As filed with the Securities and Exchange Commission on September 18, 2003
Registration No.______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM F-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
APEX WEALTH ENTERPRISES LIMITED
____________________
(Exact name of registrant as specified in its charter)
The British Virgin Islands N/A N/A
.............. ............. ..................
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) No.)
Unit 1502, 15th Floor
World Wide House
19 Des Voeux Road Central, Hong Kong
(852) 2736-2111
.......................................
.
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
NATIONAL REGISTERED AGENTS, INC.
875 Avenue of the Americas,
Suite 501 New York, New York 10001
1-800-550-6724
....................................
Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH COPIES TO:
Simon C. Luk, Esq. Stephen Davis, Esq.
Heller Ehrman White & McAuliffe LLP Heller Ehrman White & McAuliffe LLP
35th Floor, One Exchange Square 120 West 45th Street
8 Connaught Place New York, New York 10036
Central, Hong Kong 212-832-8300
011-852-2292-2000
Approximate date of commencement of proposed sale to the public: as soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box: [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering period. [_]
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 period. [ ]
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 period.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price Per Aggregate Offering Registration
Unit Price Fee
Common Stock , $0.01 par value:
To be sold to the public for cash. 2,000,000 $0.01 $20,000 $162.00
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that the registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
APEX WEALTH ENTERPRISES LIMITED
CROSS REFERENCE SHEET
Pursuant to Rule 404(a) and Item 501(b) of Regulation S-K
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REGISTRATION STATEMENT ITEM AND HEADING PROSPECTUS CAPTION
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1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus Facing Page; Outside Front Cover Page
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2. Inside Front and Outside Back Cover Pages of
Prospectus Inside Front Cover Page; Outside Back Cover Page
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3. Summary Information and Risk Factors Prospectus Summary; Summary Financial
Information; Risk Factors
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4. Use of Proceeds
Prospectus Summary; Use of Proceeds
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5. Determination of Offering Price Arbitrary Determination of Offering Price
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6. Dilution Dilution
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7. Selling Security Holdings N/A
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8. Plan of Distribution Outside Front Cover Page; Plan of Distribution
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9. Description of Securities to be Registered Prospectus Summary; Description of Securities;
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10. Interests of Named Experts and Counsel Experts; Legal Matters
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11. (a). Information with Respect to the Registrant Prospectus Summary; Use of Proceeds; Dividends
and Dividend Policy; Dilution; Capitalization;
Summary of Financial Information; Management's
Discussion and Analysis of Financial Condition
and Results of Operations; Business;
Management; Description of Securities; Shares
Eligible for Future Sale; Taxation; Certain
Transactions; and Financial Statements
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12. Disclosure of Commission Position on Indemnification N/A
for Securities Act Liabilities
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Preliminary Prospectus
SUBJECT TO COMPLETION
Apex Wealth Enterprises Limited
2,000,000 shares of common stock
We are offering to sell 2,000,000 shares to the public for cash at an
offering price of $0.01 per share. After we complete this offering, our founder
will offer to sell up to 10,000,000 shares to third parties in connection with a
future business combination. We will not receive any proceeds from the sale of
shares by our founder.
We are a recently organized company and have not engaged in any business to
date. We have no specific plans to engage in any particular business in the
future. We have approximately $100,256 in cash and no other tangible assets at
the date of this prospectus. The purpose of this offering is to create a "public
shell" that will attempt to negotiate a business combination with another
company that has both a business history and operating assets. The offering
price for our shares does not bear any relationship to established valuation
standards.
We are a "blank check company," as defined in Rule 419 of the Securities
Act of 1933. This is an initial public offering of our shares. We will sell the
2,000,000 shares offered by us on a "best efforts, all or none" basis for a
period of 90 days from the date of this prospectus. We are offering the shares
in 1,000 share blocks. The minimum subscription we will accept from any investor
is 1,000 shares. We intend to offer the shares on a "self-underwritten" basis.
Accordingly, our officers and directors will attempt to sell the shares without
the assistance of a professional underwriter.
We will deposit your money in a segregated subscription escrow account
until we have received subscriptions for 2,000,000 shares. If all of the shares
are not purchased within 90 days, we will terminate this offering and refund
your money, together with any interest we earn on the subscription escrow
account. If we successfully complete the offering, 10% of the subscription
proceeds will be immediately released to us. The remaining 90% of the
subscription proceeds, together with the stock certificates for the shares
purchased by investors, will be retained in escrow for the benefit of investors
until we comply with the requirements of Rule 419 and complete a business
combination.
There has never been a public market for our shares. You will not receive
your stock certificate or be permitted to sell your shares until we comply with
the requirements of Rule 419 and complete a business combination. At that time,
you will be allowed to sell your shares, but there can be no assurance that
anyone will want to buy them. If a public market for our shares develops, it is
likely to be illiquid and volatile. 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 offense.
Our shares are EXTREMELY speculative. The offering described in this Prospectus involves a VERY high degree of risk.Persons
who cannot afford to lose their entire investment should not consider an investment in our shares. See "Risk Factors"
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Price to Public (1) Underwriting Discounts Proceeds to the Company
and Commissions (2)
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Per share $0.01 -- $0.01
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TOTAL OFFERING (3) $20,000 -- $20,000
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(1) Subscribers should make their check payable to " ___________ Bank, Subscription Escrow Agent for Apex Wealth Enterprises
Limited."
(2) We will not pay any underwriting discounts, selling commissions or finders' fees in connection with this offering.
(3) We expect to pay out-of-pocket cash expenses of approximately $24,622 in connection with this offering.
Any changes to this offering will be made by means of an amendment to our registration statement and this prospectus.
Since this offering is subject to Rule 419, you will not receive a certificate for your shares until the safekeeping,
disclosure and reconfirmation requirements of Rule 419 are satisfied.
The date of this prospectus is September 17, 2003
THESE SECURITIES ARE HIGHLY SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK,
AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS" FOR SPECIAL RISKS CONCERNING THE COMPANY AND
"DILUTION" FOR INFORMATION CONCERNING DILUTION OF THE BOOK VALUE OF THE
INVESTORS' SHARES FROM THE PUBLIC OFFERING PRICE.
PRIOR TO THIS OFFERING THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK
OF THE COMPANY. THERE IS NO ASSURANCE THAT ANY TRADING MARKET IN THESE
SECURITIES WILL EVER DEVELOP.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") on Form
F-1 under the Securities Act of 1933 with respect to the Shares offered hereby.
This prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. The Company will be subject to the
reporting requirements of the Securities Exchange Act of 1934 (the "Exchange
Act"), but is currently not a reporting company. The reports and other
information filed by the Company may be inspected and copied at the public
reference facilities of the Commission in Washington, D.C., at prescribed rates.
Descriptions contained in this prospectus as to the contents of any contract or
other document filed as an exhibit to the Registration Statement are not
necessarily complete and each such description is qualified by reference to such
contract or document.
The Company intends to furnish to its stockholders, after the close of each
fiscal year, an annual report relating to the operations of the Company and
containing audited financial statement examined and reported upon by an
independent certified public accountant. In addition, the Company may furnish to
stockholders such other reports as may be authorized, from time to time, by the
Board of Directors. The Company's year end is December 31.
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SHALL NOT UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF; HOWEVER, ANY CHANGES THAT MAY
HAVE OCCURRED ARE NOT MATERIAL TO AN INVESTMENT DECISION. IN THE EVENT THERE
HAS BEEN ANY MATERIAL CHANGES IN THE AFFAIRS OF THE COMPANY, A POST-EFFECTIVE
AMENDMENT WILL BE FILED. THE COMPANY RESERVES THE RIGHT TO REJECT ANY ORDER,
IN WHOLE OR IN PART, FOR THE PURCHASE OF ANY OF THE SHARES OFFERED HEREBY.
Until 90 days after the date when the deposited funds and deposited
securities are released from the escrow account, all dealers effecting
transactions in the Common Stock, whether or not participating in this
distribution, may be required to deliver a prospectus. This is in addition to
the obligation of dealers to deliver a prospectus when acting as underwriters
with respect to their unsold allotments or subscriptions.
Table of contents
PROSPECTUS SUMMARY................................................................................................9
SUMMARY FINANCIAL INFORMATION....................................................................................10
RISK FACTORS.....................................................................................................13
Specific Risks of Our Rule 419 Offering..........................................................................17
ARBITRARY DETERMINATION OF OFFERING PRICE........................................................................21
USE OF PROCEEDS..................................................................................................21
DIVIDEND AND DIVIDEND POLICY.....................................................................................22
CAPITALIZATION...................................................................................................23
DILUTION.........................................................................................................23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................25
BUSINESS.........................................................................................................26
MANAGEMENT.......................................................................................................34
PRINCIPAL STOCKHOLDERS...........................................................................................36
CERTAIN TRANSACTIONS.............................................................................................37
DESCRIPTION OF SECURITIES........................................................................................37
SHARES ELIGIBLE FOR FUTURE SALE..................................................................................38
PLAN OF DISTRIBUTION.............................................................................................40
EXPERTS..........................................................................................................42
LEGAL MATTERS....................................................................................................42
ADDITIONAL INFORMATION...........................................................................................42
APPENDIX I......................................................................................................A-1
FINANCIAL STATEMENTS............................................................................................F-1
PROSPECTUS SUMMARY
The following is a summary of certain detailed information discussed
elsewhere in this prospectus. This summary does not contain all the information
you should consider before making an investment decision. You should carefully
read the entire prospectus, including our financial statements and both
appendixes.
The Company
Apex Wealth Enterprises Limited is a "blank check company" that has
approximately $100,256 in cash and no other tangible assets on the date of this
prospectus. The purpose of this offering is to create a "public shell" that will
attempt to negotiate a business combination with another company that has both a
business history and operating assets. We will refer to acquisition candidates
as "targets" in this prospectus. We have not engaged in any business activities
to date, and we have no specific plans to engage in any particular business in
the future. We will not restrict our search for a target to any particular
industry. Our business plan is entirely contingent on the successful completion
of this offering.
If we complete this offering, we believe the owners of a target may
conclude that a business combination with us is an attractive alternative to an
initial public offering. We have not identified a target or commenced
negotiations for a business combination. There can be no assurance that we will
be able to identify a target or negotiate a business combination.
We were incorporated in the British Virgin Islands on April 8, 2002. Our
principal executive office is located at Unit 1502, 15th Floor, World Wide
House, 19 Des Voeux Road Central, Hong Kong, SAR. Our telephone number is (852)
2736-5511.
The Offering
Our founder bought 10,000,000 (post stock split) shares of common stock for
$100,000 in cash when they organized our company. These founder's shares are the
only stock outstanding at the date of this prospectus.
We are offering 2,000,000 shares of common stock to the public at a price
of $0.01 per share. We are offering the shares in 1,000 share blocks. The
minimum subscription we will accept from any investor is 1,000 shares. After we
complete this offering, our founder will offer to sell up to 10,000,000 shares
to third parties in connection with a future business combination.
Use of Proceeds
We will receive total cash proceeds of $20,000 from this offering. Of this
amount, $18,000 will be deposited in the Rule 419 escrow and $2,000 will be
released to us. We expect to pay approximately $24,662 in out-of-pocket costs in
connection with this offering. Therefore, this offering will not be a
significant source of cash that can be used to finance our operations.
Enforceability Of Civil Liabilities
We are organized under the laws of The British Virgin Islands, and all or a
substantial portion of our assets are or may be located outside the United
States. In addition, certain of the directors and officers and certain of the
experts named herein are nationals or residents of Hong Kong, and all or a
substantial portion of the assets of such persons are or may be located outside
the United States. We have appointed National Registered Agents, Inc., 875
Avenue of the Americas, Suite 501 New York, New York 10001 as our agent to
receive service of process with respect to any action brought against us in the
United States District Court for the District of New York under the laws of the
United States or any state, or any action brought against it in the Supreme
Court of the State of New York in the County of New York under the laws of the
State of New York. However, it may be difficult for investors to enforce outside
the United States judgments against us or any of our officers and directors or
the experts named herein obtained in the United States in any such actions,
including actions predicated upon the civil liability provisions of the United
States federal securities laws. As a result, it may be difficult for investors
to effect service of process within the United States upon such persons or to
enforce against them judgments obtained in United States federal or state
courts, including judgments predicated upon the civil liability provisions of
United States federal securities laws.
The Offering Described In This Prospectus Is Subject To Rule 419 Of The
Securities Act Of 1933
We are a "blank check company," as defined in Rule 419(a)(2) of the
Securities Act of 1933, and this offering is subject to the requirements of that
rule. Our offering may also be referred to as a "blind pool" because neither you
nor we know what our business will ultimately be. The following introductory
information explains the requirements of Rule 419 and describes the procedures
we will follow to insure compliance therewith. Appendix I to this prospectus is
the full text of Rule 419.
SUMMARY FINANCIAL INFORMATION
The following table presents summary information on our financial condition
and results of operations as of May 30, 2003 and for the period from April 8,
2002 (inception) through May 30, 2003. It also presents a pro forma case which
gives immediate effect to the completion of this offering. The Summary Financial
Information is qualified in its entirety by our financial statements.
As of
May 30, 2003
Statement of operations $
Revenues 0
Net Loss (4,072)
Net Loss Per Share 0.0004
Shares outstanding 10,000,000
----------------
Balance Sheet Date As of After
May 30, 2003 Offering
Current Assets 100,256 102,256
Total Assets 100,256 102,256
Total Liabilities 4,328 28,990
Shareholders' Equity 95,928 73,266
================= ===========
Plan of Operations
After we complete this offering, our founder may offer to sell or transfer
up to 10,000,000 founder's shares to the owners of a target, or other persons
who are involved in the proposed transaction. The founder's shares have not
been included in our registration statement. We will not receive any proceeds
from the sale of the founder's shares.
The terms of any proposed resale or other transfer of the founder's shares
will be determined by arms-length negotiation between our founder and the
representatives of a potential target. "Shell companies" such as ours typically
maintain a market value that depends on a variety of factors. We expect that the
ultimate sales price of the founder's shares will be in line with the market
value for similar shells at the time of the transaction.
The following table provides summary pro forma information on the potential
future ownership of our company if all of the founder's shares are sold or
transferred to persons designated by the owners of a target.
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Current Officers and Directors Original Stock issuances and Likely future Percent of
holdings (sales) ownership total
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Founder's shares 10,000,000 (10,000,000) - 0%
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Investors in this offering 2,000,000 2,000,000 17%
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Owners of the target Purchase of 10,000,000 10,000,000
founder's shares 83%
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Total 12,000,000 12,000,000 100%
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Total shares outstanding after business 12,000,000 100.00%
combination
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Before a business combination can be completed, we must file a
post-effective amendment to our registration statement and deliver a final
prospectus to each investor. Our final prospectus will provide detailed
information on the terms of the proposed business combination and the terms of
any agreements for the sale or transfer of the founder's shares. Investors will
then have not less than 20 days and no more than 45 days to determine whether
they want to remain stockholders of our company.
RISK FACTORS
Our shares are extremely speculative and the offering described in this
prospectus involves a very high degree of risk. In fact, our officers and
directors believe that a public offering by a blank check company like ours
involves one of the most speculative and risky investment opportunities
available. You should carefully consider the specific risks described below,
together with the other information in this prospectus, before making a decision
to invest in our shares. Persons who cannot afford to lose their entire
investment should not purchase our shares.
General Risks of Rule 419 Offerings
You will not be able to withdraw your money from the subscription escrow or
the Rule 419 escrow.
All subscriptions to purchase shares are irrevocable upon receipt by our
subscription escrow agent. Accordingly, you will have no right to withdraw your
money from the subscription escrow during the offering period. If we
successfully complete this offering, you will have no right to withdraw your
money from the Rule 419 escrow. If we negotiate a business combination, you will
be given an opportunity to either reconfirm your investment, or receive a refund
of your pro rata share of the escrowed funds. If we fail to complete a business
combination, you will receive a liquidating distribution equal to your pro rata
share of our remaining assets, together with a distribution from the Rule 419
escrow equal to your pro rata share of the escrowed funds. You should not
purchase our shares if you are seeking investment liquidity.
OUR SUBSCRIPTION ESCROW WILL BE INVESTED AT ORDINARY PASSBOOK SAVINGS
RATES, AND WE WILL KEEP THE INTEREST IF THIS OFFERING IS SUCCESSFULLY COMPLETED.
The funds we deposit in our subscription escrow will be held in an insured
bank deposit at ordinary passbook savings rates. If we fail to complete this
offering, your subscription funds will be returned to you, together with any
interest we earn on your money while it is deposited in the subscription escrow.
If we sell all 2,000,000 shares offered by us, the interest we earn on the
subscription escrow will be transferred to the Rule 419 escrow. In that event,
you will not receive any credit for the interest we earn on your subscription
funds during the period between the date of your investment and the closing date
of the offering. Instead, all interest we earn on the subscription escrow will
simply be treated as additional subscription proceeds and allocated among all
investors on a pro rata basis.
10% OF YOUR INVESTMENT WILL BE IMMEDIATELY USED TO PAY OFFERING COSTS.
While we will deposit 90% of the offering proceeds in the Rule 419 escrow,
we will use 10% of the proceeds to pay the costs of this offering. In case of a
distribution of the offering proceeds, only $18,000 will be available for
distribution.
THE ESCROWED FUNDS WILL NOT GENERATE SUBSTANTIAL INTEREST.
The escrowed funds will be invested in insured bank deposits, open-end
money market funds, or short-term U.S. Government securities. Currently,
investments of this nature yield an annual return of less than 3%, far less than
other investment options. If we negotiate a business combination and you
reconfirm your investment, the interest we earn on the escrowed funds will be
released to us. If we are obligated to distribute your share of the escrowed
funds, you will also receive your pro rata share of any interest we earn.
We will not generate any operating revenue until we complete a business
combination. While our primary business goal is to increase stockholder value by
concluding a business combination with an operating company, we cannot give you
any assurance that any target we acquire will have material revenue, profitable
operations or other characteristics that are prerequisites for a viable public
company.
We will have limited operating cash and may be forced to abandon our
business plan.
After paying our offering expenses and current liabilities and establishing
the Rule 419 escrow, we will have approximately $73,266 in cash. We will use
this cash to pay the costs of operating our company and the fees of our
independent auditors, our outside legal counsel and any other experts we hire to
assist in our investigations. If we spend our available cash and are unable to
obtain additional financing, we may be forced to abandon our business plan,
liquidate our company and distribute the escrowed funds to investors.
Our officers and directors will be able to approve all corporate actions
without your consent.
After this offering, Mr. Li Sze Tang, one of our officers and a director
will own 83.33% of our outstanding common stock. Therefore, he will have the
voting power to unilaterally approve all corporate transactions without the
consent of any other stockholders. You will have no effective voice in decisions
made by our company.
The process of negotiating a business combination between a public shell
and a private company involves a delicate balancing of interests that is
frequently unsuccessful.
The vast majority of private companies do not have the fundamental business
potential to become viable public companies. Even when a private company has the
potential, a well-structured business combination can be very difficult to
negotiate and implement. The full range of legal and economic consequences of a
shell transaction are not well understood by most legal and financial
professionals, even professionals who specialize in securities matters.
Therefore, it can be difficult to strike a balance between the conflicting
interests of the shell and the private company. We can give you no assurance
that our officers and directors have the education, experience and ability
required to negotiate a well-structured business combination. Further, we can
give you no assurance that the officers of a target, or the professionals
employed by them, will have the education, experience and ability required to
successfully implement any business combination we ultimately negotiate. If the
combined companies are unable to create a sustained public market for our stock,
you may be unable to sell your shares at any price.
You will not have an opportunity to approve or reject specific terms of a
proposed business combination.
Our officers and directors will negotiate all the terms of a proposed
business combination. You will have no opportunity to participate in the
negotiations, or to approve or reject specific terms. When all the terms of a
proposed transaction have been negotiated, we will prepare a post-effective
amendment to our registration statement and distribute a final prospectus to
you. This final prospectus will contain detailed information concerning:
o The business, history and properties of the target.
o Audited financial statements of the target and pro forma financial
statements of the combined companies.
o The identity and experience of the directors and executive officers of
the combined companies.
o The terms of any agreements between our company and the target.
o The terms of any agreements relating to the sale or transfer of the
founder's shares.
o The pro forma ownership of our stock after the business combination.
o Other information required by applicable SEC rules, regulations and
practice.
While you will have the opportunity to decide whether you want to remain a
stockholder of our company, you will have no opportunity to approve or
disapprove of specific business terms proposed.
WE WILL PROBABLY NOT BE ABLE TO MAKE MULTIPLE ACQUISITIONS AND OUR
RECONFIRMATION OFFERING WILL BE A ONE TIME "TAKE IT OR LEAVE IT" PROPOSITION.
Under Rule 419, we are required to file a post-effective amendment to our
registration statement, deliver a final prospectus and conduct our
reconfirmation offering as soon as we enter into acquisition agreements with an
aggregate value that equals or exceeds 80% of the subscription proceeds, or
$16,000 in the case of this offering. We are not likely to pursue a business
combination that represents less than $500,000 in value. Therefore, we will
probably not be able to make multiple acquisitions before we conduct our
reconfirmation offering. If we select a target and make a reconfirmation
offering that is not acceptable to our investors, we will not be given a second
opportunity. Therefore, our reconfirmation offering will be a one time "take it
or leave it" proposition.
YOU MAY NOT BE ABLE TO RELY ON THE COLLECTIVE BUSINESS JUDGMENT OF OUR
OTHER INVESTORS.
Rule 419 does not establish a predetermined percentage of investors that
must reconfirm their subscriptions before a business combination can be
completed. Instead, it only requires that our final prospectus disclose the
reconfirmation threshold negotiated by the parties. If a proposed business
combination provides for a relatively low reconfirmation threshold, investors
will not be able to rely on the collective business judgment of a large number
of other investors in making their individual reconfirmation decisions.
Conversely, if a proposed business combination provides for a relatively high
reconfirmation threshold, our other investors, as a group, may have the power to
effectively overrule your affirmative investment decision.
WE EXPECT A BUSINESS COMBINATION TO RESULT IN A CHANGE IN CONTROL.
We expect a business combination to result in a change in voting control of
our company. We expect that the owners of a target will ask our current officers
and directors to sell their founder's shares and resign in connection with a
business combination. After a change in control, the owners of the target will
have the right to appoint their own officers and directors, and our current
stockholders will have no meaningful voice in the management of the combined
companies. We can give you no assurance respecting the experience,
qualifications or abilities of future management after a change in control.
OUR BUSINESS COMBINATION MAY NOT BE SUCCESSFUL.
Even if we are successful in locating, negotiating and consummating a
business combination, we can give you no assurances that the combined companies
will be successful. Operational risks include the possibility that the target
will not ultimately or timely provide the core operations necessary for a viable
commercial enterprise. In addition, lack of a defined business plan, lack of
sufficient resources for success and a multitude of other factors could cause
the business of the combined companies to fail. Financial risks involve the
possible lack of revenues or profitable operations of the acquired business,
incurrence of indebtedness and the subsequent need to service such indebtedness
or the utilization of cash or other assets to consummate an acquisition. There
can be no assurance that we will be able to successfully integrate the business
operations of another entity with our company or that any growth opportunities
anticipated as a result of a business combination will ever materialize.
YOU WILL NOT BE ABLE TO SELL, PLEDGE OR OTHERWISE TRANSFER YOUR SHARES
UNTIL WE COMPLETE A BUSINESS COMBINATION, AND THERE CAN BE NO ASSURANCE THAT A
PUBLIC MARKET FOR OUR STOCK WILL EVER DEVELOP.
We will deposit your stock certificate in the Rule 419 escrow until we
complete a business combination. You will not be able to sell, pledge or
otherwise transfer your shares, or any interest therein, until we have complied
with Rule 419 and the escrow agent has mailed your stock certificate to you.
This process may take up a significant amount of time. When you are able to sell
your shares, there can be no assurance that anyone will want to buy them. If a
public market for our stock develops, it is likely to be illiquid and volatile.
Accordingly, you may be unable to sell our shares when you want to. Even if
there is a market, you may not be satisfied with the market price. You should be
prepared to bear the economic risk of your investment for an indefinite period
of time. You should not purchase our shares if you are seeking short-term
appreciation.
EVEN IF OUR STOCK BECOMES TRADED, WE ARE LIKELY TO BE SUBJECT TO SEC
REGULATIONS RELATING TO LOW-PRICED STOCKS, WHICH COULD HAVE AN ADVERSE EFFECT ON
THE MARKET FOR OUR SHARES.
The Securities and Exchange Commission has adopted regulations concerning
low-priced (or "penny") stocks. The regulations generally define "penny stock"
to be any equity security that has a market price less than $5.00 per share,
subject to certain exceptions. Our stock is likely to become, and may remain, a
penny stock subject to these regulations. The regulations impose additional
sales practice requirements on broker/dealers who sell penny stock to persons
other than established customers and accredited investors. The additional
burdens imposed upon broker/dealers by these penny stock requirements may
discourage broker/dealers from effecting transactions in the common stock, which
could severely limit the market liquidity of our common stock and your ability
as purchasers to sell our common stock in the secondary market. In addition, it
is unlikely that any bank or financial institution will accept such penny stock
as collateral, which could have an adverse effect in developing or sustaining
any market for our common stock.
THE COMBINED COMPANIES MAY BE UNABLE TO ATTRACT MARKET MAKERS.
The development of a sustained public trading market depends upon not only
the existence of willing buyers and sellers, but also on the participation of
qualified market makers. No market makers have expressed any interest in our
company. Following the consummation of a business combination and the
disbursement of the escrowed funds, we hope that a number of broker/dealers will
become market makers for our shares. Should this occur, the market bid and asked
prices for our shares is likely to be significantly influenced by decisions of
the market makers to buy or sell the shares. Market makers are not required to
maintain a continuous two-sided market and are free to withdraw quotations at
any time. In addition, in order to become listed on the Nasdaq Stock Market's
National Market or SmallCap Market, we need to have at least three registered
and active market makers. No assurance can be given that any market making
activities will commence or, if commenced, that they will continue.
Our current officers and directors will probably not have any power to
influence the after-market support activities of the combined companies.
Since we expect a business combination to result in a change in control,
our current officers and directors will probably not have any power to seek a
market listing for our shares or take any other action to promote or improve any
public market that does develop. We intend to address after-market support
issues in our negotiations with potential targets, but there can be no assurance
that we will be able to negotiate suitable after-market support requirements or
that any terms we negotiate will prove to be effective. If the combined
companies do not devote sufficient time and resources to developing an active
trading market, you may be unable to sell your shares.
MANY BLANK CHECK COMPANIES ARE COMPLETE FAILURES.
There have been many cases where blank check companies have sold their
shares to the public and then failed to negotiate a timely business combination.
There have also been many cases where blank check companies have negotiated
business combinations and the stockholders have either failed or refused to
reconfirm their subscriptions. In all of these cases, the blank check companies
involved were total failures from the investors' perspective. We can provide you
no assurance that we will be able to negotiate a timely business combination or
that our reconfirmation offering will be successful. If we fail to accomplish
either of these goals, the return on your investment will be limited to your pro
rata share of the escrowed funds and your pro rata share of our liquidating
distribution.
SPECIFIC RISKS OF OUR RULE 419 OFFERING
THE SUBSCRIPTION PROCEEDS RELEASED TO US WILL NOT BE SUFFICIENT TO PAY OUR
ANTICIPATED OFFERING COSTS.
Our founders contributed $100,000 in cash when they organized our company.
After paying our organizational and administrative expenses have a current cash
balance of approximately $95,928. We will receive total cash proceeds of $20,000
from our initial public offering. Of this amount, $18,000 will be deposited in
the Rule 419 escrow and $2,000 will be released to us. We expect to pay
approximately $24,662 in out-of-pocket costs in connection with this offering.
The proceeds released to us will not be sufficient to pay our offering
costs.Therefore, this offering will not be a significant source of cash that can
be used to finance our operations.
ALL OF OUR OFFICERS AND DIRECTORS WILL FACE SUBSTANTIAL CONFLICTS OF
INTEREST.
Our officers and directors are not required, by contract or otherwise, to
devote any specific amount of time to our business. Each of our officers and
directors is actively involved in other business pursuits. Therefore, all of our
officers and directors will face conflicts of interest in allocating their time
between our company and their other business interests.
All of our officers and directors have retained the right to pursue other
business interests, including interests that may be competitive with the
business of our company. Our officers and directors will all be obligated to
present any business opportunities that come to their attention to our Board of
Directors. They may also have a similar obligation to present such a business
opportunity to the board of directors of a competitive entity. If any of our
officers, directors or advisors becomes subject to a potential conflict of
interest, the underlying facts that give rise to the potential conflict must be
fully disclosed to our Board of Directors. Because of the potential for
conflicting obligations, our company will not necessarily have a preferential
right to exploit all opportunities that come to the attention of our officers
and directors. The potential for conflicting obligations and business activities
among the members of our management team may limit the opportunities available
to our company.
Our founders bought 10,000,000 shares of common stock for $100,000. We
believe the owners of a target will probably want to acquire or direct the
disposition of these founder's shares in connection with a business combination.
To facilitate the sale or transfer of the founder's shares, we have included the
founder's shares in our registration statement. Investors will not be entitled
to share in any proceeds from the sale of the founder's shares. Under the
circumstances, it is likely that a series of related transactions will result in
the transfer of business assets to our company and the payment of cash to our
founders. Therefore, the personal pecuniary interests of our founders may
conflict with their fiduciary duties to stockholders.
IF WE LOSE THE SERVICES OF LI SZE TANG, WE WOULD HAVE DIFFICULTY FINDING A
SUITABLE TARGET.
Our ability to successfully identify a suitable target and negotiate a
business combination will be largely dependent upon the personal efforts and
abilities of Li Sze Tang, one of our directors. We have not entered into an
employment agreement with Li Sze Tang or obtained any "key man" life insurance
on his life. The loss of Li Sze Tang's services could have a material adverse
effect on our ability to successfully achieve our business objectives, including
selecting a suitable target and negotiating a business combination.
WE DO NOT INTEND TO BEGIN NEGOTIATIONS WITH POTENTIAL TARGETS UNTIL WE
COMPLETE THIS OFFERING.
While our officers and directors believe, based on prior business
experience, that suitable targets currently exist, we have not commenced
negotiations with any potential targets or made any commitments to enter into
negotiations. We do not intend to begin any negotiations until we complete this
offering. If an acquisition becomes probable before we complete this offering,
Rule 419 will require that we suspend the offering, file a post-effective
amendment to our registration statement and conduct our reconfirmation offering
immediately.
WE MAY NOT BE ABLE TO IDENTIFY A TARGET AND COMPLETE A BUSINESS COMBINATION
IN A TIMELY FASHION.
The search for a suitable target can be very time consuming. There can be
no assurance that we will be able to identify a suitable target in a timely
manner. If we are unable to identify a suitable target in a timely manner, we
will be forced to abandon our business plan in its entirety. This will increase
the risk that we might truncate our due diligence procedures, lower our
expectations or liberalize our selection standards with the passage of time.
Business combinations are complex transactions that frequently take a long
time to investigate, structure, negotiate and document. We expect to encounter
significant delays during the due diligence process. We may also encounter
significant delays in negotiating the specific terms and conditions of a
business combination. After we have negotiated and documented a business
combination, we will be required to file a post-effective amendment to our
registration statement before we can commence our reconfirmation offering. This
process may also result in unforeseen delays as we coordinate the response to
any questions, comments or requests for additional information that may arise.
WE MAY NOT ACCURATELY ASSESS THE QUALIFICATIONS OF MANAGEMENT OF A
POTENTIAL TARGET BUSINESS.
We cannot assure you that our assessment of the skills, qualifications and
abilities of the management of a target will prove to be correct, especially in
light of the inexperience of our officers and directors in evaluating many types
of businesses. In addition, we cannot assure you that the management of a
prospective target will have the necessary skills, qualifications and abilities
to manage a public company.
Since we have not identified a target or selected a particular industry, we
are unable to ascertain the merits or risks of the business or industry in which
we may ultimately operate.
We have not identified a target and do not intend to focus our search for a
target in any particular industry. Accordingly, there is no current basis for
prospective investors to evaluate the possible merits or risks of a particular
target or the industry in which we may ultimately operate. After the completion
of a business combination, we will be subject to both the specific risks of our
target and the more general risks of the industry in which the target operates.
Although our management will endeavor to evaluate the risks inherent in a target
and the industry in which it operates, we cannot assure you that we will
properly ascertain or assess all of the significant risk factors.
THE SALE OF A SUBSTANTIAL NUMBER OF SHARES IN THE PUBLIC MARKET FOLLOWING
THE COMPLETION OF A BUSINESS COMBINATION COULD ADVERSELY AFFECT THE PRICE FOR
OUR STOCK.
After completing a business combination, we will have up to 12,000,000
shares of common stock outstanding. While we believe the bulk of our shares will
be subject to legal or contractual restrictions on resale, we can offer you no
assurance that substantial amounts of our stock will not be eligible for
immediate resale.
Under Rule 144 of the Securities Act of 1933, the term "restricted
securities" includes stock that has been registered under the Securities Act of
1933, but is held by a person who is an "affiliate" of the issuer of such
securities. The term "affiliate" is generally defined as any person who directly
or indirectly controls, is controlled by or under common control with the issuer
of the securities. Therefore the term affiliate generally includes all officers,
directors and owners of 10% or more of an issuer's securities.
A stockholder's ability to resell registered shares of our stock will be
dependent on (a) his status as an affiliate of our company before the business
combination, (b) his status as an affiliate of the target before the business
combination, and (c) his status as an affiliate of the combined companies after
the business combination. In general,
o Purchasers of shares in this offering will be allowed to resell their
shares without legal restriction when we complete a business
combination and at any time thereafter.
o Current stockholders of a target who are not affiliates of the target
or the combined companies will be allowed to resell their shares
without legal restriction when we complete a business combination and
at any time thereafter.
o Persons who are affiliates of our company or the target, but are not
affiliates of the combined companies, will be required to comply with
the notice, manner of sale and volume limitations of Rule 144 for a
period of 1 year after the completion of a business combination.
Thereafter, they will be allowed to resell their shares without legal
restriction.
o Persons who are affiliates of the combined companies will be required
to comply with the notice, manner of sale and volume limitations of
Rule 144 for as long as they retain that status. Our founders paid
$0.01 per share for the 10,000,000 shares they purchased in connection
with the organization of our company.
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS MAY NOT PROVE TO BE
ACCURATE.
This prospectus includes forward-looking statements on a number of
subjects, including:
o Our goals, business plan and strategies.
o The availability of suitable targets.
o Our ability to conduct an adequate due diligence investigation.
o Our ability to negotiate a reasonable business combination.
o Our ability to execute our business plan within the restrictions of
Rule 419.
o Other topics that can be identified by the use of forward looking
terminology such as "may," "will," "expect," "anticipate,"
"estimate," "continue," "believe" and other similar words.
These statements are forward-looking and reflect our current expectations.
They are subject to a number of risks and uncertainties, including but not
limited to, the risks factors and other uncertainties described in this
prospectus. We do not intend to update our forward-looking statements. In light
of the many risks and uncertainties surrounding our business plan, prospective
purchasers should be aware that we cannot provide any assurance that any of the
forward-looking statements in this prospectus will prove to be accurate.
THIS IS A SELF-UNDERWRITTEN OFFERING AND WE MAY NOT BE ABLE TO SUCCESSFULLY
SELL OUR SHARES.
This is a self-underwritten offering. No one has made any commitment to buy
any of the shares being offered by us. Therefore, the success of this offering
and the company will depend upon the success of the sales efforts of our
officers and directors who will be selling the offering on our behalf. No broker
or dealer has been retained or is under any obligation to purchase any of our
shares. We cannot give any assurance that we will be successful in our
fundraising efforts. If this offering is unsuccessful, our business will fail.
OUR BUSINESS IS LIKELY TO FACE ADDITIONAL RISKS AND UNCERTAINTIES NOT
PRESENTLY KNOWN.
In addition to specific risks identified in the "Risk Factors" section of
this prospectus, we are likely to face additional risks and uncertainties that
are not presently known to us or that we currently deem immaterial. Such unknown
risks and uncertainties could ultimately impair our business and prospects.
Prospective investors are urged to conduct their own investigation of our
affairs and independently evaluate our business plan.
ARBITRARY DETERMINATION OF OFFERING PRICE
The offering price for our shares does not bear any relationship to
established valuation standards. Nor does it bear any relationship to our
assets, book value, net worth or expected revenues or earnings. In determining
the offering price, our board of directors considered the following factors,
among others:
o The nature of our proposed business and their opinions on capital
o structure issues.
o The amount per share paid by our founders when they organized our
company.
o The requirements of Rule 419 and the amount needed to recover the
out-of-pocket costs of this offering.
o The general economics of transactions involving public shells.
o The general condition of the equity markets.
Many of these factors are inherently subjective and others are subject to
change based on uncertain future events. Accordingly, the offering price of our
shares must be considered arbitrary.
USE OF PROCEEDS
We will receive total proceeds of $20,000 from the sale of our shares. Of
this amount, $18,000 (90%) will be retained in the Rule 419 escrow and $2,000
(10%) will be released to us. We expect to pay approximately $24,662 in offering
costs in connection with this offering. Therefore, this offering will not be a
significant source of cash that can be used to finance our operations. The
following table summarizes the use of proceeds from this offering.
-------------------------------------------------------------- --------------------------
Subscription proceeds $20,000
-------------------------------------------------------------- --------------------------
-------------------------------------------------------------- --------------------------
Proceeds transferred to Rule 419 escrow $18,000
-------------------------------------------------------------- --------------------------
-------------------------------------------------------------- --------------------------
Proceeds used to pay offering expenses $2,000
-------------------------------------------------------------- --------------------------
-------------------------------------------------------------- --------------------------
Proceeds available for use in our business --
-------------------------------------------------------------- --------------------------
-------------------------------------------------------------- --------------------------
Total uses of subscription proceeds $20,000
-------------------------------------------------------------- --------------------------
The Rule 419 escrow will be held by ___________, as escrow agent, pending
the completion of a business combination. The escrowed funds may only be held in
the form of insured bank deposits, open-end money market funds, or short-term
U.S. Government securities. The escrowed funds may not be used for any purpose
until we have complied with the requirements of Rule 419 and completed a
business combination. The proposed uses of the escrowed funds will be described
in our final prospectus and distributed to investors in connection with our
reconfirmation offering.
After completing this offering, paying current liabilities and establishing
the Rule 419 escrow, we will have approximately $73,266 in operating cash. We
will use this cash to pay the expenses associated with operating our company,
investigating business opportunities, negotiating a business combination and
preparing a post-effective amendment to our registration statement. We will not
pay any fees or other cash compensation to any of our officers, directors or
advisors, or any of their affiliates.
We expect to incur recurring expenses for the fees of our independent
auditors and we may be required to make substantial cash payments to other
experts we hire to assist in our investigations.
DIVIDEND AND DIVIDEND POLICY
We have never declared or paid any dividends on our shares. We do not
anticipate paying any dividends in the foreseeable future. Any future
determination to pay dividends will be at the discretion of the board of
directors and will be dependant upon our financial condition and such other
factors as the board of directors deem relevant.
CAPITALIZATION
The following table sets forth our capitalization as of May 30, 2003.
- ------------------------------------------------------- ------------- -----------------------------------------
Rule 419 Escrow Data Actual Pro forma as after This offering
- ------------------------------------------------------- ------------- -----------------------------------------
- ------------------------------------------------------- ------------- -----------------------------------------
Cash in Rule 419 Escrow (1) -- $18,000
- ------------------------------------------------------- ------------- -----------------------------------------
- ------------------------------------------------------- ------------- -----------------------------------------
Shares in Rule 419 Escrow (2) -- 2,000,000
- ------------------------------------------------------- ------------- -----------------------------------------
- ------------------------------------------------------- ------------- -----------------------------------------
Capitalization Data Actual Pro forma as after adjustment for this
offering stock issuance
- ------------------------------------------------------- ------------- -----------------------------------------
- ------------------------------------------------------- ------------- -----------------------------------------
Long-term debt -- --
- ------------------------------------------------------- ------------- -----------------------------------------
- ------------------------------------------------------- ------------- -----------------------------------------
Common stock, $0.01 par value, 100,000,000 shares
authorized,
- ------------------------------------------------------- ------------- -----------------------------------------
- ------------------------------------------------------- ------------- -----------------------------------------
10,000,000 shares outstanding at May 30, 2003 $100,000 10,000,000
- ------------------------------------------------------- ------------- -----------------------------------------
- ------------------------------------------------------- ------------- -----------------------------------------
2,000,000 shares outstanding after offering 2,000,000
- ------------------------------------------------------- ------------- -----------------------------------------
- ------------------------------------------------------- ------------- -----------------------------------------
Additional paid-in capital 20,000
- ------------------------------------------------------- ------------- -----------------------------------------
- ------------------------------------------------------- ------------- -----------------------------------------
- ------------------------------------------------------- ------------- -----------------------------------------
- ------------------------------------------------------- ------------- -----------------------------------------
Total stockholders' equity $100,000 $120,000
- ------------------------------------------------------- ------------- -----------------------------------------
- ------------------------------------------------------- ------------- -----------------------------------------
Total capitalization $100,000 $120,000
- ------------------------------------------------------- ------------- -----------------------------------------
DILUTION
The escrow agent will hold 90% of the subscription proceeds in the Rule 419
escrow until after a business combination is negotiated. At that time, we will
give every investor an opportunity to make a new investment decision on the
basis of additional information. If any investor does not reconfirm his
investment decision after receiving our final prospectus for our reconfirmation
offering, the escrow agent will promptly refund his pro rata share of the
escrowed funds. Under these circumstances, we believe a traditional dilution
analysis has limited utility. The following discussion includes both a
traditional dilution analysis and a comparison of relative risks and rewards.
Traditional Dilution Analysis
Dilution is a reduction in the value of a purchaser's investment, generally
measured by the difference between the purchase price and the net tangible book
value of the shares after the purchase takes place. The net tangible book value
of a share is equal to the stockholders' equity (deficit), as shown on our
balance sheet, less intangible assets, divided by the number of shares
outstanding. Our net tangible book value as of May 30, 2003 was $95,928, or
approximately $0.0096 per common share.
After giving immediate effect to our sale of 2,000,000 shares for cash, the
transfer of $18,000 to the Rule 419 escrow and the payment of $24,662 in
offering costs, our pro forma net tangible book value as of May 30, 2003 would
have been approximately $77,594 or approximately $0.0065 per common share. This
represents a dilution of approximately $0.0035 per share, or 35%, in the net
tangible book value of the shares we are offering to investors. It also
represents a dilution of approximately $0.0036 per share, or 32.30%, in the net
tangible book value of shares held by our existing stockholders. The following
table illustrates this dilution:
Public offering price per share
Less: Mandatory deposit to Rule 419 Escrow $0.01
Net public offering price per share ($0.009) $0.001
Net tangible book value at May 30, 2003 $0.0096
Dilution to existing stockholders from offering
($0.0031)
Pro forma net tangible book value per share after this $0.0065
offering
Dilution in the net tangible book value per share of stock $0.0035
purchased by new investors
Comparison of Risks and Rewards
After giving effect to the creation of the Rule 419 escrow, the following
table summarizes the differences in the number of shares purchased and the cash
placed at risk in our business by our existing stockholders and the investors
who purchase shares in this offering.
- ----------------------------- ------------------------------ ------------------------------ ----------------------
Number of shares purchased Amount of cash placed at risk Cash at risk
per share
- ----------------------------- ------------------------------ ------------------------------ ----------------------
- ----------------------------- -------------- ------------ -- -------------- -- ------------ ----------------------
Number Percent Amount Percent
- ----------------------------- -------------- ------------ -- -------------- -- ------------ ----------------------
- -------------------------- -- -------------- ------------ -- -------------- -- ------------ -- -------------------
Founding stockholders 10,000,000 83.33% $100,000 83.00% $0.01
- -------------------------- -- -------------- ------------ -- -------------- -- ------------ -- -------------------
- -------------------------- -- -------------- ------------ -- -------------- -- ------------ -- -------------------
New investors 2,000,000 16.66% $20,000 16.00% $0.01
- -------------------------- -- -------------- ------------ -- -------------- -- ------------ -- -------------------
- -------------------------- -- -------------- ------------ -- -------------- -- ------------ -- -------------------
Total 12,000,000 100.00% $120,000 100.00% $0.01
========== ====== ======== ====== =====
- -------------------------- -- -------------- ------------ -- -------------- -- ------------ -- -------------------
The average cash price paid for the 10,000,000 shares of common stock that
will be held by "insiders" is $0.01 per share. This cash contribution is equal
to 83.00% of the cash placed at risk in our business by the purchasers of the
shares offered hereby.
It is impossible to predict whether a business combination will ultimately
result in significant "dilution" to the persons who purchase the shares offered
hereby. If the target has a weak balance sheet, a business combination may
result in significant dilution to the cash purchasers. If a target has a
relatively strong balance sheet, there may be no dilution. If necessary, our
post effective amendment and the prospectus for our reconfirmation offering will
include a traditional dilution discussion.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
We were incorporated on April 8, 2002. On April 24, 2002, our founder
purchased 10,000 shares of our common stock, par value of US$1.00for $10,000 in
cash in connection with the organization of our company. On August 1, 2002 the
authorized capital was subdivided from 50,000 shares or US$1.00 par value into
500,000 shares of US$0.10 par value. On May 12, 2002, the authorized capital was
increased to US$1,000,000 divided into 100,000,00 share of common stock at
US$0.01 par value. On May 12, 2002, the founder purchase an additional 9,000,000
shares of common stock for US$90,000. After paying $4,072 in organizational and
administrative expenses , we have $95,928 in cash and no other tangible assets
at the date of this prospectus.
We are a blank check company. The purpose of this offering is to create a
"public shell" that will attempt to negotiate a business combination with a
target that has both business history and operating assets. We will not be able
to implement our business plan unless this offering is successfully completed.
We have not engaged in any business activities to date, and we have no
specific plans to engage in any particular business in the future. We have not
received any operating revenue or incurred any operating expenses to date. We
will not commence our proposed business activities until after the successful
completion of this offering.
We are offering 2,000,000 shares to the public at a price of $0.01 per
share. If this offering is successfully completed, we will receive total
subscription proceeds of $20,000. Of this amount, $18,000 (90%) will be
deposited in the Rule 419 escrow and $2,000 (10%) will be released to us. We
expect to pay approximately $24,662 in out-of-pocket costs in connection with
this offering. Therefore, this offering will not be a significant source of cash
that can be used to finance our operations. This is a "self-underwritten"
offering and our officers and directors will attempt to sell the shares to the
public without the assistance of a professional underwriter.
IMPACT OF RULE 419
We are subject to the requirements of Rule 419. Therefore, we must deposit
at least 90% of the subscription proceeds in a Rule 419 escrow. The Rule 419
escrow will be held by ___________, as escrow agent, pending the completion of a
business combination.
The escrowed funds may not be used for any purpose until we have:
o Negotiated a business combination with a suitable target.
o Filed a post-effective amendment to our registration statement.
o Delivered a final prospectus to each purchaser that contains the
detailed information, including financial statements, specified in
Rule 419, specifies the time period for the reconfirmation offer,
reminds investors that a failure to reconfirm a subscription will be
treated as a refund request; and specifies the reconfirmation threshold
that must be reached before the proposed business combination can
close.
o Conducted a reconfirmation offering where each purchaser is given not
less than 20 nor more than 45 days to confirm his intent to remain a
stockholder in writing.
o Closed a business combination in accordance with the terms disclosed in
our final prospectus.
If any purchaser of shares fails to reconfirm his intent to remain a
stockholder within the period specified in our final prospectus, the escrow
agent will automatically refund that purchaser's share of the escrowed funds. If
we fail to meet the reconfirmation threshold within the period specified in our
final prospectus, the escrow agent will automatically distribute all of the
escrowed funds to investors and return all stock certificates to us for
cancellation.
Plan of Operations
After completing this offering, paying organizational and administrative
expenses and establishing the Rule 419 escrow, we expect to have approximately
$73,266 in operating cash. We will use this cash to pay the expenses associated
with operating our company, investigating business opportunities, negotiating a
business combination and preparing one or more post-effective amendments to our
registration statement. We will not pay any cash fees or other cash compensation
to any of our officers, directors or advisors, or any of their affiliates.
While our officers and directors have many of the skills required to
implement our business plan, we expect to incur recurring expenses for the fees
of our independent auditors and legal counsel. We may also be required to make
substantial cash payments to other experts we hire to assist in our
investigations.
We intend to request a due diligence fee before we begin a detailed
investigation into the affairs of a potential target. There can be no assurance
that any potential target will be willing to pay a due diligence fee. There can
be no assurance that any due diligence fees we receive will be sufficient to
offset the out-of-pocket costs we will incur in connection with our
investigations. We believe our available cash will be adequate for our
anticipated needs. Nevertheless, we may run out of money if a particular
investigation requires significant technical expertise, or if we spend
substantial amounts investigating an opportunity and then determine that the
company will not be suitable for a business combination.
We will not be able to rely on the exemptions provided by Securities and
Exchange Commission Regulation D and Section 4(2) of the Securities Act of 1933
until after we have complied with the requirements of Rule 419 and closed a
business combination. Therefore, we will not be able to sell additional equity
securities to augment our working capital. While we have the corporate power to
borrow money, credit is not likely to be available. Our officers, directors and
principal stockholders have no duty to loan funds to our company. If we spend
our available cash and are unable to obtain additional financing, we may be
forced to abandon our business plan and refund the money in the Rule 419 escrow.
BUSINESS
HISTORY AND ORGANIZATION
We were incorporated in the British Virgin Islands on April 8, 2002. To
date, our corporate activities have been limited to completing our organization
and preparing our registration statement. We have not engaged in any substantive
business activities to date and we have no specific plans to engage in any
particular business in the future. The purpose of this offering is to create a
"public shell" that will attempt to negotiate a business combination with a
suitable target that has both business history and operating assets.
OUR BUSINESS GOALS
We are a blank check company. Our business goal is to increase stockholder
value by concluding a business combination where the expected market value of
the stock of the combined companies will be greater than the offering price of
the shares described in this prospectus. We have not engaged in any business
activities to date and we have no specific plans to engage in any particular
business in the future. We will not focus our search for a target in any
particular industry. Our business plan is entirely contingent on the success of
this offering.
We do not believe that the funds deposited in the Rule 419 escrow will be
sufficient to finance the ongoing operations of any target we may acquire.
Therefore, we do not intend to enter into a business combination with any target
that has an immediate need for substantial additional capital. We intend to
issue the acquisition shares in exchange for the assets or outstanding stock of
our eventual target. These stock issuances are likely to result in a change in
control. Therefore, we will not be able to effect more than one business
combination.
Our current officers and directors will have broad discretion with respect
to the selection of a target and the negotiation of a business combination. They
also have the voting power to unilaterally approve all corporate transactions
until we complete a business combination. You will have no effective voice in
decisions made by our company. Nevertheless, the subscription reconfirmation
requirements of Rule 419 will give you the ultimate power to decide whether you
want to remain a stockholder, or obtain a refund of your pro rata share of the
funds in the Rule 419 escrow.
After the completion of a business combination, we expect that the shares
of the combined companies will be eligible for quotation on the OTC Bulletin
Board, an automated inter-dealer quotation system for equity securities that is
sponsored and operated by the NASD. We cannot give you any assurance that an
active trading market will develop for the stock of the combined companies. We
cannot predict the future market prices for the stock of the combined companies.
If a public market for the shares develops, it is likely to be illiquid and
volatile. If large quantities of the stock of the combined companies are offered
for sale at the same time, it will be difficult to establish or maintain a
stable market and the price is likely to fall. We believe the limitations on the
number of shares that will be sold to a particular investor and the contractual
restrictions on resale that are applicable to our officers, directors and
advisors will help to minimize market volatility.
OVERVIEW OF SHELL TRANSACTIONS
The two most common ways for a private company to "go public" are a
traditional initial public offering, or IPO, and a business combination with a
public shell. Most private companies that decide to go public do so because they
need to raise capital for operations or expansion. But financing is not the only
reason that private companies decide to go public. Other common reasons include:
o Creating an "alternative currency" (i.e., publicly traded shares) that
can be used for acquisitions.
o Facilitating equity-based compensation, management succession and
retirement plans.
o Facilitating estate planning and establishing a "market value."
o Providing investment liquidity and preparing a foundation for future
financing activities. In cases where the primary motive is a current
need for capital, we believe a traditional IPO is the only prudent
course of action. In other cases, however, we believe it is important
for a private company to carefully weigh the pros and cons of each
alternative. The following table highlights some of the differences
we believe a private company should consider before deciding between
an IPO and a business combination with an existing shell.
- ---------------------------------------------------------- -------------------------------------------------------
Characteristics of IPO Market Characteristics of Business Combination Market
- ---------------------------------------------------------- -------------------------------------------------------
- ---------------------------------------------------------- -------------------------------------------------------
An IPO usually generates substantial cash proceeds. Business combinations do not usually generate
substantial cash proceeds.
- ---------------------------------------------------------- -------------------------------------------------------
- ---------------------------------------------------------- -------------------------------------------------------
The IPO market can be very "trendy," and if a company is The business combination market is frequently less
not in a "hot" industry it can be difficult or concerned with current trends.
impossible to conduct an IPO.
- ---------------------------------------------------------- -------------------------------------------------------
- ---------------------------------------------------------- -------------------------------------------------------
Secondary markets develop rapidly, the markets are Secondary markets develop slowly, liquidity is
generally liquid and there is usually a good balance frequently a problem and there are usually more
between sellers and buyers. sellers than buyers.
- ---------------------------------------------------------- -------------------------------------------------------
- ---------------------------------------------------------- -------------------------------------------------------
The IPO market is very sensitive to current market The business combination market has less sensitivity
conditions and deals are frequently aborted or delayed to current market conditions and deals are less
at a relatively late stage in the process. likely to be aborted or delayed in their final stages.
- ---------------------------------------------------------- -------------------------------------------------------
- ---------------------------------------------------------- -------------------------------------------------------
The IPO market has a high degree of visibility and The business combination market has relatively low
companies that complete an IPO find it relatively easy visibility and companies frequently find it more
to develop "institutional" interest in their stock. difficult to develop "institutional" interest in
their stock.
- ---------------------------------------------------------- -------------------------------------------------------
- ---------------------------------------------------------- -------------------------------------------------------
Because of the intense competition and extensive due Companies that engage in shell transactions are
diligence associated with the IPO process, companies generally viewed with skepticism for an extended
that complete an IPO are frequently perceived as period of time.
substantial and credible.
- ---------------------------------------------------------- -------------------------------------------------------
The generic term "public shell" can be used to describe any existing
company that (1) has no substantial ongoing business activities, (2) has a large
or widely held stockholder base, and (3) has outstanding stock that may be
lawfully resold in the public securities markets by the existing stockholders.
Within this broad definition, there are substantial variations in the structure,
value and overall utility of public shells. The factors that are typically
considered when evaluating the overall utility and value of a particular shell
include:
- ----------------------------------- ------------------------------------------------------------------------------
Control Status Public shells that can offer a controlling interest to the owners of a
target are generally more desirable than shells that cannot implement a
change in control.
- ----------------------------------- ------------------------------------------------------------------------------
- ----------------------------------- ------------------------------------------------------------------------------
Regulatory Status Public shells that are registered with the SEC are generally more desirable
than shells that will be required to register with the SEC at some future
date.
- ----------------------------------- ------------------------------------------------------------------------------
- ----------------------------------- ------------------------------------------------------------------------------
1933 Act Registration Public shells that have the ability to issue registered stock in connection
with a business combination are generally more desirable than shells that
can only issue restricted stock.
- ----------------------------------- ------------------------------------------------------------------------------
- ----------------------------------- ------------------------------------------------------------------------------
Trading Status Public shells that are listed for trading or eligible for immediate listing
are generally more desirable than shells that will be required to pursue a
listing at a future date.
- ----------------------------------- ------------------------------------------------------------------------------
- ----------------------------------- ------------------------------------------------------------------------------
Public shells that have available resources, particularly cash resources,
Available Resources are generally more desirable than shells that have no available resources.
- ----------------------------------- ------------------------------------------------------------------------------
- ----------------------------------- ------------------------------------------------------------------------------
Prior Operations Public shells that have no prior operations are generally more desirable
than shells that have prior operations and the potential for contingent
liabilities.
- ----------------------------------- ------------------------------------------------------------------------------
- ----------------------------------- ------------------------------------------------------------------------------
Stock Distribution Public shells that have a substantial number of existing stockholders and a
relatively even distribution of stock ownership are generally more desirable
than shells that have a small number of stockholders, or a few stockholders
who control large blocks of stock.
- ----------------------------------- ------------------------------------------------------------------------------
While our officers and directors believe that suitable targets are
available, we have not commenced negotiations with any potential targets or made
any commitments to enter into negotiations. We do not intend to begin any
negotiations until we complete this offering. If an acquisition becomes probable
before we complete this offering, Rule 419 will require that we suspend the
offering, file a post-effective amendment to our registration statement and
conduct our reconfirmation offering.
In developing a structure for our company and the terms of this offering,
we have endeavored to maximize our prospective competitive advantages and
minimize our prospective competitive disadvantages. If we can successfully
complete this offering, we believe our company will have a strong competitive
position when compared with other available public shells. We can provide you no
assurances, however, that prospective targets will find our structure more
desirable than competitive shells.
ADMINISTRATION OF OUR AFFAIRS
Li Sze Tang has been hired to serve as our president and director and
manage the implementation of our business plan. He will assist in the
identification and investigation of potential targets. Mr. Li is specifically
authorized and obligated to (i) manage the administrative, accounting and
reporting functions associated with our day-to-day operations, (ii) assist in
the identification and investigation of potential targets, and (iii) assist in
the negotiation of a business combination agreement.
Li Sze Tang's only compensation will be a variable interest in the cash
proceeds, if any, received by Mr. Li from his resale of the founder's shares.
Selecting a Target and Structuring a Business Combination
We anticipate that potential targets will be brought to our attention by
our officers and directors, and various unaffiliated sources, including
broker-dealers, investment bankers, venture capitalists, bankers and other
members of the financial community, who may present solicited or unsolicited
proposals. We will not enter into exclusive relationships with professional
firms that specialize in business acquisitions. We may, however, agree to work
with such firms on a non-exclusive basis.
Our Founder may sell 10,000,000 founder's shares in connection with a
business combination. Within these limits, our officers and directors will have
virtually unlimited flexibility and discretion in negotiating the terms of a
business combination. In evaluating a prospective target, our management will
ordinarily consider the following factors, among others:
o The target's liquidity, financial condition and results of operation.
o The target's growth potential and future capital requirements.
o The nature, competitive position and market potential of the target's
products, processes or services.
o The relative strengths and weaknesses of the target's intellectual
property protection.
o The education, experience and abilities of management and key
personnel.
o The regulatory environment within the target's industry.
o The market performance of equity securities of similarly situated
companies in the target's industry.
The foregoing is not intended as an exhaustive list of the factors we may
consider in connection with the evaluation of a potential target. While our
evaluation of a particular target will be based, to the extent relevant, on the
factors listed above, we will also consider other factors that our officers and
directors deem relevant under the circumstances. In evaluating a prospective
target, our management anticipates that we will conduct a due diligence review
that will include, among other things, meetings with management and key
personnel, inspection of properties and facilities, review of all material
contracts, review of all financial statements and projections, and review of any
other matters that we believe are relevant under the circumstances.
We intend to request a modest due diligence fee before we begin a detailed
investigation into the affairs of a potential target. There can be no assurance
that any potential target will be willing to pay a due diligence fee. There can
be no assurance that any due diligence fees we receive will be sufficient to
offset the out-of-pocket costs we will incur in connection with our
investigations. We believe our available cash will be adequate for our
anticipated needs. Nevertheless, we may run out of money if a particular
investigation requires significant technical expertise, or if we spend
substantial amounts investigating an opportunity and then determine that the
potential target will not be suitable for a business combination.
The time, effort and expense required to evaluate a target and to negotiate
a proposed business combination cannot be predicted with any degree of accuracy.
Our officers and directors are not employees of our company and they are not
required to devote any specific amount of time to our business. In addition, we
do not have any full time employees who will devote 100% of their time to our
affairs. If our officers and directors are unable to devote adequate time to
investigation, due diligence and negotiations, we may be unable to identify a
suitable target, negotiate a business combination or comply with the
requirements of Rule 419 in a timely manner.
We will endeavor to structure a business combination so as to achieve the
most favorable tax treatment to us, the target and the stockholders of both
companies. We cannot assure you, however, that the Internal Revenue Service or
appropriate state tax authority will agree with our tax treatment of the
business combination.
Limited Ability to Evaluate Successor Management
While it is possible that one or more of our officers and directors will
remain involved in the affairs of the combined companies, it is unlikely that
any of them will have ongoing executive or board level authority. While our
officers and directors have substantial experience in a variety of industries,
we cannot assure you that our officers and directors will have significant
experience or knowledge relating to the operations of a particular target.
We intend to closely scrutinize the management of a prospective target when
evaluating the desirability of a business combination. However, we cannot assure
you that our assessment of the skills, qualifications and abilities of
management will prove to be correct. In addition, we cannot assure you that a
prospective target's management will possess the particular skills,
qualifications and abilities required to effectively manage a public company.
In connection with a proposed business combination, we may require the
target to recruit additional personnel to supplement its current management
team. We cannot assure you that a potential target will have the ability to
recruit additional managers, or that any new management team members who are
recruited by a target will have the requisite skills, knowledge or experience.
Our post-effective amendment and the final prospectus will include a
summary information on the identity, education and experience of the officers,
directors and key personnel of the proposed target.
BUSINESS DIVERSIFICATION IS UNLIKELY
Under Rule 419, we will be required to file our post-effective amendment
and deliver a final prospectus to investors as soon as we agree to a business
combination or acquisition with a transaction value that equals or exceeds 80%
of the subscription proceeds, or $16,000 in the case of this offering. Since we
intend to issue acquisition shares in connection with a business combination,
any substantial acquisitions will probably result in a change in control.
Therefore, we will probably not be in a position to make multiple acquisitions.
In the expected case, we will not be able to diversify our operations or
benefit from the possible spreading of risks or offsetting of losses. Our
probable lack of diversification may subject us to numerous economic,
competitive and regulatory developments, any or all of which may have a
substantial adverse impact on our future business. In addition, by consummating
a business combination with only a single entity, the prospects for our success
may become dependent upon the development or market acceptance of a single or
limited number of products, processes or services. Accordingly, we cannot assure
you that our future operations will prove to be commercially viable.
VALUATION OF TARGETS
Our ultimate business goal is to increase stockholder value by concluding a
business combination where the expected market value of the stock of the
combined companies will be greater than the offering price of the shares
described in this prospectus. In furtherance of this goal, our board of
directors intends to apply established metrics that are generally used in the
financial and investment banking communities to determine the approximate value
of a target and negotiate the terms of a business combination. Our board of
directors will ordinarily begin its evaluation of a target using the following
objective factors, among others:
o The target's actual and projected sales.
o The target's actual and projected results of operations.
o The target's actual and projected cash flows.
o The historical book value of the target's assets.
o The accounting policies used to determine book value.
In most cases, our board of directors will then proceed to a consideration
of a variety of subjective factors that can also have a positive or negative
impact on valuation decisions, including:
o Overall competitive conditions in the target's industry.
o The target's competitive position within its industry.
o The relative risks of the target's development plans.
o The market valuation of similarly situated public companies.
o The relative strengths and weaknesses of the target, compared with
similarly situated public companies.
Based on their analysis, our board of directors will reach a conclusion
concerning the fair market value of a target. It will then attempt to negotiate
a business combination that maximizes stockholder value. The board of directors
may retain independent experts to assist in the evaluation of a target but it is
not required to do so.
The valuation of a prospective target is an inherently subjective process
that is subject to a substantial degree of risk and uncertainty. Our officers
and directors are not experts in investment banking or the evaluation of
businesses. We can give you no assurance that our board of directors will be
able to accurately assess the fair market value of a particular target. We can
give you no assurance that our board of directors will be able to negotiate a
business combination on terms that are advantageous to our stockholders. If a
business combination is concluded, we can give you no assurance that the stock
of the combined companies will ever achieve a market price that is in line with
the value determined by our board of directors.
FINDERS' FEES
We will not pay any finders' fees, commissions or similar compensation to
our officers and directors, or any of their respective affiliates. We will not,
without the consent of the target, execute any agreement that obligates the
combined companies to pay any finders' fees, commissions or similar compensation
in connection with a business combination.
We have no resources that can be used for the direct payment of finders'
fees. The founder beneficially ownes 10,000,000 founder's shares. These shares
will be available in connection with a business combination. If stock-based
finders' fees are to be paid, they will have to be deducted from the shares that
would otherwise be available to the owners of a target. Therefore, we believe
the owners of the target should make all decisions respecting the payment of
stock-based finders' fees.
The final prospectus for our reconfirmation offering will include a
detailed description of the material terms of the proposed business combination.
This description will include a discussion of the cash payable to our founders
in connection with the sale of their founder's shares, the shares that will be
issued or transferred to finders and other professionals who are directly or
indirectly involved in the proposed transaction, and the shares that will be
issued or transferred to the current owners of a target.
NO RIGHT TO APPROVE SPECIFIC TERMS
We do not intend to provide information to our stockholders regarding the
potential targets being considered by our management. Our officers and directors
will have the power to unilaterally approve all corporate actions until we
negotiate a business combination. As a result, investors in this offering will
have no effective voice in decisions made by our management and will be entirely
dependent on our management's judgment in the selection of a target and the
negotiation of the specific terms of a business combination.
Under the laws of the British Virgin Islands, the stockholders of a
corporation are not entitled to vote with respect to a stock issuance
transaction that does not involve a statutory merger, even if the transaction
will result in a change in control. We presently intend to structure a business
combination as an exchange of stock in our company for the assets or outstanding
stock of a target. Since we do not intend to conduct a statutory merger with a
target, we do not intend to seek prior stockholder approval of the terms of a
proposed business combination.
Rule 419 will not give stockholders voting rights that they do not
otherwise possess under the laws of the British Virgin Islands. If we
successfully negotiate a business combination, the transaction will be presented
to our stockholders as an integrated whole. Each investor will then be required
to make an independent decision about whether he wants to remain a stockholder.
Investors who do not confirm their intent to remain stockholders of our company
will automatically receive a refund of their pro rata share of the funds on
deposit in the Rule 419 escrow. If a sufficient number of investors reconfirm
their subscriptions, we will proceed to a closing of the business combination.
Rule 419 does not require that a fixed or predetermined percentage of the
investors in this offering reconfirm their subscriptions. Instead, Rule 419
leaves that issue to negotiations between our company and the target. Since the
funds on deposit in the Rule 419 escrow are not expected to be sufficient to
finance the ongoing operations of the combined companies, it is possible that
the target will decide that the funds are a relatively unimportant part of the
overall transaction. Under these circumstances, a proposed business combination
could provide for a relatively low reconfirmation threshold. Under those
circumstances, investors will not necessarily be able to rely on the collective
business judgment of a large number of investors in making their reconfirmation
decisions.
COMPETITION
We expect to encounter intense competition from other entities that have a
business objective similar to ours. Many of these potential competitors have
significant cash resources that will be available for use following a business
combination. Others have outstanding warrants and/or stock purchase rights that
can be expected to generate substantial cash for future operations. In addition,
many of our potential competitors possess more experienced management teams and
greater technical, human and other resources than we do. The inherent
limitations on our competitive position may give others an advantage in pursuing
the acquisition of a target. Further, our obligation to file a post-effective
amendment and conduct a reconfirmation offering will probably delay the
completion of a transaction. This obligation may place us at a competitive
disadvantage in successfully negotiating a business combination.
FACILITIES AND PROPERTY
We have no facilities or property. First Asia International Holdings
Limited ("First Asia") has agreed to provide all necessary office facilities for
our company. First Asia will not be entitled to receive any direct or indirect
cash fees from our company, any target, or any affiliate of a target. Our
officers and directors believe the facilities to be provided by First Asia will
be adequate for our needs until we negotiate a business combination and complete
our reconfirmation offering.
EMPLOYEES
We have no employees. First Asia has agreed to provide all necessary
administrative staff for our company. Our officers and directors believe that
First Asia's existing administrative staff will be adequate for our needs until
we negotiate a business combination and complete our reconfirmation offering.
PERIODIC REPORTING AND AUDITED FINANCIAL STATEMENTS
We have filed a Form F-1 registration statement for this offering and
expect that the combined companies will register our common stock under the
Securities Act of 1933 upon completion of a business combination. Therefore, we
will be subject to the reporting requirements of the Securities Exchange Act of
1934, including the requirement that we file annual and quarterly reports with
the SEC. In accordance with the requirements of Rule 419, we intend to furnish
to our stockholders annual reports containing financial statements audited and
reported on by our independent accountants.
We will not enter into a business combination agreement with a target that
does not have audited financial statements meeting the requirements of
Regulation S-X. In connection with our reconfirmation offering, we will deliver
a final prospectus to investors that includes, among other things, audited
financial statements for the target and pro forma financial information for the
combined companies.
MANAGEMENT
Officers and Directors
The following table identifies our directors and executive officers.
------------------------------------ --------------------------------- ----------------------------------
Name Age Position
------------------------------------ --------------------------------- ----------------------------------
------------------------------------ --------------------------------- ----------------------------------
Mr. Li Sze Tang 44 Director
------------------------------------ --------------------------------- ----------------------------------
------------------------------------ --------------------------------- ----------------------------------
Mr. Wilson Cheung 29 Director
------------------------------------ --------------------------------- ----------------------------------
The following is a brief account of the business experience of each of
our directors and executive officers.
Mr. Li Sze Tang has approximately twenty years of experience in various
aspects of finance and investments. He received a Master's degree in science
from the Imperial College of Science, Technology and Medicine from the
University of London and a Master's degree in Economic Law from Zhongshan
University, PRC. He is a Fellow Member of Chartered Institute of Management
Accountants, the United Kingdom and the Hong Kong Society of Accountants .
Mr. Cheung has more than five years' working experience in the investment
banking and corporate finance areas. Mr. Cheung is engaging in the provision of
corporate finance, financial advisory, securities placement and underwriting
services. During the course of his employment, Mr. Cheung had successfully
assisted a number of companies to list on both of the Main Board and GEM board
of the SEHK. Mr. Cheung holds a Bachelor of Business degree from Swinburne
University of Technology, Melbourne of Australia.
BOARD STRUCTURE
Our certificate of incorporation provides that the board of directors may
fix the number of directors by resolution. Our current board consists of two
members. Mr. Li Sze Tang, one of our current directors own 100% of our voting
stock and was elected to the board in connection with the organization of our
company. The initial terms of our current directors will expire on the date of
our first annual meeting of stockholders. Until we effect a business
combination, the current members of our board will have sufficient voting power
to re-elect themselves as directors without the approval or consent of the other
stockholders.
BOARD COMMITTEES
We do not have an audit committee or a compensation committee. We do not
intend to create an audit committee or a compensation committee until after the
completion of a business combination.
COMPENSATION OF OFFICERS AND DIRECTORS
Our officers and directors do not receive any cash compensation from us.
Our officers and directors may not ask for or accept any direct or indirect cash
compensation for services they perform on behalf of our company. Our officers
and directors may not ask for or accept any cash compensation from a target, or
any officer, director, affiliate or associate of a target. Notwithstanding the
generality of the foregoing, Mr. Li is a director and also a founder of our
company. In connection with a business combination transaction, our founder
intends to offer to sell up to 10,000,000 founder's shares to the owners of a
target.
Our officers and directors may receive reimbursement for out-of-pocket
expenses they incur on our behalf. There is no limit on the amount of
reimbursable expenses and there will be no review of the reasonableness of such
expenses by anyone other than our board of directors. A detailed accounting of
these expense reimbursements will be included in our post-effective amendment
and the related prospectus.
POTENTIAL CONFLICTS OF INTEREST
Investors should be aware of the following potential conflicts of
interest:
o Our officers and directors are not employees of our company and they
are not required to devote any specific amount of time to our business.
o Our officers and directors are actively involved in other business
pursuits and will face conflicts of interest in allocating their time
between our affairs and their other business interests.
o Our officers and directors intend to become affiliated with entities,
including blank check companies, and other public shells engaged in
business activities similar to ours.
o Our officers and directors may have fiduciary obligations to more than
one entity. In such an event they might be obligated to present a
single opportunity to multiple entities.
o One of our directors owns founder's shares that will probably be
offered for sale to others, usually the principals of a target, in
connection with a business combination.
Therefore, it is likely that:
o A business combination will result in a series of related transactions
where our company receives property for the any acquisition shares that
may be sold but our directors receive cash for the founder's shares.
o Our directors will have a significant conflict of interest if they are
presented with a situation where the owners of two competing targets
offer different prices for the founder's shares.
o Our directors will have a significant conflict of interest if the
owners of a relatively weak target are willing to pay a relatively
high price for the founder's shares.
In general, officers and directors of a British Virgin Islands corporation
are obligated to act in a manner that is in, or not opposed to, the best
interests of the stockholders. We cannot assure you that any of the above
mentioned conflicts would be resolved in our favor.
In order to minimize potential conflicts of interest arising from multiple
corporate affiliations, each of our officers and directors has agreed to present
to us, prior to presentation to any other entity, any business opportunity which
may reasonably be required to be presented to us, until we agree to a business
combination. We will not enter into a business combination with any entity where
any of our officers or directors is the beneficial owner of 5% or more of the
entity's common stock.
PRINCIPAL STOCKHOLDERS
The following table contains information on the beneficial ownership of our
common stock as of May 30, 2003 as adjusted to reflect the sale of 2,000,000
shares to the public and as adjusted to reflect the resale of 10,000,000
founder's shares in connection with a business combination. The table
identifies:
o Each person known by us to be the owner of more than 5% of the
outstanding shares of common stock.
o Each of our officers and directors.
o All our officers and directors as a group.
Unless otherwise indicated, we believe that all persons named in the table
have sole voting and investment power with respect to the shares of common stock
beneficially owned by them.
- ------------------------------ --------------------------- --------------------------- ---------------------------
Names and Address of Before This Offering After This Offering (1) After Combination (1)
Beneficial Owner
- ------------------------------ --------------------------- --------------------------- ---------------------------
- ------------------------------ ------------- ------------- ------------- ------------- ------------- -------------
Shares Percent Shares Percent Shares Percent
- ------------------------------ ------------- ------------- ------------- ------------- ------------- -------------
- ------------------------------ ------------- ------------- ------------- ------------- ------------- -------------
Li Sze Tsang 10,000,000 100% 10,000,000 83.33% 0 0%
- ------------------------------ ------------- ------------- ------------- ------------- ------------- -------------
- ------------------------------ ------------- ------------- ------------- ------------- ------------- -------------
- ------------------------------ ------------- ------------- ------------- ------------- ------------- -------------
Note:Mr.LI is the 100% beneficial owner of First Asia International Holdings Limited.
Each of the Company's officers and directors may be deemed to be a
"promoter" of our company as that term is defined in Rule 12b-2 of the General
Rules of the Securities and Exchange Commission promulgated under the Securities
Exchange Act of 1934.
CERTAIN TRANSACTIONS
All ongoing transactions between us and any of our officers and directors
or their respective affiliates, as well as any future transactions, will be on
terms that we believe are no less favorable than the terms that could have been
negotiated with unaffiliated third parties. All related party transactions will
require prior approval from a majority of the members of our board of directors
who do not have an interest in the transaction.
DESCRIPTION OF SECURITIES
General
We are authorized to issue 100,000,000 shares of common stock, par value
$0.01. As of the date of this prospectus, 10,000,000 shares of common stock are
outstanding, held of record by First Asia International Holdings Limited.
After the completion of a business combination, we will have 88,000,000
shares of authorized and unissued common stock. These authorized and unissued
shares may be issued without stockholder approval at any time, in the sole
discretion of our board of directors. The authorized and unissued shares may be
issued for cash, to acquire property or for any other purpose that is deemed in
the best interests of our company. Any decision by the board of directors to
issue additional shares of common or preferred stock will reduce the percentage
of our stockholders' equity that will be held by the purchasers of the shares
and could result in dilution of our net tangible book value.
Common Stock
Our stockholders are entitled to one vote for each share held of record on
all matters to be voted on by stockholders. There is no cumulative voting with
respect to the election of directors, with the result that the holders of more
than 50% of the shares voted for the election of directors can elect all of the
directors. Our stockholders are entitled to receive dividends when, as and if
declared by our board out of funds legally available. In the event of our
liquidation, dissolution or winding up, our stockholders, except as noted in the
next sentence, are entitled to share ratably in all assets remaining available
for distribution to them after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the common
stock. Upon our failure to effect our initial business combination, our existing
stockholders have agreed to waive their rights to share in any such distribution
with respect to common stock owned prior to the offering. Our stockholders have
no conversion, preemptive or other subscription rights, and there are no
redemption provisions applicable to the common stock. All of the outstanding
shares of common stock are fully paid and nonassessable.
Dividend Policy
We have never paid or declared dividends on our common stock and do not
intend to pay dividends before we complete a business combination. After we
complete a business combination, a new management team will probably control our
dividend policy. Our company is not likely to pay cash dividends for an extended
period of time, if ever. You should not purchase our shares if you require
current income from your investments.
Status of Investors' Shares Delivered to Escrow Agent
The cash in the Rule 419 escrow will not be an asset of our company until
after the reconfirmation offering. Under the laws of the British Virgin Islands,
the shares sold to investors and delivered to the escrow agent will be deemed to
be fully paid and nonassessable stock. Such shares will, however, be subject to
the subscription reconfirmation, Rule 419 escrow and additional payment
requirements discussed in this prospectus.
Transfer Agent
You will not be able to sell, pledge or otherwise transfer your shares, or
any interest therein, until we have complied with Rule 419 and the escrow agent
has mailed your stock certificate to you. We do not intend to retain a transfer
agent for our shares until we have negotiated a business combination
transaction. Information on the company that is selected to serve as our
transfer agent will be included in our final prospectus.
SHARES ELIGIBLE FOR FUTURE SALE
General
Upon the completion of this offering, we will have 12,000,000 shares of
common stock outstanding. Upon completion of a business combination, we will
have up to 12,000,000 shares of common stock outstanding. 2,000,000 shares of
common stock have been registered pursuant to this registration statement. Prior
to a business combination the founder may register his 10,000,000 shares for
resale. Except as described below, all of these shares (if all are registered)
will be freely tradable without restriction or further registration under the
Securities Act.
Under Rule 144 of the Securities Act of 1933, the term "restricted
securities" includes stock that has been registered under the Securities Act of
1933, but is held by a person who is an "affiliate" of the issuer of such
securities. The term "affiliate" is generally defined as any person who directly
or indirectly controls, is controlled by or under common control with the issuer
of the securities. Therefore the term affiliate generally includes all officers,
directors and owners of 10% or more of the issuer's securities.
A stockholder's ability to resell registered shares of our stock will be
dependent on (a) his status as an affiliate of our company before the business
combination, (b) his status as an affiliate of the target before the business
combination, and (c) his status as an affiliate of the combined companies after
the business combination. The following sections discuss the general rules that
will be applicable to certain broadly defined groups of stockholders.
Shares Eligible for Immediate Resale
- ---------------------------------------------------------- -------------------------------------------------------
Shares Eligible for Immediate Resale (if registered) 10,000,000
- ---------------------------------------------------------- -------------------------------------------------------
- ---------------------------------------------------------- -------------------------------------------------------
Shares sold to the public 2,000,000 shares that will be sold to the public.
- ---------------------------------------------------------- -------------------------------------------------------
In general, the shares issued to the public, our non-affiliated advisors
and the non-affiliated stockholders of the target will not be subject to any
restrictions on resale under federal securities laws.
Shares Eligible for Resale, but Subject to Rule 144 for 1 year
- ---------------------------------------------------------- -------------------------------------------------------
- ---------------------------------------------------------- -------------------------------------------------------
Acquisition shares issued to affiliates of target who An indeterminate number of acquisition shares that
are not affiliates of the combined companies may be issued to persons who are affiliates of the
target but are not affiliates of the combined
companies.
- ---------------------------------------------------------- -------------------------------------------------------
In general, the registered shares issued to persons who are affiliates of
our company or the target before the business combination but are not affiliates
of the combined companies after the business combination will be classified as
"control securities" when they are issued. The holders of these shares will be
required to comply with the notice, manner of sale and volume limitations of
Rule 144 for a period of 1 year after the completion of a business combination.
Thereafter, they will be allowed to resell their shares without legal
restriction. All of our officers and directors, however, will agree in writing
to abide by certain contractual resale restrictions.
- ---------------------------------------------------------- -------------------------------------------------------
Shares Subject to Continuing Restrictions
- ---------------------------------------------------------- -------------------------------------------------------
- ---------------------------------------------------------- -------------------------------------------------------
Acquisition shares issued to officers, directors and 10% An indeterminate number of acquisition shares that
stockholders will be issued to persons who are affiliates of the
combined companies.
- ---------------------------------------------------------- -------------------------------------------------------
In general, the registered shares issued to persons who are affiliates of
the combined companies will be classified as "control securities." These
securities will be eligible for resale after the completion of a business
combination, but the holders will be required to comply with the notice, manner
of sale and volume limitations of Rule 144 for as long as they remain affiliates
of the combined companies. If a person who was originally an affiliate of the
combined companies subsequently becomes a non-affiliated person, the
restrictions on his shares will terminate 90 days after the event that gives
rise to the change in status.
Rule 144
Rule 144 provides a safe harbor exemption for the open market resale of
"restricted securities." The term "restricted securities" generally includes
securities that were sold in an exempt transaction, or that are held by a person
who is an affiliate of the issuer of the securities.
For restricted securities acquired by non-affiliates in an exempt
transaction, Rule 144 generally prohibits resale transactions during the first
year, permits limited resale transactions during the second year, and permits
unrestricted resale transactions after the securities have been held for at
least 2 years.
For restricted securities acquired by affiliates in an exempt transaction,
Rule 144 generally prohibits resale transactions during the first year and then
treats those securities as "control securities."
Under Rule 144 as currently in effect, a holder of "control securities," or
restricted securities that are eligible for limited resale, will be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of either of the following:
o 1% of the number of shares of common stock then outstanding, or
o The average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a notice on Form 144 with
respect to such sale.
To the extent that shares of a company are only listed on the OTC Bulletin
Board or in the "Pink Sheets" the 1% limit will be applied without regard to
trading volume. Sales under Rule 144 are also limited by manner of sale
provisions and notice requirements and to the availability of current public
information about us.
PLAN OF DISTRIBUTION
Conduct of the Offering
We are offering to sell 2,000,000 shares of common stock for $0.01 per
share. We will sell the shares on a "best efforts, all or none" basis for a
period of 90 days from the date of this prospectus. We are currently planning to
conduct the offering without employing a professional underwriter. Therefore, we
do not expect to pay any underwriters' discounts, selling commissions or
finders' fees in connection with the offering.
Our officers and directors will personally distribute the prospectus to
prospective investors whom we believe may be interested, or who have contacted
us expressing an interest in evaluating an investment in our shares. While each
of our officers and directors is an "associated person" as that term is defined
in Rule 3a4-1 under the Securities Exchange Act of 1934, they will not be deemed
to be brokers because:
1. they are not subject to a statutory disqualification as that term is
defined in Section 3(a)(39) of the Securities Exchange Act;
2. they will not be compensated in connection with their participation in
the sale of our shares by the payment of commission or other
remuneration based either directly or indirectly on transactions in
securities;
3. they will be not an associated person of a broker or dealer at the time
of their participation in the sale of our securities; and
4. they will restrict their participation to the following activities:
i. preparing written communications and delivering them through the mails
or other means that do not involve their oral solicitation of a
potential purchaser;
ii. responding to inquiries of a potential purchaser in a communication
initiated by the potential purchaser, provided however, that the
content of each response will be limited to information contained in
our registration statement and this prospectus; and
iii. performing ministerial and clerical work involved in effecting any
transaction.
As of the date of the prospectus, we have not retained any broker-dealers
to assist in the sale of the shares to investors. However, our board of
directors has reserved the right to enter into an underwriting contract with one
or more broker-dealers on a "best efforts" or "firm commitment" basis. If we
ultimately decide to enter into such an agreement, commissions and expenses
within the guidelines of the National Association of Securities Dealers will be
negotiated. In the event we enter into an underwriting or other agreement with a
broker-dealer, we will halt sales and file an amendment to our registration
statement. However, we have no present intention of using a broker-dealer.
We intend to offer shares to persons who are not residents of the United
States, but only to the extent we may lawfully do so under the laws of the
country where the offeree resides. No person or group has made any commitment to
purchase any or all of the shares offered by us.
We will not approach nor permit anyone acting on our behalf to approach a
market maker or take any steps to request or encourage a market in our
securities until we have fully complied with the requirements of Rule 419 and
forwarded a notice of completion to the escrow agent. We have not conducted any
preliminary discussions or entered into any understandings with any market maker
regarding a future trading market in our securities, nor do we have any plans to
engage in any discussions. We do not intend to use consultants to obtain market
makers. No member of our management, no promoter or anyone acting at their
direction will recommend, encourage or advise investors to open brokerage
accounts with any broker-dealer that makes a market in the shares. Our investors
shall make their own decisions regarding whether to hold or sell their shares.
We will not attempt to exercise any influence over investors' decisions.
How to Subscribe
We will sell the shares on a "best efforts, all or none" basis for a period
of 90 days from the date of this prospectus. Investors may subscribe to purchase
shares by filling in and signing the subscription agreement and delivering it to
us prior to the expiration date. Subscribers must pay $0.01 per share in cash or
by check, bank draft or postal express money order payable in United States
dollars to "____________ Bank - Subscription Escrow Agent for Apex Wealth
Enterprises Limited."
We will deposit your money in a subscription escrow until we have received
subscriptions for 2,000,000 shares. If all 2,000,000 shares are not purchased
within 90 days, we will terminate the offering and refund your money, together
with any interest we earn on the subscription escrow. When we have sold all
2,000,000 shares and deposited $20,000 in our subscription escrow, we will
establish a separate "Rule 419 escrow" with _______________ as escrow agent.
Promptly thereafter, we will instruct the subscription escrow agent to release
10% of the subscription proceeds to us and transfer 90% of the subscription
proceeds, together with any previously earned interest income, to the Rule 419
escrow. The escrowed funds will be retained in the Rule 419 escrow until we
complete a business combination transaction or the escrow agent disburses the
escrowed funds to investors.
If we sell all 2,000,000 shares, we will not separately account for
interest earned on the subscription escrow. Instead, all interest income from
the subscription escrow will be added to the proceeds of the offering.
Thereafter, the amount of escrowed funds on any given date will equal the sum of
(a) $20,000 in subscription proceeds, (b) the interest earned on the
subscription escrow, and (c) the interest earned on the escrowed funds. If we
are required to make a distribution to investors from the Rule 419 escrow, the
escrow agent will determine the balance of escrowed funds as of the distribution
date, and then divide that balance by 2,000,000 to arrive at a per share
distribution value.
Our officers and directors will not be permitted to purchase shares in
connection with this offering. This prohibition will also apply to immediate
family members of our officers and directors who live in the same household.
EXPERTS
The financial statements included in this prospectus have been audited by
PKF, CPA, Hong Kong, independent public accountants, as indicated in their
report on such financial statements, and are included in this prospectus in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
LEGAL MATTERS
We are not a party to any legal proceedings.
Heller Ehrman White & McAuliffe LLP has been primarily responsible for the
preparation and filing of our registration statement.
The law firm of Conyers, Dill & Pearman, British Virgin Islands, has given
us its opinion that upon issuance, the shares will be duly authorized, legally
issued, fully paid and non assessable common stock of our company. Conyers, Dill
& Pearman has not passed on any other legal matters in connection with this
offering.
ADDITIONAL INFORMATION
We have filed a Form F-1 registration statement under the Securities Act of
1933 with the Securities and Exchange Commission. Our registration statement
includes certain exhibits, schedules and other materials that are not included
in this prospectus. Although this prospectus, which forms a part of the
registration statement, contains all material information included in the
registration statement, other parts of the registration statement have been
omitted as permitted by rules and regulations of the SEC. We refer you to the
registration statement and its exhibits for further information about our
securities, this offering and us. The registration statement and its exhibits
can be inspected and copied at the SEC's public reference room at:
Room 1024, Judiciary Plaza,
50 Fifth Street, N.W.,
Washington, D.C. 20549-1004,
and at the SEC regional offices located at:
Northwest Atrium Center,
500 West Madison Street, 14th Floor,
Chicago, Illinois 60661.
The public may obtain information about the operation of the public
reference room by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains a web site at http://www.sec.gov that contains our Form F-1 and other
reports, proxy and information statements and information that we file
electronically with the SEC.
APPENDIX I
COMPLETE TEXT OF RULE 419
(17 CFR 230.419)
Appendix I - 1
Rule 419 -- Offerings by Blank Check Companies
(a) Scope of the rule and definitions.
(1) The provisions of this section shall apply to every
registration statement filed under the Act relating to an
offering by a blank check company.
(2) For purposes of this section, the term "blank check company"
shall mean a company that:
(i) Is a development stage company that has no specific business
plan or purpose or has indicated that its business plan
is to engage in a merger or acquisition with an unidentified
company or companies, or other entity or person; and
(ii) Is issuing "penny stock," as defined in Rule 3a51-1 (17 CFR
240.3a51-1) under the Securities Exchange Act of 1934
("Exchange Act").
(3) For purposes of this section, the term "purchaser" shall mean
any person acquiring securities directly or indirectly
in the offering, for cash or otherwise, including promoters
or others receiving securities as compensation in
connection with the offering.
(b) Deposit of securities and proceeds in escrow or trust account
(1) General.
(i) Except as otherwise provided in this section or prohibited by other
applicable law, all securities issued in connection with an offering by a blank
check company and the gross proceeds from the offering shall be deposited
promptly into:
(A) An escrow account maintained by an "insured depository institution," as
that term is defined in section 3(c)(2) of the Federal Deposit Insurance Act (12
U.S.C. 1813(c)(2)); or
(B) A separate bank account established by a broker or dealer registered
under the Exchange Act maintaining net capital equal to or exceeding $25,000 (as
calculated pursuant to Exchange Act Rule 15c3-1 (17 CFR 240.15c3-1), in which
the broker or dealer acts as trustee for persons having the beneficial interests
in the account.
(ii) If funds and securities are deposited into an escrow account
maintained by an insured depository institution, the deposit account records of
the insured depository institution must provide that funds in the escrow account
are held for the benefit of the purchasers named and identified in accordance
with 12 CFR 330.1 of the regulations of the Federal Deposit Insurance
Corporation, and the records of the escrow agent, maintained in good faith and
in the regular course of business, must show the name and interest of each party
to the account. If funds and securities are deposited in a separate bank account
established by a broker or dealer acting as a trustee, the books and records of
the broker-dealer must indicate the name, address, and interest of each person
for whom the account is held.
(2) Deposit and investment of proceeds. (i) All offering proceeds, after
deduction of cash paid for underwriting commissions, underwriting expenses and
dealer allowances, and amounts permitted to be released to the registrant
pursuant to paragraph (b)(2)(vi) of this section, shall be deposited promptly
into the escrow or trust account; provided, however, that no deduction may be
made for underwriting commissions, underwriting expenses or dealer allowances
payable to an affiliate of the registrant.
(ii) Deposited proceeds shall be in the form of checks, drafts, or money
orders payable to the order of the escrow agent or trustee.
(iii) Deposited proceeds and interest or dividends thereon, if any, shall
be held for the sole benefit of the purchasers of the securities.
(iv) Deposited proceeds shall be invested in one of the following:
(A) An obligation that constitutes a "deposit," as that term is defined in
section 3(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813 (1));
(B) Securities of any open-end investment company registered under the
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) that holds itself out
as a money market fund meeting the conditions of paragraphs (c)(2), (c)(3), and
(c)(4) of 17 CFR 270.2a-7 (Rule 2a-7) under the Investment Company Act; or
(C) Securities that are direct obligations of, or obligations guaranteed as
to principal or interest by, the United States. NOTE TO SEC. 230.419(B)(2)(IV):
Issuers are cautioned that investments in government securities are
inappropriate unless such securities can be readily sold or otherwise disposed
of for cash at the time required without any dissipation of offering proceeds
invested.
(v) Interest or dividends earned on the funds, if any, shall be held in the
escrow or trust account until the funds are released in accordance with the
provisions of this section. If funds held in the escrow or trust account are
released to a purchaser of the securities, the purchasers shall receive interest
or dividends earned, if any, on such funds up to the date of release. If funds
held in the escrow or trust account are released to the registrant, interest or
dividends earned on such funds up to the date of release may be released to the
registrant.
(vi) The registrant may receive up to 10 percent of the proceeds remaining
after payment of underwriting commissions, underwriting expenses and dealer
allowances permitted by paragraph (b)(2)(i) of this section, exclusive of
interest or dividends, as those proceeds are deposited into the escrow or trust
account.
(3) Deposit of securities.
(i) All securities issued in connection with the offering, whether or not
for cash consideration, and any other securities issued with respect to such
securities, including securities issued with respect to stock splits, stock
dividends, or similar rights, shall be deposited directly into the escrow or
trust account promptly upon issuance. The identity of the purchaser of the
securities shall be included on the stock certificates or other documents
evidencing such securities. See also 17 CFR 240.15g-8 regarding restrictions on
sales of, or offers to sell, securities deposited in the escrow or trust
account.
(ii) Securities held in the escrow or trust account are to remain as issued
and deposited and shall be held for the sole benefit of the purchasers, who
shall have voting rights, if any, with respect to securities held in their
names, as provided by applicable state law. No transfer or other disposition of
securities held in the escrow or trust account or any interest related to such
securities shall be permitted other than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined by
the Internal Revenue Code of 1986 as amended (26 U.S.C. 1 et seq.), or Title 1
of the Employee Retirement Income Security Act (29 U.S.C. 1001 et seq.), or the
rules thereunder.
(iii) Warrants, convertible securities or other derivative securities
relating to securities held in the escrow or trust account may be exercised or
converted in accordance with their terms; provided, however, that securities
received upon exercise or conversion, together with any cash or other
consideration paid in connection with the exercise or conversion, are promptly
deposited into the escrow or trust account.
(4) Escrow or trust agreement. A copy of the executed escrow or trust
agreement shall be filed as an exhibit to the registration statement and shall
contain the provisions of paragraphs (b)(2), (b)(3), and (e)(3) of this section.
(5) Request for supplemental information. Upon request by the Commission or
the staff, the registrant shall furnish as supplemental information the names
and addresses of persons for whom securities are held in the escrow or trust
account.
NOTE TO SEC. 230.419(B): With respect to a blank check offering subject to
both Rule 419 and Exchange Act Rule 15c2-4 (17 CFR 240.15c2- 4, the requirements
of Rule 15c2-4 are applicable only until the conditions of the offering governed
by that Rule are met (e.g., reaching the minimum in a "part-or-none" offering).
When those conditions are satisfied, Rule 419 continues to govern the use of
offering proceeds.
(c) Disclosure of offering terms. The initial registration statement shall
disclose the specific terms of the offering, including, but not limited to:
(1) The terms and provisions of the escrow or trust agreement and the
effect thereof upon the registrant's right to receive funds and the effect of
the escrow or trust agreement upon the purchaser's funds and securities required
to be deposited into the escrow or trust account, including, if applicable, any
material risk of non-insurance of purchasers' funds resulting from deposits in
excess of the insured amounts; and
(2) The obligation of the registrant to provide, and the right of the
purchaser to receive, information regarding an acquisition, including the
requirement that pursuant to this section, purchasers confirm in writing their
investment in the registrant's securities as specified in paragraph (e) of this
section.
(d) Probable acquisition post-effective amendment requirement. If, during
any period in which offers or sales are being made, a significant acquisition
becomes probable, the registrant shall file promptly a post- effective amendment
disclosing the information specified by the applicable registration statement
form and Industry Guides, including financial statements of the registrant and
the company to be acquired as well as pro forma financial information required
by the form and applicable rules and regulations. Where warrants, rights or
other derivative securities issued in the initial offering are exercisable,
there is a continuous offering of the underlying security.
(e) Release of deposited and funds securities--(1) Post-effective amendment
for acquisition agreement. Upon execution of an agreement(s) for the
acquisition(s) of a business(es) or assets that will constitute the business (or
a line of business) of the registrant and for which the fair value of the
business(es) or net assets to be acquired represents at least 80 percent of the
maximum offering proceeds, including proceeds received or to be received upon
the exercise or conversion of any securities offered, but excluding amounts
payable to non-affiliates for underwriting commissions, underwriting expenses,
and dealer allowances, the registrant shall file a post-effective amendment
that:
(i) Discloses the information specified by the applicable registration
statement form and Industry Guides, including financial statements of the
registrant and the company acquired or to be acquired and pro forma financial
information required by the form and applicable rules and regulations;
(ii) Discloses the results of the initial offering, including but not
limited to:
(A) The gross offering proceeds received to date, specifying the amounts
paid for underwriter commissions, underwriting expenses and dealer allowances,
amounts disbursed to the registrant, and amounts remaining in the escrow or
trust account; and
(B) The specific amount, use and application of funds disbursed to the
registrant to date, including, but not limited to, the amounts paid to officers,
directors, promoters, controlling shareholders or affiliates, either directly or
indirectly, specifying the amounts and purposes of such payments; and
(iii) Discloses the terms of the offering as described pursuant to
paragraph (e)(2) of this section.
(2) Terms of the offering. The terms of the offering must provide, and the
registrant must satisfy, the following conditions.
(i) Within five business days after the effective date of the
post-effective amendment(s), the registrant shall send by first class mail or
other equally prompt means, to each purchaser of securities held in escrow or
trust, a copy of the prospectus contained in the post-effective amendment and
any amendment or supplement thereto;
(ii) Each purchaser shall have no fewer than 20 business days and no more
than 45 business days from the effective date of the post-effective amendment to
notify the registrant in writing that the purchaser elects to remain an
investor. If the registrant has not received such written notification by the
45th business day following the effective date of the post-effective amendment,
funds and interest or dividends, if any, held in the escrow or trust account
shall be sent by first class mail or other equally prompt means to the purchaser
within five business days;
(iii) The acquisition(s) meeting the criteria set forth in paragraph (e)(1)
of this section will be consummated if a sufficient number of purchasers confirm
their investments; and
(iv) If a consummated acquisition(s) meeting the requirements of this
section has not occurred by a date 18 months after the effective date of the
initial registration statement, funds held in the escrow or trust account shall
be returned by first class mail or equally prompt means to the purchaser within
five business days following that date.
(3) Conditions for release of deposited securities and funds. Funds held in
the escrow or trust account may be released to the registrant and securities may
be delivered to the purchaser or other registered holder identified on the
deposited securities only at the same time as or after:
(i) The escrow agent or trustee has received a signed representation from
the registrant, together with other evidence acceptable to the escrow agent or
trustee, that the requirements of paragraphs (e)(1) and (e)(2)of this section
have been met; and
(ii) Consummation of an acquisition(s) meeting the requirements of
paragraph (e)(2)(iii) of this section.
(4) Prospectus supplement. If funds and securities are released from the
escrow or trust account to the registrant pursuant to this paragraph, the
prospectus shall be supplemented to indicate the amount of funds and securities
released and the date of release.
NOTES TO SEC. 230.419(E): 1. WITH RESPECT TO A BLANK CHECK OFFERING SUBJECT
TO BOTH RULE 419 AND EXCHANGE ACT RULE 10B-9 (17 CFR 240.10B-9), THE
REQUIREMENTS OF RULE 10B-9 ARE APPLICABLE ONLY UNTIL THE CONDITIONS OF THE
OFFERING GOVERNED BY THAT RULE ARE MET (E.G., REACHING THE MINIMUM IN A
"PART-OR-NONE" OFFERING). WHEN THOSE CONDITIONS ARE SATISFIED, RULE 419
CONTINUES TO GOVERN THE USE OF OFFERING PROCEEDS.
2. IF THE BUSINESS(ES) OR ASSETS ARE ACQUIRED FOR CASH, THE FAIR VALUE
SHALL BE PRESUMED TO BE EQUAL TO THE CASH PAID. IF ALL OR PART OF THE
CONSIDERATION PAID CONSISTS OF SECURITIES OR OTHER NON-CASH CONSIDERATION, THE
FAIR VALUE SHALL BE DETERMINED BY AN ACCEPTED STANDARD, SUCH AS BONA FIDE SALES
OF THE ASSETS OR SIMILAR ASSETS MADE WITHIN A REASONABLE TIME, FORECASTS OF
EXPECTED CASH FLOWS, INDEPENDENT APPRAISALS, ETC. SUCH VALUATION MUST BE
REASONABLE AT THE TIME MADE.
(f) Financial statements. The registrant shall:
(1) Furnish to security holders audited financial statements for the first
full fiscal year of operations following consummation of an acquisition pursuant
to paragraph (e) of this section, together with the information required by Item
303(a) of Regulation S-K (17 CFR 229.303(a)), no later than 90 days after the
end of such fiscal year; and
(2) File the financial statements and additional information with the
Commission under cover of Form 8-K (17 CFR 249.308); provided, however, that
such financial statements and related information need not be filed separately
if the registrant is filing reports pursuant to Section 13(a) or 15(d) of the
Exchange Act.
APEX WEALTH ENTERPRISES LIMITED
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 30, 2003
INDEX
Page
Independent Auditors' Report F-2
Balance Sheet as of May 30, 2003 F-3
Statement of Operations for the period ended May 30, 2003 F-4
Statement of Stockholders' Equity for the period ended May 30, 2003 F-5
Statement of Cash Flows for the period ended May 30, 2003 F-6
Notes to the Financial Statements F-7
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Apex Wealth Enterprises Limited
We have audited the accompanying balance sheet of Apex Wealth Enterprises
Limited as of May 30, 2003 and the related statements of operations,
stockholders' equity and cash flows for the period from April 8, 2002 (date of
incorporation) to May 30, 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Apex Wealth Enterprises
Limited as of May 30, 2003, and the results of its operations and its cash flows
for the period from April 8, 2002 (date of incorporation) to May 30, 2003 in
conformity with accounting principles generally accepted in the United States of
America.
/s/ PKF
_______________________________
PKF Certified Public Accountants
Hong Kong
8th September 2003
Apex Wealth Enterprises LIMITED
BALANCE SHEET
AS OF May 30, 2003
Note US$
ASSETS
Current assets
Cash and cash equivalents 100,256
----------------
Total assets 100,256
================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Amount due to a director 2 3,046
Accrued expenses 1,282
----------------
Total liabilities 4,328
----------------
----------------
Commitments and contingency
Stockholders' equity
Common stock, US$0.01 par value: 100,000,000 shares 100,000
authorised: 10,000,000 shares issued and outstanding at
May 30, 2003
Accumulated deficit (4,072 )
----------------
Total stockholders' equity 95,928
----------------
----------------
Total liabilities and stockholders' equity 100,256
================
Apex Wealth Enterprises LIMITED
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED May 30, 2003
Note US$
Revenue -
Expenses
Formation expenses 1,026
General and administrative expenses 3,046
----------------
Loss from operations (4,072 )
Income taxes 3 -
----------------
----------------
Net loss (4,072 )
================
APEX WEALTH ENTERPRISES LIMITED
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM APRIL 8, 2002 TO MAY 30, 2003
Common stock
----------------------------
----------------------------
Accumulated
Shares Amount deficit Total
US$ US$ US$
Issuance of common stock 10,000,000 100,000 - 100,000
Net loss - - (4,072 ) (4,072 )
------------- ------------ ----------------- -----------
Balance, May 30, 2003 10,000,000 100,000 (4,072 ) 95,928
============== ============ ================= ===========
============= ============ ================= ===========
APEX WEALTH ENTERPRISES LIMITED
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED May 30, 2003
US$
Cash flows from operating activities :
Net loss (4,072 )
Changes in liabilities :
Increase in accrued expenses 1,282
----------------
Net cash used in operating activities (2,790 )
----------------
----------------
Cash flows from financing activities :
Proceeds from issuance of common stock 100,000
Advance from a director 3,046
----------------
----------------
Net cash provided by financing activities 103,046
----------------
Net change in cash and cash equivalents and
cash and cash equivalents, end of period 100,256
================
APEX WEALTH ENTERPRISES LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 30, 2003
1. Nature of business and significant accounting policies
The Company
The purpose of Apex Wealth Enterprises Limited ("the Company") is
investment holding.
The Company was incorporated under the International Business Companies Act
of the British Virgin Islands on April 8, 2002 as a company with limited
liability with authorised capital of US$50,000 divided into 50,000 shares of
common stock at US$1 par value.
On August 1, 2002, the authorised capital had been subdivided into 500,000
shares of common stock at US$0.1 par value. On May 12, 2003, the authorised
capital was increased to US$1,000,000 divided into 100,000,000 shares of common
stock at US$0.01 par value.
The Company has no activity during the period.
Cash and cash equivalents
Cash and cash equivalents are short-term, highly liquid investments with
original maturities of three months or less.
Income taxes
The Company accounts for income tax under the provisions of Statement of
Financial Accounting Standards No. 109, which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of the
events that have been included in the financial statements or tax returns.
Deferred income taxes are recognised for all significant temporary differences
between tax and financial statements bases of assets and liabilities.
Foreign currency translation and transactions
The Company uses Hong Kong dollars ("HK$") as the functional currency.
Transactions denominated in currencies other than HK$ are translated into HK$ at
the applicable rates of exchange prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in other currencies are translated
into HK$ at rates of exchange at the balance sheet dates. Exchange gains or
losses arising from changes in exchange rates subsequent to the transactions
dates for monetary assets and liabilities denominated in other currencies are
included in the determination of net income for the respective period.
APEX WEALTH ENTERPRISES LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 30,2003
1. Nature of business and significant accounting policies
Foreign currency translation and transactions (cont'd)
For financial reporting purposes, HK$ has been translated into United
States dollars ("US$") as the reporting currency. Assets and liabilities are
translated at the exchange rate in effect at period end. Income statement
accounts are translated at the average rate of exchange prevailing during the
period. Translation adjustments arising from the use of different exchange rates
from period to period are included as a component of stockholders' equity as
"Accumulated other comprehensive income - foreign currency translation
adjustments". Gains and losses resulting from foreign currency transactions are
included in other comprehensive income (expenses).
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the dates of financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. Amount due to a director
The amount is interest free, unsecured and repayable within one year.
3. Income taxes
The Company has net operating loss at May 30, 2003 for Hong Kong
profits tax purpose.
4. Commitments and contingencies
There was no significant commitments or contingent liabilities as of
May 30, 2003.
5. Concentrations of Credit Risk
Cash and cash equivalents are financial instruments that potentially subject the
Company to concentrations of credit risk.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. EXPENSES OF ISSUANCE AND DISTRIBUTION
The other expenses payable by the Registrant in connection with
the issuance and distribution of the securities being registered are
estimated as follows:
Escrow Fee $1,000
Securities and Exchange Commission Registration Fee $162
U.S. Legal Fees $20,000
British Virgin Islands Legal Fees $1,500
Accounting Fees $1,500
Printing Fees $500
TOTAL $24,622
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ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our organizational documents provide, in general, that we shall indemnify
our directors and officers, from and against all actions, proceedings, costs,
charges, losses, damages, and expenses which they or any of them shall or may
incur or sustain by reason of any act done or omitted in or about the execution
of their duty in their respective offices or trusts, except such (if any) as
they shall incur or sustain by or through their own willful neglect or default
respectively.
ITEM 15 RECENT SALES OF UNREGISTERED SECURITIES
The following sets forth information relating to all securities of
Registrant sold by it since April 8, 2002, the date of Registrant's inception.
All of such shares of common stock were purchased on April 21, 2002 and May 12,
2002, respectively, at a price of $.01 per share, which was paid in cash.
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Name Date Number of Shares
- ---------------------------------------------- ---------------- ---------------------------------------------------
- ---------------------------------------------- ---------------- ---------------------------------------------------
First Asia International Holdings Limited 4/21/2002 1,000,000 (after stock split)
- ---------------------------------------------- ---------------- ---------------------------------------------------
- ---------------------------------------------- ---------------- ---------------------------------------------------
First Asia International Holdings Limited 5/12/2003 9,000,000
- ---------------------------------------------- ---------------- ---------------------------------------------------
- ---------------------------------------------- ---------------- ---------------------------------------------------
Total 10,000,000
==========
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Exemption from registration under the Securities Act of 1933, as amended,
is claimed for the sales of common stock referred to above in reliance upon the
exemption afforded by Section 4(2) of the Securities Act for transactions not
involving a public offering. Each purchaser was either an accredited investor or
had sufficient knowledge or experience in financial or business matters that he
was capable of evaluating the merits and risks of the investment. Each
certificate evidencing such shares of Common Stock bears an appropriate
restrictive legend and "stop transfer" orders are maintained on Registrant's
stock transfer records there against. None of these sales involved participation
by an underwriter or a broker-dealer.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of Exhibits filed herewith as part of the
Registration Statement:
3.1 Registrant's Memorandum and Articles of Association
4.1 Form of certificate evidencing shares of common stock
5.1 Form of Opinion of Conyers Dill and Pearman, respecting legality of
common stock
10.1 Proposed Form of Subscription Escrow Agreement by and between the
Registrant and _________________ Bank as escrow agent
10.3 Proposed Form of Rule 419 escrow Agreement by and between the
Registrant and ______________ Bank as escrow agent
23.1 Consent of PKF, CPA.
23.2 Form of Consent of Conyers Dill and Pearman (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature page of Part II of this
Registration Statement)
(b) Financial Statement Schedule(s)
None required
ITEM 17. UNDERTAKINGS
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:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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 a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) To file a post-effective amendment to the to the registration statement
to include any financial statements required by paragraph 210.3-19 of this
chapter at the start of any delayed offering or throughout a continuous
offering. Financial statements and information otherwise required by Section
10(a)(3) of the Act need not be furnished, provided that the registrant includes
in the prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (a)(4) and other information necessary to
ensure that all other information in the prospectus is at least as current as
the date of those financial statements.
(5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
Registrant pursuant to Item 1a4 of this Part II to the registration statement,
or otherwise, Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a director, officer or
controlling person of Registrant 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, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against the public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(6) That for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Hong Kong, SAR on the 16th day of
September, 2003.
Apex Wealth Enterprises Limited
_____/s/ Li Sze Tang________________
Chairman of the Board
Each of the officers and directors of Apex Wealth Enterprises Limited whose
signature appears below hereby constitutes and appoints Li Sze Tang, as his true
and lawful attorneys-in-fact and agents, with full power of substitution, each
with the power to act alone, to sign and execute on behalf of the undersigned
any amendment or amendments to this registration statement on Form F-1, and to
perform any acts necessary to be done in order to file such amendment, and each
of the undersigned does hereby ratify and confirm all that such
attorneys-in-fact and agents, or their or his substitutes, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated
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Signature Title Date
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/s/ Mr. Wilson Cheung Director September 18, 2003
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