As filed with the Securities and Exchange Commission on September 14, 2000
Registration No. 333-37064
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
Amendment No. 1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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AVIC TECHNOLOGIES LTD.
(Name of issuer in its charter)
Delaware ??? 98-0212726
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code) Identification Number)
445 St-Francis Xavier St. Irving Rothstein, Esq.
Montreal, Quebec H2Y 2T1 Heller, Horowitz & Feit, P.C.
Canada 292 Madison Avenue
(514) 844-3510 New York, New York 10017
(Address and telephone number (212) 685-7600
of registrant's principal executive (Name, address and telephone
offices and principal place of business) number of agent for service)
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Copies to:
Irving Rothstein, Esq.
Heller, Horowitz & Feit, P.C.
292 Madison Avenue
New York, New York 10017
Telephone: (212) 685-7600
Approximate date of commencement of proposed sale to public: At the discretion
of the selling stockholders.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933 check the following box. [X]
CALCULATION OF REGISTRATION FEE
- ----------------------------------- ------------------ ------------------------ -------------------------- -------------------
Title of Each Class of Securities Amount To Be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price Per Aggregate Offering Registration Fee
Security(1) Price(1)
- ----------------------------------- ------------------ ------------------------ -------------------------- -------------------
- ----------------------------------- ------------------ ------------------------ -------------------------- -------------------
Common Stock, par value $0.0001 7,411,000 $0.10(2) $741,100 $195.65
- ----------------------------------- ------------------ ------------------------ -------------------------- -------------------
- ----------------------------------- ------------------ ------------------------ -------------------------- -------------------
Total 7,411,000 $741,100 $195.65
- ----------------------------------- ------------------ ------------------------ -------------------------- -------------------
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Based upon the price of the most recent private offering.
The registrant hereby amends the registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
SUBJECT TO COMPLETION DATED, September 14, 2000
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AVIC TECHNOLOGIES LTD.
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7,411,000 Shares of Common Stock
This Prospectus covers 7,411,000 shares of the common stock, par
value $.0001 per share, of Avic Technologies Ltd. The common stock will be sold
solely by the selling stockholders.
The securities offered hereby involve a high degree of risk.
Please read the "Risk factors" beginning on page 3.
There is presently no public market for our securities.
--------------------------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this Prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of the Prospectus is ________, 2000.
Summary
Avic is a Delaware corporation established in March 1999 to
capitalize on the rapidly growing building industry in China and other parts of
Asia. We intend to profit from this growth by offering our technical expertise
in this industry as consultants to small and medium building contractors, and by
establishing joint ventures in the production and marketing of fiberglass window
frames. Our principal executive offices are located at 445 St-Francis Xavier
St., Montreal, Quebec H4X 2C9. Our telephone number is (514) 844-3510.
Common stock offered for sale Up to 7,411,000 shares solely
by selling stockholders
Price At the market
Number of shares outstanding 12,221,000 shares
Use of proceeds Avic will not receive any proceeds from the
sale of the shares of common stock by the
selling stockholders.
Plan of distribution The sale of the shares of common stock by
the selling stockholders may be effected by
them from time to time in the over the
counter market or in such other public forum
where our shares are publicly traded or
listed for quotation.
2
Risk factors
We have been recently organized, have had losses since inception and expect to
have losses for the foreseeable future
From our inception in March 1999 through December 1999, we
incurred a net loss of $192,331. We anticipate continuing to incur significant
losses until, at the earliest, we generate sufficient revenues to offset the
substantial up-front expenditures and operating costs associated with developing
and commercializing products utilizing our technology. There can be no assurance
that we will ever operate profitably.
In their report on our audited financial statements, our
auditors have stated that there is a substantial doubt as to whether we will be
able to remain in business for even the next twelve months. Their concerns are
based upon our losses and that we have no specific plan to have the funds
necessary to implement our business plan. If their concerns are proven accurate,
any investment in our securities will likely be lost.
We do not have any products currently for sale nor any contracts with customers
and there can be no assurance that we ever will
We have not entered into any agreements to sell our products
to any customers, as yet. We do not believe that we will generate significant
revenues in the immediate future. We will not generate any meaningful revenues
unless we obtain contracts with a significant number of building contractors or
building components suppliers. There can be no assurance that we will ever be
able to obtain contracts with a significant number of customers to generate
meaningful revenues or achieve profitable operations.
We have only limited experience in developing and
commercializing new products based on innovative technologies, and there is
limited information available concerning the potential performance or market
acceptance of our proposed products. There can be no assurance that
unanticipated expenses, problems or technical difficulties will not occur which
would result in material delays in commercialization of our products or that our
efforts will result in successful commercialization.
We anticipate needing additional financing in the amount of $1,000,000 during
the next 12 months to implement our business plan and such financing may be
unavailable or too costly
Our capital requirements relating to the marketing of our
product have been, and will continue to be, significant. We are dependent on the
proceeds of future financing in order to continue in business and to develop and
commercialize additional proposed products. We anticipate requiring at least
$1,000,000.00 in additional financing. There can be no assurance that we will be
3
able to raise the substantial additional capital resources necessary to permit
us to pursue our business plan. We have no current arrangements, or sources of,
additional financing and there can be no assurance that any such financing will
be available to us on commercially reasonable terms, or at all. Any inability to
obtain additional financing will have a material adverse effect on us, such as
requiring us to significantly curtail or cease operations.
Our business plan is to sell our products in China and there are unique
financial and political risks with doing business in China
We intend to conduct operations in China. China does not
currently have a democratic, western style, free market economy. While China has
taken steps to turn parts of its economy on more capitalistic basis to attract
business and investment, the development of political and economic systems are
relatively new and not necessarily stable. In addition, the lack of convertible
currency substantially increases the risk to the investor. Further, China does
not have a comprehensive legal system and the interpretation and enforcement of
a commercial agreement may be problematic.
Our business plan involves a new concept for China and it is uncertain if the
market will embrace our services
Our business plan introduces a novel concept to the Chinese
marketplace in that we will not only offer products for sale, but also supply
design consulting services to the construction companies or contractors. This
approach is, to the best of our knowledge, not yet available to the construction
industry in China. If we are able, as well, to enter into satisfactory marketing
and distribution arrangements in the future, our success will be largely
dependent on the successful acceptance of this multi-service approach. There can
be no assurance that our strategy will result in successful product
commercialization or that our efforts will result in initial or continued market
acceptance for our proposed services.
In addition, our products were developed outside of China, and
may have to be modified to adapt to the Chinese construction industry. This may
require us to commit considerable time, effort and resources to finalize such
development and adapt our products to satisfy the local codes and standards of
the Chinese regulatory authorities. No assurance can be given that we will be
able to successfully modify our products and in the event we cannot, our
business will be adversely effected.
Special note regarding forward-looking statements
Some of the statements under "Risk factors," Plan of
operations," "Business" and elsewhere in this prospectus are forward-looking
statements that involve risks and uncertainties. These forward-looking
statements include statements about our plans, objectives, expectations,
intentions and assumptions and other statements contained in this prospectus
that are not statements of historical fact. You can identify these statements by
words such as "may," "will," "should," "estimates," "plans," "expects,"
"believes," "intends" and similar expressions. We cannot guarantee future
4
results, levels of activity, performance or achievements. Our actual results and
the timing of certain events may differ significantly from the results discussed
in the forward-looking statements. Factors that might cause such a discrepancy
include those discussed in "Risk Factors" and elsewhere in this prospectus. You
are cautioned not to place undue reliance on any forward-looking statements.
Summary historical financial information
The following selected financial data as of and for the
periods ended December 31, 1999 and June 30, 2000 is derived from our December
31, 1999 audited financial statements and our June 30, 2000 unaudited financial
statements included in this Prospectus.
The following data should be read in conjunction with our
financial statements.
Statement of operations data
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From 3/4/99 For the six month
(inception) to 12/31/99 Period ended 6/30/00
----------------------- (unaudited)
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- ------------------------------------ --------------------------------------- -----------------------------------------
Net Revenues $ -0- $ 1,860
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- ------------------------------------ --------------------------------------- -----------------------------------------
Operating Loss $ (192,331) $(96,070)
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- ------------------------------------ --------------------------------------- -----------------------------------------
Income Taxes $ -0- $ -0-
- ------------------------------------ --------------------------------------- -----------------------------------------
- ------------------------------------ --------------------------------------- -----------------------------------------
Net Loss $ (192,331) $ (94,210)
- ------------------------------------ --------------------------------------- -----------------------------------------
- ------------------------------------ --------------------------------------- -----------------------------------------
Loss Per Share $ (.02) $ (.01)
(Basic and Diluted)
- ------------------------------------ --------------------------------------- -----------------------------------------
Balance sheet data
December 31, 1999 June 30, 2000
----------------- (unaudited)
--------------
Working Capital $ 122,400 $ 88,190
Total Assets $ 124,900 $ 90,690
Total Liabilities $ 2,500 $ 2,500
Stockholders' Equity $ 122,400 $ 88,190
5
Plan of operations
The following discussion should be read in conjunction with
the financial statements and related notes that are included elsewhere in this
prospectus.
Overview
We plan to derive revenues from two principal sources:
o Mostly from window frame manufacturing, sales, and
distribution, and
o Technical services, offering small and medium sized
contractors access to our expertise.
Technical services will usually include an initial one-time
setup fee and a consulting fee based on hourly or other time related billings.
Technical consulting services include product design and integration solutions
and related services provided by us. As described in greater detail below, we
have been hired by a Chinese Government Agency to provide specific consulting
services.
In the case of manufacturing and sales of fiberglass window
frame products, revenues from sales will be accrued upon delivery of goods. We
do not anticipate delivery of any manufactured products prior to the second
quarter 2001.
Our business plan is to develop our business in China in two
stages, both from a financial and operational viewpoint. Upon obtaining
requisite seed capital, the first stage in our plan is to set-up our operations
in China and Canada. This includes concluding agreements with manufacturing and
distribution networks in China; delivering consulting services to establish our
reputation for expertise in this area and provide some positive cash flow; and
the establishment of additional funding sources. The second stage, which is the
primary focus of our business, will be the actual selling and manufacturing of
fiberglass window frames in China.
Phase one
During the first stage we are looking to solidify
relationships with potential joint venture partners that are required to carry
out our primary business. We are searching for partners having one or more of
the following capabilities; supplying capital, either directly to a joint
venture or to the parent company; having existing production facilities; having
a well-developed marketing and/or distribution organization in place; having
expertise or contacts in the construction or housing products industries and/or
having achieved important recognition in the business communities within their
respective Chinese territories.
6
To accomplish this, we are relying heavily on the personal
contacts in China that our co-founders have developed through their various
prior business ventures in China. Additionally, the ability to attract partners
or customers is dependent on our co-founders knowledge of the building industry,
in general, and the fiberglass window industry, in particular. To further assist
us, we have engaged Mr. Alan Chan, as consultant to the Company, who has special
expertise in the evaluation and selection of equipment for this industry.
To make us more attractive to potential Chinese partners we
are attempting to differentiate ourselves from our competitors along the
following lines. By investing in researching and evaluating the current status
of the window frame market in China and becoming fully cognizant of the various
suppliers of manufacturing equipment, we have developed the capability to be a
sole source for the integration of most of the fiberglass window frame
equipment. Additionally, we will be marketing a high level of technical
expertise and the ability to be a sole source supplier of fiberglass window
frame products and related services to small and medium construction and design
institutes, particularly those with limited technical resources.
From the commencement of our company in March 1999 until now,
we first concentrated on obtaining funding for the first phase of operations,
which we estimate will ultimately require approximately $400,000 to implement,
including funds spent to date. In a private placement during the second half of
1999, we successfully sold 3,621,000 common shares, realizing $362,100, and
additionally are in the process of receiving a banking line of credit in the
amount of $75,000, for a total funding of $437,100. This allowed us to establish
our presence in Beijing, China and Montreal, Quebec, Canada, and to further the
implementation of the main objective of stage one, which is, to find, negotiate
and conclude agreements with desirable joint venture partners.
During the past ten months, we have succeeded in identifying
and contacting many viable candidates and have received positive interest from
five companies expressing their desire to participate with us to varying degrees
of involvement.
Most importantly, on the manufacturing side, on October 28,
1999, we entered into our first Letter of Intent to undertake a Joint Venture.
Our intended Joint Venture Partner is ShenZhen Li Zheng Industrial Ltd., of Shen
Zhen, Guangdong, a medium size basic material manufacturing company with annual
revenue of about 180 million "Renminbi" the lawful currency of the People
Republic of China, or approximately US$22,000,000. Their main products include
cement, white cement, concrete products, ceramic, aluminum window and other
decorative materials. They are among the biggest construction material suppliers
in the local Shenzhen market.
This Joint Venture is intended to establish, in partnership,
a manufacturing plant with two production lines to produce fiberglass
7
windows and doors. The products initially will be sold to the southern part
of China and later to overseas clients.
The estimated cost of one plant to sell and manufacture our
product, including plant, equipment and working capital is approximately
$800,000. We anticipate funding from the following sources:
o North American funder (investment partner) $275,000
o Chinese Joint Venture Partner $190,000
o Business loan from a Chinese bank $250,000
o Chinese local government job creation grant $10,000
o Canadian government technology & training grant $75,000
Potential investment partners are ABB China Ltd., the Chinese
subsidiary of an international conglomerate that is a global supplier of
equipment; Huacheng Navcom Corp. of Beijing, China, a multi-million dollar
company with numerous investments, including basic materials, media, high tech
and import/export trading; Topmost Universal Corp. of Hong Kong, a company
having many investments in the building materials business in China; S&C Proneq
Inc. of Delson, Quebec, Canada, a factory automation manufacturing company,
which has some investment in South America; and Pronitec Investment Inc. of
Brossard, Quebec, Canada, a private investment company, strong in energy and
infrastructure projects.
We have also received a term sheet offer of financing from
AlphaGen Acceptance Corp. of Montreal, Quebec, Canada, indicating their
commitment, subject to various conditions, to assist in funding at least one
plant in China.
No assurances can be given that discussions or negotiations
with any of the above will result in final agreements.
We commenced our first consulting project in May 2000 for the
China Planning Institute for Building Materials Industry of Beijing. We were
requested to provide our expertise and recommendations on local housing
integration problems, specifically with regard to fiberglass window frames as
building materials and housing components.
In June we billed a one-time fee of $12,750. We are continuing
to bill them for our services at an hourly charge of $42 per hour. The estimated
total revenue is expected to be between $50,000 and $60,000 over the next six
months. In addition, we have several on going discussions with other design
institutes and construction firms to provide this type of consulting services.
We believe that this part of our business will begin to grow
at a faster rate once we have the joint venture plant product to show
contractors.
8
Liquidity
All of our future revenues are expected to be derived from
sales outside the United States and will be paid in foreign currencies,
principally the Renminbi (China) and, to a lesser extent, in Canadian Dollars.
For purposes of our statement of operations, items are converted into U.S.
dollars at average currency exchange rates prevailing during the period. Assets
and liabilities on our balance sheet are translated into U.S. dollars at
currency exchange rates prevailing at the balance sheet dates. All dollar
amounts stated in this Prospectus are in U.S. dollars, unless otherwise
explicitly stated. We have not engaged in hedging activities to reduce our
currency exchange rate exposure.
As to our operations to date, as our financial statements
indicate, we incurred some costs in connection with the outside consultants for
equipment evaluation, development of products and search for joint venture
partners. These costs, including direct labor, overhead and third-party costs
related to establishing our offices in Canada and China amounted to $90,800.00.
Our monthly operating expenses, including rent, utilities, and
payroll, are approximately $7,500.00. Additionally, we have budgeted $30,000 for
three trips to China within the next six months. As at June 30, 2000, we had a
balance in our bank account of approximately $90,000, and anticipate obtaining a
line of credit from our banking institution for $75,000, fairly shortly. We
believe we have enough funds on hand to accomplish the remaining objectives of
the first stage of our plan.
We expect to continue incurring net losses for at least one
year after the Joint Venture Plant is in full operation, but we plan to continue
to execute on those measures which are designed to produce ultimately profitable
operations. However, we cannot give any assurances that we will achieve such
objectives.
In general, for the longer term, our business strategy depends
in large part on our ability to establish Joint Ventures in China. Further
expansion of our business over the long term will require substantial additional
capital and will require additional outside financing. We are reviewing a number
of options from among the following choices: an equity or debt financing, a
partnership with one of the parties which has submitted a letter of intent,
alternative financing similar to the AlphaGen transaction and/or a grant from
the Canadian government. We currently have sufficient funds for the next twelve
months and we will use this time to continue exploring these options, and any
other reasonable proposals, over the next few months.
In summary, while we currently have no customers for our
principal products, we have successfully implemented two of the three parts of
phase one of our business plan by raising sufficient capital to see us through
to phase two and by performing profitable consulting services.
9
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." ("SFAS No. 133"), which requires companies
to recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. Gains and losses
resulting from changes in the fair market values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The effective date of this standard was delayed via the
issuance of SFAS No. 137. The effective date for SFAS No. 133 is now for fiscal
years beginning after June 15, 2000, though earlier adoption is encouraged and
retroactive application is prohibited. The Company does not presently enter into
any transactions involving derivative financial instruments and, accordingly,
does not anticipate the new standard will have any effect on its financial
statements.
Year 2000 Disclosure
We are Year 2000 compliant and we do not anticipate any
internal problems. In the event any internal problems should arise, we have many
expert computer technicians on our payroll and we believe that we will be able
to satisfactorily address any such problems. However, we are dependent on the
integrity of the internet being maintained to derive income from the sale of
advertising spots at remote locations via the internet and if the internet
should fail or if our hosts or internet service providers should fail, we could
be adversely impacted. Given the currently available information this does not
appear to be a likely scenario and, accordingly, we do not believe that our
potential for profitability or operations will be materially affected by the
Year 2000 problem.
Use of Proceeds
We will not receive any proceeds from the sale of the shares
of common stock by the selling stockholders.
10
Business
Description of business
Avic is a Delaware corporation established in March 1999 to
capitalize on the rapidly growing building industry in China and other parts of
Asia. We intend to profit from this growth by offering our technical expertise
in this industry as consultants to small and medium building contractors, and by
establishing joint ventures in the production and marketing of fiberglass window
frames.
Fiberglass window frames are the newest window products for
the building industry in China. Due to their superior quality and competitive
price, and as well as regulations introduced by governments to promote their
use, there exists a substantial growth potential for this product line. Our goal
is to participate in China's rapid economic growth by establishing majority
joint venture interest in selected companies in the fiberglass window industry.
We will introduce these companies to the latest cost-effective technologies and
management skills, adapted to local conditions, thereby improving their overall
competitiveness and profitability.
We plan to evolve business activities through joint ventures
with established Chinese companies. We anticipate that the structure of these
joint ventures will require us to provide management expertise and the use of
advanced pultrusion process machinery and our Chinese partners to contribute
land, production plants, low cost labor and distribution channels for the local
fiberglass windows market.
Fiberglass window frames
Fiberglass is not a new material, it has been in general use
for over 40 years. Its properties are well known. In the case of China, however,
the use of fiberglass for windows is fairly recent.
Pultruded Fiberglass has been in use for the window and door
industry for the last 15 years. Fiberglass is a manmade material created by
using glass in fibrous form. Pultrusion is a continuous pulling-type process
used to stretch out and prepare glass fibres for fiberglass frames in
specialized dies.
The performance of fiberglass windows are covered by
international standards that use a rating system to compare one product and/or
material against others. Like wood (e.g. oak, pine, balsa, cedar), fiberglass'
properties can vary, based on chemistry and glass content.
Fiberglass, as a material used for the fabrication of windows
currently meets the 101 Standard established by the American Architectural
11
Manufacturers Association that defines the products performance under air
leakage, water leakage, wind resistance (strength - blow-out and deflection)
forced entry, and ease of operation. These test reports are readily available,
with summaries given in all the standard literature.
Thermal Performance is measured under the National
Fenestration Rating Council, which defines a window "U" value, solar heat gain
coefficient, and visible light transmission. The performance claims in those
literatures are supported by independent test reports. The US Department of
Energy and National Fenestration Rating Council have been quoted as saying that
"Fiberglass Windows are the most energy efficient Windows."
Fiberglass is an inert material, corrosive resistant to
materials ranging from salt spray to toxic chemicals. Evidence of fiberglass'
durability, longevity, and corrosion resistance, can be seen by the fact that in
the United States all local gas stations were required to remove their old steel
gas storage tanks and replace them with fiberglass tanks. Fiberglass is accepted
as the material least likely to deteriorate, rot, corrode, etc. and leak the
tanks' contents into the surrounding environment.
The finishing of fiberglass has achieved relatively high
acceptance standards as evidenced by the fact that many U.S. companies are
prepared to warranty black painted windows for sale to hot climate countries as
found in the Middle East. Many offer a full 20 year warranty under conditions of
120 degrees Fahrenheit in the day with extremely high UV and -20 degrees
Fahrenheit at night. This is because fiberglass does not leak, does not retain
heat and has low expansion/contraction co-efficient.
12
Comparisons with other materials
Some of the basic comparisons of the various materials currently in use for
windows are given in the following table as published by the American Society
for Testing and Materials:
Unit Fiberglass Plastic Wood Aluminum Steel
Longitudinal Tensile Strength Kg/m2 4200 490 56 1400 2800
Transverse Tensile Strength Kg/m2 700 490 42 1400 2800
Longitudinal Compression Strength Kg/m2 240000 35 105 700 2000
Thermal Coefficient W/m.F 2 1.2 1 810 280
Linear Thermal Expansion Coefficient Mm/mm 7 623 217 100
Corrosion Resistant Good Good Good Medium Bad
Fire Retardancy Good Bad Bad Good Good
Durability Good Bad Medium Good Good
An important analysis is the environmental comparison of the
various window types. The table below summarizes how the three most common
window frame materials compare in addressing eight major environmental issues.
Materials Resource Mfg Embodied Energy Used Ozone Emission Disposal
Used Depletion Emissions Energy During Life Depletion During Life
Fiberglass Glass fibre Low Low Med Low Low Med Med
and resin
Aluminum Wood and Med Med Med Med Low Low Med
Clad Wood Aluminum
Vinyl Polyvinyl High High Med Med Low Low Med
Chloride
13
Energy use in window production is most likely the most
important environmental factor and this analysis shows that fiberglass windows
have the lowest overall environmental impact. The energy efficiency and long
life of fiberglass windows, significantly reduces the need for purchased energy,
which means that their impacts on resource depletion and embodied energy is also
limited.
In the above tables, our supporting statements are from the following
publications:
- American Society for Testing and Materials
- Engineering Materials Handbook (published by ASM
International)
- Independent Lab Reports (published by Inline Fiberglass Inc.)
- Site Conditions and Application (published by Inline Fiberglass
Inc.)
The information provided on the characteristics and properties
of fiberglass windows are taken from the U.S. & Canadian Fiberglass Window
vendors' literatures. In addition, some of the claims are also from publications
by the Consumer's Guide, Natural Resources Canada & U.S. Department of Energy.
Following are some noteworthy quotes published regarding
fiberglass frames:
"Fiberglass frames...They have the highest
R-values of all frames; thus, they are excellent for
insulating and will not warp, shrink, swell, rot or corrode."
U.S. Department Of Energy
"Generally, well-designed fiberglass frames provide
the best insulating value, . . .Fiberglass frames offer
insulation and strength in low-profile, contributing to some
of the highest energy ratings." R-2000 Windows.
Natural Resources Canada
"The best energy performance in window frames has
been achieved using a fiberglass frame with foam insulation in
the frame cavities." Consumer's Guide.
Natural Resources Canada
Our product
As indicated above, fiberglass provides excellent physical and
mechanical properties desired for window frames. These properties include:
o Low thermal conductivity;
o Dimensional stability over temperature spectrum;
o Resistance to moisture and corrosion;
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o Easy acceptance of color finishes;
o High strength;
o Light weight; and
o Fire resistance.
Our basic product will be protruded fiberglass window frames.
Our frames will be made using various formulas with the precise mix of glass and
resin to be determined by engineers working for each joint venture. Each
geographic region will require modifications of this mixture. The determining
factors are mostly local weather conditions and cost of raw materials.
Because of the characteristics of our pultruded fiberglass,
our choice of material is not only attractive for use as a single window framing
material, but also in combination with other materials. These combination
designs allow full utilization of specific advantages of other various
materials, resulting in windows with unique qualities.
The strength and dimensional stability of pultruded fiberglass
also significantly reduces warping when used in tandem with other materials.
Tests have shown that under identical loading conditions, doors with a pultruded
fiberglass core experience about 80% less deflection than a comparable solid
wood door.
(Source: Manufacturer's literature)
1. Roving- is unidirectional continuous glass fiber. Roving
provides the high tensile strength, flexibility, and stiffness of pultruded
shapes, particularly longitudinally. Generally, glass fiber roving is used,
however, graphite roving may be used in custom application where higher
stiffness is needed or aramid roving where more flexibility is needed.
2. Mat- is a matting of multidirectional glass fibers. Where
roving contributes to the strength of profile in the longitudinal direction, mat
ties the profile together in the transverse direction. Continuous glass fiber
mat is usually used, however, a variety of other mat materials can be used to
achieve additional material properties.
3. Veil- is used to enhance the surface of pultruded shapes.
Most widely used today are veils of synthetic materials. A veil is added to the
outside of a profile just before it enters the die. As a result, the finished
profile has a resin rich surface which enhances its resistance to UV degradation
and chemical corrosion, in addition to making the material easier to handle.
4. Resins- the standard resin systems we use are appropriate
for most applications; however, when needed, resin systems can be
custom-tailored to fit the requirements of a specific application. Please note
that the references below to E-84 and D-635 are to testing standards established
by the American Society of Testing and Materials.
15
a. Standard polyester resin - exhibits good corrosion
resistance, good electrical properties, low thermal conductivity, and excellent
mechanical properties.
b. Fire retardant polyester resin - exhibits the same
characteristics as standard polyester with a frame spread rating of 25 or less
when tested in accordance with E-84, generates very little smoke and is
nonflammable and self-extinguishing as D-635.
c. Fire retardant vinylester resin - exhibits excellent
corrosion resistance, capable of use in higher temperatures than polyester with
a frame spread rating of 25 or less when tested in accordance with E-84,
generates very little smoke and is nonflammable and self extinguishing as per
D-635.
d. Modified acrylic resin - chosen for its excellent corrosion
resistance and mechanical properties, our proprietary formulation offers an E-84
frame spread rating of 5, a smoke index of 15 and is better than the New York
Transit Authority specification for combustion products specifications.
The main raw materials for making fiberglass windows are
available everywhere in China. The main foreign supplier could be DuPont &
Monsanto, but their unit price will be much higher than the local manufacturers,
since China subjects all polyester materials to substantial import duties and
sale taxes.
Manufacturing
The fiberglass used for our window frame materials are
produced by pultrusion process. Pultrusion is a continuous molding process
utilizing glass or fiberous reinforcement in a polyester or other thermosetting
resin matrices. Pre-selected reinforcement materials like fiberglass roving; mat
or cloth are drawn through a resin bath where all the material is thoroughly
impregnated with a liquid thermosetting resin. The wet-out fiberous laminate is
formed to the desired geometric shape and pulled into the heated steel die. Once
in the die, the resin cure is initiated by controlling precise elevated
temperatures. The laminate solidifies in the exact shape of the cavity of the
die as it is continuously pulled by the machine. The pultrusion process is an
environmentally friendly closed process.
The required energy used to produce a pultruded fiberglass
profile is only about a 1/4 of that for steel and 1/6 of that for aluminum. The
pultruding process ensures stability of dimension, precisely placed fibers and a
smooth, closed surface. Coloring is possible by means of pigments.
For production facilities, we intend to establish an alliance
with a manufacturer that has developed the latest technology in pultrusion
machines. While there are several manufacturers of this type of machinery, our
16
preference is to reach an arrangement with one of the smaller companies. We
currently are holding two offers. One is from a Canada based company which will
charge us approximately US$200,000 for a machines that can pultrude fiberglass
composites at a speed of two to three times faster than any machines currently
available on the market. This machine is more modular than many of those of the
competition, as it is designed as a series of rigid structural stress relieved
modules, each module being dedicated to a specific task. In the event we do not
have sufficient funding, we can purchase a less sophisticated machine from a
China based company for approximately US$70,000. While the Chinese machine is
not as quick as the Canadian machine, we believe that both machines produce
products of similar quality.
The market
With a population of over 1.2 billion and a rapid growth in
its building industry, China has an enormous market for building products,
including of course, door and window frames. In the past ten years, there have
been over 10 billion square meters of completed building construction, consuming
over 1.3 billion square meters of door and window frames. In 1995, 1.2 billion
square meters of residential housing were completed in China, requiring over 180
million square meters of door and window frames.
In 1996, the completed floor area of all types of construction
in China was approximately 1.625 billion square meters, of which about 750
million square meters were for construction in urban areas and about 875 million
square meters for construction in rural areas. For the area completed,
approximately 1.225 billion square meters were for residential purposes.
Based on the current industry norm, about 0.20 square meter of
window would be required for every square meter of building and housing floor
completed. This implies that the total annual consumption of windows in China is
over of 300 million square meters. As the result, China has a huge market for
windows.
Due to the enforcement of the forestry conservation policy in
China, use of wooden windows is prohibited in many areas. The use of steel
windows has been gradually discontinued because of their poor functionality and
poor insulation level. Aluminum windows have also many deficiencies, including
poor insulation, and therefore are not widely used in the Northern and coastal
areas in China. Plastic steel windows, the latest generation of window product
after aluminum, have the characteristics of good appearance, good insulation,
corrosion-resistance and vapor and waterproof. They are currently widely used
and have become the main window product in China.
Fiberglass windows have been recently introduced in China.
They are the latest generation of windows in China. In comparison to plastic
steel windows, fiberglass windows are stronger, have a lower expansion
co-efficient, are more heat resistant, and are easier to clean. Fiberglass
windows also do not require steel reinforcement like plastic steel window and
17
their cost is competitive to that of plastic/steel windows. In 1998, we
commissioned a business feasibility study, and the following expectations are
derived from that report. We expect that the use of fiberglass windows will grow
rapidly in the future in China as China introduces increasingly stringent energy
conservation regulations. In fact, China recently introduced guidelines by the
Chinese government that set a target to reduce energy consumption of housing by
up to 50% within the next few years.
In rural areas, wooden windows are still used. However, with
the economic development and the increase in wealth among farmers, and with the
enforcement of forestry conservation policy, many rural areas have begun to use
more modern windows, such as plastic/steel and fiberglass windows.
Besides requiring over 300 million square meters of windows
for new construction in China, there is also a growing demand for windows in the
renovation market, as more and more consumers want to renovate their homes. It
is estimated that the total window market for both new constructions and
renovations in China is over 500 million square meters. This means the demand
for window frame materials, which include wood, steel, aluminum, plastic and
fiberglass, is about 5 million tonnes annually. To meet this demand would
require 1,000 factories with an average annual production output of 5,000
tonnes. The current annual production capacity of plastic window frames in China
is less than 300,000 tonnes. For fiberglass, the capacity is less than 50,000
tonnes. The central Chinese government has issued several directives demanding
the abolition, by year 2000, of the use of wood, steel, and aluminum as window
frame materials, while recommending the use of plastic and fiberglass materials.
An announcement from the Chinese government some time in the next couple of
months is anticipated that this directive is to become effective immediately.
With the intended abolition of the wood, steel, and aluminum window, there
exists a substantial growth potential for plastic and fiberglass windows. We
believe that with their superior quality and competitive pricing, fiberglass
windows will replace plastic windows in the future as the main window product in
China.
Marketing and distribution
In pursuing its business strategy in China, we will initially target
the major urban centers, such as Beijing, Shanghai, Shenzhen and Nanning.
Currently, all these centers are experiencing massive building programs in both
commercial and residential sectors. Furthermore, these large centers are the
most developed and open to the adaptation of new technology or products. More
and more people in these centers are joining the middle class ranks and starting
to buy their own homes. Many of these middle income people are demanding and
accepting products of higher quality. We believe these large urban centers will
be the highest potential and acceptance for fiberglass window and door products.
We intend to market our products through our own joint venture
18
marketing forces as well as through agents and state owned building materials
retail companies. Initially, we will focus our marketing efforts in those major
urban centers with strong housing construction activities.
Distribution will be by railway and truck transportation. All
large urban centers in China have a good network of rail and road systems.
Competition
Fiberglass window frames are a new building material for China
and there is currently little competition. The industry is in its initial
development stage and thus has a very short history. The fiberglass window frame
industry uses mostly domestic equipment and therefore, the quality of their
products is not very high. A few plants import foreign pulling equipment, but do
not have access to the latest technology. Thus their production is not
promising. There are two currently existing fiberglass window production plants
in China.
1. Yao Hua Yin Lai Fiber Glass Door and Window LTD.
Yao Hua Yin Lai Fiber Glass Door and Window LTD. is located in
the city of Qin Huang Dao, Hebei Province. This company imported Canadian
equipment and technology. It started to build its plant in March, 1999, and
plant is expected to be completed and to be in operation by late spring 2000.
The needed imported equipment is on the way and is expected to arrive in China
around April, 2000. Total investment for this project is 29,920,000.00 RMB
(approximately 3,605,000 US dollars). Annual production capacity of this plant
is 100,000 m2 of fiber glass. The floor space for the plant is 4000 m2 . The
investment also involved in building a small community in the surrounding plant
area with school & living quarters.
This plant is an equity joint venture between Chinese and
foreign companies. The Chinese investors own 75% of the interests in the joint
venture and the foreign party, a Canadian company, has 25% of the interests. The
two parties purchased all equipment together and they imported two pultrusion
machine production lines, 50 molds, a door and window assembly line and a
painting line.
This plant is the first plant of its kind in China that has
imported a complete set of Canadian equipment and technology. However, it is not
in operation yet. We cannot, as yet, tell their performance on the market. Our
research shows that the market for their products is fairly promising.
2. Beijing Fang Shan Fiber Glass Plant.
Beijing Fang Shan Fiber Glass Plant is a cooperative company.
It has almost 200 employees and covers about 4 acres of land. The main product
of this plant is fiberglass water tanks. However, Beijing Fang Shan Fiber Glass
19
Plant has been planning to build a production facility for fiberglass doors and
windows since June, 1998. This plant invested 2,000,000.00 RMB (about 241,000 US
dollars) and bought 4 domestic pultrusion machines, equipment and molds. Its
annual production capacity is 70,000 m2 of fiberglass. After more than one year
in construction & installation, the plant was officially put into operation in
late1999. Beijing Dai Xing Jin Yuan Xiao Qu used 10,000 m2 of its fiberglass.
Users of their products have generally had good comments on their output.
Government regulation
Since this industry is involved with innovative building
material products and high technology manufacturing, all levels of the Chinese
government are encouraging its development. The central government also
introduced regulation to promote its use, therefore, any additional government
regulation is not expected to be a hindrance.
Furthermore, the industry is creating many new jobs for the
local economies, therefore, in some Chinese cities, there are many local tax
incentives available to attract these types of businesses into the city. Under
Chinese income tax regulations, a 33% income tax rate is normally applicable to
a Sino-foreign joint venture. A typical Sino-foreign joint venture of a
production nature is exempt from Chinese income tax for its first two profitable
years, and receive a 50% reduction in income taxes for the third to fifth years.
Any business in China is subjected to Chinese Law and
Regulation. From our past working experience in China, the attractiveness of a
Joint Venture with a Chinese Partner is that most of approval process will be
the responsibility of the prospective Chinese Partner.
Most of the Research and Development work is being carried out
in Canada currently. In the future, the joint venture Chinese Partners will be
involved in the in-depth marketing research.
The product improvement or the manufacturing process might be
done in China, but those activities are still three to five years away.
20
Management
Officers and directors
Our officers and directors are as follows:
Name Age Position
Ms. Annette Shaw 47 President, Chief Executive Officer, Director
Victor Sun 57 Director
Robert E. Cenon 41 Vice President
Ms. Annette Shaw, Director, CEO, and President
Ms. Shaw, one of our founders, has worked both in the private
and public sectors, and has held various management positions. In 1990, she
established the groundwork for this company by forming her own business to
develop and finance projects in the Far East. From 1992 to 1997 she worked for
the Planned Parenthood Ass. of San Mateo County as manager of claims processing,
while still developing her Far East interests. She has established strong and
close relationships with many contacts in both the private and government
sectors in China and Taiwan. This extensive experience and entrepreneurial
spirit is the basis for our development and potential implementation of joint
ventures and strategic partnerships. From 1997 to early 1999, she was the
Chairman and CEO of Sino-Canadian Resources Ltd., a non-reporting Bulletin Board
company seeking to develop gold mining in China. Ms. Shaw has a B.A. in Business
Administration from University of Windsor, Ontario, Canada in 1979.
Mr. Victor Sun, Director
Victor Sun is one of our co-founders and is a Professional Engineer with over 28
years of engineering and management experience. Mr. Sun was with Lafarge Cement
for 14 years, from August 1971 to September 1986, where he directed the design
of control and automation systems for all new and rehabilitation projects. In
the late 1970's, he initiated the cement consulting market in China for Lafarge
Consultants with the Fa Yuan project and established a co-operative relationship
with a major cement design and research institute in China. He worked for
Monenco Agra from Sept 1987 to August 1997 as the instrumentation discipline
engineer of the Hibernia Off Shore Platform Project. From 1996 to 1999, he
served as Vice President of Asia Pacific Concrete Inc. (Calgary exchange: symbol
AFI), of Calgary, Alberta, a business involved in development with Chinese
partners of cement and concrete projects in China. His experience in developing
business with China's cement industry dates back 18 years while being employed
by Lafarge. Since helping establish the China Pacific Industrial Corporation
(CPIC), a private investment company with holdings in Canada and China, he has
continued to establish relations with contacts in China and has been
instrumental in developing CPIC's potential joint venture projects.
21
Mr. Robert E. Cenon, Vice-President
Mr. Cenon has a degree in business communications from the University of East
Manila, Philippines. He began his career as a credit analyst for the State
Compensation Insurance Fund, in its San Francisco office in 1987, where he still
maintains a full time position. He experienced and worked in all major aspects
of the insurance, investment and finance world over the past thirteen years. His
last three years have focused on performing the duties of an Associate
Information System Analyst for the State Compensation Insurance Fund, where his
duty involved technical support on all activities to computer database, on-line
products and Internet/Intranet website. He has developed and used many contacts
and relationships with investors and brings this important and valuable resource
to us.
Indemnification of directors and officers
Our By-Laws includes certain provisions permitted by the
Delaware General Corporation Act whereby our officers and directors are to be
indemnified to the maximum extent permitted by law. These provisions of the
By-Laws have no effect on any director's liability under Federal securities laws
or the availability of equitable remedies, for breach of fiduciary duty. We
believe that these provisions will facilitate our ability to continue to attract
and retain qualified individuals to serve as our directors and officers.
At present, there is no pending litigation or proceeding
involving any of our directors, officers, employee or agents where
indemnification might be required or permitted. We are unaware of any threatened
litigation or proceedings that might result in a claim for such indemnification.
Compensation of directors
Directors do not receive any compensation for their service as
members of the board of directors.
22
Security ownership of certain
beneficial owners and management
The following table sets forth, as of June 30, 2000,
information regarding the beneficial ownership of our common stock based upon
the most recent information available to us for
o each person known by us to own beneficially more
than five (5%) percent of our outstanding common
stock,
o each of our officers and directors and
o all of our officers and directors as a group.
Each stockholder's address is c/o Avic Technologies Ltd., 445
St-Francis Xavier St., Montreal, Quebec H4X 2C9. Our telephone number is (514)
844-3510.
Number of
Shares Owned
Name Beneficially % of Total
Annette Shaw 4,700,000 38.46
Victor Sun 1,020,000 8.35
Robert E. Cenon 40,000 0.33
All directors and Officers
as a Group( 3 persons) 5,760,000 47.13
Executive compensation
From inception through the fiscal year ended December 31,
1999, no compensation was paid to any of our executive officers. Effective
January 1, 2000, we agreed to pay an annual salary of $20,000 and $40,000 to
Ms. Annette Shaw and Mr. Victor Sun, respectively.
On June 1, 2000, the Company issued to Annette Shaw and Victor
Sun, 200,000, and 400,000 common shares, respectively, in lieu of salaries owed
for the period January 1, 2000 to June 30, 2000.
23
Certain relationships and related transactions
We lease office space and secretarial support from an entity
owned by one of our shareholders under a lease agreement requiring monthly
payments of $3,500 through March 31, 2001. Total rent paid under this agreement
during the period March 4, 1999 to June 30, 2000 was $52,500.
On December 2, 1999, we issued 288,000 shares of common stock
to an entity as consideration for web design services at a rate of $.10 per
share. The entity is majority owned by a less than 5% owner of our stock. The
services were valued at $28,800, which we believe is a fair price for such
services.
On December 2, 1999, we issued 320,000 shares of common stock
to an entity as consideration for equipment appraisal services at a rate of $.10
per share. Mr. Sun, one of our directors, owns less than 10% of this entity and
is neither an officer or a director. The services were valued at $32,000, which
we believe is a fair price for such services.
During the period March 4, 1999 (date of incorporation) to
June 30, 2000, the Company paid $38,500 for certain consulting services to an
entity owned by a family member of one of the Company's directors and
stockholders.
In connection with a Regulation S offering, the Company paid
consulting fees of approximately $36,000 to a company partially owned by a
spouse of one of the Company's directors and stockholders.
Disclosure of commission position on
indemnification for securities act liabilities
Our By-Laws require us to indemnify any and all persons who
may serve or who have served at any time as directors or officers as well as
employees or agents, or who, at the request of the board of directors, may
serve, or at any time have served as directors, officers, employees or agents of
another corporation. Indemnification is required to the full extent permitted by
the General Corporation Law of Delaware as it may from time to time be amended.
Our By-Laws also require indemnification in the event of a
derivative claim of persons who were our officers, directors, employees or
agents or of another enterprise if the person was serving at the request of the
board of directors as an employee or agent of that enterprise. Indemnification
is also permitted as provided under Delaware law except in cases of gross
negligence or willful misconduct.
24
We may purchase and maintain insurance for the benefit of any
person as provided in our By-Laws and to the extent permitted by Delaware law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore unenforceable.
Description of securities
Authorized and outstanding stock
Our authorized capital stock consists of 50,000,000 shares of
Common Stock, $.0001 par value. As of June 30, 2000, there were 12,221,000
shares of Common Stock outstanding, which were held by approximately 57
stockholders of record.
Common stock
Subject to legal and contractual restrictions on payment of
dividends, the holders of our common stock are entitled to receive such lawful
dividends as may be declared by the Board of Directors. In the event of our
liquidation, dissolution or winding up, the holders of shares of common stock
are entitled to receive all of our remaining assets available for distribution
to stockholders after satisfaction of all liabilities and preferences. Holders
of our common stock do not have any preemptive, conversion or redemption rights
and there are no sinking fund provisions applicable to our common stock. Record
holders of our common stock are entitled to vote at all meetings of stockholders
and at those meetings are entitled to cast one vote for each share of record
that they own on all matters on which stockholders may vote. Stockholders do not
have cumulative voting rights in the election of our directors. As a result, the
holders of a plurality of the outstanding shares can elect all of our directors,
and the holders of the remaining shares are not able to elect any of our
directors. All outstanding shares of common stock are fully paid and
non-assessable, and all shares of common stock to be offered and sold in this
offering will be fully paid and non-assessable.
Transfer agent and registrar
The stock transfer agent and registrar for our common stock is
Intercontinental Registry and Stock Transfer, located at 900 Buchanan Blvd # 1,
Boulder City, Nevada 89005-2100. The transfer agent charges $15 to issue a stock
certificate. This means that in the event you want to sell your shares, there
will be an additional $15 fee on top of your other transactional costs. This fee
is fairly standard and is usually, although not always, absorbed by the broker
In the event your broker does not pick up this fee, it will reduce your net
profits from any sale.
Dividend policy
25
Under applicable law, dividends may only be paid out of
legally available funds as proscribed by a statute, subject to the discretion of
the board of directors. In addition, it is currently our policy to retain
internally generated funds to support future expansion of our business.
Accordingly, even if we do generate earnings, and even if we are not prohibited
from paying dividends, we do not currently intend to declare or pay cash
dividends on our common stock for the foreseeable future.
Shares available for future sale
On the date of this Prospectus, all 7,411,000 shares included
in this Prospectus will generally be freely tradeable without restriction
imposed by, or further registration under, the Securities Act. An additional
4,810,000 shares of our common stock may be deemed "restricted securities," as
that term is defined under Rule 144 promulgated under the Securities Act. Such
shares may be sold to the public, subject to volume restrictions, as described
below. Commencing at various dates, these shares may be sold to the public
without any volume limitations.
In general, under Rule 144 as currently in effect, subject to
the satisfaction of certain other conditions, a person, including one of our
affiliates, or persons whose shares are aggregated with affiliates, who has
owned restricted shares of common stock beneficially for at least one year is
entitled to sell, within any three-month period, a number of shares that does
not exceed 1% of the total number of outstanding shares of the same class. In
the event our shares are sold on an exchange or are reported on the automated
quotation system of a registered securities association, you could sell during
any three-month period the greater of such 1% amount or the average weekly
trading volume as reported for the four calendar weeks preceding the date on
which notice of your sale is filed with the SEC. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about us. A person who has not been
one of our affiliates for at least the three months immediately preceding the
sale and who has beneficially owned shares of common stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
You should note that we anticipate that our shares of common
stock will initially be included for quotation on the OTC Bulletin Board.
Pursuant to SEC regulations, the OTC Bulletin Board is not considered an
"automated quotation system of a registered securities association" and Rule 144
will only permit sales of up to 1% of the outstanding shares during any three
month period.
Plan of distribution
The sale of the shares of common stock by the selling
stockholders may be effected by them from time to time in the over the counter
26
market or in such other public forum where our shares are publicly traded or
listed for quotation. These sales may be made in negotiated transactions through
the timing of options on the shares, or through a combination of such methods of
sale, at fixed prices, which may be charged at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The selling stockholders may effect such transactions by
selling the shares to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholders and/or the purchasers of the shares for which such
broker-dealer may act as agent or to whom they sell as principal, or both. The
compensation as to a particular broker-dealer may be in excess of customary
compensation.
The selling stockholders and any broker-dealers who act in
connection with the sale of the shares hereunder may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act, and any
commissions received by them and any profit on any sale of the shares as
principal might be deemed to be underwriting discounts and commissions under the
Securities Act.
27
Selling stockholders
We are registering
o shares of common stock purchased by investors in our
1999 private placement offerings, and
o a portion of the shares of common stock owned by our
founders.
Other than the costs of preparing this Prospectus and a
registration fee to the SEC, we are not paying any costs relating to the sales
by the selling stockholders. Each of the selling stockholders, or their
transferees, and intermediaries to whom such securities may be sold may be
deemed to be an "underwriter" of the common stock offered hereby, as that term
is defined under the Securities Act. Each of the selling stockholders, or their
transferees, may sell these shares from time to time for his own account in the
open market at the prices prevailing therein, or in individually negotiated
transactions at such prices as may be agreed upon. The net proceeds from the
sale of these shares by the selling stockholders will inure entirely to their
benefit and not to that of us.
Except as indicated below, none of the selling stockholders
has held any position or office, or had any material relationship with us or any
of our predecessors or affiliates within the last three years, and after
completion of this offering will own the amount of our outstanding common stock
listed opposite their name. The shares reflected by each selling stockholder is
based upon information provided to us by our transfer agent and from other
available sources in December 1999.
These shares may be offered for sale from time to time in
regular brokerage transactions in the over-the-counter market, or, either
directly or through brokers or to dealers, or in private sales or negotiated
transactions, or otherwise, at prices related to the then prevailing market
prices. Thus, they may be required to deliver a current prospectus in connection
with the offer or sale of their shares. In the absence of a current prospectus,
if required, these shares may not be sold publicly without restriction unless
held by a non-affiliate for two years, or after one year subject to volume
limitations and satisfaction of other conditions. The selling stockholders are
hereby advised that Regulation M of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934 will be applicable to
their sales of these shares. These rules contain various prohibitions against
trading by persons interested in a distribution and against so-called
"stabilization" activities.
The selling stockholders, or their transferees, might be
deemed to be "underwriters" within the meaning of Section 2(11) of the Act and
any profit on the resale of these shares as principal might be deemed to be
underwriting discounts and commissions under the Act. Any sale of these shares
by selling shareholders, or their transferees, through broker-dealers may cause
the broker-dealers to be considered as participating in a distribution and
subject to Regulation M promulgated under the Securities Exchange Act of 1934,
28
as amended. If any such transaction were a "distribution" for purposes of
Regulation M, then such broker-dealers might be required to cease making a
market in our equity securities for either two or nine trading days prior to,
and until the completion of, such activity.
Shares Beneficially Owned
Before Offering After Offering
Name of Selling Security Holder Offering
-------------------------------------------------------
Annette Shaw 4,700,000 500,000 4,200,000
Robert E. Cenon 40,000 30,000 10,000
Victor I. H. Sun 1,020,000 420,000 600,000
Alan Chan 500,000 500,000 0
C.P. Lee 250,000 250,000 0
Janet Lee 250,000 250,000 0
Ed Tam 125,000 125,000 0
Gerry Peacock 75,000 75,000 0
Norman Kwong 250,000 250,000 0
Bradly Kwong 250,000 250,000 0
Dennis Nikirk 200,000 200,000 0
Francis Leong 250,000 250,000 0
Louis H. Ladouceur 250,000 250,000 0
Mei Yueh Chou 475,000 475,000 0
David Amsel 150,000 150,000 0
Yik Ching Sun 250,000 250,000 0
Hong Gang 240,000 240,000 0
1688 Investissement Inc. 330,000 330,000 0
Brian Riordan 10,000 10,000 0
Yaohua Wang 15,000 15,000 0
Easter Kwong 10,000 10,000 0
Kenneth Wong 10,000 10,000 0
Lily Tu 10,000 10,000 0
Chang Yu Shao 100,000 100,000 0
Solomon Bierbrier 34,000 34,000 0
Zaven Darakjian 20,000 20,000 0
324966 Alberta Ltd. 35,000 35,000 0
Walter Wlasenko 10,000 10,000 0
Jia Ming Liu 20,000 20,000 0
Charles S.M. Mak 20,000 20,000 0
Asia Internet Inc. 320,000 320,000 0
Michael L. Pang 10,000 10,000 0
Claude Filion 50,000 50,000 0
Dr. Mauice Houde 50,000 50,000 0
29
Cielo D. Cenon 10,000 10,000 0
Gordon Ching 20,000 20,000 0
Samson Lau 10,000 10,000 0
George Ching 10,000 10,000 0
Elisa Ching 10,000 10,000 0
Stephen T. Minamide 10,000 10,000 0
Alan Riendeau 12,000 12,000 0
A. Chan & Associate 288,000 288,000 0
Kit Chan 20,000 20,000 0
Stephanie Ho Lem 5,000 5,000 0
Winnie Shih 210,000 210,000 0
Dynamic Concept Investment Ltd. 235,000 235,000 0
Olivia De Santos 10,000 10,000 0
TTY Systems Inc. 300,000 300,000 0
Douglas C. Tom 10,000 10,000 0
Andre Labranche 10,000 10,000 0
Maryse Leblond 20,000 20,000 0
Sun Consultant Inc. 180,000 180,000 0
Yik Yiu Sun 225,000 225,000 0
Patricia Medina 124,000 124,000 0
Ron Guttman 25,000 25,000 0
Chou Chin Lung 148,000 148,000 0
TOTALS: 12,221,000 7,411,000
Legal matters
Certain legal matters in connection with this offering are
being passed upon by the law firm of Heller, Horowitz & Feit, P.C., New York,
New York.
30
Available information
Commencing on the date of this prospectus, we will be subject
to the information requirements of the Securities Exchange Act of 1934, as
amended. This Act requires us to file reports, proxy statements and other
information with the Securities and Exchange Commission. Copies of the reports,
proxy statements and other information we file can be inspected at the
Headquarters Office of the Securities and Exchange Commission located at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at certain of its
regional offices at the following addresses:
o 7 World Trade Center, 13th Floor, New York, New York
10048; and
o 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
Copies of the material we file may be obtained from the Public
Reference Section of the Commission, at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. at prescribed rates. The Public Reference Room can be reached
at (202) 942-8090. The Commission also maintains a web site that contains
reports, proxy and information statements and other information regarding us.
This material can be found at http://www.sec.gov.
31
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Avic Technologies Ltd.:
We have audited the accompanying balance sheet of Avic Technologies Ltd. (the
"Company"), a development stage enterprise, as of December 31, 1999, and the
related statements of operations, stockholders' equity and cash flows for the
period March 4, 1999 (date of incorporation) to December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 the disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as the overall financial statement presentation. We
believe 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 the Company as of December 31,
1999, and the results of its operations and its cash flows for the period March
4, 1999 (date of incorporation) to December 31, 1999 in conformity with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes A and B to the
financial statements, the Company is in the development stage and will require a
significant amount of capital to commence its planned principal operations and
proceed with its business plan. As of the date of these financial statements
there is no assurance that the Company will be successful in its efforts to
raise the necessary capital to commence its planned principal operations and/or
implement its business plan. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are described in Note B. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/Kingery, Crouse & Hohl, P.A.
April 20, 2000
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
Financial Statements as of and for the period
March 4, 1999
(date of incorporation) to December 31, 1999
and
Independent Auditors' Report
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Pages
Independent Auditors' Report F-2
Financial Statements as of and for the period March 4, 1999
(date of incorporation) to December 31, 1999:
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7
F-2
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
BALANCE SHEET AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 109,900
Note Receivable 15,000
-----------------
TOTAL $ 124,900
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES- Due to stockholder $ 2,500
-----------------
STOCKHOLDERS' EQUITY:
Common stock - $.0001 par value: 50,000,000 shares
authorized; 11,621,000 shares issued and outstanding 1,162
Additional paid-in capital 316,549
Subscription receivable (2,980)
Deficit accumulated during the development stage (192,331)
-----------------
Total stockholders' equity 122,400
-----------------
TOTAL $ 124,900
=================
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
F-3
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
for the period March 4, 1999 (date of incorporation)
to December 31, 1999
- --------------------------------------------------------------------------------
EXPENSES (substantially all related party):
Consulting fees $ 64,000
Professional fees 48,052
Website design 32,000
Rent 31,500
Other 16,779
-------------
NET LOSS $ 192,331
=============
NET LOSS PER SHARE:
Basic and diluted $ .02
=============
Weighted average number of shares - basic and diluted 9,304,400
=============
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
F-4
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
for the period March 4, 1999 (date of incorporation)
to December 31, 1999
- --------------------------------------------------------------------------------
Deficit
Accumulated
Additional During the
Common Stock Paid-In Subscription Development
Shares Value Capital Receivable Stage Total
------------- ----------- -------------- ---------------- --------------- --------------
Balances, March 4, 1999
(date of incorporation) 0 $ 0 $ 0 $ 0 $ 0 $ 0
Proceeds from the issuance
of common stock:
At $.0001 per share 8,000,000 800 800
At $.10 per share 2,778,000 278 277,522 (2,980) 274,820
Stock issuance costs (45,189) (45,189)
Issuance of common stock in
exchange for services rendered 843,000 84 84,216 84,300
Net loss for the period,
March 4, 1999 (date of
incorporation) to December
31, 1999 (192,331) (192,331)
------------- ----------- -------------- ---------------- --------------- --------------
Balances, December 31, 1999 11,621,000 $ 1,162 $ 316,549 $(2,980) $(192,331) $ 122,400
============= =========== ============== ================ =============== ==============
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
F-5
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
for the period March 4, 1999 (date of incorporation)
to December 31, 1999
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (192,331)
Adjustments to reconcile net loss to
net cash used in operating
activities - non cash compensation 84,300
------------------
NET CASH USED BY OPERATING ACTIVITIES (108,031)
------------------
CASH FLOWS FROM INVESTING ACTIVITIES-
Loan made (25,000)
Repayment of loan 10,000
------------------
NET CASH USED BY INVESTING ACTIVITIES (15,000)
------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from stockholder 2,500
Cash paid for stock issuance costs (45,189)
Proceeds from the issuance of common stock 275,620
------------------
------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 232,931
------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 109,900
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 0
------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 109,900
==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 0
==================
Taxes paid $ 0
==================
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
F-6
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A - FORMATION AND OPERATIONS OF THE COMPANY
Avic Technologies Ltd., Inc. (the "Company") was incorporated under the laws of
the state of Delaware on March 4, 1999. The Company, which is considered to be
in the development stage as defined in Financial Accounting Standards Board
Statement No. 7, intends to participate in the building industry in China and
other parts of Asia by offering consulting services to contractors, and by
establishing joint ventures for the production and marketing of fiberglass
window frames. The planned principal operations of the Company have not yet
commenced, therefore accounting policies and procedures have not yet been
established.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements. The
reported amounts of revenues and expenses during the reporting period may be
affected by the estimates and assumptions management is required to make. Actual
results could differ significantly from those estimates.
NOTE B - GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has incurred a net
loss of approximately $192,000 for the period March 4, 1999 (date of
incorporation) to December 31, 1999, anticipates incurring continuing losses and
will require a significant amount of capital to commence its planned principal
operations and proceed with its business plan. Accordingly, the Company's
ability to continue as a going concern is dependent upon its ability to secure
an adequate amount of capital to finance its operations and planned principal
operations. The Company hopes to secure additional financing, which may include
borrowings from current stockholders, however there is no assurance that they
will be successful in these efforts. In the event the Company is unable to
secure additional financing, the Company will seek alternative funding sources,
and may have to defer and/or adjust its focus and expenditures currently
required to implement its business plan. These factors among others may indicate
that the Company will be unable to continue as a going concern for a reasonable
period of time. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
NOTE C - CONCENTRATION OF CREDIT RISK
The Company maintains substantially all of its cash and cash equivalents at one
Canadian insured institution,
F-7
which has a maximum insurance limit of $60,000. Accordingly, at December 31,
1999, the Company's uninsured cash balances approximated $50,000.
NOTE D - NOTE RECEIVABLE
In 1999, the Company loaned $25,000 to an unrelated entity. The note, which has
a remaining balance of $15,000 at December 31, 1999, is non-interest bearing,
unsecured, due on demand and requires the borrower to issue 10,000 shares of its
common stock to the Company. No value has been ascribed to these shares in the
accompanying financial statements because of the uncertainty as to any future
realization.
NOTE E - INCOME TAXES
During the period March 4, 1999 (date of incorporation) to December 31, 1999,
the Company recognized losses for both financial and tax reporting purposes.
Accordingly, no deferred taxes have been provided for in the accompanying
statement of operations.
At December 31, 1999, the Company had a net operating loss carryforward of
approximately $190,000 for income tax purposes. The carryforward will be
available to offset future taxable income through the year ended December 31,
2019. The deferred income tax asset arising from this net operating loss
carryforward is not recorded in the accompanying balance sheet because the
Company established a valuation allowance to fully reserve such asset as its
realization did not meet the required asset recognition standard established by
SFAS 109.
NOTE F - LOSS PER SHARE
The Company computes net loss per share in accordance with SFAS No. 128
"Earnings per Share" ("SFAS No. 128") and SEC Staff Accounting Bulletin No. 98
("SAB 98"). Under the provisions of SFAS No. 128 and SAB 98, basic net loss per
share is computed by dividing the net loss available to common stockholders for
the period by the weighted average number of common shares outstanding during
the period. Diluted net loss per share is computed by dividing the net loss for
the period by the number of common and common equivalent shares outstanding
during the period. As of December 31, 1999, there were no common equivalent
shares outstanding.
NOTE G - PROPOSED COMMON STOCK OFFERING
The Company intends to file a registration statement which will enable various
shareholders to sell 7,411,000 shares of the common stock they own in the
Company (the Company will not receive any part of the proceeds from the sale of
any of these shares). The Company has agreed to pay all expenses associated with
the registration of the shares and the printing of the prospectus. Management
anticipates that the ultimate total expense paid for the selling stockholders
under this arrangement will approximate $59,000.
NOTE H - RELATED PARTY TRANSACTIONS (ALSO SEE NOTE G)
The Company leases its office space and secretarial support from an entity owned
by one of its shareholders under a lease agreement, which required monthly
payments of $3,500 through March 31, 2000. Total rent paid under this agreement
during the period March 4, 1999 to December 31, 1999 was $31,500; such amount is
reflected as Rent Expense in the accompanying statement of operations.
F-8
During the period March 4, 1999 (date of incorporation) to December 31, 1999,
the Company issued 843,000 shares of its common stock as consideration for the
following services which were provided by entities in which various stockholders
have ownership interests:
Value of Share Shares Date
Description of Service Service Price Issued Issued
- ---------------------- -------- ----- ------- -------
Website Design $32,000 $0.10 320,000 12/2/99
Equipment Appraisal 28,800 $0.10 288,000 12/2/99
Search for Joint Venture Partners 23,500 $0.10 235,000 12/2/99
------- -------
Totals $84,300 843,000
======= =======
The value of these services, which was based on the number, and fair value, of
shares issued (share prices represent the price at which other shares were sold
at the date the services were rendered), has been included in various expenses
in the accompanying statement of operations.
During the period March 4, 1999 (date of incorporation) to December 31, 1999,
the Company paid $38,500 for certain consulting services to an entity owned by a
family member of one of the Company's directors and stockholders. Such amount
has been included in Consulting Fees in the accompanying statement of
operations.
In connection with a Regulation S offering, the Company paid fees of
approximately $36,000 to a company partially owned by a spouse of one of the
Company's directors and stockholders. Because the costs related to the sale of
the Company's stock, they have been reflected as a reduction of stockholders'
equity in the accompanying financial statements.
No amounts have been ascribed to services provided by the Company's officers in
the accompanying statement of operations. The Company engaged and directed
consultants to perform the majority of the services required to operate the
Company; accordingly management believes that the value of services provided by
its officers was not significant during the period March 4, 1999 (date of
incorporation) to December 31, 1999.
NOTE I - LETTER OF INTENT
The Company has entered a letter of intent with a Chinese company to establish a
joint venture for the purpose of producing fiberglass window and doorframes.
Pursuant to terms of the letter of intent, the Company has agreed to fund
approximately $506,000 (or 60%) of the total anticipated investment cost. Of
this amount, approximately $217,000 is anticipated to be funded through a loan
that the Company has agreed to arrange on the joint venture's behalf. The joint
venture is anticipated to have a life of 20 years, and both of the venturers
have agreed to shoulder the risks jointly.
F-9
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Pages
Financial Statements:
Balance Sheets as of June 30, 2000 (Unaudited)
and December 31, 1999 F-1
Statements of Operations for the three and six months ended June 30,
2000, the period March 4, 1999 (date of incorporation) to June 30, 1999
and the period March 4, 1999 (date of incorporation) to June
30, 2000 (Unaudited) F-2
Statement of Stockholders' Equity for the six months ended
June 30, 2000 (Unaudited) F-3
Statements of Cash Flows for the three and six months ended June 30,
2000, the period March 4, 1999 (date of incorporation) to June 30, 1999
and the period March 4, 1999 (date of incorporation)
to June 30, 2000 (Unaudited) F-4
Notes to Financial Statements F-5
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
BALANCE SHEETS AS OF
June 30,
2000 December 31,
(Unaudited) 1999
--------------- -------------------
--------------- -------------------
ASSETS
Cash and cash equivalents $ 90,690 $ 109,900
Note receivable - 15,000
--------------- -------------------
--------------- -------------------
TOTAL $ 90,690 $ 124,900
=============== ===================
=============== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES - Due to stockholder $ 2,500 $ 2,500
--------------- -------------------
--------------- -------------------
STOCKHOLDERS' EQUITY:
Common stock - $.0001 par value; 50,000,000 shares
Authorized 1,222 1,162
Additional paid-in capital 376,489 316,549
Subscription receivable (2,980) (2,980)
Deficit accumulated during the development stage (286,541) (192,331)
--------------- -------------------
--------------- -------------------
Total stockholders' equity 88,190 122,400
--------------- -------------------
--------------- -------------------
TOTAL $ 90,690 $ 124,900
=============== ===================
=============== ===================
F-1
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
UNAUDITED STATEMENTS OF OPERATIONS
FOR THE
- ------------------------------------------------------------------------------------------------------------------------------------
Period March 4, Period March 4,
1999 1999
Three Six (date of (date of
Months Months Incorporation) incorporation)
Ended Ended to to
June 30, June 30, June 30, June 30,
2000 2000 1999 2000
---------------- --------------- -------------------- ------------------
EXPENSES:
Compensation - non-cash $ 60,000 $ 60,000 $ - $ 60,000
Consulting fees 2,000 3,205 31,750 67,205
Professional fees 4,455 4,455 28,800 52,507
Website design - - - 32,000
Rent 10,500 21,000 10,500 52,500
Other 3,655 7,410 5,275 24,189
---------------- --------------- -------------------- ------------------
---------------- --------------- -------------------- ------------------
Total expenses 80,610 96,070 76,325 288,401
---------------- --------------- -------------------- ------------------
---------------- --------------- -------------------- ------------------
Interest income (665) (1,860) - (1,860)
---------------- --------------- -------------------- ------------------
---------------- --------------- -------------------- ------------------
NET LOSS $ 79,945 $ 94,210 $ 76,325 $ 286,541
================ =============== ==================== ==================
================ =============== ==================== ==================
NET LOSS PER SHARE
Basic and diluted $ 0.01 $ 0.01 $ 0.01 $ 0.03
================ =============== ==================== ==================
Weighted average number of
Shares - basic and diluted 11,821,000 11,721,000 6,352,250 10,180,625
================ =============== ==================== ==================
F-2
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Additional During the
Common Stock Paid-In Subscription Development
Shares Value Capital Receivable Stage Total
------------- ----------- -------------- ---------------- --------------- ----------
Balances, December 31, 1999 11,621,000 $1,162 $ 316,549 $ (2,980) $ (192,331) $ 122,400
Issuance of common stock in
exchange for services rendered 600,000 60 59,940 60,000
Net loss for the six months
ended June 30, 2000 (94,210) (94,210)
------------- ----------- -------------- ---------------- --------------- ----------
Balances, June 30, 2000 12,221,000 $ 1,222 $ 376,489 $ (2,980) $(286,541) $ 88,190
============= =========== ============== ================ =============== ==========
F-3
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE
Period March 4, Period March 4,
Three 1999 (date of 1999 (date of
Months Six incorporation) incorporation)
Ended Months Ended to June 30, 1999 to June 30,
June 30, June 30, 2000
2000 2000
--------------------- ------------------- ------------------ ---------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(79,945) $(94,210) $(76,325) $(286,541)
Adjustments to reconcile net loss to net
cash used by operating activities:
Increase (decrease) in accrued expenses (3,560) 76,325
Non-cash compensation 60,000 60,000 144,300
------------- --------------- ---------------- ------------
------------- --------------- ---------------- ------------
NET CASH USED BY OPERATING
ACTIVIES (23,505) (34,210) - (142,241)
------------- --------------- ---------------- ------------
------------- --------------- ---------------- ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Loan made - - - (25,000)
Repayment of loan 15,000 15,000 - 25,000
------------- --------------- ---------------- ------------
------------- --------------- ---------------- ------------
NET CASH PROVIDED BY INVESTING
ACTIVITIES 15,000 15,000 - -
------------- --------------- ---------------- ------------
------------- --------------- ---------------- ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Advances from stockholder - - - 2,500
Cash paid for stock issuance costs - - - (45,189)
Proceeds from the issuance of
common stock - - 76,200 275,620
------------- --------------- ---------------- ------------
------------- --------------- ---------------- ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES - - 76,200 232,931
------------- --------------- ---------------- ------------
------------- --------------- ---------------- ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (8,505) (19,210) 76,200 90,690
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 99,195 109,900 - -
------------- --------------- ---------------- ------------
------------- --------------- ---------------- ------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $90,690 $90,690 $76,200 $ 90,690
============= =============== ================ ============
F-4
AVIC TECHNOLOGIES LTD.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE A - FORMATION AND OPERATIONS OF THE COMPANY
Avic Technologies Ltd., Inc. (the "Company") was incorporated under the laws of
the state of Delaware on March 4, 1999. The Company, which is considered to be
in the development stage as defined in Financial Accounting Standards Board
Statement No. 7, intends to participate in the building industry in China and
other parts of Asia by offering consulting services to contractors, and by
establishing joint ventures for the production and marketing of fiberglass
window frames. The planned principal operations of the Company have not
commenced, therefore accounting policies and procedures have not yet been
established.
Basis of Presentation
The accompanying unaudited financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB and Rule 10-01 of
Regulation S-X of the Securities and Exchange Commission ("SEC"). Accordingly,
the financial statements do not include all of the information and footnotes
required by generally accepted accounting principles. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three and six-month periods ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. The accompanying financial statements and notes thereto
should be read in conjunction with the Company's audited financial statements as
of December 31, 1999.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements. The
reported amounts of revenues and expenses during the reporting period may be
affected by the estimates and assumptions management is required to make. Actual
results could differ significantly from those estimates.
NOTE B - GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has incurred a net
loss of approximately $286,500 for the period March 4, 1999 (date of
incorporation) to June 30, 2000, anticipates incurring continuing losses and
will require a significant amount of capital to commence its planned principal
operations and proceed with its business plan. Accordingly, the Company's
ability to continue as a going concern is dependent upon its ability to secure
an adequate amount of capital to finance its operations and planned principal
operations.
F-5
The Company hopes to secure additional financing, which may include borrowings
from current stockholders, however there is no assurance that they will be
successful in these efforts. In the event the Company is unable to secure
additional financing, the Company will seek alternative funding sources, and may
have to defer and/or adjust its focus and expenditures currently required to
implement its business plan. These factors among others may indicate that the
Company will be unable to continue as a going concern for a reasonable period of
time. The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
NOTE C - CONCENTRATION OF CREDIT RISK
The Company maintains substantially all of its cash and cash equivalents at one
Canadian insured institution, which has a maximum insurance limit of $60,000.
Accordingly, at June 30, 2000, the Company's uninsured cash balances
approximated $30,700.
NOTE D - INCOME TAXES
During the period March 4, 1999 (date of incorporation) to June 30, 2000, the
Company recognized losses for both financial and tax reporting purposes.
Accordingly, no deferred taxes have been provided for in the accompanying
statement of operations.
At June 30, 2000, the Company had a net operating loss carryforward of
approximately $226,500 for income tax purposes. The carryforward will be
available to offset future taxable income through the period ended June 30,
2020. The deferred income tax asset arising from this net operating loss
carryforward is not recorded in the accompanying balance sheet because the
Company established a valuation allowance to fully reserve such asset as its
realization did not meet the required asset recognition standard established by
SFAS 109.
NOTE E - LOSS PER SHARE
The Company computes net loss per share in accordance with SFAS No. 128
"Earnings per Share" ("SFAS No. 128") and SEC Staff Accounting Bulletin No. 98
("SAB 98"). Under the provisions of SFAS No. 128 and SAB 98, basic net loss per
share is computed by dividing the net loss available to common stockholders for
the period by the weighted average number of common shares outstanding during
the period. Diluted net loss per share is computed by dividing the net loss for
the period by the number of common and common equivalent shares outstanding
during the period. As of June 30, 2000 and 1999, there were no common equivalent
shares outstanding.
F-6
NOTE F - PROPOSED COMMON STOCK OFFERING
The Company intends to file a registration statement, which will enable various
shareholders to sell 7,411,000 shares of the common stock they own in the
Company (the Company will not receive any part of the proceeds from the sale of
any of these shares). The Company has agreed to pay all expenses associated with
the registration of the shares and the printing of the prospectus. Management
anticipates that the ultimate total expense paid for the selling stockholders
under this arrangement will approximate $59,000.
NOTE G - RELATED PARTY TRANSACTIONS (ALSO SEE NOTE F)
The Company issued 200,000 shares of its common stock to its Chief Executive
Officer and 400,000 shares of its common stock to one of its Directors as
compensation for services performed on behalf of the Company during the six
months ended June 30, 2000. The fair market value assigned to these shares was
based on the latest sales of the Company's stock at $0.10 per share.
The Company leases its office space and secretarial support from an entity owned
by one of its shareholders under a lease agreement, which required monthly
payments of $3,500 through March 31, 2001. Total rent paid under this agreement
during the period March 4, 1999 to June 30, 2000 was $52,500; such amount is
reflected as rent expense in the accompanying statement of operations.
During the period March 4, 1999 (date of incorporation) to June 30, 2000, the
Company issued 843,000 shares of its common stock as consideration for the
following services, which were provided by entities in which various
stockholders have ownership interests:
Value of Price per Date
Description of Service Service share Shares Issued Issued
- ---------------------- -------- ------ ------------- ------
Website Design $32,000 $0.10 320,000 12/2/99
Equipment Appraisal 28,800 $0.10 288,000 12/2/99
Search for Joint Venture Partners 23,500 $0.10 235,000 12/2/99
------ -------
Totals $84,300 843,000
======= =======
The value of these services, which was based on the number, and fair value, of
shares issued (share prices represent the price at which other shares were being
sold at the date the services were rendered), has been included in various
expenses in the accompanying statement of operations.
During the period March 4, 1999 (date of incorporation) to June 30, 2000, the
Company paid $38,500 for certain consulting services to an entity owned by a
family member of one of the Company's directors and stockholders. Such amount
has been included in Consulting Fees in the accompanying statement of
operations.
In connection with a Regulation S offering, the Company paid fees of
approximately $36,000 to a company partially owned by a spouse of one of the
Company's directors and stockholders. Because the costs related to the sale of
the Company's stock, they have been reflected as a reduction of stockholders'
equity in the accompanying financial statements.
F-7
No amounts have been ascribed to services provided by the Company's officers in
the accompanying statement of operations. The Company engaged and directed
consultants to perform the majority of the services required to operate the
Company; accordingly management believes that the value of services provided by
its officers was not significant during the period March 4, 1999 (date of
incorporation) to December 31, 1999.
NOTE H - LETTER OF INTENT
The Company has entered a letter of intent with a Chinese company to establish a
joint venture for the purpose of producing fiberglass window and doorframes.
Pursuant to terms of the letter of intent, the Company has agreed to fund
approximately $506,000 (or 60%) of the total anticipated investment cost. Of
this amount, approximately $217,000 is expected to be funded through a loan that
the Company has agreed to arrange on the joint venture's behalf. The joint
venture is anticipated to have a life of 20 years, and both of the venturers'
have agreed to shoulder the risks jointly.
F-8
You should only rely on the information contained
in this document or other information that we refer
you to. We have not authorized anyone to
provide you with any other information
that is different. You should note that 7,411,000 Shares of Common Stock
even though you received a copy of this
Prospectus, there may have been changes
in our affairs since the date of this Prospectus.
This Prospectus does not constitute
an offer to sell securities in any jurisdiction
in which such offer or solicitation is not authorized
AVIC TECHNOLOGIES LTD.
TABLE OF CONTENTS PAGE
Risk Factors 2
Special Note Regarding PROSPECTUS
Forward-Looking Statements 7
Summary Historical Financial Information 8
Plan of Operations 9
Use of Proceeds 12
Business 13
Management 20
Security Ownership of Certain
Beneficial Owners and Management 22
Executive Compensation 22
Certain Relationships and
Related Transactions 23
Disclosure of Commission Position
on Indemnification for Securities
Act Liability 23
Description of Securities 23
Plan of Distribution 25
Selling Stockholders 26
Legal Matters 28
Available Information 29
Index to Financial Statements.............. F-
_____________ , 2000
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following statement sets forth the estimated expenses in
connection with the offering described in the Registration Statement, all of
which will be borne by the Registrant.
Securities and Exchange Commission Fee........... $ 196
Accountants' Fees................................................ $ 12,000
Legal Fees....................................................... $ 20,000
Company's Administrative Expenses.................... $ 20,000
Printing and engraving........................................ $ 5,000
Miscellaneous...................................................... $ 2,804
TOTAL $ 60,000
Item 14. Indemnification of Directors and Officers.
Our By-Laws includes certain provisions permitted pursuant by
the Delaware General Corporation Act whereby our officers and directors are to
be indemnified against certain liabilities. These provisions of the By-Laws have
no effect on any director's liability under Federal securities laws or the
availability of equitable remedies, for breach of fiduciary duty. We believe
that these provisions will facilitate our ability to continue to attract and
retain qualified individuals to serve as our directors and officers.
At present, there is no pending litigation or proceeding
involving any of our directors, officers, employee or agents where
indemnification might be required or permitted. We are unaware of any threatened
litigation or proceeding that might result in a claim for such indemnification.
The Registrant may also purchase and maintain insurance for
the benefit of any director or officer which may cover claims for which the
Registrant could not indemnify such persons.
Item 15. Recent Sales of Unregistered Securities
In March 1999, Registrant sold an aggregate of 8,000,000
shares at par value to 16 purchasers. All of shares were restricted and were
issued pursuant to the exemptions from registration contained in Regulation S
(for sales outside the United States to 13 non-U.S. persons) and Regulation D,
Rule 506 (for sales to 3 accredited investors).
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Between May 1, 1999 and December 31, 1999, Registrant sold
3,613,000 common shares, at a price of $0.10 per share for aggregate gross
proceeds of $361,300, to 55 investors (including 13 existing shareholders who
purchased more stock). All of the shares were restricted and were issued
pursuant to the exemptions from registration contained in Regulation S (for
sales outside the United States to 51 non-U.S. persons) and Regulation D, Rule
506 (for sales to 4 sophisticated investors, previously known to the Registrant
and whom the Registrant knows to have experience in evaluating and investing in
private companies).
On June 1, 2000, Registrant issued 400,000 and 200,000 shares
of its common stock to its CEO and one of its directors, respectively, in lieu
of salary. The shares were valued at $.10 per share and were issued pursuant to
the exemption contained in Regulation D, Rule 506, as both recipients are
accredited investors.
Item 16. Exhibits and Financial Statements Schedules.
3.1 Certificate of Incorporation*
3.2 By-Laws*
4.1 Specimen Common Stock Certificate*
5 Opinion of Heller, Horowitz & Feit, P.C.
10.1 Lease Agreement
10.2 Consulting Agreement with A. Chan & Associates, Inc.
23.1 Consent of Heller, Horowitz & Feit, P.C.
(included in the Opinion filed as Exhibit 5)
23.2 Consent of Kingery, Crouse & Hohl, P.A.
27 Financial Data Schedule
- ----------------------------
* Previously filed
Item 17. Undertakings.
------------
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section
10(a)(3) of the Securities Act;
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(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change in the
information in the registration statement; and notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) Include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the registration statement is on Form S-3, Form
S-8 or Form F-3, and the information required to be included in post-
effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(iv) Include any additional or changed
material information on the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
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SIGNATURES
In accordance with the requirements of the Securities Act,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and has authorized this
registration statement or amendment to be signed on its behalf by the
undersigned, in the City of Montreal on the 7th day of September 2000.
AVIC TECHNOLOGIES LTD.
By:/s/Annette Shaw
Annette Shaw, President and CEO
In accordance with the requirements of the Securities Act,
this registration statement or amendment was signed by the following persons in
the capacities and on the dates stated:
Signature Title Date
/s/Ms. Annette Shaw
Ms. Annette Shaw President, Chief September 7, 2000
Executive Officer
and Director
/s/Victor I. Sun
Victor I. Sun Director September 7, 2000