SECURITIES EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
Amendment No. 5
FORM 10-SB12G/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACTS OF 1934
ASIAN STAR DEVELOPMENT, INC.
---------------------------
(Exact name of registrant as specified in its Charter)
Nevada
--------
(State of other jurisdiction of incorporation or organization)
86-0866395
----------------
(I.R.S. Employer Identification No.)
Room 930, Block B, East Wing
New World Office Building
Tsimshatsui, Kowloon, Hong Kong
---------------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code:(852) 2721-0936
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g)
of the Act: Common Stock
------------
(Title of Class)
1
<PAGE>
PART I
=======
Registrant is filing this Form 10-SB on a voluntary basis to (1) provide
current, public information to the investment community; (2) to expand the
availability of secondary trading exemptions under the Blue Sky laws and thereby
expand the trading market in Registrant's securities; and (3) to comply with the
reporting requirements for listing of the Company's securities. In the event
Registrant's obligation to file periodic reports under the Exchange Act is
suspended, Registrant reserves the right to reevaluate whether to continue
filing periodic reports on a voluntary basis.
ITEM 1. DESCRIPTION OF BUSINESS
=========================
Background and Reorganization
- ---------------------------------
Asian Star Development, Inc., (Registrant) was incorporated under the laws
of the State of Nevada in United States of America on January 8, 1997 to conduct
real estate development business in the People's Republic of China (PRC).
Currently, Registrant has four (4) separate projects under development in
PRC.
Business Acquisitions
- ---------------------
On January 8, 1997, Registrant entered into an agreement with Honpar
(Huangzhou) Properties Limited, a Hong Kong corporation, for the purchase and
sale of certain assets. Stephen Chow, an officer, director and principal
shareholder of Registrant, is also an officer, director and principal
shareholder of Honpar (Huangzhou). Pursuant to the terms of the Agreement,
Registrant issued a total of 5,760,000 shares of its restricted Common Stock in
exchange for all of the rights and interests in and to the assets of Honpar
(Huangzhou), consisting of an 80% equity interest in and to 2 projects known as
"Dragon Villa" and "Water World". A total of 4,885,700 of the shares were
issued to 4 parties who are officers, directors and/or principal share-
holders of Registrant as follows:
<TABLE>
<CAPTION>
<S> <C>
Name of Officer/Director/Principal Shareholder Number of Shares
- ---------------------------------------------- ----------------
Stephen Chow 4,322,700
Extensiview Ltd. 503,000
Paul Tong (1) 10,000
Paul Lam 50,000
</TABLE>
(1) These shares are held in the name of Sino Pride Group Limited, a
Hong Kong corporation of which Mr. Tong, an officer, director and
shareholder of Registrant, is an officer, director and principal
shareholder.
The balance of 874,300 shares were issued to 81 unrelated third parties.
2
<PAGE>
This transaction was a reverse acquisition in which the controlling
Shareholders of Honpar (Huangzhou) became the controlling shareholders of
Registrant. The number of shares issued was based on the estimated market
value of the properties at the time of acquisition, which was approximately
US$14,164,000, or approximately $2.46 per share.
On January 8, 1997, Registrant entered into an agreement with Honpar
Properties Limited, a Hong Kong corporation, for the purchase and sale of
certain assets. Stephen Chow, an officer, director and principal shareholder
of Registrant, is also an officer, director and shareholder of Honpar
Properties Limited. Pursuant to the terms of the Agreement, Registrant issued a
total of 3,240,000 shares of its restricted Common Stock in exchange for all of
the rights and interests in and to the assets, consisting of all right, title
and interest in a project known as "Maple City". A total of 2,309,000 of the
shares were issued to 5 parties who are officers, directors, advisors and/or
principal shareholders of the Registrant as follows:
<TABLE>
<CAPTION>
<S> <C>
Name of Officer/Director/Principal Shareholder Number of Shares
- ---------------------------------------------- ----------------
Stephen Chow 1,077,300
Extensiview Ltd. 972,000
Sang Chan 103,000
Paul Tong (1) 100,000
Sam Chow (2) 56,700
</TABLE>
(1) These shares are held in the name of Sino Pride Group Limited, a
Hong Kong corporation of which Mr. Tong, an officer, director and
shareholder of Registrant, is an officer, director and principal
shareholder.
(2) Sam Chow is a member of Registrant's Advisory Board and the brother of
Stephen Chow.
The balance of 931,000 shares were issued to 19 unrelated third parties.
The number of shares issued was based on the estimated market value of the
properties at the time of acquisition, which was approximately US$6,524,000,
or approximately $2.01 per share.
On December 15, 1998, Registrant issued 2,590,730 shares of Common Stock at
$1.113 per share in exchange for 100% equity interest in Honpar (Shilong)
Properties Limited (Honpar Shilong), a Hong Kong corporation of which Stephen
Chow, an officer, director and principal shareholder of Registrant, is an
officer, director and principal shareholder. The 2,590,730 shares issued by
Registrant for the exchange of Honpar Shilong's shares was based on the
historical cost of the net assets and liabilities of Honpar Shilong, which
was $2,879,078 . The price per share of $1.113 used to determine the
number of Registrant's shares to be issued (2,590,730 shares) was based on
a 30% discount on the weighted average trading price of the Registrant's
shares 60 days before the transaction date. Honpar Shilong has one
project, the Shilong City Hall, which has been under construction since 1996.
Registrant intends to sell all of the above development projects once they
are completed and fully operational.
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Name of Officer/Director/Principal Shareholder Number of Shares
- ---------------------------------------------- ----------------
Stephen Chow(1) 180,000
</TABLE>
(1) Immediately upon his receipt of these shares, Mr. Chow made a gift of all
180,000 shares, in three (3) equal parts, each consisting of 60,000 shares, to
his three daughters, Connie Chow, Conway Chow and Melody Chow. Each of his
daughters is over 21 years of age and none of them reside in the same house-
hold as Mr. Chow.
As a result of Registrant's acquisitions of Honpar (Huangzhou), Honpar
Properties Limited and Honpar (Shilong) Properties Limited, the officers,
directors and principal shareholders of Registrant received the following
aggregate number of shares and percentage of outstanding shares of Registrant:
<TABLE>
<CAPTION>
<S> <C> <C>
Name of Officer, Director Aggregate Number Percentage of Total
Principal Shareholder of Shares Received Outstanding Shares
- ------------------------ ------------------ -------------------
Stephen Chow 5,400,000 42%
Extensiview Ltd. 1,475,000 11%
Paul Tong 100,000 1%
Sang Chan 103,000 1%
Paul Lam 50,000 Less than 1%
Sam Chow 56,700 Less than 1%
</TABLE>
Including business combinations described above, Registrant's
subsidiaries and equity interests therein are as follows:
NAME INCORPORATED EQUITY
- ---- IN INTEREST
-------------- ---------
DONGGUAN DRAGON VILLA LTD PRC 80%
DONGGUAN DRAGON ENTERTAINMENT CENTRE LTD. PRC 80%
HONSTAR ENTERTAINMENT CENTRE LTD PRC 100%
GANG FENG (BOLUO) REAL ESTATE CO. LTD PRC 100%
HONPAR (SHILONG) PROPERTIES LIMITED HONG KONG 100%
ASIAN STAR (HONG KONG) LIMITED HONG KONG 100%
General
- -------
Registrant raised a total of $723,600 in a public offering pursuant to an
exemption provided by Rule 504 of Regulation D, promulgated under the Securities
Act of 1933, as amended. The offering was approved for sale by the New York
State Department of Law on June 4, 1997 and was closed on March 12, 1998. A
total of 361,800 shares of Common Stock, at a price of $2.00 per share were sold
under the offering.
Registrant has a Web site at www.asianstardev.com.
4
<PAGE>
Registrant's corporate offices are located at Suite 930, East Wing, Block B, New
World Office Building, Tsimshatsui, Kowloon, Hong Kong.
Registrant's Business Strategy
- --------------------------------
Registrant's business strategy is to continue to enter into joint venture
agreements/business combinations with certain government entities to jointly
acquire and develop urban land in the developing provinces of China.
Registrant's main focus is on resorts, amusement parks and entertainment
complexes; however, Registrant intends to also build and develop shopping malls
and other retail centers and multi-use structures. Once a project is
completed and fully operational, Registrant intends to sell its interests in and
to that project, thereby generating funds for other business projects selected
by Registrant. (See "Management Discussion and Analyses-Results of Operations"
and "Description of Projects-Limited Operating History; Accumulated Deficit;
Need for Additional Capital.")
Four (4) Projects Under Development
- -------------------------------------
1. Dragon Villa Resort in Shilong, Dongguan, Guandong Province:
Honpar (Huangzhou) Properties Limited, a Hong Kong corporation wholly owned by
Stephen S. Chow, Chairman of the Board and President of Registrant, entered
into an equity joint venture agreement with Shilong City Development Co., a
company owned by the Government of Shilong City, to develop a piece of property
at the gateway of the Huangzhou Development District, a new district of Shilong
City.
Honpar (Huangzhou) Properties Limited owned 80% of the Joint Venture and the
Shilong Government owns 20%. On January 8, 1997, Registrant entered into
an asset purchase agreement whereby it acquired all of Honpar (Huangzhou)
Properties Limited's right, title and interest in and to the joint venture
agreement and project in exchange for 5,760,000 shares of Registrant's
restricted common stock. According to the terms of the agreement, the
profit and loss sharing ratio between Registrant and Shilong City Development
Co. is 80% and 20%, respectively.
Shilong City Development Co. contributed 57,500 square meters (approximately 86
acres) of land to the project and is responsible for securing government
approvals, permits and licenses, and obtaining financing for all infrastructure
improvements (electricity, drinking water, sewer lines, gas,
telecommunications, etc.) prior to commencement of construction. As of December
31, 1998, 5,700 square meters land usage rights certificate was obtained.
The joint venture company is awaiting issuance of the land usage rights
certificates from the relevant authorities for the remaining parcels. Registrant
is responsible for the master layout of the project, architectural design,
coordination and building supervision, as well as cost of the construction of
the buildings, including road work and landscaping.
The master plans for the project were approved by the Shilong City Government
and construction work has commenced with piling work already completed for Phase
1 and part of Phase 2.
Phase 1 will consist of:
(1) Resort Hotel - The 4-story building is completed and ready for interior
finish work.
5
<PAGE>
(2) Entertainment Center - The building plans have been approved and
construction has commenced. The building will house the largest Night Club/Music
Hall in Guangdong. The Entertainment Center will also contain a Sports &
Recreation Club, Restaurant, Sauna and other indoor activities.
An approximately 67-acre site adjacent to this project was designated for a
water park, which will become an integral part of the recreational activities of
the Dragon Villa Resort. Registrant contributed funds in the amount of
$1,468,797 to the joint venture company, Dongguan Dragon Villa Limited, for the
construction of the water park, while the PRC joint venture partner contributed
a parcel of land. This parcel of land will be returned to the PRC joint venture
partner when the co-operative joint venture agreement expires in 70 years
commencing from 1997. The construction of the water park and entertainment
center which includes facilities such as a restaurant, swimming pools and a
kiosk was completed and operations commenced on August 1, 1998. The park opened
to overflow crowds, has a full range of water sports and entertainment
facilities, including a standard size underwater musical swimming pool, wave
pool, toddler's pool, water slide towers, restaurant and other facilities. The
water park had over 2,000 visitors on its first day of operation. The profit and
loss sharing ratio between Dongguan Dragon Villa Limited and the joint venture
partner is 80% and 20%, respectively.
Shilong is a well-known industrial/business area of Dongguan in the Guangdong
Province. It is located in the northern portion of Dongguan and is serviced by
a well-developed road and communication network to other cities. The entire
region is served by the Shenzhen/Guangzhou Freeway, which connects Dongguan to
Guangzhou in the north and Shenzhen in the south. Shilong is approximately
a 13-hour drive from Hong Kong.
Shilong is also serviced by train, which takes approximately 45 minutes,
either from Guangzhou or Shenzhen. Planning is currently underway for
redevelopment of the existing train station into a modern train station to match
the operation of a high speed train serving the increasing population from the
various local districts. The journey from Shilong to Guangzhou is expected to
be shortened to approximately 20 minutes when the new train station project is
completed in 2001.
Shilong is one of the cities of Dongguan with active foreign investments by
high-tech industries from Japan, Taiwan, Hong Kong and the U.S. With the
continuing development of major entertainment/leisure complexes, such as
Registrant's water park and other planned resorts, Shilong is projected to
become a major regional entertainment center.
With the continuing growth in both the business and residential markets in
Shilong and Guandong Province, Registrant believes its projects will be highly
successful and will make a significant contribution to the successful
development of the areas of the Province where it operates.
2. Mapi (Maple City), Guandong, China:
Honpar Properties Limited, a Hong Kong corporation, entered into a Joint
Venture Agreement with the Government of Mapi to develop Maple City, nicknamed
the "City of the Future". Under the terms of the agreement,the
Government of Mapi is responsible for securing all necessary government
approvals, permits and licenses for all aspects of the project and obtaining
financing for all infrastructure improvements (electricity, drinking water,
sewer lines, gas, telecommunications, etc.) prior to commencement of
6
<PAGE>
construction. Honpar Properties Limited is responsible for the
development and construction of the joint venture projects. On January 8,
1997, Registrant entered into an asset purchase agreement with Honpar Properties
Limited to acquire all of Honpar's rights, titles and interests in the Maple
City Joint Venture Agreement.
The Maple City project, which is developed by Registrant, comprises 3 parcels of
land which are close, but not adjacent to each other. The land usage
rights certificates for the Maple City project stipulate a lease term of 70
years commencing from 1993 and the total area is approximately 74,000 square
meters (approximately 111 acres). It is the intention of Registrant to build a
hotel, commercial and entertainment complex on these parcels of land.
Registrant intends to develop the parcels as follows:
(1) A Hotel Entertainment Center/Exhibition Plaza will be built on 35,000
square meters in the heart of the project. The building is completed and ready
for interior finish work. The main building will house a hotel with 24 rooms, a
night club, a sauna and restaurant on the first floor. Registrant anticipates
expansion of the hotel to up to 200 rooms in the future.
(2) An exclusive resort with a private lake, single family homes, marina,
club and water amusement facilities will be built. The infrastructure work and
utilities are currently being completed. The main road from the City Center
Gateway to the project site has been completed.
(3) A commercial/residential complex in the City Center Gateway will be
built on 33,000 square meters. All utilities and infrastructure work has been
completed on this project.
The Maple City Master Plan includes the new railway station and freeway system
and includes 500 acres for an industrial park near the train station. 86 acres
are reserved for hotel, commercial, entertainment and condominium developments
in the heart of the city. Approximately 600 acres are set aside around the
lakeshore areas of Red Lady Lake for the usage of developing resort and
residential properties.
Maple City is located east of Guangzhou and north of Huizhou and in the center
of Guandong Province, the wealthiest and most developed Province, with a total
population of 62,460,000. Fully aware of the fact that both Guangzhou City and
Shenzhen City are overly populated, congested and developed, the Chinese Central
government is diverting new projects and investment into the Greater Huizhou
area. The new "Beijing-Hong Kong" railway passes through Maple City, giving
it direct access to all major cities in China by train. The present
South-West route also provides rail service from Maple City to other
major cities of Guandong, the East route to Shantou and the West route
to Zhanjiang. In addition, Guandong has one of the newest freeway systems in
China, making access to Maple City accessible from many cities by car and,
when the new freeway is completed, travelers will have access to Pingtam
Airport, a 30-minute drive from Maple City and the only airport in the Huizhou
area. The total population of the five major surrounding cities accessible
to Maple City is approximately 17 million. Maple City enjoys year-round
sub-tropical climate, typical of Southern China.
7
<PAGE>
3. Shilong City Hall Plaza
The Shilong City Hall project, which under development by Honpar
Shilong, consists of a parcel of land located in the center of Shilong Town
with approximately 5,855 square meters. Honpar Shilong entered into a
co-operative contract with Shilong City Government to build a commercial complex
on the land, including retail and office space, residential space and a
city hall theatre with approximately 1,000 seats. In addition, Honpar Shilong is
required to allow the Shilong City Government to freely use the city hall
theater. The lease of land usage rights will expire in 70 years
commencing on the date when the inspection certificate (certificate of
occupancy after completion of construction) is issued by the City
Government.
Pursuant to the terms of the co-operative contract, Honpar Shilong is
required to pay, upon the issuance of the inspection certificate, RMB50
million for the land usage rights and RMB3.8 million for land management
fee and land improvement expenses. Upon fulfilling the above requirements, the
title of the land usage rights will be transferred to Honpar Shilong from the
Shilong City Government. As of December 31, 1998, RMB4 million ($469,814)
in installment payments had been made by Honpar Shilong against the RMB50
million land usage rights.
On December 15, 1998, Registrant acquired 100% of Honpar Shilong's total
outstanding shares in exchange for 2,590,730 shares of Registrant's restricted
common stock.
The subject property is a rectangular shaped corner lot located at the
junction of two major arterial roads within the prime commercial/
residential location of Shilong City and directly across from a
newly-developed high-rise, modern commercial building/apartment hotel. The site
is also in close proximity to some of the well-known tourist areas of Shilong,
and to the train and bus stations.
Registrant's current development plans include a main structure, consisting of
a food court, bars, night club, fitness center and shopping mall; a theater
building; and a parking garage.
4. 6-12 Convenience Store Chain
In September, 1998, Registrant entered into a letter of intent with Lin Tao Ge,
an unrelated third party, to form a new Hong Kong corporation to acquire 100% of
the total issued and outstanding shares of two China corporations, Super
Shopping Channels Ltd. and Beijing Kinetic Sales Network Limited. Registrant
will own 75% of the newly-formed corporation and Mr. Ge will own 25%.
No costs have been incurred on this project as of the date of the filing of
this Form 10SB.
Due to the rapid process of reform and liberalization in China, coupled with an
increased demand for work efficiency and an acceleration in the pace of life,
most people in Beijing have changed their purchasing habits in order to adjust
to cosmopolitan living. Nevertheless, Beijing still lacks a large-scale
convenience store chain that carries a large variety of products where people
can conveniently shop at a relatively early or late hour. Registrant
intends to develop the first large scale convenience store chain in China,
namely the 6-12 Convenience Store. Each store, or kiosk, will be equipped
8
<PAGE>
with air-conditioning, electricity and water, computers to facilitate record
keeping, telecommunication equipment and shelf space for 300-400 retail
convenience items. Billboard spaces on the exterior of the kiosks will also
be available for rental. Registrant intends to begin installation of 1,000
"6-12" Convenience Stores in Beijing. Registrant is also developing plans
to install the stores in other regions of China in the near future.
Project Funding
- ---------------
The operating activities of the above four projects were substantially financed
by Stephen Chow, an officer, director and principal shareholder of Registrant,
by either infusing equity capital or providing shareholder loans. Additional
financing was derived from the sale of the Registrant's equity
securities. (See "Certain Transactions" and "Financial Statements".)
Considering the condition that only limited funding is presently available, the
completion of these four projects on a timely basis will depend significantly on
the additional funding available to the Registrant through debt and/or equity
financing in the near future. (See "Management Discussion and Analyses")
Competition
- -----------
Both Maple City and Shilong Town are currently being heavily expanded and
developed with the assistance of their respective governments. Registrant
anticipates that there will be extensive competition from other companies and
businesses, including some large, multi-national hotel and resort developers.
Currently, Registrant has the only Water World project commencing operation and
other projects in development in the Dongguan area. There are currently
several resort hotels and entertainment facilities in the area, but
none as large as those being developed by Registrant.
Government Regulation
- ----------------------
Registrant's projects are subject to various laws and governmental regulations
relating to its business operations and project developments, such as zoning
requirements. In these joint venture projects with Chinese state-owned entities,
the Chinese partners are responsible for obtaining all licenses, permits and
regulatory approvals for the projects. Meanwhile, Registrant is solely
responsible for obtaining such licenses, permits and regulatory approvals for
any other projects not involving these state-owned entities. Registrant
believes it is currently in compliance with all laws, rules and regulations
applicable to its projects and such laws, rules and regulations do not currently
have a material impact on its operations. However, due to the increasing
popularity and growth in development in the areas of China where Registrant is
currently operating, it is possible that new laws, rules and/or regulations may
be adopted with respect to Registrant's projects or proposed projects. The
enactment of any such laws, rules or regulations in the future may have a
negative impact on Registrant's projected growth, which could in turn decrease
Registrant's projected revenues or increase its cost of doing business.
Employees
- ---------
At the present time, Registrant has 125 full-time employees, including its
officers and directors. Registrant subcontracts out all of the work on its
development projects to unrelated third parties.
9
<PAGE>
Additional Information
- -----------------------
Registrant intends to provide annual reports to its security holders, and to
make quarterly reports available for inspection by its security holders.
The annual report will include audited financial statements.
Upon completion of this registration statement, Registrant will be subject to
the informational requirements of the Securities Exchange Act of 1934 (the
Exchange Act) and, in accordance therewith, will file reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information may be inspected at public reference facilities
of the Commission at Judiciary Plaza, 450 Fifth Street N.W., Washington D.C.
20549; Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; 7 World Trade Center, New York, New York, 10048; and 5670
Wilshire Boulevard, Los Angeles, California 90036. Copies of such material can
be obtained from the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 at prescribed rates.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSES
======================================
This registration statement contains forward-looking statements that involve
risks and uncertainties. The statements contained in this registration statement
that are not purely historical are forward-looking statements, including without
limitation statements regarding Registrant's expectations, beliefs,
intentions or strategies regarding the future. All forward-looking
statements included in this document are based on information available to the
Registrant on the date hereof, and Registrant assumes no obligation to
update any such forward-looking statements. Registrant's actual results
may differ materially as a result of certain factors, including those set
forth hereafter and elsewhere in this registration statement.Potential investors
should consider carefully the following factors, as well as the more detailed
information contained elsewhere in this registration statement, before making
a decision to invest in the Common Stock of Registrant.
Consolidation of Joint Ventures in PRC
- -----------------------------------------
The Company has consolidated the joint ventures in China because it has a
controlling interest provided by the underlying joint venture agreements;
however, joint venture interests in the PRC are generally not consolidated in
the financial statements of U.S. companies due to rights asserted by the PRC as
a party to the joint venture agreements. In that regard, the PRC's
interpretation of the joint venture agreements may differ from the Company's
and it is uncertain what legal recourse the Company would have available within
the Chinese legal system if any such dispute arose.
Selected Consolidated Financial Data
- ---------------------------------------
The following historical financial data for the period ended December 31, 1997
and the year ended December 31, 1998 was derived from the historical
consolidated financial statements of Registrant that have been audited by BDO
International, independent auditors (the Financial Statements). The
historical financial data for nine months ended September 30, 1998
and 1999 are unaudited and were extracted from Registrant's accounting records.
10
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
- ------------------
<S> <C> <C> <C>
12/31/97 12/31/98 9/30/99
========= ======== =========
Cash and cash equivalents . . $ 34,311 $ 71,690 $ 4,601
Subscription receivable . . . . . . . . - 91,980 -
Prepayments - 393,818 170,022
Inventories . . . . . . . . . . . . . . - 29,045 7,586
Other assets. . . . . . . . . . . . . 580 20,405 65,397
--------- ---------- ----------
Total current assets. . . . . $ 34,891 $ 606,938 $ 247,606
Land usage rights 234,909 469,814 469,814
Land improvement 4,042,644 4,274,312 4,274,312
Construction in progress. . . . 1,080,539 1,564,530 1,961,606
Property and equipment(net) . . . . 3,160 1,424,053 1,348,061
---------- ---------- ----------
Total assets. . . . . . . . $ 5,396,143 $ 8,339,647 8,301,399
Due to a shareholder. . . . . $ 524,329 $ 236,922 $ 478,903
Accounts payable. - 579,289 542,812
Others payable 33,860 126,447 276,009
Accrued expenses. . . . . . . . . 123,539 95,737 9,223
----------- ----------- -----------
Total current liabilities . . $ 681,728 $ 1,038,395 $ 1,306,947
Total shareholders'
equity $ 4,714,415 7,301,252 $ 6,994,452
</TABLE>
<TABLE>
<CAPTION>
Statements of operations data:
- ------------------------------
From Year Nine Months
Inception to Ended ended Sept.30
December 31, December 1998 1999
1997 31, 1998 (unaudited)
------------ --------- ------ ------
<S> <C> <C> <C> <C>
Sales. . . . . . $ - $188,583 $ 174,317 $ 41,926
Cost of sales .. $ - $ 94,845 $ 75,872 $ 40,603
Selling expenses $ - $175,744 $ 109,836 $ 78,928
General and
administrative
expenses $ - $975,567 $ 513,821 $282,565
Other Income, net $ - $ (46,058) $ (178) $(53,370)
Net loss . . . . . $ - $(1,011,515) $ (525,034) $(306,800)
Net loss per
common share $ - $ (.08) $ (.043) $ (.024)
Weighted average
common shares
Outstanding 11,628,146 12,294,905 12,096,012 12,955,530
</TABLE>
11
<PAGE>
Results of Operations
- -----------------------
Limited Operating History; Accumulated Deficit; Need for Additional Capital
There is limited historical financial information about Registrant upon which
to base an evaluation of the Registrant's performance or to make a decision
regarding an investment in shares of Registrant's Common Stock. Registrant has
an accumulated deficit of $1,318,315 through September 30, 1999. Registrant's
cash and cash equivalents decreased from $70,117 at September 30, 1998 to $4,601
at September 30, 1999.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended
September 30, 1998
Revenue from the operation of the Water Park's restaurant and swimming pool for
the nine months ended September 30, 1999 amounted to $41,926 and for the quarter
ended September 30, 1999, it amounted to $22,643. Revenue of Registrant for the
nine months ended September 30, 1998 and for the quarter ended September 30,
1998 amounted to $174,317. Reduction in revenue is because of the suspension of
restaurant business after the Chinese New Year during the first quarter of 1999.
Included in the selling expenses of $78,928 for the nine months ended September
30, 1999 are mainly salary and depreciation expenses. Reduction in selling
expenses is because of the gradual lay off of PRC staff after the Chinese New
Year. Included in the general and administrative expenses are $175,262
consulting fees and $26,894 salary expenses. Reduction in general and
administrative expenses is because of the provision of $339,657 employees'
compensation for stock option granted and the provision of $60,000 CEO
compensation for the quarter ended September 30, 1998.
Period Ended December 31, 1997 and Year ended December 31, 1998:
Revenue for the five (5) months operation of the Water Park for the year ended
December 31, 1998 was $188,583. Registrant had no revenues for the year ended
December 31, 1997, as all of its projects were in the construction/development
stage through December 1997. Revenues realized in 1998 were attributable to the
opening of Shilong Water World in August, 1998.
The cost of sales for the year ended December 31, 1998 was $94,845. Selling,
general and administrative expenses were $1,151,311 for the year ended December
31, 1998. Other income for the year ended December 31, 1998 was $46,058.
The main items included in 1998 cost of sales are $58,239 food material and
$31,573 salary expenses. Selling expenses comprise $46,000 salary and staff
benefits, $46,432 depreciation expenses, and $63,892 fuel and water. General
and administrative expenses include $112,500 consultancy fee, $120,000 CEO
compensation and $679,314 stock-based compensation.
Net cash provided by financing activities increased from $886,669 for the period
ended December 31, 1997 to $1,491,273 for the year ended December 31, 1998, as a
result of proceeds received from sales of Common Stock of Registrant.
Registrant's net loss for the year ended December 31, 1998 was a deficit of
$1,011,515, or a deficit of $.08 per share, based on 12,294,905 weighted
average shares outstanding at December 31, 1998. Since there were no revenues
realized during the calendar year 1997, no comparison of net loss is made.
12
<PAGE>
The large deficit for the year ended 1998 period was attributed to the costs
associated with the stock-based compensation amounting to $679,314 and the CEO
compensation of $120,000.
Liquidity and Capital Resources
For the quarter ended September 30, 1999, Registrant has generated negative cash
flow of $67,089 from its operations for the nine months operation due to the
payment for overhead. Due to the infant stage of its operations, substantial
ongoing investment in properties and development efforts, and expenditures to
build the appropriate infrastructure to support expected future growth,
Registrant has been substantially dependent on private placements of its equity
securities and shareholder loan financing to fund its cash requirements.
Expenditures for acquisition of properties and fixed assets decreased from
$1,405,894 for the nine months ended September 30, 1998 to $7,137 for the nine
months ended September 30, 1999. Expenditures for overhead, representing
accumulated indirect costs which are related to projects, decreased from
$256,001 for the nine months ended September 30, 1998 to $248,825 for the nine
months ended September 30, 1999. Payments for construction materials increased
from $324 for the nine months ended September 30, 1998 to $148,251 for the nine
months ended September 30, 1999. Net cash used in investing activities
decreased from $1,622,219 for nine months ended September 30, 1998 to $378,051
for the nine months ended September 30, 1999.
Proceeds from common stock subscription decreased from $1,600,660 for the nine
months ended September 30, 1998 to $91,980 for the nine months ended September
30, 1999.
As of September 30, 1999, Registrant had total assets of $8,301,399 and total
liabilities of $1,306,947.
Period Ended December 31, 1997 and Year ended December 31, 1998:
Expenditures for acquisition of properties and fixed assets increased from $966
for the period ended December 31, 1997 to $1,470,510 for the year ended December
31, 1998. Expenditures for overhead, representing accumulated indirect costs
which are related to projects, decreased from $477,591 for the period ended
December 31, 1997 to $471,742 for the year ended December 31, 1998. Payments for
land improvement costs decreased from $523,597 for the period ended December 31,
1997 to zero for the year ended December 31, 1998. Net cash used in investing
activities increased from $1,002,154 for the period ended December 31, 1997 to
$1,942,696 for the year ended December 31, 1998.
Registrant issued 198,100 shares of Common Stock at $2.00 per share through a
Rule 504 Regulation D offering in 1997. The total proceeds were $362,340, net
of total offering expense of $33,860. Of these 198,100 shares of Common Stock,
20,000 shares were issued in early January 1998.
In March 1998, Registrant issued another 163,700 shares of Common Stock at $2.00
per share through the same Rule 504 Regulation D offering in 1997. The total
proceeds were $294,660, net of total offering expense of $32,740. The investor
group consisted of approximately 20 individuals. Most investors are either
relatives or close friends of one of the Registrant's directors and are
accredited investors.
13
<PAGE>
In June 1998, Registrant sold, in a private placement transaction, a total of
323,000 shares of its restricted Common Stock to Extensiview Ltd., an existing
shareholder of Registrant, for the sum of $646,000 U.S., or $2.00 per share.
In July 1998, pursuant to a Stock Option Plan adopted by the Board of Directors
of Registrant on July 1, 1998, Registrant granted stock options to acquire up to
a total of 968,480 shares of its restricted Common Stock to certain of its
officers, directors, key employees and consultants. As additional compensation
for services rendered and/or incentives for services to be rendered to
Registrant in the near future. The Stock Option Plan provides that each holder
of Options shall be entitled to purchase one share of Registrant's restricted
Common Stock at an exercise price of $1.50 per share for a period of one (1)
year from the date of issue of the Option. Any shares acquired through exercise
of these Options shall be restricted shares and may not, under any
circumstances, be registered or in any way become free trading until two years
from the date the shares are acquired through exercise of the Option. As of the
date of this registration statement, no Options have been exercised.
In August 1998, Registrant sold, in a private placement transaction, a total of
300,000 shares of its restricted Common Stock to Mr. Li Chee Ngam, for the sum
of $660,000 U.S., or $2.20 per share.
In September 1998, Registrant issued 200,000 shares of its restricted Common
Stock, valued at $2.25 per share, to two unrelated business entities in exchange
for stock promotion services for a term of two (2) years.
In November 1998, Registrant sold, in a private placement transaction, a total
of 180,000 shares of its restricted Common Stock to Mr. Li Chee Ngam, for the
sum of $270,000 U.S., or $1.50 per share.
In December 1998, Registrant issued 2,590,730 shares of its restricted Common
Stock, valued at $1.113 per share, in exchange for a 100% equity interest in
Honpar Shilong, a company incorporated in Hong Kong of which Stephen Chow, an
officer, director and principal shareholder of Registrant, is an officer,
director and principal shareholder. The value of the price per share was
determined based on the historical cost of the total assets and liabilities of
Honpar Shilong as of October 31, 1998.
Since inception, Registrant has used its Common Stock and stock options to
attract and compensate employees and consultants, as additional incentive for
debt financing, for acquisitions, and to repay outstanding indebtedness.
As of December 31, 1998, Registrant's total assets and total liabilities
were $8,339,647 and $1,038,395, respectively.
Registrant has only recently begun operations at its Shilong Water World and
has yet to reach break-even in terms of both cash flow and profitability
Total proceeds of $1,778,680 generated from the sale of Registrant's common
stock both in public and private offerings were used as follows:
<TABLE>
<CAPTION>
<S> <C>
(a) Acquisition of properties and fixed assets $1,470,510
(b) Repayment of advances from a shareholder $ 287,407
(c) Payment of overhead expenses $ 471,742
</TABLE>
14
<PAGE>
For 1999, the Registrant expects to incur additional costs for construction and
development of its properties and for professional and legal fees. It also
expects to expand its sales and marketing efforts relating to its business
operations. These efforts could significantly increase demand for Registrant's
properties and business operations beyond Registrant's current capacity.
Significant additional funding is required to meet any additional expansion
requirements while Registrant believes it can increase its production and
staffing capacity to meet any such demand.
Registrant is taking steps to raise equity capital; however, there can be no
assurance that any new capital will be available to Registrant or that adequate
funds for operations, whether from Registrant's revenues, financial markets,
collaborative or other arrangements with corporate partners or from other
sources, will be available when needed, or on terms satisfactory to Registrant.
The failure of Registrant to obtain adequate additional financing may require
Registrant to delay, curtail or scale back some or all of its construction and
development programs, sales and marketing efforts and, potentially, to cease its
operations. Any additional equity financing may involve substantial dilution to
Registrant's then-existing shareholders.
Effect of Inflation
- ---------------------
Registrant believes that inflation has not had a material effect on its net
sales and results of operations.
Effect of Fluctuation in Foreign Exchange Rates
- -----------------------------------------------------
Registrant is operating in China and maintains its financial control center in
Hong Kong. Also, most of its operating activities are recorded in Hong Kong
dollars. Chinese currency, Renminbi (RMB), has been quite stable for the past
few years and the Hong Kong dollar has also been stable in its exchange rate
with the U.S. dollar. Therefore, Registrant believes there could be very
limited effects of fluctuation of the foreign exchange rate on its financial
statements. However, there is no assurance that Renminbi will not fluctuate
against other hard currencies, or that Renminbi may be devalued against the US
Dollar.
Year 2000 Issues
- ------------------
Management has done a significant analysis and assessment of its Year 2000
Issues, including Registrant's officers and directors consulting with
independent Y2K consultants and devoting significant time and energies, at
several lengthy meetings, to the analysis and assessment of the Y2K issue.
Based thereon, it was determined that, since Registrant has no use of computers
in its business operations, Y2K will not have a material effect on its
operations. Registrant has not no remediation relative to the Y2K issues, and
does not intend to do so. To date, Registrant has incurred nominal costs (less
than $500 U.S.) to address Y2K issues. Registrant has not developed any
contingency plans to address possible Y2K risks. Registrant has consulted
with its third-party vendors in China and was advised that they, like
Registrant, do not use computers in their respective operation.
Therefore, based upon its analysis and assessment, Registrant has concluded
that:
(1) The assessment of its Year 2000 issues is complete; and
15
<PAGE>
(2) Management has determined that the consequences of its Year 2000
issues will not have a material effect on its business, results
of operations or financial condition.
ITEM 3. DESCRIPTION OF PROJECTS
=========================
The projects held by Registrant consist of the following:
(A) Shilong Town Resort and Water World
(B) Maple City Resort
(C) Shilong City Hall Plaza
(A) Shilong Town Resort and Water World
-----------------------------------------
The Shilong Town project, which was acquired by Registrant for a total cost of
$8,523,218, out of which $6,053,268 represents the land usage fee (right), or
cost for the parcel of land, as agreed upon by the Registrant and the
Seller. The property is situated in Shilong Town, Dongguan, Guangdong
Province. Although this amount was the contractually agreed upon value of
the land usage fee (right), the Registrant has not realized this value from an
accounting standpoint and the book value of the right is carried on the
financial statements at $0. The price was paid by Registrant through
Issuance of 5,760,000 shares of its restricted Common Stock. The parcel of
land contains a total area of 57,500 square meters and the land usage fee for
50-70 years, as provided in the agreement between the parties, is RMB 50
Million. As of December 31, 1998, the foreign currency exchange rate was
US $1.00 = RMB $8.265. The 57,500 square meters of property was contributed
by Shilong City Development Co. (SCDC), a Chinese corporation owned by the
Chinese government, as consideration for its 20% share of capital in the joint
venture company with Honpar (Huangzhou) Properties Limited.
The project consists of 3 parcels of land located in the new Shilong Town
Center, which are adjacent to each other and comprise a total area of
approximately 86 acres. It is the intention of Registrant and its joint venture
partner, Shilong City Development Co., a company owned by the Government of
Shilong Town to establish a residential, commercial and entertainment complex on
these 3 parcels of land.
Registrant expects the project will be completed in 2001. The land on which the
commercial and entertainment buildings will be built will have a 50-year lease
term while the remainder have a 70-year lease term, starting from the date when
land usage rights certificates are obtained. (See "Description of Business.")
The Shilong Water Amusement Park project is located adjacent to the 3 parcels of
land and consists of approximately 40,000 square meters. This land will be
returned to the Government of Shilong when the joint venture agreement expires
in 70 years. (See Item 1. "Description of Business.")
(B) Maple City Resort
-------------------
Registrant issued 3,2400,000 shares of its restricted Common Stock to
acquire the Maple City Project through the acquisition of Honpar Properties
Limited, which was 80% owned by Honpar (Huangzhou) Properties Limited.
The Maple City project consists of 3 parcels of land which are close to each
other, comprising approximately 74,000 square meters. The land usage
16
<PAGE>
rights certificates of the Maple City project stipulate a lease term of 70
years commencing from 1993 and the total area is approximately 74,000 square
meters (approximately 111 acres). The land was contributed to Registrant at
nominal consideration. It is the intention of Registrant to build a hotel,
commercial and entertainment complex on these parcels of land. A hotel and
entertainment center is being built by a PRC wholly-owned subsidiary, Honstar
Entertainment Center Limited (Honstar), with structural work already
completed. Registrant anticipates the project being completed in 2002.
The Maple City Master Plan includes the new railway station and freeway system
and includes 500 acres for an industrial park near the train station. 86 acres
are reserved for hotel, commercial, entertainment and condominium developments
in the heart of the city. Approximately 600 acres are set aside around the
lakeshore areas of Red Lady Lake for the usage of developing resort and
residential properties. (See Item 1. Description of Business.)
(C) Shilong City Hall Plaza
--------------------------
On December 15, 1998, Registrant entered into an agreement with Honpar (Shilong)
Properties Limited, a Hong Kong corporation, of which Stephen Chow, an officer,
director and principal shareholder of Registrant, is an officer, director and
principal shareholder, whereby Registrant agreed to exchange 2,590,730
shares of its restricted Common Stock for 100% of the total issued and
outstanding stock of Honpar (Shilong) Properties Limited. The net asset
value of Honpar (Shilong) Properties Limited was supported by audited
financial statements of Honpar (Shilong) Properties Limited, prepared in
accordance with U.S. GAAP. Registrant considers the transaction by which it
acquired all these assets is an arm's length transaction for the following
reasons:
(a) The management of Registrant is not related, directly or indirectly, to
Shilong City Development Co. ("SCDC") and neither party has the ability to
control the other party or exercise influence over the other party in making
financial and/or operating decisions.
(b) Prior to the Shilong Town project, there were no other dealings among
Honpar (Huangzhou) Properties Limited, Honpar Properties Limited, SCDC and
Registrant.
(c) The land usage fee (RMB $50 Million) was agreed to by the parties (SCDC
and Honpar) after considerable arm's length negotiations between the management
of Honpar (Huangzhou) Properties Limited and SCDC.
(d) Following the transfer of the subject projects to the Registrant by
Honpar (Huangzhou) Properties Limited and Honpar Properties Limited, both of
these companies commenced proceedings for liquidation and have no further
rights, titles or interests in or to the subject projects.
(e) Land improvement and development contracts for the Shilong Town project
and other projects were entered into with parties not related to either STHP or
the officers, directors or shareholders of Honpar (Huangzhou) Properties,
Honpar Properties Limited or the Issuer. These land improvement and development
contracts were accepted by the management of each company based upon their
property development expertise and comparable market prices for similar goods
and services. Registrant anticipates the project will be completed in
2002.
17
<PAGE>
Limited Operating History; Accumulated Deficit; Need for Additional Capital
- ---------------------------------------------------------------------------
There is limited historical financial information about Registrant upon which to
base an evaluation of Registrant's performance or to make a decision regarding
an investment in shares of Registrant's Common Stock. Registrant has
had an accumulated deficit of $1,318,315 through September 30, 1999.
Registrant's cash and cash equivalents decreased from $10,371 at June 30, 1999
to $4,601 at September 30, 1999.
Registrant only recently completed construction of its first project, Shilong
Water World, and commenced operations on August 1, 1998, generating gross
revenues at December 31, 1998 of $188,583. There can be no assurance that
Registrant will be successful in its business operations or will achieve
significant levels of market acceptance for its proposed property
development ventures. Registrant's business could be subject to any or all of
the problems, expenses, delays and risks inherent in the establishment of a new
business enterprise including limited capital resources, possible delays in
construction and/or development of its properties, possible cost overruns due to
price and cost increases in raw products and manufacturing processes, uncertain
market acceptance and the absence of an operating history. Therefore, there can
be no assurance that Registrant's business or proposed ventures will be
successful or that Registrant will be able to achieve or maintain profitable
operations. Further, there can be no assurance that Registrant will not
encounter unforeseen difficulties that may deplete its capital resources more
rapidly than anticipated.
To become and remain profitable and competitive, Registrant will likely be
required to make significant investments in the construction and development of
its properties. Registrant is seeking additional equity financing in order to
provide for the capital required to maintain or expand its business operations.
To date, Registrant has not been successful in its attempts to find additional
equity financing and presently has no available sources of financing.
Upon completion of each project, Registrant intends to sell its interests in
and to that project, thereby generating funds for other business projects
selected by Registrant. (See "Description of Business-Registrant's Business
Strategy" and "Management Discussion and Analyses - Results of Operations".)
The timing and total amount of capital requirements cannot be predicted at this
time. There can be no assurance that any financing will be available on
acceptable terms, if at all. If such financing is not available on satisfactory
terms, Registrant may be unable to continue, develop or expand its business or
develop new properties at the rate desired and its operating results may be
adversely affected. Equity financing could result in additional dilution to
existing shareholders.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
=========================================================
MANAGEMENT
==========
The following table sets forth information regarding the shares of Registrant's
Common Stock, par value $.001, beneficially owned for (i) each stockholder known
by Registrant to be the beneficial owner of 5% or more of the Registrant's
issued and outstanding Common Stock; (ii) each of the Registrant's officers and
directors; and (iii) all officers and directors as a group. At June
30,1999, there were 12,955,530 shares of Common stock outstanding.
18
<PAGE>
<TABLE>
<CAPTION>
Amount &
Nature of
Title Beneficial Percent of
Name and address Of Class Ownership(1) Class
- ----------------- ---------- ----------- ----------
<S> <C> <C> <C>
Stephen Chow (2). . . . . . Common Stock 5,578,480 43%
Room 930, Block B,
East Wing
New World Office Bldg.
Tsimshatsui, Kowloon,
Hong Kong
Sang Chan Common Stock 200,000 2%
Room 930, Block B,
East Wing
New World Office Bldg.
Tsimshatsui, Kowloon,
Hong Kong
Paul Lam Common Stock 150,000 1%
Room 930, Block B,
East Wing
New World Office Bldg.
Tsimshatsui, Kowloon,
Hong Kong
Dr. Paul Tong Common Stock 210,000 2%
Room 930, Block B,
East Wing
New World Office Bldg.
Tsimshatsui, Kowloon,
Hong Kong
Sam Chow (2) Common Stock 222,800 2%
2535 Irving Street
San Francisco, Ca. 94122
- --------------------------
All officers and directors
as a group 6,361,280 49%
</TABLE>
(1) Includes Stock Options which were granted to the officers and directors
under a Stock Option Agreement, dated July 14, 1998. (See "Management"
"Principal Stockholders" and "Certain Transactions".)
(2) Sam Chow, a member of Registrant's Advisory Board, is the brother of
Stephen Chow, an officer, director and principal shareholder of Registrant.
There are no arrangements, known to Registrant, including any pledge by any
person of securities of the Registrant, which may, at a subsequent date, result
in a change in control of Registrant.
19
<PAGE>
Future Sales by Existing Stockholders
- -----------------------------------------
All shares of Common Stock of Registrant are "restricted securities", as that
term is defined in Rule 144 of the Rules and Regulations of the SEC promulgated
under the Act ("Rule 144"), save and except the 361,800 shares which were issued
under a public offering in the State of New York, pursuant to an exemption
provided by Rule 504 of Regulation D, promulgated under the Securities Act of
1933, as amended, which are not "restricted securities" under Rule 144 and can
be publicly sold, except for those Shares purchased by "affiliates" of the
Registrant, as that term is defined in Rule 144.
Under Rule 144, restricted shares can be publicly sold, subject to volume
restrictions and certain restrictions on the manner of sale, commencing one (1)
year after their acquisition. Sales of shares by "affiliates" are subject to
volume restrictions and certain other restrictions pertaining to the manner of
sale, all pursuant to Rule 144.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
==================================================================
The following table sets forth the names, ages and positions of the Directors
and Executive Officers of Registrant:
<TABLE>
<CAPTION>
Name and Address . . . Age Position(s) Held (1)
- ---------------- --- --------------------
<S> <C> <C>
Stephen Chow 58 President, CEO and
Room 930, Block B, Chairman of the Board
East Wing
New World Office Bldg.
Tsimshatsui, Kowloon,
Hong Kong
Sang Chan 62 Director and Treasurer
Room 930, Block B,
East Wing
New World Office Bldg.
Tsimshatsui, Kowloon,
Hong Kong
Paul Lam 57 Director and Secretary
Room 930, Block B,
East Wing
New World Office Bldg.
Tsimshatsui, Kowloon,
Hong Kong
Dr. Paul Tong 57 Director
Room 930, Block B,
East Wing
New World Office Bldg.
Tsimshatsui, Kowloon,
Hong Kong
</TABLE>
20
<PAGE>
Each director of the Registrant is elected by the stockholders to a term of one
(1) year and serves until his successor is elected and qualified. Each
officer of the Registrant is elected by the Board of Directors to a term of one
(1) year and serves until his successor is duly elected and qualified, or
until he is removed from office. The Board of Directors has no nominating,
auditing or compensation committees.
Background of Officers and Directors
- ----------------------------------------
Stephen Chow - Mr. Chow has been the Chief Executive Officer, President and
Chairman of the Board of Directors of the Registrant since inception. For the
past five years, he has also been the Managing Director of Honpar group
companies, Hong Kong and Vice President of Enrich Ventures, Ltd., a public
corporation traded on the Vancouver Stock Exchange. From 1983 to 1990, he was
Senior Vice President of Hip Shing Land Development Ltd., USA and from 1972 to
1994, he was President of Consolidated Investment & Construction Ltd. in Canada.
He is currently the Advisor of Economic Affairs in the City of Taishan,
Guandong, China and has been appointed an Honorable Citizen of Shilong,
Dongguan, Guandong, China. His past appointments/affiliations include Director,
Community Redevelopment Agency of the City of Los Angeles; Director/Officer of
Windsor Builders Association of Ontario, Canada; President, Essex County
Chinese-Canadian Association of Ontario, Canada; and Director, Multi-Cultural
Council of Canada. He graduated from Hong Kong Technical College in 1959. He is
the brother of Sam Chow, a member of Registrant's Advisory Board. Mr. Chow
devotes full time to the business of Registrant.
Sang Chan - Mr. Chan has been a Director and the Treasurer of the Registrant
since inception. From 1993 to the present, he has also been Chairman of Po Sang
Construction Co., Ltd. of China; General Manager of Honpar (Huangzhou)
Properties Co., Ltd.; General Manager of the China Division of Honpar
Properties, Ltd. and the Owner/Manager of Po Sang Construction Co., Ltd., Hong
Kong. From 1961 to 1993 he was a Consultant/Designer for various architectural
firms in Hong Kong. Mr. Chan has a Major Degree in Accounting from Yuet Hoi
University of Macau and devotes full time to the business of Registrant.
Paul Lam - Mr. Lam has been a Director and the Secretary of the Registrant since
inception. From 1992 to the present, he has been the Managing Director of CNT
Group Ltd., a Hong-Kong publicly-traded paint manufacturing company.
From 1975 to 1992, he was Managing Director of The China Paint Mfg. (1946)
Co., Ltd. Mr. Lam graduated from the University of California-Berkeley in
1966 with a B.A. Degree in Chemistry. He is currently a committee member of
the Chinese People Political Consultative Conferences (CPPCC) of Shenyang City,
Liaoling Province and Chengdu City, Sichuan, respectively. He devotes his time
as necessary to the business of Registrant.
Dr. Paul Tong - Dr. Tong has been a Director of the Registrant since March 2,
1998. From 1995 to September 1997, he has been the Chief Executive Officer of
Pacific Century Regional Developments Ltd., with responsibility for
infrastructure and property developments. From 1978 to 1994, he was General
Manager of New World Development Co., Ltd., where he supervised the design and
administration of commercial, residential and infrastructural projects in the
Asian Pacific and North America. Dr. Tong has gained extensive experience in
civil engineering having worked as a geotechnical engineer for a British
consultancy as a civil engineer for a Hong Kong engineering consultancy and as a
director and technical manager of a Hong Kong construction company. Dr. Tong
21
<PAGE>
graduated from the University of Manchester, U.K. in 1970 with a PhD. He is
currently a member of the Institution of Civil Engineers, London and the Hong
Kong Institution of Engineers. He devotes his time as necessary to the business
of Registrant.
Employment Agreements
- ----------------------
None of Registrant's officers or directors are currently party to employment
agreements with Registrant. Registrant presently has no pension, health,
annuity, bonus, insurance, profit sharing or similar benefit plans; however, it
may adopt such plans in the future. There are presently no personal benefits
available for directors, officers or employees of Registrant, except for options
granted by the Board of Directors to certain officers, directors and consultants
to Registrant.
Advisory Board
- ---------------
The following professional engineers comprise Registrant's Advisory Board:
Brian Poon - Mr. Poon, a Canadian residing in Vancouver, B.C., is a
structural engineer by profession with extensive building and structural
engineering experience in Canada and Hong Kong for over 30 years. He was the
chairman of the Structural Division of the Hong Kong Institution of Engineers
1984-1985 and served as Council member for several years. He co-founded
Ng Chun Man & Associates, Architects and Engineers (H.K.) Ltd., one of
the largest architectural and engineering firms in Hong Kong. In a wide and
varied spectrum in building development field, his major projects include
the Asia Terminal Limited Building, the Hong Kong Exhibition Centre, Central
Plaza in Hong Kong and Shantou University in China. He took up residence in
Vancouver in 1991 and is the President of Jet Fast Consultants Ltd. in
Vancouver. He is also involved in food, hotel, travel and tour business and
property developments in Southeast Asia.
Sam Chow - Mr. Chow resides in San Francisco, California, where he
is professionally licensed in Civil Engineering by the State of California.
Mr. Chow has 35 years of experience in construction, structural engineering,
and civil engineering involving various low-rise and high-rise commercial
and residential buildings. Mr. Chow is the Founder and President of
ECD Construction, Inc., which provides contracting and construction
management services to both public and private sector. As a licensed
General Building Contractor, his projects include commercial, residential,
and industrial construction. Prior to founding ECD Construction, Inc., Mr.
Chow was at Davy McKee Corporation, where he was responsible for all
aspects of civil and structural work on several multi-million dollar mining
projects. Mr. Chow is the brother of Stephen Chow, an officer, director and
principal shareholder of Registrant. Mr. Chow is the brother of Stephen Chow,
an officer, director and principal shareholder of Registrant.
ITEM 6. EXECUTIVE COMPENSATION
========================
The following table sets forth certain information relating to the aggregate
annual remuneration the Registrant pays to its officers and directors:
22
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
SECURITIES
RESTRICTED UNDERLYING
NAME AND PRINCIPAL STOCK OPTIONS/
POSITION YEAR SALARY AWARD(S)(2) SARS(2) OTHER
- ------------------- ---- ------ ----------- ---------- ------
<S> <C> <C> <C> <C> <C>
STEPHEN CHOW (1) 1998 - $178,480 178,480 -
PRESIDENT, CEO
SANG CHAN, 1997 $46,000 - - -
TREASURER 1998 $46,000 $100,000 100,000 -
22
<PAGE>
PAUL LAM 1998 - $100,000 100,000 -
PAUL TONG 1998 - $100,000 100,000 -
- -------------------------------------------------------------------------------
</TABLE>
(1) Mr. Stephen Chow, CEO of Registrant, waived his annual compensation of
$120,000 for the fiscal year ended December 31, 1998.
The other officers and directors of Registrant do not currently receive cash
remuneration or salaries for their efforts. Upon successful completion of
Registrant's proposed business projects, or receipt of revenues from operations
of Registrant, of which there can be no assurance, salaries and other
remuneration will be established by the Board of Directors as appropriate.
There are no employment contracts between Registrant and any of its officers or
directors.
Registrant does not have any plan or arrangement with respect to compensation to
its executive officers which would result from the resignation, retirement or
any other termination of employment with Registrant or from a change in control
of Registrant, or a change in the executive officers' responsibilities following
any change in control, where in respect of an executive officer, the value of
such compensation exceeds $120,000.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
------------------------------------------
On July 14, 1998, Registrant granted the following stock options to the
following officers and/or directors as additional compensation and incentives
for services rendered to Registrant:
23
<PAGE>
<TABLE>
<CAPTION>
PERCENT
OF
TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED EXERCISE DATE OF
NAME OF HOLDER GRANTED (#) FISCAL YR PRICE EXERCISE
- -------------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C>
STEPHEN CHOW 178,000 18% $1.50/SHARE UNTIL 7/13/99
PAUL TONG 100,000 10% $1.50/SHARE UNTIL 7/13/99
PAUL LAM 100,000 10% $1.50/SHARE UNTIL 7/13/99
SANG CHAN 100,000 10% $1.50/SHARE UNTIL 7/13/99
</TABLE>
(1) These percentages are based on the total number of option shares (968,480).
Each of the above options allow the holder to purchase one share of Registrant's
restricted Common Stock at an exercise price of $1.50 per share for a period of
one (1) year from the date of issue of the Option. Any shares acquired through
exercise of these options shall be restricted shares and may not, under any
circumstances, be registered or in any way become free trading until two years
from the date the shares are acquired through exercise of the option. The
records of the stock transfer agency, as well as any certificates issued upon
exercise of these options shall contain said restrictive legend.
There are no other bonus, pension, deferred compensation, long-term incentive
plans or awards, or any other similar plans for executive officers and/or
directors of Registrant.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
==================================================
On January 8, 1997, Registrant entered into two separate agreements for the
purchase and sale of certain assets, one with Honpar (Huangzhou) Properties
Limited and one with Honpar Properties Limited. Stephen Chow, an officer,
director and principal shareholder of the Registrant, is an officer, director
and principal shareholder of both of these companies. Registrant issued a total
of 9,000,000 shares of its restricted Common Stock in exchange for all of the
rights and interests in and to the assets as follows: (i) 5,760,000 shares in
exchange for an 80% equity interest in the Dragon Villa and Water World projects
in Guandong Province, China, and (ii) 3,240,000 shares in exchange for the Maple
City project. Of the total 9,000,000 shares, 5,755,800 were issued to officers,
directors, advisors and/or control person of the Registrant and 3,244,200 were
issued to unrelated third parties. (See Item 1, Description of Business and Item
3, Description of Property.)
On June 20, 1998, Registrant sold, in a private placement transaction, a total
of 323,000 shares of its restricted Common Stock to Extensiview Ltd., a
principal shareholder of Registrant and an unrelated third party, for the sum
of $646,000 U.S., or $2.00 per share.
24
<PAGE>
On December 15, 1998, Registrant acquired a city hall development project in
Shilong Town by issuing 2,590,730 shares of its Common Stock to Honpar (Shilong)
Properties Limited, a Hong Kong corporation, of which Stephen Chow, an officer,
director and principal shareholder of Registrant, is an officer, director and
shareholder, in exchange for 100% equity interest in Honpar (Shilong).
ITEM 8. DESCRIPTION OF SECURITIES
===========================
The authorized capital stock of the Registrant consists of 25,000,000 shares of
Common Stock, par value $.001, of which a total of 12,955,530 are issued and
outstanding. The holders of the Common Stock (i) have equal ratable rights to
dividends from funds legally available therefor, when, as and if declared by the
Board of Directors of the Registrant; (ii) are entitled to share ratably in all
of the assets of the Registrant available for distribution to holders of Common
Stock upon liquidation, dissolution or winding up of the affairs of the
Registrant; (iii) do not have preemptive, subscription or conversion rights and
there are no redemption or sinking fund provisions or rights applicable
thereto; and (iv) are entitled to one non-cumulative vote per share on all
matters on which stockholders may vote. All shares of Common Stock now
outstanding are fully paid for and non-assessable. Reference is made to the
Registrant's Articles of Incorporation, By-Laws and the applicable statutes of
the State of Nevada for a more complete description of the rights and
liabilities of holders of the Registrant's securities.
The holders of shares of Common Stock of the Registrant do not have cumulative
voting rights, which means that the holders of more than 50% of such outstanding
shares, voting for the election of directors, can elect all of the directors to
be elected, if they so choose, and, in such event, the holders of the remaining
shares will not be able to elect any of the Registrant's directors.
To date, Registrant has not paid any cash dividends to stockholders. The
declaration of any future cash dividend will be at the discretion of the Board
of Directors and will depend upon the earnings, if any, capital requirements and
financial position of the Registrant, general economic conditions, and other
pertinent conditions. It is the present intention of the Registrant not to pay
any cash dividends in the foreseeable future, but rather to reinvest earnings,
if any, in the Registrant's business.
Registrant will furnish annual financial reports to stockholders, certified by
its independent accountants, and may, in its discretion, furnish unaudited
quarterly financial statements.
Options
- -------
On July 14, 1998, pursuant to a Stock Option Plan adopted by the Board of
Directors on July 1, 1998, Registrant granted stock options to acquire up to a
total of 968,480 shares of its restricted Common Stock to certain of its
officers, directors, employees and consultants. The Stock Option Agreement
provides that each holder of Options may purchase one share of Registrant's
restricted Common Stock at an exercise price of $1.50 per share for a period of
one (1)) year from the date of issue of the Option. Any shares acquired through
exercise of these Options shall be restricted shares and may not, under any
circumstances, be registered or in any way become free trading until two years
from the date the shares are acquired through exercise of the Option.
25
<PAGE>
PART II
========
ITEM 1. STOCK MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON
==================================================================
STOCK AND OTHER SHAREHOLDER MATTERS
=======================================
Common Stock Trading Information
- -----------------------------------
Registrant's shares were formerly traded on the OTC Bulletin Board under
the symbol ASTV and commenced trading on July 1, 1998. On August 1,
1999, the Registrant's shares were delisted from the Bulletin Board because it
failed to comply with the OTC Bulletin Board Eligibility Rule, which requires
all companies to be fully reporting under the Securities Exchange Act of 1934,
and for their Form 10SB to be in a "no comment" stage with the SEC. The
Registrant has filed this Form 10SB in an effort to comply with the Eligibility
Rule. As of the date hereof, Registrant's Common Stock is trading on the Pink
Sheets under the symbol ASTV. The following table sets forth the high
and low bid quotations for the Common Stock for the periods indicated. These
quotations reflect prices between dealers, do not include retail mark-ups,
mark-downs or commissions and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
- ------ ----- -----
<S> <C> <C>
SEPTEMBER 30, 1999 1.50 .75
JUNE 30, 1999 3.50 1.25
MARCH 31, 1999 2.25 1.50
DECEMBER 31, 1998 2.25 1.125
SEPTEMBER 30, 1998 . . . . 2.25 2.00
JULY 1, 1998 2.00 2.00
</TABLE>
This information was obtained from the Internet (Quicken.com) and does not
reflect inter-dealer prices, without retail mark-up, mark-down, or commission,
and may not represent actual transactions.
As of September 30, 1999 there were 216 shareholders of record of the
12,955,530 shares of Common Stock issued and outstanding.
Stock Transfer Agent
- ----------------------
Transfer Online, 227 S.W. Pine Street, Suite 300, Portland, Oregon 97204,
telephone number (503) 227-2950, is Registrant's stock transfer
agent for its securities.
Dividends
- ---------
Registrant has not paid any cash dividends to any of its shareholders. The
declaration of any future cash dividends will be at the sole discretion of the
Board of Directors and will depend upon the earnings, if any, the capital
requirements and financial position of Registrant, general economic conditions
and other pertinent conditions. Unless otherwise determined by the Board of
Directors, no dividends shall be paid on any share which has been purchased or
redeemed by Registrant while the shares are held by Registrant. Pursuant to
Registrant's Articles of Incorporation (attached hereto as Exhibit 3(I) and
26
<PAGE>
incorporated herein by reference), the Directors may, from time to time,
capitalize any undistributed surplus on hand of Registrant and may from time to
time issue shares, bonds, debentures or debt obligations of Registrant as a
dividend representing such undistributed surplus on hand, or any part thereof.
It is the present intention of Registrant not to pay any cash dividends in the
foreseeable future, but rather to reinvest any earnings into its business
operations.
The Securities and Exchange Commission has adopted regulations which generally
define "penny stock" to be any equity security that has a market price of
less than $5.00 per share, subject to certain exceptions. Registrant's Common
Stock may be deemed to be a penny stock and thus will become subject to rules
that impose additional sales practice requirements on broker/dealers who sell
such securities to persons other than established customers and accredited
investors, unless the Common Stock is listed on The Nasdaq SmallCap Market.
Consequently, the penny stock rules may restrict the ability of broker/
dealers to sell Registrant's securities and may adversely affect the
ability of holders of Registrant's Common Stock to resell their shares in
the secondary market.
ITEM 2. LEGAL PROCEEDINGS
==================
One of Registrants subsidiaries, Honpar (Shilong) Properties Limited, is
involved in a legal proceeding with a PRC construction company relating to the
Shilong Town Hall project. The amount claimed by the construction company is
Approximately RMB 5 million ($605,000 U.S). Management of Registrant has
Denied and is vigorously defending against the claims and believes that a
Contingent liability is remote.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
==================================================
Registrant has not had any changes in or disagreements with Accountants since
inception.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
===========================================
On June 20, 1998, Registrant sold, in a private placement transaction, a total
of 323,000 shares of its restricted Common Stock to Extensiview Ltd., a
principal shareholder of Registrant, for the sum of $646,000,or $2.00 per share.
On August 6, 1998, Registrant sold, in a private placement transaction, a total
of 300,000 shares of its restricted Common Stock to Mr. Li Chee Ngam,
an unrelated third party, for the sum of $660,000, or $2.20 per share.
On November 5, 1998, Registrant sold, in a private placement transaction, a
total of 180,000 shares of its restricted Common Stock to Mr. Li Chee Ngam, an
unrelated third party, for the sum of $270,000, or $1.50 per share.
The purpose of this Form 10-SB is to register all of the issued and outstanding
shares of Registrant. During the last two years, no other unrestricted shares
of Common Stock were sold by Registrant.
27
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
=============================================
Pursuant to the Articles of Incorporation of Registrant, Registrant's officers
and directors, and/or heirs and personal representatives, who may be made a
party to any proceeding, including a law suit, because of his/her position, may
be indemnified from any personal liability. This indemnification shall include
payment of all costs, charges and expenses, including an amount paid to settle
an action or satisfy a judgment, actually and reasonably incurred in a civil,
criminal or administrative proceeding. The indemnification is intended to be to
the fullest extent permitted by law.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors or officers of Registrant
pursuant to the foregoing provisions, Registrant is informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy, as expressed in said Act and is, therefore,
unenforceable.
PART F/S
========
FINANCIAL STATEMENTS AND EXHIBITS
====================================
Audited financial statements of Registrant for the period from January 8, 1997
(date of incorporation) through the period ended December 31, 1997 and the year
ended December 31, 1998, were audited by BDO International, 29/F Wing On
Centre, 111 Connaught Road Central, Hong Kong. The unaudited consolidated
Financial statements for the nine months ended September 30, 1999,
prepared by Registrant immediately follow:
28
<PAGE>
BDO INTERNATIONAL
Certified Public Accountants
29th Floor Wing On Centre
111 Connaught Road Central
Hong Kong
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
ASIAN STAR DEVELOPMENT, INC.
We have audited the accompanying consolidated balance sheets of Asian Star
Development, Inc. as of December 31, 1997 and 1998 and the related consolidated
statements of operations, changes in shareholders equity and cash flows for the
period from January 8, 1997 (date of incorporation) to December 31, 1997 and the
year ended December 31, 1998. These financial statements are the responsibility
of the Registrant's management. Our responsibility is to express an opinion on
the financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Asian Star
Development, Inc. at December 31, 1997 and 1998, and the consolidated results of
their operations and cash flows for the period from January 8, 1997 to December
31, 1997 and year ended December 31, 1998, in conformity with generally accepted
accounting principles in the United States of America.
As discussed in Note 13, the Company restated its December 31, 1998 and 1997
financial statements to adjust the recording of the minority interest.
BDO International
Certified Public Accountants
Hong Kong
April 23, 1999, except Note 13 as to which the date is November 19, 1999
29
<PAGE>
<TABLE>
<CAPTION>
ASIAN STAR DEVELOPMENT, INC.
CONSOLIDATED BALANCE SHEETS
(Restated - See Note 13)
(Expressed in US Dollars)
December 31,
-----------------------
1997 1998
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $34,311 $71,690
Subscription receivable - 91,980
Prepayments - 393,818
Inventories (Note 3) - 29,045
Other assets 580 20,405
---------- ---------
Total current assets $34,891 $606,938
Land usage rights (Note 4) $ 234,090 $469,814
Land improvement (Note 4) 4,042,644 4,274,312
Construction in progress (Note 4) 1,080,539 1,564,530
Property and equipment, net (Note 5) 3,160 1,424,053
---------- ----------
Total assets 5,396,143 $8,339,647
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Due to a shareholder (Note 6) $524,329 $236,922
Accounts payable - 579,289
Others payable 33,860 126,447
Accrued liabilities 125,539 95,737
----------- ----------
Total current liabilities $681,728 $1,038,395
Commitments and contingencies (Note 8)
Minority interest (Note 9) $ - $ -
Shareholders' equity
Common stock, $0.001 par value:
25,000,000 shares authorized, 11,768,830 and
12,955,530 shares issued and outstanding
Common stock (Note 10) 11,769 12,956
Additional paid-in capital (Notes 10 and 11) 4,666,646 8,207,831
Stock subscribed 36,000 91,980
Accumulated losses - (1,011,515)
---------- ----------
Total Shareholders' equity $4,714,415 7,301,252
Total liabilities and shareholders' equity $5,396,143 $8,339,647
=========== ===========
<FN>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</FN>
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
ASIAN STAR DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Restated - See Note 13)
(Expressed in US Dollars)
Period from
January 8,
1997 to Year ended
December 31, December 31,
1997 1998
------------ -----------
<S> <C> <C>
Revenue, net $ - $ 188,583
Cost of sales - 94,845
------------- -----------
Gross profit - 93,738
Selling expenses - 175,744
General and administrative expenses - 975,567
Other income net - (46,058)
------------ -----------
Loss before income tax - (1,011,515)
Income tax provision (Note 7) - -
------------ ----------
Net loss before minority interest - (1,011,515)
Less: loss in a subsidiary attributed to
minority interest - -
----------- ---------
Net loss attributed to common shareholders $- $(1,011,515)
============ ==========
Net loss per common share - Basic and diluted $- $ (0.08)
============ ==========
Weighted average number of common shares
outstanding 11,628,146 12,294,905
============ ==========
<FN>
See accompanying summary of accounting policies and notes to consolidated
financial statements
</FN>
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
ASIAN STAR DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Restated - See Note 13)
(Expressed in US Dollars)
Common Stock Additional Total
Number Paid-in Accumulated Stock Share-
of Shares Amount Capital Losses Subscribed holders
Equity
------------------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 8,
1997 11,590,730 11,591 $2,542,037 $ - $ - $2,553,628
Rule 504
offering
(Note 10) 198,100 198 362,142 - - 362,340
Capital
injected
(Note 10) - - 1,798,447 - - 1,798,447
Net loss - - - - - -
----------- ------- ---------- ---------- ---------- ---------
Balance at
12-31-97 11,788,830 11,789 4,702,626 - - 4,714,415
Rule
offering
(Note 10) 163,700 164 294,496 - - 294,660
Private
placement
in 6/98
(Note 10) 323,000 323 645,677 - - 646,000
Private
placement
in 8/98
(Note 10) 300,000 300 659,700 - - 660,000
Private
placement
in 9/98
(Note 10) 200,000 200 449,800 - - 450,000
Private
placement
in 11/98
(Note 10) 180,000 180 177,840 - 91,980 270,000
32
<PAGE>
Stock-based
compensation
(Note 11) - - 679,314 - - 679,314
CEO notional
compensation
(Note 12) - - 120,000 - - 120,000
Capital
injected
(Note 10) - - 478,378 - - 478,378
Net loss - - - $(1,011,515) - (1,011,515)
-------- ------- --------- ----------- -------- ---------
Balance at
December
31, 1998 $12,955,530 $12,956 $8,207,831 $(1,011,515) $91,980 $7,301,252
=========== ======= ========== =========== ======= ==========
<FN>
See accompanying summary of accounting policies and notes to
consolidated financial statements
</FN>
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
ASIAN STAR DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Restated - See Note 13)
(Expressed in US Dollars)
Period from
January 8,
1997 to Year ended
December 31, December 31,
1997 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ - $(1,011,515)
Adjustment to reconcile net loss to
net cash provided by operating activities
Depreciation and amortization of fixed assets - 49,617
Stock Issued for consulting service - 450,000
Non-cash compensation expense - 799,314
Prepayments - (393,818)
Inventories - (29,045)
Other assets (580) (19,825)
Accounts payable - 579,289
Others payable 33,860 92,587
Accrued expenses 116,516 (27,802)
----------- ----------
Net cash provided by operating activities $ 149,796 $ 488,802
Cash flows from investing activities
Payments for overhead (477,591) (471,742)
Payments for land improvement (523,597) -
Payments for construction materials - (444)
Acquisition of properties and fixed assets (966) (1,470,510)
------------ ------------
Net cash used in investing activities (1,002,154) (1,942,696)
Cash flows from financing activities
Proceeds from common stock subscription 362,340 1,778,680
Advanced from (Repayment to) a shareholder 524,329 (287,407)
------------ -----------
Net cash provided by financing activities 886,669 1,491,273
Net increase in cash and cash equivalents 34,311 37,379
Cash and cash equivalents at beginning of period - 34,311
------------ ----------
Cash and cash equivalents at end of period $ 34,311 $ 71,690
============ ==========
Supplemental disclosure of significant
non-cash transactions
Shares issued on date of incorporation
in exchange for projects under construction $1,946,654 -
Capital injection in Honpar Shilong for:
Land usage rights 234,909 234,905
Land improvement 1,572,393 231,668
Construction in progress 375,448 11,805
Overhead pool 223,371 -
</TABLE>
34
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated - See Note 13)
(Expressed in US Dollars)
NOTE 1 - BACKGROUND AND REORGANIZATION
Asian Star Development, Inc., (the Company) was incorporated under the laws of
the State of Nevada in United States of America on January 8, 1997 to conduct
real estate development business in the People's Republic of China (PRC).
The Company was incorporated to consolidate two projects, the Maple City project
and Shilong Town project, previously conducted by two Hong Kong corporations,
namely Honpar Properties Limited (Honpar) and Honpar (Huangzhou) Properties
Limited (Honpar Huangzhou) respectively. Honpar and the Company are owned by
the same group of shareholders. Honpar (Huangzhou) is wholly owned by one of
the Company's majority shareholders.
The interest in the project of Maple City was transferred into Honpar from
Brightstar Investment Limited in 1993, a company in which an existing director
of the Company has the majority interests. The transfer-in value of the project
at that time was determined on the basis of historical cost.
The Shilong Town project is conducted through two equity joint venture companies
in the PRC, Dongguan Dragon Villa Ltd. (Dragon Villa) and Dongguan Dragon
Entertainment Centre Ltd. (Dragon Entertainment), in which Honpar Huangzhou
owned 80% interests and rights. Dragon Villa and Dragon Entertainment were
formed in December 1995, for the sole purpose of this project.
The Company issued 9,000,000 shares of common stock in exchange for the
entire rights to and interests in the Maple City project and an 80% rights
to and interest in Dragon Villa and Dragon Entertainment on January 8,
1997.
In October 1997, the Company entered into a co-operative joint venture agreement
in respect of the development of Shilong Water World located in Shilong Town in
the PRC through Dragon Villa. The joint venture constructed a water
entertainment complex, which includes facilities such as a restaurant, swimming
pools and a kiosk. Operations commenced on August 1, 1998.
During December 1998, the Company issued 2,590,730 shares of common stock at
$1.113 per share in exchange for 100% equity interest in Honpar (Shilong)
Properties Limited (Honpar Shilong), a company incorporated in Hong Kong and
conducting the Shilong City Hall project since 1996. Honpar Shilong was owned
by a major shareholder of the Company. The price per share of $1.113 was
calculated based on giving a 30% discount on the weighted average trading price
of 60 days before the transaction date (December 15, 1998). The number of
shares was determined based on the historical cost of the total assets and
liabilities of Honpar Shilong divided by the price per share as determined
aforementioned.
This combination was treated as a reorganization of entities under common
control and accounted for in a manner similar to that in pooling of interest.
Consequently, the consolidated financial statements present the financial
positions, the related results of operations, shareholders' equity, and cash
flows of the Company by consolidating the two entities' activities as if this
combination had taken place at the beginning of the years presented.
35
<PAGE>
After this combination, the total subsidiaries and equity interest structure are
as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Incorporated in Equity Interest
- ----- -------------- ---------------
Dongguan Dragon Villa Ltd. PRC 80%
Dongguan Dragon Entertainment Centre Ltd. PRC 80%
Honstar Entertainment Centre Ltd. PRC 100%
Gang Feng (Boluo) Real Estate Co. Ltd. PRC 100%
Honpar Shilong Properties Limited Hong Kong 100%
Asian Star (Hong Kong) Limited Hong Kong 100%
</TABLE>
The Company did not have any operating activities in 1997 and has suffered a
loss of $1,011,515 in 1998, and had negative working capital in 1997 and
1998, respectively. Historically, one of the Company's directors and major
shareholders provided the Company with substantial financing sources. The
director has provided a letter of support indicating that he pledges to provide
continuous financial support to enable the Company to satisfy its working
capital requirements and to complete its commitments to these investment
projects on a going concern basis. While there is no assurance that funding
will be available, the Company is continuing to actively seek funding to
complete respective investment projects through equity and/or debt financing.
There is uncertainty that management fund raising exercise will be successful.
The accompanying financial statements do not include any provisions or
adjustments, which might result from the outcome of the uncertainty discussed
above.
NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES
Basis of Accounting and Principles of Consolidation
The consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America and present
the financial statements of the Company and its foreign subsidiaries. All
material inter-company transactions have been eliminated. The joint ventures
have been consolidated because the Company controls the development and
operations of the real estate projects and maintains control over the board.
The rights of the People's Republic of China (PRC) are protective in nature.
Foreign Currency Translation and Transactions
The financial position and result of operations of the Company's foreign
subsidiaries are determined using local currency (Renminbi Yuan and Hong Kong
Dollars, hereafter RMB and HKD, respectively) as the functional currency.
Assets and liabilities of the subsidiaries are translated at the prevailing
exchange rate in effect at each period end. Contributed capital is translated at
historical exchange rate when capital is injected. Income statement accounts
are translated at the weighted average rate of exchange during the period .
Translation adjustments arising from the use of different exchange rates from
period to period are included in cumulative translation adjustments in
shareholders' equity. Gains and losses resulting from foreign currency
transactions are included in other income or expense. There are currently no
assets or liabilities that would give rise to an other comprehensive income
item.
36
<PAGE>
Revenue Recognition
Revenue from swimming pool ticket sales are recognized when tickets (net of
business tax) are sold. Revenue from goods sold in kiosk operation are
recognized when the risk of loss for the goods sold is passed to the buyers,
which is usually at the time of delivery. Revenue from the restaurant operation
are recognized when the services are rendered to the customers.
Inventories
Inventories, which consist of purchased merchandise and consumable stores, are
stated at the lower of cost (first-in-first-out basis) and market value.
Capitalization Policy
The development and construction of real estate involves direct project costs
and indirect project costs, which are allocated to a specific real estate
project. Capitalization of these costs continues until the project is complete.
Land Usage Rights
Land usage right is an intangible asset and stated at cost and is amortized
Over the unexpired land usage term.
Land Improvement
Land improvement is stated at cost, including substantially capitalized interest
and direct costs related to grading, filling, leveling and landscaping
activities. Land improvement is depreciated over the estimated economic life of
any project which is built on these parcels of improved land.
Construction in Progress
Construction in progress is stated at cost. Construction in progress includes
direct costs and capitalized interest related to any identifiable project.
Overhead
Overhead represents all accumulated indirect costs that are related to projects,
such as project supervisors' salaries, certain travel and administrative
expenses and legal fees, etc. The accumulated overhead is allocated to
respective projects based on the actual time spent on each project. A project
is generally considered to be operational when it is substantially completed,
including tenant improvement, and held available for occupancy, but not later
than one year from cessation of major construction activities.
Cash and Cash Equivalents
Cash includes cash in hand and deposits repayable on demand with any bank or
other financial institution. Cash equivalents include short-term, highly liquid
investments which are readily convertible into known amounts of cash without
notice and which were within three months of maturity when acquired; less
advances from banks repayable within three months from the date of the advance.
Cash and cash equivalents include cash in hand, deposits, investments and
advances denominated in foreign currencies provided that they fulfill the above
criteria.
37
<PAGE>
Property, Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method to allocate the acquisition cost of depreciable assets over
the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
Estimated
Useful Life
(in years)
-----------
<S> <C>
Land usage rights 50-70
Building premises 10-25
Water amusement park facilities 8-25
Vehicles 8
Office furniture, fixture and equipment. 3-10
Kitchen equipment and facilities 3-10
</TABLE>
Maintenance, repairs and minor renewals are charged directly to expenses as
incurred. Additions and betterments to property and equipment are capitalized.
When assets are disposed of, the related cost and accumulated depreciation
thereon are removed from the accounts and any resulting gain or loss is included
in operations.
Income Taxes
The Company and its subsidiaries account for income taxes using the liability
method, which requires an entity to recognize deferred tax liabilities and
assets. Deferred income taxes are recognized based on the differences between
the tax bases of assets and liabilities and their reported amounts in the
financial statements that will result in taxable or deductible amounts in future
years. Further, the effects of enacted tax laws or rate changes are included as
part of deferred tax expenses or benefits in the year that covers the enactment
in the near future date. A valuation allowance will be provided due to the
uncertainty that deferred tax benefit will be realized.
Fair Value of Financial Instruments
The carrying amounts of certain financial instruments, including cash, accounts
receivable and accounts payable approximate fair value as of December 31, 1997
and 1998 because of the relatively short-term maturity of these instruments.
Use of Estimates
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect 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 revenues and expenses during the
reporting period. Actual results could be different from those estimates.
Reclassification
Certain comparative figures were reclassified to conform to the December 31,
1998 presentation.
38
<PAGE>
Adoption of SFAS No. 121
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121 (SFAS No. 121) Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, which requires impairment
losses to be recorded on long-lived assets being developed, based on fair value,
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount. Example of indicators of impairment include a significant decrease in
the market value of an asset, a significant change in the extent or manner in
which an asset is used or a significant adverse change in legal or business
factors that could affect the value of an asset.
The estimation process in determining the fair value of real estate assets is
inherently uncertain and relies on considerable extent on current and future
economic and market conditions, the availability of suitable financing to fund
holding, development and construction activities, and the repayment or
refinancing of existing debts. Such economic and market conditions may affect
management's development and marketing plans. Accordingly, the ultimate
realization may differ from amounts presently estimated.
Earnings (Loss) Per Share
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (SFAS No. 128) "Earnings per Share". The statement
replaces the calculation of primary and fully diluted earnings (loss) per share
with basic and diluted earnings (loss) per share. Basic earnings (loss) per
share includes no dilution and is computed by dividing income (loss) available
to common shareholders by the weighted average number of shares outstanding
during the period. Diluted earnings (loss) per share reflects the potential
dilution of securities that could share in the earnings (loss) of an entity,
similar to fully diluted earnings (loss) per share.
During loss periods, dilutive common equivalent shares are excluded as the
effect would be anti-dilutive.
Stock-based Compensation
The Company adopted Statement of Financial Accounting Standards No. 123 (SFAS
No. 23) - Accounting for Stock-based Compensation. The Company uses the
intrinsic value method of accounting per APB No. 25 for employee stock options
and discloses the pro forma impact on net income and earnings (loss) per share
as if the fair value based method had been applied. For equity instruments,
including stock options issued to non-employees, including directors, the fair
value of the equity instruments or the fair value of the consideration received,
whichever is more readily determinable, is used to determine the value of
services or goods received and the corresponding charge to operations.
New Accounting Standards Not Adopted Yet
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 133, (SFAS No. 133) - Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 requires companies to
recognize all derivatives contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. If certain conditions are met,
a derivative may be specifically designated as a hedge, the objective of which
is to match the timing of gain or loss recognition on the hedging derivative
39
<PAGE>
with the recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999.
Historically, the Company has not entered into derivatives contracts either to
hedge existing risks or for speculative purposes. Accordingly, the Company does
not expect adoption of the new standard on January 1, 2000 to affect its
financial statements.
NOTE 3 - INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
<S> <C> <C>
Merchandise and service goods $ - $20,275
Spare parts and supplies - 8,770
------ -------
$ - $29,045
</TABLE>
NOTE 4 - PROJECTS UNDER CONSTRUCTION
Projects under construction consist of the following:
<TABLE>
<CAPTION>
Shilong Shilong Shilong
Town Water Maple Town
World City Hall Total
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulated cost:
Land usage rights $ - $ - $ - $ 234,909 $ 234,909
Land improvement 217,800 - 1,876,701 1,948,143 4,042,644
Construction in
progress 295,036 80,412 - - 375,448
Overhead 81,844 12,833 299,506 310,908 705,091
----------
Balance, 12/31/97 $5,358,092
===========
Accumulated cost:
Land usage rights $ - $ - $ - $ 469,814 $ 469,814
Land improvement 217,800 - 1,876,701 2,179,811 4,274,312
Construction in
Progress 302,227 - 85,470 - 387,697
Overhead 131,271 - 495,312 550,250 1,176,833
----------
Balance, 12/31/98 $ 6,308,656
===========
</TABLE>
40
<PAGE>
Shilong Town (Land usage term : 50-70 years)
The Shilong Town project, which is developed by Dragon Villa and Dragon
Entertainment, comprises three parcels of land located in Shilong Town center,
which are adjacent to each other with a total area of approximately 57,500
square meters. It is the intention of the joint venture companies to establish
a residential, commercial and entertainment complex on these 3 parcels of land.
Management expects the completion date will be 2001. Out of 57,500 square
meters, a land usage rights certificate in the name of Dragon Villa with a
total area of approximately 5,700 square meters was obtained during 1998. The
joint venture entities awaiting issuance of the land usage rights certificates
from the relevant authorities for the remaining parcels. The land on which the
commercial and entertainment buildings will be built will have a 50-year lease
term, while the remainder will have a 70-year lease term, starting from the date
when the land usage rights certificates are obtained. According to the joint
venture agreement, the profit and loss sharing ratio between the Company and the
joint venture partner is 80% and 20%, respectively.
Shilong Water World (Land usage term: 70 years)
Shilong Water World (Land usage term: 70 years)Water World (Land usage term
70 years)
The Shilong Water World project, which is developed by Dragon Villa, is located
adjacent to the Shilong Town center with a total area of approximately 40,000
square meters. The Company contributed funds for the construction of an
entertainment complex , while the PRC joint venture partner contributed a parcel
of land without receiving any consideration. This parcel of land will be
returned to the PRC joint venture partner when the co-operative joint venture
agreement expires in 70 years starting from 1997. The construction of the water
entertainment center, which includes facilities such as a restaurant, swimming
pools and a kiosk, was completed and operations commenced on August 1, 1998.
The profit and loss sharing ratio between the Company and the joint venture
partner is 80% and 20%, respectively.
Maple City (Land usage term: 70 years)
The Maple City project, which is developed by the Company, comprises three
parcels of land which are close by each other. The land usage rights
certificates of the Maple City project stipulate a lease term of 70 years,
commencing from 1993 and the total area is approximately 74,000 square meters.
The land was contributed by the Chinese joint venture partner to the Company at
no consideration. It is the intention of the Company to build a hotel,
commercial and entertainment complex on these parcels of land. A hotel and
entertainment center is being built by a PRC registered and wholly-owned
subsidiary, Honstar Entertainment Center Ltd. ("Honstar"). The construction has
commenced and certain concrete structural work was completed.
Shilong City Hall (Land usage term: 70 years)
The Shilong City Hall project, which is developed by Honpar Shilong, consists of
a parcel of land located in the center of Shilong Town with approximately 5,855
square meters. Honpar Shilong entered into a co-operative contract with Shilong
41
<PAGE>
Town Government to build a commercial complex including retail and office space,
residential space and a town hall theatre with approximately 1,000 seats on the
aforementioned parcel of land. In addition, Honpar Shilong is required to allow
Shilong Town Government to freely use the city hall theater. The land usage
right will expire in 70 years starting from the date when the inspection
certificate is issued.
In light of the co-operative contract, Honpar Shilong is required to pay, upon
the issuance of an inspection certificate when the construction is complete,
RMB50 million for the land usage right and RMB3.8 million for land management
fee and land improvement expenses. Upon fulfilling the above requirements, the
land usage rights will be transferred to Honpar Shilong from the Shilong Town
Government. As of December 31, 1998, a total of RMB4 million ($469,814)
installment payments were made by Honpar Shilong against the RMB50 million land
usage rights.
"6-12" Convenience Store Chain
In September 1998, the Company entered into a letter of intent to establish a
Hong Kong company to acquire 100% of the total issued and outstanding shares of
two PRC corporations. The Company will own 75% of this newly established
company which will carry a "6-12" convenience store chain in PRC. No cost has
been incurred on this project as of December 31, 1998.
NOTE 5 - PROPERTY AND EQUIPMENT, NET
Property and equipment consists of:
<TABLE>
<CAPTION>
December 31,
1997 1998
<S> <C> <C>
Building premises $ - $ 332,586
Water amusement park facilities - 964,765
Vehicles - 20,171
Office furniture, fixture and equipment 7,604 59,168
Kitchen equipment and facilities - 101,424
-------- -----------
7,604 $1,478,114
Less: Accumulated depreciation (4,444) (54,061)
-------- ----------
$ 3,160 $1,424,053
======== ==========
</TABLE>
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company, from time to time, received from or made payment to a shareholder.
The balance due to the shareholder does not bear any interest and does not have
clearly defined terms of repayments.
As of December 31, 1997 and 1998, the amount due to the shareholder is $524,329
and $236,922, respectively.
42
<PAGE>
NOTE 7 - INCOME TAXES
Dragon Villa commenced operations in 1998. The standard enterprise income tax
rate in PRC is 33% of which 30% is attributed to the central government and 3%
to the provincial government. For the year ended December 31, 1998, Dragon
Villa suffered a tax loss, no provision for income taxes is required
accordingly.
Significant components of the Company's estimated deferred tax assets as of
December 31, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1998
<S> <C> <C>
Deferred tax assets and liabilities:
Net operating loss carry forward $ - $ 333,961
Capitalization of pre-operating expenses - (1,179)
Depreciation - 14,561
----------- ----------
Net deferred tax assets - 347,343
Valuation allowance for deferred tax assets - (347,343)
------------ -----------
Net deferred tax assets $ - $ -
============ ==========
</TABLE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Based on the joint venture contracts and agreements the Company has entered
into, the overall status of the four projects as of December 31, 1998 is as
follows:
<TABLE>
<CAPTION>
Total
Investment
Per Project Costs Years Remaining to
Per Agreement Incurred Complete the Project
Or Contract To Date Per Agreement
or Contract
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Shilong Town $24,200,000 $ 520,027 Seven
Shilong Water World 3,630,000 1,468,797 No time limit
Maple City 38,000,000 1,962,171 No time limit
Shilong Town Hall 23,571,000 2,649,625 Pending on the
----------- ---------- PRC economic
$89,401,000 $6,600,620 conditions and
endeavoring to
complete
within 3 years
</TABLE>
43
<PAGE>
Financing Resource Dependency
Historically, the operating activities of the above four projects were
substantially financed by one of the Company's directors through the form of
either infusing equity capital or providing shareholder's loans in addition to
the fund raising exercises implemented in 1997 and 1998 and described in Note
10.
Considering the condition that only limited funding is presently available,
management believes that the completion of these four projects on a timely basis
will depend significantly on the additional funding available to the Company
through debt and/or equity financing in the near future.
NOTE 9 - MINORITY INTEREST
The Company applies APB Opinion No. 19(I) and related interpretation in
Accounting for minority share of attributable losses arising from the operation
of Shilong Water World under the entity of Dragon Villa. The 20% loss of
$22,632 attributable to minority shareholder was recognized by the Company as
no capital contribution has been made by the minority shareholder as of the
balance sheet date.
NOTE 10 - TRANSACTIONS IN SHAREHOLDERS' EQUITY
The Company issued 198,100 shares of common stock at $2.00 per share through a
Rule 504 Regulation D offering in 1997. The total proceeds were $362,340, net
of offering expense of $33,860. Among these 198,100 shares of common stock
subscribed, 20,000 shares were issued in early January 1998.
In March 1998, the Company issued 163,700 shares of common stock at $2.00 per
share through a Rule 504 Regulation D offering. The net proceeds were $294,660,
net of offering expense of $32,740. The investor group consisted of
approximately 20 individuals. The investors who bought approximately 150,000
shares of common stock are either relatives or close friends of one of the
Company's directors and are all accredited investors.
In June 1998, the Company issued 323,000 shares of common stock at $2.00 per
share to a business entity in exchange for proceeds of $646,000.
In August 1998, the Company issued 300,000 shares of common stock at a market
price of $2.20 per share to an accredited investor for total proceeds of
$660,000.
In September 1998, the Company issued 200,000 shares of common stock at a market
price of $2.25 per share to two business entities in exchange for stock
promotion service for a term of two years.
In November 1998, the Company issued 180,000 shares of common stock at a market
price of $1.50 per share to the same investor who previously bought 300,000
shares of common stock at $2.20 per share.
In December 1998, the Company issued 2,590,730 shares of common stock at $1.113
per share in exchange for 100% equity interest in Honpar Shilong, a company
incorporated in Hong Kong and wholly owned by a major shareholder of the
Company. This transaction was treated as a reorganization of entities under
common control and accounted for in a manner similar to that in pooling of
interest. The price per share of $1.113 was calculated based on a 30% discount
44
<PAGE>
on the weighted average trading price for 60 days before the transaction date
(December 15, 1998). The number of shares was determined based on the
historical cost of total assets and liabilities of Honpar Shilong divided by the
price per share as determined aforementioned. The following table presents the
shareholders' equity of Honpar Shilong as of December 31, 1997 and 1998.
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Total
Stock Capital Earnings
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, 1/1/97 $ 60,797 $ 547,177 $ - $ 607,974
Capital injected 179,845 1,618,602 - 1,798,447
--------- ---------- -------- -----------
Balance, 12/31/97 240,642 2,165,779 - 2,406,421
Capital injected 47,838 430,540 - 478,378
-------- ---------- -------- ---------
Balance, 12/31/98 $ 288,480 $2,596,319 $ - 2,884,799
======== ========== ======== =========
</TABLE>
NOTE 11 - STOCK OPTIONS
In July 1, 1998, the Board of Directors of the Company approved a Stock Option
Plan. The Stock Option Plan provides officers, directors, key employees and
consultants with options to purchase shares of the restricted common stock as
additional compensation for services rendered and/or incentives for services to
be rendered to the Company in the near future. As a result of adopting this
Stock Option Plan, a total of 968,480 options were granted on July 14, 1998.
Accordingly, a total of 968,480 shares of common stock will be reserved by the
Company for issuance upon exercise of the granted stock options.
Each option shall entitle the holder to purchase one share of the Company's
common stock at a price of $1.50 per share within one year from the granting
date. Each option is immediately exercisable after the granting date and will
expire if it would not be exercised within one year from the granting date. The
shares acquired through exercise of the options shall be restricted and will not
be registered for trading unless the Company, in its sole discretion, files a
registration statement and includes these designated shares. The following
table summarizes the total options granted as of December 31, 1998.
<TABLE>
<CAPTION>
Granting Options Exercise Vested Expiring
Date Granted Price Period Date
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Options granted to
non-employees 7-14-98 640,000 $1.50 None 7-13-99
Options granted to
employees 7-14-98 328,480 $1.50 None 7-13-99
--------
Total Options granted 968,480
=======
</TABLE>
45
<PAGE>
The Company applies APB Opinion No. 25 and related interpretations in accounting
for its stock options granted to employees. The difference of $164,240 between
option exercise price of $1.50 and market price of $2.00 was recognized as
employee stock compensation cost. In accordance with APB No. 25, no
compensation cost has been recognized for the fair value of options granted to
employees. Had the compensation cost for the fair value of options granted to
employees been recognized in line with SFAS No. 123, the Company's net loss and
loss per share would have been reduced to the pro forma amounts as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
<S> <C> <C>
1997 1998
Net loss attributed to common shares:
As reported $ - $(1,011,515)
Pro forma - (1,111,636)
Basic loss per share
As reported $ - $ (0.08)
Pro forma - (0.09)
</TABLE>
A summary of the status of the Company's stock options as of December 31, 1998
and changes during the year then ended are presented as follows:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
----------------------------
<S> <C> <C>
Outstanding at beginning of year - -
Options granted to non-employees 640,000 $1.50
Options granted to employees 328,480 $1.50
------- -----
968,480 $1.50
------- -----
Options exercisable at year-end 968,480 $1.50
======= =====
Weighted average fair value of options granted during the year $0.80
======
</TABLE>
The following table summarizes information about stock options outstanding as of
December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
- -------- ----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$1.50 968,480 0.53 Year $1.50 968,480 $1.50
</TABLE>
46
<PAGE>
Using Black Scholes option pricing model, the Company determined that the fair
value of 968,480 options granted during 1998 was $779,435. Among $779,435, a
non-employee director stock compensation of $515,074 has been recognized for the
fair value of options granted to non-employee directors and consultants. The
assumptions used are as follows:
<TABLE>
<CAPTION>
December 31,
1998
-----------------
<S> <C>
Discount rate 5.5%
Volatility 69.0%
Expired life 1 year
Expected dividend yield -
=========
</TABLE>
NOTE 12 - CEO NOTIONAL COMPENSATION
CEO of the Company waived his personal salary of $120,000 in the fiscal year
ended December 31, 1998. The Company recorded this amount as part of additional
paid-in capital.
NOTE 13 - RESTATEMENT OF FINANCIAL STATEMENTS
The financial statements for the years ended December 31, 1998 and 1997 were
restated to reflect an adjustment to the land usage rights and the minority
interests. This restatement was made to reflect the carryover basis of the
minority shareholder's contribution to the joint ventures acquired from Honpar
Huangzhou. The restatement reduced land usage rights and minority interests by
approximately $6,000,000 in each period.
The adjustment described above changed the amounts previously reported by the
Company for net loss and net loss per share as follows:
<TABLE>
<CAPTION>
Year ended December 31
1998 1997
----------------------
<S> <C> <C>
Net Loss
As previously reported $ 988,883 $ -
As restated $ 1,011,515 $ -
Net Loss per share
As previously reported $ (0.08) $ -
As restated $ (0.08) $ -
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Asian Star Development, Inc.
Interim Consolidated Balance Sheet
(Expressed in U.S. Dollars)
September 30, 1999
--------------------
(Unaudited)
<S> <C>
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . $ 4,601
Prepayments . . . . . . . . . . . . . . . . 170,022
Inventories . . . . . . . . . . . . . . . . 7,586
Other assets. . . . . . . . . . . . . . . . 65,397
--------------------
Total current assets. . . . . . . . . . . 247,606
Land usage rights . . . . . . . . . . . . . . 469,814
Land improvement. . . . . . . . . . . . . . . 4,274,312
Construction in progress. . . . . . . . . . . 1,961,606
Property and equipment, net . . . . . . . . . 1,348,061
---------------------
Total assets. . . . . . . . . . . . . . . . . $ 8,301,399
--------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Due to a shareholder. . . . . . . . . . . . $ 478,903
Accounts payable. . . . . . . . . . . . . . 542,812
Others payable. . . . . . . . . . . . . . . 276,009
Accrued liabilities . . . . . . . . . . . . 9,223
-------------------
Total current liabilities . . . . . . . . 1,306,947
Commitments and contingencies
Minority interest . . . . . . . . . . . . . . -
Shareholders' equity
Common stock, $0.001 par value:
25,000,000 shares authorized and
12,955,530 shares issued and outstanding
Common stock. . . . . . . . . . . . . . . . . 12,956
Additional paid-in capital. . . . . . . . . . 8,299,811
Accumulated losses. . . . . . . . . . . . . . (1,318,315)
Total shareholders' equity. . . . . . . . . 6,994,452
--------------------
Total liabilities and shareholders' equity. . $ 8,301,399
--------------------
<FN>
See accompanying notes to unaudited consolidated condensed financial statements.
</FN>
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Asian Star Development, Inc.
Interim Consolidated Statements of Operations
(Expressed in U.S. Dollars)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
1998 1999 1998 1999
---------- ---------- --------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue, net . . . . . . . $ 174,317 $ 22,643 $ 174,317 $ 41,926
Cost of sales. . . . . . . . .(75,872) (22,965) (75,872) (40,603)
--------- --------- ---------- ---------
Gross profit . . . . . . . . 98,445 (322) 98,445 1,323
Selling expenses . . . . . . (109,836) (8,856) (109,836) (78,928)
General and administrative
expenses . . . . . . . . . (513,821) (93,160) (513,821) (282,565)
Other income, net. . . . . . . . .178 1,458 178 53,370
--------- ---------- --------- --------
Loss before income tax . . . (525,034) (100,880) (525,034) (306,800)
Income tax provision . . . . . . . .- - - -
-------- --------- --------- --------
Net loss before minority
interest. . . . . . . (525,034) (100,880) (525,034) (306,800)
Less: Loss in a subsidiary
attributed to minority
interest. . . . . . . . - - - -
-------- --------- -------- ---------
Net loss attributed to
common shareholders. . $(525,034) $(100,880) $(525,034) $(306,800)
--------- -------- ---------- ----------
loss per common share
- Basic and diluted. . $ (0.042) $ (0.008) $ (0.043) $ (0.024)
---------- --------- --------- ----------
Weighted average number
of common shares
outstanding . . . 12,470,095 12,955,530 12,096,012 12,955,530
---------- ---------- ---------- ----------
<FN>
See accompanying notes to unaudited consolidated condensed financial statements.
</FN>
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Asian Star Development, Inc.
Interim Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Expressed in US Dollars)
Nine Months Ended
September 30,
-------------------
1998 1999
-------------------
<S> <C> <C>
(Unaudited) (Unaudited)
Cash flows from operating activities
Net loss. . . . . . . . . . . . . . . . . $ (525,034) $ (306,800)
Adjustment to reconcile net loss to
net cash provided by operating activities
Depreciation and amortization of fixed assets . . . .19,007 50,419
Loss on disposal of fixed assets. . . . . . . . . . - 6,548
Recognition of deferred expense . . . . . . . . . . 56,250 112,500
Non-cash compensation expense . . . . . . . . . . . 399,657 -
Prepayments . . . . . . . . . . . . . . . . . . . . (29,093) 111,296
Inventories . . . . . . . . . . . . . . . . . . . . (24,100) 21,459
Other assets. . . . . . . . . . . . . . . . . . . .(106,856) (44,992)
Accounts payable. . . . . . . . . . . . . . . . . . 566,609 (36,477)
Others payable. . . . . . . . . . . . . . . . . . . 119,479 149,562
Accrued expenses. . . . . . . . . . . . . . . . . .(60,261) (86,514)
-------- ----------
Net cash provided by/(used by) operating activities 415,658 (22,999)
Cash flows from investing activities
Payments for overhead . . . . . . . . . . . . . . .(256,001) (248,825)
Payments for construction materials . . . . . . . . (324) (148,251)
Acquisition of properties and fixed assets. . . .(1,405,894) (7,137)
Proceeds from disposal of fixed assets. . . . . . - 26,162
----------- ------------
Net cash used in investing activities . . . . . .(1,622,219) (378,051)
Cash flows from financing activities
Proceeds from common stock subscription . . . . . 1,600,660 91,980
(Repayment to)/advanced from a shareholder. . . . (318,293) 241,981
---------- ------------
Net cash provided by financing activities . . . . 1,282,367 333,961
Net increase/(decrease) in cash and cash
equivalents. 35,806 (67,089)
Cash and cash equivalents at beginning of period. . .34,311 71,690
---------- ----------
Cash and cash equivalents at end of period. . . $ 70,117 $ 4,601
----------- ----------
Supplemental disclosure of significant
non-cash transactions
Capital injection in Honpar Shilong for:
Land usage right. . . . . . . . . . . . . . . .$ 234,905 $ -
Land improvement. . . . . . . . . . . . . . . . . .195,079 -
Overhead pool . . . . . . . . . . . . . . . . 291 -
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
50
<PAGE>
Asian Star Development, Inc.
Notes to Interim Consolidated Financial Statements
(Expressed in US Dollars)
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial data as of September 30, 1999 and for the three and
nine months ended September 30, 1999 and 1998, have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are adequate to
make the information presented not misleading. These financial statements
should be read in conjunction with the financial statements and the notes
thereto included in the Company's audited annual financial statements for the
year ended December 31, 1998.
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates that affect the
reported amounts of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities. Actual results could differ
from these estimates.
In the opinion of Management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows as of September 30, 1999 and for the three
and nine months ended September 30, 1999, have been made. The results of
operations for the three and nine months ended September 30, 1999 are not
necessarily indicative of the operating results for the full year.
NOTE 2 - LAND USAGE RIGHTS
Land usage right is an intangible asset and stated at cost and is amortized over
the unexpired land usage term ranging from 50 to 70 years.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
Based on the joint venture contracts and agreements the Company has entered
into, the overall status of the four projects as of September 30, 1999 is as
follows:
<TABLE>
<CAPTION>
Total
Investment
Per Project Costs
Per Agreement Incurred Years Remaining to Complete
Project or Contract to Date Project Per Agreement/Contract
- ------- -------------- --------- ------------------------------
(Unaudited)
<S> <C> <C> <C>
Shilong Town $24,200,000 $ 613,828 Seven
Shilong Water
World 3,630,000 1,468,797 No time limit
51
<PAGE>
Maple City 38,000,000 2,016,621 No time limit
Shilong Town Hall 23,571,000 2,649,625 Pending on the PRC economic
conditions and endeavoring
to complete within 3 years
----------- ---------
$89,401,000 $6,748,871
----------- ----------
</TABLE>
One of the Company's subsidiary, Honpar (Shilong) Properties Limited,
is involved in a legal proceeding with a PRC construction company relating to
the Shilong Town Hall project. The amount claimed by the construction
company is approximately RMB5 million (equivalent to US$605,000). The
management of the Company has denied and defended vigorously against the claim
and believes that the realization of this contingent liability is remote.
Accordingly no provision has been provided for the claim amount.
Financing Resource Dependency
Historically, the operating activities of the above four projects were
substantially financed by one of the Company's directors through the form of
either infusing equity capital or providing shareholder's loans in addition to
the fund raising exercises implemented in 1997 and 1998.
Considering the condition that only limited funding is presently available,
management believes that the completion of these four projects on a timely basis
will depend significantly on the additional funding available to the Company
through debt and/or equity financing in the near future.
NOTE 4 - "6-12" CONVENIENCE STORE CHAIN
According to the letter of intent entered into in September 1998, the Company
planned to acquire 100% of total issued and outstanding shares of two PRC
corporations through a 75% owned newly-established Hong Kong subsidiary. No
cost has been incurred on this project as of September 30, 1999.
NOTE 5 - HARMONIC HALL INVESTMENT
On July 6, 1999, one of the Company's wholly owned subsidiary has entered into a
preliminary agreement to purchase 62.5% of Harmonic Hall Investment Holdings
Limited in exchange for 3,870,968 restricted common stock of the Company. Up to
date no formal agreement has been entered and no share exchange has been carried
out yet.
PART III
=========
ITEM 1. INDEX TO EXHIBITS
===================
Exhibit No. Document Description
- ----------- ---------------------
3.1 Articles of Incorporation and any Amendments
3.2 Bylaws
52
<PAGE>
5 Opinion and Consent of Michael J. Morrison, Esq.
8 Opinion and Consent of BDO Binder,
Certified Public Accountants
10.1 Agreement for Purchase and Sale of Assets
Between Honpar (Huangzhou)
10.2 Agreement for Purchase and Sale of Assets
Between Honpar Properties Limited and Registrant
10.3 Joint Venture Agreement with Shilong Town House
and Properties Corporation (Shilong City
Development Co.)
10.4 Agreement for Exchange of Shares between
Honpar (Shilong) Development Co. Ltd. and
Registrant
10.5 Agreement for the Acquisition of Two Beijing
Companies
SIGNATURES
===========
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ASIAN STAR DEVELOPMENT, INC., a
Nevada corporation
By:/s/ Stephen Chow Dated: December 1, 1999
Chief Executive Officer and President
By:/s/ Sang Chan Dated: December 1, 1999
Chief Financial Officer
53
<PAGE>
EXHIBIT 3(i)
=============
FILED in the Office of the
Secretary of State of the
State of Nevada - January 8, 1997
/s/ Dean Heller, Secretary of State
No. C 25D-1997
ARTICLES OF INCORPORATION
OF
ASIAN STAR DEVELOPMENT, INC.
The undersigned, to form a Nevada corporation, CERTIFIES THAT:
I. NAME: The name of the corporation is: ASIAN STAR DEVELOPMENT, INC.
II. REGISTERED OFFICE; RESIDENT AGENT: The location of the registered
office of this corporation within the State of Nevada is 1025 Ridgeview Drive,
Suite 400, Reno, Nevada 89509; this corporation may maintain an office or
offices in such other place within or without the State of Nevada as may be
from time to time designated by the Board of Directors or by the By-Laws of the
corporation; and this corporation may conduct all corporation business of every
kind or nature, including the holding of any meetings of directors or
shareholders, inside or outside the State of Nevada, as well as without the
State of Nevada.
The Resident Agent for the corporation shall be Michael J. Morrison, Esq., 1025
Ridgeview Drive, Suite 400, Reno, Nevada 89509.
III. PURPOSE: The purpose for which this corporation is formed is: To
engage in any lawful activity.
IV. AUTHORIZATION OF CAPITAL STOCK: The amount of the total
authorized capital stock of the corporation shall be Twenty-Five Thousand
Dollars ($25,000), consisting of Twenty-Five Million (25,000,000) shares of
Common Stock, par value $.001 per share.
V. INCORPORATOR: The name and post office address of the Incorporator
signing these Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
Rita S. Dickson 1025 Ridgeview Drive #400
Reno, Nevada 89509
VI. DIRECTORS: The governing board of this corporation shall be known as
directors, and the first Board shall consist of one (1) director.
So long as all of the shares of this corporation are owned beneficially and of
record by either one or two shareholders, the number of Directors may be fewer
than three, but not fewer than the number of shareholders.
54
<PAGE>
The number of directors may, pursuant to the By-Laws, be increased or decreased
by the Board of Directors, provided there shall be no less than one (1) nor more
than nine (9) Directors.
The name and post office address of the director constituting the first Board of
Directors is as follows:
NAME POST OFFICE ADDRESS
Stephen Chow 1025 Ridgeview Drive, Suite 400
Reno, Nevada 89509
VII. STOCK NON-ASSESSABLE: The capital stock, or the holders thereof,
after the amount of the subscription price has been paid in, shall not be
subject to any assessment whatsoever to pay the debts of the corporation.
VIII. TERM OF EXISTENCE: This corporation shall have perpetual existence.
IX. CUMULATIVE VOTING: No cumulative voting shall be permitted in the
election of directors.
X. PREEMPTIVE RIGHTS: Shareholders shall not be entitled to preemptive
rights.
XI. LIMITED LIABILITY: No officer or director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as an officer or director, except for liability
(i) for any breach of the officer or director's duty of loyalty to the
Corporation or its Stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, or (iii) for
any transaction from which the officer or director derived any improper personal
benefit. If the Nevada General Corporation Law is amended after the date of
incorporation to authorize corporate action further eliminating or limiting the
personal liability of officers or directors, then the liability of an officer
or director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Nevada General Corporation Law, or amendments thereto.
No repeal or modification of this paragraph shall adversely affect any right or
protection of an officer or director of the Corporation existing at the time of
such repeal or modification.
XII. INDEMNIFICATION: Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
for whom he or she is the legal representative, is or was an officer or
director of the Corporation or is or was serving at the request of the
Corporation as an officer or director of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans whether the basis of such proceeding is
alleged action in an official capacity as an officer or director or in any other
capacity while serving as an officer or director shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Nevada
General Corporation Law, as the same exists or may hereafter be amended, (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
55
<PAGE>
excise taxes or penalties and amounts to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be an officer or
director and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that except as provided herein with respect
to proceedings seeking to enforce rights to indemnification, the Corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred in this Section shall be a contract right
and shall include the right to be paid by the Corporation the expenses incurred
in defending any such proceeding in advance of its final disposition; provided
however, that, if the Nevada General Corporation Law requires the payment of
such expenses incurred by an officer or director in his or her capacity as an
officer or director (and not in any other capacity in which service was or is
rendered by such person while an officer or director, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, payment shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such officer or director, to
repay all amounts so advanced if it shall ultimately be determined that such
officer or director is not entitled to be indemnified under this Section or
otherwise.
If a claim hereunder is not paid in full by the Corporation within ninety days
after a written claim has been received by the Corporation, the claimant may,
at any time thereafter, bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful, in whole or in part, the
claimant shall be entitled to be paid the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Nevada General Corporation Law for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Nevada General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
The right to indemnification and the payment of expenses incurred in defending a
proceeding in advance of its final disposition conferred in this Section shall
not be exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the
Certificate of Incorporation, By-Law, agreement, vote of Stockholders or
disinterested directors or otherwise.
The Corporation may maintain insurance, at its expense, to protect itself
and any officer, director, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Nevada General Corporation Law.
56
<PAGE>
The Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification to any employee or agent of the
Corporation to the fullest extent of the provisions of this section with respect
to the indemnification and advancement of expenses of officers and directors of
the Corporation or individuals serving at the request of the Corporation as an
officer, director, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise.
THE UNDERSIGNED, being the Incorporator hereinbefore named for the purpose of
forming a corporation pursuant to the General Corporation Law of the State of
Nevada, does make and file these Articles of Incorporation, hereby declaring
and certifying the facts herein stated are true, and, accordingly, has hereunto
set her hand this 8th day of January, 1997.
/s/ Rita S. Dickson, Asst. Secretary
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE )
On this 8th day of January, 1997, before me, a Notary Public, personally
appeared Rita S. Dickson, who acknowledged to me that she executed the above
instrument.
/s/ Michael J. Morrison, Notary Public
My appointment expires 8/24/98
CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT BY RESIDENT AGENT
In the matter of ASIAN STAR DEVELOPMENT, INC. I, Michael J. Morrison, with the
address of 1025 Ridgeview Drive, Suite #400 Reno, Nevada 89509, hereby accept
the appointment as Resident Agent of the above-entitled corporation in
accordance with NRS 78.090.
Furthermore, that the mailing address for the above registered office is 1025
Ridgeview Drive, Suite #400, Reno, Nevada 89509.
IN WITNESS WHEREOF, I hereunto set my hand this 7th day of January, 1997.
/s/ Michael J. Morrison, Resident Agent
EXHIBIT 3.2
============
BYLAWS OF
ASIAN STAR DEVELOPMENT, INC.
ARTICLE 1. OFFICES
1.1 Business Office
The principal business office ("principal office") of the corporation shall be
located at any place either within or without the State of Nevada as designated
in the corporation's most current Annual List filed with the Nevada Secretary of
State. The corporation may have such other offices, either within or without
the State of Nevada, as the Board of Directors may designate or as the business
of the corporation may require from time to time. The corporation shall
maintain at its principal office a copy of certain records, as specified in
Section 2.14 of Article 2.
1.2 Registered Office
The registered office of the corporation shall be located within Nevada and may
be, but need not be, identical with the principal office, provided the principal
office is located within Nevada. The address of the registered office may be
changed from time to time by the Board of Directors.
ARTICLE 2. SHAREHOLDERS
2.1 Annual Shareholder Meeting
The annual meeting of the shareholders shall be held on or about the 9th day of
January, each year, beginning with the year 1998, or at such other time on such
other day within such month as shall be fixed by the Board of Directors, for
the purpose of electing directors and for the transaction of such other business
as may come before the meeting. If the day fixed for the annual meeting shall
be a legal holiday in the State of Nevada, such meeting shall be held on the
next succeeding business day.
If the election of directors shall not be held on the day designated herein for
any annual meeting of the shareholders, or at any subsequent continuation after
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as convenient.
2.2 Special Shareholder Meetings.
Special meetings of the shareholders, for any purpose or purposes described in
the notice of meeting, may be called by the president, or by the Board of
Directors, and shall be called by the president at the request of the holders of
not less than one-tenth of all outstanding shares of the corporation entitled to
vote on any issue at the meeting.
58
<PAGE>
2.3 Place of Shareholder Meetings
The Board of Directors may designate any place, either within or without the
State of Nevada, as the place for any annual or any special meeting of the
shareholders, unless by written consent, which may be in the form of waivers of
notice or otherwise, all shareholders entitled to vote at the meeting designate
a different place, either within or without the State of Nevada, as the place
for the holding of such meeting. If no designation is made by either the Board
of Directors or unanimous action of the voting shareholders, the place of
meeting shall be the principal office of the corporation in the State of Nevada.
2.4 Notice of Shareholder Meeting
(a) Required Notice. Written notice stating the place, day and hour of
any annual or special shareholder meeting shall be delivered not less than 10
nor more than 60 days before the date of the meeting, either personally or by
mail, by or at the direction of the president, the Board of Directors, or other
persons calling the meeting, to each shareholder of record entitled to vote at
such meeting and to any other shareholder entitled by the laws of the State of
Nevada governing corporations (the "Act") or the Articles of Incorporation to
receive notice of the meeting. Notice shall be deemed to be effective at the
earlier of: (1) when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid; (2) on the date shown on the return
receipt if sent by registered or certified mail, return receipt requested, and
the receipt is signed by or on behalf of the addressee; (3) when received; or
(4) 5 days after deposit in the United States mail, if mailed postpaid and
correctly addressed to an address, provided in writing by the shareholder, which
is different from that shown in the corporation's current record of
shareholders.
(b) Adjourned Meeting. If any shareholder meeting is adjourned to a
different date, time, or place, notice need not be given of the new date, time,
and place if the new date, time, and place is announced at the meeting before
adjournment. But if a new record date for the adjourned meeting is, or must be
fixed (see Section 2.5 of this Article 2) then notice must be given pursuant to
the requirements of paragraph (a) of this Section 2.4, to those persons who are
shareholders as of the new record date.
(c) Waiver of Notice. A shareholder may waive notice of the meeting (or
any notice required by the Act, Articles of Incorporation, or Bylaws), by a
writing signed by the shareholder entitled to the notice, which is delivered to
the corporation (either before or after the date and time stated in the notice)
for inclusion in the minutes of filing with the corporate records.
A shareholder's attendance at a meeting:
(1) waives objection to lack of notice or defective notice of the meeting
unless the shareholder, at the beginning of the meeting, objects to holding the
meeting or transacting business at the meeting; and
(2) waives objection to consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting notice,
unless the shareholder objects to consideration of the matter when it is
presented.
59
<PAGE>
(d) Contents of Notice. The notice of each special shareholder meeting
shall include a description of the purpose or purposes for which the meeting is
called. Except as provided in this Section 2.4(d), or as provided in the
corporation's articles, or otherwise in the Act, the notice of an annual
shareholder meeting need not include a description of the purpose or purposes
for which the meeting is called.
If a purpose of any shareholder meeting is to consider either: (1) a proposed
amendment to the Articles of Incorporation (including any restated articles
requiring shareholder approval); (2) a plan of merger or share exchange; (3)
the sale, lease, exchange or other disposition of all, or substantially all of
the corporation's property; (4) the dissolution of the corporation; or (5)
the removal of a director, the notice must so state and be accompanied by,
respectively, a copy or summary of the: (a) articles of amendment; (b) plan of
merger or share exchange; and (c) transaction for disposition of all, or
substantially all, of the corporation's property. If the proposed corporate
action creates dissenters' rights, as provided in the Act, the notice must state
that shareholders are, or may be entitled to assert dissenters' rights, and must
be accompanied by a copy of relevant provisions of the Act. If the corporation
issues, or authorizes the issuance of shares for promissory notes or for
promises to render services in the future, the corporation shall report in
writing to all the shareholders the number of shares authorized or issued, and
the consideration received with or before the notice of the next shareholder
meeting. Likewise, if the corporation indemnifies or advances expenses to an
officer or a director, this shall be reported to all the shareholders with or
before notice of the next shareholder meeting.
2.5 Fixing of Record Date
For the purpose of determining shareholders of any voting group entitled to
notice of or to vote at any meeting of shareholders, or shareholders entitled to
receive payment of any distribution or dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors may fix in advance a date as the record date. Such record date shall
not be more than 70 days prior to the date on which the particular action
requiring such determination of shareholders entitled to notice of, or to vote
at a meeting of shareholders, or shareholders entitled to receive a share
dividend or distribution. The record date for determination of such
shareholders shall be at the close of business on:
(a) With respect to an annual shareholder meeting or any special shareholder
meeting called by the Board of Directors or any person specifically authorized
by the Board of Directors or these Bylaws to call a meeting, the day before the
first notice is given to shareholders;
(b) With respect to a special shareholder meeting demanded by the
shareholders, the date the first shareholder signs the demand;
(c) With respect to the payment of a share dividend, the date the Board of
Directors authorizes the share dividend;
(d) With respect to actions taken in writing without a meeting (pursuant to
Article 2, Section 2.12), the first date any shareholder signs a consent; and
(e) With respect to a distribution to shareholders, (other than one
involving a repurchase or reaquisition of shares), the date the Board of
Directors authorizes the distribution.
60
<PAGE>
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made, as provided in this section, such determination
shall apply to any adjournment thereof unless the Board of Directors fixes a new
record date, which it must do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting.
If no record date has been fixed, the record date shall be the date the written
notice of the meeting is given to shareholders.
2.6 Shareholder List
The officer or agent having charge of the stock transfer books for shares of the
corporation shall, at least ten (10) days before each meeting of shareholders,
make a complete record of the shareholders entitled to vote at each meeting of
shareholders, arranged in alphabetical order, with the address of and the number
of shares held by each. The list must be arranged by class or series of shares.
The shareholder list must be available for inspection by any shareholder,
beginning two business days after notice of the meeting is given for which the
list was prepared and continuing through the meeting. The list shall be
available at the corporation's principal office or at a place in the city where
the meeting is to be held, as set forth in the notice of meeting. A
shareholder, his agent, or attorney is entitled, on written demand, to inspect
and, subject to the requirements of Section 2.14 of this Article 2, to copy the
list during regular business hours and at his expense, during the period it is
available for inspection. The corporation shall maintain the shareholder list
in written form or in another form capable of conversion into written form
within a reasonable time.
2.7 Shareholder Quorum and Voting Requirements
A majority of the outstanding shares of the corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. If less than a majority of the outstanding shares are represented
at a meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Once a share is represented for any purpose at a meeting, it is deemed present
for quorum purposes for the remainder of the meeting and for any adjournment of
that meeting, unless a new record date is or must be set for that adjourned
meeting.
If a quorum exists, a majority vote of those shares present and voting at a duly
organized meeting shall suffice to defeat or enact any proposal unless the
Statutes of the State of Nevada, the Articles of Incorporation or these Bylaws
require a greater-than-majority vote, in which event the higher vote shall be
required for the action to constitute the action of the corporation.
2.8 Increasing Either Quorum or Voting Requirements
For purposes of this Section 2.8, a "supermajority" quorum is a requirement that
more than a majority of the votes of the voting group be present to constitute a
quorum; and a "supermajority" voting requirement is any requirement that
61
<PAGE>
requires the vote of more than a majority of the affirmative votes of a voting
group at a meeting.
The shareholders, but only if specifically authorized to do so by the Articles
of Incorporation, may adopt, amend, or delete a Bylaw which fixes a
"supermajority" quorum or "supermajority" voting requirement.
The adoption or amendment of a Bylaw that adds, changes, or deletes a
"supermajority" quorum or voting requirement for shareholders must meet the same
quorum requirement and be adopted by the same vote required to take action under
the quorum and voting requirement then if effect or proposed to be adopted,
whichever is greater.
A Bylaw that fixes a supermajority quorum or voting requirement for shareholders
may not be adopted, amended, or repealed by the Board of Directors.
2.9 Proxies
At all meetings of shareholders, a shareholder may vote in person, or vote by
written proxy executed in writing by the shareholder or executed by his duly
authorized attorney-in fact. Such proxy shall be filed with the secretary of
the corporation or other person authorized to tabulate votes before or at the
time of the meeting. No proxy shall be valid after six (6) months from the date
of its execution unless otherwise specifically provided in the proxy or coupled
with an interest.
2.10 Voting of Shares
Unless otherwise provided in the articles, each outstanding share entitled to
vote shall be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders.
Shares held by an administrator, executor, guardian or conservator may be voted
by him, either in person or by proxy, without the transfer of such shares into
his name. Shares standing in the name of a trustee may be voted by him, either
in person or by proxy, but no trustee shall be entitled to vote shares held by
him without transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer thereof into his name if authority to do so is contained in
an appropriate order of the Court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such shares
until the shares are transferred into the name of the pledgee, and thereafter,
the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
Redeemable shares are not entitled to vote after notice of redemption is mailed
to the holders and a sum sufficient to redeem the shares has been deposited with
a bank, trust company, or other financial institution under an irrevocable
obligation to pay the holders the redemption price on surrender of the shares.
62
<PAGE>
2.11 Corporation's Acceptance of Votes
(a) If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, or proxy appointment and
give it effect as the act of the shareholder.
(b) If the name signed on a vote, consent, waiver, or proxy appointment does
not correspond to the name of its shareholder, the corporation, if acting in
good faith, is nevertheless entitled to accept the vote, consent, waiver, or
proxy appointment and give it effect as the act of the shareholder if:
(1) the shareholder is an entity, as defined in the Act, and the name signed
purports to be that of an officer or agent of the entity;
(2) the name signed purports to be that of an administrator, executor,
guardian or conservator representing the shareholder and, if the corporation
requests, evidence of fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, or proxy appointment;
(3) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of this
status acceptable to the corporation has been presented with respect to the
vote, consent, waiver or proxy appointment;
(4) the name signed purports to be that of a pledgee, beneficial owner, or
attorney-in-fact of the shareholder and, if the corporation requests, evidence
acceptable to the corporation of the signatory's authority to sign for the
shareholder has been presented with respect to the vote, consent, waiver, or
proxy appointment; or
(5) the shares are held in the name of two or more persons as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all the
co-owners.
(c) The corporation is entitled to reject a vote, consent, waiver, or proxy
appointment if the secretary or other officer or agent authorized to tabulate
votes, acting in good faith, has reasonable basis for doubt about the validity
of the signature on it or about the signatory's authority to sign for the
shareholder.
(d) The corporation and its officer or agent who accepts or rejects a vote,
consent, waiver, or proxy appointment in good faith and in accordance with the
standards of this Section 2.11 are not liable in damages to the shareholder for
the consequences of the acceptance or rejection.
(e) Corporation action based on the acceptance or rejection of a vote,
consent, waiver, or proxy appointment under this section is valid unless a court
of competent jurisdiction determines otherwise.
2.12 Informal Action by Shareholders
Any action required or permitted to be taken at a meeting of the shareholders
may be taken without a meeting if one or more written consents, setting forth
the action so taken, shall be signed by shareholders holding a majority of the
shares entitled to vote with respect to the subject matter thereof, unless a
"supermajority" vote is required by these Bylaws, in which case a
63
<PAGE>
"supermajority" vote will be required. Such consent shall be delivered to the
corporation secretary for inclusion in the minute book. A consent signed under
this Section has the effect of a vote at a meeting and may be described as such
in any document.
2.13 Voting for Directors
Unless otherwise provided in the Articles of Incorporation, directors are
elected by a plurality of the votes cast by the shares entitled to vote in the
election at a meeting at which a quorum is present.
2.14 Shareholders' Rights to Inspect Corporate Records
Shareholders shall have the following rights regarding inspection of corporate
records:
Minutes and Accounting Records - The corporation shall keep, as permanent
records, minutes of all meetings of its shareholders and Board of Directors, a
record of all actions taken by the shareholders or Board of Directors without a
meeting, and a record of all actions taken by a committee of the Board of
Directors in place of the Board of Directors on behalf of the corporation.
The corporation shall maintain appropriate accounting records.
(b) Absolute Inspection Rights of Records Required at Principal Office - If
a shareholder gives the corporation written notice of his demand at least five
business days before the date on which he wishes to inspect and copy, he, or his
agent or attorney, has the right to inspect and copy, during regular business
hours, any of the following records, all of which the corporation is required to
keep at its principal office:
(1) its Articles or restated Articles of Incorporation and all amendments to
them currently in effect;
(2) its Bylaws or restated Bylaws and all amendments to them currently in
effect;
(3) resolutions adopted by its Board of Directors creating one or more
classes or series of shares, and fixing their relative rights, preferences and
limitations, if shares issued pursuant to those resolutions are outstanding;
(4) the minutes of all shareholders' meetings, and records of all action
taken by shareholders without a meeting, for the past three years;
(5) all written communications to shareholders within the past three years,
including the financial statements furnished for the past three years to the
shareholders;
(6) a list of the names and business addresses of its current directors and
officers; and
(7) its most recent annual report delivered to the Nevada Secretary of
State.
(c) Conditional Inspection Right - In addition, if a shareholder gives the
corporation a written demand, made in good faith and for a proper purpose, at
least five business days before the date on which he wishes to inspect and copy,
64
<PAGE>
describes with reasonable particularity his purpose and the records he desires
to inspect, and the records are directly connected to his purpose, a shareholder
of a corporation, or his duly authorized agent or attorney, is entitled to
inspect and copy, during regular business hours at a reasonable location
specified by the corporation, any of the following records of the corporation:
(1) excerpts from minutes of any meeting of the Board of Directors; records
of any action of a committee of the Board of Directors on behalf of the
corporation; minutes of any meeting of the shareholders; and records of action
taken by the shareholders or Board of Directors without a meeting, to the extent
not subject to inspection under paragraph (a) of this Section 2.14;
(2) accounting records of the corporation; and
(3) the record of shareholders (compiled no earlier than the date of the
shareholder's demand).
(d) Copy Costs - The right to copy records includes, if reasonable, the
right to receive copies made by photographic, xerographic, or other means. The
corporation may impose a reasonable charge, to be paid by the shareholder on
terms set by the corporation, covering the costs of labor and material incurred
in making copies of any documents provided to the shareholder.
"Shareholder" Includes Beneficial Owner - For purposes of this Section 2.14, the
term "shareholder" shall include a beneficial owner whose shares are held in a
voting trust or by a nominee on his behalf.
2.15 Financial Statements Shall Be Furnished to the Shareholders.
(a) The corporation shall furnish its shareholders annual financial
statements, which may be consolidated or combined statements of the corporation
and one or more of its subsidiaries, as appropriate, that include a balance
sheet as of the end of the fiscal year, an income statement for that year, and a
statement of changes in shareholders' equity for the year, unless that
information appears elsewhere in the financial statements. If financial
statements are prepared for the corporation on the basis of generally accepted
accounting principles, the annual financial statements for the shareholders must
also be prepared on that basis.
(b) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for the
corporation's accounting records:
(1) stating his reasonable belief that the statements were prepared on the
basis of generally accepted accounting principles and, if not, describing the
basis of preparation; and
(2) describing any respects in which the statements were not prepared on a
basis of accounting consistent with the statements prepared for the preceding
year.
(c) A corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year. Thereafter, on
written request from a shareholder who was not mailed the statements, the
corporation shall mail him the latest financial statements.
65
<PAGE>
2.16 Dissenters' Rights.
Each shareholder shall have the right to dissent from and obtain payment for his
shares when so authorized by the Act, Articles of Incorporation, these Bylaws,
or a resolution of the Board of Directors.
2.17 Order of Business.
The following order of business shall be observed at all meetings of the
shareholders, as applicable and so far as practicable:
(a) Calling the roll of officers and directors present and determining
shareholder quorum requirements;
(b) Reading, correcting and approving of minutes of previous meeting;
(c) Reports of officers;
(d) Reports of Committees;
(e) Election of Directors;
(f) Unfinished business;
(g) New business; and
(h) Adjournment.
ARTICLE 3. BOARD OF DIRECTORS
3.1 General Powers.
Unless the Articles of Incorporation have dispensed with or limited the
authority of the Board of Directors by describing who will perform some or all
of the duties of a Board of Directors, all corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be managed under the direction of the Board of Directors.
3.2 Number, Tenure and Qualification of Directors.
Unless otherwise provided in the Articles of Incorporation, the authorized
number of directors shall be not less than 1 (minimum number) nor more than 9
(maximum number). The initial number of directors was established in the
original Articles of Incorporation. The number of directors shall always be
within the limits specified above, and as determined by resolution adopted by
the Board of Directors. After any shares of this corporation are issued,
neither the maximum nor minimum number of directors can be changed, nor can a
fixed number be substituted for the maximum and minimum numbers, except by a
duly adopted amendment to the Articles of Incorporation duly approved by a
majority of the outstanding shares entitled to vote. Each director shall hold
office until the next annual meeting of shareholders or until removed. However,
if his term expires, he shall continue to serve until his successor shall have
been elected and qualified, or until there is a decrease in the number of
directors. Unless required by the Articles of Incorporation, directors do not
need to be residents of Nevada or shareholders of the corporation.
66
<PAGE>
3.3 Regular Meetings of the Board of Directors.
A regular meeting of the Board of Directors shall be held without other notice
than this Bylaw immediately after, and at the same place as, the annual meeting
of shareholders. The Board of Directors may provide, by resolution, the time
and place for the holding of additional regular meetings without other notice
than such resolution. (If permitted by Section 3.7, any regular meeting may be
held by telephone).
3.4 Special Meeting of the Board of Directors.
Special meetings of the Board of Directors may be called by or at the request of
the president or any one director. The person or persons authorized to call
special meetings of the Board of Directors may fix any place, either within or
without the State of Nevada, as the place for holding any special meeting of the
Board of Directors or, if permitted by Section 3.7, any special meeting may be
held by telephone.
3.5 Notice of, and Waiver of Notice of, Special Meetings of the Board of
Directors.
Unless the Articles of Incorporation provide for a longer or shorter period,
notice of any special meeting of the Board of Directors shall be given at least
two days prior thereto, either orally or in writing. If mailed, notice of any
director meeting shall be deemed to be effective at the earlier of: (1) when
received; (2) five days after deposited in the United States mail, addressed to
the director's business office, with postage thereon prepaid; or (3) the date
shown on the return receipt, if sent by registered or certified mail, return
receipt requested, and the receipt is signed by or on behalf of the director.
Notice may also be given by facsimile and, in such event, notice shall be deemed
effective upon transmittal thereof to a facsimile number of a compatible
facsimile machine at the director's business office. Any director may waive
notice of any meeting. Except as otherwise provided herein, the waiver must be
in writing, signed by the director entitled to the notice, and filed with the
minutes or corporate records. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
and at the beginning of the meeting, or promptly upon his arrival, objects to
holding the meeting or transacting business at the meeting, and does not
thereafter vote for or assent to action taken at the meeting. Unless required
by the Articles of Incorporation or the Act, neither the business to be
transacted at, nor the purpose of, any special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting.
3.6 Director Quorum.
A majority of the number of directors fixed, pursuant to Section 3.2 of this
Article 3, shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, unless the Articles of Incorporation or the
Act require a greater number for a quorum.
Any amendment to this quorum requirement is subject to the provisions of Section
3.8 of this Article 3.
Once a quorum has been established at a duly organized meeting, the Board of
Directors may continue to transact corporate business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.
67
<PAGE>
3.7 Actions By Directors.
The act of the majority of the directors present at a meeting at which a quorum
is present when the vote is taken shall be the act of the Board of Directors,
unless the Articles of Incorporation or the Act require a greater percentage.
Any amendment which changes the number of directors needed to take action is
subject to the provisions of Section 3.8 of this Article 3.
Unless the Articles of Incorporation provide otherwise, any or all directors may
participate in a regular or special meeting by, or conduct the meeting through
the use of, any means of communication by which all directors participating may
simultaneously hear each other during the meeting. Minutes of any such meeting
shall be prepared and entered into the records of the corporation. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.
A director who is present at a meeting of the Board of Directors or a committee
of the Board of Directors when corporate action is taken is deemed to have
assented to the action taken unless: (1) he objects at the beginning of the
meeting, or promptly upon his arrival, to holding it or transacting business at
the meeting; or (2) his dissent or abstention from the action taken is entered
in the minutes of the meeting; or (3) he delivers written notice of his dissent
or abstention to the presiding officer of the meeting before its adjournment or
to the corporation within 24 hours after adjournment of the meeting. The right
of dissent or abstention is not available to a director who votes in favor of
the action taken.
3.8 Establishing a "Supermajority" Quorum or Voting Requirement for the
Board of Directors.
For purposes of this Section 3.8, a "supermajority" quorum is a requirement that
more than a majority of the directors in office constitute a quorum; and a
"supermajority" voting requirement is one which requires the vote of more than a
majority of those directors present at a meeting at which a quorum is present to
be the act of the directors.
A Bylaw that fixes a supermajority quorum or supermajority voting requirement
may be amended or repealed:
(1) if originally adopted by the shareholders, only by the shareholders
(unless otherwise provided by the share- holders); or
(2) if originally adopted by the Board of Directors, either by the
shareholders or by the Board of Directors.
A Bylaw adopted or amended by the shareholders that fixes a supermajority quorum
or supermajority voting requirement for the Board of Directors may provide that
it may be amended or repealed only by a specified vote of either the
shareholders or the Board of Directors.
Subject to the provisions of the preceding paragraph, action by the Board of
Directors to adopt, amend, or repeal a Bylaw that changes the quorum or voting
requirement for the Board of Directors must meet the same quorum requirement and
be adopted by the same vote required to take action under the quorum and voting
requirement then in effect or proposed to be adopted, whichever is greater.
68
<PAGE>
3.9 Director Action Without a Meeting.
Unless the Articles of Incorporation provide otherwise, any action required or
permitted to be taken by the Board of Directors at a meeting may be taken
without a meeting if all the directors sign a written consent describing the
action taken. Such consents shall be filed with the records of the corporation.
Action taken by consent is effective when the last director signs the consent,
unless the consent specifies a different effective date. A signed consent has
the effect of a vote at a duly noticed and conducted meeting of the Board of
Directors and may be described as such in any document.
3.10 Removal of Directors.
The shareholders may remove one or more directors at a meeting called for that
purpose if notice has been given that a purpose of the meeting is such removal.
The removal may be with or without cause unless the Articles of Incorporation
provide that directors may only be removed for cause. If cumulative voting is
not authorized, a director may be removed only if the number of votes cast in
favor of removal exceeds the number of votes cast against removal.
3.11 Board of Director Vacancies.
Unless the Articles of Incorporation provide otherwise, if a vacancy occurs on
the Board of Directors, excluding a vacancy resulting from an increase in the
number of directors, the director(s) remaining in office shall fill the vacancy.
If the directors remaining in office constitute fewer than a quorum of the Board
of Directors, they may fill the vacancy by the affirmative vote of a majority
of all the directors remaining in office.
If a vacancy results from an increase in the number of directors, only the
shareholders may fill the vacancy.
A vacancy that will occur at a specific later date (by reason of a resignation
effective at a later date) may be filled by the Board of Directors before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.
The term of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors are elected. However, if his term
expires, he shall continue to serve until his successor is elected and qualifies
or until there is a decrease in the number of directors.
3.12 Director Compensation.
Unless otherwise provided in the Articles of Incorporation, by resolution of the
Board of Directors, each director may be paid his expenses, if any, of
attendance at each meeting of the Board of Directors, and may be paid a stated
salary as director or a fixed sum for attendance at each meeting of the Board of
Directors, or both. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
3.13 Director Committees.
(a) Creation of Committees. Unless the Articles of Incorporation provide
otherwise, the Board of Directors may create one or more committees and appoint
members of the Board of Directors to serve on them. Each committee must have
two or more members, who serve at the pleasure of the Board of Directors.
69
<PAGE>
(b) Selection of Members. The creation of a committee and appointment of
members to it must be approved by the greater of (1) a majority of all the
directors in office when the action is taken, or (2) the number of directors
required by the Articles of Incorporation to take such action.
(c) Required Procedures. Sections 3.4, 3.5, 3.6, 3.7, 3.8 and 3.9 of this
Article 3 apply to committees and their members.
(d) Authority. Unless limited by the Articles of Incorporation or the Act,
each committee may exercise those aspects of the authority of the Board of
Directors which the Board of Directors confers upon such committee in the
resolution creating the committee. Provided, however, a committee may not:
(1) authorize distributions to shareholders;
(2) approve or propose to shareholders any action that the Act requires be
approved by shareholders;
(3) fill vacancies on the Board of Directors or on any of its committees;
(4) amend the Articles of Incorporation;
(5) adopt, amend, or repeal Bylaws;
(6) approve a plan of merger not requiring shareholder approval;
(7) authorize or approve reacquisition of shares, except according to a
formula or method prescribed by the Board of Directors; or
(8) authorize or approve the issuance or sale, or contract for sale of
shares, or determine the designation and relative rights, preferences, and
limitations of a class or series of shares; except that the Board of Directors
may authorize a committee to do so within limits specifically prescribed by the
Board of Directors.
ARTICLE 4. OFFICERS
4.1 Designation of Officers.
The officers of the corporation shall be a president, a secretary, and a
treasurer, each of whom shall be appointed by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary, including any
vice-presidents, may be appointed by the Board of Directors. The same
individual may simultaneously hold more than one office in the corporation.
4.2 Appointment and Term of Office.
The officers of the corporation shall be appointed by the Board of Directors for
a term as determined by the Board of Directors. If no term is specified, they
shall hold office until the first meeting of the directors held after the next
annual meeting of shareholders. If the appointment of officers is not made at
such meeting, such appointment shall be made as soon thereafter as is
convenient. Each officer shall hold office until his successor has been duly
appointed and qualified, until his death, or until he resigns or has been
removed in the manner provided in Section 4.3 of this Article 4.
70
<PAGE>
The designation of a specified term does not grant to the officer any contract
rights, and the Board of Directors can remove the officer at any time prior to
the termination of such term.
Appointment of an officer shall not of itself create any contract rights.
4.3 Removal of Officers.
Any officer may be removed by the Board of Directors at any time, with or
without cause. Such removal shall be without prejudice to the contract rights,
if any, of the person so removed.
4.4 President.
The president shall be the principal executive officer of the corporation and,
subject to the control of the Board of Directors, shall generally supervise and
control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the shareholders. He may sign, with the
secretary or any other proper officer of the corporation thereunto duly
authorized by the Board of Directors, certificates for shares of the corporation
and deeds, mortgages, bonds, contracts, or other instruments which the Board of
Directors has authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of Directors or by
these Bylaws to some other officer or agent of the corporation, or shall be
required by law to be otherwise signed or executed. The president shall
generally perform all duties incident to the office of president and such other
duties as may be prescribed by the Board of Directors from time to time.
4.5 Vice-President.
If appointed, in the absence of the president or in the event of the president's
death, inability or refusal to act, the vice-president (or in the event there be
more than one vice-president, the vice-presidents in the order designated at the
time of their election, or in the absence of any designation, then in the order
of their appointment) shall perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the president. If there is no vice-president, then the treasurer shall perform
such duties of the president. Any vice-president may sign, with the secretary
or an assistant secretary, certificates for shares of the corporation the
issuance of which have been authorized by resolution of the Board of Directors.
A vice-president shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors.
4.6 Secretary.
The secretary shall (a) keep the minutes of the proceedings of the shareholders
and of the Board of Directors in one or more books provided for that purpose;
(b) see that all notices are duly given in accordance with the provisions of
these Bylaws or as required by law; (c) be custodian of the corporate records
and of any seal of the corporation and, if there is a seal of the corporation,
see that it is affixed to all documents, the execution of which on behalf of the
corporation under its seal is duly authorized; (d) when requested or required,
authenticate any records of the corporation; (e) keep a register of the post
office address of each shareholder, as provided to the secretary by the
shareholders; (f) sign with the president, or a vice-resident, certificates for
shares of the corporation, the issuance of which has been authorized by
resolution of the Board of Directors; (g) have general charge of the stock
transfer books of the corporation; and (h) generally perform all duties incident
71
<PAGE>
to the office of secretary and such other duties as from time to time may be
assigned to him by the president or by the Board of Directors.
4.7 Treasurer.
The treasurer shall (a) have charge and custody of and be responsible for all
funds and securities of the corporation; (b) receive and give receipts for
moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies, or other depositories as may be selected by the Board of Directors;
and (c) generally perform all of the duties incident to the office of treasurer
and such other duties as from time to time may be assigned to him by the
president or by the Board of Directors.
If required by the Board of Directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the Board of Directors shall determine.
4.8 Assistant Secretaries and Assistant Treasurers.
The assistant secretaries, when authorized by the Board of Directors, may sign
with the president, or a vice-president, certificates for shares of the
corporation, the issuance of which has been authorized by a resolution of the
Board of Directors. The assistant treasurers shall respectively, if required by
the Board of Directors, give bonds for the faithful discharge of their duties in
such sums and with such sureties as the Board of Directors shall determine. The
assistant secretaries and assistant treasurers, generally, shall perform such
duties as may be assigned to them by the secretary or the treasurer,
respectively, or by the president or the Board of Directors.
4.9 Salaries.
The salaries of the officers, if any, shall be fixed from time to time by the
Board of Directors.
ARTICLE 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, AGENTS, AND EMPLOYEES
5.1 Indemnification of Officers, Directors, Employees and Agents.
Unless otherwise provided in the Articles of Incorporation, the corporation
shall indemnify any individual made a party to a proceeding because he is or was
an officer, director, employee or agent of the corporation against liability
incurred in the proceeding, all pursuant to and consistent with the provisions
of NRS 78.751, as amended from time to time.
5.2 Advance Expenses for Officers and Directors.
The expenses of officers and directors incurred in defending a civil or criminal
action, suit or proceeding shall be paid by the corporation as they are incurred
and in advance of the final disposition of the action, suit or proceeding, but
only after receipt by the corporation of an undertaking by or on behalf of the
officer or director on terms set by the Board of Directors, to repay the
expenses advanced if it is ultimately determined by a court of competent
jurisdiction that he is not entitled to be indemnified by the corporation.
72
<PAGE>
5.3 Scope of Indemnification.
The indemnification permitted herein is intended to be to the fullest extent
permissible under the laws of the State of Nevada, and any amendments thereto.
ARTICLE 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 Certificates for Shares.
(a) Content. Certificates representing shares of the corporation shall at
minimum, state on their face the name of the issuing corporation; that the
corporation is formed under the laws of the State of Nevada; the name of the
person to whom issued; the certificate number; class and par value of shares;
and the designation of the series, if any, the certificate represents. The form
of the certificate shall be as determined by the Board of Directors. Such
certificates shall be signed (either manually or by facsimile) by the president
or a vice-president and by the secretary or an assistant secretary and may be
sealed with a corporate seal or a facsimile thereof. Each certificate for
shares shall be consecutively numbered or otherwise identified.
(b) Legend as to Class or Series. If the corporation is authorized to issue
different classes of shares or different series within a class, the
designations, relative rights, preferences, and limitations applicable to each
class and the variations in rights, preferences, and limitations determined for
each series (and the authority of the Board of Directors to determine variations
for future series) must be summarized on the front or back of the certificate
indicating that the corporation will furnish the shareholder this information on
request in writing and without charge.
(c) Shareholder List. The name and address of the person to whom the shares
are issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the corporation.
(d) Transferring Shares. All certificates surrendered to the corporation
for transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed, or mutilated certificate, a
new one may be issued therefore upon such terms as the Board of Directors may
prescribe, including indemnification of the corporation and bond requirements.
6.2 Registration of the Transfer of Shares.
Registration of the transfer of shares of the corporation shall be made only on
the stock transfer books of the corporation. In order to register a transfer,
the record owner shall surrender the share certificate to the corporation for
cancellation, properly endorsed by the appropriate person or persons with
reasonable assurances that the endorsements are genuine and effective. Unless
the corporation has established a procedure by which a beneficial owner of
shares held by a nominee is to be recognized by the corporation as the owner,
the person in whose name shares stand on the books of the corporation shall be
deemed by the corporation to be the owner thereof for all purposes.
6.3 Restrictions on Transfer of Shares Permitted.
The Board of Directors may impose restrictions on the transfer or registration
of transfer of shares, including any security convertible into, or carrying a
right to subscribe for or acquire shares. A restriction does not affect shares
issued before the restriction was adopted unless the holders of the shares are
73
<PAGE>
parties to the restriction agreement or voted in favor of the restriction.
A restriction on the transfer or registration of transfer of shares may be
authorized:
(1) to maintain the corporation's status when it is dependent on the number
or identity of its shareholders;
(2) to preserve exemptions under federal or state securities law; or
(3) for any other reasonable purpose.
A restriction on the transfer or registration of transfer of shares may:
(1) obligate the shareholder first to offer the corporation or other persons
(separately, consecutively, or simultaneously) an opportunity to acquire the
restricted shares;
(2) obligate the corporation or other persons (separately, consecutively, or
simultaneously) to acquire the restricted shares;
(3) require the corporation, the holders or any class of its shares, or
another person to approve the transfer of the restricted shares, if the
requirement is not manifestly unreasonable; or
(4) prohibit the transfer of the restricted shares to designated persons or
classes of persons, if the prohibition is not manifestly unreasonable.
A restriction on the transfer or registration of transfer of shares is valid and
enforceable against the holder or a transferee of the holder if the restriction
is authorized by this Section 6.3 and its existence is noted conspicuously on
the front or back of the certificate. Unless so noted, a restriction is not
enforceable against a person without knowledge of the restriction.
6.4 Acquisition of Shares.
The corporation may acquire its own shares and unless otherwise provided in the
Articles of Incorporation, the shares so acquired constitute authorized but
unissued shares.
If the Articles of Incorporation prohibit the reissue of shares acquired by the
corporation, the number of authorized shares is reduced by the number of shares
acquired, effective upon amendment of the Articles of Incorporation, which
amendment shall be adopted by the shareholders, or the Board of Directors
without shareholder action (if permitted by the Act). The amendment must be
delivered to the Secretary of State and must set forth:
(1) the name of the corporation;
(2) the reduction in the number of authorized shares, itemized by class and
series; and
(3) the total number of authorized shares, itemized by class and series,
remaining after reduction of the shares.
74
<PAGE>
ARTICLE 7. DISTRIBUTIONS
7.1 Distributions.
The Board of Directors may authorize, and the corporation may make,
distributions (including dividends on its outstanding shares) in the manner and
upon the terms and conditions provided by law.
ARTICLE 8. CORPORATE SEAL
8.1 Corporate Seal.
The Board of Directors may adopt a corporate seal which may be circular in form
and have inscribed thereon any designation, including the name of the
corporation, Nevada as the state of incorporation, and the words "Corporate
Seal."
ARTICLE 9. EMERGENCY BYLAWS
9.1 Emergency Bylaws.
Unless the Articles of Incorporation provide otherwise, the following provisions
shall be effective during an emergency, which is defined as a time when a quorum
of the corporation's directors cannot be readily assembled because of some
catastrophic event. During such emergency:
(a) Notice of Board Meetings
Any one member of the Board of Directors or any one of the following officers:
president, any vice-president, secretary, or treasurer, may call a meeting of
the Board of Directors. Notice of such meeting need be given only to those
directors whom it is practicable to reach, and may be given in any practical
manner, including by publication and radio. Such notice shall be given at least
six hours prior to commencement of the meeting.
(b) Temporary Directors and Quorum
One or more officers of the corporation present at the emergency board meeting,
as is necessary to achieve a quorum, shall be considered to be directors for the
meeting, and shall so serve in order of rank, and within the same rank, in order
of seniority. In the event that less than a quorum (as determined by Section
3.6 of Article 3) of the directors are present (including any officers who are
to serve as directors for the meeting), those directors present (including the
officers serving as directors) shall constitute a quorum.
(c) Actions Permitted To Be Taken
The Board of Directors, as constituted in paragraph (b), and after notice as set
forth in paragraph (a), may:
(1) Officers' Powers. Prescribe emergency powers to any officer of the
corporation;
(2) Delegation of Any Power. Delegate to any officer or director, any of
the powers of the Board of Directors;
75
<PAGE>
(3) Lines of Succession. Designate lines of succession of officers and
agents, in the event that any of them are unable to discharge their duties;
(4) Relocate Principal Place of Business Relocate the principal place of
business, or designate successive or simultaneous principal places of business;
(5) All Other Action. Take any other action which is convenient, helpful, or
necessary to carry on the business of the corporation.
ARTICLE 10. AMENDMENTS
10.1 AMENDMENTS
The Board of Directors may amend or repeal the corporation's Bylaws unless:
(1) the Articles of Incorporation or the Act reserve this power exclusively
to the shareholders, in whole or part; or
(2) the shareholders, in adopting, amending, or repealing a particular
Bylaw, provide expressly that the Board of Directors may not amend or repeal
that Bylaw; or
(3) the Bylaw either establishes, amends or deletes a "supermajority"
shareholder quorum or voting requirement, as defined in Section 2.8 of Article
2.
Any amendment which changes the voting or quorum requirement for the Board of
Directors must comply with Section 3.8 of Article 3, and for the shareholders,
must comply with Section 2.8 of Article 2.
The corporation's shareholders may also amend or repeal the corporation's Bylaws
at any meeting held pursuant to Article 2.
CERTIFICATE OF SECRETARY
I hereby certify that I am the Secretary of Asian Star Development, Inc. and
that the foregoing Bylaws constitute the Code of Asian Star Development, Inc.,
as duly adopted by the Board of Directors of the corporation on this 10th day of
January, 1997.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 10th day of January
1997.
/s/ Stephen Chow, Secretary
MICHAEL J. MORRISON, CHTD.
1495 Ridgeview Drive, Suite 220
Reno, Nevada 89509
Telephone: (775) 827-6300
Facsimile: (775) 827-6311
May 6, 1999
Mr. Stephen Chow, President
Asian Star Development, Inc.
Room 930, Block B, East Wing
New World Office Building
Tsimshatsui, Kowloon, Hong Kong
Dear Mr. Chow:
I have acted as counsel to Asian Star Development, Inc. (the "Company") in
connection with registration of the Company's securities pursuant to filing of a
Form 10-SB registration statement with the U.S. Securities and Exchange
Commission. You have requested my opinion as to certain matters in connection
with the Form 10-SB filing.
In my capacity as counsel to the Company, I have examined and am familiar with
the originals and/or copies, the authenticity of which has been established to
my satisfaction, of all documents, corporate records and other instruments which
I have deemed necessary to express the opinions hereinafter set forth.
Based upon my examination and upon consideration of applicable laws, rules and
regulations, it is my opinion that the shares of Common Stock to be registered
by the Company described in the Form 10-SB registration statement have been
validly issued, fully paid and non-assessable.
Further, I consent to the use of this opinion as an Exhibit to the registration
statement and to the use of my name in such registration statement and
prospectus.
Very truly yours,
/s/ Michael J. Morrison, Esq.
BDO INTERNATIONAL
Certified Public Accountants
29th Floor Wing On Centre
111 Connaught Road Central
Hong Kong
Telephone: (852) 2541-5041
Facsimile: (852) 2815-0002
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Asian Star Development Inc.
We hereby consent to the use in the Form 10-SB (the Form) constituting a part
of this Registration Statement of our report dated April 23, 1999, relating to
the consolidated financial statements of Asian Star Development, Inc., which is
contained in that Form.
/s/ BDO International
December 1, 1999
AGREEMENT FOR PURCHASE AND SALE OF ASSETS (Dragon Villa)
THIS AGREEMENT is made and entered into this 8th day of January, 1997, by and
between HONPAR (HUANGZHOU) PROPERTIES LIMITED ("Seller") and ASIAN STAR
DEVELOPMENT, INC., a Nevada corporation ("Buyer").
W I T N E S S E T H:
This Agreement is made and entered into with reference to the following facts:
A. Seller is the owner, free and clear of all liens and encumbrances, of
that certain property described in Exhibit "A" attached hereto and made a part
hereof by reference ("the Assets").
B. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, the Assets upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, and other good and valuable consideration, receipt of
which is hereby acknowledged, it is agreed by the parties as follows:
1. Sale of Assets. Seller shall sell and Buyer shall purchase the Assets,
free and clear of all liens and encumbrances.
2. Purchase Price. The purchase price for the Assets shall be 5,760,000
shares of restricted Common Stock of Buyer. This transaction is intended to be
a tax-free exchange of equity securities of Buyer for the Assets of Seller, all
pursuant to the U.S. Internal Revenue Code.
3. Warranties of Seller. Seller represents and warrants to Buyer as
follows:
(a) It has not entered into any other contracts to sell, mortgage, or assign
the Assets.
(b) As of the date of closing, the Assets shall be free and clear of all
liens, encumbrances, chattel mortgages or conditional sales contracts.
(c) It has taken all corporate action, and other legally required action,
including permits and consents required by the governmental authorities in the
jurisdiction where the Assets are situated, necessary to sell and transfer the
Assets to Buyer and has received/obtained full corporate, legal, govern-mental
and other necessary authority to do so.
5. Condition of Assets. Buyer acknowledges that it has inspected the
Assets and is purchasing them in an "as is" condition. The parties waive any
provisions of commercial bulk sales laws.
7. Obligations Upon Closing. At the closing:
(a) Seller shall deliver to Buyer a bill of sale.
79
<PAGE>
(b) The parties shall execute all documents deemed necessary and appropriate
to effect issuance and delivery to Seller of the shares of Common Stock, as
described in Paragraph 2 hereof.
8. Indemnity by Seller. Seller shall indemnify Buyer against any loss,
damage, cost or expense that Buyer shall incur or suffer as a result of the
breach, untruth or inaccuracy of any promise, agreement, covenant, warranty or
representation made by Seller herein and for the benefit of Buyer.
9. Indemnity of Buyer. Buyer shall indemnify Seller against any loss,
damage, cost or expense that Seller shall incur or suffer as a result of the
breach, untruth or inaccuracy of any promise, agreement, covenant, warranty or
representation made by Buyer herein to and for the benefit of Seller.
10. Broker's /Finder's Fees. The parties warrant to and with each other
that the transaction evidenced by this Agreement was initiated, negotiated and
completed by the parties hereto directly, as principals, and without the
intervention of any broker, dealer, agent or finder, except as otherwise
provided herein. Each party agrees to indemnify and hold the other party
harmless from and against any loss, damage, cost or expense, including without
limitation, attorneys' fees and litigation expenses, resulting from any breach
or breaches of the foregoing warranty.
11. Risk of Loss. Risk of loss, damage, or destruction of the Assets
shall remain with Seller until Buyer takes possession and control of the Assets
of Seller, at which time risk of loss, damage or destruction of the Assets shall
pass to Buyer.
12. Miscellaneous.
(a) Time. Time is of the essence of this Agreement and in the performance
and enforcement of each of the promises, covenants, representations and
warranties of the parties contained herein. For the purpose of computing any
period of time prescribed herein or relating hereto, the first day shall be
excluded. If the period of time is six (6) days or more, weekends and public
holidays shall be included. An act required to be performed on a day shall be
performed at or before the close of business on such day. If an act is required
to be performed on a certain day and such day is not a regular business day, the
time of performance or measurement shall be extended to and including the next
regular business day.
(b) Entire Agreement. This Agreement constitutes the entire agreement of the
parties and all prior rights, negotiations and representations are merged
herein.
(c) Binding Effects. This Agreement shall inure to the benefit of, and be
binding upon, the parties and their several successors in interested in any
capacity.
(d) Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of Nevada.
(e) Notices. Any notice or notices which any party hereto deems
necessary, useful or convenient to give to any other party or parties hereto, at
any time and from time to time, shall be in writing and shall be personally
served upon or mailed to the parties at the following addresses:
80
<PAGE>
To Seller at: Suite 930, East Wing, Block B
New World Office Building
Tsimshatsui, Kowloon, Hong Kong
To Buyer at: 1495 Ridgeview Drive,
Suite 220
Reno, Nevada 89509
(f) Attorneys' Fees and Costs. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which he may be
entitled.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to constitute but one and the same
instrument.
(h) Captions. Article and paragraph captions contained in this Agreement
are inserted only as a matter of convenience and reference. Said captions shall
not be construed to define, limit, restrict, extend or describe this Agreement
or the intent of any provision hereof.
(i) Gender and Number. Whenever used in this Agreement and as required by
the context of the transaction, the single number shall include the plural, the
plural number shall include the singular, and masculine gender shall include the
feminine and neuter.
(j) Form of Association. As required by the context, the term "person"
shall include individuals, partnerships, limited partnerships, corporations,
estates and trusts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and
year first above written.
ASIAN STAR DEVELOPMENT, INC. HONPAR (HUANGZHOU) PROPERTIES
/s/ Rita S. Dickson, LIMITED
Assistant Secretary /s/ Stephen Chow
81
<PAGE>
EXHIBIT A
HONPAR (HUANGZHOU)PROPERTIES LIMITED
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
Value Value
in RMB in USD
----------- ----------
Land 57,500 sm @ RMB
2,000/sm (Estimated at today's 115,000,000 13,355,000
market value)
Design of city master plan, 2,800,000 325,000
architectural, engineering,
surveyors, supervision and
other operational expenses
Construction, land fill and
site office 4,170,000 484,000
----------- -----------
TOTAL ASSETS 121,970,000 14,164,000
</TABLE>
AGREEMENT FOR PURCHASE AND SALE OF ASSETS (Maple City
THIS AGREEMENT is made and entered into this 8th day of January, 1997, by and
between HONPAR PROPERTIES LIMITED ("Seller") and ASIAN STAR DEVELOPMENT, INC.,
a Nevada corporation ("Buyer").
W I T N E S S E T H:
This Agreement is made and entered into with reference to the following facts:
A. Seller is the owner, free and clear of all liens and encumbrances, of
that certain property described in Exhibit "A" attached hereto and made a part
hereof by reference ("the Assets").
B. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, the Assets upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, and other good and valuable consideration, receipt of
which is hereby acknowledged, it is agreed by the parties as follows:
1. Sale of Assets. Seller shall sell and Buyer shall purchase the Assets,
free and clear of all liens and encumbrances.
2. Purchase Price. The purchase price for the Assets shall be 3,240,000
shares of restricted Common Stock of Buyer. This transaction is intended to be
a tax-free exchange of equity securities of Buyer for the Assets of Seller, all
pursuant to the U.S. Internal Revenue Code.
3. Warranties of Seller. Seller represents and warrants to Buyer as
follows:
(a) It has not entered into any other contracts to sell, mortgage, or assign
the Assets.
(b) As of the date of closing, the Assets shall be free and clear of all
liens, encumbrances, chattel mortgages or conditional sales contracts.
(c) It has taken all corporate action, and other legally required action,
including permits and consents required by the governmental authorities in the
jurisdiction where the Assets are situated, necessary to sell and transfer the
Assets to Buyer and has received/obtained full corporate, legal, govern-mental
and other necessary authority to do so.
5. Condition of Assets. Buyer acknowledges that it has inspected the
Assets and is purchasing them in an "as is" condition. The parties waive any
provisions of commercial bulk sales laws.
7. Obligations Upon Closing. At the closing:
(a) Seller shall deliver to Buyer a bill of sale.
83
<PAGE>
(b) The parties shall execute all documents deemed necessary and appropriate
to effect issuance and delivery to Seller of the shares of Common Stock, as
described in Paragraph 2 hereof.
8. Indemnity by Seller. Seller shall indemnify Buyer against any loss,
damage, cost or expense that Buyer shall incur or suffer as a result of the
breach, untruth or inaccuracy of any promise, agreement, covenant, warranty or
representation made by Seller herein and for the benefit of Buyer.
9. Indemnity of Buyer. Buyer shall indemnify Seller against any loss,
damage, cost or expense that Seller shall incur or suffer as a result of the
breach, untruth or inaccuracy of any promise, agreement, covenant, warranty or
representation made by Buyer herein to and for the benefit of Seller.
10. Broker's /Finder's Fees. The parties warrant to and with each other
that the transaction evidenced by this Agreement was initiated, negotiated and
completed by the parties hereto directly, as principals, and without the
intervention of any broker, dealer, agent or finder, except as otherwise
provided herein. Each party agrees to indemnify and hold the other party
harmless from and against any loss, damage, cost or expense, including without
limitation, attorneys' fees and litigation expenses, resulting from any breach
or breaches of the foregoing warranty.
11. Risk of Loss. Risk of loss, damage, or destruction of the Assets
shall remain with Seller until Buyer takes possession and control of the Assets
of Seller, at which time risk of loss, damage or destruction of the Assets shall
pass to Buyer.
12. Miscellaneous.
(a) Time. Time is of the essence of this Agreement and in the performance
and enforcement of each of the promises, covenants, representations and
warranties of the parties contained herein. For the purpose of computing any
period of time prescribed herein or relating hereto, the first day shall be
excluded. If the period of time is six (6) days or more, weekends and public
holidays shall be included. An act required to be performed on a day shall be
performed at or before the close of business on such day. If an act is required
to be performed on a certain day and such day is not a regular business day, the
time of performance or measurement shall be extended to and including the next
regular business day.
(b) Entire Agreement. This Agreement constitutes the entire agreement of the
parties and all prior rights, negotiations and representations are merged
herein.
(c) Binding Effects. This Agreement shall inure to the benefit of, and be
binding upon, the parties and their several successors in interested in any
capacity.
(d) Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of Nevada.
(e) Notices. Any notice or notices which any party hereto deems
necessary, useful or convenient to give to any other party or parties hereto, at
any time and from time to time, shall be in writing and shall be personally
served upon or mailed to the parties at the following addresses:
84
<PAGE>
To Seller at: Suite 930, East Wing, Block B
New World Office Building
Tsimshatsui, Kowloon, Hong Kong
To Buyer at: 1495 Ridgeview Drive, Suite 220
Reno, Nevada 89509
(f) Attorneys' Fees and Costs. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which he may be
entitled.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to constitute but one and the same
instrument.
(h) Captions. Article and paragraph captions contained in this Agreement
are inserted only as a matter of convenience and reference. Said captions shall
not be construed to define, limit, restrict, extend or describe this Agreement
or the intent of any provision hereof.
(i) Gender and Number. Whenever used in this Agreement and as required
by the context of the transaction, the single number shall include the plural,
the plural number shall include the singular, and masculine gender shall include
the feminine and neuter.
(j) Form of Association. As required by the context, the term "person"
shall include individuals, partnerships, limited partnerships, corporations,
estates and trusts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and
year first above written.
ASIAN STAR DEVELOPMENT, INC. HONPAR PROPERTIES LIMITED
/s/ Rita S. Dickson, Asst. Secty. /s/ Stephen Chow
EXHIBIT A - HONPAR PROPERTIES LIMITED ASSETS
<TABLE>
<CAPTION>
Value Value
in RMB in USD
<S> <C> <C>
Land 74,000 sm @ RMB 500/sm 37,150,000 4,314,000
(Estimated at today's market value)
Design of city master plan, 16,000,000 1,860,000
architectural, engineering, surveyors,
supervision and other operational
expenses
Construction, land fill and site office 3,000,000 350,000
TOTAL ASSETS 56,150,000 6,524,000
========== =========
</TABLE>
85
JOINT-VENTURE
DONGGUAN SHILONG TOWN NEW CITY CENTRE LOT #PI
AGREEMENT
Based on the principle of mutual benefits and by means of friendly consultation,
Shilong Town House and Properties Corporation (referred to as Party A hereafter)
and Honpar (Huangzhou) Properties Ltd. of Hong Kong (referred to as Party B
hereafter) have agreed to invest jointly in the Shilong Town New City Centre Lot
#PI. This agreement is established to this end:
Article One
Party A and Party B have agreed to develop the Shilong Town New City Centre Lot
#PI in Shilong Town, Dongguan, Guangdong and to operate the development therein.
Article Two
The scope of this project is to develop, construct, sell, rent and operate the
following items in the core of the Dongguan Shilong Town New City Centre Lot
#PI: single family dwelling units, offices, commercial/ residential dual purpose
building, service-style residential units, Chinese and Western style restaurant,
Karaoke bar, night club, tennis court, swimming pool, bowling alley, gym,
laundry mat, integrated shopping mall, supermarket, product showroom and
integrated service facilities. The scope of operation in the second phase shall
include these additional items: guest rooms, sauna, etc
The purpose of this project is to provide residential units, service-style
residential guess rooms, offices, restaurant service, shopping and integrated
service facilities to foreign personnel in China, business travelers, overseas
Chinese visitors, Chinese from Hong Kong and Macao and other visitors and
businesses from abroad.
Article Three
The location of this project is the Dongguan Shilong Town New City Centre Lot
#PI. This project is to be implemented in phases in accordance with an overall
master plan. Applications for the pertinent approval documents and operation
permits shall be filed on a phase by phase and item by item basis. (The company
with the required operation permit shall be referred to as "The Joint Venture
Company" hereafter.)
The lot area involved in the multipurpose building component of this project is
appropriate 4,130 square meters (M2) . The building area is approximately
16,000 M2. (The final measurement shall be based on the building plan and the
design papers approved by the administrative authorities of Dongguan.)
The lot area involved in the entertainment centre component of this project is
approximately 3,600 M2 . The building area is approximately 10,000 M2 . The
first phase of construction is targeted for completion in approximately two
years.
86
<PAGE>
The lot area required for other buildings in this project is approximately
48,000M2, of which 2,100 M2 is for the first phase. The building area is
approximately 40,000 M2 to 62,000 M2, (the final measurement to be based on the
building plan and the design papers approved by the administrative authorities
of Dongguan), of which 5,000 M2 is for the first phase. The first phase is
targeted for completion in approximately two years. When 70% of the first phase
has been rented and/or sold, the second phase is to begin. The entire project
is targeted for completion in approximately ten years.
The Joint Venture Company has the status of a corporation in the People's
Republic of China, and is under the protection and jurisdiction of the law of
the People's Republic of China. It also enjoys the favorable treatments granted
to Chinese-Foreign joint venture companies (and Three Capital Enterprises).
Article Four
The total investment in this project is approximately two hundred and fifty
million RMB (V250,000,000.00), of which sixteen million and eight hundred
thousand RMB (Y 16,800,000.00) is for the entertainment centre component in the
phase.
Party A's share of investment shall be in the form of the Shilong City Centre
Lot #PI, which has an area of 57,500 M2 , valued at fifty million RMB,
equivalent to a 20% share. Party B shall put in two hundred million RMB and
shall have an 80% share. Both parties shall put in their respective share of
investment in phases. In the first phase, Party A shall put in 3,864 M2 of
land, valued at three million three hundred and sixty thousand RMB, which is
equivalent to a 20% share. Party B shall put in thirteen million four hundred
and forty thousand RMB, which is equivalent to 80% share.
Article Five
The registered capital for the first phase of this project shall be eleven
million seven hundred and sixty thousand RMB (V11,760,000.00). Party A shall put
in its share of investment in the form of 2,705 M2 of land, valued at two
million three hundred and fifty thousand RMB (Y2,350,000.00). During the first
phase, Party A shall, according to the needs of the development project, put in
an additional 159 M2 of land, valued at one million and ten thousand RMB
(Y I,010,000.00).Party B shall put in nine million four hundred and ten thousand
RMB (y9,410,000.00), of which the first installment of one million and one
hundred and forty thousand RMB (VI, 140,000.00) shall be put in by Party B
within three months after obtaining the operation permit. Party B is
responsible for raising an additional four million and thirty thousand RMB
(Y4,030,000.00), over and above the registered capital, as additional funds to
be put in according to the needs of the project.
Article Six
In this project, Party A shall provide the Shilong Town New City Centre Lot #PI,
the area of which is approximately 57,500 M2 (of which the first phase shall
have an area of 3,864 M2); the land use right shall be for 50 years (70 years).
In addition, Party A shall be responsible for the requisition of the land, the
land requisition cost(s), and for the costs of hook up/installation for three
utility services and land leveling to the building line. In the project, Party
B shall be responsible for raising and putting in the entire amount required for
construction (including the fees for obtaining the certificate of land use right
for state-owned land, municipal coordination fees and the administration fees
87
<PAGE>
collected by the city government and the township government). For this
project, Party A shall not be reimbursed for the price of the land, and Party B
shall not be reimbursed for the construction fees.
2. The land use term for the multipurpose building and entertainment
centre is 50 years; the land use term for other buildings is 70 years.
3. Both parties have agreed that the initial phase of this project shall
include a multipurpose building, a hotel, service-style residential units,
single family dwelling units, and a commercial/residential dual purpose
building, etc(subject to modification due to market demands upon the approval of
the Board of Directors).
4. As to the multipurpose building and the entertainment centre, Party B
shall be responsible for the costs of the elevator(s), fire safety costs, and
the costs for furnishing the outside wails as well as the public areas of the
buildings. (Party B shall not be reimbursed for these costs.) The remainder of
the furnishing costs shall be paid for by the Joint Venture Company. The
various components failing within this venture may be leased, in part or in
whole, to one or more third party operators (in which case the leases shall in
turn assume the costs of furnishing).
5 . For all other buildings (including service-style residential units,
single family dwelling units and the commercial/residential dual purpose
building), a separate portfolio file for each phase shall be prepared to reflect
the market demands. Once Party B has ascertained and confirmed that a portfolio
file reflects the standard rent and selling price, any amounts in excess of the
standard furnishing costs (including capital portion and interest) may be
recouped by Party B in stages.
6. As to the portion of each phase of this project to be rented and sold and
the prices thereof, the General Manager shall, based on market demands, prepare
a proposal for execution upon the approval of the Board of Directors.
7. The profit generated by this project (i.e. for the multipurpose building,
entertainment centre and rental buildings: revenue minus operating costs; for
the remainder of the project: revenue minus costs incurred in sales) shall first
be used to repay the following: the principal of and interest on the bank loan
for running capital (not including construction costs), the principal and
interest on the government administration fee(s) which Party B put in (including
the fees for obtaining the certificate of land use right for state- owned land,
municipal coordination fees and the administration fees collected by the city
government and the township government), the capital put in by Party B for the
business operation (from the time of the signing of the contract to the
completion of the first phase). After the above repayments, taxes shall be paid
according to the pertinent regulations on the remaining amount. The after tax
profit shall be distributed between Party A and Party B, whereby Party A shall
have 20%, and Party B shall have 80%.
8. In the event of pre-selling while the project is still in the
construction phase, Party A and Party B have agreed to abide by the following
provision:
While pre-selling abroad (in such areas as Hong Kong, Macao and Taiwan), Party B
shall deposit the pre-sale amount in the bank account at a bank designated by
Party A and Party B upon mutual agreement. The bank account shall be located in
Hong Kong and shall be in the name of the Joint Venture Company. Two
88
<PAGE>
signatures-one from an appointed representative from Party A and one from an
appointed representative from Party B-are required for withdrawal. While
pre-selling in the People's Republic of China, the pre-sale amount shall be
deposited in the Joint Venture Company account in a bank in China. In the event
that the Joint Venture Company has to utilize the pre-sale amount, both parties
have agreed that payments be made according to the following principles (neither
side may refuse to pay):
0.1 Construction costs and furnishing costs: including design fees, building
project fees, costs of materials, costs of facilities, facility installation
charges, costs of enhancing the hydro and electricity capacity, supervision
fees, furnishing fees, Party B's administration fees, the various construction
related fees charged by the authorities, and so on.
0.2 Sales and Marketing Costs: advertising and agency fees, etc
0.3 Other Costs: including legal fees, bank charges and insurance premium,
etc
0.4 The remaining amount shall be distributed according to the stipulation
in point 7) of this article.
Article Seven
The term for the entire joint venture project is 70 years, in that the joint
venture term for the component involving the multipurpose building and
entertainment centre is 50 years and the joint venture term for the other
buildings is 70 years. The joint venture term commences on the date on which
the Joint Venture Operation Permit is issued.
Article Eight
In addition to the stipulations in the other provisions of this agreement, the
joint venture parties shall fulfill the following obligations:
Party A:
1) shall be responsible, on behalf of the Joint Venture Company for filing
the required applications to the pertinent Dongguan authorities, obtaining
approvals for contracts and company bylaws, obtaining registration and business
licenses, etc. for the different phases of the project.
2) shall be responsible for reporting to the pertinent Dongguan authorities
regarding the construction projects and for obtaining the engineering/
construction project permit, building permit, and construction permit, etc.
3) shall be responsible for providing the land use right for the 4,130
M2 of land located at the Dongguan Shilong Town New City Centre Lot #PI and for
the 3,864 M2 of land for the entertainment centre. In addition, Party A shall
also be responsible for obtaining other certificates and documentation papers,
and shall obtain the certificate of land use right for state-owned land within
three months after the Joint Venture Company has obtained its operation permit.
The remainder of the land for other buildings shall be subdivided in eight
phases; Party A shall provide the land use right for each phase as the project
progresses and shall obtain for each phase the certificate of land use right for
state-owned land.
89
<PAGE>
4) shall complete the hook up/installation of the three utility services
and the land leveling work within one month after Party B has put in its first
installment of funds. As to the land for other buildings, Party A shall be
responsible for completing the hook up/installation of the three utility
services and the land leveling work for each phase within one month after
obtaining the land use certificate for that phase.
5) shall assist the Joint Venture Company in the purchase, in China, of
materials and supplies required for the construction work of this project.
6) shall assist the Joint Venture Company in handling and making proper
contacts for the hook up/installation of the five utility services (hydro,
plumbing, electricity, communications, and public antenna) and municipal
infrastructure.
7) shall assist the Joint Venture Company in handling the custom declaration
and custom exemption application procedures for the import of required
materials, equipment, machines etc. and in obtaining the required import
permits.
8) shall assist in the arrangement of entry visas, work permit and travel
papers for personnel from Hong Kong.
9) shall assist in other matters as entrusted by the Joint Venture Company.
Party B:
1) shall be responsible for putting in the first installment of
registered capital according to the stipulated time frame in this contract, and
for putting in the rest of the registered capital according to the needs of the
development and the progress of the construction project(s).
2) shall produce preliminary plan(s) as per the requirements of the Dongguan
planning authorities.
3) shall assist the Joint Venture Company in such matters as the handling of
construction project approval application.
4) shall be responsible for the purchase of materials and equipment,
etc. from abroad.
5) shall be responsible for the planning, development and operation of
this project.
Article Nine
The Board of Director for this project shall consist of seven members. Party A
shall appoint two members; Party B, five members.
Article Ten
The Joint Venture Company shall establish an entity for the operation and
administration of this project. This operational and administrative entity is
responsible for the planning and day to day operation of the construction
project(s), and shall have a General Manager. Party B shall recommend a
candidate for the General Manager position, and the Board of Direct shall carry
out the hiring. The term for the position is four years.
90
<PAGE>
Article Eleven
In the event that either party fails to fulfill any of the obligations in this
contract, such that this contract may not be realized in part or in whole, such
eventuality shall constitute a breach of contract. The party in breach of
contract shall assume the responsible for the breach, and shall compensate the
other party for financial losses resulted from the breach both directly and
indirectly.
Article Twelve
Both parties may, at any time, consult with each other on any outstanding
matters concerning the project, and may, at any time, provide amendment and
elaboration to this agreement. Amendment may be made in writing with signatures
from both parties.
Article Thirteen
Six exact duplicate copies of this agreement will be made, three copies for
Party A and three copies for Party B. The six duplicate copies shall be equally
valid.
Party A: Party B:
Shilong Town House and Properties Honpar (Huangzhou) Properties Limited of
Corporation of Dongguan Hong Kong
Name of Representative: Name of Representative:
CHEN, Jiannng Stephen Shue Tong
Position: Manager Position: President
Signature: Jiannng Chen Signature: /s/ Stephen Shue Tong
Witnesses:
Government of Shilong Town, Dongguan
Secretary: Town Mayor:
YUAN, Houzhi Huang, Zhuoxi
November 29, 1995 November 29, 1995
AGREEMENT FOR EXCHANGE OF SHARES
THIS AGREEMENT is made and entered into this 15th day of December 1998, by and
between Honpar (Shilong) Development Co., Ltd., a Hong Kong corporation (the
"Company"), the shareholders of the Company (the Shareholders) and Asian Star
Development, Inc., a Nevada corporation, or assigns ("ASD"), pursuant to which
the Shareholders will exchange the entire equity interest of the Company as full
consideration for 2,590,730 ASD shares. A portion of such shares shall be
restricted and a portion unrestricted, consistent with and based upon applicable
U.S. Securities Laws (the ASD Shares). The transaction will be consummated
pursuant to certain tax-free provisions of the U.S. Internal Revenue Code.
W I T N E S S E T H:
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, it is agreed by and between the parties as follows:
1. Exchange of Shares. The Shareholders shall transfer, assign and
convey to ASD the entire equity interest of the Company, consisting of
22,328,344 shares of Common Stock (the Shares), and ASD shall issue to the
Shareholders, on a pro rata basis, 2,590,730 ASD SHARES. The net assets of the
Company as of October 31, 1998 shall be equal to the value of the Shares and
will be supported by audited financial statements prepared in accordance with
generally accepted accounting principles in the U.S.
2. Closing. The Closing shall be held as soon as possible, but in any
event, subject to the satisfaction of conditions, on or before December 30,
1998.
Pending the Closing, the Company will operate its business only in the ordinary
course, and will not allow the Company to sell, distribute or encumber any of
its assets or purchase or acquire any assets, except in the ordinary course of
business.
3. Conditions to Closing.
Delivery by the Company to ASD of such certificates and opinions and certified
financial statements of the Company as ASD may reasonably request; delivery by
the Shareholders of the Company to ASD of all stock certificates, with medallion
guarantee thereon, representing 100% of the issued and outstanding Shares of the
Company.
Delivery by ASD to the Shareholders of the Company, and/or their nominees, stock
certificates representing 2,590,730 ASD Shares.
Receipt by each party of all consents, approvals, authorizations and orders
required of or for the execution and consummation of the transactions
contemplated herein.
Warranty by the Company that no material adverse changes in the Company's
business or financial conditions have occurred.
Conversion by the Company of all outstanding shareholder loans, as of October
31, 1998, into equity of the Company prior to Closing.
92
<PAGE>
Warranty by the Company that it has land usage rights of the Shilong
City Hall Center, pursuant to applicable laws in China.
Warranty by the Company that it has fully complied with all applicable
laws, rules and regulations, including accounting practices in Hong Kong.
4. Representations and Warranties of ASD. ASD represents and warrants to
the Company as follows:
(A) ASD has not entered into any other contracts to sell, mortgage, encumber
or assign the Shares.
(B) As of the date of this Agreement and at Closing, the Shares shall be
free and clear of all liens, encumbrances, chattel mortgages or conditional
sales contracts of whatsoever nature.
(B) The ASD Shares have not been registered under the Securities Act and/or
any applicable state securities laws in reliance upon an exemption provided by
Section 4(2) of the Securities Act and Regulation D relating to transactions not
involving a public offering.
The foregoing representations and warranties shall be true and accurate as of
the date of this Agreement, the date of the Closing and shall continue in effect
after the Closing.
5. Representations and Warranties of the Company and Shareholders.
(A) The Company and Shareholders, jointly and severally, represent that they
understand that they are exchanging the issued and outstanding Shares of the
Company for Shares of ASD and that the same have not been registered under the
Securities Act and/or any applicable state securities laws in reliance upon
exception provided by Section 4(2) of the Securities Act and Regulation D
relating to transactions not involving a public offering.
(B) The Company and Shareholders represent that the Shares are being
acquired solely for the Shareholders' own account for investment, and are not
being acquired with a view to or for the resale or distribution thereof and that
the Shareholders have no present plans to enter into any contract, undertaking,
agreement or arrangement for such resale or distribution.
(C) The Company and Shareholders are aware of the existence of substantial
restrictions on the transferability of the Shares.
(D) The Company and Shareholders are each an Accredited Investor, as that
term is defined in Regulation D promulgated under the Securities Act.
The foregoing representations and warranties shall be true and accurate as of
the date of this Agreement, the date of the Closing and shall continue in effect
after the Closing.
6. Indemnity of the Parties. Each party shall indemnify the other party
against any loss, damage, cost or expense that a party may incur or suffer as a
result of any breach, untruth or inaccuracy of any promise, agreement, covenant,
warranty or representation made by either party herein for the benefit of other
party.
93
<PAGE>
7. Broker's Fees. The parties warrant to and with each other that the
transaction evidenced by this Agreement was initiated, negotiated and completed
by the parties hereto directly, as principals, and without the intervention of
any broker, dealer, agent or finder. Each party agrees to indemnify and hold
the other party harmless from and against any loss, damage, cost or expense,
including without limitation, attorneys' fees and litigation expenses, resulting
from any breach or breaches of the foregoing warranty.
8. Risk of Loss. Risk of loss, damage, or destruction of the Shares
shall remain with ASD until the transfer of the Shares to the Company and
Shareholders, at which time risk of loss, damage or destruction of the Shares
shall pass to the Company and Shareholders.
9. Expenses. The parties shall each bear their own respective costs,
expenses and fees associated with this transaction.
10. Cooperation and Access. The transactions outlined herein are ones
which the parties wish to pursue vigorously. Therefore, each party will
cooperate fully with the other party, and each other's agents, including, but
not limited to, causing their employees and agents to give access to the
respective party's books, records and premises, and expeditiously to provide the
other party with any information which it reasonably requests to complete the
transactions contemplated herein.
11. Confidentiality. Each party agrees that such party and its
representatives shall hold in strict confidence all information and documents
received from the other party (including the general nature and the specific
terms of this Agreement) and, if the proposed transaction shall not be
consummated, each party shall continue to hold such information and documents in
strict confidence and shall return to the other party all such documents then in
the receiving party's possession without retaining copies thereof; provided,
however, that each party's obligations hereunder to maintain such
confidentiality shall not apply to any information or documents that are in the
public domain at the time furnished, that come into the public domain thereafter
through any means other than as a result of any act of the receiving party or of
its agents, officers, directors or stockholders which constitutes a breach of
this provision, or that are required by applicable law to be disclosed.
12. No Shopping. The parties hereby agree that, until the Closing, neither
party will solicit any third party for the sale of the control of either
company, or solicit opportunities for either company to enter into any
discussions with any third party for the sale of assets of either company or
with respect to any "change in control" transaction.
13. Publicity. Neither the Company, on the one hand, nor ASD, on the other,
will make any disclosures or public announcements relating to the proposed
transaction or the terms thereof without the prior written consent and approval
of the other. In addition, the parties agree that the proposed terms shall be
divulged only to such of the employees and representatives of the Company and
ASD who shall have a "need to know".
14. Equitable Relief. The parties acknowledge and agree that in the event
any party shall violate or threaten to violate any of the terms set forth
herein, the aggrieved party will be without an adequate remedy at law and shall,
therefore, be entitled to enforce such restrictions by temporary or permanent
injunctive or mandatory relief in any court of competent jurisdiction without
94
<PAGE>
the necessity of proving damages and without prejudice to any other remedies
which it may have in law or in equity.
15. Miscellaneous.
(A) Time. Time is of the essence of this Agreement and in the
performance and enforcement of each of the promises, covenants, representations
and warranties of the parties contained herein. For the purpose of computing
any period of time prescribed herein or relating hereto, the first day shall be
excluded. If the period of time is six (6) days or more, weekends and public
holidays shall be included. An act required to be performed on a day shall be
performed at or before the close of business on such day. If an act is required
to be performed on a certain day and such day is not a regular business day, the
time of performance or measurement shall be extended to and including the next
regular business day.
(B) Entire Agreement. This Agreement constitutes the entire agreement of
the parties and all prior rights, negotiations and representations are merged
herein.
(C) Binding Effects. This Agreement shall inure to the benefit of, and be
binding upon, the parties and their several successors in interested in any
capacity.
(D) Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of Nevada, U.S.A.
(E) Notices. Any notice or notices which any party hereto deems
necessary, useful or convenient to give to any other party or parties hereto, at
any time and from time to time, shall be in writing and shall be personally
served upon or mailed to the parties at the addresses provided by the parties.
(F) Attorneys' Fees and Costs. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which he may be
entitled.
(G) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to constitute but one and the same
instrument.
(H) Captions. Article and paragraph captions contained in this Agreement
are inserted only as a matter of convenience and reference. Said captions shall
not be construed to define, limit, restrict, extend or describe this Agreement
or the intent of any provision hereof.
(I) Gender and Number. Whenever used in this Agreement and as required by
the context of the transaction, the single number shall include the plural, the
plural number shall include the singular, and masculine gender shall include the
feminine and neuter.
95
<PAGE>
(J) Form of Association. As required by the context, the term "person"
shall include individuals, partnerships, limited partnerships, corporations,
estates and trusts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
HONPAR (SHILONG) DEVELOPMENT CO., LTD.
/s/ Stephen Chow
ASIAN STAR DEVELOPMENT, INC. SHAREHOLDERS:
/s/ Sang Chan /s/ Stephen Chow
Agreement for the Acquisition of Two Beijing Companies
Party A: Asian Star Development, Inc.
Party B: GE Lin Tao
Based on friendly discussion, the aforementioned parties have agreed to form a
Company in Hong Kong to acquire Super Shopping Channels Ltd. (referred to
hereafter as Company A) and Beijing Kinetic Sales Network Limited (referred to
hereafter as Company B), and reached the following agreement:
(1) The Hong Kong company shall be formed by the two parties. Party A shall put
in 10
million yuan RMB or an equivalent amount in foreign currency and shall have
a 75%
share. Party B shall have a 25% share.
(2) Party B shall be responsible for acquiring 100% of the shares of Company A
and
Company B. Company A needs 10 million yuan RMB and Company B needs 8
million yuan RMB. Party A shall top up funds required for the acquisition
through a
loan to the Hong Kong company. Company A and Company B shall be responsible
for developing such investment projects as the 6-12 Convenient Store Chain
(in
cooperation with the CCG and the Chinese People's Political Consultative
conference), merchandise delivery, and Shandong Winery, etc
(3) Party A now puts in a deposit of 300,000 yuan RMB as a token of sincerity.
(4) Party B must have the contracts for the 6-12 Convenient Store Chain and the
Shandong Winery projects ready within 90 days following the signing of this
agreement. Should there be any discrepancies between the contracts and this
agreement, Party A shall have the right to demand a refund of the said
deposit from
Party B.
96
<PAGE>
(5) Both parties shall each retain a copy of this agreement.
Party A: Asian Star Development, Inc. Party B: GE Lin Tao
Representative: LIN Ding Bo Representative: GE Lin Tao
Signature: [Signed] LIN Ding Bo Signature: [Signed] GE Lin Tao
Date: September 10, 1998 Date: September 10, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4601
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 7586
<CURRENT-ASSETS> 247606
<PP&E> 1348061
<DEPRECIATION> 0
<TOTAL-ASSETS> 8301399
<CURRENT-LIABILITIES> 1306947
<BONDS> 0
<COMMON> 12956
0
0
<OTHER-SE> 8299811
<TOTAL-LIABILITY-AND-EQUITY> 8301399
<SALES> 41926
<TOTAL-REVENUES> 95296
<CGS> 40603
<TOTAL-COSTS> 40603
<OTHER-EXPENSES> 361493
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (306800)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (306800)
<EPS-BASIC> (.24)
<EPS-DILUTED> (.24)
</TABLE>
