UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(x) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the Fiscal Year Ended December 31, 2008
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For The Transition Period From __________To ____________
Commission file number: 000-50320
CREDIT ONE FINANCIAL, INC
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(Name of Small Business Issuer in Its Charter)
Florida 59-3641205
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
80 Wall Street, Suite 818 New York, NY 10005
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(Address of principal executive offices including zip code)
(212) 809-1200
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(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Common Stock, Par Value $0.001
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Securities registered pursuant to Section 12(g) of the Act
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes |__| No |X|
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act. Yes |__| No |X|
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |__|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. |__|
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definition of "larger accelerated filer", and "accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non Accelerated filer [ ] (Do not check if a smaller reporting company)
Smaller Reporting Company [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the exchange Act.) Yes [ ] No [X]
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common
equity as of the last business day of the registrant's most recently completed
second fiscal quarter. _________
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 107,781,150 shares
as of March 25, 2009.
TABLE OF CONTENTS
PART I
Item 1. Business...................................................... 4
Item 1A. Risk Factors.................................................. 5
Item 1B. Unresolved Staff Comments..................................... 9
Item 2. Properties.................................................... 10
Item 3. Legal Proceedings............................................. 10
Item 4. Submission of Matters to a Vote of Security Holders........... 10
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities........... 10
Item 6. Selected Financial Data....................................... 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 12
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.... 15
Item 8. Financial Statements and Supplementary Data................... 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure......................... 28
Item 9A(T). Controls and Procedures....................................... 28
Item 9B. Other Information............................................. 30
PART III
Item 10. Directors, Executive Officers, and Corporate Governance....... 30
Item 11. Executive Compensation........................................ 33
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.................. 34
Item 13 Certain Relationships and Related Transactions; and
Director Independence....................................... 35
Item 14 Principal Accounting Fees and Services........................ 36
PART IV
Item 15. Exhibits, Financial Statement Schedules.......................... 37
Signatures................................................................. 38
PART I
Item 1. BUSINESS
Credit One Credit Financial, Inc. (the "Company") was incorporated in the State
of Florida on September 24, 1999. From inception to May 4, 2006, the Company was
engaged in market research regarding the cost and availability of non-performing
credit card debt portfolios. On May 4, 2006, James H. Bashaw, then the Company's
President and CEO, and Richard R. Cook, then Secretary, Treasurer and CFO of the
Company, sold an aggregate of 4,698,238 of their shares of the Company's common
stock to STM 1, LLC. The shares sold by Messrs. Bashaw and Cook to STM 1, LLC
represented 78.55% of the Company's issued and outstanding shares of common
stock. Subsequent to such change in control, Messrs. Bashaw and Cook resigned
from their positions as the Company's directors and officers.
From May 4, 2006 to July 24, 2007, the Company changed its business plan from
contemplating the acquisition of non-performing accounts receivable to
attempting to acquire other assets or business operations that will maximize
shareholder value. On July 24, 2007, four principal shareholders of the Company,
Guy Wolf; STM 1, LLC; Antonio Investments, Ltd; and Smart Trading, Ltd, sold an
aggregate of 6,962,438 shares, which represented 89.48% of the Company's capital
shares, to ten persons for a total of $625,000 in cash. Simultaneous with the
sale of the securities, the Company's sole officer and director John Vidaver
resigned, and Dicky Cheung was appointed as its sole officer and director.
After the change in control in 2007, the Company tried to provide funding,
primarily in the form of advance, to small- and medium-sized companies with good
and feasible business plans, but lacking capital to implement their business
plans. In January 2008, the Company decided to cease its project financing
business. On February 27, 2008, the Company entered into a joint venture
agreement with Global Select Ltd in Hong Kong. Under the agreement, a joint
venture company, Moderation Limited ("JVC"), has been set up in Hong Kong,
whereby, on January 12, 2009, the Company contributed $16 million Hong Kong
dollars, approximately $2.05 million, in exchange for 51.6% of the equity
interest in the JVC, and Global Select and its partner together contributed
$15 million Hong Kong dollars, approximately $1.92 million, for 48.4% of the
equity interest in the JVC. The purpose of the joint venture is to engage in a
business of natural resources products, primarily graphite at this time, in
China.
As a result, Moderation Ltd became a subsidiary of the Company. Recently the
Chinese government approved Moderation's application for setting up a wholly
owned subsidiary "Liaoning Sinorth Resources Co., Ltd." in Yingkou, Liaoning
province, China. The main business of Liaoning Sinorth Resources Co., Ltd. is
producing, processing and sale of mineral products, primarily graphite, in
China.
The Company has not been involved in any bankruptcy, receivership or similar
proceeding.
Proposed Milestones to Implement Business Operations
At the present time, we plan to do business through our subsidiary, Liaoning
Sinorth Resources Co., Ltd., operating from one location in Liaoning, China. Our
plan is to make our operation profitable by the end of our next fiscal year. We
expect to generate and increase sales, but there can be no assurance we will
generate sales sufficient to continue operations or to expand.
Marketing
We intend to market through direct contact with prospective customers. We plan
to hire a number of sales representatives who solicit potential clients.
Customers and Competition
Our sales depend upon the number of customers we can generate. We cannot
guarantee we will ever develop a substantial number of customers. Even if we
develop a substantial number of customers, there is no assurance that we will
become a profitable company. We may never become profitable, and, as a result,
we could go out of business.
The natural resources industry, in general, is intensely competitive. It is a
fragmented industry, with no one company, or groups of companies in control.
The relationships are typically based upon providing quality service and
products. Generally, we compete with a number of local and regional business
entities, all of whom are larger and better-financed than we are. We must rely
upon our contacts, referrals from customers, and repeat business to be
successful.
Research and Development
In fiscal 2008, we didn't conduct any research or development activities. We
don't anticipate conducting such activities in the near future.
Patents, trademarks, franchises, concessions, royalty agreements or labor
contracts
We don't own any patents, trademarks, copyrights, franchises, concessions,
royalty agreements, or labor contracts.
Employees
In addition to our executive officer, we have one part time employee at this
time. As our business activities increase in size, we plan to hire more
employees. None of our employees are covered by collective bargaining
agreements, and we believe our relationships with our employees to be
satisfactory.
Item 1A. RISK FACTORS
An investment in the Company involves a high degree of risk. Investors should
carefully consider the risks below before making an investment decision. Our
business, financial condition or results of operations could be materially
adversely affected by any of these risks. In such case, the trading price of
our common stock could decline and investors could lose all or part of their
investment. As of the date of this filing, our management is aware of the
following material risks.
Risks Related to the Company's Business
We have limited operating history and face many of the risks and difficulties
frequently encountered for an early stage business.
We are in the developmental stage and have yet to commence any substantive
commercial operations. We have yet to generate positive earnings and there
can be no assurance that it will ever operate profitably. As an early stage
business, we are subject to all the risks, uncertainties, expenses and
difficulties inherent in a new business. There is no assurance that we will be
successful in realizing revenues or in achieving or sustaining positive cash
flow at any time in the future.
We have not been profitable to date, and we may never be profitable.
We have incurred annual operating losses and generated negative cash flows since
our inception and have financed our operations principally through equity
investments and borrowings. At this time, our ability to generate sufficient
revenues to fund operations is uncertain. For the fiscal year ended December 31,
2008, we incurred loss of $70,128, and with total accumulated deficit of
$270,028 as of December 31, 2008. There is no assurance that we will be
profitable in the future or generate future revenues. If the loss continues, our
ability to operate may be severely impacted or alternatively we may be forced
to terminate our operations.
It is highly likely that we will need additional capital to meet our business
requirements in the future, and such capital raising may be costly or difficult
to obtain and could dilute current shareholders' ownership interests.
In the future, we may need to raise additional funds through borrowings or
equity financings to meet various objectives including, but not limited to:
o pursuing growth opportunities, including more rapid expansion;
o making capital improvements to improve our infrastructure;
o acquiring complementary businesses;
o hiring qualified management and key employees;
o increased advertising and marketing expenses;
o responding to competitive pressures; and
o maintaining compliance with applicable laws.
Any future issuance of our equity may dilute then-current shareholders'
ownership percentages. Furthermore, any additional debt or equity financing that
we may need may not be available on terms favorable to us, or at all. If we are
unable to obtain required additional capital, we may have to curtail its growth
plans or cut back on existing business and, further, we may not be able to
continue operating if we do not generate sufficient revenues from operations
needed to stay in business.
Our independent auditors have expressed doubt about our ability to continue as
a going concern.
We are a development stage company that has limited revenue. Our independent
auditors stated that our financial statements were prepared assuming that we
would continue as a going concern. As a result of the going concern
qualification, we may find it much more difficult to obtain financing in the
future, if required. Further, any financing we do obtain may be on less
favorable terms. Moreover, if we should fail to continue as a going concern,
there is a risk of total loss of any monies invested in the Company, and it is
also possible that, in such event, our shares would be of little or no value.
The natural resources industry in China is fragmented and competitive.
The natural resources industry in China is highly competitive and fragmented. We
expect to compete with numberous reginoal and local business entities, many of
which have substantially greater financial, managerial and other resources than
those presently available to us. No assurance can be given that we will be able
to effectively compete with these companies. In the event that we cannot
effectively compete on a continuing basis or competitive pressures arise, such
inability to compete or competitive pressures will have a material adverse
effect on our business, results of operations and financial condition.
Our operating results may fluctuate significantly, which makes our future
results difficult to predict and could cause our operating results to fall below
expectations.
Our operating results may fluctuate significantly in the future due to a
variety of factors, many of which are outside of our control. As a result,
comparing our operating results on a period-to-period basis may not be
meaningful, and, therefore, prior results are not necessarily indicative of
results to be expected in future periods.
Our success depends on our key management personnel and the loss of their
services could adversely affect our business.
We consider Dicky Cheung, our President, Chief Executive Officer, and Chief
Financial Officer to be essential to the success of our business. Loss of his
service could have a material adverse effect on our ability to fulfill its
business plan. We do not maintain key life insurance on him. In addition, in
order to successfully implement and manage its business plan, we will be
dependent upon, among other things, successfully recruiting qualified personnel
having experience in the natural resource industry. Competition for qualified
individuals is intense and we may be unable to retain existing employees or
find, attract and retain qualified personnel on acceptable terms.
Our business operations may be adversely affected by the changing political and
economic policies in China.
Substantially all of our assets are expected to be located in China and
substantially all of our revenues are expected to derive from its operations in
China. The Chinese government exerts substantial influence and control over the
manner in which we must conduct our business activities. Our ability to operate
in China may be adversely affected by changes in Chinese laws and regulations,
including those relating to taxation, import and export tariffs, raw materials,
environmental regulations, land use rights, property and other matters. As a
result, changes in the political and economic policies of the Chinese government
could have a significant impact on the results of our operations and financial
condition.
Investors may experience difficulties in effecting service of legal process,
enforcing foreign judgments, or bringing original actions in China, against the
Company or its management.
Most of our operations are expected to be conducted in China, and our sole
director and officer is resided outside the United States. As a result, it may
not be possible to effect service of process against the Company and its
management within the United States. Additionally, uncertainty exists as to
whether the courts of China would recognize or enforce judgments of U.S. courts
obtained against the Company or its officers and/or directors predicated upon
the civil liability provisions of the securities laws of the United States or
any state thereof.
Risks Related to the Company's Securities
Our principal shareholder beneficially owns 32.2% of our outstanding common
stock and could take actions detrimental to your investment for which you would
have no remedy.
As of the date of this report, our principal shareholder and our President and
CEO, Mr. Dicky Cheung, beneficially owns 34,672,705 shares, or approximately
32.2%, of our outstanding common stock. Accordingly, until such time as his
ownership is sufficiently diluted by the issuance of additional shares of common
stock, Mr. Cheung could significantly influence us on matters submitted to the
stockholders for approval. These matters include the election of directors,
mergers, consolidations, the sale of all or substantially all of our assets,
and also the power to prevent or cause a change in control. The interests of
Mr. Cheung may differ from the interests of our other shareholders.
Our common stock is subject to the penny stock restrictions which will create a
lack of liquidity and make trading difficult or impossible.
Our common stock is currently subject to the penny stock rules adopted by the
Securities and Exchange Commission. Under the SEC Rule 15g-9, a stock is
considered a "penny stock" if it meets one or more of the following conditions:
(i) the stock trades at a price less than $5.00 per share; (ii) it is not traded
on a "recognized" national exchange; (iii) it is not quoted on the Nasdaq
Capital Market, or even if so, has a price less than $5.00 per share; or (iv)
is issued by a company that has been in business less than three years with net
tangible assets less than $5 million. The penny stock rules require brokers to
provide extensive disclosure explaining the penny stock market and the risks
associated with investing in penny stocks to their customers prior to executing
trades in penny stocks. These disclosure requirements may cause a reduction in
the trading activity of the our common stock, which in all likelihood would make
it difficult for our shareholders to sell their securities.
Because of the limited trading volume of our common stock and the price
volatility of our common stock, you may be unable to sell your shares of our
common stock when you desire or at the price you desire.
Our common stock does not have substantial trading volume. As a result,
relatively small trades of our common stock may have a significant impact on the
price of our common stock and, therefore, may contribute to the price volatility
of its common stock. Because of the limited trading volume and price volatility
of our common stock, you may be unable to sell your shares of our common stock
when you desire or at the price you desire. Moreover, the inability to sell your
shares of our common stock in a declining market because of such illiquidity or
at a price you desire may substantially increase your risk of loss.
We have not paid cash dividends on the shares of our common stock and do not
anticipate doing so in the foreseeable future.
We have paid no cash dividends on our common stock to date and it is not
anticipated that any cash dividends will be paid to holders of our common stock
in the foreseeable future. While our dividend policy will be based on our
operating results and capital needs of the business, it is anticipated that any
earnings will be retained to finance our future expansion. As an investor, you
should take note of the fact that a lack of a dividend can further affect the
market value of our stock, and could significantly affect the value of any
investment in the Company.
Compliance with changing regulation of corporate governance and public
disclosure will result in additional expenses.
Changing laws, regulations and standards relating to corporate governance and
public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC
regulations, have created uncertainty for public companies and significantly
increased the costs and risks associated with accessing the public markets and
public reporting. Management of the Company will need to invest significant
management time and financial resources to comply with both existing and
evolving standards for public companies, which will lead to increased general
and administrative expenses and a diversion of management time and attention
from revenue generating activities to compliance activities.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
We lease our corporate office space, approximately 250 square feet, at 80 Wall
Street, Suite 818, New York, NY 10005, under a twelve-month sublease, which
expires on July 31, 2009. The rent is $650 per month. If the Company requires
additional space, the Company believes that it will be able to obtain such
space on commercially reasonable terms.
Item 3. LEGAL PROCEEDINGS
We are not a party to any material legal proceedings, nor is our property the
subject of any material legal proceeding.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held no shareholders meeting in the fourth quarter of our fiscal year.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASE OF EQUITY SECURITIES
Market Information
The Company's common stock has been quoted on the OTC Bulletin Board under the
symbol "COFI.OB" since December 27, 2005. There is not an active trading market
for our shares. The following table sets forth the range of quarterly high and
low sales prices of the common stock as reported on the OTC Bulletin Board for
the periods indicated:
Price Information
Financial Quarter Ended High Low
----------------------------- ---------- ----------
March 31, 2007 0.25 0.20
June 30, 2007 0.25 0.20
September 30, 200 0.27 0.22
December 31, 2007 0.22 0.12
March 31, 2008 0.13 0.11
June 30, 2008 0.14 0.12
September 30, 200 0.09 0.08
December 31, 2008 0.09 0.03
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The quotations do not reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
Record Holders
As of December 31, 2008, the Company had approximately 58 holders of record of
its common stock.
Dividends
The Company has not declared or paid any cash dividends on its common stock nor
does the Company anticipate paying any in the foreseeable future. The Company
expects to retain any future earnings to finance its operations and expansion.
The payment of cash dividends in the future will be at the discretion of our
Board of Directors and will depend upon the Company's earnings levels, capital
requirements, any restrictive loan covenants and other factors the Board
considers relevant.
Purchases of Our Equity Securities
The Company did not repurchase any shares of its common stock during the years
ended December 31, 2008 and 2007.
Securities authorized for issuance under equity compensation plans
We do not have any equity compensation plans.
Transfer Agent
Our transfer agent is Island Stock Transfer of St. Petersburg, Florida.
Item 6. SELECTED FINANCIAL DATA
A smaller reporting company is not required to provide the information in this
Item.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Some of the information in this Annual Report on Form 10-K contains forward-
looking statements that involve substantial risks and uncertainties. You can
identify these statements by forward-looking words such as "may," "will,"
"expect," "anticipate," "believe," "estimate" and "continue," or similar words.
You should read statements that contain these words carefully because they:
o discuss our future expectations;
o contain projections of our future results of operations or of our
financial condition; and
o state other "forward-looking" information.
We believe it is important to communicate our expectations. However, there may
be events in the future that we are not able to accurately predict or over which
we have no control. Our actual results and the timing of certain events could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth under "Risk Factors,"
"Business" and elsewhere in this Annual Report. See "Risk Factors."
Plan of Operation
In January 2008, the Company ceased its project financing business. In February
2008, the Company entered into a joint venture agreement with Global Select Ltd
in Hong Kong. Under the agreement, a joint venture company, Moderation Limited
("JVC"), has been set up in Hong Kong, whereby, on January 12, 2009, the Company
contributed $16 million Hong Kong dollars, approximately $2.05 million, in
exchange for 51.6% of the equity interest in the JVC, and Global Select and its
partner together contributed $15 million Hong Kong dollars, approximately $1.92
million, for 48.4% of the equity interest in the JVC. The purpose of the joint
venture is to engage in a business of natural resources products, primarily
graphite at this time, in China.
Recently the Chinese government approved Moderation's application for setting
up a wholly owned subsidiary "Liaoning Sinorth Resources Co., Ltd." in Yingkou,
Liaoning province, China. The main business of Liaoning Sinorth Resources Co.,
Ltd. is producing, processing and sale of mineral products, primarily graphite,
in China.
Results of Operations for the Years Ended December 31, 2008 and 2007
Revenues
For the year ended December 31, 2008, the Company had no revenue, because no
income generating activities were conducted. In fiscal 2007, the Company earned
service fee of $21,000 from its project financing business.
Operating expenses
Operating expenses for the years ended December 31, 2008 and 2007 were $54,473
and $52,340, respectively. The two biggest expense items of the Company for
fiscal 2008 and 2007 were salary expense and professional fees. In 2008, the
Company's salary expenses were $24,000, or approximately 44.1%, and professional
fees $18,544, or approximately 34.0%.
Other income (expense)
Our total other income (expense) for the year ended December 31, 2008 was
($15,655), which consists of $11,178 of interest income and $26,833 of interest
expenses in connection with the borrowings from a related party. We received
such interest income was because the company we provided the project financing
did not return our advance until late March 2008. We had interest expense of
$6,875 for the prior year.
Net loss
For the year ended December 31, 2008, we had a net loss of $70,128, or $0.01 per
share, as compared to a net loss of $38,196, or $0.01 per share, for the
previous year.
Liquidity and Capital Resources
The Company historically met its capital requirements through the issuance of
stock and borrowings from its executive officers and directors. In 2007, the
Company entered into three promissory notes with Dicky Cheung, the Company's
President and CEO, for an aggregate principal amount of $620,000 with interest
rate at 5% per year. In April 2008, all notes mentioned above were extended
under the same terms and conditions. In December 2008, as a part of a private
placement as set out below, the notes ($620,000) with their accrued interests
($33,708) were converted into the equity shares of the Company at $0.03 per
share.
At December 31, 2008, the Company had cash balance of $2,924,405. For the year
ended December 31, 2008, the Company's operating activities used $76,747 of net
cash, mainly due to the Company's net loss of $70,128. For the year, the
Company's investing activities provided $599,751 of net cash, largely from
return of project advances. For the same period, the Company's financing
activities provided net cash of $2,346,292 from issuance of common stock at
$0.03 per share. In addition, $620,000 of loan proceeds received from a related
party in 2007, and related accrued interest of $33,708 were converted into
shares of common stock. Combined the private placement totaled $3,000,000.
On January 12, 2009, the Company remitted $2.8 million to set up a 51.6% owned
subsidiary, Moderation Limited. Of the $2.8 remitted, $2,063,185 ($16 million
Hong Kong dollars) were the Company's capital investment to Moderation for 51.6%
of the equity interest in Moderation, the remaining $736,815 was provided by
the Company to Moderation as temporary working capital.
In the opinion of management, available funds will satisfy the Company's capital
requirements for the next twelve months. However, the Company may need to raise
additional funds to implement its business plan. The Company may raise funds
through private placements, either in equity offerings, or interest bearing
borrowings. There is no guarantee that the Company will be able to raise
additional funds through offerings or other sources. If the Company is unable
to raise funds, the Company's ability to continue with operations will be
materially hindered.
Off-Balance Sheet Arrangements
None.
Going Concern
The Company's ability to continue as a going concern remains dependent upon
successful operation under our business plan, obtaining additional capital and
financing, and generating positive cash flow from operations. This is because
the Company, due to its financial condition, may have to seek additional
capital either through debt or equity offerings to meet its cash needs. The
Company has no significant revenue and has little cash. The level of current
operations does not sustain the Company's expenses and the Company has no
commitments for obtaining additional capital. These factors, among others, raise
substantial doubt about its ability to continue as a going concern.
Critical Accounting Policies
Our discussion and analysis of results of operations and financial condition are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. We
evaluate our estimates on an ongoing basis, including those related to
provisions for uncollectible accounts receivable, inventories, valuation of
intangible assets and contingencies and litigation. We base our estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
The accounting policies that we follow are set forth in Note 2 to our financial
statements as included in this report. These accounting policies conform to
accounting principles generally accepted in the United States, and have been
consistently applied in the preparation of the financial statements.
Recently Issued Accounting Standards
In December 2007, the FASN+B issued SFAS No. 141(R), Business Combinations, and
SFAS No. 160, Accounting and Reporting of Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51. SFAS No. 141(R)
is required to be adopted concurrently with SFAS No. 160. These standards are
effective for fiscal years beginning after December 15, 2008 and will apply
prospectively to business combinations completed on or after that date. Early
adoption is prohibited. SFAS 141(R) requires changes in accounting for
acquisitions and SFAS 160 will change the accounting for minority interests.
The Company is evaluating the impact of these statements on its financial
statements.
Item 7A. QUANTIATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
A smaller reporting company is not required to provide the information in this
Item.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Stockholders of
Credit One Financial, Inc.
We have audited the accompanying balance sheet of Credit One Financial, Inc., a
development stage company, as of December 31, 2008 and 2007, and the related
statements of operations, stockholders' equity and cash flows for the years then
ended and for the period from inception to December 31, 2008. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Credit One Financial, Inc. as
of December 31, 2008 and 2007, and the results of its operations and its cash
flows for the years then ended and for the period from inception to December 31,
2008 in conformity with accounting principles generally accepted in the United
States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has suffered recurring losses from operations
and has no commitments for funding future operations. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 7. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Berman Hopkins Wright & Laham, CPAs and Associates, LLP
- ------------------------------------------------------------------
Berman Hopkins Wright & Laham, CPAs and Associates, LLP
Winter Park, Florida
March 25, 2009
CREDIT ONE FINANCIAL, INC.
(A Development Stage Company)
Balance Sheet
December 31, 2008 and 2007
ASSETS
2008 2007
---------------- ---------------
<s> <c> <c>
Current Assets:
Cash and cash equivalents......................... $ 2,924,405 $ 21,401
---------------- ---------------
Total Current Assets......................... 2,924,405 21,401
Property, Plant & Equipment:
Furniture and fixtures............................ 1,299 1,050
Less: Accumulated depreciation................... (273) (17)
---------------- ---------------
Total Property, Plant & Equipment............ 1,026 1,033
---------------- ---------------
Other Assets:
Project advances................................. - 600,000
---------------- ---------------
Total Other Assets.......................... - 600,000
Total Assets..................................... $ 2,925,431 $ 622,434
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term loans payable......................... $ - $ 620,000
Accrued interest payable........................ - 6,875
---------------- ---------------
Total Current Liabilities................... - 626,875
Stockholders' Equity:
Common stock: par value $0.001; 110,000,000 shares
authorized; 107,781,150 and 7,781,150 shares issued and
outstanding at December 31, 2008 and 2007, respectively 107,781 7,781
Additional paid-in capital....................... 3,087,678 187,678
Deficit accumulated during the development stage. (270,028) (199,900)
---------------- ---------------
Total stockholders' equity.................. 2,925,431 (4,441)
---------------- ---------------
Total Liabilities and Stockholders' Equity....... $ 2,925,431 $ 622,434
================ ===============
See accompanying notes to financial statements
CREDIT ONE FINANCIAL, INC.
(A Development Stage Company)
Statements of Operations
For the Years ended December 31, 2008 and 2007
and Cumulative from Inception
Cumulative
Since Sept. 24, 1999
2008 2007 (Inception) to 12/31/2008
------------- ------------- ------------------------
<s> <c> <c> <c>
Revenue:
Service fees................................ $ - $ 21,000 $ 21,000
Commissions................................. - - 11,397
Consulting.................................. - - 4,881
------------- -------------- ----------------
Total revenues......................... - 21,000 37,278
Expenses:
Consulting expense.......................... - - 6,892
Commission expense.......................... - - 6,962
Salary expense.............................. 24,000 10,895 76,895
General and administrative expense.......... 30,473 41,445 185,141
------------- -------------- ----------------
Total expenses......................... 54,473 52,340 275,890
------------- -------------- ----------------
Loss from operations........................ (54,473) (31,340) (238,612)
------------- -------------- ----------------
Other income (expense):
Interest income............................. 11,178 19 11,434
Interest expense............................ (26,833) (6,875) (42,850)
------------- -------------- ----------------
Total other income (expense)........... (15,655) (6,856) (31,416)
------------- -------------- ----------------
Net loss before taxes....................... (70,128) (38,196) (270,028)
Income tax provision........................ - - -
------------- ------------- ----------------
Net loss.................................... $ (70,128) $ (38,196) $ (270,028)
============= ============= ================
Basic and diluted loss per share............ $ (0.01) $ (0.01)
============= =============
Weighted average common shares outstanding.. 10,520,876 7,781,150
============= =============
See accompanying notes to financial statements
CREDIT ONE FINANCIAL, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Cumulative from Inception, September 1999, Through December 31, 2008
Defit
Accumulated
Additional Stock During The Stock-
Common Stock Paid-In Subscription Development holders'
Shares Amount Capital Receivable Stage Equity
--------------- ----------- ------------ ----------------- ------------- -----------
<s> <c> <c> <c> <c> <c> <c>
Founders shares purchased for cash @
$.00222/share November 29, 2001 4,500,000 $ 4,500 $ 5,500 - - $ 10,000
Net loss for the year
ended Dec. 31, 2001 - - - - ($ 9,786) (9,786)
-------------- ----------- ------------ -------------- ------------ -----------
Balance December 31, 2001 4,500,000 4,500 5,500 - (9,786) 214
Officer's loan contributed to capital - - 700 - - 700
Shares sold for cash @ $.04/share on
October 10, 2002 12,000 12 468 - - 480
October 15, 2002 6,000 6 234 - - 240
October 23, 2002 6,000 6 234 - - 240
November 9, 2002 12,000 12 468 - - 480
December 29, 2002 52,500 53 2,048 - - 2,101
Net loss for the year ended Dec 31, 2002 - - - - (1,244) (1,244)
------------- ----------- ------------ ------------- ------------- -----------
Balance December 31, 2002 4,588,500 4,589 9,652 - (11,030) 3,211
Shares sold for cash @ $.04/share on
January 24, 2003 15,000 15 585 - - 600
March 7, 2003 12,000 12 468 - - 480
March 26, 2003 15,000 15 585 - - 600
April 25, 2003 9,000 9 351 - - 360
April 26, 2003 6,000 6 234 - - 240
April 28, 2003 6,000 6 234 - - 240
April 29, 2003 9,000 9 351 - - 360
May 5, 2003 6,000 6 234 - - 240
May 7, 2003 26,700 27 1,041 - - 1,068
May 12, 2003 6,000 6 234 - - 240
June 4, 2003 4,200 4 164 - - 168
September 24, 2003 92,000 92 3,588 - - 3,680
November 7, 2003 50,250 50 1,960 - - 2,010
November 28, 2003 42,000 42 1,638 - - 1,680
Non-cash expenses contributed by officers - - 379 - - 379
Legal fees paid by issuing shares valued
at $.04/share on May 27, 2003 62,500 62 2,438 - - 2,500
Officer's shares redeemed, by reducing
Note payable due from officer valued
at $.04/share on December 31, 2003 (125,000) (125) (4,876) - - (5,001)
Net loss for the year
ended December 31, 2003 - - - - (11,624) (11,624)
-------------- ------------- ----------- ------------- -------------- ----------
Balance December 31, 2003 4,825,150 4,825 19,260 - (22,654) 1,431
Officer's loans contributed to capital - - 7,400 - - 7,400
Non-cash expenses contributed by officers - - 300 - - 300
Shares sold for cash @ $.04/share on
February 11, 2004 6,000 6 234 - - 240
June 30, 2004 50,000 50 1,950 - - 2,000
Non-cash expenses paid by issuing
Shares valued at $.04/share on
February 4, 2004 100,000 100 3,900 - - 4,000
Net loss for the year
ended December 31, 2004 - - - - (14,638) (14,638)
-------------- ------------- ------------ ------------- ---------------- -----------
Balance December 31, 2004 4,981,150 4,981 33,044 - (37,292) 733
Shares sold to officers by subscription
at $.04/share on May 30, 2005 1,000,000 1,000 39,000 (40,000) - -
Partial payment of stock subscription
Received by canceling Notes payable
to officers - - - 16,992 - 16,992
Non-cash expenses contributed by officers - - 300 - - 300
Net loss for the year ended December 31, 2005 - - - - (16,759) (16,759)
--------------- ------------- ------------ -------------- --------------- -----------
Balance December 31, 2005 5,981,150 5,981 72,344 (23,008) (54,051) 1,266
Payment of stock subscription receivable - - - 23,008 - 23,008
Non-cash expense contributed by officers - - 75 - - 75
Shares issued to officers for cash at
$.05/share on September 5, 2006 1,800,000 1,800 88,214 - - 90,014
Net Loss for the year ended December 31, 2006 - - - - (107,653) (107,653)
--------------- ------------- ------------- -------------- ----------------- ----------
Balance at December 31, 2006 7,781,150 7,781 160,633 - (161,704) 6,710
Cash capital contribution
by shareholders - - 27,045 - - 27,045
Net Loss for the year ended December 31, 2007 - - - - (38,196) (38,196)
-------------- ------------- ------------- -------------- ------------------ ----------
Balance at December 31, 2007 7,781,150 7,781 187,678 - (199,900) (4,441)
Shares issued on conversion of
loans payable and accrued interest
at $.03/share to a related party on
Dec. 22, 2008 21,790,267 21,790 631,918 - - 653,708
Shares issued for cash at
$.03/share on Dec. 22, 2008 78,209,733 78,210 2,268,082 - - 2,346,292
Net loss for the year ended
December 31, 2008 - - - - (70,128) (70,128)
=============== ============= ============= =============== ================= =========
Balance at December 31, 2008 107,781,150 $ 107,781 $ 3,087,678 - $ (270,028)$2,925,431
See accompanying notes to financial statements
CREDIT ONE FINANCIAL, INC.
(A Development Stage Company)
Statements of Cash Flows
For the Years Ended December 31, 2008 and 2007
and Cumulative from Inception
Cumulative
From Inception
2008 2007 To 12/31/2008
---------------- --------------- ----------------
<s> <c> <c> <c>
Cash Flows from Operating Activities:
Net loss................................................ $ (70,128) $ (38,196) $ (270,028)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation.......................................... 256 17 273
Non-cash expenses contributed......................... - - 1,054
Non-cash consulting and legal fees paid with common stock - - 6,500
Non-cash interest expense paid with common stock to a related party 26,833 - 33,708
Changes in operating assets and liabilities:
Increase (decrease) in accrued interest payable....... - 6,875 -
Increase (decrease) in security deposit............... - 550 -
Increase (decrease) in accounts payable............... - (9,273) -
--------------- ---------------- ---------------
Net cash used in operating activities.............. (43,039) (40,027) (228,493)
--------------- ---------------- ---------------
Cash Flows from Investing Activities:
Purchase of property, plant and equipment............... (249) (1,050) (1,299)
Project advances........................................ 600,000 (600,000) -
-------------- ---------------- ---------------
Net cash used in investing activities.............. 599,751 (601,050) (1,299)
-------------- ---------------- ---------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock.................. 2,346,292 - 2,499,052
Loan from a related party............................... - 620,000 620,000
Additional capital contributed by shareholders.......... - 27,045 35,145
-------------- ---------------- ---------------
Net cash provided by financing activities.......... 2,346,292 647,045 3,154,197
-------------- ---------------- ---------------
Increase in cash and cash equivalents................... 2,903,004 5,968 2,924,405
Cash and cash equivalents, beginning of period.......... 21,401 15,433 -
-------------- ---------------- ---------------
Cash and cash equivalents, end of period................ $ 2,924,405 $ 21,401 $ 2,924,405
============== ================ ===============
Supplemental disclosures:
Interest paid in cash............................... $ - $ - $ 9,143
=============== ================= ==============
Income taxes paid in cash........................... $ - $ - $ -
=============== ================= ==============
Non-cash investing and financing transactions:
Common stock issued on conversion of loans payable
and accrued interest to a related party............. $ 653,708 $ - $ 653,708
=============== ================= ==============
See accompanying notes to financial statements
CREDIT ONE FINANCIAL, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2008
NOTE 1 - NATURE OF BUSINESS
Credit One Financial, Inc. (the "Company") was incorporated in the State of
Florida on September 24, 1999. The Company was engaged in market research
regarding the cost and availability of non-performing credit card debt
portfolios. It was also engaged in research regarding the current market price
for re-performing portfolios as well as the market prices offered for portfolios
deemed non-collectable at the time of sale.
After the change in control in July 2007, the Company tried to engage some
businesses of small and medium sized companies that have good and feasible
business plans, but lacking working capital to implement their business plans.
On February 27, 2008, the Company entered into a Joint Venture Agreement with
Global Select Limited in Hong Kong. Under the agreement, a joint venture
company, Moderation Limited, has been set up in Hong Kong, whereby, on January
12, 2009, the Company contributed $16 million Hong Kong dollars, approximately
$2.05 million, in exchange for 51.6% of the equity interest in Moderation, and
Global Select and its partner together contributed $15 million Hong Kong
dollars, approximately $1.92 million, for 48.4% of the equity interest in
Moderation. The purpose of the joint venture is to engage in a business of
natural resources products, primarily graphite at this time, in China.
Recently, the Chinese government has approved Moderation's application for
setting up a wholly owned subsidiary "Liaoning Sinorth Resources Co., Ltd." in
Yingkou, Liaoning province, China. The main business of Liaoning Sinorth
Resources Co., Ltd. is producing, processing and sale of mineral products,
primarily graphite, in China.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Provision for Income Taxes
Deferred income taxes result from temporary differences between the basis of
assets and liabilities recognized for differences between the financial
statement and tax basis thereon, and for the expected future tax benefits to be
derived from net operating losses and tax credit carry forwards. The Company has
$270,028 in net operating losses as of December 31, 2008, and a valuation
allowance equal to the tax benefit of the accumulated net operating losses has
been established since it is uncertain that future taxable income will be
realized during the applicable carry-forward periods. The net operating loss
carry-forwards may be limited under the change of control provisions of the
Internal Revenue Code, Section 382.
The Company applies the provisions of FASB, Interpretation No. 48, or FIN 48,
"Accounting for Uncertainty in Income Taxes - an Interpretation of FASB
Statement 109." FIN 48 prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to
be recognized, a tax position must be more likely than not to be sustained upon
examination by taxing authorities. The amount recognized is measured as the
largest amount of benefit that has a greater than 50% likelihood of being
realized upon ultimate settlement.
When applicable, the Company will include interest and penalties related to
uncertain tax positions in income tax expense.
Use of estimates in the preparation of the financial statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Financial Instruments
The fair values of all financial instruments approximate their carrying values.
Cash and Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.
Concentrations of Credit Risk
Financial instruments which potentially expose the Company to concentrations of
credit risk consist principally of cash which is insured by the FDIC up to
balances of $250,000. The Company maintains its cash in a bank deposit account
which, at times, may exceed federally insured limits. At December 31, 2008,
Company deposits exceeded FDIC insured limits by $2,674,405. The Company has
not experienced any losses in such accounts and believes it is not exposed to
any significant credit risk on cash and cash equivalents.
Foreign Currency
The functional and reporting currency of the Company is the US dollar. All
transactions included in the financial statements were transacted in US
dollars.
Impairment of Long Lived Assets
Management reviews long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison for the carrying amount of an asset to future cash flows expected to
be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount exceeds the fair value of the assets which considers the discounted
future net cash flows.
Furniture and Fixtures
Acquisitions of furniture and equipment are recorded at cost. Improvements and
replacements of furniture and equipment are capitalized. Maintenance and repairs
that do not improve or extend the lives of furniture and equipment are charged
to expense as incurred. Depreciation is computed using the straight-line method
over the estimated useful life of each class of depreciable assets.
Earnings Per Share
Earnings Per Share is computed by dividing net income available to common
stockholders by the weighted average number of common stock shares outstanding
during the year. Diluted EPS is computed by dividing net income available to
common stockholders by the weighted average number of common stock shares
outstanding during the year plus potential dilutive instruments such as stock
options and warrants. The effect of stock options on diluted EPS is determined
through the application of the treasury stock method, whereby proceeds received
by the Company based on assumed exercises are hypothetically used to repurchase
the Company's common stock at the average market price during the period. The
Company has no stock options, warrants or other potentially dilutive instruments
outstanding at December 31, 2008.
Recent Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, or
SFAS 141(R). SFAS 141(R) establishes principles and requirements for how the
acquirer of a business recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree. SFAS 141(R) also provides guidance for recognizing
and measuring the goodwill acquired in the business combination and determines
what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. The
provisions of SFAS 141(R) are effective for financial statements issued for
fiscal years beginning after December 15, 2008. The Company is currently
assessing the financial impact of SFAS 141(R) on its financial statements.
In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements - An Amendment of ARB No. 51, or SFAS 160.
SFAS 160 amends Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," or ARB 51, to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. This statement also amends certain of ARB 51's consolidation
procedures for consistency with the requirements of SFAS 141(R). In addition,
SFAS 160 also includes expanded disclosure requirements regarding the interests
of the parent and its noncontrolling interest. The provisions of SFAS 160 are
effective for fiscal years beginning March 1, 2009. Earlier adoption is
prohibited. The Company is currently assessing the financial impact of SFAS
160 on its financial statements.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161 amends and
expands the disclosure requirements of FASB Statement 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133") to require
qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of and gains and losses on
derivative instruments, and disclosures about credit risk-related contingent
features in derivative agreements. The Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008. Early application is encouraged. The Company is currently assessing
the financial impact of SFAS 161 on its financial statements.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles." SFAS No. 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP. SFAS No. 162 is effective 60 days following
the Securities and Exchange Commission's approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present
Fairly in Conformity with Generally Accepted Accounting Principles." The
Company is currently evaluating the potential impact of the adoption of SFAS
No. 162.
In May 2008, the FASB issued FASB FSP APB 14-1, "Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)". FSP APB 14-1 requires the issuer of certain convertible debt
instruments that may be settled in cash (or other assets) on conversion to
separately account for the liability (debt) and equity (conversion option)
components of the instrument in a manner that reflects the issuer's
non-convertible debt borrowing rate. Such separate accounting also requires
accretion of the resulting discount on the liability component of the debt to
result in interest expense equal to an issuer's nonconvertible debt borrowing
rate. In addition, the FSP provides for certain changes related to the
measurement and accounting related to derecognition, modification or exchange.
FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on
a retroactive basis. The impact of this standard cannot be determined until
the transactions occur.
Note 3 - Project Advances
In 2007, the Company entered into two project agreements with Tinloon Trading
Company, a Hong Kong corporation, to advance it an aggregate of $600,000. The
proceeds were used exclusively by Tin Loon Trading as working capital for its
graphite trading business. In consideration for the advances, the Company
received the right to earn a certain percentage of the profit each quarter of
Tin Loon Trading or a minimum fee. The Company earned $21,000 from the
agreements during 2007. The agreements allow for the return of the advances
and in March 2008 the Company received the $600,000 along with accrued
interest.
Note 4 - Issuance of Shares
On September 22, 2008, the Company entered into a Securities Purchase Agreement
with sixteen investors in a private placement. Pursuant to the agreement, the
Company issued and investors purchased an aggregate of 100,000,000 shares of the
Company's common stock, par value $0.001 per share, at a price of $0.03 per
share, for an aggregate consideration of $3,000,000 in cash. Net cash proceeds
of $2,346,292 were received in December 2008.
Note 5 - Transactions with Related Parties
On July 25, 2007, the Company issued to Dicky Cheung, the President and CEO of
the Company, a promissory note, in the principal amount of $20,000 in
consideration for a $20,000 cash loan made by Mr. Cheung to the Company.
Interest on the note accrues at the rate of 5% per year. Pursuant to the terms
of the note, the entire principal sum and all accrued interest was due on or
before January 30, 2008.
On September 25, 2007, the Company issued to Dicky Cheung, the President and
CEO of the Company, a promissory note, in the principal amount of $100,000 in
consideration for a $100,000 cash loan made by Mr. Cheung to the Company.
Interest on the note accrues at the rate of 5% per year. Pursuant to the terms
of the note, the entire principal sum and all accrued interest was due on or
before March 25, 2008.
On October 5, 2007, the Company issued to Dicky Cheung, the President and CEO
of the Company, a promissory note, in the principal amount of $500,000 in
consideration for a $500,000 cash loan made by Mr. Cheung to the Company.
Interest on the note accrues at the rate of 5% per year. Pursuant to the terms
of the note, the entire principal sum and all accrued interest was due on or
before April 4, 2008.
On April 2, 2008, the above three notes were extended under the same terms and
conditions. On December 22, 2008, as a part of the transaction described in
Note 4 above, all three notes and accrued interest in a total amount of $653,708
were converted into the equity shares of the Company at $0.03 per share. At the
same time, Mr. Cheung purchased additional 9 million shares of the Company's
common stock at a purchase of $0.03 per share.
Note 6 - Capital Stock and Contributed Capital
On March 30, 2005, the Company amended its Articles of Incorporation, to
authorize the maximum number of shares to have outstanding at any one time to
be 110,000,000 shares of common stock having a par value of $0.001 per share.
As of December 31, 2008, there were 107,781,150 shares of the Company's common
stock issued and outstanding.
Note 7 - Going Concern
The nature of the Company's financial status makes the Company lack the
characteristics of a going concern. This is because the Company, due to its
financial condition, may have to seek loans or the sale of its securities to
raise cash to meet its cash needs. The level of current operations does not
sustain the Company's expenses and the Company has no commitments for obtaining
additional capital. These factors, among others, raise substantial doubt about
its ability to continue as a going concern.
Note 8 - Subsequent Event
On January 12, 2009, the Company remitted $2.8 million to its joint venture
company, Moderation Limited ("Moderation"). Of the $2.8 million remitted,
$2,063,185 ($16 million Hong Kong dollars) were the Company's capital investment
to Moderation for 51.6% of the equity interest in Moderation, the remaining
$736,815 was provided by the Company to Moderation as temporary working capital.
The Chinese government has approved Moderation's application for setting up a
wholly owned subsidiary "Liaoning Sinorth Resources Co., Ltd." in Yingkou,
Liaoning province, China. The main business of Liaoning Sinorth Resources Co.,
Ltd. is producing, processing and sale of mineral products, primarily graphite,
in China.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING AND
FINANCIAL DISCLOSURE
We did not have any disagreements on accounting and financial disclosures with
our accounting firm.
Item 9A(T). CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our principal executive
officer and principal financial officer, we evaluated our disclosure controls
and procedures, as such term is defined under Rule 13a-15(e) promulgated under
the Securities Exchange Act of 1934, as amended (the Exchange Act), and
concluded that our disclosure controls and procedures were effective as of
December 31, 2008 to ensure that information required to be disclosed in reports
we file or submit under the Exchange Act is recorded, processed, and summarized
and reported within the time periods specified in SEC rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the Act is accumulated and
communicated to the issuer's management, including its principal executive and
principal financial officers, or persons performing similar functions as
appropriate to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) and 15d-(f) under
the Exchange Act. Our internal control over financial reporting are designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of consolidated financial statements for external purposes
in accordance with U. S. generally accepted accounting principles. Our internal
control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our assets;
(ii) provide reasonable assurance that transactions are recorded as necessary
to permit the preparation of our consolidated financial statements in
accordance with U. S. generally accepted accounting principles, and that our
receipts and expenditures are being made only in accordance with authorizations
of our management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the consolidated financial statements. Management assessed
the effectiveness of the Company's internal control over financial reporting as
of December 31, 2008. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control-Integrated Framework. Management has concluded
that our internal control over financial reporting was effective as of
December 31, 2008.
Inherent Limitations Over Internal Controls
Internal control over financial reporting cannot provide absolute assurance of
achieving financial reporting objectives because of its inherent limitations,
including the possibility of human error and circumvention by collusion or
overriding of controls. Accordingly, even an effective internal control system
may not prevent or detect material misstatements on a timely basis. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions
or that the degree of compliance with the policies or procedures may
deteriorate.
Changes in Internal Control Over Financial Reporting.
We have made no change in our internal control over financial reporting during
the last fiscal quarter that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
Attestation Report of the Registered Public Accounting Firm
This annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our independent
registered public accounting firm pursuant to temporary rules of the SEC that
permit us to provide only management's report in this annual report on Form 10-K
ffected, or is reasonably likely to materially affect, our internal control over
financial reporting.
Item 9B. OTHER INFORMATION
None.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The members of our Board of Directors serve for one year terms and are elected
at the next annual meeting of stockholders, or until their successors have been
elected. The officers serve at the pleasure of the board of directors.
Directors and Officers
The following table sets forth the name, age, position and term of directorship,
as applicable, of the Company's director and executive officer as of the date
hereof.
Name Age Position
- ------------- ----- --------------------------------------------------------
Dicky Cheung 37 President, Chief Executive Officer, Chief Financial
Officer, Secretary and Director
- -----------------------------------------------------------------------------
Mr. Dicky Cheung has been the Company's President, CEO, CFO, Secretary and the
sole Director since July 24, 2007. Mr. Cheung has been President of Companhhia
Internacional Tek Tat Limitada, a privately held company located in Macau,
since its formation in 2007. Companhia Internacional Tek Tat Limitada is a
controlling shareholder of the Company. Since 2002, Mr. Cheung has been a
self-employed stock and bond investor.
Mr. Cheung has never held any position in a reporting company.
Significant Employees
There are no significant employees other than our executive officer.
Family Relationships
Not applicable.
Involvement in Certain Legal Proceedings
No director or executive officer has been a director or executive officer of any
business which has filed a bankruptcy petition or had a bankruptcy petition
filed against it. No director or executive officer has been convicted of a
criminal offense within the past five years or is the subject of a pending
criminal proceeding. No director or executive officer has been the subject of
any order, judgment or decree of any court permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in any type of
business, securities or banking activities. No director or officer has been
found by a court to have violated a federal or state securities or commodities
law.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
executive officers and directors, and persons who beneficially own more than 10%
of our common stock, to file initial reports of ownership and reports of changes
in ownership with the SEC. Executive officers, directors and greater than 10%
beneficial owners are required by SEC regulations to furnish us with copies of
all Section 16(a) forms they file. Based upon a review of the copies of such
forms furnished to us and written representations from our executive officers
and directors, we believe that, as of the date of this filing, Mr. Dicky Cheung
has not filed his "Initial Statement of Beneficial Ownership of Securities"
on Form 3.
Election of Directors and Officers
Directors are elected to serve until the next annual meeting of stockholders and
until their successors have been elected and qualified. Officers are appointed
to serve until the meeting of the Board of Directors following the next annual
meeting of stockholders and until their successors have been elected and
qualified. Presently, Directors are not compensated for their services.
Audit Committee and Financial Expert
We do not have an Audit Committee. Our sole director performs the same
functions of an Audit Committee, such as recommending a firm of independent
certified public accountants to audit the annual financial statements; reviewing
the independent auditor independence, the financial statements and their audit
report; and reviewing management's administration of the system of internal
accounting controls. We do not currently have a written audit committee charter
or similar document.
We have no financial expert. We believe the cost related to retaining a
financial expert at this time is prohibitive. Further, because of our start-up
operations, we believe the services of a financial expert are not warranted.
Code of Ethics
A code of ethics relates to written standards that are reasonably designed to
deter wrongdoing and to promote:
o Honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional relationships;
o Full, fair, accurate, timely and understandable disclosure in reports and
documents that are filed with, or submitted to, the Commission and in other
public communications made by an issuer;
o Compliance with applicable governmental laws, rules and regulations;
o The prompt internal reporting of violations of the code to an appropriate
person or persons identified in the code; and
o Accountability for adherence to the code.
Our board of directors has not adopted a code of ethics but plans to do so in
the future. We intend to formally adopt a written corporate code of ethics that
applies to our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions in the near future.
Nominating and Compensation Committees
We do not have standing Nominating or Compensation committees. Our Board of
Directors performs the functions that would otherwise be delegated to such
committees. We have elected not to have a Nominating or Compensation Committee
at this time in that we are a development stage company with limited operations
and resources. We anticipate that we will seek qualified independent directors
to serve on the Board and ultimately form standing Audit, Nominating and
Compensation committees.
Review, approval and ratification of related party transactions
Given our small size and limited financial resources, we had not adopted formal
policies and procedures for the review, approval or ratification of
transactions, such as those described above, with its executive officers,
directors and significant stockholders. Yet, all such transactions were approved
and ratified by our sole director. We intend to establish such policies and
procedures so that such transactions will, on a going-forward basis, be subject
to the review, approval or ratification of our board of directors, or an
appropriate committee thereof.
Indebtedness of Executive Officers and Directors
No executive officer, director or any member of these individuals' immediate
families or any corporation or organization with whom any of these individuals
is an affiliate is or has been indebted to us.
Options/SAR Grants and Fiscal Year End Option Exercises and Values
We have not had a stock option plan or other similar incentive compensation plan
for officers, directors and employees, and no stock options, restricted stock or
SAR grants were granted or were outstanding at any time.
Item 11. EXECUTIVE COMPENSATION
The following tables set forth the compensation of the Company's executive
officers during the last two fiscal years:
Summary Compensation Table
Summary Compensation Table
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Non- Nonquali-
Equity fied
Incentive Deferred All
Name and Stock Option Plan Compensation Other
Principal Salary Bonus Awards Awards Compensation Earnings Compensation Total
Position Year ($) ($) ($) ($) ($) ($) ($) ($)
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Dicky Cheung 2008 12,000 - - - - - - 12,000
CEO and 2007 6,000 - - - - - - 6,000
President
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At the end of the last completed fiscal year, there were no "most highly
compensated executive officers" as that term is defined in Item 402(a)(2) of
Regulation S-K and there were no additional individuals for whom disclosure
would have been made in this table but for the fact that the individual was not
serving as our executive officer.
Outstanding Equity Awards at Fiscal Year-End Table
The Company does not have any equity incentive plans. No option or stock awards
have been granted to any of our executive officers or directors since our
inception. Pursuant to Item 402(a)(4) of Regulation S-K, the Outstanding Equity
Awards at Fiscal Year-End Table is omitted because there has been no
compensation awarded to, earned by, or paid to any of the named executive
officers or directors required to be reported in that table.
Compensation of Directors
The members of the Board of Directors are not compensated by us for their
service as members of the Board of Directors, but may be reimbursed for
reasonable expenses incurred in connection with attendance of meetings of the
board of directors. There are no arrangements pursuant to which directors are
or will be compensated in the future for any services provided as a director.
Employment Contracts, Termination of Employment, Change-in-Control Arrangements
The Company has not entered employment agreements with its executive officers.
There are no compensatory plans or arrangements, including payments to be
received from us, with respect to a named executive officer, if such plan or
arrangement would result from the resignation, retirement or any other
termination of such executive officer's employment with us or form a change-in-
control of us or a change in the named executive officer's responsibilities
following a change-in-control.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of December 31, 2008 each person who
is known by the Company to own beneficially more than 5% of the Company's
outstanding common stock. The Company has only one class of securities
outstanding. Except as otherwise indicated, the Company believes that the
beneficial owners of the common stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares, subject to community property laws where applicable.
Name and Address of Amount & Nature of
Title of Class Beneficial Owner Beneficial Owner Percent of Class
- --------------- -------------------------- ---------------------- ----------------
<s> <c> <c> <c>
Common Stock Dicky Cheung 34,672,705 shares 32.2%
80 Wall Street, Suite 818
New York, NY 10005
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Security Ownership of Management
The following table sets forth certain information, as of December 31, 2008, as
to each class of our equity securities beneficially owned by all of our
directors and nominees, each of the named executive officers, and our directors
and executive officers as a group.
Name and Address of Amount & Nature of
Title of Class Beneficial Owner Beneficial Owner Percent of Class
- ----------------- ------------------------- --------------------- -------------------
<s> <c> <c> <c>
Common Stock Dicky Cheung (1) 34,672,705 shares 32.2%
80 Wall Street, Suite 818
New York, NY 10005
All officers and directors
as a group 34,672,705 shares 32.2%
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The persons named above do not have any specified rights to acquire, within 60
days of the date of this registration statement any options, warrants or rights
and no conversion privileges or other similar obligations exist.
(1) Dicky Cheung is the President and CEO of the Company.
The company does not have any securities that are convertible into common stock.
Changes in Control
There are no arrangements that the management is aware of that may result in
changes in control as that term is defined by the provisions of Item 403(c) of
Regulation S-K. There are no provisions within our Articles or Bylaws that
would delay or prevent a change of control.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; AND DIRECTOR
INDEPENDENCE
There is no material relationships between the Company and its current directors
and executive officers other than the transactions and relationships described
below.
Transactions with Related Persons
On September 5, 2006 Guy Wolf, our Chief Executive Officer at that time,
purchased 1,800,000 shares from us for an aggregate purchase price of $90,014.
On July 24, 2007, Companhhia Internacional Tek Tat Limitada, a company
controlled by Dicky Cheung, our President, CEO and a Director, acquired an
aggregate of 3,882,438 shares, or approximately 49.9%, of the Company's issued
and outstanding common stock, from former directors and officers of the Company,
for the aggregate cash purchase price of approximately $349,521.
On July 25, 2007, the Company issued to Dicky Cheung, the President and CEO of
the Company, a promissory note, in the principal amount of $20,000 in
consideration for a $20,000 cash loan made by Mr. Cheung to the Company.
Interest on the note accrues at the rate of 5% per year. Pursuant to the terms
of the note, the entire principal sum and all accrued interest was due on or
before January 30, 2008.
On September 25, 2007, the Company issued to Dicky Cheung, the President and
CEO of the Company, a promissory note, in the principal amount of $100,000 in
consideration for a $100,000 cash loan made by Mr. Cheung to the Company.
Interest on the note accrues at the rate of 5% per year. Pursuant to the terms
of the note, the entire principal sum and all accrued interest was due on or
before March 25, 2008.
On October 5, 2007, the Company issued to Dicky Cheung, the President and CEO
of the Company, a promissory note, in the principal amount of $500,000 in
consideration for a $500,000 cash loan made by Mr. Cheung to the Company.
Interest on the note accrues at the rate of 5% per year. Pursuant to the terms
of the note, the entire principal sum and all accrued interest was due on or
before April 4, 2008.
On April 2, 2008, the above three notes were extended under the same terms and
conditions. On December 22, 2008, as a part of the transaction described in
Note 4 above, all three notes and accrued interest in a total amount of $653,708
were converted into the equity shares of the Company at $0.03 per share. At the
same time, Mr. Cheung purchased additional 9 million shares of the Company's
common stock at a purchase of $0.03 per share.
Parents
None.
Promoters and Control Persons
Please refer to the transactions disclosed above "Transactions with Related
Persons."
Director Independence
We are presently not required to comply with the director independence
requirements of any securities exchange, which requires that a majority of a
company's directors be independent. The board of directors of the Company
intends to appoint additional members, each of whom will satisfy such
independence requirements.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Berman, Hopkins, Wright & Laham, CPAs and Associates, LLP, ("Berman Hopkins")
audited the Company's 2008 and 2007 financial statements. Fees related to audit
services performed in 2008 and 2007 were as follows:
2008 2007
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Audit Fees (1) $ 18,544 $ 18,155
Audit Related Fees -0- -0-
Tax Fees (2) -0- 1,742
All Other Fees -0- -0-
------------ -----------
Total $ 18,544 $ 19,897
(1) Audit fees represent fees for professional services provided in connection
with the audit of our financial statements and review of our quarterly financial
statements.
(2) Tax fees represent fees for preparation of our tax returns.
We do not have an audit committee. Our Board of Directors has reviewed and
discussed with Berman Hopkins the audited financial statements of the Company
contained in the Company's Annual Report on Form 10-K for the Company's 2008
fiscal year. Our Board has also discussed with Berman Hopkins the matters
required to be discussed pursuant to Public Company Accounting Oversight Board
Standards and to SAS No. 61 (Codification of Statements on Auditing Standards,
AU Section 380), which includes, among other items, matters related to the
conduct of the audit of the Company's financial statements.
Our Board has received and reviewed the written disclosures and the letter from
Berman Hopkins required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and has discussed with Berman
Hopkins its independence from the Company.
Our Board has considered whether the provision of services other than audit
services is compatible with maintaining auditor independence.
Pre-Approval Policies
The Board's policy is now to pre-approve all audit services and all permitted
non-audit services (including the fees and terms thereof) to be provided by the
Company's independent auditor; provided, however, pre-approval requirements for
non-audit services are not required if all such services (1) do not aggregate
to more than five percent of total revenues paid by the Company to its
accountant in the fiscal year when services are provided; (2) were not
recognized as non-audit services at the time of the engagement; and (3) are
promptly brought to the attention of the Board and approved prior to the
completion of the audit.
Our Board pre-approved all of the fees described above.
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
3.1 Articles of Incorporation, incorporated by reference herein from Exhibit
3(i) (A) to our Form 10-SB filed June 25, 2003.
3.2 Amended Articles of Incorporation, incorporated by reference herein from
Exhibit 3(i)(B) to our Form 10-SB filed June 25, 2003.
3.3 Amended Articles of Incorporation, incorporated by reference herein from
Exhibit 3(i)(C) to our Form 10-QSB for the fiscal quarter ended March 31,
2005.
3.4 By-laws incorporated by reference herein from Exhibit 3(ii) to our Form
10-SB filed June 25, 2003.
10.1 Stock Purchase Agreement with STM 1, LLC dated May 3, 2006, incorporated
by reference herein from Exhibit 99 to our Form 8-K filed May 9, 2006.
31.1 Certification pursuant to Section 13a-14 of the Securities Exchange Act of
1934
32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 USC 1830)
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CREDIT ONE FINANCIAL, INC.
By: /s/ Dicky Cheung
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Dicky Cheung
President & CEO
(Principal Executive Officer and Principal Financial Officer)
Date: March 26, 2009