UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
Commission file number ______
Pan Asian Corporation
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(Exact name of registrant as specified in its charter)
Cayman Islands N/A
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(State or other jurisdiction of (I.R.S. Employer
incorporation or formation) Identification Number)
c/o Nautilus Global Partners, LLC
700 Gemini, Suite 100
Houston, Texas 77058
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-869-7000
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Copies to:
Lawrence G. Nusbaum, Esq.
Gusrae, Kaplan, Bruno & Nusbaum PLLC
120 Wall Street
New York, NY 10005
(212) 269-1400
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of Exchange on which to
be so registered each class is to be registered
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None N/A
Securities to be registered under Section 12(g) of the Exchange Act:
Ordinary Shares, par value $0.0001
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Title of each class
ITEM 1. DESCRIPTION OF BUSINESS
General
Pan Asian Corporation ("we", "us", "our" or the "Company")
was organized under the laws of the Cayman Islands on
September 27, 2006. Since inception, we have been engaged in
organizational efforts. We are a blank check development stage
company formed for the purpose of acquiring, through a stock exchange,
asset acquisition or similar business combination an operating
business. We have not conducted negotiations or entered into a letter
of intent concerning any target business.
Plan of Operation
We do not currently engage in any business activities that
generate revenue and do not expect to generate revenue until such time
as we have successfully completed a business combination. Our
operations will consist entirely of identifying, investigating and
conducting due diligence on potential businesses for acquisition, none
of which will generate revenues. In addition to the costs that we
have incurred in connection with our formation and the filing of this
registration statement, including legal, accounting and auditing fees,
we expect to incur costs associated with identifying acquisition
targets and completing necessary due diligence.
We believe we will be able to meet the costs of these activities
through use of funds that we have raised in private sales of our
ordinary shares. If we require additional funds, we will seek
additional investments from our shareholders, management or other
investors.
Narrative Description of Business
Although we have not identified or entered into any agreements
with a potential target business to date, we intend to focus on
targets located primarily in Asia, South America and Eastern Europe,
as we believe that businesses with operating history and growth
potential in these locations could benefit significantly from access
to the United States capital markets and may offer the potential of
capital appreciation stemming from economic growth in such emerging
markets.
The analysis of business opportunities will be undertaken by or
under the supervision of our officer and directors who will have a
large amount of flexibility in seeking, analyzing and participating in
potential business opportunities. In our efforts to analyze potential
acquisition targets, we will consider the following kinds of factors:
* Potential for growth, indicated by new technology,
anticipated market expansion or new products;
* Competitive position as compared to other firms of similar
size and experience within the industry segment as well as
within the industry as a whole;
* Strength and diversity of management, either in place or
scheduled for recruitment;
* Capital requirements and anticipated availability of
required funds;
* The extent to which the business opportunity can be advanced;
* The accessibility of required management expertise,
personnel, raw materials, services, professional assistance
and other required items; and
* Other relevant factors.
In applying the foregoing criteria, no one of which will be
controlling, management will attempt to analyze all factors and
circumstances and make a determination based upon reasonable
investigative measures and available data. Potentially available
business opportunities may occur in many different industries, and at
various stages of development, all of which will make the task of
comparative investigation and analysis of such business opportunities
extremely difficult and complex. If necessary, we will retain third
party consultants to aid us in our evaluation of potential targets,
provided that we have the necessary capital available.
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We anticipate that the selection of a business combination will
be complex and extremely risky. In addition, we believe that as a
result of general economic conditions, shortages of available capital,
the attractiveness of obtaining access to United States capital
markets, and the perceived benefits of becoming a publicly traded
company, that there may be numerous firms seeking business combination
partners such as ourselves, thus adding to the complexity.
Competition
In identifying, evaluating and selecting a target business, we may
encounter intense competition from other entities having a business
objective similar to ours. There are numerous blank check companies
that have gone public in the United States that have significant
financial resources, that are seeking to carry out a business plan
similar to our business plan. Furthermore, there are a number of
additional blank check companies that are still in the registration
process or are about to file registration statements, both under the
Securities and Exchange Act and under the Securities Act.
Additionally, we may be subject to competition from other companies
looking to expand their operations through the acquisition of a target
business. Many of these entities are well established and have
extensive experience identifying and effecting business combinations
directly or through affiliates. Many of these competitors possess
greater technical, human and other resources than us and our financial
resources will be relatively limited when contrasted with those of
many of these competitors.
While we believe there may be numerous potential target businesses
that we could acquire with our currently available funds, our ability
to compete in acquiring certain sizable target businesses will be
limited by our available financial resources. This inherent
competitive limitation gives others an advantage in pursuing the
acquisition of a target business.
Our management believes, however, that our status as a reporting
entity and potential access to the United States public equity markets
may give us a competitive advantage over privately-held entities
having a similar business objective as ours in acquiring a target
business with significant growth potential on favorable terms. We also
believe that because we are incorporated in the Cayman Islands we may
be attractive from a tax perspective to potential targets operating
outside of the United States, as the majority of non-operating
companies that are seeking reverse merger candidates are incorporated
in the United States, which potentially adds an additional layer of
taxation.
Further, if we succeed in effecting a business combination, there
will be, in all likelihood, intense competition from competitors of
the target business. We cannot assure you that, subsequent to a
business combination, we will have the resources or ability to compete
effectively.
Forms of Acquisition
The structure of a potential business combination, either
through an acquisition or a merger, will depend upon a number of
factors, including, the nature of the target entity's ownership
structure, its business structure and the relative negotiating
strengths of the parties to the transaction. It is our intention to
structure a business combination so that the consideration we offer
the owners of the target company consists primarily of ordinary
shares. Such a structure provides the benefit of conserving our
capital, but has the potential drawback of resulting in our current
shareholders no longer having control of a majority of our voting
ordinary shares following such a transaction.
If a business combination is structured as an acquisition, we
may be able to structure the transaction so that the vote or approval
by our shareholders is not required. If a business combination is
structured as a merger, then we may be required to call a shareholders'
meeting and obtain the approval of the holders of a majority of the
outstanding ordinary shares. The necessity to obtain such shareholder
approval may result in delay and additional expense in the
consummation of any proposed transaction and may also give rise to
certain appraisal rights to dissenting shareholders. Accordingly, we
will seek to structure any such transaction so as not to require
shareholder approval.
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We currently anticipate that we will be able to effect only one
business combination, due primarily to our limited financing, and the
dilution of interest for present and prospective shareholders, which
is likely to occur if we offer our ordinary shares to obtain a target
business. This lack of diversification should be considered a
substantial risk in investing in us, because it will not permit us to
offset potential losses from one venture against gains from another.
Employees
We presently have no employees apart from our officers. We
expect no significant changes in the number of our employees other
than such changes, if any, incident to a business combination.
Available Information
We have elected to file this Form 10 registration statement on
a voluntary basis in order to become a reporting company under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
As a reporting company, we will be obligated to file with the
SEC certain interim and periodic reports including an annual report
containing audited financial statements, as required under the
Exchange Act.
The public may read and copy any materials that we file with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-
SEC-0330. Additionally, the SEC maintains an Internet site that
contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC,
which can be found at http://www.sec.gov.
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We are not required to deliver an annual report to security
holders and at this time we do not anticipate the distribution of such
a report.
ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated in the Cayman Islands because our management
believes that incorporation in the Cayman Islands offer a number of
benefits, including, but not limited to, the following:
* political and economic stability;
* an effective judicial system;
* a favorable tax system;
* the absence of exchange control or currency restrictions;
and
* the availability of professional and support services.
However, certain disadvantages accompany incorporation in the
Cayman Islands. These disadvantages include:
* the Cayman Islands has a less developed body of securities
laws as compared to the United States and provides
significantly less protection to investors; and
* Cayman Islands companies may not have standing to sue
before the federal courts of the United States.
We have been advised that there is uncertainty as to whether the
courts of the Cayman Islands would:
* recognize or enforce judgments of United States courts
obtained against us or our directors or officers predicated
upon the civil liability provisions of the securities laws
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of the United States or any state in the United States; or
* entertain original actions brought in the Cayman Islands or
China against us or our directors or officers predicated
upon the securities laws of the United States or any state
in the United States.
We have been advised that a final and conclusive judgment in the
federal or state courts of the United States under which a sum of
money is payable, other than a sum payable in respect of taxes, fines,
penalties or similar charges, may be subject to enforcement
proceedings as a debt in the courts of the Cayman Islands under the
common law doctrine of obligation.
ITEM 1A. RISK FACTORS
An investment in our ordinary shares is extremely speculative and
involves a high degree of risk. You should carefully consider the
risks and uncertainties described below and the other information
contained in this registration statement before purchasing any of our
securities. The risks and uncertainties set forth below are not the
only ones facing us. Additional risks and uncertainties may also
adversely impact our proposed business plan and prospects. In the
event that any of the following risks actually materialize, our
proposed business plan, and/or prospects would likely suffer
significantly. In such event, you could lose all or a substantial
part of the money that you paid for our ordinary shares.
We are a development stage company with no operating history and,
accordingly, you will not have any basis on which to evaluate our
ability to achieve our business objective.
Because we are a recently formed development stage company with
no operations and/or functions to date, you will have no basis upon
which to evaluate our ability to achieve our business objective, which
is to acquire an operating business. We have not conducted any
negotiations regarding acquisitions and we have no current plans,
arrangements or understandings with any prospective acquisition
candidates.
We are dependent on the ability of management to locate, attract and
effectuate a suitable acquisition candidate; management intends to
devote only a limited amount of time to seeking a target company.
The nature of our operations is highly speculative and there is a
consequent risk of loss of your investment. The success of our plan of
operation will depend to a great extent on the operations, financial
condition and management of an identified business opportunity. We
cannot assure you that we will be successful in locating candidates
with established operating histories. In the event we complete a
business combination with a privately held company, the success of our
operations may be dependent upon management of the successor firm and
numerous other factors beyond our control. While seeking a business
combination, management anticipates devoting no more than a few hours
per week to the Company's affairs. Our officers have not entered into
written employment agreements with us and are not expected to do so in
the foreseeable future. This limited commitment may adversely impact
our ability to identify and consummate a successful business
combination.
There is no public market for our ordinary shares.
There is no public trading market for our ordinary shares and
none is expected to develop unless and until, among other things, we
complete an acquisition, file a selling shareholder registration
statement under the Securities Act, and such ordinary shares are
accepted for trading on a trading medium in the United States, the
occurrence of any of which no assurances can be given when, if, or
ever.
Because of our limited resources and intense competition for private
companies suitable for an acquisition of the type contemplated by
management, we may not be able to consummate an acquisition on
suitable terms, if at all.
We expect to encounter intense competition from other entities
having business objectives similar to ours. The highly competitive
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market for the small number of business opportunities could reduce the
likelihood of consummating a successful business combination. Many of
the entities that we will be in competition with are well established
and have extensive experience in identifying and effecting business
combinations directly or through affiliates. A large number of
established and well-financed entities, including small public
companies and venture capital firms, are active in mergers and
acquisitions of companies that may be desirable target candidates for
us. Nearly all these entities have significantly greater financial
resources, technical expertise and managerial capabilities than we do;
consequently, we will be at a competitive disadvantage in identifying
possible business opportunities and successfully completing a business
combination. These competitive factors may reduce the likelihood of
our identifying and consummating a successful business combination.
We have no agreements for a business combination or other transaction.
We have no arrangement, agreement or understanding with respect
to engaging in a merger with, joint venture with or acquisition of, a
private or public entity. No assurances can be given that we will
successfully identify and evaluate suitable business opportunities or
that we will conclude a business combination. Management has not
identified any particular industry or specific business within an
industry for evaluation. We cannot guarantee that we will be able to
negotiate a business combination on favorable terms, and there is
consequently a risk that funds allocated to the purchase of our shares
will not be invested in a company with active business operations.
Management intends to devote only a limited amount of time to seeking
a target company which may adversely impact our ability to identify a
suitable acquisition candidate.
While seeking a business combination, management anticipates
devoting no more than a few hours per week to the Company's affairs in
total. Our officer has not entered into a written employment agreement
with us and is not expected to do so in the foreseeable future. This
limited commitment may adversely impact our ability to identify and
consummate a successful business combination.
The time and cost of preparing a private company to become a public
reporting company may preclude us from entering into a merger or
acquisition with the most attractive private companies.
Target companies that fail to comply with SEC reporting
requirements may delay or preclude acquisition. Sections 13 and 15(d)
of the Exchange Act require reporting companies to provide certain
information about significant acquisitions, including certified
financial statements for the company acquired, covering one, two, or
three years, depending on the relative size of the acquisition. The
time and additional costs that may be incurred by some target entities
to prepare these statements may significantly delay or essentially
preclude consummation of an acquisition. Otherwise suitable
acquisition prospects that do not have or are unable to obtain the
required audited statements may be inappropriate for acquisition so
long as the reporting requirements of the Exchange Act are applicable.
Our business will have no revenues unless and until we merge with or
acquire an operating business.
We are a development stage company and have had no revenues from
operations. We may not realize any revenues unless and until we
successfully merge with or acquire an operating business. Further, we
anticipate that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements,
disclosure documents and other instruments will require substantial
management time and attention require the expenditure of significant
financial resources. If we decide not to participate in a specific
business opportunity, or if we fail to consummate a business
combination, the costs incurred by us related to a transaction may
result in the loss of the related costs incurred.
We may require additional funds in order to operate a business that we
acquire.
Any target business that is selected may be a financially
unstable company or an entity in its early stages of development or
growth, including entities without established records of sales or
earnings. In that event, we will be subject to numerous risks inherent
in the business and operations of financially unstable and early stage
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or potential emerging growth companies. In addition, we may effect a
business combination with an entity in an industry characterized by a
high level of risk, and, although our management will endeavor to
evaluate the risks inherent in a particular target business, there can
be no assurance that we will properly ascertain or assess all
significant risks. If we obtain a business that requires additional
capital that we cannot provide, it could have a material adverse
effect on our business and could result in the loss of your entire
investment.
We expect to issue additional ordinary shares in a merger or
acquisition, which will result in substantial dilution.
Our Memorandum of Association authorizes the issuance of a
maximum of 50,000,000 ordinary shares. Any merger or acquisition
effected by us may result in the issuance of additional securities
without shareholder approval and may result in substantial dilution in
the percentage of our ordinary shares held by our then existing
shareholders.
We have not conducted any market research or identified business
opportunities, which may affect our ability to identify a business to
merge with or acquire.
We have neither conducted nor have others made available to us
results of market research concerning prospective business
opportunities. Therefore, we have no assurances that market demand
exists for a merger or acquisition as contemplated by us. Our
management has not identified any specific business combination or
other transactions for formal evaluation by us, such that it may be
expected that any such target business or transaction will present
such a level of risk that conventional private or public offerings of
securities or conventional bank financing will not be available. There
is no assurance that we will be able to acquire a business opportunity
on terms favorable to us. Decisions as to which business opportunity
to participate in will be unilaterally made by our management, which
may act without the consent, vote or approval of our shareholders.
We cannot assure you that following a business combination with an
operating business, our ordinary shares will be listed on NASDAQ or
any other securities exchange.
Following a business combination, we may seek the listing of our
ordinary shares on NASDAQ or the American Stock Exchange. However, we
cannot assure you that following such a transaction, we will be able
to meet the initial listing standards of either of those or any other
stock exchange, or that we will be able to maintain a listing of our
ordinary shares on either of those or any other stock exchange. After
completing a business combination, until our ordinary shares are
listed on the NASDAQ or another stock exchange, we expect that our
ordinary shares would be eligible to trade on the OTC Bulletin Board,
another over-the-counter quotation system, or on the "pink sheets,"
where our shareholders may find it more difficult to dispose of shares
or obtain accurate quotations as to the market value of our ordinary
shares. In addition, we would be subject to an SEC rule that, if it
failed to meet the criteria set forth in such rule, imposes various
practice requirements on broker-dealers who sell securities governed
by the rule to persons other than established customers and accredited
investors. Consequently, such rule may deter broker-dealers from
recommending or selling our ordinary shares, which may further affect
its liquidity. This would also make it more difficult for us to raise
additional capital following a business combination.
Our shareholders may face different considerations in protecting their
interests because we are incorporated under Cayman Islands law.
Our corporate affairs are governed by our Memorandum and Articles
of Association, by the Companies Law (as revised) of the Cayman
Islands and the common law of the Cayman Islands. The rights of
shareholders to take action against our directors, actions by minority
shareholders and the fiduciary responsibilities of our directors to us
under Cayman Islands law are to a large extent governed by the common
law of Cayman Islands. The common law in the Cayman Islands is derived
in part from comparatively limited judicial precedent in the Cayman
Islands and from English common law, the decisions of whose courts are
of persuasive authority but are not binding on a court in the Cayman
Islands. Cayman Islands law relating to the right of shareholders and
the fiduciary duties of our directors may not be as established and
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may differ from provision under statutes or judicial precedent in
existence in jurisdictions in the United States. As a result, our
public shareholders may have more difficulty in protecting their
interests in actions against the management, directors or our
controlling shareholders than would shareholders of a corporation
incorporated in a jurisdiction in the United States.
Judgments against us may be difficult or impossible to enforce in
foreign jurisdictions.
We are a Cayman Islands company and a substantial majority of our
assets are located outside the U.S. In addition, a majority of our
directors and officers reside outside the U.S. As a result, it may not
be possible to effect service of process within the U.S. upon such
persons, including with respect to matters arising under U.S. or
foreign securities or other applicable laws. There is uncertainty as
to whether the courts of the Cayman Islands, Hong Kong or China would
recognize or enforce judgments of United States courts obtained
against us or such persons based upon the civil liability provisions
of the securities laws of the United States, or be competent to hear
original actions based upon these laws. In addition, any judgments
obtained in the U.S. against us, including judgments predicated on the
civil liability provisions of the securities laws of the United States
or any state thereof, may be not collectible within the U.S. Moreover,
China does not have treaties providing for the reciprocal recognition
and enforcement of judgments of courts within the U.S., Japan or most
western countries. Hong Kong has no arrangement for the reciprocal
enforcement of judgments within the U.S. As a result, if you intend to
enforce a judgment obtained in the U.S. against our assets located
outside the U.S., such judgment may be subject to re-examination of
the merits of the action by a foreign court and face additional
procedures and other difficulties which would not be required for
enforcement of such judgment in the U.S. Enforcing such judgments may
be difficult or impossible.
If we effect a business combination with a company located outside of
the United States, we would be subject to a variety of additional
risks that may negatively impact our operations.
We intend to effect a business combination with a company located
outside of the United States. If we do so, we could be subject to
special considerations and/or risks associated with companies
operating in the target business' home jurisdiction, including any of
the following:
* rules and regulations or currency conversion or corporate
withholding taxes on individuals;
* tariffs and trade barriers;
* regulations related to customs and import/export matters;
* longer payment cycles;
* tax issues, such as tax law changes and variations in tax
laws as compared to the United States;
* currency fluctuations;
* challenges in collecting accounts receivable;
* cultural and language differences; and
* employment regulations.
We cannot assure you that we would be able to adequately address
these additional risks. If we were unable to do so, our operations,
and those of the business that we acquired, could be materially
adversely affected.
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If we effect a business combination with a company located outside of
the United States, the laws applicable to such company will likely
govern all of our material agreements and we may not be able to
enforce our legal rights.
If we effect a business combination with a company located outside
of the United States, the laws of the country in which such company
operates will govern almost all of the material agreements relating to
its operations. We cannot assure you that the target business will be
able to enforce any of its material agreements or that remedies will
be available in this new jurisdiction. The system of laws and the
enforcement of existing laws in such jurisdiction may not be as
certain in implementation and interpretation as in the United States.
The inability to enforce or obtain a remedy under any of our future
agreements could result in a significant loss of business, business
opportunities or capital. Additionally, if we acquire a company
located outside of the United States, it is likely that substantially
all of our assets would be located outside of the United States and
some of our officers and directors might reside outside of the United
States. As a result, it may not be possible for investors in the
United States to enforce their legal rights, to effect service of
process upon our directors or officers or to enforce judgments of
United States courts predicated upon civil liabilities and criminal
penalties of our directors and officers under Federal securities laws.
Authorization of Preference Shares.
Our Memorandum of Association authorizes the issuance of up to
1,000,000 preference shares with designations, rights and preferences
determined from time to time by our Board of Directors. Accordingly,
our Board of Directors is empowered, without shareholder approval, to
issue preference shares with dividend, liquidation, conversion,
voting, or other rights which could adversely affect the voting power
or other rights of the holders of our ordinary shares. In the event of
issuance, the preference shares could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a
change in control of our Company. Although we have no present
intention to issue any preference shares, we cannot assure you that we
will not do so in the future.
We may become a passive foreign investment company, which could result
in adverse U.S. federal income tax consequences to U.S. investors.
Based on the nature of our business, we do not expect to be a
passive foreign investment company, or PFIC, for U.S. federal income
tax purposes for our current taxable year. However, whether or not we
are a PFIC for any taxable year will be based in part on the character
of our income and assets and the value of our assets from time to
time, which will be based in part on the trading price of our ordinary
shares, once they commence trading, which may be volatile.
Accordingly, it is possible that we may be a PFIC for any taxable
year. If we were treated as a PFIC for any taxable year during which a
U.S. investor held an ordinary share, certain adverse U.S. federal
income tax consequences could apply to the U.S. investor. See
"Taxation-United States Federal Income Taxation-Passive Foreign
Investment Company Rules."
If we effect a business combination with a United States corporation
we could face adverse tax effects under the United States tax laws.
Although we currently intend to focus on Asia, South America and
Eastern Europe for potential business combination targets, if we were
to effect a business combination with a U.S. corporation, such a
combination could subject us to potentially adverse tax effects as a
result of changes made to the U.S. Internal Revenue Code of 1986, as
amended, by the American Jobs Creation Act of 2004 relating to the
treatment of domestic business entities which expatriate from the
United States to a foreign jurisdiction. These new provisions
generally apply to the direct or indirect acquisition of substantially
all of the properties of a domestic enterprise by a foreign
corporation if there is at least 60% or 80% of continuing share
ownership in the successor foreign entity by the former stockholders
of the U.S. corporation and substantial business activities are not
conducted in the jurisdiction in which such successor is created or
organized. In the event we effected a business combination with a
U.S. corporation, and were subsequently subject to these new rules, it
could cause us to lose certain tax benefits, which could make the
8
transaction more expensive to us, which could have an adverse effect
on our operations. See "Taxation - Certain Material United States
Federal Income Tax Considerations - Tax Effects if We Acquire a U.S.
Corporation"
If we are deemed to be a controlled foreign corporation, or CFC, we
may be subject to certain U.S. income tax risks associated with the
CFC rules under the U.S. Internal Revenue Code of 1986, as amended.
We will be considered a CFC for any year in which our United
States shareholders that each own (directly, indirectly or by
attribution) at least 10% of our voting shares (each a "10% U.S.
Holder") together own more than 50% of the total combined voting power
of all classes of our voting shares or more than 50% of the total
value of our shares. If we were classified as a CFC, such
classification would have many complex results, one of which is that
if you are a 10% U.S. Holder on the last day of our taxable year, you
will be required to recognize as ordinary income your pro rata share
of certain of our income (including both ordinary earnings and capital
gains) for the taxable year, whether or not you receive any
distributions on your ordinary shares during that taxable year.
If we are deemed to be a CFC in the future, these rules would
then apply to holders of our ordinary shares. Accordingly, U.S.
persons should consider the possible application of the CFC rules
before making an investment in our ordinary shares. See "Certain Tax
Considerations-Certain Material United States Federal Income Tax
Considerations-Controlled Foreign Corporation Status and Related
Consequences."
ITEM 2. FINANCIAL INFORMATION
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues, expenses, contingent assets
and liabilities and the related disclosures in the accompanying
financial statements. Changes in these estimates and assumptions could
materially affect our financial position, results of operations or
cash flows. Management considers an accounting estimate to be critical
if: (a) it requires assumptions to be made that were uncertain at the
time the estimate was made, and (b) changes in the estimate or
different estimates that could have been selected could have a
material impact on our consolidated results of operations or financial
condition. All other significant accounting policies that we employ
are presented in the notes to the consolidated financial statements.
The following discussion presents information about the nature of our
most critical accounting policies and estimates, our assumptions or
approach used and the effects of hypothetical changes in the material
assumptions used to develop each estimate.
Loss Per Ordinary Share -
Basic loss per ordinary share is based on the weighted effect of
ordinary shares issued and outstanding, and is calculated by dividing
net loss by the weighted average shares outstanding during the period.
Diluted loss per ordinary share is calculated by dividing net loss by
the weighted average number of ordinary shares used in the basic loss
per share calculation plus the number of ordinary shares that would be
issued assuming exercise or conversion of all potentially dilutive
ordinary shares outstanding. The Company does not present diluted
earnings per share for years in which it incurred net losses as the
effect is antidilutive.
At September 30, 2006, there were no potentially dilutive
ordinary shares outstanding.
Income Taxes -
Pan Asian Corporation was registered as an Exempted Company
in the Cayman Islands, and therefore, is not subject to Cayman Island
income taxes for 20 years from the Date of Inception. While the
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Company has no intentions of conducting business operations in the
United States, the Company would be subject to United States income
taxes based on activities occurring in the United States.
The Company accounts for income taxes in accordance with SFAS No.
109, Accounting for Income Taxes. This statement prescribes the use of
the liability method whereby deferred tax asset and liability account
balances are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. In assessing the realization of
deferred tax assets, management considers whether it is likely that
some portion or all of the deferred tax assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the
Company attaining future taxable income during periods in which those
temporary differences become deductible.
Recently Issued Accounting Pronouncements -
Management does not believe that any recently issued, but not yet
effective, accounting standards, if currently adopted, would have a
material effect on the accompanying financial statements.
Selected Financial Data
The selected financial data presented below has been derived from
our audited financial statements appearing elsewhere herein.
Period from September 27, 2006
(Date of Inception)
to September 30, 2006
------------------------------
Revenues $ -
Expenses 2,592
Net Loss (2,592)
Basic and diluted loss
per share $ (.00)
Total Assets $ -
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Disclosure Regarding Forward Looking Statements
Statements, other than historical facts, contained in this
Registration Statement on Form 10, including statements of potential
acquisitions and our strategies, plans and objectives, are "forward-
looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Although we believe that our forward looking statements are
based on reasonable assumptions, we caution that such statements are
subject to a wide range of risks, trends and uncertainties that could
cause actual results to differ materially from those projected. Among
those risks, trends and uncertainties are important factors that could
cause actual results to differ materially from the forward looking
statements, including, but not limited to; the effect of existing and
future laws, governmental regulations and the political and economic
climate of the United States; the effect of derivative activities; and
conditions in the capital markets. In particular, careful
consideration should be given to cautionary statements made in this
Form 10 in the Risk Factors section. We undertake no duty to update
or revise these forward-looking statements.
When used in this Form 10, the words, "expect," "anticipate,"
"intend," "plan," "believe," "seek," "estimate" and similar
expressions are intended to identify forward-looking statements,
10
although not all forward-looking statements contain these identifying
words. Because these forward-looking statements involve risks and
uncertainties, actual results could differ materially from those
expressed or implied by these forward-looking statements for a number
of important reasons, including those discussed under Item 1A. "Risk
Factors" and elsewhere in this Form 10.
General
We are a development stage company formed solely for the purpose
of identifying and entering into a business combination with a
privately held business or company, domiciled and operating in an
emerging market, that is seeking the advantages of being a publicly
held corporation whose stock is eventually traded on a major United
States stock exchange. We intend to focus on targets located
primarily in Asia, South America and Eastern Europe, as we believe
that businesses with operating history and growth potential in these
locations would benefit significantly from access to the United States
capital markets and may offer the potential of capital appreciation
stemming from the economic growth in such emerging markets.
Plan of Operation
As of the date of this registration statement, we have not
engaged in any business activities that generate revenue. Our
activities to date have been primarily focused upon our formation. We
may conduct private offerings of our ordinary shares, the proceeds of
which we intend to use for payment of costs associated with formation,
accounting and auditing fees, legal fees, and costs associated with
identifying acquisition targets and completing necessary due
diligence. In addition, we expect to incur costs related to filing
periodic reports with the Securities and Exchange Commission. If
necessary, we believe that we will be able to raise additional funds
through additional private sales of ordinary shares, by obtaining
loans from our shareholders, management or other investors.
We may consider a business which has recently commenced
operations, is a developing company in need of additional funds for
expansion into new products or markets, is seeking to develop a new
product or service, or is an established business which may be
experiencing financial or operating difficulties and is in need of
additional capital. In the alternative, a business combination may
involve the acquisition of, or merger with, a company which does not
need substantial additional capital, but which desires to establish a
public trading market for its shares, while avoiding, among other
things, the time delays, significant expense, and loss of voting
control which may occur in a public offering.
Liquidity and Capital Resources
As of September 30, 2006, we had no cash available, and had
current liabilities of $2,482 to a related party.
Quantitative Disclosures About Market Risk
None.
ITEM 3. DESCRIPTION OF PROPERTY
We do not own or rent any property. We utilize the office space
and equipment of our officer and directors at no cost.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security ownership of certain beneficial owners.
The following table sets forth, as of November 16, 2006, the
number of Ordinary Shares owned of record and beneficially by our
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executive officers, directors and persons who hold 5% or more of our
outstanding Ordinary Shares.
Amount and Nature of Percentage
Name and Address Beneficial Ownership of Class
---------------- -------------------- ----------
David Richardson* 100,000 9.1%
Joseph Rozelle* 0
Nautilus Global Partners, LLC
700 Gemini, Suite 100
Houston, TX 77058 1,000,000 90.9%
Mid-Ocean Consulting Limited
Bayside House
Bayside Executive Park
West Bay Street & Blake Road
Nassau, Bahamas 100,000 9.1%
All Officers and Directors
as a group (2 individuals) 100,000 9.1%
* The address of Messrs. Richardson and Rozelle is c/o Nautilus Global
Business Partners, 700 Gemini, Suite 100, Houston, Texas 77058.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
Our officers and directors and additional information concerning
them are as follows:
Name Age Position
---- --- --------
David Richardson 49 Director
Joseph Rozelle 33 President, Director
David Richardson. David Richardson has been one of our directors
since September 2006. Mr. Richardson is an Executive Director of
Lighthouse Capital Insurance Company (Fortis' insurance affiliate in
the Cayman Islands), and the President and CEO of Mid-Ocean Consulting
Group Ltd., which guides both institutions and individuals on
sophisticated international structuring and tax related strategies.
From 2003 through 2005, Mr. Richardson served as the President of
Oceanic Bank and Trust Limited's Insurance Specialty Unit. Prior
thereto, in 1996, he became the Head of Private Banking for
MeesPierson, a Dutch merchant/private bank in the Cayman Islands.
Following that, he became the Managing Director for MeesPierson
(Bahamas) Ltd. and Chairman of Lighthouse Capital Insurance Company.
David Richardson began his professional career in the investment
business over 20 years ago, working for one of Canada's preeminent
investment houses; Walwyn, Stodgell, Cochrane and Murray (now Merrill
Lynch Canada). In 1987, he joined the Bank of Bermuda in Bermuda as
Portfolio Manager, where he personally oversaw the management of in
excess of $350 million for the Bank's top tier clientele. From there
he moved to the Bank of Bermuda's wholly owned trust subsidiary,
Bermuda Trust Company serving as Assistant Manager and Director of
Americas' marketing activities. Mr. Richardson is a graduate of the
University of Toronto (Hon.BSc) with a post graduate degree from
Northwestern University (NTS Graduate), as well as possessing a number
of professional affiliations including a Member of STEP, the ITPA and
the Bahamas International Insurance Association.
Joseph Rozelle. Joseph Rozelle has been one of our directors
since September 2006. Mr. Rozelle is currently the President of
12
Nautilus Global Partners, a Limited Liability Company dedicated to
facilitation of "going public" transactions for foreign and domestic
operating companies on the public United States Exchanges. Prior to
joining Nautilus in 2006, Mr. Rozelle was a consultant with Accretive
Solutions, providing Sarbanes-Oxley Compliance consulting and other
accounting related consulting services. Prior thereto, Mr. Rozelle
worked with Momentum Equity Group, LLC and Momentum Bio Ventures as a
Principal Analyst in the spring of 2002 and winter of 2003,
respectively. At Momentum, Mr. Rozelle was responsible for financial
modeling, due diligence, and preparation of investment summaries for
client companies. Prior to joining Momentum, Mr. Rozelle was an
associate with Barclays Capital in the Capital Markets Group,
specializing in asset securitization. Prior thereto, he was the
Assistant Vice President of Planning and Financial Analysis for a
regional commercial bank and was responsible for all of the corporate
financial modeling, risk analysis, mergers and acquisition evaluation,
and corporate budgeting. Before his tenure in commercial banking, Mr.
Rozelle served as a senior auditor with Arthur Andersen, where he was
involved in a variety of filings with the SEC involving corporate
mergers, spin-offs, public debt offerings, and annual reports. Mr.
Rozelle holds a Bachelors of Business Administration degree from the
University of Houston and a Masters of Business Administration degree
from the Jesse H. Jones School of Management at Rice University. In
addition, he is a Certified Public Accountant in the State of Texas.
Mr. Rozelle is also the sole director and sole executive officer of
VPGI, Inc., a public corporation.
Each of our directors is elected by holders of a majority of the
ordinary shares to serve for a term of one year and until his
successor is elected and qualified, which is generally at the annual
meeting of shareholders. Officers serve at the will of the board,
subject to possible future employment agreements which would establish
term, salary, benefits and other conditions of employment. No
employment agreements are currently contemplated.
Significant Employees
None
Family Relationships
None
Involvement in Certain Legal Proceedings
There have been no events under any bankruptcy act, no criminal
proceedings and no judgments, injunctions, orders or decrees material
to the evaluation of the ability and integrity of any director,
executive officer, promoter or control person of our Company during
the past five years.
Board Committees
Our Board of Directors has no separate committees and our Board
of Directors acts as the Audit Committee. We do not have a qualified
financial expert serving on our Board of Directors.
Involvement of Officers and Directors in Blank Check Companies
Other than as set forth below, none of our officers or directors
has been or currently is a principal of, or affiliated with, a blank
check company.
Mr. Rozelle is an officer and Messrs. Richardson and Rozelle are
currently serving on the boards of directors for the following
entities, each incorporated under the laws of the Cayman Islands:
* Dragon Acquisition Corporation
* Tiger Growth Corporation
* Emerald Acquisition Corporation
* Ruby Growth Corporation
13
* Matador Acquisition Corporation
* China Growth Corporation
* Lunar Growth Corporation
* Action Acquisition Corporation
* Global Growth Corporation
* Juniper Growth Corporation
* Seven Seas Acquisition Corporation
* Summit Growth Corporation
* Bering Growth Corporation
* Compass Acquisition Corporation
Each of the foregoing entities was formed for the purpose of
engaging in an acquisition or business combination of an operating
business.
ITEM 6. EXECUTIVE COMPENSATION
None of our officers or directors has received any cash
remuneration since inception. Officers will not receive any
remuneration until the consummation of an acquisition. No remuneration
of any nature has been paid for or on account of services rendered by
a director in such capacity. None of the officers and directors
intends to devote more than a few hours a week to our affairs.
It is possible that, after we successfully consummates a business
combination with an unaffiliated entity, that entity may desire to
employ or retain one or a number of members of our management for the
purposes of providing services to the surviving entity.
We have not adopted retirement, pension, profit sharing, stock
option or insurance programs or other similar programs for the benefit
of our employees.
There are no understandings or agreements regarding compensation
our management will receive after a business combination that is
required to be included in this table, or otherwise.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
On September 27, 2006, we issued 1,000,000 and 100,000 ordinary
shares to Nautilus Global Partners and Mid-Ocean Consulting Limited
(collectively, the "Founders") at a price of $0.0001 per share. Mr.
Rozelle, one of our directors is the President of Nautilus Global
Partners, LLC.
All ongoing and future transactions between us and any of our
officers and directors or their respective affiliates, including loans
by our officers and directors, will be on terms believed by us to be
no less favorable than are available from unaffiliated third parties
and such transactions or loans, including any forgiveness of loans,
will require prior approval in each instance by a majority of our
uninterested "independent" directors (to the extent we have any) or
the members of our board who do not have an interest in the
transaction, in either case who had access, at our expense, to our
attorneys or independent legal counsel.
ITEM 8. LEGAL PROCEEDINGS
We are not party to any legal proceedings.
14
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S ORDINARY
EQUITY AND RELATED STOCKHOLDER MATTERS.
Our ordinary shares have not been listed for trading on the OTC
Bulletin Board or on any stock exchange and we do not anticipate
applying for listing on any exchange until after such time that we
have completed a business acquisition.
As of September 30, 2006, there were 2 record holders of
1,100,000 Ordinary Shares.
We have not paid any cash dividends to date and we do not
anticipate or contemplate paying dividends in the foreseeable future.
It is the present intention of management to utilize available funds
for development of our business.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
On September 27, 2006, we issued 1,000,000 ordinary shares to
Nautilus Global Partners and 100,000 shares to Mid-Ocean Consulting
Limited, for aggregate consideration of $110 at a purchase price of
$.0001 per share. Such shares were issued in connection with our
organization pursuant to the exemption from registration contained in
Section 4(2) of the Securities Act as they were sold to sophisticated,
accredited, wealthy individuals and entities. No underwriting
discounts or commissions were paid with respect to such sales.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
General
We are a Cayman Islands company and our affairs are governed by
our memorandum and articles of association and the Companies Law (2004
Revision) of the Cayman Islands, or the Companies Law. The following
are summaries of material provisions of our memorandum and articles of
association and the Companies Law insofar as they relate to the
material terms of our ordinary shares. We have filed copies of our
complete memorandum and articles of association and the form of our
new amended and restated articles of association as exhibits to this
registration statement. The following summary description relating to
our share capital does not purport to be complete and is qualified in
its entirety by our memorandum and articles of association attached as
an exhibit hereto.
As of November 20, our authorized share capital consists of
50,000,000 ordinary shares, par value $0.0001 per share and 1,000,000
preference shares, par value $0.0001 per share. As of the date
hereof, there are 1,100,000 ordinary shares outstanding and no
preference shares outstanding.
Ordinary Shares
Voting
Holders of ordinary shares are entitled to one vote for each
ordinary share on all matters to be voted on by the shareholders.
Holders of ordinary shares do not have cumulative voting rights.
Holders of ordinary shares are entitled to share ratably in dividends,
if any, as may be declared from time to time by the Board of Directors
in its discretion from funds legally available therefor. In the event
of a liquidation, dissolution or winding up of the Company, the
holders of ordinary shares are entitled to share pro rata all assets
remaining after payment in full of all liabilities.
Holders of ordinary shares have no preemptive rights to purchase
ordinary shares. There are no conversion or redemption rights or
sinking fund provisions with respect to the ordinary shares.
Dividends
The holders of our ordinary shares are entitled to such dividends
as may be declared by our board of directors. We have not paid any
dividends on our ordinary shares to date and do not intend to pay
15
dividends prior to the completion of a business combination. The
payment of dividends in the future will be contingent upon our
revenues and earnings, if any, capital requirements and general
financial condition subsequent to completion of a business
combination. The payment of any dividends subsequent to a business
combination will be within the discretion of our then board of
directors. It is the present intention of our board of directors to
retain all earnings, if any, for use in our business operations and,
accordingly, our board does not anticipate declaring any dividends in
the foreseeable future.
Preference Shares
We are authorized to issue 1,000,000 blank check preference
shares, $0.0001 par value per share with designations, rights and
preferences determined from time to time by our Board of Directors.
TAXATION
The following summary of the material Cayman Islands and United
States federal income tax consequences of an investment in our
ordinary shares is based upon laws and relevant interpretations
thereof in effect as of the date hereof, all of which are subject to
change. This summary does not deal with all possible tax consequences
relating to an investment in our ordinary shares, such as the tax
consequences under state, local and other tax laws.
Certain Cayman Islands Taxation Considerations
The Cayman Islands currently levies no taxes on individuals or
corporations based upon profits, income, gains or appreciation and
there is no taxation in the nature of inheritance tax or estate duty.
There are no other taxes likely to be material to us levied by the
Government of the Cayman Islands except for stamp duties which may be
applicable on instruments executed in, or after execution brought
within the jurisdiction of the Cayman Islands. The Cayman Islands is
not party to any double tax treaties. There are no exchange control
regulations or currency restrictions in the Cayman Islands.
Pursuant to Section 6 of the Tax Concessions Law (1999 Revision) of
the Cayman Islands, we have obtained an undertaking from the Governor-
in-Council:
* that no law which is enacted in the Cayman Islands imposing any
tax to be levied on profits or income or gains or appreciation
shall apply to us or our operations; and
* that the aforesaid tax or any tax in the nature of estate duty
or inheritance tax shall not be payable on the shares, debentures
or other of our obligations.
The undertaking for us is for a period of 20 years from inception.
Certain Material United States Federal Income Tax Considerations
The following is a discussion of the material U.S. federal income
tax considerations applicable to the purchase, ownership and
disposition of ordinary shares by U.S. Holders (as defined below) and
Non-U.S. Holders (as defined below). This discussion deals only with
our ordinary shares held as capital assets by holders. This discussion
does not cover all aspects of U.S. federal income taxation that may be
relevant to the purchase, ownership or disposition of our ordinary
shares by investors in light of their particular circumstances. In
particular, this discussion does not address all of the tax
considerations that may be relevant to certain types of investors
subject to special treatment under U.S. federal income tax laws, such
as the following:
1. brokers or dealers in securities or currencies;
16
2. financial institutions;
3. pension plans;
4. regulated investment companies;
5. real estate investment trusts;
6. cooperatives;
7. tax-exempt entities;
8. insurance companies;
9. persons holding ordinary shares as part of a hedging,
integrated, conversion or constructive sale transaction or
a straddle;
10. traders in securities that elect to use a mark-to-market
method of accounting for their securities holdings;
11. persons liable for alternative minimum tax;
12. U.S. expatriates;
13. partnerships or entities or arrangements treated as
partnerships or other pass through entities for U.S.
federal tax purposes (or investors therein); or
14. U.S. Holders (as defined below) whose "functional
currency" is not the U.S. dollar.
Furthermore, this discussion is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the ''Code''), the Treasury
regulations promulgated thereunder and administrative and judicial
interpretations thereof, all as of the date hereof. Such authorities
may be repealed, revoked, modified or subject to differing
interpretations, possibly on a retroactive basis, so as to result in
U.S. federal income tax consequences different from those discussed
below. This discussion does not address any state, local or non-U.S.
tax considerations.
For purposes of this discussion, you will be considered a "U.S.
Holder" if you beneficially own our ordinary shares and you are for
U.S. federal income tax purposes one of the following:
* a citizen or an individual resident of the United States;
* a corporation (or other entity taxable as a corporation)
created or organized in or under the laws of the United
States, any state thereof or the District of Columbia;
* an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
* a trust if you (i) are subject to the primary supervision
of a court within the United States and one or more U.S.
persons have the authority to control all of your
substantial decisions or (ii) have a valid election in
effect under applicable U.S. Treasury regulations to be
treated as a U.S. person.
You will be considered a "Non-U.S. Holder" if you beneficially
own our ordinary shares and your are not a U.S. Holder or a
partnership or an entity or arrangement treated as a partnership for
U.S. federal income tax purposes. If you are a partnership or other
entity or arrangement treated as a partnership for U.S. federal income
tax purposes, the U.S. federal income tax treatment of your partners
generally will depend upon the status of such partners and your
activities.
We urge you to consult your own tax advisors concerning the particular
U.S. federal income tax consequences to you of the purchase, ownership
and disposition of our ordinary shares, as well as any consequences to
you arising under state, local and non-U.S. tax laws.
Consequences to U.S. Holders
The following discussion applies to you only if you are a U.S.
Holder.
Dividends
Subject to the passive foreign investment company rules and the
controlled foreign corporation rules discussed below, distributions of
17
cash or property that we pay in respect of our ordinary shares will
constitute dividends for U.S. federal income tax purposes to the
extent paid out of our current or accumulated earnings and profits (as
determined for U.S. federal income tax purposes) and will be
includible in your gross income upon receipt and taxed at ordinary
rates applicable to ordinary income. Distributions to you in excess of
our earnings and profits will be treated first as a return of capital
(with a corresponding reduction in your tax basis in the ordinary
shares) to the extent of your tax basis in the ordinary shares on
which the distribution was made, and then as capital gain from the
sale or exchange of such ordinary shares. We expect that our
distributions will not be eligible for the dividends-received
deduction for corporate U.S. Holders or constitute "qualified dividend
income" (which is taxable at the rates generally applicable to long-
term capital gains) for U.S. Holders taxed as individuals.
Subject to applicable limitations, dividends that are "qualified
dividend income" paid to a U.S. Holder who is an individual, trust or
estate, or a "U.S. Individual Holder," in taxable years beginning
before January 1, 2009, will be taxable at a maximum rate of 15%. In
order to be treated as "qualified dividend income" and taxable to such
U.S. Individual Holders at preferential tax rates the following
conditions must be satisfied: (1) the ordinary shares must be readily
tradable on an established securities market in the United States
(such as the Nasdaq National Market); (2) we are not a passive foreign
investment company for the taxable year during which the dividend is
paid or the immediately preceding taxable year (which we do not
believe we are or will be); (3) the U.S. Individual Holder has owned
the ordinary shares for the required holding period set forth under
the Code; and (4) the U.S. Individual Holder is not under an
obligation to make related payments with respect to positions in
substantially similar or related property. There is no assurance that
any dividends paid on our ordinary shares will be eligible for these
preferential rates in the hands of a U.S. Individual Holder. Any
dividends we pay which are not eligible for these preferential rates
will be taxed to a U.S. Individual Holder at regular rates applicable
to ordinary income. Legislation has been recently introduced in the
United States Senate which, if enacted in its present form, would
preclude our dividends from qualifying for such preferential rates
prospectively from the date of enactment.
Sale, Exchange or Other Taxable Disposition of Ordinary Shares
Subject to the passive foreign investment company rules and the
controlled foreign corporation rules discussed below, upon the sale,
exchange or other taxable disposition of ordinary shares, you will
recognize capital gain or loss equal to the difference between the
amount realized on such sale, exchange or taxable disposition and your
tax basis in the ordinary shares sold. Such gain or loss generally
will be long-term capital gain or loss if your holding period with
respect to such ordinary shares is more than one year at the time of
its disposition. The deductibility of capital losses is subject to
limitations.
Passive Foreign Investment Company Rules
Special United States tax rules apply to a company that is
considered a passive foreign investment company, or PFIC. Under these
rules, we will be classified as a PFIC for United States federal
income tax purposes in any taxable year in which either:
* at least 75% of our gross income for the taxable year is
passive income; or
* at least 50% of the gross value, determined on the basis of a
quarterly average, of our assets is attributable to assets
that produce or are held for the production of passive income.
Passive income generally includes dividends, interest, royalties,
rents (not including certain rents and royalties derived in the active
conduct of a trade or business), annuities and gains from assets that
produce passive income. If a foreign corporation owns directly or
indirectly at least 25% by value of the stock of another corporation,
the foreign corporation is treated for purposes of the PFIC tests as
owning its proportionate share of the assets of the other corporation,
and as receiving directly its proportionate share of the other
corporation's income.
We do not expect to be a PFIC for our 2006 tax year or in the
foreseeable future. We expect to conduct our affairs in a manner so
18
that we will not qualify as a PFIC in the foreseeable future. Our
determination of whether we are a PFIC is, however, not binding on the
U.S. Internal Revenue Service (the "IRS"). We cannot assure you that
we will not be a PFIC in any future year.
If we are treated as a PFIC, and you are a U.S. Holder that does
not make a mark-to-market election, as described below, you will be
subject to special rules with respect to:
* any gain you realize on the sale or other disposition of your
ordinary shares; and
* any excess distribution that we make to you (generally, any
distributions to you during a single taxable year that are
greater than 125% of the average annual distributions received
by you in respect of the ordinary shares during the three
preceding taxable years or, if shorter, your holding period
for the ordinary shares or ordinary shares).
Under these rules:
* the gain or excess distribution will be allocated ratably over
your holding period for the ordinary shares;
* the amount allocated to the taxable year in which you realized
the gain or excess distribution will be taxed as ordinary income;
* the amount allocated to each prior year, with certain exceptions,
will be taxed at the highest tax rate in effect for that year;
and
* the interest charge generally applicable to underpayments of tax
will be imposed in respect of the tax attributable to each such
year.
Special rules apply for calculating the amount of the foreign tax
credit with respect to excess distributions by a PFIC.
If you own ordinary shares in a PFIC that are treated as marketable
stock, you may make a mark-to-market election. If you make this
election, you will not be subject to the PFIC rules described above.
Instead, in general, you will include as ordinary income each year the
excess, if any, of the fair market value of your ordinary shares at
the end of the taxable year over your adjusted basis in your ordinary
shares. These amounts of ordinary income will not be eligible for the
favorable tax rates applicable to qualified dividend income or long-
term capital gains. You will also be allowed to take an ordinary loss
in respect of the excess, if any, of the adjusted basis of your
ordinary shares over their fair market value at the end of the taxable
year (but only to the extent of the net amount of previously included
income as a result of the mark-to-market election). Your basis in the
ordinary shares will be adjusted to reflect any such income or loss
amounts. Your gain, if any, recognized upon the sale of your ordinary
shares will be taxed as ordinary income.
In addition, notwithstanding any election you make with regard to
the ordinary shares, dividends that you receive from us will not
constitute qualified dividend income to you if we are a PFIC either in
the taxable year of the distribution or the preceding taxable year.
Dividends that you receive that do not constitute qualified dividend
income are not eligible for taxation at the 15% maximum rate
applicable to qualified dividend income. Instead, you must include the
gross amount of any such dividend paid by us out of our accumulated
earnings and profits (as determined for United States federal income
tax purposes) in your gross income, and it will be subject to tax at
rates applicable to ordinary income.
If you own ordinary shares during any year that we are a PFIC, you
must file IRS Form 8621.
You should consult your own tax advisor regarding the application
of the PFIC rules to our ordinary shares in your particular
circumstances, including the availability of making an election to
avoid adverse United States federal income tax consequences under the
PFIC rules in the event we are determined to be a PFIC in a future
year.
19
Controlled Foreign Corporation Status and Related Tax Consequences
Our status as a CFC depends upon the ownership of our ordinary
shares, there can be no assurance that we will not be deemed a CFC in
the future. We will be considered a CFC for any year in which U.S.
Holders that each own (directly, indirectly or by attribution) at
least 10% of our voting shares (each a "10% U.S. Holder") together own
more than 50% of the total combined voting power of all classes of our
voting shares or more than 50% of the total value of our shares. If
we were classified as a CFC, such classification would have many
complex results, one of which is that if you are a 10% U.S. Holder on
the last day of our taxable year, you will be required to recognize as
ordinary income your pro rata share of certain of our income
(including both ordinary earnings and capital gains) for the taxable
year, whether or not you receive any distributions on your ordinary
shares during that taxable year. In addition, special foreign tax
credit rules would apply. Your adjusted tax basis in your ordinary
shares would be increased to reflect any taxed but undistributed
earnings and profits. Any distribution of earnings and profits that
previously had been taxed would result in a corresponding reduction in
your adjusted tax basis in your ordinary shares and would not be taxed
again when you receive such distribution. Subject to a special
limitation in the case of individual 10% U.S. Holders that have held
their ordinary shares for more than one year, if you are a 10% U.S.
Holder, any gain from disposition of your ordinary shares will be
treated as dividend income to the extent of accumulated earnings
attributable to such ordinary shares during the time you held such
ordinary shares.
If in any given year we are deemed to be both a PFIC and a CFC, if
you are a 10% U.S. Holder, would be subject to the CFC rules and not
the PFIC rules with respect to your ownership of ordinary shares.
You should consult your own tax advisor regarding the application
of the CFC rules to our ordinary shares in your particular
circumstances, in the event that we are determined to be a CFC in a
future year.
Tax Effects if we Acquire a U.S. Corporation
The American Jobs Creation Act of 2004 added Section 7874 to the
Code which applies to domestic business entities which expatriate from
the United States to a foreign jurisdiction, which is referred to as
an "inversion". Although we currently do not intend to acquire a U.S.
Corporation, if we did affect such an acquisition, we could become
subject to certain adverse U.S. federal income tax consequences under
the new provisions of Section 7874 of the Code. These new provisions
generally apply to the direct or indirect acquisition of substantially
all of the properties of a domestic enterprise by a foreign
corporation if there is at least 60% or 80% of continuing share
ownership in the successor foreign entity by the former stockholders
of the U.S. corporation and substantial business activities are not
conducted in the jurisdiction in which such successor is created or
organized.
In cases where the ownership continuity by the former U.S.
corporation shareholders is between 60% and 80%, Section 7874 of the
Code operates to increase the tax cost of the inversion transaction by
denying the U.S. corporation the use of its tax attributes (such as
net operating losses) and by imposing a tax on certain income received
from related entities during the 10 year period following the
inversion transaction. In cases where the ownership continuity by the
former U.S. corporation shareholders in the new foreign parent is 80%
or more, the new rules deny the traditional benefits of an inversion
transaction because they provide that the new foreign parent will, for
all tax purposes, be treated as a U.S. corporation.
Information Reporting and Backup Withholding
In general, information will be reported to the IRS each year
regarding the amount of any dividends on our ordinary shares and the
proceeds of any sale of our ordinary shares paid to you during such
year unless you are an exempt recipient (such as a corporation). A
backup withholding tax will apply to such payments if you fail to
provide your taxpayer identification number or to make required
certifications or you have been notified by the IRS that you are
subject to backup withholding. Backup withholding is not an additional
tax and any amounts withheld under the backup withholding rules will
20
be allowed as a refund or a credit against your U.S. federal income
tax liability provided that you timely furnish the required
information to the IRS.
If you are a U.S. Holder that owns more than 10% of the aggregate
value of our ordinary shares (or you are one of our officers or
directors and you are a United States citizen or resident) you may be
required to file an information return on IRS Form 5471. A U.S. Holder
that purchases ordinary shares with cash generally will be required to
file Form 926 with the IRS if (i) immediately after the transfers such
investor holds, directly or indirectly, at least 10% of our voting
shares, or (ii) the amount of cash transferred in exchange for
ordinary shares during the 12-month period ending on the date of the
transfer exceeds $100,000. In the event a U.S. Holder fails to file
any such required form, such holder could be required to pay a
substantial penalty. In addition, depending on your particular
circumstances, you may be required to file certain other IRS
information returns with respect to an investment in ordinary shares.
Consequences to Non-U.S. Holders
The following discussion applies you only if you are a Non-U.S.
Holder. Special rules may apply to you if you are a CFC or a PFIC or
are otherwise subject to special treatment under the Code. In such
case, you should consult your own tax advisor to determine the U.S.
federal, state, local and non-U.S. tax consequences that may be
relevant to you with respect to an investment in ordinary shares.
Dividends
You generally will not be subject to U.S. federal income tax or
withholding tax on dividends received from us with respect to the
ordinary shares, unless that income is effectively connected with your
conduct of a trade or business in the United States. If you are
entitled to the benefits of a U.S. income tax treaty with respect to
those dividends, that income is generally taxable only if it is
attributable to a permanent establishment maintained by you in the
United States.
Sale, Exchange or Other Taxable Disposition of Ordinary Shares
You generally will not be subject to U.S. federal income tax or
withholding tax with respect to any gain recognized on a sale,
exchange or other taxable disposition of shares of our ordinary shares
unless:
* the gain is effectively connected with your conduct of a
trade or business in the United States, or, if certain tax
treaties apply, is attributable to a permanent establishment
you maintain in the United States; or
* if you are an individual and you are present in the United
States for 183 or more days in the taxable year of the sale,
exchange or other taxable disposition, and you meet certain
other requirements
If you are an individual and are described in the first bullet
above, you will be subject to tax on any gain derived from the sale,
exchange or other taxable disposition of ordinary shares under regular
graduated U.S. federal income tax rates. If you are an individual and
are described in the second bullet above, you will be subject to a
flat 30% tax on any gain derived from the sale, exchange or other
taxable disposition of ordinary shares that may be offset by U.S.
source capital losses (even though you are not considered a resident
of the United States). If you are a corporation and are described in
the first bullet above, you will be subject to tax on your gain under
regular graduated U.S. federal income tax rates and, in addition, may
be subject to the branch profits tax on your effectively connected
earnings and profits for the taxable year, which would include such
gain, at a rate of 30%, or at such lower rate as may be specified by
an applicable income tax treaty.
Information Reporting and Backup Withholding
You may be required to establish your exemption from information
reporting and backup withholding by certifying your status on IRS Form
W-8BEN, W-8ECI or W-8IMY, as applicable.
21
If you are a Non-U.S. Holder and you sell your ordinary shares to
or through a U.S. office of a broker, the payment of the proceeds is
subject to both U.S. backup withholding and information reporting
unless you certify that you are a non-U.S. person, under penalties of
perjury, or you otherwise establish an exemption. If you sell your
ordinary shares through a non-U.S. office of a non-U.S. broker and the
sales proceeds are paid to you outside the United States, then
information reporting and backup withholding generally will not apply
to that payment. However, U.S. information reporting requirements, but
not backup withholding, will apply to a payment of sales proceeds,
even if that payment is made to you outside the United States, if you
sell your ordinary shares through a non-U.S. office of a broker that
is a U.S. person or that has some other contacts with the United
States. Such information reporting requirements will not apply,
however, if the broker has documentary evidence in its records that
you are a non-U.S. person and certain other conditions are met, or you
otherwise establish an exemption.
The IRS may make information reported to you and the IRS
available under the provisions of an applicable income tax treaty to
the tax authorities in the country in which you reside. Any amounts
withheld under the backup withholding rules will be allowed as a
refund or a credit against your U.S. federal income tax liability, if
any, provided the required information is timely furnished by you to
the IRS. You should consult your own tax advisors regarding the filing
of a U.S. tax return for claiming a refund of any such backup
withholding.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Cayman Islands law does not limit the extent to which a company's
articles of association may provide for indemnification of officers
and directors, except to the extent any such provision may beheld by
the Cayman Islands courts to be contrary to public policy, such as to
provide indemnification against civil fraud or the consequences of
committing a crime. Our articles of association provide for
indemnification of our officers and directors for any liability
incurred in their capacities as such, except through their own willful
negligence or default.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling us pursuant to the foregoing provisions, we have been
informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
Securities Act and is theretofore unenforceable.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements required to be included in this
registration statement appear at the end of the registration statement
beginning on page F-1.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
There are not and have not been any disagreements between us and
our accountants on any matter of accounting principles, practices or
financial statement disclosure.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
The list of financial statements filed as part of this
registration statement is provided on page F-1.
22
(b) Exhibits:
Exhibit
Number Description
------- -----------
3.1 Memorandum and Articles of Association
23
Pan Asian Corporation
(A Development Stage Company)
Index to Financial Statements
PAGE
----
Report of Independent Registered Public Accounting Firm......... F-2
Balance Sheet as of September 30, 2006.......................... F-3
Statement of Operations for the period September 27, 2006
(date of inception) through September 30, 2006.................. F-4
Statement of Shareholders' Deficit for the period September
27, 2006 (date of inception) through September 30, 2006......... F-5
Statement of Cash Flows for the period
September 27, 2006 (date of inception) through September
30, 2006........................................................ F-6
Notes to Financial Statements................................... F-7
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Pan Asian Corporation:
We have audited the accompanying balance sheet of Pan Asian
Corporation (the Company) (a development stage company) as of
September 30, 2006, and the related statements of operations,
shareholders' deficit, and cash flows for the period from inception
(September 27, 2006) through September 30, 2006. 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our 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 Pan Asian
Corporation as of September 30, 2006, and the results of its
operations and its cash flows for the period from inception (September
27, 2006) through September 30, 2006, in conformity with generally
accepted accounting principles in the United States of America.
The accumulated deficit during the development stage for the period
from date of inception through September 30, 2006 is $2,592.
Helin, Donovan, Trubee & Wilkinson, LLP
/s/Helin, Donovan, Trubee & Wilkinson, LLP
November 17, 2006
Houston, Texas
F-2
Pan Asian Corporation
(A Development Stage Company)
Balance Sheet
As of September 30, 2006
ASSETS
Current assets
Cash $ -
------------
Total assets $ -
============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Payable to affiliate $ 2,482
------------
Total current liabilities 2,482
------------
Commitments and contingencies <Note 7> -
------------
Shareholders' deficit
Preference shares, $0.0001 par value,
1,000,000 shares authorized, none issued and
outstanding -
Ordinary shares, $0.0001 par value, 50,000,000
shares authorized, 1,100,000 shares issued
and outstanding 110
Additional paid in capital -
Deficit accumulated during the development stage (2,592)
------------
Total Shareholders' Deficit (2,482)
------------
$ -
============
The accompanying notes are an integral part of these financial statements.
F-3
Pan Asian Corporation
(A Development Stage Company)
Statement of Operations
For the period from September 27, 2006 (Date of Inception)
through September 30, 2006
Revenues $ -
------------
Expenses
Formation and other costs 2,592
------------
Total operating expenses 2,592
------------
Operating loss (2,592)
Income tax expense (benefit) -
------------
NET LOSS $ (2,592)
============
Basic and diluted loss per share $ (0.00)
============
Weighted average ordinary shares outstanding -
basic and diluted 1,100,000
============
The accompanying notes are an integral part of these financial statements.
F-4
Pan Asian Corporation
(A Development Stage Company)
Statement of Shareholders' Deficit
For the period from September 27, 2006 (Date of Inception)
to September 30, 2006
Deficit
Accumulated
Additional during the
Preferred Stock Ordinary Shares Paid In Development
Shares Amount Shares Amount Capital Stage Totals
------ ------ ----------- --------- ---------- ----------- --------
Founder shares issued at inception at
September 27, 2006 - $ - 1,100,000 $ 110 $ - $ - $ 110
Net loss - - - - - (2,592) (2,592)
------ ------ ----------- --------- ---------- ----------- --------
Balance as of September 30, 2006 - $ - 1,100,000 $ 110 $ - $ (2,592) $ (2,482)
====== ====== =========== ========= ========== =========== ========
The accompanying notes are an integral part of these financial statements.
F-5
Pan Asian Corporation
(A Development Stage Company)
Statement of Cash Flows
For the period from September 27, 2006 (Date of Inception)
through September 30, 2006
Cash flows from operating activities
Net loss $ (2,592)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Shares issued to founder for payment of formation costs 110
Changes in:
Payable to affiliate 2,482
---------
Net cash provided by operating activities -
---------
Cash flows from investing activities -
---------
Net cash provided by investing activities -
---------
Cash flows from financing activities -
---------
Net cash provided by financing activities -
---------
Net increase in cash -
Cash at beginning of the period -
---------
Cash at end of the period $ -
=========
Supplemental disclosures of cash flow information:
Interest paid $ -
=========
Income taxes paid -
=========
The accompanying notes are an integral part of these financial statements.
F-6
Pan Asian Corporation
(A Development Stage Company)
Notes to Financial Statements
NOTE 1 - Organization, Business and Operations
On September 27, 2006, Pan Asian Corporation (the "Company") was
formed in the Cayman Islands with the objective to acquire, or merge
with, an operating business. The Company's formation costs of $2,592
were financed through the issuance of 1,100,000 shares of ordinary
shares at par value of $0.0001 per share together with a payable to
the Founders of $2,482.
At September 30, 2006, the Company had not yet commenced any
operations. All activity from September 27, 2006 ("Date of Inception")
through September 30, 2006 relates to the Company's formation. The
Company selected June 30 as its fiscal year-end.
The Company, based on its proposed business activities, is a "blank
check" company. The Securities and Exchange Commission defines such a
company as "a development stage company" as it either 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 has issued 'penny stock,' as
defined in Rule 3a51-1 under the Securities Exchange Act of 1934. Many
states have enacted statutes, rules and regulations limiting the sale
of securities of "blank check" companies in their respective
jurisdictions. Management does not intend to undertake any efforts to
cause a market to develop in its securities, either debt or equity,
until the Company concludes a business combination with an operating
entity.
The Company was organized to acquire a target company or business
seeking the perceived advantages of being a publicly-held company and,
to a lesser extent, that desires to employ the Company's funds in its
business. The Company's principal business objective for the next 12
months and beyond will be to achieve long-term growth potential
through a business combination rather than short-term earnings. The
Company will not restrict its potential candidate target companies to
any specific business, industry or geographical location. The analysis
of new business opportunities will be undertaken by or under the
supervision of the officers and directors of the Company.
NOTE 2 - Summary of Significant Accounting Policies
Basis of Presentation
These financial statements are presented on the accrual basis of
accounting in accordance with generally accepted accounting principles
in the United State of America, whereby revenues are recognized in the
period earned and expenses when incurred. The Company also follows
Statement of Financial Accounting Standards ("SFAS") No. 7,
"Accounting and Reporting for Development Stage Enterprises" in
preparing its financial statements.
Statement of Cash Flows
For purposes of the statement of cash flows, we consider all highly
liquid investments (i.e., investments which, when purchased, have
original maturities of three months or less) to be cash equivalents.
F-7
NOTE 2 - Summary of Significant Accounting Policies (Continued)
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 date of the financial statements and reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Loss Per Common Share
Basic loss per common share is based on the weighted effect of common
shares issued and outstanding, and is calculated by dividing net loss
by the weighted average shares outstanding during the period. Diluted
loss per common share is calculated by dividing net loss by the
weighted average number of common shares used in the basic loss per
share calculation plus the number of common shares that would be
issued assuming exercise or conversion of all potentially dilutive
common shares outstanding. The Company does not present diluted
earnings per share for years in which it incurred net losses as the
effect is antidilutive.
At September 30, 2006, there were no potentially dilutive common
shares outstanding.
Income Taxes
Pan Asian Corporation was registered as an Exempted Company in the
Cayman Islands, and therefore, is not subject to Cayman Island income
taxes for 20 years from the Date of Inception. While the Company has
no intention of conducting any business activities in the United
States, the Company would be subject to United States income taxes
based on such activities that would occur in the United States.
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. This statement prescribes the use of the
liability method whereby deferred tax asset and liability account
balances are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. In assessing the realization of
deferred tax assets, management considers whether it is likely that
some portion or all of the deferred tax assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the
Company attaining future taxable income during periods in which those
temporary differences become deductible.
Fair Value of Financial Instruments
Our financial instruments consist of a payable to an affiliate. We
believe the fair values of our payable reflect its respective carrying
amounts.
Recently Issued Accounting Pronouncements
Management does not believe that any recently issued, but not yet
effective, accounting standards, if currently adopted, would have a
material effect on the accompanying financial statements.
F-8
NOTE 3 - Liquidity and Capital Resources
The Company has no revenues for the period from inception through
September 30, 2006, and does not intend to realize revenues until the
consummation of a merger with an operating entity. The Company's
principal business objective for the next 12 months and beyond will be
to achieve long-term growth potential through a business combination
rather than short-term earnings. There can be no assurance that the
Company will ever consummate the business combination; achieve or
sustain profitability or positive cash flows from its operations,
reduce expenses or sell ordinary shares. To date, the Company has
funded its formation activities primarily through the issuance of its
ordinary shares and a payable to affiliate.
NOTE 4 - Payable to Affiliate
The Company has a payable to affiliate of $2,482 to a Founder of the
Company. The payable is non-interest bearing and payable on demand.
NOTE 5 - Ordinary shares
On September 27, 2006, the Company was formed with 1,100,000 shares of
its restricted ordinary shares issued at par value of $0.0001 per
share, for consideration of $110 to its founding shareholders. The
stock, along with a payable issued to a Founder of $2,482 were the
basis of the funding of the Company's formation costs to date.
NOTE 6 - Preference shares
The Company is authorized to issue 1,000,000 shares of preference
shares with such designations, voting and other rights and preferences
as may be determined from time to time by the Board of Directors. At
September 30, 2006, there was no preference shares issued or
outstanding.
NOTE 7 - Commitments and Contingencies
The Company may become subject to various claims and litigation. The
Company vigorously defends its legal position when these matters
arise. The Company is not a party to, nor the subject of, any
material pending legal proceeding nor to the knowledge of the Company,
are any such legal proceedings threatened against the Company.
F-9
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: December 1, 2006 PAN ASIAN CORPORATION
By: /s/ Joseph Rozelle
----------------------------------
Name: Joseph Rozelle
Title: President