File Date:_______________ File Number: 333-121183
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FORM SB-2
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form SB-2/A
(Amendment #3)
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AMERICAN METAL TECHNOLOGY GROUP
--------------------------------------------------------------
(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: [ ]
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CALCULATION OF REGISTRATION FEE
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Title of each class Amount to be Proposed maximum Proposed maximum
of securities to be registered offering price per aggregate offering Amount of
registered unit (4) price 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) 3,328,630 $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 and certain selling security holders of
Beijing Sande Technology (Holding) Co., Ltd. and Beijing Sande Shang Mao
Co., Ltd. who shall receive shares in the registered distribution.
(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
3,328,630 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 1,902,904 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 475,726
shares of our common stock (does not include shares to be received by affiliates
of AMTG in the dividend).
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY
PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.
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............................................................8
RISK FACTORS RELATED TO OUR BUSINESS...............................8
RISK FACTORS RELATED TO THE PRC....................................10
RISK FACTORS RELATED TO THIS OFFERING..............................11
USE OF PROCEEDS....................................................13
DETERMINATION OF OFFERING PRICE....................................13
DILUTION...........................................................13
SELLING SECURITY HOLDERS...........................................13
PLAN OF DISTRIBUTION...............................................18
TAX CONSEQUENCES OF DISTRIBUTION...................................20
LEGAL PROCEEDINGS..................................................20
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS.................................20
EXECUTIVE COMPENSATION.............................................23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.........................................24
DESCRIPTION OF SECURITIES..........................................26
DESCRIPTION OF OUR BUSINESS........................................27
MANAGEMENT DISCUSSION AND PLAN OF
OPERATION.....................................................43
CRITICAL ACCOUNTING POLICIES.......................................50
FACTORS AFFECTING OPERATING RESULTS................................52
MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS...................................53
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES................55
INTEREST OF NAMED EXPERTS AND COUNSEL..............................55
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE........................55
CERTAIN RELATIONSHIP AND RELATED
TRANSACTIONS..................................................56
FINANCIAL STATEMENTS...............................................58
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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 precision investment casting and
metal fabrication products in the People's Republic of China ("China"). To date,
the only products we have produced have been parts used to make beverage
equipment. The majority of the parts we have produced have consisted of CO2
regulators and dispensers.
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"). 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. Through AMLF, we acquired the remaining 20%
ownership of BJTY.
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
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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 1,902,904 shares
received through the registered dividend by certain BST Selling Security
Holders, and the resale of 475,726 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. Please see section
titled "Tax Consequences of Distribution on page 19".
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.
Furthermore, the AMTG Selling Security Holders should be aware that the
anti-manuipulation provisions of Regulation M under the Exchange Act will apply
to their purchases and sales of shares of common stock. The AMTG Selling
Security Holders are advised to contact a securities consultant if they are
unfamiliar with the provisions promulgated under Regulation M.
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 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.
SUMMARY FINANCIAL INFORMATION
Because this is only a financial summary, it does not contain all the financial
information that may be important to you. You should also read carefully all the
information that is contained in this prospectus, including the financial
statements and their explanatory notes. Please note that the summary financials
below are consolidated financial information for our companies and two
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subsidiaries, Beijing Tong Yuan Heng Feng Technology Co., Ltd. and American
Metal Technology (Lang Fang) Co., Ltd.
Operations Data For the Twelve Month Period from January 1 For the Twelve Month Period from
through December 31, 2003 January 1 through December 31, 2004
----------------------------------------------- -------------------------------------
Net Sales US$2,483,006 US$4,088,413
Cost of Sales US$1,931,637 US$3,154,506
Net income US$475,407 US$863,379
Balance Sheet Data As of December 31, 2004
Total assets US$2,797,877
Working capital US$877,162
Stockholder's equity US$1,955,836
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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 all material risks known to us.
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.
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. Furthermore, should we be unable to maintain and manage
our growth, we may be unable to generate sufficient revenues to payback the
existing loans we currently hold in the amount of $990,000. A failure to payback
these loans could result in collection proceeding against us and we may no
longer be able to continue operations.
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Certain employees have accrued salaries with us that are due upon demand. If
such salaries are placed upon demand, we will be subject to remit $127,295 which
may affect our cash position and, consequently, our growth.
As of March 31, 2005, we owed an aggregate amount of $127,295 for accrued
salaries. If all salaries are placed upon demand, our cash position will be
limited and this may delay our current plans, including the construction of our
new factory.
Our sales have been limited to two related customers which exposes us to
financial risk.
Historically, a substantial percentage of our sales have been to two customers
who are also related parties. During the years ended December 31, 2003, except
for an insignificant amount of subcontracting income, the two related customers
accounted for 100% of our net sales. Should we subsequently lose one or both of
these customers; we will no longer have sufficient revenue to continue
operations.
We have no written agreement or contract for future production which places us
at financial risk.
Our sales transactions to our customers are based on purchase orders
periodically received by us. Except for these purchase orders, we have no
written agreements with our customers for future orders of production or for
future sales. Furthermore, the percentage of sales to any of our customers may
fluctuate from time to time. Should we fail to maintain the level of production
orders from our current customers, or fail to obtain new customers, our revenues
will substantially decrease and we may not be able to continue operations.
A substantial portion of our sales are on credit which exposes us to financial
risk if a customer is unable to honor its credit.
Our current customers, as well as potential future customers, have and will
place orders with us based on credit. Should one or both of our customers be
unable honor its credit obligations and pay for our products or services, our
revenues will substantially decrease and we may not be able to continue
operations.
We compete against a number of companies which are in a better position to offer
products in higher volume and at a lower price.
We compete against numerous metal fabrication manufacturers. Due to intense
price competition, we may have to reduce our prices, 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 from
potential new clients due to pricing pressures and limitation of production
facilities, which has affected our net sales.
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Should we be unable to complete construction of our new facility upon expiration
of our current lease agreement, we may be forced into paying a much higher price
for rent, or may be forced to temporarily cease operations all together.
All our manufacturing and production is conducted at our current plant at No.
15, Shixing Street, Shijingshan Badachu, High-Tech Park, Beijing, China. Our
lease for this facility expires on July 15, 2005. There is currently no contract
or agreement to continue the lease upon its expiry. We are attempting to
construct our own factory at this time. However, if we are unable to complete
the factory by July, renew or extend the current lease or obtain a new lease for
a similar rent of $51,849 per year, our revenues may be greatly reduced.
Furthermore, if we are unable to complete the factory or obtain a new or
extended lease, we may be unable to continue operations.
We do not presently maintain insurance at our facility which exposes us to
serious financial risk.
Presently, we do not maintain any insurance at our manufacturing and production
facility. Should our facility be affected by fire or natural calamity, our
operations may be severely hampered and we may be unable to continue with
operations at all.
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 legal system and application of laws are uncertain which may impact
our ability to enforce our agreements and may expose us to lawsuits.
The legal system of PRC is new, unclear and continually evolving. There can be
no certainty as to the application of its laws and regulations in particular
instances. The 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. These
factors may limit our ability to enforce agreements with our current and future
customers and vendors. Furthermore, it may expose us to lawsuits by customers
and vendors in which we may not be adequately able to protect ourselves.
We may be unable to fully comply with local and regional laws which may expose
us to financial risk.
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
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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. At the moment, we believe we are in
compliance with applicable local and regional laws, but there is no assurance
that we will maintain compliance. Our failure to maintain compliance with the
local laws may result in hefty fines and fees which may substantially impact our
cash flow, cause substantial decrease in our revenues and may affect our ability
to continue operation.
Various administrative agencies have informal rule enforcement that we may not
be able to comply with.
While we have, to date, been able to operate within 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 our business and affect our ability to continue
operation.
The Chinese judiciary is relatively inexperienced in enforcing the laws that
exist which may expose us to costly litigation and uncertain outcomes.
Should we be exposed to litigation in the PRC, we may not be able to properly
evaluate the possible outcomes. This may expose us to costly litigation.
Furthermore, we may be exposed to potential inequitable judicial results. Either
of these scenarios may result in failure to continue operation.
RISK FACTORS RELATED TO THIS OFFERING
Our stock is not listed on any trading market nor is there any guarantee that a
market will develop. This may result in the inability of purchaser of shares in
this offering to be able to resell their shares.
We have not yet made any arrangements to have a broker make a market in any of
our securities. There is presently no public trading market for any of our
securities, and we can provide no assurance that an active market will develop
or be sustained. We plan on applying for listing on the Over the Counter
Bulletin Board ("OTCBB"), but there is no guarantee that we will obtain such a
listing. If arrangements cannot be made for a broker to make a market in our
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securities, or if an active public trading market does not develop or is not
sustained, it may be difficult or impossible for you to resell your securities
at any price. Even if a public market does develop, the market price could
decline below the amount you paid for your securities.
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 10,000,000 common shares issued and
outstanding. Immediately after the completion of this offering, we will have
3,328,630 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.
The liquidity of sales of our securities may be limited due to the fact that all
initial holders of our securities are Chinese and all our operations are based
in China.
All our officers, directors, and selling security holders of our Company are
residents of China. Based upon this fact, the liquidity of the initial sales of
the stock may be limited because the initial selling security holders may have
limited access to the U.S markets due to distance and time change. Furthermore,
the familiarity of our Company with U.S shareholders may be limited due to the
fact that all operations are conducted outside the U.S.
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
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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 established a price of $1.00 per
share. This was determined by basing it on a Price/Earning ("PE") of 10. We had
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 following table below represents AMTG Selling Security Holders, including
certain selling security holders that will be receiving shares in the registered
dividends. 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.
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SELLING SECURITY HOLDERS
- -------------------------------------------------------------------------------------------------------------
Name, Address, and Securities Owned Prior Number Of Shares Being Securities Owned After
Relationship To Offering(1) Registered Offering
Shares Percent Shares Percent
------ ------- ------ -------
- -------------------------------------------------------------------------------------------------------------
Lui Chung Mui Hoo
Flat C 8/F, Man Hoo Court,
448-452, Nathan Road,
Kowloon, Hong Kong(2) 475,000 4.75% 475,000 -0- -0-
- -------------------------------------------------------------------------------------------------------------
Rui Lin Ding
(2)(7)
314 E. Mission Rd. 475,000 4.75% 475,000 -0- -0-
San Gabriel, CA 91776
- -------------------------------------------------------------------------------------------------------------
Mei Si Gao
No. 601, 1st Door, 14th
Floor, ShuangYu Shu Bei Li, 495,261 4.95% 247,631 247,631 2.48%
Haidian District, Beijing,
China(3)
- -------------------------------------------------------------------------------------------------------------
Ran Song
No. 601, 1st Door, 14th
Floor, Shuang Yu Shu Bei 495,261 4.95% 247,631 247,631 2.48%
Li, Haidian District,
Beijing, China(3)
- -------------------------------------------------------------------------------------------------------------
Jian Xin Xu
No. 5, 21st Building,
Nanying Fang Water and
Power Departement 495,261 4.95% 247,631 247,631 2.48%
Dormitory, West District,
Beijing, China(3)
- -------------------------------------------------------------------------------------------------------------
Meng Xu
No. 8, 3rd Door, 11th
Floor, Liu Pu Keng, West 495,261 4.95% 247,631 247,631 2.48%
District, Beijing, China(3)
- -------------------------------------------------------------------------------------------------------------
Ya Ni Gao
No. 7, Weishu Street,
Haidian District, Beijing, 110,058 1.1% 55,029 55,029 0.55%
China(3)(5)
- -------------------------------------------------------------------------------------------------------------
Ying Pan
No. 7, Weishu Street,
Haidian District, Beijing, 495,261 4.95% 247,631 247,631 2.48%
China(3)
- -------------------------------------------------------------------------------------------------------------
14
- -------------------------------------------------------------------------------------------------------------
Hang Yuan
No. 601, 3rd Door, 42th
Floor, GuanZhuangDongLi, 275,145 2.75% 137,573 137,573 1.38%
Chaoyang District, Beijing,
China(3)
- -------------------------------------------------------------------------------------------------------------
Xin Min Yuan
No. 502, 1st Door, 40th
Floor, GuanZhuangDongLi, 495,261 4.95% 247,631 247,631 2.48%
Chaoyang District, Beijing,
China(3)(6)
- -------------------------------------------------------------------------------------------------------------
Xin Jian Yuan
No. 601, 3rd Door, 42th
Floor, GuanZhuangDongLi, 495,261 4.95% 247,631 247,631 2.48%
Chaoyang District, Beijing,
China(3)(6)
- -------------------------------------------------------------------------------------------------------------
Wei Li
No. 031-02 Yongshengli,
Front District, Yingkou 22,012 <1% 11,006 11,006 0.11%
city, Liaoning, China(3)
- -------------------------------------------------------------------------------------------------------------
Zhen Bang Song
No. 601, 1st Door, 14th
Floor, Shuang Yu Shu Bei 550,290 5.5% 275,145 275,145 2.75%
Li, Haidian District,
Beijing, China(3)
- -------------------------------------------------------------------------------------------------------------
Jing Zhao
No. 7, 31st Floor,
HeishanxiaoLou, Mentougou, 38,520 <1% 19,260 19,260 0.19%
Haidian District, Beijing,
China(3)
- -------------------------------------------------------------------------------------------------------------
Wei Li
No. 212, 3rd Floor, Water
and Heat No. 2 Factory 27,515 <1% 13,757 13,757 0.14%
Dormitory, Qinghe, Haidian
District, Beijing, China(3)
- -------------------------------------------------------------------------------------------------------------
Xiu Hua Liu
No. 77, 1st Door, Apt 114,
Banbidian, Haidian 27,515 <1% 13,757 13,757 0.14%
District, Beijing, China(3)
- -------------------------------------------------------------------------------------------------------------
15
- -------------------------------------------------------------------------------------------------------------
Bing Lu
No. 6 Building, Apt 707
Jianwai Guanghui Li, 27,515 <1% 13,757 13,757 0.14%
Chaoyang District,Beijing,
China(3)
- -------------------------------------------------------------------------------------------------------------
Wen Ge Ren
No. 53, Liuniangfu,
Shijingshan, Beijing, 27,515 <1% 13,757 13,757 0.14%
China(3)
- -------------------------------------------------------------------------------------------------------------
Xue Min Yang
No. 501, 15 Building,
Muoshikou Nanli, 27,515 <1% 13,757 13,757 0.14%
Shijingshan, Beijing,
China(3)
- -------------------------------------------------------------------------------------------------------------
Hong Jin Zhang
Changhe Xingzheng Town,
Desheng Valley, Wuwei 5,503 <1% 2,751 2,751 0.03%
County, Fuwu region, Anhui,
China(3)
- -------------------------------------------------------------------------------------------------------------
Ying Qiang Li
Liuqiao Town, Wangdian
Valley, Huaiyang County, 3,852 <1% 1,926 1,926 0.02%
Henan, China(3)
- -------------------------------------------------------------------------------------------------------------
Shi You Liu
Liuqiao Town, Wangdian
Valley, Huaiyang County, 1,651 <1% 825 825 0.01%
Henan, China(3)
- -------------------------------------------------------------------------------------------------------------
Hong Wei Liu
No. 503, Building 4, Unit
1, Keyan Building, Jinding 27,515 <1% 13,757 13,757 0.14%
St. Shijingshan, Beijing,
China(3)
- -------------------------------------------------------------------------------------------------------------
Yong Xiu Yan
No. 1, Nanheyan, Pingguo
Yuan, Shijingshan District, 5,503 <1% 2,751 2,751 0.03%
Beijing, China(3)
- -------------------------------------------------------------------------------------------------------------
16
- -------------------------------------------------------------------------------------------------------------
Shang Min He
Youfangzhuang Town, Shaji
Valley, Lucheng County, 5,503 <1% 2,751 2,751 0.03%
Heinan, China(3)
- -------------------------------------------------------------------------------------------------------------
Xiao Yan Li
No. 5, Unit 2, Buidling 5,
West Street, Dingfu Zhuang, 44,023 <1% 22,012 22,012 0.22%
Chaoyang District, Beijing,
China(3)
- -------------------------------------------------------------------------------------------------------------
Yan Wu Xu
No. 602, 3rd Door, Building
225, Muofangbeili, Chaoyang 55,029 <1% 27,515 27,515 0.28%
District, Beijing, China(3)
- -------------------------------------------------------------------------------------------------------------
Wen Yong Ma
Family Center, Meikuang Er 2,751 <1% 1,376 1,376 0.01%
Gong District, Dongniuma
Si, Shaodong, Hunan,
China(3)
- -------------------------------------------------------------------------------------------------------------
Xin Fa Li
No. 5 Maopingtou Town,
Yanquan Valley, Yizhang 2,751 <1% 1,376 1,376 0.01%
County, Heinan, China(3)
- -------------------------------------------------------------------------------------------------------------
Sheng Jie He
Youfangzhuang Town, Shaji
Valley, Lucheng County, 2,751 <1% 1,376 1,376 0.01%
Henan, China(3)
- -------------------------------------------------------------------------------------------------------------
(1) Number of shares following dividend distribution
(2) Current AMTG Shareholders
(3) Shareholders will receive AMTG shares through the registered distribution
based on ownership in both BSS and BST.
(4) The Wei Li's listed in this table are separate individuals. Neither of
these individuals are related to Mr. Wei Li, the manager of the technical
department of BJTY.
(5) Mei Si Gao and Ya Ni Gao are elder sisters to Mr. Chen Gao, our President,
Treasurer, and Director. They all maintain separate residences.
17
(6) Xin Min Yuan and Xian Jian Yuan are the brothers of Ms. Xin Yan Yuan, one
of our Directors. They all maintain separate residences.
(7) Ruilin Ding is the father of Ms. Monica Ding, our Secretary. They both
maintain separate residences.
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 and sale of such shares, we have made
certain undertakings in which 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 common 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 common share of BST. Beijing Sande Shang Mao Co.,
Ltd. ("BSS") shall distribute 1,800,000 shares of our common shares, which it
owns, to common 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 common share of
BSS. 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 _________________.
One half (1/2) of those shares to be received by each shareholder of BST and BSS
in the distribution, other than those shares received by affiliates of AMTG,
will be deemed freely transferable shares pursuant to the selling security
holder provisions of this prospectus. Those shareholders who receive shares in
the BST and BSS dividend distributions that are deemed to be affiliates of AMTG
shall receive restricted shares only. The shares received by affiliates, as well
as the remaining shares to be distributed to BST and BSS shareholders that will
not be included in the resale provisions of this prospectus, 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
18
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.
SALES BY AMTG, BST, AND BSS SELLING SECURITY HOLDERS
The AMTG Selling Security Holders, including certain shareholders receiving
shares in the registered distribution, shall be selling certain securities
pursuant to this prospectus. AMTG, BST, and BSS Selling Security Holders shall
be registering for resale3,328,630 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. At this time, we
plan on seeking to have our shares listed and traded on the OTC Bulletin Board
("OTCBB").
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 Regulation 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. Should a broker-dealer be
retained to facilitate the sale of shares in this prospectus, we will file an
appropriate post-effective amendment to this prospectus to include information
concerning the broker-dealer retained as well as any compensation paid to the
broker-dealer.
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
19
discounts of underwriters, brokers, dealers and agents. We will receive no
proceed in connection with the sales of securities in this prospectus.
TAX CONSEQUENCES OF DISTRIBUTION
The BST and BSS shareholders who will receive common stock of AMTG as dividends
are all Non-US Holders. Consequently, no material taxable event is anticipated
in the United States. In accordance with the tax laws of the Peoples Republic of
China, dividend income paid in cash and upon receipt to shareholders are
generally taxable events. Taxable events are transactions that could trigger an
obligation to pay a tax. Each shareholder must then determine whether a tax is
actually due or payable by the shareholder as a result of the taxable event. The
distribution of our common stock to BST and BSS shareholders as a dividend is in
the form of common stock will likely be a taxable event if the shareholder sells
the dividend stock to a third party and receives cash in return. Accordingly,
the shareholders of BST and BSS should seek advice from qualified tax accountant
familiar with the tax laws of the Peoples Republic of China.
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 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 39 Director/Chairman
Monica Ding 26 Secretary
Chen Gao, age 49, has served as president, treasurer and director of American
Metal Technology Group since Jan 28, 2004; served as Chairman and director of
Beijing Tong Yuan Heng Feng Technology Co., Ltd. from Jan 2002 to present,
served as Chairman and director of American Technology (Lang Fang) Co., Ltd.
from August 2004 to present; served as Chairman and President of Beijing Mai Ke
Luo Machinery Co., Ltd. from May 1994 to present. Beijing Mai Ke Luo Machinery
Co., Ltd. is a beverage equipment manufacturer in China; served as Chairman of
Beijing Sande Technology (Holding) Co., Ltd, a beverage equipment and parts
manufacturer from Jan 1993 to present. Mr. Gao was the accounting manager for
Beijing Beichen Group Wuzhou Hotel, a hotel management company, from Sep 1987 to
Dec 1992.
20
Richard Lui, age 39, has served as Chairman and director of American Metal
Technology Group since February 2004. Mr. Lui served as vice Chairman of AP
Henderson Group since July 23, 2004 to December 16, 2004. AP Henderson Group, a
computer hardware and peripheral manufacturer, 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 Chairman and director of Beijing Tong Yuan
Heng Feng Technology Co., Ltd. from Jan 2002 to present, served as director of
American Metal Technology (Lang Fang) Co., Ltd. from August 2004 to present,
served as Director and Vice President of Beijing Mai Ke Luo Machinery Co., Ltd.,
a beverage equipment manufacturer in China from May 1994 to present, and has
served as President of Beijing Sande Technology (Holding) Co., Ltd, a beverage
equipment and parts maufacturer from Jan 1993 to present.
Monica Ding, age 26, 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 in the
business of financial and business consulting.
Directors of Beijing Tong Yuan Heng Feng Technology Co., Ltd.
- -------------------------------------------------------------
Mr Chen Gao, the president, secretary, and treasurer of AMTG as well as Mr. Xin
Yan Yuan, a director of AMTG, both serve as directors of BJTY and AMLF. In
addition, Mr. Xia Jie Guo also serves as a director of BJTY.
Xia Jie Guo, age 42, served as director of Beijing Tong Yuan Heng Feng
Technology Co., Ltd. from July 14, 2004 to present; served as Manager of
Business Department of Beijing Mai Ke Luo Machinery Co., Ltd. from February 1995
to present; Beijing Mai Ke Luo Machinery Co., Ltd. is a beverage equipment
manufacturer in China; and has served as Office Manager of Bejing Sande
Technology (Holding) Co., Ltd. from January 1993 to January 1995.
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.
since January 2002 to present; served as Manager of Finance and Accounting
Department of Beijing Mai Ke Luo Machinery Co., Ltd., a beverage equipment
manufacturer in China from September 1995 to present; served as accountant in
the Beijing Mineral Bureau, government bureau for mineral development from
September 1980 to August 1995.
21
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., a beverage equipment
manufacturer in China from May 1996 to present; Manager of Foreign Relations
Department of Beijing Lan Jian Travel Agency, a travel agency for China's
domestic travel 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., a beverage
equipment manufacturer in China from March 2000 to present; Serviced as Deputy
Chief of Beijing Five Star Beer Plant, a beer brewery in Beijing, China from
July 1988 to December 1999.
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. , a beverage equipment manufacturer in
China from May 2002 to present; teacher at Beijing Shougang Steel Mechanics
Institute from September 1994 to April 2002.
Officer and Director of American Metal Technology (Lang Fang) Co., Ltd.
- -----------------------------------------------------------------------
Currently, Mr. Chen serves as the chairman and a director of AMLF. Xin Yan Yuan
serves as a director.
Committees of the Board of Directors
- ------------------------------------
As of November 1, 2004, the Board of Directors of the Company had no standing
board committees.
Dependence on Key Personnel
- ---------------------------
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 and
employees. We also rely on a number of key engineering and technology officers
22
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.
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
------ ------ -------
Name and Other Restricted Securities
Principal Annual Stock Options LTIP All other
Position Year Salary($) Bonus($) Compensation Awards /SARs payout compensation
- -------- ---- --------- -------- ------------ ------ ----- ------ ------------
Officers of AMTG
- ----------------
Chen Gao 2005(est) -5,480- -1,000- -0- -0- -0- -0- -0-
President 2004 -5,480- -1,000- -0- -0- -0- -0- -0-
Director 2003 -5,480- -1,000- -0- -0- -0- -0- -0-
Treasurer 2002 -5,402- -0- -0- -0- -0- -0- -0-
Chairman of BJTY
Chairman of AMLF
Xin Yan Yuan 2005(est) -1,169- -0- -0- -0- -0- -0- -0-
Director 2004 -1,169- -0- -0- -0- -0- -0- -0-
Director of BJTY 2003 -1,169- -0- -0- -0- -0- -0- -0-
Director of AMLF 2002 -974- -0- -0- -0- -0- -0- -0-
Richard Lui 2005(est) -0- -0- -0- -0- -0- -0- -0-
Chairman 2004 -0- -0- -0- -0- -0- -0- -0-
2003 -0- -0- -0- -0- -0- -0- -0-
2002 -0- -0- -0- -0- -0- -0- -0-
Monica Ding 2005(est) -0- -0- -0- -0- -0- -0- -0-
Secretary 2004 -0- -0- -0- -0- -0- -0- -0-
2003 -0- -0- -0- -0- -0- -0- -0-
2002 -0- -0- -0- -0- -0- -0- -0-
23
Officers of BJTY
- ----------------
Xiao Jie Guo 2005(est) -0- -0- -0- -0- -0- -0- -0-
Director of BJTY 2004 -0- -0- -0- -0- -0- -0- -0-
2003 -0- -0- -0- -0- -0- -0- -0-
2002 -0- -0- -0- -0- -0- -0- -0-
Zhong Min Li 2005(est) -731- -0- -0- -0- -0- -0- -0-
CFO, Finance 2004 -731- -0- -0- -0- -0- -0- -0-
Accounting Dept 2003 -731- -0- -0- -0- -0- -0- -0-
Manager 2002 -609- -0- -0- -0- -0- -0- -0-
Jun Li 2005(est) -731- -0- -0- -0- -0- -0- -0-
Sales Dept. 2004 -731- -0- -0- -0- -0- -0- -0-
Manager 2003 -731- -0- -0- -0- -0- -0- -0-
2002 -609- -0- -0- -0- -0- -0- -0-
Wei Li 2005(est) -731- -0- -0- -0- -0- -0- -0-
Technical Dept 2004 -731- -0- -0- -0- -0- -0- -0-
Manager 2003 -731- -0- -0- -0- -0- -0- -0-
2002 -609- -0- -0- -0- -0- -0- -0-
Han Zhang 2005(est) -731- -0- -0- -0- -0- -0- -0-
Production Dept 2004 -731- -0- -0- -0- -0- -0- -0-
Manager 2003 -731- -0- -0- -0- -0- -0- -0-
2002 -609- -0- -0- -0- -0- -0- -0-
Yun Song He 2005(est) -658- -0- -0- -0- -0- -0- -0-
Chief Engineer 2004 -658- -0- -0- -0- -0- -0- -0-
2003 -658- -0- -0- -0- -0- -0- -0-
2002 -548- -0- -0- -0- -0- -0- -0-
All salaries are paid for through BJTY. No salaries have been paid out, but are
currently accruing. Accrued salaries bear no interest and are due on demand. The
Board of AMTG will meet and decide on payment based on the Company's operation
results. Specific factors in determining payment schedules include net income
derived from operations, current and foreseeable expenses, and past demands made
by executives for payment.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information about beneficial ownership of
our common stock, upon distribution pursuant to this prospectus, to 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%
24
Common Richard Lui(4) 50,000 0.05%
Common Monica Ding(5) -0- -0-
Common Xiao Jie Guo(6) 528,279 (1) 5.28%
Common Zhong Min Li(7) 55,029 (1) 0.55%
Common Jun Li(8) 16,509 (1) 0.16%
Common Wei Li (9) 55,029 (1) 0.55%
Common Han Zhang(10) 11,006 (1) 0.11%
Common Yun Song He(11) -0- -0-
Common Zhen Bang Song 550,290 (1) 5.5%
Common Officers/Directors/
Management as a Group 4,292,740 42.93%
(1) Number of shares to be owned following the dividend distribution.
(2) President, Director, Treasurer of AMTG. Chairman and Director of BJTY and
AMLF.
(3) Director of AMTG. Vice Chairman and Director of BJTY.
(4) Director/Chairman of AMTG.
(5) Secretary of AMTG.
(6) Director of BJTY
(7) CFO of BJTY, Manager of Finance and Accounting Department of BJTY
(8) Manager of Sales Department of BJTY
(9) Manager of Technical Department of BJTY
(10) Manager of Production Department of BJTY
(11) Chief engineer of BJTY
Currently, there are no employment agreements between any members of management
and AMTG or any of its subsidiaries.
DESCRIPTION OF SECURITIES
General
- -------
We currently have 20,000,000 shares of common stock, $.001 par value per share,
authorized. Currently, we have 10,000,000 shares of common stock issued. There
are no preferred shares authorized.
25
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
- -----------------------------------
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
26
DESCRIPTION OF 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. On June
1, 2004, the Company acquired 80% ownership of Beijing Tong Yuan Heng Feng
Technology Co., Ltd. ("BJTY"), a manufacturer of precision investment casting
products in the People's Republic of China ("China"). (See Exhibit 10.1) 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. (See Exhibit 10.2) 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.
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 beverage equipment 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 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 Foreign Direct A Chinese Limited Company
Investment Company
27
Our Business
- ------------
American Metal Technology Group, a Nevada corporation, through our wholly owned
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 precision investment casting and metal fabrication
products in the People's Republic of China ("China"). Our production facilities
allow us to manufacture investment casting and machined products, including
valves, pipe fittings, regulators, dispensers and other equipment parts based
upon blueprints supplied to us by our customers. 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 manufacture our products
through a process called "Investment Casting Process", also called the "lost wax
process" and through a process called "CNC Machining Process".
The Manufacturing Process
- -------------------------
Our manufacturing cycle begins with the acceptance of blue-prints with detail
technical drawings, specification of materials, and precision levels of the
parts to be produced from the customer (existing or new). For any new customer,
we would first estimate a price based on the blueprint, the order quantity, and
the cost of raw materials. If the new customer accepts our quotation, we will
produce samples of the parts for customer inspection. Upon customer
satisfaction, we begin the actual production of the parts ordered. Our
production cycle mainly consisted of two processes, the investment casting
process, also called the "lost wax process" and the CNC machining process. At
the end of each process, we will conduct qualification inspection and deliver
the final products directly to the customers.
Overview of our Investment Casting Process
Investment casting, often called lost wax casting, is regarded as a precision
casting process to fabricate near-net-shaped metal parts that could readily be
put into their final form. The investment process can be performed from a
variety of metal alloy such as stainless steels, carbon alloy steels, tool
alloys, monel alloys, hastelly c alloys, nickel base alloys, cobalt base alloys,
aluminum alloys and brass alloys. Although its history lies to a great extent in
the production of art items such as statues, jewelry and etc., the most common
use of investment casting in more recent history has been the production of
components requiring complex, often thin-wall castings.
Our investment casting process begins with the injection of high temperature
melted wax into a ceramic shell mold to form a pattern. The formed pattern is
based on customer's technical drawing and is within the same basic geometrical
shape and dimension as the finished metal cast part. Because the pattern is made
of wax, it can be melted away very easily. Once a wax pattern is produced, we
then dip the pattern in a mixture of ceramic slurry. This would result in the
pattern covered with a sand stucco. We then allow it to dry. The dipping and
stuccoing process is repeated until a shell of 6 to 8 mm (1/4 to 3/8 in) is
formed.
28
Once the ceramic has dried, we would place the entire assembly in a steam
autoclave to remove most of the wax. A steam autoclave is a piece of equipment
that can produce pressurized high temperature steam in a closed chamber for
melting wax. After autoclaving, the remaining amount of wax that soaked into the
ceramic shell is burned out in a furnace. At this point, all of the residual wax
pattern and material is removed, and the ceramic mold remains. Next, we would
preheat the mold to a specific temperature and fill it with molten metal,
creating the metal casting. Then, we will allow the metal casting to cool down.
Once the metal casting has cooled and set, we'll remove the mold shell from the
casting. At this point, the investment metal casting process is completed. The
last step is to conduct qualification check and other tests, such as leakage
inspections according to customer specification. Depending on the specific
design requirements, we may need to perform CNC machining to bring the castings
to their precise final form.
Overview of our CNC Machining Process
CNC stands for computer numerical control. CNC Machining is the process by which
material is removed from a work-piece with Computer Numerical Control ("CNC")
equipment that cuts away unwanted material. The CNC machining process is a
versatile system that allows us to control the motion of tools and parts through
computer programs that use numeric data. Machining is possible on virtually any
material. Parts are machined directly from your 3D CAD models. 3D CAD
(computer-aided design) refers to the use of computer systems to design detailed
three-dimensional models of physical objects, such as mechanical parts,
buildings, and molecules.
The CNC machines in our facilities include machining centers (mills) and turning
centers (lathes). CNC machining center is a numerically controlled computer mill
that cuts metal with a multiple-tooth cutting tool called a milling cutter. The
work-piece is fastened to the milling machine table and is fed against the
revolving milling cutter. The work-piece can be fed to the milling cutter either
horizontally or vertically. The milling cutters can have cutting teeth on the
edge or sides or both. The cutting teeth can be straight or spiral. CNC turning
center is a computer numerically controlled lathe with the capability to hold a
number of cutting tools. The CNC turning center is designed to remove metal by
moving cutting tools against a rotating work-piece. The work-piece is rotated
around its axis and a cutting tool is fed parallel to the axis to create a
cylinder or at right angles to the axis to create a face. The rotating
work-piece can be either parallel or vertical to the floor.
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. Telephone equipment parts, the steel plate in light switches,
automobile starters and many other automobile parts, metal hinges on desktop
computers, or door handles, knots and taps, dispensers and regulators etc., are
all made by using the investment casting process. 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
29
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.
www.oit.doe.gov/pdfs/annual03_metal.pdf, Page 7. Other methods, accounting for
approximately 40 percent, 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. Casting process must
continually evolve and improve to remain completive in today's market place.
Source: Metal Casting Annual Report, Fiscal Year 2003 by U.S. Department of
Energy. www.oit.doe.gov/pdfs/annual03_metal.pdf Pages 7,
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 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. Source: MetalCasting - Industry of the
Future 2002 Annual Report by U.S. Department of Energy, Energy Efficiency and
Renewable Energy.
http://www.eere.energy.gov/industry/metalcasting/pdfs/annual2002.pdf Page 18
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. Source:
MetalCasting - Industry of the Future 2002 Annual Report by U.S. Department of
Energy, Energy Efficiency and Renewable Energy.
www.eere.energy.gov/industry/about/pdfs/metalcasting_fy2004.pdf Page 8
30
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 precision metal parts for
original equipment manufacturers ("OEMs"). BJTY is a manufacturer of precision
metal parts in China with a current 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 precision equipments with a monthly production capacity
of seventy-one (71) tons and an annual output of eight hundred and fifty (850)
tons. For the last three fiscal years, we increased our production capacity from
an annual capacity of 256 tons in 2002 to 850 tons as of the date of this report
by continuous purchase of CNC Lathes from the Yamazaki Mazak Corporation. In
each of last three fiscal years, we have produced and sold 348 tons for fiscal
2002 (29 tons per month), 360 tons for fiscal 2003 (30 tons per month), and 636
tons for fiscal 2004 (53 tons per month). BJTY owns and operates 26 units of
Quick Turn 200C Mazak CNC Turning Centers ("Quick Turn 200C Lathes"), of which 4
units were purchases in January 2005. The Quick Turn 200C Lathes are
manufactured by Yamazaki Mazak Corporation (Japan), a machine tool maker in
Japan, which is a global manufacturer of CNC machine tools with operations in
Japan, the US, England, and Singapore. According to Mazak, the Quick Turn 200C
lathes are flat-bed two axis lathes, designed for ease of operation. They use
the popular controller for faster programming and increased operating
efficiency. Standard features include the automatic tool measuring and the fully
programmable tailstock. The maximum machining diameter of the work-piece is
340mm. The spindle speed can be adjusted from 40 to 4000 rpm. This machine
produces precision up to 0.01mm(0.0003937 inch). Typically, a linear tolerance
of 0.005 inch per inch is standard for investment casting.
As well as 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 among our eighty (80) total employees. Twenty six (26)
employees are college graduates or have received other higher education.
Furthermore, thirty seven (37) of our employees have multiple years experience
in the investment casting industry. 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 22 %
increase in revenue and a 27 % increase in net income as compared with fiscal
year 2002.
31
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. This land-use-right was
purchased for RMB 4,543,700 (approximately $548,756). (See Exhibit 10.3 and
Balance Sheets as of March 31, 2005)
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. We have begun the initial construction phase by
engaging Lang Fang City Zhong Tai Construction and Installation Group Ltd. Co.
on February 4, 2005. The Construction was started on February 9 and expected to
be completed by June 8, 2005. (See Exhibit 10.8) The new facility is designed to
be two stories occupying 4,950 square meters.
Our Products
- ------------
We are capable of manufacturing equipment parts and components up to 35kg and
300mm in diameter or length with our existing equipments. Our products are
custom-made to each customer's specification. Currently, we have only accepted
job orders from two main customers, Beijing Sande Shang Mao Co., Ltd. ("BSS")
and Beijing Mai Ke Luo Machinery Co., Ltd. ("BMKL"). Both of these companies are
in the business of manufacturer and sales of food and beverage equipments.
32
The customer orders we receive are mainly for parts and components for CO2
regulators and dispensers for food and beverage equipments which is estimated to
constitute 80% of our gross revenue; CO2 regulators generate approximately 50%
our revenues and dispensers approximately 30%. The remaining 20% of revenues
come from various other beverage equipment parts we are asked to produce from
time to time. A dispenser releases liquids from a container in a controlled
manner.(i.e. from beer or soda kegs) We produce three types of dispensers, Wall
type, Flat type and Party-use, Wall Type Dispensers are used in conjunction with
a walk-in cooler system, which stores tubes connected with liquid containers
mounted directly through a wall. The beverages are dispensed at the same
temperature as it is stored in the walk-in. These dispensers are available with
a tin/nickel plated brass body or stainless steel body. . Flat Type Dispensers
are the standard form of dispensers for general purpose with slide-on engagement
and safe attach-on options for regular liquid containers. These dispensers are
manufactured in stainless steel. Party Type Dispensers include dispenser heads,
fonts and taps and can be used with or without a CO2 regulator. These types of
dispensers can be attached directly to a small beverage container (kegs) that
are generally used at special functions, parties, and at home. All of our
dispensers are equipped with automatic shut-off function for maximum user
safety. The CO2 regulator controls dispensing pressure, which enables user to
draw liquids from a container while carbonating the liquid instantly. A relief
valve is built into the regulator body for safety. The gas outlet contains a
shutoff valve, which allows the user to instantly turn off the pressure to the
liquid container, and a check valve, which prevents liquid from entering the gas
lines. Our dispensers are generally sold and marketed to bars and restaurants by
our customers.
As of the date of this report, relatively all of our sales revenues are from two
related customers, whom are also related parties. This dependence on a limited
amount of customers places us a financial risk. Should we loose one or both of
these customers without finding a new customer base, we may not have sufficient
revenues to continue operations. We hope to seek out a new customer base to
lessen the dependence on such a small amount of customers.
Although our manufacturing activities have been limited to the production of
regulators and dispensers thus far, we are capable of producing other metal
parts, such as valves, pipe fittings, and other equipment parts with existing
equipment and without additional effort or expense. At this time, it is our plan
to seek out additional customers and market our services to other industries. In
the next 12 months, we plan to market our products and services to potential
customers both in China and in the United States. We hope to seek potential
customer companies that require metal parts created using the investment casting
and machined process by utilizing Internet and facsimile marketing. Upon the
completion of the new AMLF factory, we will have increased production capacity
in order to meet the possible demands from future customers.
Raw Materials and Suppliers
- ---------------------------
The raw materials used in our current productions are stainless steel, carbon
steel, copper, aluminum and other types of alloys. We have established long-term
relationships with our key suppliers, which have resulted in timely delivery.
33
Yet, there are numerous alternative supply sources in case any of the current
preferred suppliers were to go out of business or change their pricing
structure.
Our major suppliers are listed in the following table:
Name of Supplier Location Type of Raw Material
Qing Huang Dao AnYan Metal Parts Producer Qing Huang Dao City, Heibei, Stainless Steels
Co., Ltd. China
Zhejiang Yong Shang Stainless Steel Co., Ltd. Wenzhou city, Zhejiang, China Stainless Steel Tubs
Shanghai Baihe HuaXinli Special Steel Shanghai, China Stainless Steel Sticks
Manufacturer Co., Ltd.
Beijing Shun Long Guang Da Stainless Steel Beijing, China Stainless Steel Sticks
Products Co., Ltd.
Luoyang Copper Processing Group Co., Ltd. Henan, China Cooper Sticks
Xinan Aluminum (Group) Co., Ltd. Chongqing, China Aluminum
Currently, we have relied on Yamazaki Mazak Corporation for the purchase of all
of our equipment. However, there are a number of other manufactures that produce
the machines we require, including Fadal Machining Centers, LLC, a Company of
ThyssenDrupp MetalCutting, a California company; and Okuma Corporation, a
Japanese company.
For three months ended March 31, 2005 and for the fiscal year ended December 31,
2004, we have purchased 89% and 74% of our raw materials respectively, from Qing
Huang Dao AnYan Metal Parts Producer Co., Ltd.
Our Strategies
- --------------
Our goal is to become a premier supplier of precision metal 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:
Our business objectives are to maintain current growth rate while expanding
customer base both domestically and to the international market. When
introducing our products and services to the international market, we hope to
take advantage of the low overhead costs and inexpensive labor available in
China based upon the location of our principal manufacturing facility in
Beijing, and our future facilities in Hebei, China. In the event we are
successful in attracting foreign customers, the close proximity of the factory
complex to the Tianjin sea port, one of the main seaports in China, should
34
provide us convenient transportation of our products to those foreign customers.
There are, however, limitations in having all our manufacturing facility in
China. There would be additional shipping, handling, and possible tariff costs
associate with potential overseas customers. This may make finding international
clients difficult as it would increase their overall costs.
Capitalize on, and leverage our manufacturing strength:
Our goal is to focus on manufacturing value-added products for larger customers
in China as well as overseas. In addition, as U.S. and European companies
establish their manufacturing facilities in China, we will seek to provide
precision metal component to these new companies. According to the CRS Issue of
Brief for Congress on China's Economic Conditions updated May 21, 2003, China's
trade and investment reforms and incentives led to a surge in foreign direct
investment (FDI), which has been a major source of China's capital growth.
Annual utilized FDI in China grew from $636 million in 1983 to nearly $53
billion in 2002. It is estimated that there are over 420,000 foreign-funded
enterprises in China, with a cumulative level of FDI of $448 billion. FDI in
China in 2002 grew by nearly 13%, an impressive figure considering that
worldwide FDI in developing countries fell by over 25%, according to the United
Nations Conference on Trade and Development. Analysts predict that FDI will
continue to pour into China as investment barriers are reduced under China's WTO
commitments and Chinese demand for imports continue to increase. The United
Nations estimates that in 2002, China replaced the United States as the world's
largest recipient of FDI. The Chinese government predicts that FDI will reach
over $100 billion by 2006. See "CRS Issue Brief for Congress - China's Economic
Conditions" Updated May 21, 2003 in regards to increase of U.S and European
Companies in China.
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. Management believes that our commitment to services
levels 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.
35
The factory complex in Beijing, China, at which we conducted all of our
manufacturing operations, was designed 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. We will be looking for similar casting companies that either
manufacturers larger parts in comparison to our existing ability, such as larger
automobile parts, or companies that would increase our production capacity or
expand our customer base. We will also consider companies that are up-stream
from us, such as stainless steel aluminum processing companies, or companies
down-stream from us, such as food and beverage equipment manufacturers or other
equipment manufacturers. . However, we do not consider strategic merger or
acquisition a necessary component of our growth strategy.
At this time, we plan on using cash (assuming either our future working capital
allows or we are able to obtain capital from debt or equity financing either in
the US or in China), or through the issuance of equity to make these
acquisitions. At this time, have not done any research on the possibility of
obtaining additional capital, and we don't have any existing viable source of
cash to make these acquisitions.
Should we be successful in making acquisitions, we may establish additional
sales and marketing, research and development, and manufacturing facilities.
According to the 38th Census of World Casting Production - 2003, the Chinese
metal fabrication industry is in a growth in tons of output while the number of
foundries have consolidated from 24,000 foundries in 1998 to 12,000 in 2003.
SOURCE: 38th Census of World Casting Production 2003, Chart: Casting Tonnage
Trends for each of the "Top 10" Casting-producing nations over the last six
years. (http://www.moderncasting.com/pdfs/census1204.pdf Page 26) Our strategy
is driven in part by this trend of 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.
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, such as stainless steel, aluminum processing
companies, or down-stream from us, such as food and beverage equipment
manufacturer or other equipment manufacturers. We have no definitive agreements
with respect to potential acquisitions and there is no assurance that we will be
36
successful in our efforts to make any such acquisitions. The management does not
consider the potential acquisition to be a necessary component of our growth
strategy.
Competition
- -----------
The metal casting industry is highly competitive in China. According to the
Perspective of China's Foundry Industry report of 1998, there were approximately
24,000 metal foundries and metal casting manufacturers in China, differing
widely either in technology level or in production scale. Source: Perspective of
China's Foundry Industry in Next Decade.
http://www.foundry-china.com/report/f-report02b.html In 2003, there were
approximately 12,000 metal foundries and metal casting manufacturers in China.
Source: 2004 Casting Census, by the World Foundrymen Organization.
(http://www.moderncasting.com/pdfs/census1204.pdf Page 1). We also compete with
many international companies. There are an estimated 2,950 metal casting
companies in the United States as of year 2002. Source: MetalCasting - Industry
of the Future 2002 Annual Report by U.S. Department of Energy, Energy Efficiency
and Renewable Energy. ( Page 10)
An example of one of our Chinese competitors is Beijing Hithertop Precision
Casting Co., Ltd. ("Hithertop"), with $14.5 million in sales,. Hithertop is a
privately owned high-tech export-oriented metal casting manufacturer. It
occupies a total plant area of 53,000m2. Hithertop is located in South-east
suburb of Beijing, 35km southeast off the Beijing International Airport and 75km
northwest of Tianjin International Seaport. Other than competing on the same
geographical area in the city of Beijing, Hitherop is competing with our metal
casting parts in the Food and Beverage industry as well as metal casting
components in other industries. .
An example of one of our foreign competitors is Timken Company ("Timken") a U.S
based Corporation, which is a leading global manufacturer of engineered metal
parts and a provider of related products and services with operations in 27
countries. The company reported record sales of $4.5 billion in 2004 and
employed approximately 26,000 at year-end. Timken has been competing with us in
China through its subsidiaries in Yantai and Wuxi, China. According to Timken's
2003 annual report, it is building up another plant in Suzhou, China. As a
result, our competitive advantage on low labor cost structure in China over
foreign competitors may be significantly diminished by Timken's presence in
Yantai, Wuxi and Suzhou. Timken also have far greater financial and other
resources available to them and possess extensive manufacturing, distribution
and marketing capabilities far greater than those we possess.
A majority of the customer orders we receive so far are for dispenser,
regulators and similar food and beverage equipment parts. We also compete with
other beverage equipment dispensing companies around the Globe.
37
An example of one of our foreign competitors is Lancer Corporation, which
designs, engineers, manufactures and markets fountain soft drink, beer and
citrus beverage dispensing systems, and other equipment for use in the
foodservice and beverage industry. Lancer is a vertically integrated
manufacturer, employing approximately 1,500 associates in the United States,
Mexico, Australia, New Zealand, and Far East, Western Europe and Russia. Lancer
competes its products in China via Lancer Hong Kong, and its authorized
distributors in Shanghai, China. The Company reported a sales of $124.2 million
in fiscal year 2004 and a net income of $10.1 million. Some of Lancer's
production lines are similar to products we have been manufacturing for our
customers. Lancer offer more variety in its production line and have far greater
financial and other resource, such as marketing and distribution, available to
them.
An example of one of our local competitor is Rising Instrument Co., Ltd, which
specializes in designing, researching, processing, manufacturing and selling all
kinds of pressure gauge, thermometer etc. Rising Instrument is located in
Ningbo, China. Their products include gas regulators and other equipment parts
that are used to control liquid pressure in dispensing systems. Rising is in the
same geographically and economic environment as we do and also enjoys the same
low labor cost. Rising competes with us in terms of gas regulators and offers
more variety than we do.
Risks Associated With Doing Business in the Peoples Republic of China
- ---------------------------------------------------------------------
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, 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.
We may also 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
38
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 will
not have material adverse effect on our business operations, financial condition
and results of operations.
Furthermore, 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.
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.
39
The majority of our revenues are denominated in Renminbi, while a portion of our
expenditures are denominated in the U.S. dollar. Currently fluctuations in
exchange rates, primarily those involving the U.S. dollar only has slight affect
on our costs and operating margins. Although we don't consider acquisition and
joint venture as an essential component to our growth strategy, should we enter
into such merger, acquisition or strategic joint ventures with any company
domiciled in the United States, our future revenue will be further affected.
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.
Government Regulation and Environmental Matters
- -----------------------------------------------
Environmental Matters
China adopted its Environmental Protection Law in 1989, and the State Council
and the State Environmental Protection Agency promulgate regulations as required
from time to time. The Environmental Protection Law addresses issues relating to
environmental quality, waste disposal and emissions, including air, water and
noise emissions. Environmental regulations have not had a material impact on our
results of operations. Our current production does not produce waste that
requires to be delivered to a waste disposal site approved by the local
government. We have not incurred any related cost. However, we expect that
environmental standards and their enforcement in China will, as in many other
countries, become more stringent over time, especially as technical advances
make achievement of higher standards more feasible.
We believe we are in compliance of this regulation and are not subject to
enforcement of these rules. However, if we are found to be non-compliant, or
should the Chinese government impose more stringent rules in terms of
environmental protection, or increase enforcement of the environmental
regulations, we may require increased expenditures to remain complaint of these
rules. The future expenditures could increase our cost of good sold as well as
affect our revenues.
PRC's Legal System
- ------------------
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
40
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, such as the tax
policy we presently are subject to (SEE FACTORS AFFECTING OPERATING RESULTS). 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.
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. Furthermore,
we have retained legal counsel in the PRC to assist us in maintaining
compliance. There can be no assurance, however, that we will be able to maintain
compliance 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, such as the Chinese government's specific
policies with respect to foreign investment, economic growth, inflation and the
availability of credit, particularly to the extent such current or future
conditions and policies affect the casting industries and markets in China, 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.
Legal Proceedings
- -----------------
There are presently no legal proceedings pending against the Company.
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.
41
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 ($3770 per month), management fee of $1884 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.
AMLF has land use rights to a total area of 30,291.6 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 October 8, 2004 to October 9, 2054. The land is
semi-developed in terms of readied access to supplies of water, electricity,
heat, natural gas and internet connections. (See Exhibit 10.3)
On Feb 4, 2005, we engaged Lang Fang City Zhong Tai Construction and
Installation Group Co., Ltd. To build a two story building for workshop and
office space for our subsidiary, American Metal Technology (Lang Fang) Co.,
Ltd.. The building will occupy a total of 4,952 square meters (approximately
53,303 square feet). The Construction begun on February 19, 2005 and is
scheduled to be complete by June 8, 2005. The total cost of construction is RMB
5,718,356 (approximately USD $691,457), of which, we have paid, RMB 1,500,000
(approximately USD $181,378).
(See Exhibit 10.8 )
Employees
- ---------
We currently have two part time employees employed directly by AMTG in our Los
Angeles office Our wholly owned subsidiary, Beijing Tong Yuan Heng Feng
Technology Co., Ltd currently has eighty full time employees.
42
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- --------------------------------------------------------------------------------
This prospectus contains forward-looking statements. 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") is in the business of manufacturing and sales of precision
investment casting and metal fabrication products in the People's Republic of
China ("China"). Our production involves implementation of investment casting
and machined process to produce precision equipment parts and components,
including dispenser, regulators, 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. 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 plan to interview and recruit at least one accounting
and operation management professional who has experience in overseeing
international operations. We plan to negotiate for stock compensation with these
professionals. However, if we are unable to recruit these professionals with a
stock based compensation, we may need to allocate $40,000 in annual salary for
an accounting or operation professional. Upon the completion of first phase
construction of AMLF factory in June, we hope to begin developing distribution
channels for BJTY products in the United States, by contacting sales
representatives for metal casting products, participation in related trade
shows, and utilizing facsimile and internet marketing to create exposure of our
products and services. We plan to target companies similar to BST and BSS which
43
are in the business of manufacturing and sales of beverage equipment and parts.
We also plan to target valuable venture opportunities in metal casting and
fabrication industries, such as any opportunities to acquire or create strategic
relationships with companies with similar production line in the United States.
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.
- -----------------------------------------------------------------------
Upon completion of the first phase of the AMLF factory, BJTY plans to move the
current operation to the new factory. The initial phase of construction is
planned to be completed by June, 2005. The lease agreement for BJTY's current
operation facility expires on July 15, 2005. We will evaluate on the feasibility
of moving BJTY's operation to the new factory by evaluating the construction
progress of AMLF by May 2005. In the event the new factory is not likely to be
completed on time, we plan to extend our current lease agreement with BST. Based
on the lease agreement, it's likely that we will be able to extend the lease
agreement. We believe we will 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 includes the construction and development of workshop
and office space with a total area of 4,950 square meters (53,281 square feet),
which we believe will be completed by June 2005. We estimate the capital
requirement to complete the initial phase is $900,000. We planned and have begun
implementing the first phase of construction in following steps: 1) complete
blue-prints which has been accomplished; 2) engaging a construction company by
end of February, 2005, 3) began construction by March 2005; 4) complete initial
phase by end of June 2005. On February 4, 2005, we engaged a construction
company, Lang Fang City Zhong Tai Construction and Installation Group Ltd. Co.
to build a two story workshop and office building of 4,950 square meters.
Pursuant to the contract, the construction is expected to be completed by June
8, 2005. As of the date of this report, the construction team has already
completed with foundation and frame work of the factory building. We expect the
construction to be completed by the planned date. The construction contract
amount is RMB 5,718,356 (USD $691,457), of which, we have paid RMB 1,500,000
(USD$181,378), with the rest due by _June 2005. (See Exhibit 10.8) We are able
to allocate the cost of construction from the long term no interest loan we
obtained from BST. This loan shall be sufficient for us to complete the initial
construction phase. Should we need additional capital to complete this phase, we
plan to obtain additional loans from BST or other local bank or financial
agency. Upon completion of the initial construction phase, we plan to install 14
units of Mazak CNC Turning Center, which will cost an estimated $680,000. Upon
completion of this installation, we'll have a monthly capacity of 38.5 tons per
month from these 14 units. By year end of 2006, we hope to complete phase two of
the construction of this new facility. The second phase shall include the
44
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. We do not plan to begin phase two of our expansion until we have
secured the funds necessary to fully fund the project.
Results of Operations
Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004.
For the three months ended March 31, 2005, we reported a net income of $256,059
compared to a net income of $177,695 for the three months ended March 31, 2004.
Revenues. Our recurring revenues are generated principally from sales of
regulators and dispensers for food and beverage equipments. Revenues in the
three months ended March 31, 2005 were $996,094, an increase of $150,287, or
17.8%, from $845,807 for the three months ended March 31, 2004. The increase was
due to an increase in production capacity. All of our revenues come from sales
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 three months ended March 31, 2005, the cost of sales
was $677,598, an increase of $34,979, or 5.44%, from $642,619 for the three
months ended March 31, 2004. The increase was due to an overall increase in
revenue. However, the cost of sales as a percentage of revenue decreased from
76% for the three months ended March 31, 2004 to 68% for the three months ended
March 31, 2005. 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, as raw materials comprised 93% and
92% of cost of sales for the three months ended March 31, 2005 and 2004
respectively. Our management has carefully and continuously inspected each
production cycle in the investment casting and machining process. Based on this
inspection, we were able to revise the design of wax mold in such a way that
less materials was needed for producing the final product while remaining
satisfactory to both our clients and our qualification standards. By doing so,
we successfully lowered the consumption rate of raw materials.
Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization for the three months ended March 31, 2005 was $3,001, an increase
of $2,475, or 470%, from $526_for the three months ended March 31, 2004. The
45
increase was due to the additional machinery units purchased since March 31,
2004 and the amortization of land use rights
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 three months ended March 31, 2005 were
$58,354, an increase of $33,239, or 132%, from $25,115 for the three months
ended March 31, 2004. The increase was due primarily to salaries paid to
additional staff added to administrative functions. General and administrative
expenses as a percentage of revenue increased from 3% for the three months ended
March 31, 2004 to 5,86% for the three months ended March 31, 2005.
Gross Profit. Gross profit for the three months ended March 31, 2005 was
$318,496, an increase of $115,308, or 56.7%, from $203,188 for the three months
ended March 31, 2004. Gross profit expressed as a percentage of revenue
increased from 24% for three months ended March 31, 2004 to 32% for three months
ended March 31, 2005.
Other Income Expense. Other income for the three months ended March 31,
2005 was ($1,373), an increase of $1,348, or 5392%, from $25 for the three
months ended March 31, 2004. Other income includes Other income & expense
includes bank commission charge, exchange gain or loss and purchasing invoice
fees. The expenses raised as the number of bank transaction grow in Year 2005.
See Certain Relationships and Related Transactions section for more information.
Net Income. Net income for the nine months ended March 31, 2005 was
$256,059, an increase of $78,384, or 44%, from $177,695 for the three months
ended March 31, 2004.
Fiscal Year December 31, 2004 Compared to Fiscal Year December 31, 2003.
For the fiscal year ended December 31, 2004, we reported a net income of
$863,379 compared to a net income of $475,407 for the year ended December 31,
2003.
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, 2004 were $4.08 million, an increase of
$1,598,557, or 64.4%, from $2.48 million in the fiscal year ended December 31,
2003. The increase was due primarily to an increase of production capacity in
year 2004. In 2003, we have increased our production capacity from 448 tons to
720 tons per annum by purchasing 8 units of CNC Mazak lathes in addition to the
16 units of Mazak lathes in place as of year end 2003. 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. Our primary cost of sales in the fiscal year ended December
31, 2004 were $3.15 million, an increase of $1,222,869 or 63.3%, from $1.93
million in the fiscal year ended December 31, 2003. The increase was due to the
overall increase in revenue.
46
Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization in the fiscal year ended December 31, 2004 was $7,910, an increase
of $4,812, or 155%, from $3,098 in the fiscal year ended December 31, 2003. The
increase was due to the purchase of 8 additional machine units.
General and Administrative Expenses. General and administrative expenses in
the fiscal year ended December 31, 2004 were $64,213, a decrease of $10,375, or
13.9%, from $74,588 in the fiscal year ended December 31, 2002. General and
administrative expenses as a percentage of revenue decreased from 2.99% in
fiscal 2003 to 1.57% during fiscal 2004. The decrease was primarily due the
employment of two general staffs for similar functions in replacement of two
higher-paid executives. We have found booking errors in 2003 which caused
general and administrative expenses in 2003 to be undervalued by $9,742 and
costs of sale in 2003 to be overvalued by the same amount of $9,742. Such errors
have been corrected in the Consolidated Statement of Operations in 2003 for
comparison purpose.
Gross Profit. Gross profit in the fiscal year ended December 31, 2004 was
$933,907, an increase of $382,538, or 41%, from $551,369 in the fiscal year
ended December 31, 2003. Gross profit expressed as a percentage of revenue
increased from 22.2% in fiscal 2002 to 22.8% during fiscal 2004.
Liquidity and Capital Resources.
Liquidity is a measure of an entity's ability to meet potential cash
requirements, including planned capital expenditures. We have historically met
our capital requirements through cash flows from operations and debt financing
with local financial institutions.
Our operating activities provided approximately $256,059 in Net Income for the
three months ended March 31, 2005. Cash as of March 31, 2005 approximated
$545,791 and working capital was $1,085,502. This compares to working capital of
$877,162 and a cash balance of $212,842 at December 31, 2004.
Net cash provided by operating activities totaled $416,239 for the three months
ended March 31, 2005, compared to $258,150 during the three months ended March
31, 2004.
The cash flows used in investing activities were $966,762 for the twelve months
ended December 31, 2004, compared to $617,792" for the same period in 2003. The
increase was mainly from the addition in plant and machinery and the acquisition
of a land use right from government for manufacturing purpose.
Cash flows used in investing activities were $390,000 for the three months ended
March 31, 2005, compared to none used in investing activities in the three
months ended March 31, 2004.
As of March 31, 2005, we had working capital of $1,085,502. We believe that
existing cash balances, cash generated by operating activities, and funds
available under our cash flow from operation and cash on hand, which includes
the two long term loans of $990,000 will be sufficient to finance our present
level of operating activities for at least the next 12 months. Since August
47
2004, we've completed acquisition of BJTY, established subsidiary, AMLF and
acquired the land-use-rights to a total area of 30,291.3 square meters
(approximately 326,053 square feet) for the purpose of expanding BJTY operating
facilities. Followings are our operating plans, cash required for each entity to
fully implement the plan, and source of capitals.
We plan to maintain current course of operation of BJTY. Upon completion of the
initial construction phase of AMLF factory, we plan to move BJTY operations to
this new location in June 2005. We will incur costs in terms of transportation
and machinery installation. However, we do not expect such costs would have a
material impact on our revenue for the next 12 months. Should there be any delay
of the completion of the first phase construction of AMLF factory, we plan to
extend the lease of our current factory facility with similar rental amount of
$51,849 per annum. Should we also fail to renew this lease, we will require
additional capital in leasing and moving to another location. 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.
The cash requirements for AMTG are mostly administrative. We expect our cash
requirement for the next 12 months to be approximately $235,010.71, which
includes $85,010.71 estimated for the cost of this offering. We estimate that we
will require $60,000 to cover the legal, accounting, and investor relations
costs generally applicable to a publicly traded company. Furthermore, $40,000
will cover general costs associated with our home office such as the office
lease, telephone, fax, mailing costs, as well as basic marketing costs to
develop sales channel in the United States. $40,000 will cover any potential
cost in hiring an accounting or management professional. $10,000 will be
allocated to costs associated with maintaining a website, usage of telephone
calls, fax and internet. We do not expect significant cash requirement in the
areas of advertising and marketing. We believe that projected revenues from our
subsidiary, Beijing Tong Yuan Heng Feng Technology Co., Ltd., will be sufficient
to fund our operations in the United States.
AMLF will require $900,000 to complete its initial phase of construction. We
have obtained two long term no interest loans from a related party company, BST,
for a total of $960,000, which includes $600,000 loan in September 2004 and
$390,000 loan on March 15, 2005. (See Exhibits 10.5 and 10.7) We plan to
allocate these funds in construction of factory and machinery installation at
AMLF facility. On Feb 4, 2005, we engaged Lang Fang City Zhong Tai Construction
and Installation Group Co., Ltd. To build a two story building for workshop and
office space for our subsidiary, American Metal Technology (Lang Fang) Co.,
Ltd.. The building will occupy a total of 4,952 square meters (approximately
53,303 square feet). The Construction begun on February 19, 2005 and is
scheduled to complete by June 8, 2005. The total cost of construction is RMB
5,718,356 (approximately USD $691,457), of which, we have paid, RMB 1,500,000
(approximately USD $181,378)
We 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
48
set aside a portion of its net income each year to fund certain reserve funds.
These reserves are not distributable as cash dividends.
In accordance with applicable requirements of the PRC Company Law, we may only
distribute dividends after we have made allowances for:
o previous years' accumulated losses, if any;
o allocation to the statutory surplus reserve fund and public welfare
fund; and
o allocation to a discretionary common reserve fund, if approved by our
shareholders and after allocation is made to the statutory surplus
fund and the statutory public welfare fund.
The minimum aggregate allocation to the statutory surplus reserve fund each year
is 10% of our net profit determined in accordance with PRC GAAP. The Company
will no longer be required to make allocations to the statutory surplus reserve
fund once the aggregate amount of such reserve exceeds 50% of the registered
capital of the Company, which was $120,773 as of December 31, 2003. At this
time, we have a surplus reserve equal to 35% of our registered capital. Since
the appropriated reserve amount in 2003 has already reached the threshold
amount, no further reserve is to be appropriate in 2004. The minimum allocation
to the statutory public welfare fund each year is 5% of the after tax net income
determined in accordance with the PRC GAAP. Under PRC law, our distributable
earnings will be equal to our net profit, as determined in accordance with PRC
GAAP or US GAAP whichever is lower, less allocations to the statutory and
discretionary reserve funds. If we record no net profit for the year, we may not
distribute dividends for that year.
In addition, we will endeavor to acquire the desired additional working capital
through bank loans or the potential sale of our securities through private
offerings. However, we cannot assure you that additional financing will be
available on terms favorable to us, or at all.
Capital Expenditures and Commitments
- ------------------------------------
At September 30, 2004, we had a long term interest free loan of $600,000 due to
a related party, which maturation is December 31, 2005 with rights to apply for
an extension. May 1, 2005, both AMTG and BST entered into an amendment to the
loan agreement of $600,000 dated August 15, 2004 to extend the loan period to
December 31, 2006.
(See Exhibit 10.6)
At March 15, 2005, we were able to borrow another long term interest free loan
of $390,000 from the same related party, which maturation is January 31, 2006
with rights to apply for an extension. (See Exhibit 10.7)
See Certain Relationships and Related Party Transactions section for more
information.
Research and Development
- ------------------------
Management has not and do not plan to engage into any Research and Development
at this stage.
49
Off-Balance Sheet Arrangements
- ------------------------------
We had no off-balance sheet arrangements or guarantees of third party
obligations at September 30, 2004.
Inflation
- ---------
We believe that inflation has not had a significant impact on our operations
since inception.
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.
Principles of consolidation - The accompanying consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States ("US GAAP"). All significant intercompany balances and
transactions have been eliminated in consolidation.
Revenue recognition - In accordance with Staff Accounting Bulletin No. 104 (SAB
104), the Company recognizes revenue from the sale of metal parts and components
at the time of delivery to its primary customers who are also the end users of
the products, when title to the products transfers, the customer bears the risk
of loss and the price is determinable. The Company records sales net of
estimated returns and allowances. In 2004, the Company has no sales return and
allowances policies being set up. There are no product warranties for metal
parts and components. Sales returns and allowances for defected products are
treated as either cost of sales or claims to supplier for reimbursements
depending on technical appraisal reports and purchase contracts signed with
suppliers. In 2003 and 2004, all defected products were fully reimbursed by
suppliers.
50
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.
51
FACTORS AFFECTING OPERATING RESULTS
Our results of operations and the period-to-period comparability of our
financial results are affected by a number of external factors, including
changes in the prices of raw materials, casting products, and chemical products
and fluctuations in exchange rates and interest rates.
SARS. In March 2003, several countries, including China, experienced an
outbreak of a new and highly contagious form of atypical pneumonia now known as
"severe acute respiratory syndrome" or "SARS." The severity of the outbreak in
certain municipalities, such as Beijing, and provinces, such as Guangdong
Province, has affected general commercial activity. While the long-term impact
of the SARS outbreak is unclear at this time, the prolonged existence of SARS
could have a negative impact on the PRC economy and, in turn, have a material
adverse effect on our results of operations.
CHINA ECONOMY AND POLITICAL SITUATION. The PRC government underwent
substantial reforms after the National People's Congress meeting in March 2003.
The PRC government has reiterated its policy of furthering reforms in the
socialist market economy. No assurance can be given that these changes will not
have an adverse effect on business conditions in China generally or on our
business in particular.
FAVORABLE TAX POLICY MAY 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. Currently, our subsidiaries
are being registered as a new and high technology enterprise and are entitled to
full exemption from income tax for three years beginning from the first year we
become profitable, which was 2002. We will also enjoy a 50% income tax reduction
for the subsequent three years. If China changes its policy and requires us to
submit income tax, the current rate is 33% of Income from Operations before
Taxes. In 2004, we had $869,819 for income from Operations before income taxes.
If we were to submit income tax, we will need to submit $287,040. In 2004, we
had net cash from operations of $192,241. The income tax will affect our cash
flow by $74,198. This amount will not affect our normal course of operation.
However, it might affect our operation plans, such as purchasing machinery or
constructions on our new factory facility.
CERTAIN GOVERNMENT AND ENVIRONMENTAL REGULATIONS MAY CHANGE. China adopted
its Environmental Protection Law in 1989, and the State Council and the State
Environmental Protection Agency promulgate regulations as required from time to
time. The Environmental Protection Law addresses issues relating to
environmental quality, waste disposal and emissions, including air, water and
noise emissions. Environmental regulations have not had a material impact on our
results of operations. We believe we are in compliance of this regulation and
are not subject to enforcement of these rules. However, if we are found to be
non-compliant, or should the Chinese government impose more stringent rules in
terms of environmental protection, or increase enforcement of environmental
regulations, we may require increased expenditures to remain complaint of these
52
rules. The future expenditure could increase our cost of good sold as well as
affect our revenues.
DEPENDENCE ON RELATED CUSTOMERS. Currently we derive relatively all of our
revenues from two customers, BST and BKML, which are related parties. SEE
CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS). Our success depends heavily on
the purchases made by these two customers. Currently, we are the only party
supplying these two customers with dispensers and regulators. The success of
these two related customers' operations and purchasing ability would affect our
future operating results. It is management's opinion that BST and BKML will
increase their orders as our production ability expands with the new factory.
Upon completion of our new factory, we will seek new customers. However, if
there's a decrease on the existing purchasing orders from our current customers,
or should we fail to obtain new customers, our operating results may be
materially affected.
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 an
active 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
53
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.
In the likely event that our shares are deemed to be "penny stocks", our shares
will be covered by Section 15(g) of the Securities Exchange Act of 1934, as
amended, and Rules 15g-1 through 15g-6 promulgated thereunder, which impose
additional sales practice requirements on broker-dealers who sell our securities
to persons other than established customers and accredited investors. Rule 15g-2
declares unlawful any broker-dealer transactions in pennystocks unless the
broker-dealer has first provided to the customer a standardized disclosure
document. Rule 15g-3 provides that it is unlawful for a broker-dealer to engage
in a penny stock transaction unless the broker-dealer first discloses and
subsequently confirms to the customer the current quotation prices or similar
market information concerning the penny stock in question. Rule 15g-4 prohibits
broker-dealers from completing penny stock transactions for a customer unless
the broker-dealer first discloses to the customer the amount of compensation or
other remuneration received as a result of the penny stock transaction. Rule
15g-5 requires that a broker-dealer executing a penny stock transaction, other
than one exempt under Rule 15g-1, disclose to its customer, at the time of or
prior to the transaction, information about the sales person's compensation.
Shares Eligible for Future Sale
- -------------------------------
Upon effectiveness of this registration statement and the subsequent
distribution to the BSS and BST shareholders, there will be 41 holders of our
common stock. 3,328,630 shares of common stock being registered for resale in
this offering will be freely tradable without restrictions under the Securities
Act of 1933.
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. At this time, there are
a total of 1,000,000 shares held by 3 shareholders that may be eligible for sale
under Rule 144. Upon distribution of certain shares to affiliates of AMTG
pursuant to this prospectus, there will be additional 5,671,370 shares of AMTG
that will be eligible for resale under Rule 144 following the one year
anniversary date of their distribution.
54
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.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON
ACCOUNTING AND FINANCIAL DISCLOSURE
On March 04, 2005_, the Company dismissed Jimmy C.H. Cheung & Co, Certified
Public Accountants, as it's independent accountants pursuant to a vote by the
Board of Directors.
The reports of Jimmy C.H. Cheung & Co, Certified Public Accountants, on the
Company's and Subsidiaries audited financial statements for the fiscal year
ended 2003 did not contain an adverse opinion or a disclaimer of opinion nor
were the statements qualified or modified as to uncertainty, audit scope, or
accounting principles.
From the date of engagement to date of dismissal, March 4, 2005, the Company and
Jimmy C.H. Cheung & Co, Certified Public Accountants have not, in connection
with the audit of the Company's and Subsidiaries financial statements for the
fiscal year ended 2003, had any disagreements on any matter of accounting
principles or practices, financial statement disclosures, or auditing scope or
procedures, which disagreement, if not resolved to Jimmy C.H. Cheung & Co,
Certified Public Accountants, would have caused Jimmy C.H. Cheung & Co,
Certified Public Accountants to make reference to the subject matter of the
disagreement in connection with its reports.
(See Exhibit 16.1)
55
The Registrant engaged Tin Wha CPAs, Certified Public Accountants as the
Company's auditors on March 5, 2005. The Registrant nor its subsidiaries have
consulted with Tin Wha CPAs, Certified Public Accountants during the past two
fiscal years concerning the application of accounting principles or any issues
relating to accounting, auditing or financial reporting.
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"). During the fiscal years ended December 31,
2002, 2003 and 2004, BJTY derived 100%, 99.78% and 99.91% of its revenue from
these two related corporations. 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$2,480,890 in 2003 and 4,079,447 in 2004 , and $996,094
for three months ended March 31, 2005, which are 100%, 99.78%, 99,.91% and 100%
respectively.
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 of rent specified in the lease
agreement is $51,849, which includes rent of $45,251 per annum ($3770 per
month), management fee of $1884 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) As of December 31, 2004 the Company has paid rent of $34,934 to BST.
Loans from Related Parties
- --------------------------
On August 15, 2004, AMTG 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, subsidiary of AMTG. This loan is
unsecured, interest free and is repayable in December 2005. (See Exhibit 10.5)
On May 1, 2005, both AMTG and BST entered into an amendment to the Loan
agreement. As a result, the loan is now payable in December 2006. (See Exhibit
10.6)
On March 15, 2005, AMTG obtained a loan of $390,000 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 2006. (See Exhibit 10.7)
56
Shared Management Expenses
- --------------------------
For the three months ended March 31, 2005 Consolidated (unaudited) and for the
three months ended March 31, 2004 3 (unaudited), BJTY incurred costs in the
amounts of $11,232, and $56,160 respectively for services provided by certain
management employees of BST on behalf of BJTY. Such costs were charged on an
actual incurred pro-rated on estimated time spent basis.
For the three months ended March 31, 2005 consolidated (unaudited) and for the
three months ended March 31, 2004 (unaudited), BJTY owed BST $127,295, $116,063
respectively for shared management expenses.
Loans Made to Related Parties
- -----------------------------
BJTY had advanced funds amounting to $182,428 to BST, a related company owned as
to 41.27% by above stated officers and directors of BJTY, as of March 31, 2005
as a short-term, unsecured loan free of interest payment. This loan is expected
to be fully paid by December 31, 2005.
Receivables
- -----------
BJTY had advanced trade receivables amounting to $36,062 to BMKL, a related
party 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, as of December 31,
2004. The amount was fully received in 2004.
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.
57
FINANCIAL STATEMENTS
AMERICAN METAL TECHNOLOGY GROUP
CONSOLIDATED FINANCIAL STATEMENTS
AS OF March 31,2005
(UNAUDITED)
AMTG: Quarterly Report- As of March 31, 2005
- --------------------------------------------------------------------------------
AMERICAN METAL TECHNOLOGY GROUP
CONTENTS
Pages
Balance Sheets
As of March 31, 2005 Consolidated (Unaudited) and December 31, 2004 2
Statements of Operations for the three months ended March 31, 2005
Consolidated and 2004 (Unaudited) 3
Statements of Stockholders' Equity
for the three months ended March 31, 2005 Consolidated and 2004
(Unaudited) 4
Statements of Cash flows for the three months ended March 31, 2005
Consolidated (Unaudited) 5
Notes to Consolidated Financial Statement 6- 13
1
AMTG: Quarterly Report- As of March 31, 2005
- --------------------------------------------------------------------------------
AMERICAN METAL TECHNOLOGY GROUP
Balance Sheets
As of March 31, 2005 Consolidated (Unaudited)
Notes March 31,2005 December 31
Consolidated 2004
Fiscal Year (Unaudited)
US$ US$
Assets
Current assets:
Cash and cash equivalents 545,791 212,842
Advanced to suppliers 2 598,866 285,030
Inventories 3 319,498 430,249
Due from related parties 10 725,906 126,679
Other current assets 4 13,773 64,403
Total current assets 2,203,834 1,119,203
Property, plant & equipment--net 5 2,115,913 1,678,674
Total assets 4,319,747 2,797,877
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 123,377 103,937
Other payable and accrued expenses 6 16,774 19,772
Other tax payables 13,277 335
Due to related parties 10 130,237 117,997
Advanced from customers 834,657
Total current liabilities 1,118,322 242,041
Long-term Liabilities: 8 990,000 600,000
Total Liabilities 2,108,322 842,041
Stockholders' equity:
Common stock, $0.001 par value, 20,000,000 shares authorized, 10,000 10,000
10,000,000 shares issued and outstanding 9
Additional paid-in capital 9 232,905 232,905
Retained earnings
Unappropriated 9 1,841,779 1,585,720
Appropriated 9 127,472 127,472
Accumulated other comprehensive income (loss) (731) (261)
Total stockholders' equity 2,211,425 1,955,836
Total liabilities and stockholders' equity 4,319,747 2,797,877
See accompanying notes to the consolidated financial statements
2
AMTG: Quarterly Report- As of March 31, 2005
- --------------------------------------------------------------------------------
AMERICAN METAL TECHNOLOGY GROUP
Statement of Operations
for the three months ended March 31, 2005 and 2004 Consolidated (Unaudited)
2005 2004
Notes Consolidated Consolidated
Fiscal Year (Unaudited) (Unaudited)
US$ US$
Net sales
To related parties 996,094 845,807
Other - -
996,094 845,807
Cost of sales 11 677,598 642,619
Gross profit 318,496 203,188
Operating expenses:
General and administrative expenses 58,354 25,115
Depreciation and amortization 3,001 526
Total operating expenses 61,355 25,641
Operating income 257,141 177,547
Interest income 291 173
Other (expense) income--net (1,373) (25)
Income before income taxes 256,059 177,695
Income taxes - -
Net income 256,059 177,695
Other comprehensive income (loss), net of taxes:
Currency translation adjustment (470) -
Total comprehensive income 255,589 177,695
Earnings per share:
Basic and diluted 0.03 0.02
Weighted average common shares outstanding:
Basic and diluted 10,000,000 10,000,000
See accompanying notes to the consolidated financial statements
3
AMTG: Quarterly Report- As of March 31, 2005
- --------------------------------------------------------------------------------
AMERICAN METAL TECHNOLOGY GROUP
Statements of Stockholders' Equity
for the three months ended March 31, 2005 Consolidated (Unaudited)
Accumulated
Common Additional Unappropriated Appropriated other Total
stock Par paid-in retained retained comprehensive stockholders'
Shares value capital earnings earning income equity
------ ---- -------- -------- ------- ------ ------
Balance, December 31,
2002 241,546 318,245 56,161 615,952
Net income 475,407 475,407
Transfer to statutory
and staff welfare
reserves -71,311 71,311
Balance, December 31,
2003 241,546 722,341 127,472 1,091,359
Common Stock issued
for the Acquisition of
BJTY 9,000,000 9,000 -9,000
Stock issued during the
year 1,000,000 1,000 359 1,359
Net income 863,379 863,379
Transfer to statutory
and staff welfare
reserves
Foreign currency
exchange -261 -261
translation adjustment 0
Balance, December 31,
2004 10,000 232,905 1,585,720 127,472 -261 1,955,836
Net income 256,059
Transfer to statutory
and staff welfare
reserves
Foreign currency
exchange -470 -470
translation adjustment
Balance, 3,31, 2005 10,000 232,905 1,841,779 127,472 -731 2,211,425
See accompanying notes to the consolidated financial statements
4
AMTG: Quarterly Report- As of March 31, 2005
- --------------------------------------------------------------------------------
AMERICAN METAL TECHNOLOGY GROUP
Statements of Cash Flow
for the three months ended March 31, 2005 and 2004 Consolidated (Unaudited)
Notes Consolidated Consolidated
Fiscal Year 2005(Unaudited) 2004(Unaudited)
US$ US$
Operating Activities:
Net income 256,059 177,695
Non-cash items affecting net income:
Depreciation and amortization 5 35,581 15,674
Changes in operating assets and liabilities, net of effects of
acquisitions:
Advances to suppliers (313,836) (129,329)
Other current assets 177,309 (4,842)
Inventories 110,751 23,953
Due from related parties (725,906) 36,062
Accounts payable 19,440 (21,018)
Other payable and accrued expenses (2,107) 21,582
Advances from a customer 833,766 120,773
Other taxes payable 12,942 6,368
Due to related parties 12,240 11,232
Net cash from operating activities 416,239 258,150
Investing Activities:
Additions to property, plant and equipment 5 (472,820) (124,695)
Proceeds from sale of property, plant & equipment
Net cash used in investing activities (472,820) (124,695)
Financing Activities:
Due to related parties 390,000 -
Due from a stockholder - -
Proceeds from the issuance of common stock - -
Net cash from (used in) financing activities 390,000 -
Effect of exchange rate changes on cash and cash equivalents (470) -
Net increase in cash and cash equivalents 332,949 133,455
Cash and cash equivalents:
Beginning of year 212,842 99,225
End of year 545,791 232,680
See accompanying notes to the consolidated financial statements
5
AMTG: Quarterly Report- As of March 31, 2005
- --------------------------------------------------------------------------------
AMERICAN METAL TECHNOLOGY GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of March 31, 2005 Consolidated (Unaudited)
1. Nature of Operations and Summary of Significant Accounting Policies
Description of business
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 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 first quarter of 2005 (consolidated) and 2004 financial
statements include the accounts of AMTG and its 100% owned subsidiary AMLF and
BJTY. All significant inter-company balances and transactions have been
eliminated in consolidation.
Use of estimates
The preparation of the consolidated financial statements in conformity with US
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities. Actual results could differ
from these estimates.
Cash and cash equivalents
6
AMTG: Quarterly Report- As of March 31, 2005
- --------------------------------------------------------------------------------
For purpose of the statements of cash flows, cash and cash equivalents include
cash on hand and demand deposits with banks with maturities of less than three
months.
Inventories
Inventories are stated at the lower of cost or market value. The cost is
determined on a first-in, first-out method. The Company provided inventory
allowances based on excess and obsolete inventories determined principally by
customer demand.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and amortization. Cost represents the purchase price of the asset and other
costs incurred to bring the asset into existing use. Depreciation is provided
using the straight-line method over the estimated useful lives.
Property, equipment and other long-lived assets are evaluated for impairment
whenever events or conditions indicate that the carrying value of an asset may
not be recoverable based on expected undiscounted cash flows related to the
asset. There were no impairment losses recorded in 2005
The Company uses the following useful lives for depreciation and amortization
purposes:
Land use rights over the land use right period of 50 years
Plant and machinery 10 years
Motor vehicles 6 years
Furniture, fixtures and equipment 5 years
No depreciation is provided for construction in progress until they are
completed and put in use. Interest and other costs on borrowings to finance the
construction of fixed assets are capitalized during the period of time that is
required to complete and prepare the property for its intended use.
The Company accounts for fixed assets in accordance with Statement of Financial
Accounting Standard ("SFAS") No.121, "Accounting for the Impairment of
Long-lived Assets to be Disposed of" which requires impairment loss to be
recognized on the long-lived assets when the sum of expected future cash flows
(undiscounted and without interest charges) resulted from the use of the asset
and its eventual disposition is less than the carrying amount of the asset.
Otherwise, an impairment loss is not recognized. Measurement of the impairment
loss for long-lived assets is based on the fair value of the assets.
Gains and losses on disposal of property, plant and equipment are determined by
reference to their carrying amounts.
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
7
AMTG: Quarterly Report- As of March 31, 2005
- --------------------------------------------------------------------------------
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.
Revenue recognition
The Company recognizes revenue from the sale of metal parts and components at
the time of delivery to its primary customers who are also the end users of the
products, when title to the products transfers, the customer bears the risk of
loss and the price is determinable. The Company records sales net of estimated
returns and allowances.
There are no product warranties for metal parts and components. Sales returns
and allowances for defected products are treated as either cost of sales or
claims to suppliers for reimbursements depending on technical appraisal reports
and purchase contracts signed with suppliers. In 2004 and first quarter of
2005, all defected products were fully reimbursed by suppliers.
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.
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).
8
AMTG: Quarterly Report- As of March 31, 2005
- --------------------------------------------------------------------------------
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.
Segments
The Company operates in only one segment; therefore segment disclosure is not
presented.
New accounting developments
There is no new accounting pronouncement in these three months.
2. Advances to suppliers
Advances to suppliers at March 31, 2005 and December 31, 2004 represent advance
payments against raw materials on order. All advances were subsequently deducted
from the final payments due to the suppliers and no provision against losses was
incurred by the Company.
3. Inventory
Inventory at March 31, 2005 Consolidated (unaudited) and December 31, 2004
consist of the following:
At March 31,2005 At December 31, 2004
(Unaudited)
US$ US$
Inventory consists of the following:
Raw materials 59,316 294,646
Work-in-progress 178,949 54,370
Finished goods 81,233 81,233
------------------------ --------------------------
319,498 430,249
======================== ==========================
For the three months ended March 31, 2005 Consolidated (unaudited) and December
31, 2004 no provision for obsolete inventories was recorded by the Company.
4. Other current assets
Other current assets at March 31, 2005 Consolidated and December 31, 2004
consist of the following:
9
AMTG: Quarterly Report- As of March 31, 2005
- --------------------------------------------------------------------------------
At March 31,2005 At December 31, 2004
(Unaudited)
US$ US$
Other receivables 409 44,506
Prepaid expenses 13,364 15,361
Value-added tax receivables - 4,535
------------------------ --------------------------
13,773 64,402
======================== ==========================
5. Property, plant and equipment
The following is a summary of property, plant and equipment at March 31, 2005
Consolidated and December 31, 2004:
At March 31,2005 At December 31, 2004
(Unaudited)
US$ US$
Plant and machinery 1,449,473 1,253,276
Motor vehicles - -
Furniture, fixtures and equipment 6,292 5,907
Land use right 548,756 548,756
Less: accumulated depreciation 167,557 131,976
Net value of fixed assets 1,836,964 1,675,963
Construction in process 278,949 2,711
------------------------ ------------------------
Total fixed assets 2,115,913 1,678,674
======================== ========================
Depreciation expense for the three months ended March 31, 2005 and for the three
months ended March 31, 2004 was $35,581 and $15,674 respectively.
The Company has purchased $196,197 of plant and machinery and $385 of Furniture,
fixture and equipment in these three months. Also $276,238 which accounted in
construction in process has been used to build new factory. So, total cash used
in additions to property, plant and equipment is $472,820.
6. Other payables and accrued liabilities
Other payables and accrued liabilities at March 31, 2005 Consolidated
(unaudited) and December 31, 2004 consist of the following:
At March 31,2005 At December 31, 2004
(Unaudited)
US$ US$
Education surtaxes payable
Employees education accrued expenses 2,304 1,796
Accrued liabilities 11,232 16,077
Advanced from customer 891
Other payables 3,238 1,008
------------------------ ------------------------
16,774 19,772
======================== ========================
10
AMTG: Quarterly Report- As of March 31, 2005
- --------------------------------------------------------------------------------
7. 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 contribution paid for the three months ended
March 31, 2005and 2004 were $1,285 and $326 respectively. 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.
8. Long-term loan
The Company has $990,000 zero-interest long-term loan as of March 31, 2005. We
used 1-3 year short-term loan rate of 5.49% for entities in China to compute the
imputed interest expenses. As of March 31, 2005, the imputed interest expense of
$13,104 has been capitalized in land use right and depreciated with the assets
accordingly.
9. Stockholders' equity
Appropriated retained earnings
BJTY is required to make appropriations to reserves of retained earnings,
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"). The total of appropriation to reserves
should be at least 10% of the after tax net income determined in accordance with
the PRC GAAP until the reserves are reached to 50% of the entities' registered
capital. Entities have their discretions on continuance or suspension of the
reserves once the threshold has been reached.
Since the opening-balance of reserves of BJTY in fiscal year of 2005 is at
$127,472 that is more than 50% of its registered capital of $241,546 as of March
31, 2005. Management of BJTY has decided to suspend further appropriation of
retained earnings in the first quarter of 2005.
10. Related party transactions
The Company's significant related party transactions affecting the results of
operations are as follows:
At March 31,2005 At December 31, 2004
(Unaudited)
US$ US$
Sales to BMKL 813,666 732,545
Sales to BST 182,428 98,522
======================== ======================
Total sales to related parties 996,094 831,067
11
AMTG: Quarterly Report- As of March 31, 2005
- --------------------------------------------------------------------------------
Due from/to related parties as of March 31, 2005 and December 31, 2004 are as
follow:
At March 31,2005 At December 31, 2004
(Unaudited)
US$ US$
Due from related parties
Trade receivable from BMKL
Trade receivable from BST 182,428
Advance to BST 543,478
Other receivable from BSS 126,679
------------------------ ----------------------
Total due from related parties 725,906 126,679
======================== ======================
Due to related parties:
Salary payable to BST 127,295 116,063
Other payable to BST 2,942 1,934
------------------------ ----------------------
130,237 117,997
Loans from BST 990,000 600,000
Total due to related parties 1,120,237 717,997
======================== ======================
For the three months ended March 31, 2005 and years ended December 31, 2004, the
Company incurred costs of a related company of $11,232 and $56,160 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 $127,295 and $116,063 as of March 31,
2005 and 2004 respectively for shared management expenses.
Amounts due from related parties are interest free, unsecured and without
predetermined repayment terms. During the three months ended March 31, 2005, the
Company obtained a loan of $390,000 from a related company.
11. Concentrations and risks
During the three months ended March 31, 2005 and March 31, 2004, 100% of the
revenues were derived from companies located in China and 100% of the Company's
assets were located in China.
During the three months ended March 31, 2005 and March 31, 2004, the Company
derived 100% and 99.61% of their revenues from a related entity and a
stockholder.
In the three months ended March 31, 2005, the company purchased 89% of its raw
materials from one supplier in the PRC. In the three months ended March 31,
2004, the Company purchased 66% of its raw materials from one supplier in the
PRC.
12
AMERICAN METAL TECHNOLOGY GROUP
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31,2004 AND 2003
AMERICAN METAL TECHNOLOGY GROUP
-------------------------------
CONTENTS
--------
Pages
Report of Independent Registered Public Accounting Firm 1
Balance Sheets
As of December 31, 2004 and 2003 Consolidated 2
Statements of Operations for the years ended December 31, 2004
and 2003 Consolidated 3
Statements of Stockholders' Equity
for the years ended December 31, 2004 and 2003 Consolidated 4
Statements of Cash flows for the years ended December 31, 2004
and 2003 Consolidated 5
Notes to Consolidated Financial Statement 6-15
Tin Wha CPAs
Certified Public Accountants
(A member of Baker Tilly International)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of:
AMERICAN METAL TECHNOLOGY GROUP
We have audited the accompanying balance sheets of AMERICAN METAL TECHNOLOGY
GROUP, as of December 31, 2004 and 2003 and the related statements of
operations, stockholders' equity and cash flows for the years ended December 31,
2004 and 2003. 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 provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AMERICAN METAL TECHNOLOGY
GROUP, as of December 31, 2004 and 2003, and the results of its operations and
its cash flows for the years ended December 31, 2004 and 2003, in conformity
with accounting principles generally accepted in the United States of America.
TIN WHA CPAs
Certified Public Accountants
Date: March 13, 2005
1
Consolidated Balance Sheet
Consolidated
Fiscal Year Notes 2004 2003
US$ US$
Assets
Current assets:
Cash and cash equivalents 1 212,842 99,225
Advanced to suppliers 3 285,030 181,800
Inventories 4 430,249 116,227
Account Receivable 2 - 36,062
Due from related parties 12 126,679 -
Other current assets 5 64,403 2,135
Total current assets 1,119,203 435,449
Property, plant & equipment--net 6 1,678,674 817,196
Total assets 2,797,877 1,252,645
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 103,937 79,681
Other payable and accrued expenses 8 19,772 12,801
Other tax payables 335 8,901
Due to related parties 12 117,997 59,903
Total current liabilities 242,041 161,286
Long Term Liabilities: 10 600,000 -
Total Liabilities 842,041 161,286
Stockholders' equity:
Common stock, $0.001 par value, 20,000,000 shares authorized,
10,000,000 shares issued and outstanding 11 10,000 -
Additional paid-in capital 11 232,905 241,546
Retained earnings
Unappropriated 11 1,585,720 722,341
Appropriated 11 127,472 127,472
Accumulated other comprehensive income (loss) (261) -
Total stockholders' equity 1,955,836 1,091,359
Total liabilities and stockholders' equity 2,797,877 1,252,645
See accompanying notes to the consolidated financial statements
2
Consolidated Statement of Operations
Consolidated
Fiscal Year Notes 2004 2003
US$ US$
Net sales 12
To related parties 4,079,447 2,480,890
Other 8,966 2,116
4,088,413 2,483,006
Cost of sales 12 3,133,281 1,921,895
Gross profit 955,132 561,111
Operating expenses:
General and administrative expenses 7 87,695 84,300
Depreciation and amortization 5,652 3,098
Total operating expenses 93,347 87,398
Operating income 861,785 473,713
Interest income 1,738 1,810
Other (expense) income--net (144) (116)
Income before income taxes 863,379 475,407
Income taxes 1 - -
Net income 863,379 475,407
Other comprehensive income (loss), net of taxes:
Currency translation adjustment (261) -
Total comprehensive income 863,118 475,407
Earnings per share:
Basic and diluted 0.09 0.05
Weighted average common shares outstanding:
Basic and diluted 10,000,000 10,000,000
See accompanying notes to the consolidated financial statements
3
Consolidated Statements of Stockholders' Equity
Accumulated
Common Additional Unappropriated Appropriated other Total
stock Par paid-in retained retained comprehensive stockholders'
Shares value capital earnings earning income equity
------ ----- ------- -------- ------- ------ ------
US$ US$ US$ US$ US$ US$
Balance, December 31,
2002 241,546 318,245 56,161 615,952
Net income 475,407 475,407
Transfer to statutory
and staff welfare
reserves -71,311 71,311
Balance, December 31,
2003 - 241,546 722,341 127,472 1,091,359
Common Stock issued
for the Acquisition
of BJTY 9,000,000 9,000 -9,000 -
Stock issued during
the year 1,000,000 1,000 359 1,359
Net income 863,379 863,379
Transfer to statutory -
and staff welfare
reserves
Foreign currency
exchange -261 -261
translation adjustment
Balance, December 31,
2004 10,000 232,905 1,585,720 127,472 -261 1,955,836
====== ======= ========= ======= === =========
See accompanying notes to the consolidated financial statements
4
Consolidated Cash Flow Statements
Consolidated
Fiscal Year Notes 2004 2003
US$ US$
Operating Activities:
Net income 863,379 475,407
Noncash items affecting net income:
Depreciation and amortization 6 105,284 28,105
Changes in operating assets and liabilities, net of effects of
acquisitions:
Advances to suppliers (103,230) (161,428)
Other current assets (62,267) 18,873
Inventories (314,022) 119,534
Due from related parties (90,617) (36,062)
Accounts payable 24,256 (48,890)
Other payable and accrued expenses 6,080 49,016
Advances from a customer 891 (217,099)
Other taxes payable (8,567) 7,696
Due to related parties 58,094 11,232
Net cash from operating activities 479,281 246,384
Investing Activities:
Additions to property, plant and equipment 6 (978,524) (617,792)
Proceeds from sale of property, plant & equipment 6 11,762 -
Net cash used in investing activities (966,762) (617,792)
Financing Activities:
Due to related parties 600,000 -
Due from a stockholder - 195,652
Proceeds from the issuance of common stock 1,359 -
Net cash from (used in) financing activities 601,359 195,652
Effect of exchange rate changes on cash and cash equivalents (261) -
Net increase in cash and cash equivalents 113,617 (175,756)
Cash and cash equivalents:
Beginning of year 99,225 274,981
End of year 212,842 99,225
See accompanying notes to the consolidated financial statements
5
1. Nature of Operations and Summary of Significant Accounting Policies
Description of business
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 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").
Principles of consolidation
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
("US GAAP"). All significant intercompany balances and transactions have been
eliminated in consolidation.
Use of estimates
The preparation of the consolidated financial statements in conformity with US
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities. Actual results could differ
from these estimates.
Cash and cash equivalents
Cash and cash equivalents include interest bearing and non-interest bearing
bank deposits, money market accounts, short-term certificates of deposit with
original maturities of three months or less.
Inventories
Inventory is stated at the lower of cost or market value. The cost is
determined on a first-in, first-out method. The Company provided inventory
allowances based on excess and obsolete inventories determined principally by
customer demand.
Account Receivable
6
Account receivables are carried at original invoiced amounts less any bad debts
recognized during the year.
`Specific charge-off method' is used to prepare the accounting for bad debts.
There were no bad debts recognized in 2003 and 2004 respectively.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and amortization. Cost represents the purchase price of the asset and other
costs incurred to bring the asset into existing use. Depreciation is provided
using the straight-line method over the estimated useful lives.
Property, equipment and other long-lived assets are evaluated for impairment
whenever events or conditions indicate that the carrying value of an asset may
not be recoverable based on expected undiscounted cash flows related to the
asset. There were no impairment losses recorded in 2004.
The Company uses the following useful lives for depreciation and amortization
purposes:
Land use rights over the land use right period of 50 years
Plant and machinery 10 years
Motor vehicles 6 years
Furniture, fixtures and equipment 5 years
No depreciation is provided for construction in progress until they are
completed and put in use. All interests and other costs on borrowings to finance
the construction of fixed assets are capitalized during the period of time that
is required to complete and prepare the property for its intended use.
The Company accounts for fixed assets in accordance with Statement of Financial
Accounting Standard ("SFAS") No.121, "Accounting for the Impairment of
Long-lived Assets to be Disposed of" which requires impairment loss to be
recognized on the long-lived assets when the sum of expected future cash flows
(undiscounted and without interest charges) resulted from the use of the asset
and its eventual disposition is less than the carrying amount of the asset.
Otherwise, an impairment loss is not recognized. Measurement of the impairment
loss for long-lived assets is based on the fair value of the assets.
Gains and losses on disposal of property, plant and equipment are determined by
reference to their carrying amounts.
Costs for planned major maintenance activities, primarily related to refinery
turnarounds, are expensed as incurred except for costs of components that result
in improvements and betterments which are capitalized as part of property, plant
and equipment and depreciated over their useful lives, which is generally the
period until the next scheduled major maintenance.
Land use rights and buildings are located in the PRC, where private ownership
of land is not allowed. Rather, entities acquire the rights to use land for a
designated term. As of December 31, 2004, the Company had rights to use 30,292
square meters of land for periods ranging from October, 2004 to October 2054.
7
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.
Revenue recognition
The Company recognizes revenue from the sale of metal parts and components at
the time of delivery to its primary customers who are also the end users of the
products, when title to the products transfers, the customer bears the risk of
loss and the price is determinable. The Company records sales net of estimated
returns and allowances. In 2004, the Company has no sales return and allowances
policies being set up.
There are no product warranties for metal parts and components. Sales returns
and allowances for defected products are treated as either cost of sales or
claims to suppliers for reimbursements depending on technical appraisal reports
and purchase contracts signed with suppliers. In 2003 and 2004, all defected
products were fully reimbursed by suppliers.
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.
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
8
translations are included in the statements of operations and stockholder's
equity as other comprehensive gain (loss).
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.
Transaction for BJTY
The Company owns 80% shares of BJTY in 2004. The Company also fully owns AMLF,
the only minority shareholder of BJTY in 2004. So, a full consolidation method
is used to account for the transactions in BJTY.
Segments
The Company operates in only one segment, therefore segment disclosure is not
presented.
New accounting developments
In November 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 151, Inventory Costs--An Amendment of ARB No. 43, Chapter 4 ("SFAS 151").
SFAS 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing , to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). Among other provisions, the new
rule requires that items such as idle facility expense, excessive spoilage,
double freight, and rehandling costs be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal" as stated in ARB
No. 43. Additionally, SFAS 151 requires that the allocation of fixed production
overhead to the costs of conversion be based on the normal capacity of the
production facilities. SFAS 151 is effective for fiscal years beginning after
June 15, 2005 and is required to be adopted by the Company beginning on January
1, 2006.
In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based
Payment ("SFAS 123R"), which revises SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS 123R also supersedes APB 25, Accounting for Stock Issued to
Employees, and amends SFAS No. 95, Statement of Cash Flows. In general, the
accounting required by SFAS 123R is similar to that of SFAS No. 123. However,
SFAS No. 123 gave companies a choice to either recognize the fair value of stock
options in their income statements or disclose the pro forma income statement
effect of the fair value of stock options in the notes to the financial
statements. SFAS 123R eliminates that choice and requires the fair value of all
share-based payments to employees, including the fair value of grants of
employee stock options, be recognized in the income statement, generally over
the option vesting period. SFAS 123R must be adopted no later than July 1, 2005.
Early adoption is permitted.
SFAS 123R permits adoption of its requirements using one of two transition
methods:
1. A modified prospective transition ("MPT") method in which compensation
cost is recognized beginning with the effective date (a) for all share-based
payments granted after the effective date and (b) for all awards granted to
employees prior to the effective date that remain unvested on the effective
date.
9
2. A modified retrospective transition ("MRT") method which includes the
requirements of the MPT method described above, but also permits restatement of
financial statements based on the amounts previously disclosed under SFAS 123's
pro forma disclosure requirements either for (a) all prior periods presented or
(b) prior interim periods of the year of adoption.
In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
Assets--An Amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions ("SFAS 153"). SFAS 153 eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets in paragraph
21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and
replaces it with an exception for exchanges that do not have commercial
substance. SFAS 153 specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange.
The adoption of these pronouncements did not have a material effect on the
Company's financial position or results of operations.
2. Account Receivable
Account receivable at December 31, 2004 Consolidated and December 31, 2003
consisted of the following:
At December 31,
2004 2003
US$ US$
Account Receivables - 36,062
================== ==================
As of December 31, 2004 all receivables from sale of products to related
companies have been received.
3. Advances to suppliers
Advances to suppliers at December 31, 2004 and 2003 represent advance payments
against raw materials on order. All advances were subsequently deducted from the
final payments due to the suppliers and no provision against losses was incurred
by the Company.
4. Inventory
At December 31,
2004 2003
US$ US$
Inventory consists of the following:
Raw materials 294,646 68,349
Work-in-progress 54,370 36,702
Finished goods 81,233 11,176
------------------ ------------------
430,249 116,227
================== ==================
5. Other current assets
10
Other current assets at December 31, 2004 Consolidated and 2003 consist of the
following:
At December 31,
2004 2003
US$ US$
Other receivables 44,506 33
Prepaid expenses 15,361 2,102
Value-added tax receivables 4,535 -
------------------ ------------------
64,402 2,135
================== ==================
6. Property, plant and equipment
The following is a summary of property, plant and equipment at December 31, 2004
Consolidated and December 31, 2003:
At December 31,
2004 2003
US$ US$
Plant and machinery 1,253,276 826,581
Motor vehicles - 16,357
Furniture, fixtures and equipment 5,907 5,545
Land use right 548,756 -
Less: accumulated depreciation 131,976 31,287
Net value of fixed assets 1,675,963 817,196
Construction in process 2,711 -
------------------ ------------------
Total fixed assets 1,678,674 817,196
================== ==================
Depreciation expense for the year ended December 31, 2004 and for the year ended
December 31, 2003 was $105,284 and $28,105 respectively.
Imputed Interest of $9,730 for long-term loan has been capitalized in land use
right and depreciated accordingly.
The Company has disposed some motor vehicles during 2004 to its related party.
The depreciable base for the motor vehicles was $11,762 at the time of disposal,
same as the proceeds obtained from related party. So, no gain and loss was
recognized for this transaction.
7. General and administrative expenses
The Company found booking errors in 2003 which caused general and administrative
expenses in 2003 to be undervalued by $9,742 and costs of sale in 2003 to be
overvalued by the same amount of $9,742. Such errors have been corrected in the
Consolidated Statement of Operations in 2003 for comparison purpose.
8. Other payables and accrued liabilities
11
Other payables and accrued liabilities at December 31, 2004 Consolidated and
December 31, 2003 consist of the following:
At December 31,
2004 2003
US$ US$
Education surtaxes payable - 248
Employees education accrued expenses 1,796 570
Accrued liabilities 16,077 11,983
Advanced from customer 891 -
Other payables 1,008 -
------------------ ------------------
19,772 12,801
================== ==================
9. 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 contribution paid for the years ended
December 31, 2004 and 2003 were $3,463 and $1,408 respectively. 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.
10. Long term loans
The Company has $600,000 zero-interest long-term loan as of December 31, 2004.
We used 1-3 year short-term loan rate of 5.49% for entities in China to compute
the imputed interest expenses. As of December 31, 2004, the imputed interest
expense of $9,730 has been capitalized in land use right and depreciated with
the assets accordingly.
11. Stockholders' equity
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.
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. 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
12
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. (See Note 1A)
Appropriated retained earnings
BJTY is required to make appropriations to reserves of retained earnings,
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"). The total of appropriation to reserves
should be at least 10% of the after tax net income determined in accordance with
the PRC GAAP until the reserves are reached to 50% of the entities' registered
capital. Entities have their discretions on continuance or suspension of the
reserves once the threshold has been reached.
Since the opening-balance of reserves of BJTY in fiscal year of 2004 is at
$127,472 that is more than 50% of its registered capital of $241,546 as of Dec
31, 2004. Management of BJTY has decided to suspend further appropriation of
retained earnings in 2004.
12. Related party transactions
The Company's significant related party transactions affecting the results of
operations are as follows:
Year Ended December 31,
2004 2003
US$ US$
Sales to BMKL 3,801,985 2,261,348
Sales to BST 277,462 219,542
======================== ======================
Total sales to related parties 4,079,447 2,480,890
Due from/to related parties as of December 31, 2004 and 2003 are as follow:
At December 31,
2004 2003
US$ US$
Due from related parties
Account receivable from BMKL - 36,062
Other receivable from BSS 126,679 -
------------------------ ----------------------
Total due from related parties 126,679 36,062
======================== ======================
Due to related parties:
Salary payable to BST 116,063 59,903
Other payable to BST 1,934 -
------------------------ ----------------------
117,997 59,903
Loans from BST 600,000 -
Total due to related parties 717,997 59,903
======================== ======================
Account receivable of $36,062 from a related company as of Dec 31, 2003 was
13
received in 2004. As of Dec 31, 2004, the Company has also lent another related
company $126,679 due in one year.
For the years ended December 31, 2004 and 2003, the Company incurred costs of a
related company of $56,160 and $61,775 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 $116,063 and $59,903 as of December 31, 2004 and 2003
respectively for these shared management services.
Amounts due from related parties are interest free, unsecured and without
predetermined repayment terms. During the year ended December 31, 2004, the
Company obtained a loan of $600,000 from a related company. This loan is
unsecured, interest free and is repayable on December 2006.
During the year ended December 31, 2004, the Company paid rent of $34,934 for
factory space leased from a related company. The amount has been accounted in
the cost of sales in the Consolidated Statement of Operations in 2004.
13. Concentrations and risks
During the years ended December 31, 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 years ended December 31, 2004 and 2003, the Company derived 99.78%
and 99.91% of their revenues from a related entity and a stockholder.
In 2004, the Company purchased 74% of its raw materials from one supplier in
PRC. In 2003, the Company purchased 73% of its raw materials from three
suppliers in the PRC.
14
================================================================================
_____________, 2005
Until ________, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
================================================================================
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:
58
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:
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
59
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:
(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:
60
(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.
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
Shares Issued to AMTG
- ------------------------------------------------------------------------
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.
(3) Shares issued for purchase of subsidiaries.
(4) Amount of shares issued represent pre-split shares.
In regards to the shares issued to Mr. Lui, Mr. Ding, and Mr. Chung, all
issuances were made directly by AMTG, without any compensation to a third party.
In regards to the issuances made to BSS and BST, they were completed pursuant to
a share purchase of Beijing Tong Yuan Heng Feng Technology Co., Ltd.
We relied on exemptions provided by Section 4(2) of the Securities Act of 1933,
as amended. These shares were issued based on the following facts: (1) the
issuances were isolated private transaction which did not involve a public
offering; (2) there were only 5 offerees, (3) the offerees have agreed to the
imposition of a restrictive legend on the face of the stock certificate
representing its shares, to the effect that it will not resell the stock unless
its shares are registered or an exemption from registration is available; (4)
there were no subsequent or contemporaneous public offerings of the stock; (5)
the stock was not broken down into smaller denominations.
Shares Issued to BSS and BST Shareholders
-----------------------------------------
BST and BSS are Limited Liability Company's in China formed in accordance to the
Company Law of the People's Republic of China. All security interests in Chinese
LLC's are based upon the amount of paid-up capital contribution of all its
shareholders. All security issuances were made pursuant to the Company Law of
the People's Republic of China.
61
BST Shareholders
- ----------------
BST was formed on September 28, 1993. It's registered capital is RMB 16,355,000
$1,977,629 in USD). BST has 35 shareholders. Each shareholder contributes
capital in RMB to BST and thus becomes a percentage owner of the Company based
on the amount of capital they have invested.
- ---------------------------------------------------------------------------------------
Name Date of Purchase Amount Paid in RMB Amount in USD
- ---------------------------------------------------------------------------------------
Chen Gao 1993.09.28 3,700,000 447,400
- ---------------------------------------------------------------------------------------
Mei Si Gao 1993.09.28 900,000 108,827
- ---------------------------------------------------------------------------------------
Ran Song 2002.06.08 900,000 108,827
- ---------------------------------------------------------------------------------------
Jian Xin Xu 2002.06.08 900,000 108,827
- ---------------------------------------------------------------------------------------
Meng Xu 2002.06.08 900,000 108,827
- ---------------------------------------------------------------------------------------
Ya Ni Gao 2002.06.08 200,000 24,184
- ---------------------------------------------------------------------------------------
Ying Pan 2002.06.08 900,000 108,827
- ---------------------------------------------------------------------------------------
Xin Yan Yuan 1993.09.28 2,800,000 338,573
- ---------------------------------------------------------------------------------------
Hang Yuan 2002.06.08 500,000 60,459
- ---------------------------------------------------------------------------------------
Xin Min Yuan 2002.06.08 900,000 108,827
- ---------------------------------------------------------------------------------------
Xin Jian Yuan 2002.06.08 900,000 108,827
- ---------------------------------------------------------------------------------------
Xiao Jie Guo 2001.07.16 960,000 116,082
- ---------------------------------------------------------------------------------------
Wei Li (2) 2002.06.08 40,000 4,837
- ---------------------------------------------------------------------------------------
Zhen Bang Song 2001.07.16 1,000,000 120,919
- ---------------------------------------------------------------------------------------
Zhong Min Li 2001.07.16 100,000 12,092
- ---------------------------------------------------------------------------------------
Jing Zhao 2002.06.08 70,000 8,464
- ---------------------------------------------------------------------------------------
Wei Li (3) 2002.06.08 50,000 6,046
- ---------------------------------------------------------------------------------------
Xiu Hua Liu 2002.06.08 50,000 6,046
- ---------------------------------------------------------------------------------------
62
Bing Lu 2002.06.08 50,000 6,046
- ---------------------------------------------------------------------------------------
Jun Li 2001.07.16 30,000 3,628
- ---------------------------------------------------------------------------------------
Wen Ge Ren 2002.06.08 50,000 6,046
- ---------------------------------------------------------------------------------------
Wei Li 2001.07.16 100,000 12,092
- ---------------------------------------------------------------------------------------
Han Zhang 2001.07.16 20,000 2,418
- ---------------------------------------------------------------------------------------
Xue Min Yang 2002.06.08 50,000 6,046
- ---------------------------------------------------------------------------------------
Hong Jin Zhang 2002.06.08 10,000 1,209
- ---------------------------------------------------------------------------------------
Ying Qiang Li 2002.06.08 7,000 846
- ---------------------------------------------------------------------------------------
Shi You Liu 2002.06.08 3,000 363
- ---------------------------------------------------------------------------------------
Hong Wei Liu 2002.06.08 50,000 6,046
- ---------------------------------------------------------------------------------------
Yong Xiu Yan 2002.06.08 10,000 1,209
- ---------------------------------------------------------------------------------------
Shang Min He 2002.06.08 10,000 1,209
- ---------------------------------------------------------------------------------------
Xiao Yan Li 2002.06.08 80,000 9,674
- ---------------------------------------------------------------------------------------
Yan Wu Xu 2002.06.08 100,000 12,092
- ---------------------------------------------------------------------------------------
Wen Yong Ma 2002.06.08 5,000 605
- ---------------------------------------------------------------------------------------
Xin Fa Li 2002.06.08 5,000 605
- ---------------------------------------------------------------------------------------
Sheng Jie He 2002.06.08 5,000 605
- ---------------------------------------------------------------------------------------
BST Total registered
capital 16,355,000 1,977,630
- ---------------------------------------------------------------------------------------
BSS Shareholders
- ----------------
BSS was formed on October 30, 1996. It's registered capital is RMB 500,000
(USD$60,459). BST has 35 shareholders. Each shareholder contributes capital in
RMB to BST and thus becomes a percentage owner of the Company based on the
amount of capital they have invested.
63
- ----------------------------------------------------------------------------------------------
Name Date of Purchase Amount Paid in RMB Amount in USD
- ----------------------------------------------------------------------------------------------
Chen Gao 1996.10.30 113,115 13,678
- ----------------------------------------------------------------------------------------------
Mei Si Gao 1996.10.30 27,515 3,327
- ----------------------------------------------------------------------------------------------
Ran Song 2002.06.08 27,515 3,327
- ----------------------------------------------------------------------------------------------
Jian Xin Xu 2002.06.08 27,515 3,327
- ----------------------------------------------------------------------------------------------
Meng Xu 2002.06.08 ?27,515 $3,327
- ----------------------------------------------------------------------------------------------
Ya Ni Gao 2002.06.08 6,114 739
- ----------------------------------------------------------------------------------------------
Ying Pan 2002.06.08 27,515 3,327
- ----------------------------------------------------------------------------------------------
Xin Yan Yuan 1996.10.30 85,601 10,351
- ----------------------------------------------------------------------------------------------
Hang Yuan 2002.06.08 15,286 1,848
- ----------------------------------------------------------------------------------------------
Xin Min Yuan 2002.06.08 27,515 3,327
- ----------------------------------------------------------------------------------------------
Xin Jian Yuan 2002.06.08 27,515 3,327
- ----------------------------------------------------------------------------------------------
Xiao Jie Guo 2001.07.16 29,349 3,549
- ----------------------------------------------------------------------------------------------
Wei Li (2) 2002.06.08 1,223 148
- ----------------------------------------------------------------------------------------------
Zhen Bang Song 2001.07.16 30,572 3,697
- ----------------------------------------------------------------------------------------------
Zhong Min Li 2001.07.16 3,057 370
- ----------------------------------------------------------------------------------------------
Jing Zhao 2002.06.08 2,140 259
- ----------------------------------------------------------------------------------------------
Wei Li (3) 2002.06.08 1,529 185
- ----------------------------------------------------------------------------------------------
Xiu Hua Liu 2002.06.08 1,529 185
- ----------------------------------------------------------------------------------------------
Bing Lu 2002.06.08 1,529 $185
- ----------------------------------------------------------------------------------------------
Jun Li 2001.07.16 917 111
- ----------------------------------------------------------------------------------------------
Wen Ge Ren 2002.06.08 1,529 185
- ----------------------------------------------------------------------------------------------
Wei Li 2001.07.16 3,057 370
- ----------------------------------------------------------------------------------------------
64
Han Zhang 2001.07.16 611 74
- ----------------------------------------------------------------------------------------------
Xue Min Yang 2002.06.08 1,529 185
- ----------------------------------------------------------------------------------------------
Hong Jin Zhang 2002.06.08 306 37
- ----------------------------------------------------------------------------------------------
Ying Qiang Li 2002.06.08 214 26
- ----------------------------------------------------------------------------------------------
Shi You Liu 2002.06.08 92 11
- ----------------------------------------------------------------------------------------------
Hong Wei Liu 2002.06.08 1,529 185
- ----------------------------------------------------------------------------------------------
Yong Xiu Yan 2002.06.08 306 37
- ----------------------------------------------------------------------------------------------
Shang Min He 2002.06.08 306 37
- ----------------------------------------------------------------------------------------------
Xiao Yan Li 2002.06.08 2,446 296
- ----------------------------------------------------------------------------------------------
Yan Wu Xu 2002.06.08 3,057 370
- ----------------------------------------------------------------------------------------------
Wen Yong Ma 2002.06.08 153 18
- ----------------------------------------------------------------------------------------------
Xin Fa Li 2002.06.08 153 18
- ----------------------------------------------------------------------------------------------
Sheng Jie He 2002.06.08 153 18
- ----------------------------------------------------------------------------------------------
BSS Total registered
capital 500,000 60,459
- ----------------------------------------------------------------------------------------------
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)
65
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)
10.6 Amendment to Loan Agreement with Beijing Sande Technology
(Holding) Co., Ltd. (dated May 1, 2005)
10.7 Loan Agreement with Beijing Sande Technology (Holding) Co.,
Ltd. (dated March 15, 2005)
10.8 Building Project Construction Contract (dated February 4,
2005)
16.1 Letter from Jimmy C.H. Cheung & Co, Certified Public
Accountants re: Change in Accountants.
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 Tin Wha CPAs, 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:
(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
66
(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 June 15, 2005.
AMTG
By: /s/ Chen Gao
----------------------------------
Chen Gao
President /CFO/Director
Principal Accounting Officer
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
67
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
Principal Accounting Officer
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: June 15, 2005
68