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 #4)
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AMERICAN METAL TECHNOLOGY GROUP
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(Name of small business issuer in its charter)
Nevada 3490 02-0715113
- ---------------------- ---------------------------- -------------------
(State or Jurisdiction (Primary Standard Industrial (I.R.S Employer
of Incorporation) Classification Code Number) Identification No.)
600 Wilshire Blvd., Suite 1253
Los Angeles, CA 90017
Phone: 213-538-1204
(Address and telephone number of principal executive offices)
GKL Resident Agents/Filings, Inc.
1000 E. William Street, #204
Carson City, NV 891701
Phone: 775-841-0644
(Name, address and telephone number of agent for service)
Copies To:
Adam U. Shaikh, Esq.
The Law Offices of Adam U. Shaikh, Chtd
7917 Autumn Gate Ave
Las Vegas, NV 89131
Phone: 702-296-3575
Facsimile: 702-549-2265
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration becomes effective.
If any of the Securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended: [ ]
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 (3) price registration fee
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Common(1) 3,365,576 $1.00 $3,365,576 $ 426.42
Common(2) 841,394 $1.00 $841,394 $ 106.60
(1) Common Shares to be distributed pursuant to a registered distribution to
non-affiliate shareholders of Beijing Sande Technology (Holding) Co., Ltd.
(2) Common Shares to be distributed pursuant to a registered distribution to
non-affiliate shareholders of Beijing Sande Shang Mao Co., Ltd.
(3) Estimated pursuant to Rule 457(e) solely for the purpose of calculating the
registration fee for the securities that will be distributed as a dividend
distribution to non-affiliate 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)
4,206,970
Shares of Common Stock
to be Received Pursuant to Distribution
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"). Beijing Sande Technology
(Holding) Co., Ltd. ("BST") shall be distributing 3,365,576 shares of common
stock as a dividend distribution to its non-affiliate shareholders of record as
of November 30, 2004 on the basis of 72,000 shares of our common stock for every
one percent (1%) of BST owned ("BST shareholders"). Beijing Sande Shang Mao Co.,
Ltd. ("BSS") shall be distributing 841,394 shares of common stock as a dividend
distribution to its non-affiliate shareholders of record as of November 30, 2004
on the basis of 18,000 shares of our common stock for every one percent (1%) of
BSS owned ("BSS shareholders"). For a greater description of those shareholders
of BSS and BST that are deemed "affiliates" of AMTG and who will not receive
shares as a dividend, please see section titled SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT on page 22.
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 8.
American Metal Technology Group will not receive any proceeds from this
distribution 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......................................12
USE OF PROCEEDS............................................................13
DILUTION...................................................................13
PLAN OF DISTRIBUTION...................................................... 14
TAX CONSEQUENCES OF DISTRIBUTION...........................................18
LEGAL PROCEEDINGS..........................................................18
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS.........................................18
EXECUTIVE COMPENSATION.....................................................21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.................................................22
DESCRIPTION OF SECURITIES..................................................24
DESCRIPTION OF OUR BUSINESS................................................26
MANAGEMENT DISCUSSION AND PLAN OF
OPERATION.........................................................42
CRITICAL ACCOUNTING POLICIES...............................................52
FACTORS AFFECTING OPERATING RESULTS........................................54
MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS..........................................55
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES....................57
INTEREST OF NAMED EXPERTS AND COUNSEL......................................57
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE........................57
CERTAIN RELATIONSHIP AND RELATED
TRANSACTIONS......................................................58
FINANCIAL STATEMENTS.......................................................60
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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 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 3,365,576 shares of our common stock to non-affiliate BST shareholders on the
basis of 72,000 shares of our common stock for every one percent (1%) of BST
owned, and a registered distribution of 841,394 shares of our common stock to
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the non-affiliate BSS shareholders on the basis of 18,000 shares of our common
stock for every one percent (1%) of BSS owned. For a greater description of
those shareholders of BSS and BST that are deemed "affiliates" of AMTG and who
will not receive shares as a dividend, please see section titled SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT on page 22.
There is currently no public market for our securities. At this time, we plan on
listing our shares for quotation on the Over the Counter Bulletin Board (OTCBB).
No assurance can be made, however, that our shares will be quoted on the OTCBB
or traded on an exchange.
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 18".
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, recipients of the dividend distribution should be aware that the
anti-manipulation provisions of Regulation M under the Exchange Act will apply
to their purchases and sales of shares of common stock. The recipients of the
dividend distribution 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.
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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
subsidiaries, Beijing Tong Yuan Heng Feng Technology Co., Ltd. and American
Metal Technology (Lang Fang) Co., Ltd.
Operations Data YEAR ENDED DECEMBER 31 SIX MONTHS ENDED JUNE 30
--------------------------------- -----------------------------------
2004 2003 2005 2004
(UNAUDITED) (UNAUDITED)
Net Sales $4,088,413 $2,483,006 $2,417,478 $2,064,926
Cost of Sales $3,133,281 $1,921,895 $1,669,683 $1,544,458
Net income $863,379 $475,407 $639,627 $469,861
Balance Sheet Data As of June 30, 2005
(UNAUDITED)
Total assets $4,374,277
Working capital $930,675
Stockholder's equity $2,594,993
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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 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 $141,469 which
may affect our cash position and, consequently, our growth.
As of June 30, 2005, we owed an aggregate amount of $141,469 for accrued
salaries. If all salaries are placed upon demand, our cash position will be
limited and this may delay our current plans, including deployment of the second
phase development on AMLF 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 from Beijing Mai
Ke Luo Machinery Co., Limited ("BMKL") and BST, who are also related parties.
(See section titled Certain Relationships and Related Transactions on page 58")
BST is the current owner of 20% of BMKL. The BSS and BST shareholders, who have
common ownership, currently own 90% of AMTG. During the six months ended June
30, 2004, BMKL and BST accounted for 100% of our net sales. For the years ended
December 31, 2004 and 2003, except for an insignificant amount of subcontracting
income, BMKL and BST accounted for 100% of our net sales. Upon the distribution
and potential sale of shares by the shareholders of BSS and BST in the public
market pursuant to this prospectus, the shareholdings of AMTG by the BSS and BST
shareholders may become diluted. Should this occur, the incentive for BMKL and
BST to shop for competitors could increase and the incentive to conduct business
with AMTG and BJTY could diminish. Should we subsequently lose one or both of
these customers; we will no longer have sufficient revenue to continue
operations.
We currently rely on few suppliers for our raw materials which exposes us to a
potential financial risk.
Historically, we have relied on few suppliers for raw materials. We purchased
87.29% and 74% of raw materials from one supplier in the PRC in the six months
ended June 30, 2005 and in fiscal 2004 respectively, and 73% of raw materials
from three suppliers in the PRC in 2003. Should we subsequently lose any of
these suppliers, we will be forced to seek other suppliers for raw materials.
Should we fail to locate suppliers of the raw materials that are willing to sell
at the same or similar price, we may be forced to purchase these materials at a
higher price. Should this occur, our profit margin may be lower than expected on
our existing contracts. Furthermore, we may not be able to obtain additional
contracts because our offered prices may not be competitive. Should the price of
the raw materials rise too high, we may be unable 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
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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, except for an insignificant amount of subcontracting income, we have
refused all metal fabrication contracts from potential new clients due to
pricing pressures and limitation of production facilities, which has affected
our net sales.
We do not presently maintain insurance at our facility which exposes us to
serious financial risk.
Presently, we do not maintain any insurance for our manufacturing and production
facility. Furthermore, we have no plans to obtain insurance for our facility in
the future. We will bear the economic risk with respect to potential loss due to
damage or destruction of our facility. Such liability could be substantial and
the occurrence of such loss could have a material adverse effect on our business
and financial condition. Should our facility be affected by fire or natural
calamity, our operations may be severely hampered and we may not 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
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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
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.
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It may be difficult to enforce service of process and enforcement of legal
judgments upon our company and our officers and directors because most of our
assets and officers and directors are located and reside outside the United
States.
As our operations are presently based in China and our key directors and
officers reside in China, service of process on our company and our key
directors and officers may be difficult to effect within the United States.
Also, our main assets are located in China and any judgment obtained in the
United States against us may not be enforceable outside the United States.
Currency fluctuations, while not presently ascertainable, may adversely affect
our earnings.
Should we locate any customer in the United States, as we intend to do, we will
be subject to risks in currency fluctuations since all our products are
manufactured in China. Fluctuations in exchange rates, primarily those involving
the U.S. dollar, may affect our costs and operating margins which in turn, could
affect our revenues. In addition, these fluctuations could result in exchange
losses and increased costs.
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
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
4,206,970 common shares 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.
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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 recipients of the dividend distribution 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
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.
DILUTION
The common stock to be distributed in the dividend is currently issued and
outstanding. Accordingly, there will be no dilution to our existing
shareholders.
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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 3,365,576
shares of our common shares, which it owns, to its non-affiliate shareholders as
a dividend as of a record date of November 30, 2004, on the basis of 72,000
shares of our common stock for every one percent (1%) of BST owned. Beijing
Sande Shang Mao Co., Ltd. ("BSS") shall distribute 841,394 shares of our common
shares, which it owns, to its non-affiliate shareholders as a dividend as of a
record date of November 30, 2004, on the basis of 18,000 shares of our common
stock for every one percent (1%) of BSS owned. Neither the BST nor BSS
shareholders will be required to pay any type of consideration for their shares.
The BSS and BST shareholders shall receive their share certificates in the mail.
It is expected that the shares will be mailed to such shareholders on or about
_________________. The shares received by the non-affiliate shareholders of BSS
and BST will be deemed freely transferable shares pursuant to the Securities Act
of 1933. For a greater description of those shareholders of BSS and BST that are
deemed "affiliates" of AMTG and who will not receive shares as a dividend,
please see section titled SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT on page 22.
Because of BST's and BSS's role in the distribution, they both will likely be
deemed to be "statutory underwriters" within the meaning of Section 2(11) of the
Securities Act. BST and BSS have both advised us that they will comply with
prospectus delivery requirements that would apply to a statutory underwriter in
connection with the distribution of our shares to their shareholders. BSS and
BST has acknowledged that it is familiar with the anti-manipulation rules of the
SEC, including Regulation M. These rules may apply to sales by BSS and BST in
the market if a market develops. BST will have 3,365,576 of our common shares
and BSS will have 841,394 of our common shares following the distribution.
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.
There is currently no public market for our securities. At this time, we plan on
listing our shares for quotation on the Over the Counter Bulletin Board (OTCBB).
No assurance can be made, however, that our shares will be quoted on the OTCBB
or traded on an exchange.
We will pay all expenses incident to the registration, offering and sale of the
shares of common stock to the public hereunder other than commissions, fees and
discounts of underwriters, brokers, dealers and agents. We will receive no
proceed in connection with the sales of securities in this prospectus.
The following is a list of the shareholders who will be receiving shares in the
distribution.
14
- ----------------------------------------------------------------------------------------------
Name, Address, and Relationship Number of AMTG Shares to % ownership of AMTG
be received in the following the
distribution (1) distribution
- ----------------------------------------------------------------------------------------------
Mei Si Gao
No. 601, 1st Door, 14th Floor, ShuangYu
Shu Bei Li, Haidian District, Beijing, 495,261 4.95%
China
- ----------------------------------------------------------------------------------------------
Ran Song
Fu Li Cheng D9, Room 1105, Chao Yang
District, Beijing, China 495,261 4.95%
- ----------------------------------------------------------------------------------------------
Jian Xin Xu
No. 5, 21st Building, Nanying Fang Water
and Power Departement Dormitory, West
District, Beijing, China 495,261 4.95%
- ----------------------------------------------------------------------------------------------
Meng Xu
No. 8, 3rd Door, 11th Floor, Liu Pu
Keng, West District, Beijing, China 495,261 4.95%
- ----------------------------------------------------------------------------------------------
Ya Ni Gao
No. 7, Weishu Street, Haidian District,
Beijing, China(3) 110,058 1.1%
- ----------------------------------------------------------------------------------------------
Ying Pan
Building No. 1, Room 902, BaoLong
Community, Feng Tai District, China 495,261 4.95%
- ----------------------------------------------------------------------------------------------
Hang Yuan
No. 601, 3rd Door, 42th Floor,
GuanZhuangDongLi, Chaoyang District, 275,145 2.75%
Beijing, China
- ----------------------------------------------------------------------------------------------
Xin Min Yuan
No. 502, 1st Door, 40th Floor,
GuanZhuangDongLi, Chaoyang District, 495,261 4.95%
Beijing, China(4)
- ----------------------------------------------------------------------------------------------
Xin Jian Yuan
A 618 Bai Lang Yuan Community, Haidian
District, China(4) 495,261 4.95%
- ----------------------------------------------------------------------------------------------
Wei Li
No. 031-02 Yongshengli, Front District,
Yingkou city, Liaoning, China(2) 22,012 <1%
- ----------------------------------------------------------------------------------------------
15
- ----------------------------------------------------------------------------------------------
Zhen Bang Song
K 301 Ya Yun Cun Community, Chaoyang
District, Beijing, China 550,290 5.5%
- ----------------------------------------------------------------------------------------------
Jing Zhao
No. 7, 31st Floor, HeishanxiaoLou,
Mentougou, Haidian District, Beijing, 38,520 <1%
China
- ----------------------------------------------------------------------------------------------
Wei Li
No. 212, 3rd Floor, Water and Heat No. 2
Factory Dormitory, Qinghe, Haidian 27,515 <1%
District, Beijing, China(2)
- ----------------------------------------------------------------------------------------------
Xiu Hua Liu
No. 77, 1st Door, Apt 114, Banbidian,
Haidian District, Beijing, China 27,515 <1%
- ----------------------------------------------------------------------------------------------
Bing Lu
No. 6 Building, Apt 707 Jianwai Guanghui
Li, Chaoyang District,Beijing, China 27,515 <1%
- ----------------------------------------------------------------------------------------------
Wen Ge Ren
No. 53, Liuniangfu, Shijingshan,
Beijing, China 27,515 <1%
- ----------------------------------------------------------------------------------------------
Xue Min Yang
No. 501, 15 Building, Muoshikou Nanli,
Shijingshan, Beijing, China 27,515 <1%
- ----------------------------------------------------------------------------------------------
Hong Jin Zhang
Changhe Xingzheng Town, Desheng Valley,
Wuwei County, Fuwu region, Anhui, China 5,503 <1%
- ----------------------------------------------------------------------------------------------
Ying Qiang Li
Liuqiao Town, Wangdian Valley, Huaiyang
County, Henan, China 3,852 <1%
- ----------------------------------------------------------------------------------------------
Shi You Liu
Liuqiao Town, Wangdian Valley, Huaiyang
County, Henan, China 1,651 <1%
- ----------------------------------------------------------------------------------------------
Hong Wei Liu
No. 503, Building 4, Unit 1, Keyan
Building, Jinding St. Shijingshan, 27,515 <1%
Beijing, China
- ----------------------------------------------------------------------------------------------
16
- ----------------------------------------------------------------------------------------------
Yong Xiu Yan
No. 1, Nanheyan, Pingguo Yuan,
Shijingshan District, Beijing, China 5,503 <1%
- ----------------------------------------------------------------------------------------------
Shang Min He
Youfangzhuang Town, Shaji Valley,
Lucheng County, Heinan, China 5,503 <1%
- ----------------------------------------------------------------------------------------------
Xiao Yan Li
No. 5, Unit 2, Buidling 5, West Street,
Dingfu Zhuang, Chaoyang District, 44,023 <1%
Beijing, China
- ----------------------------------------------------------------------------------------------
Yan Wu Xu
No. 602, 3rd Door, Building 225,
Muofangbeili, Chaoyang District, 55,029 <1%
Beijing, China
- ----------------------------------------------------------------------------------------------
Wen Yong Ma
Family Center, Meikuang Er Gong 2,751 <1%
District, Dongniuma Si, Shaodong, Hunan,
China
- ----------------------------------------------------------------------------------------------
Xin Fa Li
No. 5 Maopingtou Town, Yanquan Valley,
Yizhang County, Heinan, China 2,751 <1%
- ----------------------------------------------------------------------------------------------
Sheng Jie He
Youfangzhuang Town, Shaji Valley,
Lucheng County, Henan, China 2,751 <1%
- ----------------------------------------------------------------------------------------------
(1) Shareholders will receive AMTG shares through the registered distribution
based on ownership in both BSS and BST.
(2) 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.
(3) Mei Si Gao and Ya Ni Gao are elder sisters to Mr. Chen Gao, our President,
Treasurer, and Director. They all maintain separate residences.
(4) Xin Min Yuan and Xian Jian Yuan are the brothers of Ms. Xin Yan Yuan, one
of our Directors. They all maintain separate residences.
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/R
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
17
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.
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
18
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.
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.
19
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. Gao 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
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
20
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
------ ------ -------
Other Restricted Securities
Name and Annual Stock Options LTIP All other
Principal Position Year Salary($) Bonus($) Compensation Awards /SARs payout compensation
- ---------------------------------------------------------------------------------------------------------
Officers of AMTG
- ----------------
Chen Gao 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-
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-
21
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 Beijing Sande 3,834,424(1) 38.34%
Technology (Holding)
Co., Ltd.
Common Beijing Sande Shang 958,606(1) 9.59%
Mao Co., Ltd.
Common Chen Gao(2) -0-(1)(12) -0-
22
Common Xin Yan Yuan(3) -0- (1)(13) -0-
Common Richard Lui(4) 50,000 0.05%
Common Monica Ding(5) -0- -0-
Common Xiao Jie Guo(6) -0-(1)(14) -0-
Common Zhong Min Li(7) -0- (1)(15) -0-
Common Jun Li(8) -0-(1)(16) -0-
Common Wei Li(9) -0- (1)(17) -0-
Common Han Zhang(10) -0- (1)(18) -0-
Common Yun Song He(11) -0- -0-
Common Zhen Bang Song -0- (1)(19) -0-
Common Officers/Directors/
Management as a Group 50,000(1)(20) 0.05%
(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
(12) Chen Gao has no direct ownership of AMTG shares, however he is the owner of
22.62% of BSS and 22.62 % of BST.
(13) Xin Yan Yuan has no direct ownership of AMTG shares, however she is the
owner of 17.12% of BSS and 17.12% of BST.
(14) Xiao Jie Guo has no direct ownership of AMTG shares, however he is the
owner of 5.87% of BSS and 5.87% of BST.
(15) Zhong Min Li has no direct ownership of AMTG shares, however he is the
owner of 0.61% of BSS and 0.61 % of BST.
(16) Jun Li has no direct ownership of AMTG shares, however he is the owner of
0.18% of BSS and 0.18% of BST.
23
(17) Wei Li has no direct ownership of AMTG shares, however he is the owner of
0.61% of BSS and 0.61% of BST.
(18) Han Zhang has no direct ownership of AMTG shares, however he is the owner
of 0.12% of BSS and 0.12% of BST.
(19) Zhen Bang Song has no direct ownership of AMTG shares, however he is the
owner of 6.11% of BSS and 6.11% of BST. Mr. Song is not an officer or
director of AMTG or its subsidiaries. However, Mr. Song is a beneficial of
BSS and BST and has agreed not to receive shares in distribution at this
time.
(20) The Officer/Directors and Management as a group have direct ownership of
50,000 shares of AMTG or 0.05%. However, the Officers/Directors and
Management collectively 47.14% of BST and 47.14% of BSS.
Pursuant to the dividend distribution in this prospectus, those shareholders of
BSS and BST that are deemed non-affiliate shareholders of AMTG shall receive
shares of AMTG on the basis of one of our common shares for every one common
share of BSS and BST that they own. The officers/directors/ and management of
AMTG, listed above, who have ownership in BSS and BST will not be receiving
shares in the dividend distribution pursuant to this prospectus.
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.
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.
24
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
25
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. AMTG was
initially formed for the purpose of acquiring a Chinese company and providing
the acquired company with knowledge and access to the U.S markets for it's
products. On June 1, 2004, the Company entered into an Equity Purchase Agreement
with Beijing Sande Technology Group ("BST") to acquire 80% ownership of Beijing
Tong Yuan Heng Feng Technology Co., Ltd. ("BJTY"), for 7,200,000 shares of AMTG.
(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 and
acquiring the remaining 20% ownership of BJTY.. On August 8, 2004, the Company
via its wholly owned subsidiary AMLF entered into an Equity Purchase Agreement
with Beijing Sande Shang Mao Co., Ltd. ("BSS") to acquired the remaining 20%
ownership of BJTY for 1,800,000 shares of AMTG. (See Exhibit 10.2)
BJTY was incorporated on December 11, 2001 as a joint venture limited company in
the People's Republic of China. BJTY has been in operation and earning revenues
since 2002. As a result of the Equity Purchase Agreements, BJTY became a foreign
investment joint venture, classified as a Foreign Invested Enterprises ("FIE")
in the PRC and is subject to the FIE laws of the PRC. The acquisition of the
remaining 20% of BJTY by AMLF rather than through direct ownership by AMTG was
done so in order for BJTY to maintain its corporate status as a joint venture
company within the meaning of the Corporate Laws in the People's Republic of
China. In this way, BJTY did not need to re-register its capital with the State
Government and thus avoided interruption to its operations. 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.
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.
26
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
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.
27
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.
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
28
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
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,
29
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
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 currently maintains its facilities at North Hua Yuan Road,
Economic and Technology Development District, Lang Fang, Hebei, China and has
done so since July 10, 2005. This facility is two stories with total occupation
space of 4,952 square meters (approximately 53,303 square foot) owned by AMLF.
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
30
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 one hundred and six (106) 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, 2004, BJTY had an
audited total revenue of $4,088,413 with a net comprehensive income of $863,118.
This is a 64.7% increase in revenue and a 81.6% increase in net income as
compared with fiscal year 2003.
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 foot) 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
Consolidated Financial Statements as of June 30, 2005)
On February 4, 2004, we engaged Lang Fang City Zhong Tai Construction and
Installation Group Ltd. Co. to build a two story factory building on this piece
of land for the purpose of moving the BJTY operations to this facility. (Ex
10.8) The construction was completed as of June 30, 2005. The new facility is
two floors and consists of a workshop and office space with a total area of
4,952 square meters (53,303 square foot). Each floor occupies 2,976 square
meters. The first floor is mainly used for workshop with a storage and a
31
cafeteria for employees. The second floor consists of thirty-eight offices, two
meeting rooms. and one employee training classroom. The total cost of the
construction was RMB 9,000,000 (approximately USD $1,086,956). As of August 30,
2005, we have paid a total of RMB 8,060,000 (USD $973,430). The unpaid portion
of RMB 940,000 (USD $113,526) is due to the construction company for services
provided and materials purchased, of which RMB 200,000 (USD $24,154) will be
withheld by the Company as a qualification guarantee and is not payable to the
Construction company until June 30, 2008. We were able to allocate funds for the
construction from our current cash flow.
For the second phase of development, we plan to purchase 14 units of Quick Turn
200C Mazak CNC Turning Centers to expand the operation capacity for BJTY. We
also plan to employ a construction company to construct a new 6,000 square meter
(64,583 square foot) precision casting workshop adjacent to the current
facility. Upon completion of the casting workshop we plan to purchase and
install specialized equipment that would allow us to expand our capacity and
developing new lines of products. 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 the second development
phase. We estimate a total cost of $2,280,000 with $680,000 applied to the
fourteen units of Turning Centers, $1 million for the construction and $600,000
for the specialized casting machineries. We currently do not have sufficient
funding from our current cash on hand and cash from operating activities to fund
our proposed second phase of development. We plan to obtain required capital
through equity based financing or loans from local banks and financial
institutions in China. We cannot guarantee that we will receive the necessary
financing. We do not plan to begin this second phase until we have secured the
funds necessary to fully fund the project. At this time, it is uncertain as to
if or when we will begin the second phase of development.
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 related customers that share similar management with us,
Beijing Sande Technology Co., Ltd. ("BST") and Beijing Mai Ke Luo Machinery Co.,
Ltd. ("BMKL"). 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. (See Certain Relationships and Related Transactions section
for more information.) Both of these companies are in the business of
manufacturer and sales of food and beverage equipments.
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
32
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 and share similar management
with us. 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. Our initial
plans include posting advertisements on e-commerce websites, such as alibaba.com
and/or other similar websites to promote our products and services. We'll
utilize existing employee and management personnel to complete this task. We may
also seek to employ regional or national representatives in the metal casting
industry to solicit clients. Should we locate such representative, we plan to
negotiate the compensation as a percentage of goods sold instead of a fixed
salary. Upon the completion of the planned second phase of development, we
expect to have increased production capacity in order to meet the possible
demands from future customers.
33
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.
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 Qing Huang Dao City, Heibei, Stainless Steels
Parts Producer Co., Ltd. China
Zhejiang Yong Shang Stainless Wenzhou city, Zhejiang, Stainless Steel Tubs
Steel Co., Ltd. China
Shanghai Baihe HuaXinli Special Shanghai, China Stainless Steel Sticks
Steel Manufacturer Co., Ltd.
Beijing Shun Long Guang Da Beijing, China Stainless Steel Sticks
Stainless Steel Products Co., Ltd.
Luoyang Copper Processing Group Henan, China Cooper Sticks
Co., Ltd.
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 six months ended June 30, 2005 and for the fiscal year ended December 31,
2004, we have purchased 87.29% 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
34
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
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.
Sales to Related Parties
- ------------------------
Historically, all of our sales have been from Beijing Mai Ke Luo Machinery Co.,
Limited ("BMKL") and BST, who are also related parties that share similar
management. (See section titled Certain Relationships and Related Transactions
on page 58") BST is the current owner of 20% of BMKL. The BSS and BST
shareholders, who have common ownership, currently own 90% of AMTG. During the
six months ended June 30, 2005, BMKL and BST accounted for 100% of our net
sales; and for the years ended December 31, 2004 and 2003, except for an
insignificant amount of subcontracting income, BMKL and BST accounted for 100%
of our net sales.
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.
(http://www.eere.energy.gov/industry/metalcasting/pdfs/annual2002.pdf 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.
37
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.
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
38
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
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
39
recently discovered disease, its effects, contagiousness, and other
characteristics are still not fully understood. Any recurrence of the SARS
outbreak or a development of a similar health hazard in China may impact our
relationship with international customers and may further reduce their business
with us by shifting their manufacturing needs to manufacturers located outside
of China or by purchasing products manufactured outside of China. Any such
future shift of work orders or product purchases from us to companies based in
countries that are not so affected by SARS would have a material adverse effect
on our operations and financial condition.
The 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, or obtain any customer in the U.S., 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.
40
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
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.
41
Description of Property
- -----------------------
Our executive office is located in Los Angeles, California and consists of
approximately 500 square foot, which we lease on a month to month basis.
BJTY operates in a 4,952 square meter (53,303 square foot) facility developed
and owned by AMLF since July 10, 2005. The facility is located at North Hua Yuan
Road, Economic and Technology Development District, Lang Fang, Hebei, China.
Prior to July 10, 2005, BJTY currently leased a 14,004 square foot factory
facility from BST, a related party.
AMLF has land use rights to a total area of 30,291.6 square meters
(approximately 326,053 square foot) 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)
AMLF has developed its land since Feb 4, 2005, by engaging Lang Fang City Zhong
Tai Construction and Installation Group Co., Ltd. and completed first phase of
construction as of June 30, 2005 (See Exhibit 10.8) The facility has a total
area of 4,952 square meter (53,303 square foot) and is consisted of two stories.
The first floor is divided into three sections, 2,200 square meters (23,681
square foot) for workshops, 500 square meter (5,381 square foot) for inventory,
and a 276 square meter (2,970 square foot) cafeteria for employees. The second
floor is mainly used for office and administration, which is divided into
thirty-eight offices, two meeting rooms and one employee training classroom. The
total cost of the construction was RMB 9,000,000 (approximately USD $1,086,956).
As of August 30, 2005, we have paid a total of RMB 8,060,000 (USD $973,430). The
unpaid portion of RMB 940,000 ($113,526) is due to the Construction company for
services provided and materials purchased., of which RMB 200,000 (USD $24,154)
will be withheld by the Company as a qualification guarantee and will be payable
to the Construction company on June 30, 2008. We were able to allocate funds for
the construction from our cash flow.
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 one hundred and six 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 six months, we plan to interview and recruit at least one
accounting and operation management professional who has experience in
overseeing international operations for an estimated total cost of $44,000. We
plan to post personnel recruiting advertisements in local newspapers in Los
Angeles. Should we fail to obtain a qualified candidate using this method, we'll
consider employing experienced recruiting agency. We plan to allocate $4,000
initially to carry out aforementioned actions. 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. Should we
be able to locate qualified personnel as mentioned above, 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 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
43
the United States. Should we be able to locate such customer and make sales,
we'll be subject to risks in currency fluctuations since all of our manufacturer
are conducted in China. Fluctuations in exchange rates, primarily those
involving the U.S. dollar may affect our costs and operating margins which, in
turn, affect our revenues. In addition, these fluctuations could result in
exchange losses and increased costs in Renminbi terms. Please refer to page 40
for a greater explanation of the risks involved with foreign currency exchange
losses. 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.
- -----------------------------------------------------------------------
We have moved the operation facility of BJTY to the AMLF building as of July 10,
2005. In the next 12 months, we plan to maintain current course of operation
with cash flow from operations. We also plan for a second phase development to
expand our production capacity, by purchasing 14 additional units of Quick Turn
200C Mazak CNC Turning Centers. These units will increase our production
capacity by 39.5 tons per month (474 tons per annum) to a total production
capacity of 1,194 tons per annum. Upon the second phase of construction to be
carried out by AMLF to build a precision workshop, we also plan to equip the new
workshop with specialized equipments, such as machines for grinding, milling and
drilling, etc. We estimate the costs for purchasing and installation of
additional machines mentioned above to be $1,280,000 with $680,000 applied to
the 14 units of CNC Turning Centers and $600,000 to be applied to the other
specialized equipments. We do not plan to carry out these actions until we have
secured funds to fully fund this project. At this time, it is uncertain as if we
can secure necessary financing and uncertain as to if we will carry out this
second phase development. We have recently increased our production capacity
from 480 tons per annum to 720 tons per annum to meet the increased purchase
demand from our two customers, who are related parties. However, we cannot
guarantee that both or either one of these two customers will continue to
maintain the current orders or increase their orders in the future. We are
currently attempting to locate more customers as well as establish distribution
channels in the U.S. However, there's no guarantee that we'll be successful in
obtaining additional customers.
Plan of Operations for American Metal Technology (LangFang) Co., Ltd.
- ---------------------------------------------------------------------
In the last quarter of 2004, we have purchased land use rights for a total area
of 30,291.3 square meters (326,052 square foot) land in Lang Fang city, Heibei,
China with a total cost of $548,756. (See Exhibit 10.3) From February to June
30, 2005, we developed the land to build a two story factory facility. The total
cost of construction was $1,086,956, of which we paid a total of $852,977 as of
June 30, 2005. (See consolidated financial statements as of June 30, 2005) We've
paid $973,430, and have a remaining balance of $113,526 payable to Zhong Tai
Construction and Installation Group, of which, $24,154 is not payable until June
30, 2008. Amounts spend for land use right and construction are considered by us
to be a one time and non-reoccurring cost. We were able to allocate working
capital for expenses incurred from cash generated from operations and the
$990,000 long term loan we borrowed
44
from BST, a related party. SEE CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In the next 12 to 24 months, AMLF plans to build a precision casting workshop of
6,000 square meters (64,583 square foot)in the second phase development of its
factory. The workshop would be adjacent to the current facility occupied by
BJTY. As the first step, we will conduct research on any updates for precision
workshop design, any new technology or machinery for precision casting that
would be complimentary to our current productions. Then, we plan to hire an
architect to complete the blueprints for this workshop. Next, we plan to engage
Zhong Tai Construction and Installation Group or a similar construction company
to work on this project. Upon the engagement of the construction company, we
should be able to complete a detailed plan of construction which will include
the exact cost of construction, duration, and expected date of completion. We
estimate the cost of above engagements and constructions to be $1 million
dollars. Upon the completion of the construction, BJTY will purchase specialized
equipments as mentioned above. 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
Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004.
For the six months ended June 30, 2005, we reported a net income of $639,627,
and $639,157 in total comprehensive income after the deduction of ($470) for
currency translation adjustment, compared to a net income of $469,861 for the
six months ended June 30, 2004.
Revenues. Our recurring revenues are generated principally from sales
of regulators and dispensers for food and beverage equipments. Revenues in the
six months ended June 30, 2005 were $2,417,478, an increase of $352,552, or
17.1%, from $2,064,926 for the six months ended June 30, 2004. The increase was
due to purchase orders received from our two customers, who are related parties.
All of our revenues come from sales of our manufactured products to two related
corporations, Beijing Sande Technology Co., Limited ("BSS") and Beijing Mai Ke
Luo Machinery Co., Limited ("BMKL"), which is owned 20% by BST. See Certain
Relationships and Related Transactions section for more information. Since 2002,
we have experienced an increase of purchasing orders from these two customers.
However, we have not entered into any agreement with either of these two
companies to guarantee purchase orders in the future. Therefore, neither the
past orders nor increased earnings from these two customers is indicative of
45
future earnings. In the event that either of these customers choose to decrease
on the amount of purchasing from us or stop purchasing from us for any reason,
we will experience decreases in our revenues and affect our net earnings.
Cost of Sales. For the six months ended June 30, 2005, the cost of
sales was $1,669,683, an increase of $125,225, or 8.11%, from $1,544,458 for the
six months ended June 30, 2004. The increase was due to an overall increase in
revenue. However, the cost of sales as a percentage of revenue decreased from
74.8% for the six months ended June 30, 2004 to 69.1% for the six months ended
June 30, 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 23.51% and
35.51% of cost of sales for the six months ended June 30, 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 six months ended June 30, 2005 was $6,044, an increase of
$4,766, or 372.9%, from $1,278 for the six months ended June 30, 2004. The
increase was due to the additional machinery units purchased since June 30, 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 six months ended June
30, 2005 were $100,999, an increase of $51,565, or 104.3%, from $49,434 for the
six months ended June 30, 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 2.39% for the
six months ended June 30, 2004 to 4.18% for the six months ended June 30, 2005.
Gross Profit. Gross profit for the six months ended June 30, 2005 was
$747,795, an increase of $227,327, or 43.68%, from $520,468 for the six months
ended June 30, 2004. Gross profit expressed as a percentage of revenue increased
from 25.2% for six months ended June 30, 2004 to 30.9% for six months ended June
30, 2005.
Other Income Expense. Other income for the six months ended June 30,
2005 was ($1,416), an increase of $1,348, or 1982.3%, from ($68) for the six
months ended June 30, 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 six months ended June 30, 2005 was
$639,627, an increase of $169,766, or 36.1%, from $469,861 for the six months
ended June 30, 2004. Net income expressed as a percentage of revenue increased
46
from 22.75% in the six months ended June 30, 2004 to 26.46% in the six months
ended June 30, 2005. The increase was due to the increase in Revenue. The total
comprehensive income for the six months ended June 30, 2005 was $639,157 after
deducting a $470 loss in currency translation adjustment, whereas the Company
didn't incur this cost in the six months ended June 30, 2004. The currency
translation adjustment was due to the $390,000 loan the Company borrowed from
BST, a related party in March 2005. See Certain Relationships and Related
Transactions section for more information.
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 $4,088,413, an increase of $1,605,407,
or 64.7%, from $2,483,006 in the fiscal year ended December 31, 2003. The
increase was due primarily to an increase of purchase orders received from our
two main customers, who are related parties, and increase in 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 to meet the increasing
purchase demand from these two customers. However, there's no guarantee that
either one or both of them will maintain or continue to increasing their
purchasing amount in the future. Furthermore, there's no guarantee that they
will continue to purchase from us. Our revenues come from sales all of our
manufactured products to two related corporations, Beijing Sande Technology Co.,
Limited ("BST") and Beijing Mai Ke Luo Machinery Co., Limited ("BMKL"), which is
owned 20% by BST. 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 $3,133,28, an increase of $1,211,386 or 63%, from
$1,921,895 in the fiscal year ended December 31, 2003. The increase was due to
the overall increase in revenue.
Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization in the fiscal year ended December 31, 2004 was $5,652, an increase
of $2,554, or 82.4%, 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 $87,695, a decrease of
$3,395, or 4.03%, from $84,300 in the fiscal year ended December 31, 2002.
General and administrative expenses as a percentage of revenue decreased from
3.40% in fiscal 2003 to 2.14% 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
47
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 $955,132, an increase of $394,021, or 70.22%, from $561,111 in the fiscal
year ended December 31, 2003. Gross profit expressed as a percentage of revenue
increased from 22.6% in fiscal 2003 to 23.4% during fiscal 2004.
Net Income. Net income in the fiscal years ended December 31, 2004 was
$863,379, an increase of $387,972, or 81.6% increase, from $475,407 in the
fiscal year ended December 31, 2003. Net income expressed as a percentage of
revenue increased from 19.2% in fiscal 2003 to 21.1% in fiscal 2004. The
increase was due to the increase in Revenue.
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.
As of December 31, 2004, we had $212,842 in cash and cash equivalents compared
to $99,225 at December 31, 2003. The Company's working capital was $877,162 at
December 31, 2004 compared to $274,163 at December 31, 2003. As of June 30,
2005, our cash and cash equivalents position was $233,762 and working capital
was $930,675. This compares to a cash balance of $212,842 and working capital of
$887,162 as of December 31, 2004..
Operating Activities
Net cash from operating activities totaled $479,281 for the year ended December
31, 2004. This compares with cash flows from operating activities for $246,384
for the year ended December 31, 2003. The increase was due to $1,598,557
increase in revenues in fiscal 2004, the cost of goods increased by $1,211,386
and $387,972 increase in net profit. The value of accounts receivable and
accounts payable increased by $90,617 and $24,256 respectively at the end of
period.
Net cash from operating activities totaled $678,238 for the six months ended
June 30, 2005. This compares with cash flows from operating activities for
$572,837 for the corresponding period of the prior year. The increase was due to
increase of $352,552 in revenue and $169,766 in net income comparing
Investing activities
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 $962,167 spent for AMLF's the acquisition
of a land use right from government for manufacturing purpose.
48
Net cash used in investing activities were $(1,046,848) for the six months ended
June 30, 2005, compared to $(141,782) used in investing activities in the six
months ended June 30, 2004. The increase was mainly from the addition in plant
and machinery, the acquisition of a land use right from government for
manufacturing purpose and the construction in process for the AMLF factory.
Financing activities
Net cash from financing activities were $601,359 for the year ended December 31,
2004 compared to $195,652 from investing activities in the year ended December
31, 2003. $600,000 of the cash flow received from financing activities was a
long term no interest loan borrowed from a related party. SEE CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS. A total of 10,000 pre split common stock
were issued during 2004, of which 9,000 shares was issued in connection with the
acquisition of BJTY and 1,000 shares was issued for a proceed of $359 in cash.
SEE CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Net cash from in financing activities were $390,000 for the six months ended
June 30, 2005, compared to none used in investing activities in the six months
ended June 30, 2004. All the cash from financing activities for the six months
ended June 30, 2005 was from the long term no interest loan borrowed from BST, a
related party. SEE CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Advances to Suppliers
In the six months ended June 30, 2005, the Company has $(174,944) in advances to
suppliers compared to $(294,078) for the six months ended June 30, 2004. The
decrease was due to $270,000 in purchase of new machinery in prepayment in 2004.
The followings are our operating plans, cash required for each entity to fully
implement the plan, and source of capitals.
As of June 30, 2005, we had working capital of 30,675. Our plan of operation
over the next 12 months includes the recruitment of administrative personnel for
AMTG, continued operations of BJTY and purchase of additional machineries, and
second phase construction for AMLF. We estimate a total cash requirements for
AMTG and its two subsidiaries to be $3,407,011, which $237,011 for AMTG,
$2,080,000 for BJTY, and $1,090,000 for AMLF. Should we not to deploy operation
plans for AMTG and second phase developments for BJTY and AMLF, we'll need a
minimum of $800,000 to maintain current operations of BJTY. We believe that
existing cash balances, cash generated by operating activities, and funds
available under our cash flow from operation and cash on hand will be sufficient
to finance our present level of operating activities for BJTY for at least the
next 12 months. We will need significant additional working capital in order to
fund the operation plans for the recruitment of personnel for AMTG, the purchase
of additional machinery for BJTY and the second phase construction for AMLF. We
will endeavor to acquire the desired additional working capital through bank
loans or the potential sale of our securities through private offerings.
49
However, we cannot assure you that additional financing will be available on
terms favorable to us, or at all.
The cash requirements for AMTG are mostly administrative. We expect our cash
requirement for the next 12 months to be approximately $237,011, which includes
$85,011 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. $44,000 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. The cost involved in hiring personnel might increase should we choose
to employ a recruiting agency. The commission rate for recruiting agency is
usually based on a percentage of final negotiated salary for the management
personnel. We do not expect significant cash requirement in the areas of
advertising and marketing. We plan to allocate cash from operating activities
generated by our subsidiary, Beijing Tong Yuan Heng Feng Technology Co., Ltd.,
under the condition that such allocation does not interfere with the current
course of operations of BJTY. Should we fail to allocate funds from BJTY due to
any reason, we will try to obtain additional working capitals from bank loans or
the potential sales of our securities through private offerings. However,
there's no assurance that we can obtain such financing.
We estimate a total of $2,080,000 required for BJTY for the next 12 months. We
plan to maintain current course of operation of BJTY, which will require
approximately $800,000 in cash flow. We have moved BJTY operations to the new
facility constructed by AMLF. We believe that existing cash balances, cash
generated by operating activities, and fund available under our cash flow from
operations will be sufficient to continue the operations as currently in place.
In the next 12 months, we plan to expand BJTY operation capacity by purchasing
14 additional units of CNC Turning Centers with an estimated cost of $680,000.
Upon completion of second phase of construction to be done by AMLF, we also plan
to purchase additional machinery for an estimated cost of $600,000. We plan to
seek the additional capital required to purchase the machineries through debt or
equity based financing or loans from local banks and financial institutions in
China. We do not plan to purchase any additional machinery until we have secured
necessary financings.
AMLF will require $1,090,000 for the next 12 months. $90,000 is payable to the
Lang Fang City Zhong Tai Construction company ("Zhong Tai")that we hired for the
first phase of construction. The total payable to Zhong Tai is $113,256 with
$24,154 as a qualification guarantee to be held by AMLF and not payable until
June 30, 2008. We estimate the cost to carry out second phase of construction to
be $1 million. The second phase construction is to build a precision casting
workshop of 6,000 square meters (64,583 square foot) on the piece of land which
we have obtained land-use-rights. The new workshop would be adjacent to the
facility BJTY currently operate in. The estimated cost includes the money to be
spent to hire architect for blueprint designs, the cost of construction
materials, workers, etc. This expansion plan combined with our plan to purchase
additional machineries for BJTY will enable us to increase our production
capacity, expand production lines and volume and better fulfill market demand on
our products. At this time, we do not have the capital to complete the proposed
50
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.
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
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. The registered capital of the Company is $241,546, which
50% is at $120,773. Since the appropriated reserve amount in 2003 has already
reached the threshold amount, the opening balance of reserves in fiscal 2004 was
at $127,472, the management has decided not to appropriate further reserves 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
- ------------------------------------
As of June 30, 2005, we have two long term interest free loans for a total of
$990,000, of which a $600,000 loan due to a related party, which maturation is
December 31, 2005 with rights to apply for an extension. May 1, 2005, both AMTG
51
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 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.
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 - In 2004, the Company entered into two separate
purchase agreements with certain shareholders of BJTY. AMTG acquired 80% of the
52
registered capital of BJTY from a certain shareholder of BJTY for 7,200
(7,200,000 post split) common shares of AMTG. The Company through its 100% owned
subsidiary, American Metal Technology (Lang Fang) Co., Limited ("AMLF"), a PRC
limited liability company, 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. 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.
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
53
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 2004 and 2003
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.
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
54
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
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 BMKL, which are related parties and
share similar management as BJTY. 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 BMKL 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-
55
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
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 penny stocks 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
56
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 32 holders of our
common stock. 4,206,970 shares of common stock being registered pursuant to the
distribution and 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 5,793,030 shares held by 5 shareholders that may be eligible for sale
under Rule 144.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
company pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the 1933 Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the company of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, the company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Securities Act, and will be
governed by the final adjudication of such issue.
INTEREST OF NAMED EXPERTS AND COUNSEL
The legality of the securities offered hereby has been passed upon by The Law
Offices of Adam U. Shaikh, Chtd., Las Vegas, Nevada. Certain of the financial
statements of AMTG included in these prospectuses and elsewhere in the
registration statement, to the extent and for the periods indicated in their
reports, have been audited by Jimmy C.H. Cheung & Co., independent certified
public accountants given on the authority of the said firm as experts in
auditing and accounting.
57
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
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)
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 Technology(Holding) Co., Ltd. ("BST") and Beijing
Mai Ke Luo Machinery Co., Limited ("BMKL"). During the six months ended June 30,
2005, BJTY derived 100% of revenue from BMKL and BST. 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 $2,417,478 for six months ended June 30, 2005, which are 100%, 99.78%,
99,91% and 100% respectively.
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
58
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)
Shared Management Expenses
- --------------------------
For the six months ended June 30, 2005 Consolidated (unaudited) and for the year
ended December 31, 2004, the Company incurred costs in the amounts of $22,464,
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. As of June 30, 2005 consolidated
(unaudited) financial statements, the Company owed BST $138,527 for shared
management expenses.
Receivables
- -----------
For the six months ended June 30, 2005, the Company had advanced trade
receivables amounting to $186,487 to BST, a related party, and $417,378 in other
receivables to BST.
59
AMERICAN METAL TECHNOLOGY GROUP
CONSOLIDATED FINANCIAL STATEMENTS
AS OF Jun 30,2005
(UNAUDITED)
AMTG: Quarterly Report- As of June 30, 2005
- --------------------------------------------------------------------------------
AMERICAN METAL TECHNOLOGY GROUP
CONTENTS
Pages
Balance Sheets 1
As of Jun 30, 2005 Consolidated (Unaudited) and December 31, 2004
Statements of Operations for the six months ended Jun 30, 2005
Consolidated and 2004 (Unaudited) 2
Statements of Stockholders' Equity
for the six months ended Jun 30, 2005 Consolidated and 2004
(Unaudited) 3
Statements of Cash flows for the six months ended Jun 30, 2005
Consolidated (Unaudited) 4
Notes to Consolidated Financial Statement 5-12
AMERICAN METAL TECHNOLOGY GROUP
Balance Sheets
As of Jun 30, 2005 Consolidated (Unaudited)
-------------------------------------------
Notes Jun 30,2005 December 31
Consolidated 2004
Fiscal Year (Unaudited)
US$ US$
Assets
Current assets:
Cash and cash equivalents 233,762 212,842
Advanced to suppliers 2 459,974 285,030
Inventories 3 302,151 430,249
Due from related parties 10 603,865 126,679
Other current assets 4 120,207 64,403
Total current assets 1,719,959 1,119,203
Property, plant & equipment--net 5 2,654,318 1,678,674
Total assets 4,374,277 2,797,877
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 123,654 103,937
Other payable and accrued expenses 6 17,518 18,881
Other tax payables 34,245 335
Due to related parties 10 141,469 117,997
Advanced from customers 472,398 891
Total current liabilities 789,284 242,041
Long-term Liabilities: 8 990,000 600,000
Total Liabilities 1,779,284 842,041
Stockholders' equity:
Common stock, $0.001 par value, 20,000,000 shares authorized, 9 10,000 10,000
10,000,000 shares issued and outstanding
Additional paid-in capital 9 232,905 232,905
Retained earnings
Unappropriated 9 2,225,347 1,585,720
Appropriated 9 127,472 127,472
Accumulated other comprehensive income (loss) (731) (261)
Total stockholders' equity 2,594,993 1,955,836
Total liabilities and stockholders' equity 4,374,277 2,797,877
See accompanying notes to the consolidated financial statements
1
AMERICAN METAL TECHNOLOGY GROUP
Statement of Operations
for the six months ended Jun 30, 2005 and 2004 Consolidated (Unaudited)
-----------------------------------------------------------------------
Fiscal Year Notes THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
(Unaudited) (Unaudited)
2005 2004 2005 2004
US$ US$ US$ US$
Net sales
To related parties 1,421,384 1,219,119 2,417,478 2,064,926
Other - - -
1,421,384 1,219,119 2,417,478 2,064,926
Cost of sales 992,085 901,839 1,669,683 1,544,458
Gross profit 429,299 317,280 747,795 520,468
Operating expenses:
General and administrative expenses 42,645 24,319 100,999 49,434
Depreciation and amortization 3,043 752 6,044 1,278
Total operating expenses 45,688 25,071 107,043 50,712
Operating income 383,611 292,209 640,752 469,756
Interest income - - 291 173
Other (expense) income--net (43) (43) (1,416) (68)
Income before income taxes 383,568 292,166 639,627 469,861
Income taxes - -
Net income 383,568 292,166 639,627 469,861
Other comprehensive income (loss), net of taxes:
Currency translation adjustment - - (470) -
Total comprehensive income 383,568 292,166 639,157 469,861
Earnings per share:
Basic and diluted 0.04 0.03 0.06 0.05
Weighted average common shares outstanding:
Basic and diluted 10,000,000.00 10,000,000.00 10,000,000.00 10,000,000.00
See accompanying notes to the consolidated financial statements
2
AMERICAN METAL TECHNOLOGY GROUP
Statements of Stockholders' Equity
for the six months ended Jun 30, 2005 Consolidated (Unaudited)
--------------------------------------------------------------
Common Accumulated
Stock Additional Unappropriated Appropriated other Total
----- paid-in Retained retained comprehensive stockholders'
Shares Par value capital Earnings earning income equity
------ --------- -------- -------- ------- ------ ------
Balance, December 31,
2004 10,000,000 10,000 232,905 1,585,720 127,472 (261) 1,955,836
Net income 256,059 256,059
Transfer to statutory
and staff welfare
reserves
Foreign currency
exchange (470) (470)
Translation adjustment
Balance, Match 31, 2005 10,000,000 10,000 232,905 1,841,779 127,472 (731) 2,211,425
Net income 383,568 383,568
Transfer to statutory
and staff welfare
reserves
Foreign currency
exchange
Translation adjustment
Balance, Jun. 30, 2005 10,000,000 10,000 232,905 2,225,347 127,472 (731) 2,594,993
See accompanying notes to the consolidated financial statements
3
AMERICAN METAL TECHNOLOGY GROUP
Statements of Cash Flow
for the six months ended Jun 30, 2005 and 2004 Consolidated (Unaudited)
-----------------------------------------------------------------------
Fiscal Year Notes SIX MONTHS ENDED JUNE 30, (Unaudited)
2005 2004
US$ US$
Operating Activities:
Net income 639,627 469,861
Non-cash items affecting net income:
Depreciation and amortization 5 71,204 31,576
Changes in operating assets and liabilities, net of effects
of acquisitions:
Advances to suppliers (174,944) (294,078)
Other current assets (55,804) 2,110
Inventories 128,098 10,996
Due from related parties (477,186) 36,062
Accounts payable 19,717 5,892
Other payable and accrued expenses (1,363) 4,097
Advances from a customer 471,507 208,995
Other taxes payable 33,910 25,152
Due to related parties 23,472 72,174
Net cash from operating activities 678,238 572,837
Investing Activities:
Additions to property, plant and equipment 5 (1,046,848) (141,782)
Proceeds from sale of property, plant & equipment - -
Net cash used in investing activities (1,046,848) (141,782)
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 20,920 431,055
Cash and cash equivalents:
Cash and cash equivalents at beginning of period 212,842 99,225
Cash and cash equivalents at end of period 233,762 530,280
See accompanying notes to the consolidated financial statements
4
AMERICAN METAL TECHNOLOGY GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of Jun 30, 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 the second 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
5
AMTG: Quarterly Report - As of Jun 30, 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
6
AMTG: Quarterly Report - As of Jun 30, 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 Jan to Jun 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).
Comprehensive income
7
AMTG: Quarterly Report - As of Jun 30, 2005
- --------------------------------------------------------------------------------
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 on Jun 30, 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 on Jun 30, 2005 Consolidated (unaudited) and December 31, 2004 consist
of the following:
At June 30,2005 At December 31, 2004
(Unaudited)
US$ US$
Inventory consists of the following:
Raw materials 71,041 294,646
Work-in-progress 149,877 54,370
Finished goods 81,233 81,233
--------- ---------
302,151 430,249
========= =========
For the six months ended Jun 30, 2005 Consolidated (unaudited) and December 31,
2004 no provision for obsolete inventories was recorded by the Company.
4. Other current assets
Other current assets on Jun 30, 2005 Consolidated and December 31, 2004 consist
of the following:
8
AMTG: Quarterly Report - As of Jun 30, 2005
- --------------------------------------------------------------------------------
At June 30,2005 At December 31, 2004
(Unaudited)
US$ US$
Other receivables 117,411 44,506
Prepaid expenses 2,796 15,362
Value-added tax receivables - 4,535
--------- ---------
120,207 64,403
========= =========
5. Property, plant and equipment
The following is a summary of property, plant and equipment on Jun 30, 2005
Consolidated and December 31, 2004:
At June 30,2005 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 203,180 131,976
Net value of fixed assets 1,801,341 1,675,963
Construction in process 852,977 2,711
--------- ---------
Total fixed assets 2,654,318 1,678,674
========= =========
Depreciation expense for the six months ended Jun 30, 2005 and for the six
months ended Jun 30, 2004 was $71,204 and $31,576 respectively.
The total increment of $574,029 between the end of 2004 and Jun 30, 2005 has
been used in construction in process of new factory.
6. Other payables and accrued liabilities
Other payables and accrued liabilities on Jun 30, 2005 Consolidated (unaudited)
and December 31, 2004 consist of the following:
At June 30,2005 At December 31, 2004
(Unaudited)
US$ US$
Education surtaxes payable
Employees education accrued expenses 3,138 1,796
Accrued liabilities 11,232 16,077
Other payables 3,148 1,008
--------- ---------
17,518 18,881
========= =========
7. Commitments and contingencies- Employee benefits
9
AMTG: Quarterly Report - As of Jun 30, 2005
- --------------------------------------------------------------------------------
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 six months ended Jun 30, 2005 and 2004 were
$3,269 and $1,468 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 lender BST agrees to offer a long-term free interest loan with a total
amount of USD Six Hundred Thousand Dollars ($600,000.00) to the borrower AMTG.
The loan should be interest free and its period is from the date of agreement
till maturation date. The Borrower may apply for an extension by submit a
written notification to the lender 30 days prior to the maturation date. If the
borrower did not apply for a extension on the maturation date, the Borrower
shall remit full amount of this loan to the lender, otherwise penalty will be
applied to the borrower.
The lender BST agrees to offer a long-term free interest loan with a total
amount of USD Three Hundred Ninety Thousand Dollars ($390,000.00) to the
borrower AMTG . The loan should be interest free and its period is from January
8, 2005 till January 31, 2006 (Maturation Date). The Borrower may apply for an
extension by submit a written notification to the lender 30 days prior to the
maturation date. If the borrower did not apply for a extension on the maturation
date, the Borrower shall remit full amount of this loan to the lender,
otherwise penalty will be applied to the borrower.
The Borrower and lender agreed to extend this loan till December 31, 2006 by
signing an amendment to the loan agreement on May 01, 2005, and the period of
the loan has been extended to December 31, 2006. The Borrower shall remit full
amount of this loan to the lender. There will be no penalty if the borrower
chooses to remit part or full capital of the loan prior to maturation.
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 $241,546 as of Jun
30, 2005. Management of BJTY has decided to suspend further appropriation of
10
AMTG: Quarterly Report - As of Jun 30, 2005
- --------------------------------------------------------------------------------
retained earnings in the second quarter of 2005.
10. Related party transactions
The Company's significant related party transactions affecting the results of
operations are as follows:
For the six months For the six months
ended June 30,2005 ended June 30,2004
(Unaudited) (Unaudited)
US$ US$
Sales to BMKL 2,128,356 1,938,076
Sales to BST 289,122 126,850
------------------ ------------------
Total sales to related parties 2,417,478 2,064,926
================== ==================
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. Due from/to related parties as of Jun 30, 2005 and December 31, 2004 are
as follow:
For the six months For the six months
ended June 30,2005 ended June 30,2004
(Unaudited) (Unaudited)
US$ US$
Due from related parties
Trade receivable from BMKL - -
Trade receivable from BST 186,487 -
Advance to BST - -
Other receivable from BST 417,378 -
------------------ ------------------
Total due from related parties 603,865 -
================== ==================
Due to related parties:
Salary payable to BST 138,527 82,402
Other payable to BST 2,942 49,675
------------------ ------------------
141,469 132,077
Loans from BST 990,000
Total due to related parties 1,131,469 132,077
================== ==================
For the six months ended Jun 30, 2005 and years ended December 31, 2004, the
Company incurred costs of a related company of $22,464 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 $138,527as of Jun 30, 2005
respectively for shared management expenses.
11. Concentrations and risks
During the six months ended Jun 30, 2005 and Jun 30, 2004, 100% of the revenues
were derived from companies located in China and 100% of the Company's assets
were located in China.
11
AMTG: Quarterly Report - As of Jun 30, 2005
- --------------------------------------------------------------------------------
During the six months ended Jun 30, 2005 and Jun 30, 2004, the Company derived
100% and 100% of their revenues from a related entity and a stockholder.
In the six months ended Jun 30, 2005, the company purchased 87.29% of its raw
materials from one supplier in the PRC. In the six months ended Jun 30, 2004,
the Company purchased 68% 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 2
As of December 31, 2004 and 2003 Consolidated
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
Beijing China
Date: March 13, 2005
1
Consolidated Balance Sheet
Notes Consolidated
Fiscal Year 2004 2003
US$ US$
Assets
Current assets:
Cash and cash equivalents 1 212,842 99,225
Advanced to suppliers 2 285,030 181,800
Inventories 3 430,249 116,227
Due from related parties 11 126,679 36,062
Other current assets 4 64,403 2,135
Total current assets 1,119,203 435,449
Property, plant & equipment--net 5 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 7 18,881 12,801
Other tax payables 335 8,901
Due to related parties 11 117,997 59,903
Advanced from customers 891 -
Total current liabilities 242,041 161,286
Long Term Liabilities: 9 600,000 -
Total Liabilities 842,041 161,286
Stockholders' equity:
Common stock, $0.001 par value, 20,000,000 shares authorized,
10,000,000 shares issued and outstanding 10 10,000 9,000
Additional paid-in capital 10 232,905 232,546
Retained earnings
Unappropriated 10 1,585,720 722,341
Appropriated 10 127,472 127,472
Accumulated other comprehensive income (loss) (261) -
Total stockholders' equity 1,955,836 1,091,359
Total liabilities and stockholders' equity 2,797,877 1,252,645
See accompanying notes to the consolidated financial statements
2
Consolidated Statement of Operations
Consolidated
Fiscal Year Notes 2004 2003
US$ US$
Net sales
To related parties 11 4,079,447 2,480,890
Other 8,966 2,116
4,088,413 2,483,006
Cost of sales 11 3,133,281 1,921,895
Gross profit 955,132 561,111
Operating expenses:
General and administrative expenses 6 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
Common Accumulated
stock Additional Unappropriated Appropriated other Total
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 1,000,000 1,000 359 1,359
the year
Net income 863,379 863,379
Transfer to statutory
and staff welfare
reserves -
Foreign currency
exchange -261 -261
translation adjustment
Balance, December 31,
2004 10,000,000 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 5 105,284 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 5 (978,524) (617,792)
Proceeds from sale of property, plant & equipment 5 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.
6
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
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.
7
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.
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.
8
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).
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
9
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.
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. 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.
3. 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
================== ==================
4. 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 15,362 2,102
Value-added tax receivables 4,535 -
------------------ ------------------
64,403 2,135
================== ==================
5. 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.
6. 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 $9,742. Such errors have been corrected in the
Consolidated Statement of Operations in 2003 for comparison purpose.
7. Other payables and accrued liabilities
Other payables and accrued liabilities at December 31, 2004 Consolidated and
December 31, 2003 consist of the following:
11
At December 31,
2004 2003
US$ US$
Education surtaxes payable - 248
Employees education accrued expenses 1,796 570
Accrued liabilities 16,077 11,983
Other payables 1,008 -
------------------ ------------------
18,881 12,801
================== ==================
8. 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.
9. Long term loans
The lender BST agrees to offer a long-term free interest loan with a total
amount of USD Six Hundred Thousand Dollars ($600,000.00) to the borrower AMTG.
The loan should be interest free and its period is from the date of agreement
till maturation date. The Borrower may apply for an extension by submit a
written notification to the lender 30 days prior to the maturation date. If the
borrower did not apply for a extension on the maturation date, the Borrower
shall remit full amount of this loan to the lender, otherwise penalty will be
applied to the borrower.
10. 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
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)
12
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 $241,546 as of Dec
31, 2004. Management of BJTY has decided to suspend further appropriation of
retained earnings in 2004.
11. Related party transactions
The Company's significant related party transactions affecting the results of
operations are as follows:
Year Ended December 31,
2004 2003
US$ 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
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.
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 BST 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
=============== ===============
13
Account receivable of $36,062 from a related company as of Dec 31, 2003 was
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.
12. 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.
================================================================================
60
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada Corporation Laws and certain provisions of AMTG's Bylaws, under
certain circumstances, provide for indemnification of our officers, directors
and controlling persons against liabilities that they may incur in such
capacities. A summary of the circumstances in which such indemnification is
provided for is contained herein, but this description is qualified in its
entirety by reference to our Bylaws and to the statutory provisions.
The specific statute, charter provision, bylaw, contract, or other arrangement
which any controlling person, director or officers of the Registrant is insured
or indemnified in any manner against any liability which he or she may incur in
their capacity as such, is as follows:
Nevada Statutes
- ---------------
Under the governing Nevada statutes, director immunity from liability to a
company or its shareholders for monetary liabilities applies automatically
unless it is specifically limited by a company's articles of incorporation. Our
articles of incorporation do not contain any limiting language regarding
director immunity from liability. Excepted from this immunity are:
1. a willful failure to deal fairly with the company or its shareholders in
connection with a matter in which the director has a material conflict of
interest;
2. a violation of criminal law (unless the director had reasonable cause to
believe that his or her conduct was lawful or no reasonable cause to believe
that his or her conduct was unlawful);
3. a transaction from which the director derived an improper personal profit;
and
4. willful misconduct.
By-Laws
- -------
The Bylaws of AMTG state as follows:
61
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
Section 1. ACTIONS OTHER THAN BY THE CORPORATION. The corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, except an action by or in the
right of the corporation, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
Section 2. ACTIONS BY THE CORPORATION. The corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses, including amounts paid in settlement and attorneys'
fees, actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the corporation or
for amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
Section 3. SUCCESSFUL DEFENSE. To the extent that a director, officer,
employee or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections 1
and 2, or in defense of any claim, issue or matter therein, he must be
indemnified by the corporation against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense.
62
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:
(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
63
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
64
(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.
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
- -------------------------------------------------------------------------------------------
65
- -------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------
66
- -------------------------------------------------------------------------------------------
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 16,355,000 1,977,630
capital
- -------------------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------
67
- -------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------
68
- -------------------------------------------------------------------------------------------
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 500,000 60,459
capital
- --------------------------------------------------------------------------------------------------
EXHIBITS
3.1(a) Articles of Incorporation of AMTG.
3.1(b) Amended Articles of Incorporation of AMTG.
3.2 Bylaws of AMTG.
4.1 Form of Stock Certificate.
5.1 Opinion of The Law Offices of Adam U. Shaikh, Chtd.
regarding legality of shares.
10.1 Equity Purchase Agreement (Beijing Sande Technology
(Holding) Co. Ltd and American Metal Technology Group).
(dated June 1, 2004)
10.2 Equity Purchase Agreement (Beijing Sande Shang Mao Co.,
Ltd., American Metal Technology (Lang Fang) Co., Ltd, and
American Metal Technology Group). (dated August 8, 2004)
10.3 American Metal Technology (Lang Fang) Co., Ltd
Land-Use-Rights Agreement with the Peoples Republic of
China.
10.4 Lease Agreement for Factory. (dated July 15, 2004)
10.5 Loan Agreement with Beijing Sande Technology (Holding) Co.,
Ltd. (dated August 15, 2004)
10.6 Amendment to Loan Agreement with Beijing Sande Technology
(Holding) Co., Ltd. (dated May 1, 2005)
69
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
(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.
70
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 September 30, 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
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: September 30, 2005
71