Li, Haidian District,
Beijing, China
- -------------------------------------------------------------------------------------------------------------
Jian Xin Xu
No. 5, 21st Building,
Nanying Fang Water and
Power Departement 495,261 3.96% 369,209 -0- -0-
Dormitory, West District,
Beijing, China
- -------------------------------------------------------------------------------------------------------------
Meng Xu
No. 8, 3rd Door, 11th
Floor, Liu Pu Keng, West 495,261 3.96% 369,209 -0- -0-
District, Beijing, China
- -------------------------------------------------------------------------------------------------------------
Ya Ni Gao
No. 7, Weishu Street,
Haidian District, Beijing, 110,058 <1% 88,046 -0- -0-
China
- -------------------------------------------------------------------------------------------------------------
Ying Pan
No. 7, Weishu Street,
Haidian District, Beijing, 495,261 3.96% 396,209 -0- -0-
China
- -------------------------------------------------------------------------------------------------------------
18
- -------------------------------------------------------------------------------------------------------------
Hang Yuan
No. 601, 3rd Door, 42th
Floor, GuanZhuangDongLi, 275,145 2.2% 220,116 -0- -0-
Chaoyang District, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Xin Min Yuan
No. 502, 1st Door, 40th
Floor, GuanZhuangDongLi, 495,261 3.96% 396,209 -0- -0-
Chaoyang District, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Xin Jian Yuan
No. 601, 3rd Door, 42th
Floor, GuanZhuangDongLi, 495,261 3.96% 396,209 -0- -0-
Chaoyang District, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Xiao Jie Guo
No. 905, 1st Floor,
Qingnian Lake, East 528,279 4.23% 442,623 -0- -0-
District, Beijing, China
- -------------------------------------------------------------------------------------------------------------
Wei Li
No. 031-02 Yongshengli,
Front District, Yingkou 22,012 <1% 17,609 -0- -0-
city, Liaoning, China
- -------------------------------------------------------------------------------------------------------------
Zhen Bang Song
No. 601, 1st Door, 14th
Floor, Shuang Yu Shu Bei 550,290 4.4% 440,232 -0- -0-
Li, Haidian District,
Beijing, China
- -------------------------------------------------------------------------------------------------------------
Jing Zhao
No. 7, 31st Floor,
HeishanxiaoLou, Mentougou, 38,520 <1% 30,816 -0- -0-
Haidian District, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Wei Li
No. 212, 3rd Floor, Water
and Heat No. 2 Factory 27,515 <1% 22,012 -0- -0-
Dormitory, Qinghe, Haidian
District, Beijing, China
- -------------------------------------------------------------------------------------------------------------
19
- -------------------------------------------------------------------------------------------------------------
Xiu Hua Liu
No. 77, 1st Door, Apt 114,
Banbidian, Haidian 27,515 <1% 22,012 -0- -0-
District, Beijing, China
- -------------------------------------------------------------------------------------------------------------
Bing Lu
No. 6 Building, Apt 707
Jianwai Guanghui Li, 27,515 <1% 22,012 -0- -0-
Chaoyang District,Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Wen Ge Ren
No. 53, Liuniangfu,
Shijingshan, Beijing, China 27,515 <1% 22,012 -0- -0-
- -------------------------------------------------------------------------------------------------------------
Xue Min Yang
No. 501, 15 Building,
Muoshikou Nanli, 27,515 <1% 22,012 -0- -0-
Shijingshan, Beijing, China
- -------------------------------------------------------------------------------------------------------------
Hong Jin Zhang
Changhe Xingzheng Town,
Desheng Valley, Wuwei 5,503 <1% 4,402 -0- -0-
County, Fuwu region, Anhui,
China
- -------------------------------------------------------------------------------------------------------------
Ying Qiang Li
Liuqiao Town, Wangdian
Valley, Huaiyang County, 3,852 <1% 3,082 -0- -0-
Henan, China
- -------------------------------------------------------------------------------------------------------------
Shi You Liu
Liuqiao Town, Wangdian
Valley, Huaiyang County, 1,651 <1% 1,321 -0- -0-
Henan, China
- -------------------------------------------------------------------------------------------------------------
Hong Wei Liu
No. 503, Building 4, Unit
1, Keyan Building, Jinding 27,515 <1% 22,012 -0- -0-
St. Shijingshan, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
20
- -------------------------------------------------------------------------------------------------------------
Yong Xiu Yan
No. 1, Nanheyan, Pingguo
Yuan, Shijingshan District, 5,503 <1% 4,402 -0- -0-
Beijing, China
- -------------------------------------------------------------------------------------------------------------
Shang Min He
Youfangzhuang Town, Shaji
Valley, Lucheng County, 5,503 <1% 4,402 -0- -0-
Heinan, China
- -------------------------------------------------------------------------------------------------------------
Xiao Yan Li
No. 5, Unit 2, Buidling 5,
West Street, Dingfu Zhuang, 44,023 <1% 35,219 -0- -0-
Chaoyang District, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Yan Wu Xu
No. 602, 3rd Door, Building
225, Muofangbeili, Chaoyang 55,029 <1% 44,023 -0- -0-
District, Beijing, China
- -------------------------------------------------------------------------------------------------------------
Wen Yong Ma
Family Center, Meikuang Er 2,751 <1% 2,201 -0- -0-
Gong District, Dongniuma
Si, Shaodong, Hunan, China
- -------------------------------------------------------------------------------------------------------------
Xin Fa Li
No. 5 Maopingtou Town,
Yanquan Valley, Yizhang 2,751 <1% 2,201 -0- -0-
County, Heinan, China
- -------------------------------------------------------------------------------------------------------------
Sheng Jie He
Youfangzhuang Town, Shaji
Valley, Lucheng County, 2,751 <1% 2,201 -0- -0-
Henan, China
- -------------------------------------------------------------------------------------------------------------
(1) Number of shares following dividend distribution
21
BSS SELLING SECURITY HOLDERS
The following table identifies the shareholders of Beijing Sande Shang Mao Co.,
Ltd. as of November 30, 2004. Each person listed will receive a one share of
AMTG common stock for each share held in BSS. None of these persons has had any
position, office, or other material relationship with AMTG since its inception
other than those footnoted.
- -------------------------------------------------------------------------------------------------------------
Name, Address, and Securities Owned Prior Number Of Shares Being Securities Owned After
Relationship To Offering(1) Registered Offering
Shares Percent Shares Percent
------ ------- ------ -------
- -------------------------------------------------------------------------------------------------------------
Mei Si Gao
No. 601, 1st Door, 14th
Floor, ShuangYu Shu Bei Li, 495,261 3.7% 99,052 -0- -0-
Haidian District, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Ran Song
No. 601, 1st Door, 14th
Floor, Shuang Yu Shu Bei 495,261 3.7% 99,052 -0- -0-
Li, Haidian District,
Beijing, China
- -------------------------------------------------------------------------------------------------------------
Jian Xin Xu
No. 5, 21st Building,
Nanying Fang Water and 99,052 -0- -0-
Power Departement 495,261 3.96%
Dormitory, West District,
Beijing, China
- -------------------------------------------------------------------------------------------------------------
Meng Xu
No. 8, 3rd Door, 11th
Floor, Liu Pu Keng, West 495,261 3.96% 99,052 -0- -0-
District, Beijing, China
- -------------------------------------------------------------------------------------------------------------
Ya Ni Gao
No. 7, Weishu Street,
Haidian District, Beijing, 110,058 <1% 22,012 -0- -0-
China
- -------------------------------------------------------------------------------------------------------------
Ying Pan
No. 7, Weishu Street,
Haidian District, Beijing, 495,261 3.96% 99,052 -0- -0-
China
- -------------------------------------------------------------------------------------------------------------
22
- -------------------------------------------------------------------------------------------------------------
Hang Yuan
No. 601, 3rd Door, 42th
Floor, GuanZhuangDongLi, 275,145 2.2% 55,029 -0- -0-
Chaoyang District, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Xin Min Yuan
No. 502, 1st Door, 40th
Floor, GuanZhuangDongLi, 495,261 3.96% 99,052 -0- -0-
Chaoyang District, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Xin Jian Yuan
No. 601, 3rd Door, 42th
Floor, GuanZhuangDongLi, 495,261 3.96% 99,052 -0- -0-
Chaoyang District, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Xiao Jie Guo
No. 905, 1st Floor,
Qingnian Lake, East 528,279 4.23% 105,656 -0- -0-
District, Beijing, China
- -------------------------------------------------------------------------------------------------------------
Wei Li
No. 031-02 Yongshengli,
Front District, Yingkou 22,012 <1% 4,402 -0- -0-
city, Liaoning, China
- -------------------------------------------------------------------------------------------------------------
Zhen Bang Song
No. 601, 1st Door, 14th
Floor, Shuang Yu Shu Bei 550,290 4.4% 110,058 -0- -0-
Li, Haidian District,
Beijing, China
- -------------------------------------------------------------------------------------------------------------
Jing Zhao
No. 7, 31st Floor,
HeishanxiaoLou, Mentougou, 38,520 <1% 7,704 -0- -0-
Haidian District, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Wei Li
No. 212, 3rd Floor, Water
and Heat No. 2 Factory 27,515 <1% 5,503 -0- -0-
Dormitory, Qinghe, Haidian
District, Beijing, China
- -------------------------------------------------------------------------------------------------------------
23
- -------------------------------------------------------------------------------------------------------------
Xiu Hua Liu
No. 77, 1st Door, Apt 114,
Banbidian, Haidian 27,515 <1% 5,503 -0- -0-
District, Beijing, China
- -------------------------------------------------------------------------------------------------------------
Bing Lu
No. 6 Building, Apt 707
Jianwai Guanghui Li, 27,515 <1% 5,503 -0- -0-
Chaoyang District,Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Wen Ge Ren
No. 53, Liuniangfu,
Shijingshan, Beijing, China 27,515 <1% 5,503 -0- -0-
- -------------------------------------------------------------------------------------------------------------
Xue Min Yang
No. 501, 15 Building,
Muoshikou Nanli, 27,515 <1% 5,503 -0- -0-
Shijingshan, Beijing, China
- -------------------------------------------------------------------------------------------------------------
Hong Jin Zhang
Changhe Xingzheng Town,
Desheng Valley, Wuwei 5,503 <1% 1,101 -0- -0-
County, Fuwu region, Anhui,
China
- -------------------------------------------------------------------------------------------------------------
Ying Qiang Li
Liuqiao Town, Wangdian
Valley, Huaiyang County, 3,852 <1% 770 -0- -0-
Henan, China
- -------------------------------------------------------------------------------------------------------------
Shi You Liu
Liuqiao Town, Wangdian
Valley, Huaiyang County, 1,651 <1% 330 -0- -0-
Henan, China
- -------------------------------------------------------------------------------------------------------------
Hong Wei Liu
No. 503, Building 4, Unit
1, Keyan Building, Jinding 27,515 <1% 5,503 -0- -0-
St. Shijingshan, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
24
- -------------------------------------------------------------------------------------------------------------
Yong Xiu Yan
No. 1, Nanheyan, Pingguo
Yuan, Shijingshan District, 5,503 <1% 1,101 -0- -0-
Beijing, China
- -------------------------------------------------------------------------------------------------------------
Shang Min He
Youfangzhuang Town, Shaji
Valley, Lucheng County, 5,503 <1% 1,101 -0- -0-
Heinan, China
- -------------------------------------------------------------------------------------------------------------
Xiao Yan Li
No. 5, Unit 2, Buidling 5,
West Street, Dingfu Zhuang, 44,023 <1% 8,805 -0- -0-
Chaoyang District, Beijing,
China
- -------------------------------------------------------------------------------------------------------------
Yan Wu Xu
No. 602, 3rd Door, Building
225, Muofangbeili, Chaoyang 55,029 <1% 11,006 -0- -0-
District, Beijing, China
- -------------------------------------------------------------------------------------------------------------
Wen Yong Ma
Family Center, Meikuang Er
Gong District, Dongniuma 2,751 <1% 550 -0- -0-
Si, Shaodong, Hunan, China
- -------------------------------------------------------------------------------------------------------------
Xin Fa Li
No. 5 Maopingtou Town,
Yanquan Valley, Yizhang 2,751 <1% 550 -0- -0-
County, Heinan, China
- -------------------------------------------------------------------------------------------------------------
Sheng Jie He
Youfangzhuang Town, Shaji
Valley, Lucheng County, 2,751 <1% 550 -0- -0-
Henan, China
- -------------------------------------------------------------------------------------------------------------
(1) Number of shares following dividend distribution
The shares owned or to be owned by the selling security holders are registered
under rule 415 of the general rules and regulations of the Securities and
Exchange Commission, concerning delayed and continuous offers and sales of
securities. In regards to the offer
25
and sale of such shares, we have made certain undertakings in Part II of the
registration statement of which this prospectus is part, by which, in general,
we have committed to keep this prospectus current during any period in which
these persons make offers to sell or sell the covered securities pursuant to
Rule 415.
PLAN OF DISTRIBUTION
BEIJING SANDE TECHNOLOGY (HOLDING) CO., LTD. ("BST") AND BEIJING SANDE SHANG MAO
CO., LTD. ("BSS") DIVIDEND DISTRIBUTION
Beijing Sande Technology (Holding) Co., Ltd. ("BST") shall distribute 7,200,000
shares of our common shares, which it owns, to its shareholders as a dividend as
of a record date of November 30, 2004, on the basis of one of our common shares
for every one share of BST common share. Beijing Sande Shang Mao Co., Ltd.
("BSS") shall distribute 1,800,000 shares of our common shares, which it owns,
to its shareholders as a dividend as of a record date of November 30, 2004, on
the basis of one of our common shares for every one share of BSS common share.
Neither the BST nor BSS shareholders will be required to pay any type of
consideration for their shares. The BSS and BST shareholders shall receive their
share certificates in the mail. It is expected that the shares will be mailed to
such shareholders on or about _________________.
The BST and BSS shareholders, other than those deemed affiliates of AMTG upon
the distribution, shall receive freely transferable shares. Those shareholders
who receive shares in the BST and BSS dividend distributions that are deemed to
be affiliates of AMTG shall receive restricted shares. These shares may only be
sold pursuant to Rule 144 of the Securities Act of 1933, or by registration of
said shares under the Securities Act of 1933.
Because of BST's and BSS's role in the distribution, they both will likely be
deemed to be "statutory underwriters" within the meaning of Section 2(11) of the
Securities Act. BST and BSS have both advised us that they will comply with
prospectus delivery requirements that would apply to a statutory underwriter in
connection with the distribution of our shares to their shareholders. BSS and
BST has acknowledged that it is familiar with the anti-manipulation rules of the
SEC, including Regulation M. These rules may apply to sales by BSS and BST in
the market if a market develops. Neither BSS nor BST will not own any shares of
our company after the distribution and has no plans for future sales or
purchases.
With certain exceptions, Regulation M prohibits any selling shareholder, any
affiliated purchasers and any broker-dealer or other person who participates in
an applicable distribution from bidding for or purchasing, or attempting to
induce any person to bid for or purchase, any security which is the subject of
the distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. The foregoing
restrictions may affect the marketability of our common stock.
26
SALES BY AMTG, BST, AND BSS SELLING SECURITY HOLDERS
The AMTG, BST, and BSS Selling Security Holders (collectively referred to as the
"Selling Security Holders") shall be selling certain securities pursuant to this
prospectus. AMTG, BST, and BSS Selling Security Holders shall be registering for
resale 950,000, 4,228,431, and 1,057,108 shares of common stock, par value
$.001, respectively. These Selling Security Holders shall be selling their
shares for $1.00 per share until such time the shares are traded on a market or
exchange, at which time they will be sold at prevailing market prices.
The AMTG Selling Security Holders, BST Selling Security Holders, and BSS Selling
Security Holders (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 Shareholders,
and that there are restrictions on market-making activities by persons engaged
in the distribution of the shares. Under Registration M, the Selling
Shareholders, nor their agent, may bid for, purchase, or attempt to induce any
person to bid for or purchase, shares of our common stock while such Selling
Shareholders are distributing shares covered by this prospectus. Accordingly,
except as noted below, the selling shareholders are not permitted to cover short
sales by purchasing shares while the distribution is taking place. The Selling
Shareholders 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 required, a
post-effective amendment to the accompanying registration statement must be
filed with the Securities and Exchange Commission.
Under the securities laws of certain states, the shares of common stock may be
sold in such states only through registered or licensed brokers or dealers. The
Selling Shareholders are advised to ensure that any underwriters, brokers,
dealers or agents effecting transactions on behalf of the Selling Shareholders
are registered to sell securities in all fifty states. In addition, in certain
states the shares of common stock may not be sold unless the shares have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.
We will pay all expenses incident to the registration, offering and sale of the
shares of common stock to the public hereunder other than commissions, fees and
discounts of underwriters, brokers, dealers and agents. We will receive no
proceed in connection with the sales of securities in this prospectus.
LEGAL PROCEEDINGS
There are presently no pending or threatened legal proceedings pending against
the Company.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Officers and directors of the company are listed below. Directors are elected to
hold offices until the next annual meeting of shareholders and until their
successors are elected
27
or appointed and qualified. Officers are appointed by the board of directors
until a successor is elected and qualified or until resignation, removal or
death.
Name Age Position
- ----------------- ----------- ---------------------------
Chen Gao 49 President, Director, Treasurer
Xin Yan Yuan 47 Director
Richard Lui 38 Director/Chairman
Monica Ding 25 Secretary
Chen Gao, age 49, has served as president, treasurer and director of American
Metal Technology Group since Jan 28, 2004; served as President of Beijing Tong
Yuan Heng Feng Technology Co., Ltd. from Jan 2002 to present, served as Chairman
and President of Beijing Mai Ke Luo Machinery Co., Ltd. from May 1994 to
present, served as Chairman of Beijing Sande Technology (Holding) Co., Ltd from
Jan 1993 to present. Mr. Gao was the accounting manager for Beijing Beichen
Group Wuzhou Hotel from Sep 1987 to Dec 1992.
Richard Lui, age 38, has served as Chairman of American Metal Technology Group
since February 2004 and has also served as vice Chairman of AP Henderson Group
since July 23, 2004. AP Henderson Group is a publicly traded company trading on
the Over the Counter Bulletin Board (OTCBB:APHG). Mr. Lui has served as
President of Morgan Capital International, Inc., a Los Angeles, California based
financial and management consulting company, since July 2002. From September
1997 to July 2002, Mr. Lui was the President of GlobaLink Securities, Inc. a
NASD member broker-dealer.
Xin Yan Yuan, age 48, has served as director of American Metal Technology Group
since October 2004; serviced as Vice President of Beijing Tong Yuan Heng Feng
Technology Co., Ltd. from Jan 2002 to present, served as Director and Vice
President of Beijing Mai Ke Luo Machinery Co., Ltd. from May 1994 to present,
and has served as President of Beijing Sande Technology (Holding) Co., Ltd from
Jan 1993 to present.
Monica Ding, age 25, has served as secretary of American Metal Technology Group
since February 2004; has served as an executive assistant of Morgan Capital
International, Inc., a Los Angeles, California based financial and management
consulting company, since July 2002. From January 1999 to July 2002, Ms. Ding
was secretary of Wall Street Holding Company, a Delaware corporation.
Officers of Beijing Tong Yuan Heng Feng Technology Co., Ltd.
- ------------------------------------------------------------
Zhong Min Li, age 42, served as Chief Financial Officer, and Manager of Finance
and Accounting Department of Beijing Tong Yuan Heng Feng Technology Co., Ltd.
28
since January 2002 to present; served as Manager of Finance and Accounting
Department of Beijing Mai Ke Luo Machinery Co., Ltd. from September 1995 to
present; served as accountant in the Beijing Mineral Bureau from September 1980
to August 1995.
Jun Li, age 41, served as Manager of Sales Department of Beijing Tong Yuan Heng
Feng Technology Co., Ltd. since January 2002 to present; served as Manager of
Sales Department of Beijing Mai Ke Luo Machinery Co., Ltd. from May 1996 to
present; Manager of Foreign Relations Department of Beijing Lan Jian Travel
Agency from November 1995 to April 1996.
Wei Li, age 45, served as Manager of Technical Department of Beijing Tong Yuan
Heng Feng Technology Co., Ltd. since January 2002 to present; served as Manger
of Technical Department of Beijing Mai Ke Luo Machinery Co., Ltd., from March
2000 to present; Serviced as Deputy Chief of Beijing Five Star Beer Plant.
Han Zhang, age 44, served as Manager of Production Department of Beijing Tong
Yuan Heng Feng Technology Co., Ltd. since January 2002 to present; served as
Manager of Production Department of Beijing Tong Yuan Heng Feng Technology Co.,
Ltd. since July 1992 to present; Teacher of Beijiung Hai Dian Zoudu College from
August 1988 to June 1992.
Yun Song He, age 36, served as Chief-engineer of Beijing Tong Yuan Heng Feng
Technology Co., Ltd. since May 2002 to present; served as Chief-engineer of
Beijing Mai Ke Luo Machinery Co. Ltd. from May 2002 to present; teacher at
Beijing Shougang Steel Mechanics Institute from September 1994 to April 2002.
Committees of the Board of Directors
- ------------------------------------
As of November 1, 2004, the Board of Directors of the Company had no standing
board committees.
29
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation paid or accrued since inception of AMTG to our officers and
directors.
Annual Compensation Long term compensation
------------------- ----------------------
Awards Awards Payouts
------ ------ -------
Other Restricted Securities
Name and Annual Stock Options LTIP All other
Principal Position Year Salary($) Bonus($) Compensation Awards /SARs payout compensation
- ------------------ -------------- -------- ------------ ------ ----- ------ ------------
Officers of AMTG
- ----------------
Chen Gao 2004 -0- -0- -0- -0- -0- -0- -0-
President 2003 -0- -0- -0- -0- -0- -0- -0-
Director 2002 -0- -0- -0- -0- -0- -0- -0-
Treasurer
Xin Yan Yuan 2004 -0- -0- -0- -0- -0- -0- -0-
Director 2003 -0- -0- -0- -0- -0- -0- -0-
2002 -0- -0- -0- -0- -0- -0- -0-
Richard Lui 2004 -0- -0- -0- -0- -0- -0- -0-
Chairman 2003 -0- -0- -0- -0- -0- -0- -0-
2002 -0- -0- -0- -0- -0- -0- -0-
Monica Ding 2004 -0- -0- -0- -0- -0- -0- -0-
Secretary 2003 -0- -0- -0- -0- -0- -0- -0-
2002 -0- -0- -0- -0- -0- -0- -0-
Officers of BJTY
- ----------------
Chen Gao 2004 10,882 -0- -0- -0- -0- -0- -0-
President 2003 10,882 -0- -0- -0- -0- -0- -0-
2002 10,882 -0- -0- -0- -0- -0- -0-
Xin Yan Yuan 2004 9,674 -0- -0- -0- -0- -0- -0-
Vice President 2003 9,674 -0- -0- -0- -0- -0- -0-
2002 9,674 -0- -0- -0- -0- -0- -0-
Zhong Min Li 2004 -6,045- -0- -0- -0- -0- -0- -0-
CFO, Finance 2003 -6,045- -0- -0- -0- -0- -0- -0-
Accounting Dept 2002 -6,045- -0- -0- -0- -0- -0- -0-
Manager
Jun Li 2004 -6,045- -0- -0- -0- -0- -0- -0-
Sales Dept. 2003 -6,045- -0- -0- -0- -0- -0- -0-
Manager 2002 -6,045- -0- -0- -0- -0- -0- -0-
Wei Li 2004 -6,045- -0- -0- -0- -0- -0- -0-
Technical Dept 2003 -6,045- -0- -0- -0- -0- -0- -0-
Manager 2002 -6,045- -0- -0- -0- -0- -0- -0-
30
Han Zhang 2004 -6,045- -0- -0- -0- -0- -0- -0-
Production Dept 2003 -6,045- -0- -0- -0- -0- -0- -0-
Manager 2002 -6,045- -0- -0- -0- -0- -0- -0-
Yun Song He 2004 -5,441- -0- -0- -0- -0- -0- -0-
Chief Engineer 2003 -5,441- -0- -0- -0- -0- -0- -0-
2002 -5,441- -0- -0- -0- -0- -0- -0-
All salaries are paid for through BJTY. No salaries have been paid out, but are
accruing.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information about beneficial ownership of
our common stock upon completion of the dividend distribution through this
prospectus, by each officer and director, by any person or group who is known by
us to own more than 5% of our common stock, and by the officers and directors as
a group.
Title of Class Name and Address Amount and Nature Percent of
Of Beneficial Owner of Beneficial Owner Class
- -------------- ------------------- ------------------- -----
Common Chen Gao(2) 2,036,075 (1) 20.36%
Common Xin Yan Yuan(3) 1,540,813 (1) 15.41%
Common Richard Lui(4) 50,000 0.05%
Common Monica Ding(5) -0- -0-
Common Xiao Jie Guo 528,279 (1) 5.28%
Common Zhen Bang Song 550,290 (1) 5.5%
Common Zhong Min Li(6) 55,029 (1) 0.55%
Common Jun Li(7) 16,509 (1) 0.16%
Common Wei Li (8) 55,029 (1) 0.55%
Common Han Zhang(9) 11,006 (1) 0.11%
Common Yun Song He(10) -0- -0-
(1) Number of shares to be owned following the dividend distribution.
31
(2) President, Director, Treasurer
(3) Director
(4) Director/Chairman
(5) Secretary
(6) CFO of BJTY, Manager of Finance and Accounting Department of BJTY
(7) Manager of Sales Department of BJTY
(8) Manager of Technical Department of BJTY
(9) Manager of Production Department of BJTY
(10) Chief engineer of BJTY
DESCRIPTION OF SECURITIES
General
- -------
We currently have 20,000,000 shares of common stock, $.001 par value per share,
authorized. Upon the issuance of shares in this prospectus, there will be
10,000,000 shares of common stock issued. There are no preferred shares
authorized.
Each holder of common stock has one vote per share on all matters voted upon by
the shareholders. Holders of preferred stock do not have voting rights until
shares of preferred stock are converted into shares of our common stock. Under
our Articles of Incorporation, voting rights are non-cumulative so that
shareholders holding more than 50% of the outstanding shares of common stock are
able to elect all members of the Board of Directors.
Each share of common stock is entitled to participate equally in dividends as
and when declared by the Board of Directors of the Company out of funds legally
available, and is entitled to participate equally in the distribution of assets
in the event of liquidation after all creditors and holders, if any, of stock
with a liquidation preference have been paid in full. All shares, when issued
and fully paid, are nonassessable and are not subject to redemption or
conversion and have no conversion rights.
Dividends
- ---------
To date, we have not declared or paid any dividends on our common stock. The
payment by us of dividends, if any, is within the discretion of the Board of
Directors and will depend on our earnings, if any, our capital requirements and
financial condition, as well as other relevant factors. The Board of Directors
does not intend to declare any dividends in the foreseeable future, but instead
intends to retain earnings for use in our business operations.
Nevada Anti-Takeover Law Provisions
- -----------------------------------
32
Nevada Revised Statutes sections 78.378 to 78.379 provide state regulation over
the acquisition of a controlling interest in certain Nevada corporations unless
the Articles of Incorporation or Bylaws of the corporation provide that the
provisions of these sections do not apply. Our Articles of Incorporation and
Bylaws do not state that these provisions do not apply. The statute creates a
number of restrictions on the ability of a person or entity to acquire control
of a Nevada company by setting down certain rules of conduct and voting
restrictions in any acquisition attempt, among other things. The statute is
limited to corporations that are organized in the state of Nevada and that have
200 or more stockholders, at least 100 of whom are stockholders of record and
residents of the State of Nevada; and does business in the State of Nevada
directly or through an affiliated corporation. Because of these conditions, the
statute currently does not apply to our company.
Transfer Agent
- --------------
We have retained First American Stock Transfer, Inc. to serve as our transfer
agent. The telephone number of First American Stock Transfer is (602)-485-1346
and their facsimile number is (602)-788-0423. The website for First American
Stock Transfer is: http://www.firstamericanstock.com. Their mailing address is
as follows:
First American Stock Transfer, Inc.
706 East Bell Road
Suite # 202
Phoenix, Az. 85022
OUR BUSINESS
History and Development (Organization within Last 5 Years)
American Metal Technology Group ("AMTG", "We", "Us", "Our" or the "Company") was
incorporated on January 13, 2004 under the laws of the state of Nevada. The
Company and its subsidiaries are primarily engaged in the sales and distribution
of high precision investment casting products. On June 1, 2004, the Company
acquired 80% ownership of Beijing Tong Yuan Heng Feng Technology Co., Ltd.
("BJTY"), a manufacturer of high-precision investment casting products in the
People's Republic of China ("China"). On August 2, 2004, the Company
incorporated a wholly owned subsidiary, American Metal Technology (Lang Fang)
Co., Ltd., ("AMLF") in Lang Fang, Hebei, China for the purpose of expanding its
production capacity. On August 8, 2004, the Company via its wholly owned
subsidiary AMLF acquired the remaining 20% ownership of BJTY. On November 12,
2004, the Company increased its authorized common shares from 10,000 shares to
20,000,000 shares and effected a forward split of all the outstanding shares of
common stock on a 1,000 for 1 basis.
33
BJTY was incorporated on December 11, 2001 as a joint venture limited company by
Beijing Sande Technology (Holding) Co., Ltd. ("BST"), 80% and Beijing Sande
Shang Mao Co., Ltd. ("BSS"), 20%. BST is a high precision metal components maker
in China and has long term business relationships with several mid to large size
companies in Europe. Both BST and BSS produce complementary products, which
enabled the Company's rapid growth and expansion.
Our principal executive office is located at 600 Wilshire Blvd., Suite 1253, Los
Angeles, CA 90017. We currently maintain a web site at http://www.amtg-usa.com.
Any information displayed on our website is not part of this prospectus.
Organization Chart
American Metal
Technology Group
A Nevada Corporation
:
:-- 100% ----------------------- 80%---:
v v
American Metal Technology Beijing Tong Yuan Heng
(Lang Fang) Co., Ltd. --------- 20% ------> Feng Technology Co., Ltd.
A Chinese Limited Company A Chinese Limited Company
Our Business
- ------------
American Metal Technology Group, a Nevada corporation, ("AMTG", "We", "Us",
"Our" or the "Company"), via its subsidiaries, Beijing Tong Yuan Heng Feng
Technology Co., Ltd. ("BJTY") and American Metal Technology (Lang Fang) Co.,
Ltd., ("AMLF"), is in the business of manufacturing and sales of high-precision
investment casting and metal fabrication products in the People's Republic of
China ("China"). Our production involves high-precision investment casting and
machined products, including valves, pipe fittings, etc. We uses a wide range of
ferrous and non-ferrous materials such as stainless steel, carbon steel, monel
alloy, hastelloy alloy, and other various types of alloys.
We were incorporated on January 13, 2004 under the laws of the state of Nevada.
Our principal executive office is located at 600 Wilshire Boulevard, Suite 1253,
Los Angeles, CA 90017. On June 1, 2004, we entered into an equity purchase
agreement with Beijing Sande Technology (Holding) Co., Ltd. to acquire 80%
ownership of Beijing Tong Yuan
34
Heng Feng Technology Co., Ltd. As a result, we issued 7,200 shares of our
pre-split common stock to BST in exchange for 80% ownership of BJTY. (See
Exhibit 10.1) On August 2, 2004, we incorporated American Metal Technology (Lang
Fang) Co., Ltd. in Hebei, China, for the purpose of expanding the production
facility of BJTY. On August 8, 2004, the Company and AMLF together entered into
an equity purchase agreement with Beijing Sande Shang Mao Co., Ltd. to the
remaining 20% of BJTY. As a result, we issued 1,800 shares of our pre-split
common stock to BSS and our subsidiary, AMLF, became the owner of 20%
shareholder of BJTY. (See Exhibit 10.2) On November 12, 2004, we effected a
forward split of all the outstanding shares of common stock on a 1,000 for 1
basis.
In addition, we maintain a web site at http://www.amtg-usa.com. Any information
displayed on our website is not part of this prospectus.
Beijing Tong Yuan Heng Feng Technology Co., Ltd.
- ------------------------------------------------
Beijing Tong Yuan Heng Feng Technology Co., Ltd. ("BJTY") was incorporated on
December 11, 2001 with its principal place of business in Beijing, China. Since
its organization, BJTY has been a manufacturer of high precision metal parts for
European original equipment manufacturers ("OEMs"). BJTY is one of the
adequately equipped and fast growing manufacturers of high quality, high
precision metal parts in China with a focus on components for food and beverage
equipments. BJTY is headquartered at No. 15 Shixing Street, Shijingshan Badachu
Hi-Tech Park, Beijing, China and leases this 14,004 square feet manufacturing
complex from Beijing Sande Technology (Holding) Co., Ltd., a related
corporation. See Certain Relationships and Related Transaction section for more
information.
BJTY owns and operates high precision equipments with a monthly production
capacity of sixty (60) tons and an annual output of seven hundred and twenty
(720) tons. BJTY is equipped under the highest standard in China in terms of
precision levels. Its CNC lathes were purchased from Yamazaki Mazak Corporation,
a well known machine tool maker in Japan. BJTY owns and operates 22 units of
Quick Turn 200C Mazak CNC Turning Center, the fastest rapid traverse in its
class. This machine produces precision equipment of up to 0.01mm, which is the
type of high precision machinery used mainly in the aerospace, medical and
defense industry. Its level of precision is ensured by real-time internet
connection with the central control center of Yamazaki Mazak Corporation
(Japan).
Other than the state of the art facility, BJTY also possesses a dedicated
management team with fifty years of combined experience in the casting and metal
fabrication industries. There are thirty-seven (37) well trained professionals
and skilled technicians in the factory among the eighty (80) total employees.
According to the audited financial statements for the fiscal year ended on
December 31, 2003, BJTY had an audited total revenue of $2,483,006 with a net
profit of $475,407. This is a 21 % increase in revenue and a 27 % increase in
net income as compared with fiscal year 2002.
35
Organization Chart
President
Administration Human Resource Finance and Technical Sales Production
Department Department Accounting Department Department Department
Department
American Metal Technology (Lang Fang) Co., Ltd.
- -----------------------------------------------
American Metal Technology (Lang Fang) Co., Ltd., ("AMLF") was incorporated as a
wholly owned subsidiary by AMTG on August 2, 2004 in Lang Fang city, Heibei,
China. AMLF was formed to expand the production and operation of BJTY. Following
the incorporation, AMLF had purchased the rights to use a total area of 30,291.3
square meters (approximately 326,053 square feet) of land from the Chinese
government. The land is located at east side of Meison street and north of Lang
Fang development zone garden in Lang Fang, Heibei, China. The term of the
land-use-rights is fifty (50) years from September 1, 2004 to September 1, 2054.
The land is semi-developed in terms of readied access to supplies of water,
electricity, heat, natural gas and internet connections. We plan to build a new
metal casting and metal fabrication facility in two construction phases.
According to our plan, the new facility will have a monthly production capacity
of one hundred (100) tons and an annual output of twelve hundred (1,200) tons
upon completion of both construction phases. To achieve this capacity, we plan
to equip this facility primarily with Quick Turn 200C Mazak CNC Turning Centers,
the fastest rapid traverse in its class. The initial construction phase is
estimated to begin in March 2005 and complete in October 2005.
Products
- --------
We currently focus on the manufacture and sales of two main product lines,
regulators and dispensers for food and beverage equipments. The regulators are
produced with a high precision level compared to similar food and beverage
equipment components producers in China. To the best of our knowledge, we are
among the few companies in China capable of manufacturing regulators with this
level of precision and endurance. We also produce three types of dispensers,
Wall type, Flat type and Party-use. All of which are equipped with automatic
shut-off function for maximum user safety.
Our Strategies
- --------------
36
Our goal is to be the premier supplier of high precision metal fabricated
products in China. We are committed to the development of new manufacturing
techniques, and to bring new and technological advanced metal fabricated
products to the global market. Management believes that our future growth and
profitability depend on our ability to maintain product quality, control
production costs, increase production capacity, improve our marketing and
distribution channels, increase product offerings, and to effectively react to
market changes.
Capitalize on our cost structure and logistical advantages:
We are able to take advantage of the low overhead costs and inexpensive labor
available in China by locating our principal manufacturing facility in Beijing
and plan to locate future facilities in Hebei, China. The close proximity of the
factory complex to the Tianjin sea port can provide expedient transportation of
our products to customers.
Capitalize on, and leverage our manufacturing strength:
Unlike many of the low end metal part manufacturing competitors in China, we
have a vertically integrated manufacturing facility that can design and
manufacture high end, value-added complex metal components. Our goal is to focus
on manufacturing higher value-added products for larger customers in China as
well as overseas. In addition, as more U.S. and European companies establish
their manufacturing facilities in China, we will seek to provide high precision
metal component to these new companies.
Change our product line in response to market demand:
Our strategy is to respond to changes in market conditions by changing product
lines respectively. Management believes the demand market is changing rapidly.
In order for us to capture the most profitable products in the future, we plan
to setup a professional market intelligence team to monitor and respond to
market changes and reported to the management on a timely basis.
Maintain high product quality:
Management believes that identifying each customer's needs and efficiently
addressing its needs are vital to maintaining a competitive advantage to the
success of the business. Our existing customers have built the goodwill
associated with their products and their trade names on a high level of
perceived quality. By employing a high quality production, management and
quality control standards, we have been able to satisfy the stringent
requirements of our customers including the acceptance of specific terms or
contracts for our products. Most metal casting product manufactures aren't
capable of entering into such contracts. Management believes that our commitment
to high level services and attention to detail and quality has the effect of
providing customers with a sense of confidence and security that their product
requirements will be met and their products will be delivered on time with a
competitive price.
37
The factory complex in Beijing, China, at which we conducted all of our
manufacturing operations, was designed in accordance with strict manufacturing
standards, paying particular attention to factory layout, cleanliness, incoming
material control, in-process quality control, finished goods quality control and
final quality examination.
Expansion by strategic merger and acquisition:
We believe that we have an opportunity to enhance our business development by
acquiring other businesses that can complement our current business or that we
believe may benefit us in terms of additional product lines or advanced
technology, and by entering into strategic joint ventures with selected industry
players. As a result, establishments of additional sales and marketing, research
and development, and manufacturing facilities will be created. This strategy is
driven in part by the continued growth and consolidation of the metal
fabrication industry in China. We will seek businesses that are strategically
positioned to diversify or enhance our customer base, product breadth and
geographic coverage.
Industry
- -----------
Everyday tasks such as dialing on the telephone, turning on a light, starting an
automobile, or using a computer would not be possible without metal casting
components. The metal casting industry has been integral to the U.S. economic
growth and has helped the U.S. to become the world benchmark in fields such as
manufacturing, science, medicine, and aerospace. Nearly all manufactured goods
and capital equipments contain one or more of the cast components or rely on
casting components for their manufacture. The metal casting industry produces
both simple and complex components of unlimited variety, whether they are
produced once as a prototype or thousands of times for use in a manufactured
product. In addition to producing components of larger products, foundries may
also do machining, assembling, and coating of the castings. Major end-use
applications for castings include automobiles and trucks, farm and construction
equipment, railroads, pipes and fittings, valves, and engines.
The basic metals casting process consists of pouring or injecting molten metal
into a mold or a die containing a cavity of the desired shape. The most commonly
used method for small and medium-sized castings is green sand molding,
accounting for approximately 60 percent of castings produced. Other methods
include die casting, shell molding, permanent molding, investment casting, lost
foam casting, and squeeze casting. Markets for metal castings are increasingly
competitive and casting customers are placing greater emphasis on high-quality,
competitively priced castings. There is increasing demand for lighter-weight,
high-strength ferrous and nonferrous cast metal components and castings that
meet demanding design specifications. Casting processes must continually evolve
and improve to remain competitive in today's marketplace.
Management believes there is significant room for expansion for AMTG and our
subsidiaries in the metal casting and metal fabrication industry worldwide. We
are in a
38
multi-billion dollar metal casting industry. At least ninety percent of all
manufactured goods contain one or more cast metal components. Metal castings
components are integral in the U.S. transportation, energy, aerospace,
manufacturing, and national defense.
China's rapid emergence as a dominant economic superpower has radically changed
the competitive balance and cost structure across all manufacturing industries,
including the precision machined parts manufacturing. In 2001, the U.S. dropped
to second in world in ferrous casting production (Share of Tonnage Produced)
with 16% of the world market while China leads the world in ferrous casting
production with 24% of the world market. In 2000 and 2001, China experienced a
10% and 7% growth in ferrous casting shipments respectively while the U.S.
experienced nearly a 10% decline in casting shipments in 2001. Other major
producers of ferrous castings are Russia, Germany, Japan, and India.
Potential Acquisitions
- ----------------------
We intend to evaluate various potential acquisitions of companies and facilities
in order to expand the scope of our operations and accelerate our growth.
Specifically, we intend to evaluate the acquisition of companies or facilities
that are either up-stream or down-stream from our current production lines. We
have no definitive agreements with respect to potential acquisitions and there
is no assurance that we will be successful in our efforts to make any such
acquisitions.
Competition
- -----------
The foundry industries are highly competitive. There are thousands of companies
in China that are in the business of manufacturing and sales of investment
casting, metal fabrication and machined products. There are also a great number
of companies focusing on producing equipment for the food and beverage industry.
An increase in competition in our industry could have a material adverse effect
on us, as our competitors may have far greater financial and other resources
available to them and possess extensive manufacturing, distribution and
marketing capabilities far greater than those we possess.
Government Regulation
- ---------------------
At the present time, our management is not aware of any existing or probable
governmental regulations, including environmental regulations which may have an
effect on the Company's business.
Legal Proceedings
- -----------------
There are presently no legal proceedings pending against the Company.
39
Description of Property
- -----------------------
Our executive office is located in Los Angeles, California and consists of
approximately 500 square feet, which we lease on a month to month basis.
BJTY currently leases a 14,004 square feet factory facility from a related
party. The current lease agreement has a term of one year from July 16, 2004 to
July 15, 2005 for a total cost of $51,849, which includes rent of $45,251 per
annum ($3,770 per month), management fee of $1,884 per annum ($157 per month)
and heat supply fee of $4,714 for the winter season. The factory is located at
No. 15 Shixing Street, Shijingshan Badachu, High-Tech Park, Beijing, China. A
copy of the lease is hereby attached as Exhibit 10.4 to this prospectus.
Employees
- ---------
The Company currently has two part time employees in our Los Angeles office and
eighty full time employees with our wholly owned subsidiary, Beijing Tong Yuan
Heng Feng Technology Co., Ltd.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- --------------------------------------------------------------------------------
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results and events could differ materially from
those projected, anticipated, or implicit, in the forward-looking statements as
a result of the risk factors set forth below and elsewhere in this report. With
the exception of historical matters, the matters discussed herein are forward
looking statements that involve risks and uncertainties. Forward-looking
statements include, but are not limited to, the date of introduction or
completion of our products, projections concerning operations and available cash
flow. Our actual results could differ materially from the results discussed in
such forward-looking statements.
- --------------------------------------------------------------------------------
The following discussion and analysis should be read in conjunction
with our consolidated financial statements and related notes included in this
report.
Business Overview and Plan of Operations
- ----------------------------------------
American Metal Technology Group, a Nevada corporation, ("AMTG", "We", "Us",
"Our" or the "Company") via its subsidiaries, Beijing Tong Yuan Heng Feng
Technology Co., Ltd. ("BJTY") and American Metal Technology (Lang Fang) Co.,
Ltd., ("AMLF")
40
is in the business of manufacturing and sales of high-precision investment
casting and metal fabrication products in the People's Republic of China
("China"). The Company's production involves high-precision investment casting
and machined products, including valves, pipe fittings, etc. The Company uses a
wide range of ferrous and non-ferrous materials such as stainless steel, carbon
steel, monel alloy, hastelloy alloy, and other various types of alloys.
We were incorporated on January 13, 2004 under the laws of the state of Nevada.
Our principal executive office is located at 600 Wilshire Boulevard, Suite 1253,
Los Angeles, CA 90017. On June 1, 2004, the Company entered into an equity
purchase agreement with Beijing Sande Technology (Holding) Co., Ltd. ("BST") to
acquire 80% ownership of Beijing Tong Yuan Heng Feng Technology Co., Ltd.
("BJTY"). As a result, we issued 7,200 shares of our pre-split common stock to
BST in exchange for 80% ownership of BJTY. (See Exhibit 10.1) On August 2, 2004,
the Company incorporated American Metal Technology (Lang Fang) Co., Ltd.
("AMLF") in Hebei, China, for the purpose of expanding the production facility
of BJTY. On August 8, 2004, the Company and AMLF together entered into an equity
purchase agreement with Beijing Sande Shang Mao Co., Ltd. ("BSS") for the
remaining 20% of BJTY. As a result, we issued 1,800 shares of our pre-split
common stock to BSS and our subsidiary, AMLF, becomes the owner of 20%
shareholder of BJTY. (See Exhibit 10.2) On November 12, 2004, we effected a
forward split of all the outstanding shares of common stock on a 1,000 for 1
basis.
In the next 12 months, we hope to expand and strengthen our operations through a
number of proposed plans for our Company and subsidiaries.
Plan of Operations for American Metal Technology Group
- ------------------------------------------------------
In the next 12 months, we hope to build up an experienced, dedicated and
seasoned management team in the United States to oversee the operations of our
subsidiaries in China. We also plan to develop distribution channels for BJTY
products in the United States as well as target valuable venture opportunities
in metal casting and fabrication industries. We will actively seek out other
companies that we may possibly acquire or create strategic relationships with.
Furthermore, we plan to conduct equity based capital raising in the United
States as well as offshore.
Plan of Operations for Beijing Tong Yuan Heng Feng Technology Co., Ltd.
- -----------------------------------------------------------------------
In the next 12 months, BJTY plans to increase the production capacity by
installing four additional units of Quick Turn 200C Mazak CNC Turning Center,
which should increase our monthly capacity from 60 tons to 70 tons and annual
capacity from 720 tons to 840 tons. We estimate the cost to complete the
installation is approximately $250,000. Furthermore, upon the possible
completion of the first phase construction of the AMLF factory, BJTY plans to
move the current operation to the new factory. We believe we will
41
be able to generate the necessary capital to implement this plan from our
current cash flow.
Plan of Operations for American Metal Technology (LangFang) Co., Ltd.
- ---------------------------------------------------------------------
In the next 12 to 24 months, AMLF plans to build a manufacture facility in two
phases. The initial phases shall include the construction and development of
workshop and office space with a total area of 5,000 square meters (53,819
square feet), which we believe will be completed by October 2005. We estimate
the capital requirement to complete the initial phase is $900,000. Upon
completion of the initial construction phase, we plan to install 20 units of
Mazak CNC Turning Center, which will cost an estimated $600,000. Upon completion
of this installation, we'll have a monthly capacity of 55 tons per month. By
year end of 2006, we hope to complete phase two of the construction of this new
facility. The second phase shall include the construction of a precision casting
workshop of 6,000 square meters (64,583 square feet) with an estimated cost of
$1 million dollars. Upon the completion of the second construction phase, we
hope to install additional specialized equipments at an estimated cost of
$600,000. This expansion plan will enable us to increase our production
capacity, production volume and better fulfill market demand on our products. At
this time, we do not have the capital to complete the proposed expansion. We
plan to allocate initial funds from our current cash flow and to obtain
additional capital through equity based financing or loans from local banks and
financial institutions in China in order to fund the proposed expansion.
Results of Operations
Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30,
2003.
For the nine months ended September 30, 2004, we reported a net income of
$712,266 compared to a net income of $330,193 for the nine months ended
September 30, 2003.
Revenues. Our recurring revenues are generated principally from sales
of regulators and dispensers for food and beverage equipments. Revenues in the
nine months ended September 30, 2004 were $3.13 million, an increase of $1.33
million, or 74%, from $1.80 million for the nine months ended September 30,
2003. The increase was due to an increase in production capacity. Since January
2004, we have purchased eight units of the CNC Mazak Turning Center in addition
to fourteen units of same type Mazak lathes in place as of year end 2003. This
increased our production capacity from 448 tons to 720 tons per annum. Our
revenues come from sales all of our manufactured products to two related
corporations, Beijing Sande Shang Mao Co., Limited ("BSS") and Beijing Mai Ke
Luo Machinery Co., Limited ("BMKL"). See Certain Relationships and Related
Transactions section for more information.
Cost of Sales. For the nine months ended September 30, 2004, the Cost
of sales was $2.39 million, an increase of $0.94 million, or 64.5%, from $1.45
million for the nine
42
months ended September 30, 2003. The increase was due to an overall increase in
revenue. However, the cost of sales as a percentage of revenue decreased from
80.48% for the nine months ended September 30, 2003 to 76.28% for the nine
months ended September 30, 2004. The decrease in cost of sales as a percentage
of revenue was caused by continuous effort of our management to effectively
lowering production cost by maximizing usage of raw materials.
Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization for the nine months ended September 30, 2004 was $3,241, an
increase of $924, or 39.88%, from $2,317 for the nine months ended September 30,
2003. The increase was due to the purchase of 8 additional machine units.
General and Administrative Expenses. General and administrative
expenses are the cost we incur in administering our normal day-to-day
operations. General and administrative expenses for the nine months ended
September 30, 2004 were $28,241, an increase of $11,645, or 71.74%, from $16,596
for the nine months ended September 30, 2003. The increase was primarily due to
the employment of laborers to operate on the additional machine units. General
and administrative expenses as a percentage of revenue decreased from 0.92% for
the nine months ended September 30, 2003 to 0.9% for the nine months ended
September 30, 2004.
Gross Profit. Gross profit for the nine months ended September 30, 2004
was $742,975, an increase of $394,363, or 113%, from $348,612 for the nine
months ended September 30, 2003. Gross profit expressed as a percentage of
revenue increased from 19.32% for nine months ended September 30, 2003 to 23.72%
for nine months ended September 30, 2004.
Net Income. Net income for the nine months ended September 30, 2004 was
$712,266, an increase of $382,073, or 116%, from $330,193 for the nine months
ended September 30, 2003.
Fiscal Year December 31, 2003 Compared to Fiscal Year December 31, 2002.
For the fiscal year ended December 31, 2003, we reported a net income of
$475,407 compared to a net income of $374,406 for the year ended December 31,
2002.
Revenues. Our recurring revenues are generated principally from sales
of regulators and dispensers for food and beverage equipments. Revenues in the
fiscal year ended December 31, 2003 were $2.48 million, an increase of $440,903,
or 21.6%, from $2.04 million in the fiscal year ended December 31, 2002. The
increase was due primarily to an increase of production capacity in year 2003.
In 2003, we have increased our production capacity from 256 tons to 448 tons per
annum by purchasing 6 units of CNC Mazak lathes in addition to the 8 units of
Mazak lathes in place as of year end 2002. Our revenues come from sales all of
our manufactured products to two related corporations, Beijing Sande Shang Mao
Co., Limited ("BSS") and Beijing Mai Ke Luo
43
Machinery Co., Limited ("BMKL"). See Certain Relationships and Related Party
Transactions section for more information.
Cost of Sales. Our primary cost of sales in the fiscal year ended
December 31, 2003 were $1.93 million, an increase of $285,493, or 17.3%, from
$1.65 million in the fiscal year ended December 31, 2002. The increase was due
to the overall increase in revenue. However, cost of sales as a percentage of
revenue decreased from 80.6% in the fiscal year ended December 31, 2002 to 77.8%
in the fiscal year ended December 31, 2003. The decrease in cost of sales as a
percentage of revenue was caused by effectively lowering production cost by
maximizing usage of raw materials as well as due to the increase of profit
margin in certain products sold in 2003.
Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization in the fiscal year ended December 31, 2003 was $3,098, an increase
of $2,697, or 672%, from $401 in the fiscal year ended December 31, 2002. The
increase was due to the purchase of 6 additional machine units.
General and Administrative Expenses. General and administrative
expenses in the fiscal year ended December 31, 2003 were $74,408, an increase of
$54,361, or 271%, from $20,047 in the fiscal year ended December 31, 2002.
General and administrative expenses as a percentage of revenue increased from
0.98% in fiscal 2002 to 2.99% during fiscal 2003. The increase was primarily due
to the employment of labors to operate on the additional machine units.
Gross Profit. Gross profit in the fiscal year ended December 31, 2003
was $551,369, an increase of $155,410, or 39.2%, from $395,959 in the fiscal
year ended December 31, 2002. Gross profit expressed as a percentage of revenue
increased from 19.4% in fiscal 2002 to 22.2% during fiscal 2003.
Net Income. Net income in the fiscal year ended December 31, 2003 was
$475,407, an increase of $101,001, or 27%, from $374,406 in the fiscal year
ended December 31, 2002.
Liquidity and Capital Resources.
Our operating activities provided approximately $3,132,161 for the nine months
ended September 30, 2004. Cash as of September 30, 2004 approximated $886,469
and working capital was $799,610. This compares to working capital of $274,163
and a cash balance of $99,225 at December 31, 2003.
Cash provided by operating activities totaled $964,127 for the nine months ended
September 30, 2004, compared to $94,220 during the nine months ended September
30, 2003.
The cash requirements for AMTG are mostly administrative. We expect our cash
requirement for the next 12 months is approximately $100,000. We believe that
projected
44
revenues from our subsidiary, Beijing Tong Yuan Heng Feng Technology Co., Ltd.,
will be sufficient to fund our operations in the United States.
The cash requirement for BJTY to continue its current operations for the next 12
months is estimated to be $250,000. The cash requirement for BJTY to implement
its operation plan for the next 12 months is estimated to be $250,000. We
believe that projected revenues will be sufficient to continue the operations as
currently in place as well as implementing our business plan for the next 12
months.
AMLF is currently in the construction and development stage and will require
approximately $900,000 to complete its initial phase of construction. At this
time, the Company does not have the required funds which may greatly reduce our
chance for success with this project. We plan to allocate initial funds from our
current cash flow and to obtain additional capital through equity based
financing or loans from local banks and financial institutions in China.
However, there are no commitments on the part of anyone to provide us with any
financing in any amount and there are no guarantees that such funds will be
available on commercially reasonable terms, if at all. Our ability to raise the
required capital will greatly affect our chances for success.
Should we fail to obtain necessary financing for our operations in the U.S., we
may rely principally on our subsidiaries for working capital, including the
funds necessary to service any debt we may incur, or financing we may need for
operations other than through our subsidiaries. The Peoples Republic of China
("PRC") legal restrictions permit payments of dividends by our subsidiaries only
out of its net income, if any, determined in accordance with PRC accounting
standards and regulations. Under PRC law, our subsidiaries are also required to
set aside a portion of its net income each year to fund certain reserve funds.
These reserves are not distributable as cash dividends.
CRITICAL ACCOUNTING POLICIES
Our financial statements and accompanying notes are prepared in accordance with
generally accepted accounting principles in the United States of America.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. These estimates and assumptions are affected by management's
application of accounting policies. We believe that understanding the basis and
nature of the estimates and assumptions involved with the following aspects of
our financial statements is critical to an understanding of our financials.
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reported period. Actual results could differ
from those estimates.
45
Property and equipment - Property and equipment are stated at cost and
depreciated using the straight-line method over the estimated useful lives of 5
and 10 years. Maintenance and repairs are charged to expense as incurred. Major
improvements are capitalized.
Allowance for doubtful accounts - The Company maintains an allowance for its
doubtful accounts for estimated losses resulting from the inability of its
customers to make the required payments when due. If the financial condition of
its customers changed, changes to these allowances may be required, which would
impact the Company's future operating results.
Inventories - Inventories, consisting of finished goods, raw materials and work
in progress, are stated at the lower of cost or market value with cost
determined using the first-in, first-out method. The Company makes certain
provision for inventory obsolescence based on the age and market conditions of
the inventories. If market conditions or future product enhancements and
developments change, the Company may be required to adjust its provision for
inventory obsolescence which may have a significant impact on future operating
results and financial position.
Impairment of assets - The Company's long-lived assets principally include
property, plant and equipment and land use rights. In assessing the impairment
of these assets, the Company has made assumptions regarding the estimated future
cash flows and other factors to determine the fair value of the respective
assets. If these estimates or the related assumptions change in the future, the
Company may be required to record impairment charges for these assets.
Income taxes - The Company account for income taxes under the Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" ("Statement 109"). Under Statement 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under Statement 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
The Company's wholly owned subsidiary BJTY is incorporated in the PRC. BJTY is
registered as a new and high technology enterprise is entitled to full exemption
from PRC income tax for the three years beginning from the first year the
Company becomes profitable and a 50% income tax reduction for the subsequent
three years. No income tax expense has been recorded by BJTY for 2003 and 2002
as the Company was fully exempted under the new and high technology enterprise
rules. Should the new and high technology rules applicable to the business of
BJTY change in the future, it may have an adverse effect on the tax holiday the
Company currently enjoys or expect to enjoy in the foreseeable future under
existing rules.
46
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
Lack of Prior Public Market and Possible Volatility of Stock Price
- ------------------------------------------------------------------
Prior to this Offering, there has been no public market for the Common Stock and
there can be no assurance that a significant public market for the Common Stock
will develop or be sustained after the Offering. AMTG will seek a Market Maker
to apply to have AMTG's Common Stock included for quotation in the over-
the-counter market on the OTC Bulletin Board or quotation. There can be no
assurance that the Market Maker's activities will be continued, or that inactive
trading market for AMTG's Common Stock will be developed or maintained. The
future market price of the Common Stock may be highly volatile. There have been
periods of extreme fluctuation in the stock market that, in many cases, were
unrelated to the operating performance of, or announcements concerning the
issuers of the affected securities. Securities of issuers having relatively
limited capitalization, limited market makers or securities recently issued in a
public offering are particularly susceptible to fluctuations based on short-term
trading strategies of certain investors. Although the initial public offering
price of the Common Stock reflects AMTG's assessment of current market
conditions, there can be no assurance that such price will be maintained
following the Offering.
Designated Security/Penny Stock
- -------------------------------
Following completion of this Offering, and upon successful listing of the Common
Stock on the OTC Bulletin Board, if the bid price for AMTG's Common Stock is
below $5.00 per share, AMTG's Common Stock would be subject to special sales
practice requirements applicable to "designated securities" and "penny stock."
No assurance can be given that the bid price for AMTG's Common Stock will be
above $5.00 per share following the Offering. If such $5.00 minimum bid price is
not maintained and another exemption is not available, AMTG's Common Stock would
be subject to additional sales practice requirements imposed on broker-dealers
who sell the Common Stock to persons other than established customers and
accredited investors (generally institutions with assets in excess of $5,000,000
or individuals with net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with their spouse). For transactions covered by
these rules, the broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written agreement to the
transaction prior to the sale. These rules may be anticipated to affect the
ability of broker-dealers to sell AMTG's Common Stock, which may in turn be
anticipated to have an adverse impact on the market price for the Common Stock
and the ability of purchasers to sell their shares in the secondary market.
Possible Sale of Common Stock Pursuant to Rule 144
- --------------------------------------------------
47
AMTG has previously issued shares of Common Stock that constitute "restricted
securities" as that term is defined in Rule 144 adopted under the Securities
Act. Subject to certain restrictions, such securities may generally be sold in
limited amounts after one year after their acquisition. There are currently no
shares issued that are eligible for sale under Rule 144.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
company pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the 1933 Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the company of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, the company 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 1933 Securities Act, and will be
governed by the final adjudication of such issue.
INTEREST OF NAMED EXPERTS AND COUNSEL
The legality of the securities offered hereby has been passed upon by The Law
Offices of Adam U. Shaikh, Chtd.., Las Vegas, Nevada. Certain of the financial
statements of AMTG included in these prospectuses and elsewhere in the
registration statement, to the extent and for the periods indicated in their
reports, have been audited by Jimmy C.H. Cheung & Co., independent certified
public accountants given on the authority of the said firm as experts in
auditing and accounting.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Sales of Products to Related Parties
- ------------------------------------
Since January 2002, BJTY sold all of its manufactured products to two related
corporations, Beijing Sande Shang Mao Co., Limited ("BSS") and Beijing Mai Ke
Luo Machinery Co., Limited ("BMKL"). BSS is owned as to 41.27% by above stated
officers and directors of BJTY. BMKL is a PRC joint venture company owned as to
75% by a third party Danish company, 5% by a third party Taiwanese company and
the balance of 20% is owned by BST. The amount of related party sales were
$1,543,777 in 2002 and
48
$2,483,006 in 2003 and $3,132,161 for the nine months ended September 30, 2004
(unaudited).
Lease Agreement with Related Party
- ----------------------------------
On July 15, 2004, BJTY entered into a lease agreement with Beijing Sande
Technology (Holding) Co., Ltd. The total amount owed under the lease agreement
is $51,849, which includes rent of $45,251 per annum ($3,770 per month),
management fee of $1,884 per annum ($157 per month) and heat supply fee of
$4,714 for the winter season. The lease ends on July 15, 2005. (See Exhibit
10.4)
Loans from Related Parties
- --------------------------
On August 15, 2004, BJTY obtained a loan of $600,000 from Beijing Sande
Technology (Holding) Co., Ltd. ("BST"). BST is owned as to 41.27% by above
stated officers and directors of BJTY. This loan is unsecured, interest free and
is repayable in December 2005. (See Exhibit 10.5)
For the nine months ended September 30, 2004 Consolidated (unaudited) and for
the nine months ended September 30, 2003 (unaudited), BJTY incurred costs in the
amounts of $8,423 and $8,423 respectively for services provided by certain
management employees of BST on behalf of BJTY.
For the nine months ended September 30, 2004 consolidated (unaudited) and for
the nine months ended September 30, 2003 (unaudited), BJTY owed BST $83,496 and
$20,592 respectively for shared management expenses and short term loan
advances.
During 2003 and 2002, BJTY incurred costs to BST, a related company owned as to
41.27% by above stated officers and directors of BJTY, in the amounts of $11,232
and $9,360 respectively for services provided by certain management employees of
Beijing Sande Technology (Holding) Co., Ltd. Such costs were charged on an
actual incurred pro-rated on estimated time spent basis.
BJTY owed BST, a related company owned as to 41.27% by above stated officers and
directors of BJTY, $20,592 and $9,360 as of December 31, 2003 and 2002
respectively for shared management expenses.
Loans Made to Related Parties
- -----------------------------
BJTY had advanced funds amounting to $195,652 to BSS, a related company owned as
to 41.27% by above stated officers and directors of BJTY, as of December 31,
2002 as a short-term, unsecured loan free of interest payment. This loan was
fully repaid in 2003.
49
Affiliates Receiving Shares in Distribution
- -------------------------------------------
Chen GAO is a director, president, treasurer and shareholder of AMTG, BST and
BSS. Mr. Gao is also a director, president of BJTY and BMKL. Xin Yan YUAN is a
director and shareholder of BST and BSS. Ms. Yuan is also a director of BJTY and
BMKL. Zhong Min LI is the CFO and shareholder of BST and BSS. Mr. Zhong Min Li
is also the CFO of BJTY and BMKL. Jun LI is the Sales Department Manager and
shareholder of BST and BSS. Mr. Jun Li is also the Sales Department Manager for
BJTY and BMKL. Wei LI is the Technical Department Manager and shareholder of BST
and BSS. Mr. Wei Li is also the Technical Department Manager for BJTY and BMKL.
Han Zhang is the Production Department Manager and shareholder of BST and BSS.
Mr. Han Zhang is also the Production Department Manager for BJTY and BMKL.
Messrs. Chen Gao, Xin Yan Yuan, Zhong Min Li, Jun Li, Wei Li and Han Zhang will
receive restricted shares in AMTG upon effectiveness of this registration
statement.
50
FINANCIAL STATEMENTS
AMERICAN METAL TECHNOLOGY GROUP
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004
(UNAUDITED)
AMERICAN METAL TECHNOLOGY GROUP AND SUBSIDIARIES
CONTENTS
Pages
- ------------------------------------------------------------------------------------------
Balance Sheets
as of September 30, 2004 (Unaudited) Consolidated and December 31, 2003 1
- ------------------------------------------------------------------------------------------
Statements of Operations and Comprehensive Income
for the nine months ended September 30, 2004 Consolidated and 2003 (Unaudited) 2
- ------------------------------------------------------------------------------------------
Consolidated Statements of Stockholders' Equity
for the nine months ended September 30, 2004
(Unaudited) 3
- ------------------------------------------------------------------------------------------
Statements of Cash Flows
for the nine months ended September 30, 2004 Consolidated and 2003 (Unaudited) 4
- ------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements 5 - 11
- ------------------------------------------------------------------------------------------
AMERICAN METAL TECHNOLOGY GROUP AND SUBSIDIARIES
BALANCE SHEETS
AS OF SEPTEMBER 30, 2004 (UNAUDITED)
ASSETS
------
September 30,
2004
Consolidated December 31,
Note (Unaudited) 2003
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 886,469 $ 99,225
Accounts receivable, net of allowances 2 -- 36,062
Advances to suppliers 313,837 181,800
Inventories 3 80,892 116,227
Other receivable and prepaid expenses 11,794 2,135
---------- ----------
Total Current Assets 1,292,992 435,449
PROPERTY AND EQUIPMENT, NET 4 1,056,618 817,196
OTHER ASSETS
Land use rights, net 548,756 --
---------- ----------
TOTAL ASSETS $2,898,366 $1,252,645
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 77,583 $ 79,681
Other payables and accrued expenses 5 99,363 52,112
Advances from a customer 213,926 --
Other tax payables 19,014 8,901
Due to a stockholder 83,496 20,592
---------- ----------
Total Current Liabilities 493,382 161,286
---------- ----------
LONG TERM LIABILITY
Due to a related company 8 600,000 --
---------- ----------
TOTAL LIABILITIES $1,093,382 161,286
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
$0.001 par value, 20,000,000 shares authorized,
10,000,000 shares issued and outstanding 10,000 --
Additional paid-in capital 232,905 241,546
Retained earnings
Unappropriated 1,434,607 722,341
Appropriated 127,472 127,472
---------- ----------
Total Stockholders' Equity 1,804,984 1,091,359
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,898,366 $1,252,645
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements
1
AMERICAN METAL TECHNOLOGY GROUP AND SUBSIDIARIES
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)
-----------------------------------------------------------------
2004
Consolidated 2003
------------ ------------
NET SALES $ 3,132,161 $ 1,804,698
COST OF SALES (2,389,186) (1,456,086)
------------ ------------
GROSS PROFIT 742,975 348,612
------------ ------------
OPERATING EXPENSES
Selling expenses -- 56
General and administrative expenses 28,241 16,596
Depreciation and amortization 3,241 2,317
------------ ------------
Total Operating Expenses 31,482 18,969
------------ ------------
INCOME FROM OPERATIONS 711,493 329,643
OTHER INCOME (EXPENSE)
Interest income 1,034 550
Currency transaction expense (261) --
------------ ------------
Total Other Income 773 550
INCOME FROM CONTINUING OPERATIONS
BEFORE TAXES 712,266 330,193
INCOME TAX EXPENSE -- --
------------ ------------
NET INCOME 712,266 330,193
OTHER COMPREHENSIVE INCOME
Foreign currency translation loss -- --
------------ ------------
COMPREHENSIVE INCOME $ 712,266 $ 330,193
============ ============
Net income per share - basic and diluted $ 0.07 $ 0.03
============ ============
Weighted average number of shares outstanding
during the period - basis and diluted 10,000,000 10,000,000
============ ============
The accompanying notes are an integral part of these consolidated financial
statements
2
AMERICAN METAL TECHNOLOGY GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED)
--------------------------------------------------------
Common stock Additional Unappropriated Appropriated
paid-in retained retained
Shares Amount capital earnings earnings Total
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 2003 -- $ -- $ 241,546 $ 722,341 $ 127,472 $1,091,359
Acquisition of Beijing Tong Yuan
Heng Feng Technology Co., Ltd 9,000,000 9,000 (9,000) -- -- --
Issued during the nine months
ended September 30, 2004 1,000,000 1,000 359 -- -- 1,359
Net income for the nine months
ended September 30, 2004 -- -- -- 712,266 -- 712,266
---------- ---------- ---------- ---------- ---------- ----------
Balance, September 30, 2004 10,000,000 $ 10,000 $ 232,905 $1,434,607 $ 127,472 $1,804,984
---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of these consolidated financial
statements
3
AMERICAN METAL TECHNOLOGY GROUP AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)
-----------------------------------------------------------------
2004
Consolidated 2003
------------ ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 712,266 $ 330,193
Adjusted to reconcile net income to cash provided
by operating activities:
Depreciation - cost of sales 70,319 20,222
Depreciation 3,241 2,317
Changes in operating assets and liabilities (increase)decrease in:
Accounts receivable 36,062 (119,906)
Advances to suppliers (132,037) 5,265
Other receivable and prepaid expenses (9,659) (20,682)
Value add tax receivables -- 23,754
Inventories 35,335 167,225
Accounts payable (2,098) (96,182)
Other payables and accrued expenses 26,659 8,105
Advances from a customer 213,926 (217,099)
Other tax payables 10,113 (8,992)
--------- ---------
Net cash provided by operating activities 964,127 94,220
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (324,744) (70,845)
Land use rights acquired (548,756) --
Proceeds from the sale of property and equipment 11,762 --
--------- ---------
Net cash used in financing activities (861,738) (70,845)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Due from a stockholder -- 38,647
Due to a stockholder 83,496 8,424
Due to a related company 600,000 --
Proceeds from the issuance of common stock 1,359 --
--------- ---------
Net cash provided by financial activities 684,855 47,071
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 787,244 70,446
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 99,225 274,981
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 886,469 $ 345,427
--------- ---------
The accompanying notes are an integral part of these financial statements
4
AMERICAN METAL TECHNOLOGY GROUP AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004 (UNAUDITED)
------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A) Organization and basis of presentation
American Metal Technology Group ("AMTG") was incorporated in Nevada,
United States of America on January 13, 2004. Beijing Tong Yuan Heng
Feng Technology Co., Limited ("BJTY"), a People's Republic of China
("PRC") limited liability company is principally engaged in the
manufacturing and selling of high precision metal parts and
components.
In 2004, AMTG entered into two purchase agreements with certain
shareholders of BJTY. AMTG acquired 80% of the registered capital of
BJTY from a certain shareholder of BJTY for 7,200 (7,200,000 post
split) common shares of AMTG. AMTG, through its 100% owned subsidiary,
American Metal Technology (Lang Fang) Co., Limited ("AMLF"), a PRC
limited liability company incorporated on August 2, 2004, acquired the
remaining 20% of the registered capital for 1,800 (1,800,000 post
split) common shares of AMTG. The transactions have been accounted for
as a reorganization of entities under common control as the companies
were beneficially owned by principally identical shareholders and
share common management. The financial statements have been prepared
as if the reorganization had occurred retroactively. AMTG and its
subsidiaries are hereafter referred to as (the "Company").
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted
in the United States of America and the rules and regulations of the
Securities and Exchange Commission for interim financial information.
Accordingly, they do not include all the information necessary for a
comprehensive presentation of financial position and results of
operations.
It is management's opinion however, that all material adjustments
(consisting of normal recurring adjustments) have been made which are
necessary for a fair financial statements presentation. The results
for the interim period are not necessarily indicative of the results
to be expected for the year.
The accompanying 2004 (consolidated) and 2003 financial statements
include the accounts of AMTG and its 100% owned subsidiary AMLF and
BJTY. All significant intercompany balances and transactions have been
eliminated in consolidation.
(B) Use of estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and revenues and
expenses during the reported period. Actual results could differ from
those estimates.
(C) Cash and cash equivalents
For purpose of the statements of cash flows, cash includes demand
deposits with a bank.
(D) Inventories
Inventories are stated at lower of cost or market value, cost being
determined on a first-in, first-out method.
5
AMERICAN METAL TECHNOLOGY GROUP AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004 (UNAUDITED)
------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
(E) Property and equipment and land use right
Property and equipment are stated at cost, less accumulated
depreciation. Expenditures for additions, major renewals and
betterments are capitalized and expenditures for maintenance and
repairs are charged to expense as incurred.
Depreciation is provided on a straight-line basis, less estimated
residual value over the assets estimated useful lives. The estimated
useful lives are as follows:
Buildings 50 Years
Plant and machinery 10 Years
Motor vehicles 6 Years
Furniture, fixtures and equipment 5 Years
Land use rights are amortized over the term of the relevant rights of
50 years. At September 30, 2004 no amortization has been made as the
rights were acquired in August 2004 and the land has not been put in
service.
(F) Fair value of financial instruments
Depreciable assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may not
be recoverable based on projected undiscounted cash flows associated
with the assets. A loss is recognized for the difference between the
fair value and the carrying amount of the assets. Fair value is
determined based upon market quote, if available, or is based on
valuation techniques.
The carrying amount of the Company's cash, receivables and payables
approximates their fair value due to the short maturity of those
instruments.
(G) Revenue recognition
The Company recognizes revenue from the sale of metal parts and
components at the time of delivery, when title to the products
transfers and the customer bears the risk of loss.
(H) Income taxes
The Company accounts for income taxes under the Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
("Statement 109"). Under Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that
includes the enactment date. The Company is organized in the United
States and the People's Republic of China.
PRC income tax is computed according to the relevant laws and
regulations in the PRC. The Company being registered as a new and high
technology enterprise is entitled to full exemption from income tax
for three years beginning from the first year the Company becomes
profitable and a 50% income tax reduction for the subsequent three
years. No income tax expense has been recorded for 2004 and 2003 as
the Company was exempt under the new and high technology enterprise
rules.
6
AMERICAN METAL TECHNOLOGY GROUP AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004 (UNAUDITED)
------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
(I) Foreign currency translation
The functional currency of the Company is the Chinese Renminbi
("RMB"). Transactions denominated in currencies other than RMB are
translated into United States dollars using period end exchange rates
as to assets and liabilities and average exchange rates as to revenues
and expenses. Capital accounts are translated at their historical
exchange rates when the capital transaction occurred. Net gains and
losses resulting from foreign exchange translations are included in
the statements of operations and stockholder's equity as other
comprehensive gain (loss).
(J) Comprehensive income
The foreign currency translation gain or loss resulting from
translation of the financial statements expressed in RMB to United
States Dollar is reported as other comprehensive income in the
statements of operations and stockholders' equity.
(K) Segments
The Company operates in only one segment, therefore segment disclosure
is not presented.
(L) Recent accounting pronouncements
In January 2003, the FASB issued FIN No. 46, "Consolidation of
Variable Interest Entities, and Interpretation of ARB 51". FIN No. 46
provides guidance on the identification of entities of which control
is achieved through means other than voting rights ("variable interest
entities" or "VIE's") and how to determine when and which business
enterprise should consolidate the VIE (the "Primary Beneficiary"). In
addition, FIN No. 46 required that both the Primary Beneficiary and
all other enterprises with a significant variable interest in a VIE
make additional disclosures. The transitional disclosure requirements
of FIN No. 46 are required in all financial statements initially
issued after January 31, 2003, if certain conditions are met.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities". SFAS No. 149
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for
hedging activities under SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The changes in SFAS No. 149
improve financial reporting by requiring that contracts with
comparable characteristics be accounted for similarly. This statement
is effective for contracts entered into or modified after June 30,
2003 and all of its provisions should be applied prospectively.
In May 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 150,
"Accounting For Certain Financial Instruments with Characteristics of
both Liabilities and Equity". SFAS No. 150 changes the accounting for
certain financial instruments with characteristics of both liabilities
and equity that, under previous pronouncements, issuers could account
for as equity. The new accounting guidance contained in SFAS No. 150
requires that those instruments be classified as liabilities in the
balance sheet.
SFAS No. 150 affects the issuer's accounting for three types of
freestanding financial instruments. One type is mandatorily redeemable
shares, which the issuing company is obligated to buy back in exchange
for cash or other assets. A second type includes put options and
forward purchase contracts, which involve instruments that do or may
require the issuer to buy back some of its shares in exchange for cash
or other assets. The third type of instruments that are liabilities
under this Statement is obligations that can be settled with shares,
the monetary value of which is fixed, tied solely or predominantly to
a variable such as a market index, or varies inversely with the value
of the issuer's shares. SFAS No. 150 does not apply to features
embedded in a financial instrument that is not a derivative in its
entirety.
7
AMERICAN METAL TECHNOLOGY GROUP AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004 (UNAUDITED)
------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
(M) Recent accounting pronouncements
Most of the provisions of SFAS No. 150 are consistent with the
existing definition of liabilities of FASB Concepts Statement No. 6,
"Elements of Financial Statements". The remaining provisions of this
statement are consistent with the FASB's proposal to revise that
definition to encompass certain obligations that a reporting entity
can or must settle by issuing its own shares. This statement is
effective for financial instruments entered into or modified after
May 31, 2003 and otherwise shall be effective at the beginning of the
first interim period beginning after June 15, 2003.
The adoption of these pronouncements did not have a material effect
on the Company's financial position or results of operations.
2. ACCOUNTS RECEIVABLE
Accounts receivable at September 30, 2004 Consolidated (unaudited) and
December 31, 2003 consisted of the following:
2004
Consolidated
(Unaudited) 2003
--------------- -----------------
Trade and other receivables $ - $ 36,062
Less: allowance for doubtful accounts - -
--------------- -----------------
Accounts receivable, net $ - $ 36,062
--------------- -----------------
For the nine months ended September 30, 2004 Consolidated (unaudited) and
September 30, 2003 (unaudited), no allowances for doubtful debts were
recorded by the Company.
3. INVENTORIES
Inventories at September 30, 2004 Consolidated (unaudited) and December 31,
2003 consisted of the following:
2004
(Unaudited) 2003
-------------- -------------
Trade and other receivables $ 50,827 $ 68,349
Work-in-progress 18,356 36,702
Finished goods 11,709 11,176
-------------- -------------
80,892 116,227
Less: provision for obsolescence - -
-------------- -------------
$ 80,892 $ 116,227
-------------- -------------
For the nine months ended September 30, 2004 Consolidated (unaudited) and
September 30, 2003 (unaudited) no provision for obsolete inventories was
recorded by the Company.
8
AMERICAN METAL TECHNOLOGY GROUP AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004 (UNAUDITED)
------------------------------------
4. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at September 30, 2004
Consolidated (unaudited) and December 31, 2003:
2004
Consolidated
(Unaudited) 2003
---------- ----------
Plant and machinery $1,151,325 $ 826,581
Motor vehicles -- 16,357
Furnitures and office equipment 5,545 5,545
---------- ----------
1,156,870 848,483
Less: accumulated depreciation 100,252 31,287
---------- ----------
Property and equipment, net $1,056,618 $ 817,196
---------- ----------
Depreciation expense for the nine months ended September 30, 2004
Consolidated (unaudited) and for the nine months ended September 30, 2003
(unaudited) was $73,560 and $22,539, respectively.
5. OTHER PAYABLES AND ACCRUED LIABILITIES
Other payables and accrued liabilities at September 30, 2004 Consolidated
(unaudited) and December 31, 2003 consist of the following:
2004
Consolidated
(Unaudited) 2003
---------- ----------
Education surtaxes payable $ 6,507 $ 248
Other payables 42,324 570
Accrued expenses 50,532 51,294
---------- ----------
Accrued expenses $ 99,363 $ 52,112
---------- ----------
6. COMMITMENTS AND CONTINGENCIES - Employee benefits
The full time employees of BJTY are entitled to employee benefits including
medical care, welfare subsidies, unemployment insurance and pension
benefits through a Chinese government mandated multi-employer defined
contribution plan. BJTY is required to accrue for those benefits based on
certain percentages of the employees' salaries. The total provision for
such employee benefits was $1,178 for nine months ended September 30, 2003.
BJTY is required to make contributions to the plans out of the amounts
accrued for medical and pension benefits. The Chinese government is
responsible for the medical benefits and the pension liability to be paid
to these employees.
The total provision for such employee benefits was $2,301 for the nine
months ended September 30, 2004. The total contribution paid for the nine
months ended September 30, 2004 was $2,301.
9
AMERICAN METAL TECHNOLOGY GROUP AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004 (UNAUDITED)
------------------------------------
7. STOCKHOLDERS' EQUITY
(A) Stock Issuances
During 2004, the Company issued 1,000 (1,000,000 post split) shares
of common stock to certain investors for cash of $1,359.
(B) Stock Issued in Reverse Merger
On June 1, 2004 and August 8, 2004 the Company issued 9,000
(9,000,000 post split) shares of common stock to the shareholders of
BJTY (See Note 1A).
(C) Appropriated retained earnings
BJTY is required to make appropriations to reserves funds, comprising
the statutory surplus reserve, statutory public welfare fund and
discretionary surplus reserve, based on after-tax net income
determined in accordance with generally accepted accounting principles
of the People's Republic of China (the "PRC GAAP"). Appropriation to
the statutory surplus reserve should be at least 10% of the after tax
net income determined in accordance with the PRC GAAP until the
reserve is equal to 50% of the entities' registered capital.
Appropriations to the statutory public welfare fund are at 5% to 10%
of the after tax net income determined in accordance with the PRC
GAAP. The statutory public welfare fund is established for the purpose
of providing employee facilities and other collective benefits to the
employees and is non-distributable other than in liquidation.
Appropriations to the discretionary surplus reserve are made at the
discretion of the Board of Directors.
The Company appropriated $127,472 to the reserves funds based on its
net income under PRC GAAP.
8. RELATED PARTY TRANSACTIONS
For the nine months ended September 30, 2004 Consolidated (unaudited)
and for the nine months ended September 30, 2003 (unaudited), the
Company had related party sales of $3,132,161 and $1,802,600
respectively.
For the nine months ended September 30, 2004 Consolidated (unaudited)
and for the nine months ended September 30, 2003 (unaudited), the
Company incurred costs of a related company of $8,423 and $8,423
respectively for services provided by certain management employees of
the related company, such costs were charged on an actual incurred
pro-rated on estimated time spent basis.
The Company owed a related company $83,496 and $20,592 as of September
30, 2004 and 2003 (unaudited) respectively for shared management
expenses and short term loan advances made.
During the nine months ended September 30, 2004 Consolidated
(unaudited), the Company obtained a loan of $600,000 from a related
company. This loan is unsecured, interest free and is repayable on
December 2005.
During the nine months ended September 30, 2004 Consolidated
(unaudited), the Company paid rent of $24,384 for factory space leased
from a related company.
9. CONCENTRATIONS AND RISKS
During the nine months ended September 30, 2004 and 2003, 100% of the
revenues were derived from companies located in China and 100% of the
Company's assets were located in China.
During the nine months ended September 30, 2004 and 2003, the Company
derived 100% of their revenues from a related entity and a
stockholder.
During the nine months ended September 30, 2004 and 2003, the Company
purchased 88% and 84% of its raw materials from two suppliers in the
PRC.
10
AMERICAN METAL TECHNOLOGY GROUP AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004 (UNAUDITED)
------------------------------------
10. SUBSEQUENT EVENT
Common stock split and increase in authorized capital
On November 12, 2004, the Company declared a 1,000 for 1 common stock
split to be effected in the form of a dividend payable to stockholders
of record on November 12, 2004 and increased its authorized common
shares to 20,000,000. Per share and weighted average share amounts
have been retroactively restated in the accompanying consolidated
financial statements and related notes to reflect this split.
11
BEIJING TONG YUAN HENG FENG TECHNOLOGY CO., LIMITED
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND 2002
BEIJING TONG YUAN HENG FENG TECHNOLOGY CO., LIMITED
CONTENTS
Pages
- ------------------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm 1
- ------------------------------------------------------------------------------------------
Balance Sheets as of December 31, 2003 and 2002 2
- ------------------------------------------------------------------------------------------
Statements of Operations for the years ended December 31, 2003 and 2002 3
- ------------------------------------------------------------------------------------------
Statements of Stockholders' Equity for the years ended December 31, 2003 and 2002 4
- ------------------------------------------------------------------------------------------
Statements of Cash Flows for the years ended December 31, 2003 and 2002 5
- ------------------------------------------------------------------------------------------
Notes to Financial Statements 6 -11
- ------------------------------------------------------------------------------------------
Jimmy C.H. Cheung & Co
Certified Public Accountants
(A member of Kreston International)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of:
Beijing Tong Yuan Heng Feng Technology Co., Limited
Beijing, People's Republic of China
We have audited the accompanying balance sheets of Beijing Tong Yuan Heng Feng
Technology Co., Limited, as of December 31, 2003 and 2002 and the related
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 2003 and 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits of the financial
statements provides 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 Beijing Tong Yuan Heng Feng
Technology Co., Limited, as of December 31, 2003 and 2002, and the results of
its operations and its cash flows for the years ended December 31, 2003 and
2002, in conformity with accounting principles generally accepted in the United
States of America.
JIMMY C.H. CHEUNG & CO
Certified Public Accountants
Hong Kong
Date: September 3, 2004
304 Dominion Centre, 43 Queen's Road East, Wanchai, Hong Kong
Tel: (852) 25295500 Fax: (852) 28651067 Email: jchc@krestoninternational.com.hk
Website: http://www.jimmycheungco.com
1
BEIJING TONG YUAN HENG FENG TECHNOLOGY CO., LIMITED
BALANCE SHEETS
AS OF DECEMBER 31, 2003 AND 2002
--------------------------------
ASSETS
------
Note 2003 2002
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 99,225 $ 274,981
Accounts receivable, net of allowances 2 36,062 --
Due from a stockholder -- 195,652
Advances to suppliers 181,800 20,372
Inventories 3 116,227 235,760
Value added tax receivables -- 14,985
Other receivable and prepaid expenses 2,135 6,023
---------- ----------
Total Current Assets 435,449 747,773
PROPERTY AND EQUIPMENT, NET 4 817,196 227,509
---------- ----------
TOTAL ASSETS $1,252,645 $ 975,282
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 79,681 $ 128,571
Other payables and accrued expenses 5 52,112 3,096
Advances from a customer -- 217,099
Other tax payables 8,901 1,204
Due to a stockholder 7 20,592 9,360
---------- ----------
Total Current Liabilities 161,286 359,330
---------- ----------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Registered capital of Renminbi 2,000,000 fully paid 241,546 241,546
Retained earnings
Unappropriated 722,341 318,245
Appropriated 127,472 56,161
---------- ----------
Total Stockholders' Equity 1,091,359 615,952
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,252,645 $ 975,282
========== ==========
The accompanying notes are an integral part of these financial statements
2
BEIJING TONG YUAN HENG FENG TECHNOLOGY CO., LIMITED
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
----------------------------------------------
2003 2002
----------- -----------
NET SALES $ 2,483,006 $ 2,042,103
COST OF SALES (1,931,637) (1,646,144)
----------- -----------
GROSS PROFIT 551,369 395,959
----------- -----------
OPERATING EXPENSES
Selling expenses 150 1,804
General and administrative expenses 74,408 20,047
Depreciation 3,098 401
----------- -----------
Total Operating Expenses 77,656 22,252
----------- -----------
INCOME FROM OPERATIONS 473,713 373,707
OTHER INCOME (EXPENSES)
Interest income 1,810 841
Other expenses (116) (142)
----------- -----------
Total Other Income 1,694 699
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES 475,407 374,406
INCOME TAX EXPENSE -- --
----------- -----------
NET INCOME $ 475,407 $ 374,406
=========== ===========
The accompanying notes are an integral part of these financial statements
3
BEIJING TONG YUAN HENG FENG TECHNOLOGY CO., LIMITED
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
----------------------------------------------
Unappropriated Appropriated
Registered retained retained
capital earnings earnings Total
---------- ---------- ---------- ----------
Capital contributions from stockholders $ 241,546 $ -- $ -- $ 241,546
---------- ---------- ---------- ----------
Balance at December 31, 2001 241,546 -- -- 241,546
Net income for the year -- 374,406 -- 374,406
Transfer from retained earnings to
statutory and staff welfare reserves -- (56,161) 56,161 --
---------- ---------- ---------- ----------
Balance at December 31, 2002 241,546 318,245 56,161 615,952
Net income for the year -- 475,407 -- 475,407
Transfer from retained earnings to
statutory and staff welfare reserves -- (71,311) 71,311 --
---------- ---------- ---------- ----------
Balance at December 31, 2003 $ 241,546 $ 722,341 $ 127,472 $1,091,359
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements
4
BEIJING TONG YUAN HENG FENG TECHNOLOGY CO., LIMITED
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
----------------------------------------------
2003 2002
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 475,407 $ 374,406
Adjusted to reconcile net income to cash provided
by operating activities:
Depreciation - cost of sales 25,007 2,781
Depreciation 3,098 401
Changes in operating assets and liabilities (increase)decrease in:
Accounts receivable (36,062) --
Advances to suppliers (161,428) (20,372)
Other receivable and prepaid expenses 3,888 (6,023)
Value add tax receivables 14,985 (14,985)
Inventories 119,534 (235,760)
Accounts payable (48,890) 128,571
Other payables and accrued expenses 49,016 3,096
Advances from a customer (217,099) 217,099
Other tax payables 7,696 1,204
--------- ---------
Net cash provided by operating activities 235,152 450,418
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (617,792) (230,691)
--------- ---------
Net cash used in financing activities (617,792) (230,691)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Due from a stockholder 195,652 (195,652)
Due to a stockholder 11,232 9,360
--------- ---------
Net cash provided by(used in) financial activities 206,884 (186,292)
--------- ---------
NET(DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS (175,756) 33,435
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 274,981 241,546
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 99,225 $ 274,981
========= =========
The accompanying notes are an integral part of these financial statements
5
BEIJING TONG YUAN HENG FENG TECHNOLOGY CO., LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND 2002
--------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A) Organization
Beijing Tong Yuan Heng Feng Technology Co., Limited ("the Company")
was incorporated in the People's Republic of China ("PRC") on December
11, 2001 with its principal place of business in Beijing, PRC.
The Company is principally engaged in the manufacturing and selling of
high precision metal parts and components.
(B) Use of estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount 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
could differ from those estimates.
(C) Cash and cash equivalents
For purpose of the statements of cash flows, cash and cash equivalents
include cash on hand and demand deposits with a bank.
(D) Accounts receivable
The Company extends unsecured credit to its customers in the ordinary
course of business but mitigates the associated risks by performing
credit checks and actively pursuing past due accounts. An allowance
for doubtful accounts is established and recorded based on
managements' assessment of the credit history with the customer and
current relationships with them.
(E) Inventories
Inventories are stated at lower of cost or market value, cost being
determined on a first-in, first-out method. The Company provided
inventory allowances based on excess and obsolete inventories
determined principally by customer demand.
(F) Property and equipment
Property and equipment are stated at cost, less accumulated
depreciation. Expenditures for additions, major renewals and
betterments are capitalized and expenditures for maintenance and
repairs are charged to expense as incurred.
Depreciation is provided on a straight-line basis, less estimated
residual value over the assets' estimated useful lives. The estimated
useful lives are as follows:
Plant and machinery 10 Years
Motor vehicles 6 Years
Furniture, fixtures and equipment 5 Years
(G) Fair value of financial instruments
Depreciable assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable based on projected undiscounted cash flows associated with
the assets. A loss is recognized for the difference between the fair
value and the carrying amount of the assets. Fair value is determined
based upon market quote, if available, or is based on valuation
techniques.
The carrying amount of the Company's cash, receivables and payables
approximates their fair value due to the short maturity of those
instruments.
6
BEIJING TONG YUAN HENG FENG TECHNOLOGY CO., LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND 2002
--------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
(H) Revenue recognition
The Company recognizes revenue from the sale of metal parts and
components at the time of delivery, when title to the products
transfers and the customer bears the risk of loss.
(I) Income taxes
The Company accounts for income taxes under the Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
("Statement 109"). Under Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that
includes the enactment date. The Company is organized in the People's
Republic of China and no tax benefit is expected from the tax credits
in the future.
PRC income tax is computed according to the relevant laws and
regulations in the PRC. The Company being registered as a new and high
technology enterprise is entitled to full exemption from income tax
for three years beginning from the first year the Company becomes
profitable and a 50% income tax reduction for the subsequent three
years. No income tax expense has been recorded for 2003 and 2002 as
the Company was fully exempted under the new and high technology
enterprise rules.
(J) Foreign currency translation
The functional currency of the Company is the Chinese Renminbi
("RMB"). Transactions denominated in currencies other than RMB are
translated into United States dollars using period end exchange rates
as to assets and liabilities and average exchange rates as to revenues
and expenses. Capital accounts are translated at their historical
exchange rates when the capital transaction occurred. Net gains and
losses resulting from foreign exchange translations are included in
the statements of operations and stockholder's equity as other
comprehensive income (loss).
(K) Comprehensive income (loss)
The foreign currency translation gain or loss resulting from
translation of the financial statements expressed in RMB to United
States Dollar is reported as other comprehensive income (loss) in the
statements of operations and stockholders' equity.
(L) Segments
The Company operates in only one segment, thereafter segment
disclosure is not presented.
7
BEIJING TONG YUAN HENG FENG TECHNOLOGY CO., LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND 2002
--------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
(M) Recent accounting pronouncements
In January 2003, the FASB issued FIN No. 46, "Consolidation of
Variable Interest Entities, and Interpretation of ARB 51". FIN No. 46
provides guidance on the identification of entities of which control
is achieved through means other than voting rights ("variable interest
entities" or "VIE's") and how to determine when and which business
enterprise should consolidate the VIE (the "Primary Beneficiary"). In
addition, FIN No. 46 required that both the Primary Beneficiary and
all other enterprises with a significant variable interest in a VIE
make additional disclosures. The transitional disclosure requirements
of FIN No. 46 are required in all financial statements initially
issued after January 31, 2003, if certain conditions are met.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities". SFAS No. 149
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for
hedging activities under SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The changes in SFAS No. 149
improve financial reporting by requiring that contracts with
comparable characteristics be accounted for similarly. This statement
is effective for contracts entered into or modified after June 30,
2003 and all of its provisions should be applied prospectively.
In May 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 150,
"Accounting For Certain Financial Instruments with Characteristics of
both Liabilities and Equity". SFAS No. 150 changes the accounting for
certain financial instruments with characteristics of both liabilities
and equity that, under previous pronouncements, issuers could account
for as equity. The new accounting guidance contained in SFAS No. 150
requires that those instruments be classified as liabilities in the
balance sheet.
SFAS No. 150 affects the issuer's accounting for three types of
freestanding financial instruments. One type is mandatorily redeemable
shares, which the issuing company is obligated to buy back in exchange
for cash or other assets. A second type includes put options and
forward purchase contracts, which involve instruments that do or may
require the issuer to buy back some of its shares in exchange for cash
or other assets. The third type of instruments that are liabilities
under this Statement is obligations that can be settled with shares,
the monetary value of which is fixed, tied solely or predominantly to
a variable such as a market index, or varies inversely with the value
of the issuer's shares. SFAS No. 150 does not apply to features
embedded in a financial instrument that is not a derivative in its
entirety.
Most of the provisions of SFAS No. 150 are consistent with the
existing definition of liabilities of FASB Concepts Statement No. 6,
"Elements of Financial Statements". The remaining provisions of this
statement are consistent with the FASB's proposal to revise that
definition to encompass certain obligations that a reporting entity
can or must settle by issuing its own shares. This statement is
effective for financial instruments entered into or modified after May
31, 2003 and otherwise shall be effective at the beginning of the
first interim period beginning after June 15, 2003.
The adoption of these pronouncements did not have a material effect on
the Company's financial position or results of operations.
8
BEIJING TONG YUAN HENG FENG TECHNOLOGY CO., LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND 2002
--------------------------------
2. ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 2003 and 2002 consisted of the
following:
2003 2002
-------- --------
Accounts receivable $ 36,062 --
Less: allowance for doubtful accounts --
-------- --------
Accounts receivable, net $ 36,062 $ --
======== ========
As of December 31, 2003, the Company considered all accounts receivable
collectable and has not recorded a provision for doubtful accounts.
Accounts receivable are amounts due from a 20% associate of a stockholder.
3. INVENTORIES
Inventories at December 31, 2003 and 2002 consisted of the following:
2003 2002
-------- --------
Raw materials $ 68,349 $ 31,355
World-in-progress 36,702 68,243
Finished goods 11,176 136,162
-------- --------
116,227 235,760
Less: provision of obsolescence -- --
-------- --------
$116,227 $235,760
======== ========
For the years ended December 31, 2003 and 2002, no provision for obsolete
inventories was recorded by the Company.
4. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at December 31:
2003 2002
-------- --------
Plant and machinery $826,581 $226,244
Motor vehicles 16,357 --
Furniture and office equipment 5,545 4,447
-------- --------
848,483 230,691
Less: accumulated depreciation 31,287 3,182
-------- --------
Property and equipment, net $817,196 $227,509
======== ========
Depreciation expense for the years ended December 31, 2003 and 2002 was
$28,105 and $3,182, respectively.
9
BEIJING TONG YUAN HENG FENG TECHNOLOGY CO., LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND 2002
--------------------------------
5. OTHER PAYABLES AND ACCRUED LIABILITIES
Other payables and accrued liabilities at December 31, 2003 and 2002
consist of the following:
2003 2002
-------- --------
Education surtaxes payable $ 248 $ 498
Other payables 570 283
Accrued expenses 51,294 2,315
-------- --------
$ 52,112 $ 3,096
======== ========
6. COMMITMENTS AND CONTINGENCIES - Employee Benefits
The full time employees of the Company are entitled to employee
benefits including medical care, welfare subsidies, unemployment
insurance and pension benefits through a Chinese government mandated
multi-employer defined contribution plan. The Company is required to
accrue for those benefits based on certain percentages of the
employees' salaries and make contributions to the plans out of the
amounts accrued for medical and pension benefits. The total provision
and contributions made for such employee benefits was $1,408 and $384
for the years ended December 31, 2003 and 2002, respectively. The
Chinese government is responsible for the medical benefits and the
pension liability to be paid to these employees.
7. RELATED PARTY TRANSACTIONS
During the years ended December 31, 2003 and 2002, the Company paid
rent of $25,146 and $12,077, respectively for factory space leased
from a stockholder.
The Company had advanced funds amounting to $195,652 to a 20%
stockholder as of December 31, 2002 as a short-term, unsecured loan
free of interest payment. This loan was fully repaid in 2003.
During 2003 and 2002, the Company incurred costs of a 80% stockholder
of $11,232 and $9,360 respectively for services provided by certain
management employees of the stockholder, such costs were charged on an
actual incurred pro-rated on estimated time spent basis.
The Company owed an 80% stockholder $20,592 and $9,360 as of December
31, 2003 and 2002 respectively for shared management expenses.
During 2003 and 2002, the Company had related party sales of
$2,483,006 and $1,543,777, respectively.
See Note 2 for balance with a related company.
10
BEIJING TONG YUAN HENG FENG TECHNOLOGY CO., LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND 2002
--------------------------------
8. SHAREHOLDERS' EQUITY
(A) Registered capital
In accordance with the Articles of Association of the Company, the
registered capital of the Company of $241,546 (RMB2,000,000) was fully
paid in cash on December 5, 2001 by the stockholders.
(B) Appropriated retained earnings
The Company is required to make appropriations to reserves funds,
comprising the statutory surplus reserve, statutory public welfare fund
and discretionary surplus reserve, based on after-tax net income
determined in accordance with generally accepted accounting principles
of the People's Republic of China (the "PRC GAAP"). Appropriation to
the statutory surplus reserve should be at least 10% of the after tax
net income determined in accordance with the PRC GAAP until the reserve
is equal to 50% of the entities' registered capital. Appropriations to
the statutory public welfare fund are at 5% to 10% of the after tax net
income determined in accordance with the PRC GAAP. The statutory public
welfare fund is established for the purpose of providing employee
facilities and other collective benefits to the employees and is
non-distributable other than in liquidation. Appropriations to the
discretionary surplus reserve are made at the discretion of the Board
of Directors.
During 2003 and 2002, the Company appropriated $71,311 and $56,161,
respectively to the reserves funds based on its net income under PRC
GAAP.
9. CONCENTRATIONS AND RISKS
During 2003 and 2002, 100% of the Company's assets were located in China
and 100% of the Company's revenues were derived from companies located in
China.
In 2002, the Company derived 69% of its revenue from a related company. In
2003, the Company derived its revenue from two related entities; 91% from a
related company and the balance was derived from sales to a stockholder.
In 2002, the Company purchased 90% of its raw materials from three
suppliers in the PRC. In 2003, the Company purchased 73% of its raw
materials from three suppliers in the PRC.
10. SUBSEQUENT EVENTS
On June 1, 2004 Beijing Sande Technology (Holding) Co., Limited ("BST")
entered into an Equity Purchase Agreement ("the June Agreement") with
American Metal Technology Group ("AMTG") pursuant to which BST transferred
80% in registered capital of the Company of RMB 1,600,000 to AMTG subject
to the completion of certain customary conditions set forth in the June
Agreement.
On August 8, 2004 Beijing Sande Shang Mao Co., Limited ("BSS") entered into
an Equity Exchange Agreement ("the August Agreement") with American Metal
Technology Group ("AMTG") and American Metal Technology (Lang Fang) Co.,
Ltd ("AMLF"), a wholly owned subsidiary of AMTG, pursuant to which BSS
transferred 20% in registered capital of the Company of RMB 400,000 to AMLF
subject to the completion of certain customary conditions set forth in the
August Agreement.
Upon completion of the June and August Agreements, AMTG will become the
holding company of the Company and the current stockholders of the Company
will own 90% of AMTG shares of common stock outstanding. The transaction
will be accounted for as a reorganization of entities under common control
as the companies were beneficially owned by principally identical
shareholders and share common management.
11
================================================================================
_____________, 2002
No dealer, salesman or other person is authorized to give any information or
make any information or make any representations not contained in the prospectus
with respect to the offering made hereby. This prospectus does not constitute an
offer to sell any of the securities offered hereby in any jurisdiction where, or
to any person to whom it is unlawful to make such an offer. Neither the delivery
of this prospectus nor any sale made hereunder shall, under any circumstances,
create an implication that there has been no change in the information set forth
herein or in the business of our company since the date hereof.
================================================================================
76
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada Corporation Laws and certain provisions of AMTG's Bylaws, under
certain circumstances, provide for indemnification of our officers, directors
and controlling persons against liabilities that they may incur in such
capacities. A summary of the circumstances in which such indemnification is
provided for is contained herein, but this description is qualified in its
entirety by reference to our Bylaws and to the statutory provisions.
The specific statute, charter provision, bylaw, contract, or other arrangement
which any controlling person, director or officers of the Registrant is insured
or indemnified in any manner against any liability which he or she may incur in
their capacity as such, is as follows:
Nevada Statutes
- ---------------
Under the governing Nevada statutes, director immunity from liability to a
company or its shareholders for monetary liabilities applies automatically
unless it is specifically limited by a company's articles of incorporation. Our
articles of incorporation do not contain any limiting language regarding
director immunity from liability. Excepted from this immunity are:
1. a willful failure to deal fairly with the company or its shareholders in
connection with a matter in which the director has a material conflict of
interest;
2. a violation of criminal law (unless the director had reasonable cause to
believe that his or her conduct was lawful or no reasonable cause to believe
that his or her conduct was unlawful);
3. a transaction from which the director derived an improper personal profit;
and
4. willful misconduct.
By-Laws
- -------
The Bylaws of AMTG state as follows:
77
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
Section 1. ACTIONS OTHER THAN BY THE CORPORATION. The corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the corporation, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit or
proceeding if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, has no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the corporation, and that, with
respect to any criminal action or proceeding, he had reasonable cause to believe
that his conduct was unlawful.
Section 2. ACTIONS BY THE CORPORATION. The corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses, including amounts paid in settlement and attorneys' fees,
actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the corporation or
for amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
Section 3. SUCCESSFUL DEFENSE. To the extent that a director, officer, employee
or agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 1 and 2, or in
defense of any claim, issue or matter therein, he must be indemnified by the
corporation against expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense.
Section 4. REQUIRED APPROVAL. Any indemnification under Sections 1 and 2, unless
ordered by a court or advanced pursuant to Section 5, must be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made:
78
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding so orders, by independent legal counsel
in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot be obtained, by independent legal counsel in a written
opinion.
Section 5. ADVANCE OF EXPENSES. The articles of incorporation, the bylaws or an
agreement made by the corporation may provide that the expenses of officers and
directors incurred in defending a civil or criminal action, suit or proceeding
must be paid by the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to be
indemnified by the corporation. The provisions of this section do not affect any
rights to advancement of expenses to which corporate personnel other than
directors or officers may be entitled under any contract or otherwise by law.
Section 6. OTHER RIGHTS. The indemnification and advancement of expenses
authorized in or ordered by a court pursuant to this Article VI:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the articles of
incorporation or any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to Section 2 or for the
advancement of expenses made pursuant to Section 5, may not be made to or on
behalf of any director or officer if a final adjudication establishes that his
acts or omissions involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
Section 7. INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise for any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
79
Section 8. RELIANCE ON PROVISIONS. Each person who shall act as an authorized
representative of the corporation shall be deemed to be doing so in reliance
upon the rights of indemnification provided by this Article.
Section 9. SEVERABILITY. If any of the provisions of this Article are held to be
invalid or unenforceable, this Article shall be construed as if it did not
contain such invalid or unenforceable provision and the remaining provisions of
this Article shall remain in full force and effect.
Section 10. RETROACTIVE EFFECT. To the extent permitted by applicable law, the
rights and powers granted pursuant to this Article VI shall apply to acts and
actions occurring or in progress prior to its adoption by the board of
directors.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses payable by us in connection with the registration of the
Shares is as follows:
SEC Registration ........................................... $ 1260.71
Accounting Fees and Expenses ............................... $ 50,000
Transfer Agents Fees ....................................... $ 750.00
Legal Fees and Expenses, including Blue Sky Fees
and Expenses................................................ $ 30,000
Printing Costs ............................................. $ 3,000
Total ................................................. $ 85,010.71
RECENT SALES OF UNREGISTERED SECURITIES
Purchaser Per Share Purchase Amount Date of Purchase Shares(4)
- --------------------------------------------------------------------------------
Richard Lui $8.171 $408.55(1) 2/16/2004 50
Rui Lin Ding $1.00 $475.00(1) 2/20/2004 475
Mui Hoo Lui Chung $1.00 $475.00(1) 2/20/2004 475
BST (3) (3)(2) 6/1/2004 7,200
BSS (3) (3)(2) 8/8/2004 1,800
(1) Issued pursuant to 4(2) of the Securities Act of 1933, as amended.
(2) Issued pursuant to 4(2) of the Securities Act of 1933 and/or Regulation S
of the Securities Act.
80
(3) Shares issued for purchase of subsidiaries.
(4) Amount of shares issued represent pre-split shares.
EXHIBITS
3.1(a) Articles of Incorporation of AMTG.
3.1(b) Amended Articles of Incorporation of AMTG.
3.2 Bylaws of AMTG.
4.1 Form of Stock Certificate.
5.1 Opinion of The Law Offices of Adam U. Shaikh, Chtd. regarding legality of
shares.
10.1 Equity Purchase Agreement (Beijing Sande Technology (Holding) Co. Ltd and
American Metal Technology Group). (dated June 1, 2004)
10.2 Equity Purchase Agreement (Beijing Sande Shang Mao Co., Ltd., American
Metal Technology (Lang Fang) Co., Ltd, and American Metal Technology
Group). (dated August 8, 2004)
10.3 American Metal Technology (Lang Fang) Co., Ltd Land-Use-Rights Agreement
with the Peoples Republic of China.
10.4 Lease Agreement for Factory. (dated July 15, 2004)
10.5 Loan Agreement with Beijing Sande Technology (Holding) Co., Ltd. (dated
August 15, 2004)
21.1 List of Subsidiaries.
23.1 Consent of The Law Offices of Adam U. Shaikh, Chtd. (Included in Exhibit
5.1.)
23.2 Consent of Jimmy C. H. Cheung & Co, Certified Public Accountants.
UNDERTAKINGS
The undersigned Registrant hereby undertakes:
1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
81
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) 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; and
(c) 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) That, for the purpose of determining any liability under the Securities
Act, 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) To remove from registration by means of post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe it meets all of
the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Los
Angeles, State of California on December 9, 2004.
AMTG
By: /s/ Chen Gao
Chen Gao
President /CFO/Director
By: /s/ Monica Ding
Monica Ding
Secretary
By: /s/ Richard Lui
Richard Lui
Chairman of Board / Director
82
By: /s/ Xin Yan Yuan
Xin Yan Yuan
Director
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:
By: /s/ Chen Gao
Chen Gao
President /CFO/Director
By: /s/ Monica Ding
Monica Ding
Secretary
By: /s/ Richard Lui
Richard Lui
Chairman of Board / Director
By: /s/ Xin Yan Yuan
Xin Yan Yuan
Director
Date: December 9, 2004
83