UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
Commission File Number 000-52132
Dragon Acquisition 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 organization) Identification No.)
c/o Nautilus Global Partners
700 Gemini, Suite 100, Houston, TX 77056
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(Address of principal executive offices) (Zip Code)
(281) 488-3883
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark whether the Registrant is not required to
file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of "large
accelerated filer," "accelerated filer," and "smaller reporting
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated Filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in rule 12b-2 of the Exchange Act). YES [X] NO [ ]
As of June 29, 2007, no market price existed for voting and non-
voting common equity held by non-affiliates of the registrant.
At April 18, 2008, there were 1,281,500 shares of Registrant's
ordinary shares outstanding.
GENERAL INDEX
Page
Number
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Part I
Item 1. Business .......................................... 1
Item 1A. Risk Factors....................................... 3
Item 1B. Unresolved Staff Comments.......................... 9
Item 2. Properties......................................... 9
Item 3. Legal Proceedings.................................. 9
Item 4. Submission of Matters to a Vote of
Security Holders................................. 9
PART II
Item 5. Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of
Equity Securities.................................. 9
Item 6. Selected Financial Data............................ 9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation..... 10
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk...................................... 11
Item 8. Financial Statements and Supplementary Data........ 11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............. 11
Item 9A(T). Controls and Procedures............................ 12
Item 9B. Other Information.................................. 12
PART III
Item 10. Directors, Executive Officers and Corporate
Governance....................................... 13
Item 11. Executive Compensation............................. 15
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters... 16
Item 13. Certain Relationships and Related Transactions,
and Director Independence........................ 17
Item 14. Principal Accounting Fees and Services............. 17
PART IV
Item 15. Exhibits and Financial Statement Schedules......... 18
SIGNATURES..................................................... 18
ITEM 1. BUSINESS
General
Dragon Acquisition Corporation ("we", "us", "our", the
"Company" or "Dragon") was organized under the laws of the Cayman
Islands on March 10, 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 our registration statement and
periodic and current reports, 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.
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
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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 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.
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
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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.
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 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
This Annual Report on Form 10-K contains "forward-looking
statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements
are not statements of historical facts, but rather reflect our
current expectations or beliefs concerning future events and
results. We generally use the words "believes," "expects,"
"intends," "plans," "anticipates," "likely," "will" and
similar expressions to identify forward-looking statements.
Such forward-looking statements, including those concerning our
expectations, involve risks, uncertainties and other factors,
some of which are beyond our control, which may cause our
actual results, performance or achievements, or industry
results, to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements. The risks, uncertainties and factors
that could cause our results to differ materially from our
expectations and beliefs include, but are not limited to, those
factors set forth below:
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* changes in laws or regulations affecting our operations;
* changes in our business tactics or strategies;
* acquisitions of new operations;
* changing market forces or contingencies that necessitate,
in our judgment, changes in our plans, strategy or
tactics; and
* fluctuations in the investment markets or interest rates,
which might materially affect our operations or
financial condition.
We cannot assure you that the expectations or beliefs
reflected in these forward-looking statements will prove correct.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise. You are cautioned not
to unduly rely on such forward-looking statements when
evaluating the information presented in this Annual Report on
Form 10-K.
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 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
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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 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.
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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 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.
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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.
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.
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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
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."
-8-
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2 PROPERTIES
We do not own or rent any property. We utilize the office
space and equipment of our officer and directors at no cost.
ITEM 3. LEGAL PROCEEDINGS
We are not party to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter of 2007.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
(a) Market information
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.
(b) Holders
As of December 31, 2007, there were 465 record holders of
1,281,500 Ordinary Shares.
(c) Dividends
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.
(d) Securities authorized for issuance under equity compensation
plans
As of December 31, 2007, we had no under equity compensation
plans and we do not intend to have an equity compensation plan
prior to the completion of a business combination.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below has been derived
from our audited financial statements appearing elsewhere herein.
-9-
Year Ended Period from
(Date of Inception) March 10, 2006
December 31, 2007 to December 31, 2006
------------------- --------------------
Revenues $ - $ -
Expenses 9,105 26,374
Net Loss (8,983) (25,862)
Basic and diluted loss
per share $ (0.01) $ (0.02)
Total Assets $ 23,449 $ 35,972
ITEM 7. 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
Annual Report on Form 10-K, 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. We undertake
no duty to update or revise these forward-looking statements.
When used in this Form 10-K, the words, "expect,"
"anticipate," "intend," "plan," "believe," "seek," "estimate" and
similar expressions are intended to identify forward-looking
statements, 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.
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 December 31, 2007 and as of the date of this report,
we had not engaged in any business activities that generate
revenue. Our activities to date have been primarily focused upon
our formation and raising capital. We have conducted private
offerings of our ordinary shares, the proceeds of which we intend
to use for payment of costs associated with formation, accounting
-10-
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.
We believe we will be able to meet these costs for at least
the next 12 months using the funds that we have raised through
our private offerings. If necessary, we believe that we will be
able to raise additional funds through additional private sales
of ordinary shares, or 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.
Results of Operations
Year ended December 31, 2007 compared to period of inception
(March 10, 2006) through December 31, 2006
- ------------------------------------------------------------
Operating Expenses
Because we currently do not have any business operations, we
have not had any revenues since inception. Total operating
expenses for the year ended December 31, 2007 decreased to $9,105
from $26,374 for the period from inception (March 10, 2006)
through December 31, 2006. This decrease is primarily related to
the organizational expenses incurred in 2006.
Liquidity and Capital Resources
As of December 31, 2007, we had $23,449 in cash available
and had current liabilities of $6,497 to a related party and
$4,447 to unrelated parties. The Company is actively pursuing
merger opportunities as described in the "General" Section of
Management's Discussion and Analysis, and believes that its
current available cash will be sufficient for its operations
until a merger candidate is selected, but may seek additional
financing in connection with a potential business combination or
if it otherwise requires additional funds.
ITEM 7A. QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8. FINANCIAL STATEMENTS
The financial statements of the Company, including the notes
thereto and report of the independent auditors thereon, are
included in this report as set forth in the "Index to Financial
Statements." See F-1 for Index to Consolidated Financial
Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-11-
ITEM 9A(T). CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
- -------------------------------------------------
We maintain disclosure controls and procedures that are designed
to ensure that information required to be disclosed in our
reports filed pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act") is recorded, processed, summarized
and reported within the time periods specified in the SEC's
rules, regulations and related forms, and that such information
is accumulated and communicated to our principal executive
officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure.
As of December 31, 2007, we carried out an evaluation, under the
supervision and with the participation of our principal executive
officer and our principal financial officer of the effectiveness
of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our principal executive
officer and our principal financial officer concluded that our
disclosure controls and procedures were effective as of the end
of the period covered by this report.
Management's Report on Internal Control Over Financial Reporting
Our management is also responsible for establishing and
maintaining adequate internal control over financial reporting.
The Company's internal control over financial reporting is
designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles.
Our internal control over financial reporting includes those
policies and procedures that:
* Pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
* Provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles,
and
* that our receipts and expenditures are being made only in
accordance with authorizations of the Company's management
and directors; and
* Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
our assets that could have a material effect on the financial
statements.
As of December 31, 2007, our management conducted an assessment
of the effectiveness of the Company's internal control over
financial reporting. Based on this assessment, management has
determined that the Company's internal control over financial
reporting was effective as of December 31, 2007.
This annual report does not include an attestation report of the
Company's registered public accounting firm regarding internal
control over financial reporting. Management's report was not
subject to attestation by the Company's registered public
accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only
management's report in this annual report.
Changes in Internal Controls.
- -----------------------------
There have been no changes in our internal controls over
financial reporting during our most recent fiscal quarter that
has materially affected or is reasonably likely to materially
affect our internal controls.
ITEM 9B. OTHER INFORMATION
None.
-12-
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our officers and directors and additional information
concerning them are as follows:
Name Age Position
- -----------------------------------------------------------------
David Richardson 50 Director
Joseph Rozelle 34 President, Chief Financial Officer,
Director
David Richardson. David Richardson has been one of our
directors since April 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 April 2006. In addition, Mr. Rozelle has served
as our President and Chief Financial Officer since September
2006. Mr. Rozelle is currently the President of 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. 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
-13-
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 and the
Compensation 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 both Mr. Richardson and Mr.
Rozelle are currently serving on the boards of directors for the
following entities, each incorporated under the laws of the
Cayman Islands:
* Global Growth Corporation
* Emerald Acquisition Corporation;
* Ruby Growth Corporation
* China Growth Corporation
* Lunar Growth Corporation
* Action Acquisition Corporation
* Pan Asian Corporation
* Juniper Growth Corporation
* Seven Seas Acquisition Corporation
* Summit Growth Corporation
* Bering Growth Corporation
* Compass Acquisition Corporation
Mr. Rozelle was an officer and both Mr. Richardson and Mr.
Rozelle served on the boards of directors for the following
entities that were formerly blank check companies, both of which
are incorporated under the laws of the Cayman Islands:
* Six Diamond Resorts International
* Aegean Earth and Marine Corporation;
Each of the foregoing entities was formed for the purpose of
engaging in an acquisition or business combination of an
operating business.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires our
directors, executive officers and persons who own more than 10%
of our common stock to file reports of ownership and changes in
ownership of our common stock with the Securities and Exchange
Commission. Directors, executive officers and persons who own
more than 10% of our common stock are required by Securities and
Exchange Commission regulations to furnish to us copies of all
Section 16(a) forms they file.
-14-
Based solely on our review of such forms furnished to us
and written representations from certain reporting persons, we
believe that all filing requirements applicable to our executive
officers, directors and greater than 10% beneficial owners were
complied with during 2007.
Code of Ethics
We have not adopted a code of ethics that applies to our
principal executive officer, principal financial officer,
principal accounting officer, or persons performing similar
functions, because of the small number of persons involved in the
management of the Company.
ITEM 11. 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.
Since we do not currently have an operating business, our
officers do not receive any compensation for their service to us;
and, since we have no other employees, we do not have any
compensation policies, procedures, objectives or programs in
place. We will adopt appropriate compensation policies,
procedures, objectives or programs as necessary after an
acquisition is consummated. However, it is anticipated that,
after the consummation of an acquisition, the compensation for
our senior executives will be comprised of four elements: a base
salary, an annual performance bonus, equity and benefits.
We further anticipate that after the consummation of an
acquisition, our Board of Directors will form a compensation
committee having as part of its responsibilities, the development
of salary ranges, potential bonus payouts, equity awards and
benefit plans.
Compensation Committee Interlocks and Insider Participation
Our Board of Directors does not have a compensation
committee and the entire Board of Directors performs the
functions of a compensation committee.
No member of our Board of Directors has a relationship that
would constitute an interlocking relationship with our executive
officers or directors or another entity.
Compensation Committee Report
Our Board of Directors does not have a compensation
committee and the entire board of directors performs the
functions of a compensation committee.
-15-
Our Board of Directors has reviewed and discussed the
discussion and analysis of our compensation which appears above
with management, and, based on such review and discussion, the
board of directors determined that the above disclosure be
included in this Annual Report on Form 10-K.
The members of our Board of Directors are:
David Richardson
Joseph Rozelle
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security ownership of certain beneficial owners.
The following table sets forth, as of March 31, 2008 the
number of Ordinary Shares owned of record and beneficially by our
executive officers, directors and persons who hold 5% or more of
our outstanding Ordinary Shares.
Name and Address Amount and Nature of Percentage of Class
Beneficial Ownership
- -------------------------------------------------------------------------
David Richardson* 50,500 (1) 7.6%
Joseph Rozelle* 0 (2) 78.0%
Nautilus Global Partners, LLC
700 Gemini, Suite 100
Houston, TX 77058 1,000,000 (3) 78.0%
Mid-Ocean Consulting Limited
Bayside House
Bayside Executive Park
West Bay Street & Blake Road
Nassau, Bahamas 50,000 3.9%
All Officers and Directors as
a group (2 individuals) 50,500 3.9%
* The address of Messrs. Richardson and Rozelle is c/o Nautilus
Global Business Partners, 700 Gemini, Suite 100, Houston, Texas
77058.
(1) Includes 50,000 shares held by Mid-Ocean Consulting Limited.
Mr. Richardson is the owner and the President and CEO of Mid-
Ocean Consulting Limited and has voting and investment control
over such shares. Also includes, 500 shares held by Mr. Richardson's
wife.
(2) Does not include 1,000,000 shares held by Nautilus Global
Partners. Mr. Rozelle is the President of Nautilus Global
Partners but does not have voting or investment control over such
shares.
(3) Christopher Efird owns 40% of the ownership interests of
Nautilus and Benchmark Equity Group owns 20% of the ownership
interests of Nautilus. Mr. Frank DeLape is the 100% owner of
Benchmark. In addition, Mr. DeLape controls entities that
collectively own 20% of the ownership interests of Nautilus. Mr.
Stephen Taylor owns 20% of the ownership interests of Nautilus.
Based upon their ownership interests in Nautilus, each of Efird,
Benchmark, DeLape and Taylor may be deemed to be the indirect
Benchmark, DeLape and Taylor disclaims beneficial ownership of
such ordinary shares held by Nautilus, except to the extent of
their respective pecuniary interests therein.
-16-
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
On April 10, 2006, we issued an aggregate of 1,050,000 of
our ordinary shares to the individuals and entities set forth
below for $1,050 in cash, at a purchase price of $0.001 per
share, as follows:
Name Number of Shares Relationship to Us
- --------------------------------------------------------------------------
Nautilus Global Partners, LLC 1,000,000 Joseph Rozelle, our
700 Gemini, Suite 100 President and Chief
Houston, TX 77058 Financial Officer is the
President of Nautilus
Global Partners, LLC.
Mid-Ocean Consulting Limited 50,000 David Richardson, one
Bayside House of our directors is the
Bayside Executive Park owner, president and CEO
West Bay Street & Blake Road of Mid-Ocean Consulting.
Nassau, Bahamas
Our Board of Directors does not have any policies or
procedures that it follows in connection to transactions it
undertakes with related parties. The determination of any
policies or procedures will be made after we consummate a
business combination.
Director Independence
Our Board of Directors does not believe that any of the
directors qualifies as independent under the rules of any of the
national securities exchanges.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
Audit fees include fees paid by the Company to its auditors
in connection with the annual audit of the Company's financial
statements and the auditor's review of the Company's interim
financial statements. The aggregate fees billed to the Company
by PMB Helin Donovan LLP for audit services for the fiscal years
ended
December 31, 2007 and 2006 were $4,240 and $5,800, respectively.
Audit Related Fees
Audit related fees include fees paid by the Company to its
auditors for services related to accounting consultations and
internal control review. There were no audit-related fees paid
by the Company for either of the fiscal years ended December 31,
2007 or 2006.
Tax Fees
Tax fees include fees paid by the Company to its auditors
for corporate tax compliance and tax advisory services. There
were no tax-related fees billed to the Company for either of the
fiscal years ended December 31, 2007 or 2006.
-17-
All Other Fees
All other fees include fees paid by the Company to its
auditors for all other services rendered by the auditor to the
Company. There were no Fees for other services paid by the
Company for years ended December 31, 2007 or 2006.
Pre-Approval of Services
We do not have an audit committee. As a result, our board
of directors performs the duties of an audit committee. Our board
of directors evaluates and approves in advance the scope and cost
of the engagement of an auditor before the auditor renders the
audit and non-audit services. We do not rely on pre-approval
policies and procedures.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)(1) Financial Statements:
The list of financial statements filed as part of this
annual report is provided on page F-1.
(a)(2) Financial Statement Schedules
None
(a)(3) Exhibits:
Exhibit
Number Description
- ------- -----------
3.1 Amended Memorandum and Articles of Association (1)
3.2 Memorandum of Association (1)
3.3 Articles of Association (1)
31.1 Certification of Certification of Principal Executive
Officer and Principal Financial Officer pursuant to Rule
13a-14(a) or 15d-14(a) of the Securities and Exchange
Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive Officer and Principal
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
(1) Previously Filed
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: April 18, 2008 DRAGON ACQUISITION CORPORATION
By: /s/ Joseph Rozelle
-----------------------------------
Name: Joseph Rozelle
Title: President, Chief Financial
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
Date: April 18, 2008 By: /s/ Joseph Rozelle
-----------------------------------
Name: Joseph Rozelle
Title: President, Chief Financial
Officer and Director
(Principal Executive
Officer, Principal Financial
Officer and Principal
Accounting Officer)
Date: April 18, 2008 By: /s/ David Richardson
-----------------------------------
Name: David Richardson
Title: Director
-18-
Dragon Acquisition Corporation
(A Development Stage Company)
Index to Financial Statements
PAGE
------
Report of Independent Registered Public Accounting Firm....... F-2
Balance Sheets as of December 31, 2007 and 2006............... F-3
Statements of Operations for the year ended December 31,
2007, the period March 10, 2006 (date of inception)
through December 31, 2006 and the cumulative
period from March 10, 2006 (date of inception) through
December 31, 2007.......................................... F-4
Statement of Shareholders' Equity (Deficit) for the year
ended December 31, 2007, the period March 10, 2006
(date of inception) through December 31, 2006 and the
cumulative period from March 10, 2006 (date of
inception) through December 31, 2007....................... F-5
Statements of Cash Flows for the year ended December 31,
2007, the period March 10, 2006 (date of inception)
through December 31, 2006 and the cumulative
period from March 10, 2006 (date of inception)
through December 31, 2007.................................. F-6
Notes to Financial Statements................................. F-7
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Dragon Acquisition Corporation:
We have audited the accompanying balance sheets of Dragon
Acquisition Corporation (the Company) (a development stage
company) as of December 31, 2007 and 2006, and the related
statements of operations, shareholders' equity, and cash flows
for the year ended December 31, 2007, the period from inception
(March 10, 2006) through December 31, 2006, and the cumulative
period from inception (March 10, 2006) through December 31, 2007.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion.
An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Dragon Acquisition Corporation as of December 31, 2007 and
2006, and the results of its operations and its cash flows for
the year ended December 31, 2007, the period from inception
(March 10, 2006) through December 31, 2006, and the cumulative
period from inception (March 10, 2006) through December 31, 2007,
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 (March 10, 2006) through December
31, 2007 is $34,845.
PMB Helin Donovan, LLP
/S/PMB Helin Donovan, LLP
- -------------------------
April 16, 2008
Houston, Texas
F-2
Dragon Acquisition Corporation
(A Development Stage Company)
Balance Sheets
December 31, December 31,
2007 2006
------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 23,449 $ 35,972
------------ ------------
Total assets $ 23,449 $ 35,972
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payable to affiliate $ 6,497 $ 6,754
Accounts payable 4,447 7,730
------------ ------------
Total current liabilities 10,944 14,484
------------ ------------
Commitments and Contingencies (Note 7) -- --
------------ ------------
SHAREHOLDERS' EQUITY
Preference shares, $0.001 par value,
1,000,000 shares authorized,
none issued and outstanding -- --
Ordinary shares, $0.001 par value;
50,000,000 shares authorized;
1,281,500 issued and outstanding as
of December 31, 2007 and 2006 1,282 1,282
Additional paid in capital 46,068 46,068
Deficit accumulated during development
stage (34,845) (25,862)
------------ ------------
Total shareholders' equity 12,505 21,488
------------ ------------
Total liabilities and
shareholders' equity $ 23,449 $ 35,972
============ ============
The accompanying notes are an integral part of these financial statements.
F-3
Dragon Acquisition Corporation
(A Development Stage Company)
Statements of Operations
Period of inception Cumulative During
(March 10, 2006) Development Stage
Year Ended through December (March 10, 2006 to
December 31, 2007 31, 2006 December 31, 2007)
----------------- ------------------- ------------------
Revenues $ -- $ -- $ --
----------------- ------------------- ------------------
Expenses
Formation, general and
administrative expenses 9,105 26,374 35,479
----------------- ------------------- ------------------
Total operating expenses 9,105 26,374 35,479
----------------- ------------------- ------------------
Operating loss (9,105) (26,374) (35,479)
Other income
Interest income 122 512 634
----------------- ------------------- ------------------
Total other income 122 512 634
----------------- ------------------- ------------------
Net loss $ (8,983) $ (25,862) $ (34,845)
================= =================== ==================
Basic and diluted loss
per share $ (0.01) $ (0.02)
================= ===================
Weighted average ordinary
shares outstanding
- basic and diluted 1,281,500 1,227,370
================= ===================
The accompanying notes are an integral part of these financial statements.
F-4
Dragon Acquisition Corporation
(A Development Stage Company)
Statement of Shareholders' Equity
For the period from March 10, 2006 (Date of Inception) to December 31, 2007
Deficit
Accumulated
Additional during the
Preferred Stock Common Stock Paid In Development
Shares Amount Shares Amount Capital Stage Totals
-------- ---------- ---------- ---------- ------------ ----------- ------------
Founder shares issued
on April 10, 2006 - $ - 1,050,000 $ 1,050 $ - $ - $ 1,050
Shares issued during 2006
at $0.20 per share - - 231,500 232 46,068 - 46,300
Net loss - - - - - (25,862) (25,862)
------ ---------- ---------- ---------- ------------ ----------- ------------
Balance as of December 31, 2006 - - 1,281,500 1,282 46,068 (25,862) 21,488
------ ---------- ---------- ---------- ------------ ----------- ------------
Net loss - - - - - (8.983) (8,983)
------ ---------- ---------- ---------- ------------ ----------- ------------
Balance as of December 31, 2007 - $ - 1,281,500 $ 1,282 $ 46,068 $ (34,845) $ 12,505
====== ========== ========== ========== ============ =========== ============
The accompanying notes are an integral part of these financial statements.
F-5
Dragon Acquisition Corporation
(A Development Stage Company)
Statements of Cash Flows
Cumulative During
From Inception (March Development Stage
Year Ended 10, 2006) through (March 10, 2006 to
December 31, 2007 December 31, 2006 December 31, 2007)
----------------- ----------------- -----------------
Cash flows from operating activities
Net loss $ (8,983) $ (25,862) $ (34,845)
Adjustments to reconcile net loss to
cash used in operating activities:
Shares issued to Founder for payment
of formation costs -- 1,050 1,050
Changes in operating assets and liabilities
Payable to affiliate (257) 6,754 6,497
Accounts payable (3,283) 7,730 4,447
----------------- ----------------- -----------------
Net cash used in operating activities (12,523) (10,328) (22,851)
----------------- ----------------- -----------------
Cash flows from investing activities
Net cash provided by investing activities -- -- --
----------------- ----------------- -----------------
Cash flows from financing activities
Proceeds from issuance of ordinary shares -- 46,300 46,300
----------------- ----------------- -----------------
Net cash provided by financing activities -- 46,300 46,300
----------------- ----------------- -----------------
Net increase (decrease) in cash (12,523) 35,972 23,449
----------------- ----------------- -----------------
Cash at beginning of the period 35,972 -- --
----------------- ----------------- -----------------
Cash at end of the period $ 23,449 $ 35,972 $ 23,449
================= ================= =================
Supplemental disclosures of cash flow
information:
Interest paid $ - $ - $ -
================= ================= =================
Income taxed paid $ - $ - $ -
================= ================= =================
The accompanying notes are an integral part of these financial statements.
F-6
Dragon Acquisition Corporation
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2007
NOTE 1 - Organization, Business and Operations
On March 10, 2006, Dragon Acquisition Corporation (the "Company")
was formed in the Cayman Islands with the objective to acquire,
or merge with, a foreign operating business.
At December 31, 2007, the Company had not yet commenced
operations. Expenses incurred from inception through December 31,
2007 relates to the Company's formation and general and
administrative activities to prepare for a potential acquisition.
The Company selected December 31 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 State
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 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 December 31, 2007, there were no potentially dilutive ordinary
shares outstanding.
Income Taxes
Dragon Acquisition 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 value of our payable reflects its carrying
amount.
Recently Issued Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141 (Revised 2007),
Business Combinations - Revised 2007. SFAS 141 R provides
guidance on improving the relevance, representational
faithfulness, and comparability of information that a reporting
entity provides in its financial reports about a business
combination and its effects. SFAS 141R applies to business
combinations where the acquisition date is on or after the
beginning of the first annual reporting period beginning on or
after December 15, 2008. Management of the Company does not
expect the adoption of this pronouncement to have a material
impact on its financial statements.
In December 2007, the FASB also issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements,
which establishes accounting and reporting standards to improve
the relevance, comparability, and transparency of financial
information in its consolidated financial statements that include
an outstanding noncontrolling interest in one or more
subsidiaries. SFAS 160 is effective for fiscal years, and the
interim periods within those fiscal years, beginning on or after
December 15, 2008. Management of the Company does not expect the
adoption of this pronouncement to have a material impact on its
financial statements.
F-8
NOTE 3 - Liquidity and Capital Resources
The Company has no revenues for the period from inception (March
10, 2006) through December 31, 2007, 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 issuances of
its ordinary shares and a payable to affiliate.
NOTE 4 - Payable to Affiliate and Accounts Payable
The Company has a payable to affiliate of $6,497 to a Founder of
the Company. The payable is non-interest bearing and payable on
demand. The Company also has accounts payable related to the
formation of the Company and general and administrative expenses
for $4,447.
NOTE 5 - Ordinary Shares
On April 10, 2006, the Company was capitalized with 1,050,000
shares of its restricted ordinary shares issued at par value of
$0.001 per share, for consideration of $1,050 to its founding
shareholders. These shares, along with a payable issued to the
founder of $5,548, were the basis of the funding of the Company's
$6,598 in formation costs. On May 31, 2006, the Company sold
177,500 shares of its restricted ordinary shares for $35,500. The
restricted ordinary shares were sold to 355 offshore private
investors pursuant to a Private Placement Offering in lots of 500
shares each at $0.20 per share. On July 18, 2006, the Company
sold an additional 54,000 shares of its restricted ordinary
shares for $10,800. The restricted ordinary shares were sold to
108 offshore private investors pursuant to a Private Placement
Offering in lots of 500 shares each at $0.20 per share. No
underwriting discounts or commissions were paid with respect to
such sales.
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 December 31, 2007, there were 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