United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended: March 31, 2005
Commission file number: 0-23485
DRAGON INTERNATIONAL GROUP CORP.
(Exact name of registrant as specified in its charter)
Nevada 98-0177646
------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Bldg 14
Suite A09, International Trading Center,
29 Dongdu Road
Ningbo, China 315000
(Address of principal executive offices)(Zip code)
(86) 574-56169308
(Registrant's telephone number, including area code)
Indicate by check mark whether 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 the number of shares outstanding of each of the registrant's classes of
common stock, as of May 2, 2005; 37,585,234 outstanding shares of common stock,
$.001 par value per share.
DRAGON INTERNATIONAL GROUP CORP.
FORM 10-QSB
QUARTERLY PERIOD ENDED MARCH 31, 2005
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet
March 31, 2005 (Unaudited)...................................3
Consolidated Statements of Operations (Unaudited)
For the Three and Nine Months Ended
March 31, 2005 and 2004......................................4
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended March 31, 2005 and 2004............5
Notes to Consolidated Financial Statements............................6-19
Item 2 - Management's Discussion and Analysis or
Plan of Operation...........................................20-29
Item 3 - Controls and Procedures........................................29
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings..............................................30
Item 2 - Unregistered Sales of Equity Securities
and Use of Proceeds...........................................30
Item 3 - Default upon Senior Securities ................................30
Item 4 - Submission of Matters to a Vote of Security Holders............30
Item 5 - Other Information..............................................31
Item 6 - Exhibits.......................................................31
Signatures.............................................................32
-2-
<page>
DRAGON INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, 2005
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 226,588
Accounts receivable (net of allowance
for doubtful accounts of $57,780) 3,205,317
Inventories 1,013,259
Advances to employees 264,847
Due from related parties 3,072,182
Prepaid expenses and other 292,077
-------
Total Current Assets 8,074,270
PROPERTY AND EQUIPMENT - Net 398,487
OHER ASSETS 14,018
------
Total Assets $ 8,486,775
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,117,150
Convertible debentures payable, net 96,985
Convertible notes payable 10,188
Accounts payable 2,596,062
Accrued expenses 1,239,732
Advances from customers 64,917
------
Total Current Liabilities 5,125,034
LONG-TERM DEBT, net of current portion 120,773
-------
Total Liabilities 5,245,807
---------
STOCKHOLDERS' EQUITY:
Common stock ($.001 Par Value; 200,000,000 Shares Authorized;
37,585,234 shares issued and outstanding) 37,585
Additional paid-in capital 647,272
Retained earnings 2,556,111
---------
Total Stockholders' Equity 3,240,968
---------
Total Liabilities and Stockholders' Equity $ 8,486,775
===========
See notes to consolidated financial statements
-3-
<page>
DRAGON INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<table>
<caption>
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
---------------------------------- ------------------------------------
2005 2004 2005 2004
---------------- ---------------- ----------------- -----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<s> <c> <c> <c> <c>
NET REVENUES $ 2,472,996 $ 6,031,646 $ 14,564,067 $ 14,715,401
COST OF SALES 2,127,644 5,386,828 13,646,147 13,074,644
---------------- ---------------- ----------------- -----------------
GROSS PROFIT 345,352 644,818 917,920 1,640,757
---------------- ---------------- ----------------- -----------------
OPERATING EXPENSES:
Selling expenses 120,371 27,627 338,595 642,573
General and administrative 105,836 238,678 387,334 351,558
---------------- ---------------- ----------------- -----------------
Total Operating Expenses 226,207 266,305 725,929 994,131
---------------- ---------------- ----------------- -----------------
INCOME FROM OPERATIONS 119,145 378,513 191,991 646,626
---------------- ---------------- ----------------- -----------------
OTHER INCOME (EXPENSE):
Other income 27,943 124,559 57,856 252,002
Interest expense, net (54,105) (13,966) (105,787) (54,087)
---------------- ---------------- ----------------- -----------------
Total Other Income (Expense) (26,162) 110,593 (47,931) 197,915
---------------- ---------------- ----------------- -----------------
INCOME BEFORE INCOME TAXES 92,983 489,106 144,060 844,541
INCOME TAXES 70 (30,574) (49,213) (89,627)
---------------- ---------------- ----------------- -----------------
NET INCOME $ 93,053 $ 458,532 $ 94,847 $ 754,914
================ ================ ================= =================
NET INCOME PER COMMON SHARE
Basic $ 0.00 $ 0.02 $ 0.00 $ 0.03
================ ================ ================= =================
Diluted $ 0.00 $ 0.02 $ 0.00 $ 0.03
================ ================ ================= =================
Weighted Common Shares Outstanding - Basic 36,094,090 24,625,000 29,774,932 24,625,000
================ ================ ================= =================
Weighted Common Shares Outstanding - Diluted 36,094,090 24,625,000 29,774,932 24,625,000
================ ================ ================= =================
</table>
See notes to consolidated financial statements
-4-
<page>
DRAGON INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<table>
<caption>
For the Nine
Months Ended
March 31,
----------------------------------------
2005 2004
------------------- -------------------
(Unaudited) (Unaudited)
<s> <c> <c>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 94,847 $ 754,914
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation 53,306 34,205
Amortization of discount on debentures payable 23,684 -
Debt issuance costs 2,979 -
Changes in assets and liabilities:
Accounts receivable (1,106,472) (1,955,020)
Inventories 1,813,955 (148,993)
Prepaid and other current assets 372,876 696,662
Advances to employees 306,547 (12,487)
Other assets (14,018) 65,135
Accounts payable (1,697,935) 3,219,669
Accrued expenses 256,802 (711,326)
Advances to customers (324,022) (223,184)
------------------- -------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (217,451) 1,719,575
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Due from related parties (513,142) (1,819,651)
Decrease in short-term investments 386,473 -
Capital expenditures (153,348) (32,275)
------------------- -------------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (280,017) (1,851,926)
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable 101,450 54,347
Proceeds from debentures payable 321,750 -
Contributed capital 15,000 -
Distributions to shareholders - (102,657)
------------------- -------------------
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES 438,200 (48,310)
------------------- -------------------
NET DECREASE IN CASH (59,268) (180,661)
CASH - beginning of year 285,856 501,135
------------------- -------------------
CASH - end of period $ 226,588 $ 320,474
=================== ===================
SUPPLEMENTAL CASH FLOW INFORMATION:
Non-cash investing and financing activities
Issuance of common stock for debt $ 57,601 $ -
=================== ===================
Deferred discount and deneficial conversion on debentures payable $ 284,199 $ -
=================== ===================
</table>
See notes to consolidated financial statements.
-5-
<page>
DRAGON INTERNATIONAL GROUP CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Dragon International Group Corp. (formerly Retail Highway.com, Inc. ("Retail" or
the "Company") was incorporated in the State of Nevada on February 17, 1993
under the name "LBF Corporation" and has been in the development stage since its
inception. Effective April 17, 1999, the Company acquired certain assets to
facilitate the Company's entry into electronic commerce and changed its name to
Retail Highway.com, Inc.
On or around August 13, 2004, as amended on September 30, 2004 and effective
October 4, 2004, under an Agreement and Plan of Reorganization, the Company
issued 24,625,000 shares of the Company's common stock for the acquisition of
all of the outstanding capital stock of Dragon International Group Corp.,
("Dragon") a Florida corporation. For financial accounting purposes, the
exchange of stock will be treated as a recapitalization of Retail with the
former shareholders of the Company retaining 1,280,234 or approximately 5% of
the outstanding stock.
In connection with the merger, the Company effected a reverse stock split of the
Company's common stock, whereby one (1) share of common stock was issued in
exchange for every eight (8) shares of common stock outstanding immediately
prior to October 4, 2004, the effective date. All share and per-shares
information has been restated to reflect this reverse stock split.
Additionally, as part of the Merger, the Company amended its Articles of
Incorporation, whereby the Company changed its name to Dragon International
Group Corp. as well as reestablished its capitalization to the authorized
capital structure immediately prior to the Merger, which consists of 25,000,000
shares of Preferred Stock, par value $0.001 per share, and 50,000,000 Common
Shares, par value $.001 per share. Further, the Company's prior management
resigned their respective positions with the Company and was replaced by
management of Dragon.
-6-
<page>
DRAGON INTERNATIONAL GROUP CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(UNAUDITED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
The Company (Continued)
Dragon, a Florida corporation, was founded in June 2004. On June 30, 2004,
Dragon acquired 70% ownership interest of Ningbo Anxin International Co. Ltd.
("Anxin"). Anxin is located in Ningbo, Zhejiang Province, China, 200 miles south
of Shanghai, and was established in 1997. It is a company operating in
international trade as well as a manufacturer in the integrated packaging paper
industry. It holds an ISO9000 certificate and national license to import and
export. In addition to its own operations, Anxin operates three subsidiaries,
including: (i) Shanghai Anhong Paper Co. Ltd., ("Anhong"), a trading company
located in Shanghai, with another manufacturing facility in Ningbo; Anhong's
main products are "Federal" SBS and "Hang Kong" CCB; (ii) Ningbo Long'an
Industry and Trade Co. Ltd ("Long'an"), which has been set up to begin the
business of Indonesia `Hang Kong" CCB. It holds the national license to import
and export; and (iii) Jiangdong Yonglongxin Special Paper Co., Ltd.
("Yonglongxin"). Yonglongxin holds an ISO9000 certificate and has five series of
products, including golden and silver paperboards, aluminum foil paperboards,
pearl paperboards, laser paperboards and mirror-like paperboards. Anxin has a
distribution network covering east and central China. The Stock Purchase
Agreement between Dragon and Anxin has been accounted for as a reverse
acquisition under the purchase method for business combinations. Accordingly,
the combination of the two companies is recorded as a recapitalization of
Dragon, pursuant to which Anxin is treated as the continuing entity.
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). The accompanying financial statements for the interim
periods are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results for the
periods presented. These financial statements should be read in conjunction with
the financial statements for the year ended June 30, 2004 and notes thereto
contained on Form 10-KSB of the Company as filed with the Securities and
Exchange Commission. The results of operations for the nine months ended March
31, 2005 are not necessarily indicative of the results for the full fiscal year
ending June 30, 2005.
Estimates
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
-7-
<page>
DRAGON INTERNATIONAL GROUP CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Inventories
Inventories, consisting of raw materials and finished goods related to the
Company's products are stated at the lower of cost or market utilizing the
first-in, first-out method.
Net income per share
Basic income per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. Diluted
income per share is computed by dividing net income by the weighted average
number of shares of common stock, common stock equivalents and potentially
dilutive securities outstanding during each period.
Stock-based compensation
The Company accounts for stock options issued to employees in accordance with
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. As
such, compensation cost is measured on the date of grant as the excess of the
current market price of the underlying stock over the exercise price. Such
compensation amounts, if any, are amortized over the respective vesting periods
of the option grant. The Company adopted the disclosure provisions of SFAS No.
123, "Accounting for Stock-Based Compensation" and SFAS 148, "Accounting for
Stock-Based Compensation -Transition and Disclosure", which permits entities to
provide pro forma net income (loss) and pro forma earnings (loss) per share
disclosures for employee stock option grants as if the fair-valued based method
defined in SFAS No. 123 had been applied. The Company accounts for stock options
and stock issued to non-employees for goods or services in accordance with the
fair value method of SFAS 123.
Revenue recognition
The Company follows the guidance of the Securities and Exchange Commission's
Staff Accounting Bulletin 104 for revenue recognition. In general, the Company
records revenue when persuasive evidence of an arrangement exists, services have
been rendered or product delivery has occurred, the sales price to the customer
is fixed or determinable, and collectability is reasonably assured.
The Company's revenues from the sale of products are recorded when the goods are
shipped, title passes, and collectibility is reasonably assured.
-8-
<page>
DRAGON INTERNATIONAL GROUP CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Foreign currency translation
Transactions and balances originally denominated in U.S. dollars are
presented at their original amounts. Transactions and balances in other
currencies are converted into U.S. dollars in accordance with Statement of
Financial Accounting Standards (SFAS) No. 52, "Foreign Currency Translation,"
and are included in determining net income or loss.
For foreign operations with the local currency as the functional currency,
assets and liabilities are translated from the local currencies into U.S.
dollars at the exchange rate prevailing at the balance sheet date. Revenues and
expenses are translated at weighted average exchange rates for the period to
approximate translation at the exchange rates prevailing at the dates those
elements are recognized in the financial statements. Translation adjustments
resulting from the process of translating the local currency financial
statements into U.S. dollars are included in determining comprehensive loss. As
of March 31, 2005, the exchange rate for the Chinese Renminbi (RMB) was $1 US
for 8.28 RMB.
The reporting currency is the U.S. dollar. The functional currency of the
Company's Chinese subsidiary, Anxin, is the local currency. The financial
statements of the subsidiaries are translated into United States dollars using
year-end rates of exchange for assets and liabilities, and average rates of
exchange for the period for revenues, costs, and expenses. Net gains and losses
resulting from foreign exchange transactions are included in the consolidated
statements of operations and were not material during the periods presented
because the Chinese dollar (RMB) fluctuates with the United States dollar. The
cumulative translation adjustment and effect of exchange rate changes on cash at
March 31, 2005 and 2003 was not material.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash and trade accounts receivable. The
Company places its cash with high credit quality financial institutions. Almost
all of the Company's sales are credit sales which are primarily to customers
whose ability to pay is dependent upon the industry economics prevailing in
these areas; however, concentrations of credit risk with respect to trade
accounts receivables is limited due to generally short payment terms. The
Company also performs ongoing credit evaluations of its customers to help
further reduce credit risk.
-9-
<page>
DRAGON INTERNATIONAL GROUP CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(UNAUDITED)
NOTE 2 - INVENTORIES
At March 31, 2005, inventories consisted of the following:
Raw materials $ 447,821
Finished goods 565,438
--------------
$ 1,013,259
==============
NOTE 3 - RELATED PARTY TRANSACTIONS
Due from related parties
The consolidated financial statements include balances and transactions with
related parties. At March 31, 2005, the Company had a net receivable from
several affiliated entities owned by an officer of the Company amounting to
$3,072,182. These advanced are payable on demand and are personally guaranteed
by the officer.
Due to related party
The former President of the Company, from time to time, provided advances to the
Company for operating expenses. These advances are short-term in nature and
non-interest bearing. The amount due to the former President at March 31, 2005
was $18,345 and is included in accrued expenses on the accompanying balance
sheet.
NOTE 4 - CONVERTIBLE NOTES PAYABLE
In September 2002, the former President of the Company lent the Company $10,000
to pay operating expenses pursuant to a note. This note is convertible into
1,333,333 shares of the Company's common stock at a conversion price of $0.0075
per share and is due on the earlier of (i) the Company successfully consummating
a merger or acquisition; or (ii) one year from the date of the note. Interest
accrues at the rate of 3% per annum and aggregated $532 through March 31, 2005.
Additionally, in April 2004, the former President of the Company entered into a
convertible note agreement with the Company to convert $31,124 of advances to
pay operating expenses into to a convertible note. This note is convertible into
4,149,867 shares of the Company's common stock at a conversion price of $0.0075
per share and is due on the earlier of (i) the Company successfully consummating
a merger or acquisition; or (ii) one year from the date of the note. Interest
accrues at the rate of 3% per annum and aggregated $558 through March 31, 2005.
During the nine months ended March 31, 2005, the Company issued 4,136,789 shares
of common stock in connection with the conversion of $31,026 of this debt. At
March 31, 2005, convertible notes payable outstanding amounted to $10,188, which
is convertible into 1,358,400 shares of common stock.
-10-
<page>
DRAGON INTERNATIONAL GROUP CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(UNAUDITED)
NOTE 4 - CONVERTIBLE NOTES PAYABLE (continued)
In May, 2004, the Company's attorney entered into an agreement with the Company
to convert $15,171 of accounts payable for legal services to a note. This note
was convertible into 2,022,667 shares of the Company's common stock at a
conversion price of $0.0075 per share and was due on the earlier of (1) the
Company successfully consummating a merger or acquisition; or (ii) upon demand.
Interest accrued at the rate of 18% per annum. On October 4, 2004, this note was
converted into 2,022,667 shares of common stock.
In August 2004, a vendor entered into an agreement with the Company to convert
$11,404 of accounts payable to a convertible note. This note was convertible
into 1,520,544 shares of the Company's common stock at a conversion price of
$0.0075 per share and was due on the earlier of (1) the Company successfully
consummating a merger or acquisition; or (ii) upon demand. Interest accrued at
the rate of 18% per annum. On October 4, 2004, this note was converted into
1,520,544 shares of common stock.
NOTE 5 - DEBENTURES PAYABLE
During fiscal 2003, the Company raised capital from accredited investors under a
private placement memorandum. Each unit consisted of a promissory note of
$50,000 and a common stock purchase warrant to purchase 25,000 shares of the
Company's common stock exercisable at $.16 per share. The purchase warrants
expire in five years from the date of the warrant. The notes had a term of one
year and provided for interest accrual on the unpaid principal balance of 10%
per year.
Effective March 15, 2005, the Company raised capital from accredited investors
under a private offering of Units. The private offering provided for the sale of
12 units at a price of $25,000 per unit in order to raise up to a total of
$300,000. The private offering sold additional units for a total capital raise
of $357,500. Each unit consisted of a $25,000 8% Secured Convertible Debenture
and a Class A common stock purchase warrant to purchase 250,000 of the Company's
common stock at $.40 per share for a period of five (5) years following the
closing of the offering. The investors in this offering were also granted
"piggyback" registration rights for the shares underlying the warrants, as well
as the shares reserved for issuance in the event of conversion of the
Debentures. The Company received gross proceeds of $357,500 from the sale of
these Units ($321,750 net). The Units were sold to a total of 7 "accredited"
investors, as that term is defined under the Securities Act of 1933, as amended.
The Debentures are secured by property with an estimated value of $227,900 and
12,250,000 shares of Common Stock owned by David Wu, the Company's President and
Chief Executive Officer. The Debentures mature six (6) months following the
closing of the offering. Interest only is payable monthly.
-11-
<page>
DRAGON INTERNATIONAL GROUP CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(UNAUDITED)
NOTE 5 - DEBENTURES PAYABLE (continued)
Conversion of the Debenture can occur several ways as follows:
1. The Company may convert a portion of the remaining principal and
accrued interest due into shares of common stock, upon notice, at a
conversion rate equal to a 20% discount to the weighted average bid
price for the previous five days prior to receipt of such Notice of
Conversion with a floor of $.40 per share. The Company can elect to
convert provided that the Company notifies the Holder of its intent to
convert to shares of common stock by the 15th calendar day of the month
preceding such anticipated conversion and provided that:
i. The common stock received for payment is fully registered
at the time of receipt and is delivered without restriction of
any kind
ii. The average daily trading volume of the Company's common
stock as measured for the prior 60 days to Notice of
Conversion is no less than 50,000 shares per day to the
Holder; or
iii. The weighted average daily price per share as measured
from the five trading days prior to Notice of Conversion is no
less than $0.50 per share; or
iv. Any payment of the principal balance due herein must be
received by the Holder within three (3) business days of the
first day of the month
Further, the Company may elect to convert the remaining principal and
accrued interest due into shares of common stock at the greater of: (i)
10% of the remaining principal value of the Debenture for the previous
five (5) days prior to receipt of such Notice of Conversion; or (ii)
25% of the average weighted daily value of the common shares.
2. The Holder can elect to convert all remaining principal and interest
due into shares of common stock at a 20% discount to the market with a
floor of $.40. At no time can the conversion price be in excess of $.75
per share. Such anticipated conversion may only occur in the event the
following criteria are met: (a) the common stock received for payment
is fully registered at the time of receipt and is delivered without
restriction of any kind; (b) the average daily trading volume as
measured for the 60 days prior to Notice of Conversion is no less than
50,000 shares per day; (c) the weighted average daily price per share
as measured from the five trading days prior to Notice of Conversion is
no less than $.50 per share; and (d) the stock must be delivered within
three (3) business days of the 1st of the current month.
-12-
<page>
DRAGON INTERNATIONAL GROUP CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(UNAUDITED)
NOTE 5 - DEBENTURES PAYABLE (continued)
In connection with the 1,787,500 warrants issued with the debentures, the
Company recorded imputed interest in the amount of $239,510 that will be
amortized over the life of the debentures. Additionally in connection with the
debentures, the Company recorded a beneficial conversion amount of $44,688 as
that will be amortized over the life of the debentures. For the nine months
ended March 31, 2005, the amount of amortization of imputed interest and
beneficial conversion charged to interest expense was $23,683.
NOTE 6 - STOCKHOLDERS EQUITY
Common Stock
In August 2004, the Company's board of directors approved a 1 for 8 reverse
stock split. All per share data included in the accompanying consolidated
financial statement have been adjusted retroactively to reflect the reverse
split.
On October 4, 2004, holders of convertible promissory notes aggregating $26,575
exercised their conversion rights applicable thereto. Accordingly, the Company
issued an aggregate of 3,543,211 common shares to five persons and/or entities
(see note 4).
On October 4, 2004, under an Agreement and Plan of Reorganization, the Company
issued 24,625,000 shares of the Company's common stock for the acquisition of
all of the outstanding capital stock of Dragon International Group Corp.,
("Dragon") a Florida corporation.
On December 31, 2004, in connection with the acquisition of the remaining 30% of
its subsidiary, the Company issued 4,000,000 shares of common stock.
On January 17, 2005, holders of convertible promissory notes aggregating $13,424
exercised their conversion rights applicable thereto. Accordingly, the Company
issued an aggregate of 1,789,823 common shares (see note 4).
On February 7, 2005, holders of convertible promissory notes aggregating $17,602
exercised their conversion rights applicable thereto. Accordingly, the Company
issued an aggregate of 2,346,966 common shares (see note 4).
-13-
<page>
DRAGON INTERNATIONAL GROUP CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(UNAUDITED)
NOTE 6 - STOCKHOLDERS EQUITY (continued)
Stock Warrants
On March 15, 2005, in connection with the private offering discussed in Note 5,
the Company granted 1,787,500 warrants to purchase 1,787,500 shares of the
Company's common stock exercisable at $.40 per share. The purchase warrants
expire in five years from the date of the warrant.
A summary of the status of the Company's outstanding stock warrants as of March
31, 2005 and changes during the period then ended is as follows:
Weighted
Average
Exercise
Shares Price
----------- --------------
Outstanding at July 1, 2004 - $ -
Granted 1,787,500 0.40
Exercised - -
Forfeited - -
-------------- ------------
Outstanding at March 31, 2005 1,787,500 $ 0.40
============== ==============
Warrants exercisable at end of period 1,787,500 $ 0.40
============== ==============
Weighted-average fair value of
warrants granted during the period $0.40
=============
The following information applies to all warrants outstanding at March 31, 2005:
<table>
<caption>
Warrants Outstanding Warrants Exercisable
---------------------------- -------------------------
<s> <c> <c> <c> <c> <c>
Weighted
Average Weighted Weighted
Remaining Average Average
Contractual Exercise Exercise
Range of Exercise Prices Shares Life (Years) Price Shares Price
------------------------ ----------- ------------ ----------- -------------- ----------
$ 0.40 1,787,500 5.00 $ 0.40 1,787,500 $ 0.40
</table>
NOTE 7 - OPERATING RISK
(a) Country risk
The Company's revenues are mainly derived from the sale of paper products in the
Peoples Republic of China (PRC). The Company hopes to expand its operations to
countries outside the PRC, however, such expansion has not been commenced and
there are no assurances that the Company will be able to achieve such an
expansion successfully. Therefore, a downturn or stagnation in the economic
environment of the PRC could have a material adverse effect on the Company's
financial condition.
-14-
<page>
DRAGON INTERNATIONAL GROUP CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(UNAUDITED)
NOTE 7 - OPERATING RISK (continued)
(b) Products risk
In addition to competing with other companies, the Company could have to compete
with larger US companies who have greater funds available for expansion,
marketing, research and development and the ability to attract more qualified
personnel if access is allowed into the PRC market. If U.S. companies do gain
access to the PRC markets, they may be able to offer products at a lower price.
There can be no assurance that the Company will remain competitive should this
occur.
(c) Exchange risk
The Company can not guarantee that the current exchange rate will remain steady,
therefore there is a possibility that the Company could post the same amount of
profit for two comparable periods and because of a fluctuating exchange rate
actually post higher or lower profit depending on exchange rate of Chinese
Remnibi converted to US dollars on that date. The exchange rate could fluctuate
depending on changes in the political and economic environments without notice.
(d) Political risk
Currently, PRC is in a period of growth and is openly promoting business
development in order to bring more business into PRC. Additionally PRC allows a
Chinese corporation to be owned by a United States corporation. If the laws or
regulations are changed by the PRC government, the Company's ability to operate
the PRC subsidiaries could be affected.
(e) Key personnel risk
The Company's future success depends on the continued services of executive
management in China. The loss of any of their services would be detrimental to
the Company and could have an adverse effect on business development. The
Company does not currently maintain key-man insurance on their lives. Future
success is also dependent on the ability to identify, hire, train and retain
other qualified managerial and other employees. Competition for these
individuals is intense and increasing.
(f) Performance of subsidiaries risk
All of the Company's revenues is derived via the operations of the Company's
Chinese subsidiaries. Economic, governmental, political, industry and internal
company factors outside of the Company's control affect each of the
subsidiaries. If the subsidiaries do not succeed, the value of the assets and
the price of our common stock could decline. Some of the material risks relating
to the partner companies include the fact that the subsidiaries are located in
China and have specific risks associated with that and the intensifying
competition for the Company's products and services and those of the
subsidiaries.
-15-
<page>
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following analysis of our results of operations and financial condition
should be read in conjunction with the financial statements of Retail
Highway.com, Inc. for the year ended June 30, 2004 and notes thereto contained
in Report on Form 10-KSB of Retail Highway.com, Inc. as filed with the
Securities and Exchange Commission.
This report on Form 10-QSB contains forward-looking statements that are subject
to risks and uncertainties that could cause actual results to differ materially
from those discussed in the forward-looking statements and from historical
results of operations. Among the risks and uncertainties which could cause such
a difference are those relating to our dependence upon certain key personnel,
our ability to manage our growth, our success in implementing the business
strategy, our success in arranging financing where required, and the risk of
economic and market factors affecting us or our customers. Many of such risk
factors are beyond our control.
On or around August 13, 2004, as amended on September 30, 2004 and effective
October 4, 2004, under an Agreement and Plan of Reorganization, we issued
24,625,000 shares of our common stock for the acquisition of all of the
outstanding capital stock of Dragon International Group Corp., ("Dragon") a
Florida corporation. For financial accounting purposes, the exchange of stock
was treated as a recapitalization of Retail with our former shareholders
retaining 1,280,234, or approximately 5% of the outstanding stock.
Dragon International Group Corp. ("Dragon"), a Florida corporation, was founded
in June 2004. On June 30, 2004, Dragon acquired 70% ownership interest of Ningbo
Anxin International Co. Ltd. ("Anxin"). Anxin is located in Ningbo, Zhejiang
Province, China, 200 miles south of Shanghai, and was established in 1997. It is
a company operating in international trade as well as a manufacturer in the
integrated packaging paper industry. It holds an ISO9000 certificate and
national license to import and export. In addition to its own operations, Anxin
operates three subsidiaries, including: (i) Shanghai Anhong Paper Co. Ltd.,
("Anhong"), a trading company located in Shanghai, with another manufacturing
facility in Ningbo; Anhong's main products are "Federal" SBS and "Hang Kong"
CCB; (ii) Ningbo Long'an Industry and Trade Co. Ltd ("Long'an"), which has been
set up to begin the business of Indonesia `Hang Kong" CCB. It holds the national
license to import and export; and (iii) Jiangdong Yonglongxin Special Paper Co.,
Ltd. ("Yonglongxin"). Yonglongxin holds an ISO9000 certificate and has five
series of products, including golden and silver paperboards, aluminum foil
paperboards, pearl paperboards, laser paperboards and mirror-like paperboards
Anxin has a distribution network covering east and central China. The Stock
Purchase Agreement between Dragon and Anxin has been accounted for as a reverse
acquisition under the purchase method for business combinations. Accordingly,
the combination of the two companies is recorded as a recapitalization of Anxin,
pursuant to which Dragon is treated as the continuing entity.
On December 31, 2004, we issued 4,000,000 common shares for the remaining 30%
interest in Anxin.
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<page>
Recent Developments
On April 2005, we signed a letter of intent to acquire a 60% ownership interest
of Hangzhou Yongxin Paper Company, Limited. Hangzhou Yongxin Paper Company,
Limited, established in 2003 is located in Hangzhou of Zhejiang Province, China.
We plan to consolidate Yongxin's operations with our own subsidiary in Ningbo.
All operations will be located in the new manufacturing facilities in Ningbo.
In April 2005, we signed a letter of intent to acquire Xianyang Naite Research &
Development Center. Xianyang Naite Research & Development Center, located in
Ningbo, China, was created to improve production efficiencies in the specialty
packaging industry. Current modes of paper transfer in the Chinese specialty
paper packaging segment are inferior to global standards. The quality of the
products cannot meet the rapidly increasing requirements of consumers. The
transaction will allow us to improve our own proprietary paper transferring
technology, thereby enhancing our position as one of China's leading specialty
packaging companies. The new Research & Development Center will reduce time to
commercialization for new products substantially; providing a competitive
advantage in the industry.
In May 2005, we reached an agreement to buy a manufacturing facility from Ningbo
Xinyi Company, Limited ("Xinyi"). Xinyi will transfer ownership of 23,345 square
meters of property, including a recently completed 8,500 square meter
manufacturing facility in exchange for an outstanding receivable due to Dragon.
The receivable of approximately $2 Million will be exchanged for the
manufacturing facility and land valued at approximately $2.5 Million. This new
facility allows us to upgrade our manufacturing capabilities, providing a
significant amount of land to expand on in the future. Furthermore, the
transaction will reduce costs as we will eliminate the leasing costs on our
current facility. We intend on moving our current plant into the new facility,
consolidating the new R&D Center and manufacturing facility under one roof.
In May 2005, we signed a letter of intent to acquire a 51% ownership interest of
Shanghai Jinkui Packing Material Company, Limited ("Jinkui"). Jinkui, founded in
2002, is a manufacturer of packing materials for pharmaceutical products. In
2003, Jinkui passed Good Manufacturing Practice (GMP) with the Chinese State
Food and Drug Administration and ISO9002 Quality Assurance System. The
pharmaceutical packaging industry in China was estimated at $2 billion in 2004.
This transaction allows us to diversify its line of products and expand into a
new and significant market sector.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these consolidated 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. On an on-going basis, we evaluate our estimates based 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.
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<page>
A summary of significant accounting policies is included in Note 1 to the
audited financial statements included Form 10-KSB as filed with the Securities
and Exchange Commission for the year ended June 30, 2004. Management believes
that the application of these policies on a consistent basis enables us to
provide useful and reliable financial information about the company's operating
results and financial condition.
We record property and equipment at cost. Depreciation and amortization are
provided using the straight-line method over the estimated economic lives of the
assets, which are from five to ten years. Expenditures for major renewals and
betterments that extend the useful lives of property and equipment are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred.
We account for stock options issued to employees in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. As such,
compensation cost is measured on the date of grant as the excess of the current
market price of the underlying stock over the exercise price. Such compensation
amounts, if any, are amortized over the respective vesting periods of the option
grant. We adopted the disclosure provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" and SFAS 148, "Accounting for Stock-Based Compensation
- -Transition and Disclosure", which permits entities to provide pro forma net
income (loss) and pro forma earnings (loss) per share disclosures for employee
stock option grants as if the fair-valued based method defined in SFAS No. 123
had been applied. We account for stock options and stock issued to non-employees
for goods or services in accordance with the fair value method of SFAS 123.
We follow the guidance of the Securities and Exchange Commission's Staff
Accounting Bulletin 104 for revenue recognition. In general, we record revenue
when persuasive evidence of an arrangement exists, services have been rendered
or product delivery has occurred, the sales price to the customer is fixed or
determinable, and collectability is reasonably assured. Our revenues from the
sale of products are recorded when the goods are shipped, title passes, and
collectibility is reasonably assured.
RESULTS OF OPERATIONS
Comparison of Our Results of Operations for the Nine Month Periods Ended
March 31, 2005 and 2004
Revenues
For the nine months ended March 31, 2005, our revenues were $14,564,067, as
compared to $14,715,401 for the nine months ended March 31, 2004, a decrease of
$151,334 or approximately 1%. Additionally, during the period, we consolidated
the operations of certain of our subsidiaries in one company and delayed the
shipment of product to expedite the consolidation. Additionally, we announced
that we entered into an agreement to become the supplier of printing paper for
"Red Gold Dragon" cigarette mark paper to the Hubei Jinsanxia Printing Company
("Jinsanxia"). Jinsanxia specializes in the printing of cigarette packaging and
is ranked number one in the industry in Provinces of Hunan and Hubei. We expect
our revenues to grow it the third quarter. On April 5, 2005, we announced that
we received an order from Jiangsu Dare Technology Company Limited, a wholly
owned subsidiary of Jiangsu Dare Group.. Dare Group, established in 1978, is a
shareholder of Dare PLC, a publicly listed company. The initial order is valued
in excess of $2 million.
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<page>
Cost of Sales and Gross Profit
For the nine months ended March 31, 2005, cost of sales amounted to $13.646.147,
or 94% of net revenues, as compared to cost of sales of $13,074,644 or 89% of
net revenues for the nine months ended March 31, 2004, an increase of $571,503
or 4.4%. This increase resulted from an increase in raw material costs and
overhead costs such as utilities during the nine months ended March 31, 2005 as
compared to the nine months ended March 31, 2004. We paid more for pulp, oil,
and metal materials due to increase in global prices.
Gross profit for the nine months ended March 31, 2005 was $917,920 or 6% of
revenues, as compared to $1,640,757 or 11% of revenues for the nine months ended
March 31, 2004.
Operating Expenses
For the nine months ended March 31, 2005, total operating expenses were
$725,929, as compared to $994,131 for the nine months ended March 31, 2004, a
decrease of $268,202, or approximately 27%.
Included in this decrease was:
For the nine months ended March 31, 2005, selling expenses amounted to
$338,595, as compared to $642,573 for the nine months ended March 31, 2004, a
decrease of $303,978 or approximately 47%. This decrease is attributable to a
material decrease in consulting expense of approximately $321,000 incurred in
the 2004 period compared to $0 in the 2005 period. This decrease was offset by
increased shipping costs. Additionally, for the nine months ended March 31,
2005, we increased our advertising and promotions spending compared to the same
period in the prior year. We expect out selling expenses to increase as we
attempt to increase revenues and expect to spend increased funds on adverting
and promotion of our products.
For the nine months ended March 31, 2005, general and administrative
expenses were $387,334, as compared to $351,558 for the nine months ended March
31, 2004, an increase of $35,776, or approximately 10%. For the nine months
ended March 31, 2005, we incurred professional fees of approximately $70,000
related to our acquisition of Anxin as compared to $0 for the nine months ended
March 31, 2004, an increase of $70,000 or 100%. Additional increases were due to
increased salary and wages and operating expenses.
For the nine months ended March 31, 2005, other income amounted to
$57,856 as compared to other income of expenses of $252,002 for the nine months
ended March 31, 2004. Other income for the nine months ended March 31, 2005 and
2004 was associated with income recognized from the collection of value-added
taxes on certain of our products which we receive a tax credit.
For the nine months ended March 31, 2005, interest expense was
$105,787, as compared to $54,087 for the nine months ended March 31, 2004 and
was related to increased borrowings.
As a result of these factors, we reported net income of $94,847 (less
than $.01 per share) for the nine months ended March 31, 2005, as compared to
net income of $754,914 (approximately $.03 per share) for the nine months ended
March 31, 2004.
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<page>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2005 we had cash and cash equivalents of $226,588.
During fiscal 2003, the Company raised capital from accredited
investors under a private placement memorandum. Each unit consisted of a
promissory note of $50,000 and a common stock purchase warrant to purchase
25,000 shares of the Company's common stock exercisable at $.16 per share. The
purchase warrants expire in five years from the date of the warrant. The notes
had a term of one year and provided for interest accrual on the unpaid principal
balance of 10% per year.
Effective March 15, 2005, we raised capital from accredited
investors under a private offering of Units. The private offering provided for
the sale of 12 units at a price of $25,000 per unit in order to raise up to a
total of $300,000. The private offering sold additional units for a total
capital raise of $357,500. Each unit consisted of a $25,000 8% Secured
Convertible Debenture and a Class A common stock purchase warrant to purchase
250,000 of the Company's common stock at $.40 per share for a period of five (5)
years following the closing of the offering. The investors in this offering were
also granted "piggyback" registration rights for the shares underlying the
warrants, as well as the shares reserved for issuance in the event of conversion
of the Debentures. We received gross proceeds of $357,500 from the sale of these
Units ($321,750 net). The Units were sold to a total of 7 "accredited"
investors, as that term is defined under the Securities Act of 1933, as amended.
The Debentures are secured by property with an audited value of $227,900 and
12,250,000 shares of Common Stock owned by David Wu, the Company's President and
Chief Executive Officer. The Debentures mature six (6) months following the
closing of the offering. Interest only is payable monthly.
Additionally, we will raise capital from accredited investors under a
new private offering of Units. The private offering provides for the sale of up
to 25 units at a price of $100,000 per unit in order to raise up to a total of
$2,500,000. Each unit consisted of a $100,000 8% Secured Convertible Debenture
and a Class A common stock purchase warrant to purchase 200,000 of the Company's
common stock at $.30 per share for a period of five (5) years expiring July 1,
2010. The debentures are convertible into our common stock, as defined in the
private placement memorandum. As of the filing of this report, the Company has
not sold any units.
Net cash used in operating activities for the nine months ended March
31, 2005, was $217,451, as compared to net cash provided by operating activities
of $1,719,575 for the nine months ended March 31, 2004.
Net cash used in investing activities for the nine months ended March
31, 2005 was $280,017, as compared to net cash used in investing activities for
the nine months ended March 31, 2004, of $1,851,926. For the nine months ended
March 31, 2005, we used cash for capital expenditures of $153,348 and the
advance of funds to related parties of $513,142 offset by cash provided by a
decrease in short-term investments of $386,473. For the nine months ended March
31, 2004, we used cash for capital expenditures of $32,275 and advanced related
parties $1,819,651.
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<page>
Net cash provided by financing activities for the nine months ended
March 31, 2005 was $438,200 as compared to net cash used in financing activities
for the nine months ended March 31, 2004 of $(48,310). For the nine months ended
March 31, 2005, we received proceeds of $101,450 from loans payable, received
net proceeds of $321,750 from debentures payable, and received contributions of
$15,000. For the nine months ended March 31, 2004, we received proceeds from
loans payable of $54,347 and offset by shareholder distribution of $102,657.
We currently have no material commitments for capital expenditures.
While we have sufficient funds to conduct our business and operations
as they are currently undertaken, we want to build an additional manufacturing
line in order to expand our paper product production. Based upon our preliminary
estimates this will require capital and other expenditures of approximately USD
$1 million to $2 million. We do not presently have sufficient working capital to
fund this project and we will need to raise additional working capital to
complete this project. We do not presently have any external sources of capital
and will in all likelihood raise the capital in a debt or equity offering as
outlined above. There can be no assurance that acceptable financing to fund this
project can be obtained on suitable terms, if at all. Our ability to continue to
implement our growth strategy could suffer if we are unable to raise the
additional funds on acceptable terms which will have the effect of adversely
affecting our ongoing operations and limiting our ability to increase our
revenues in the future.
RISK FACTORS
An investment in our securities involves a high degree of risks.
Following are a description of those risks of which our management is currently
aware:
Our revenues are mainly derived from sale of paper products in the
Peoples Republic of China (PRC). We hope to expand our operations to countries
outside the PRC. However, such expansion has not been commenced and there are no
assurances that we will be able to achieve such an expansion successfully.
Therefore, a downturn or stagnation in the economic environment of the PRC could
have a material adverse effect on our financial condition and results of
operations.
In addition to competing with other companies, we could have to compete
with larger US companies who have greater funds available for expansion,
marketing, research and development and the ability to attract more qualified
personnel if access is allowed into the PRC market. If US companies do gain
access to the PRC markets, they may be able to offer products at a lower price.
There can be no assurance that we will remain competitive should this occur.
We cannot guarantee that the current exchange rate will remain steady,
therefore there is a possibility that we could post the same amount of profit
for two comparable periods and because of a fluctuating exchange rate actually
post higher or lower profit depending on exchange rate of Chinese Remnibi
converted to US dollars on that date. The exchange rate could fluctuate
depending on changes in the political and economic environments without notice.
Currently, PRC is in a period of growth and is openly promoting
business development in order to bring more business into PRC. Additionally PRC
allows a Chinese corporation to be owned by a United States corporation. If the
laws or regulations are changed by the PRC government, our ability to operate
the PRC subsidiaries could be affected.
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<page>
Our future success depends on the continued services of executive
management in China. The loss of any of their services would be detrimental to
us and could have an adverse effect on business development. We do not currently
maintain key-man insurance on their lives. Future success is also dependent on
the ability to identify, hire, train and retain other qualified managerial and
other employees. Competition for these individuals is intense and increasing.
Our revenues are derived via the operations of our Chinese
subsidiaries. Economic, governmental, political, industry and internal company
factors outside of our control affect each of the subsidiaries. If the
subsidiaries do not succeed, the value of the assets and the price of our common
stock could decline. Some of the material risks relating to the partner
companies include the fact that our subsidiaries are located in China and have
specific risks associated with that and the intensifying competition for our
products and services and those of the subsidiaries
ITEM 3. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Acting Chief Financial Officer
(collectively, the "Certifying Officers") are responsible for establishing and
maintaining disclosure controls and procedures for us. Based upon such officers'
evaluation of these controls and procedures as of a date as of the end of the
period covered by this Quarterly Report, and subject to the limitations noted
hereinafter, the Certifying Officers have concluded that our disclosure controls
and procedures are effective to ensure that information required to be disclosed
by us in this Quarterly Report is accumulated and communicated to management,
including our principal executive officers as appropriate, to allow timely
decisions regarding required disclosure.
The Certifying Officers have also indicated that there were no
significant changes in our internal controls or other factors that could
significantly affect such controls subsequent to the date of their evaluation,
and there were no corrective actions with regard to significant deficiencies and
material weaknesses.
Our management, including each of the Certifying Officers, does not
expect that our disclosure controls or our internal controls will prevent all
error and fraud. A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
control system are met. In addition, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have
been detected. These inherent limitations include the realities that judgments
in decision-making can be faulty, and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people or by
management override of the control. The design of any systems of controls also
is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions. Over time, control may
become inadequate because of changes in conditions, or the degree of compliance
with the policies or procedures may deteriorate. Because of these inherent
limitations in a cost-effective control system, misstatements due to error or
fraud may occur and not be detected.
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<page>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On January 17, 2005, holders of convertible promissory notes
aggregating $13,424 exercised their conversion rights applicable
thereto. Accordingly, the Company issued an aggregate of 1,789,823
common shares.
On February 7, 2005, holders of convertible promissory notes
aggregating $17,602 exercised their conversion rights applicable
thereto. Accordingly, the Company issued an aggregate of 2,346,966
common shares.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits
Exhibit
Number Description
- ----------- ----------------
31.1 Rule 13a - 14(a)/15d-14(a) Certification of the Chief Executive Officer *
31.2 Rule 13a - 14(a)/15d-14(a) Certification of the Chief Financial Officer *
32.1 Certification of Chief Executive Officer Certification under Section 906 *
32.2 Certification of Principal Financial and Accounting Officer Certification
under Section 906 *
* Filed herein
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in Ningbo, China on May 23, 2005.
DRAGON INTERNATIONAL GROUP CORP.
By: /s/ David Wu
David Wu,
CEO, Principal Executive Officer
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