SECURITIES EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 000-26029
ASIAN STAR DEVELOPMENT, INC.
---------------------------
(Exact name of registrant as specified in its Charter)
Nevada
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(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
Common Stock
------------
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for past 90 days. Yes XX No _____
--
Securities registered under Section 12(g) of the Exchange Act:
There are 12,955,530 shares of common stock outstanding as of December 31, 1999.
The shares are traded on the OTC Bulletin Board.
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no
disclosure will be contained , to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this
Form 10_KSB. X.
State issuer's revenues for its most recent fiscal year: $41,926
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. On March 17, 2000, the aggregate market
value was $32,971,250.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. 12,955,530 shares
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<PAGE>
TABLE OF CONTENTS
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Part I
Item 1 Description of Business
Item 2 Description of Property
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
Part II
Item 5 Market for Common Equity and Related Stockholder Matters
The Company's shares of Common Stock are traded on the OTC
Bulletin Board. The High/Low bid quotations for the period
ending December 31, 1999, was $3.50/$.75
Item 6 Management's Discussion and Analysis of Plan of Operations.
Item 7 Financial Statements
Item 8 Changes in and Disagreement with Accountants on Accounting
and Financial Disclosure.
Part III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Item 10 Executive Compensation
Item 11 Security Ownership of Certain Beneficial Owners and
Management
Item 12 Certain Relationships and Related Transactions
Item 13 Exhibits, List and Reports on Form 8-K
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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.
In addition, the Company has signed a joint development agreement for the
acquisition of an LPG cylinder and LPG bottling plant in Malaysia, together with
the development of a Super Port in the State of Kelantan, Malaysia, all
contingent upon further governmental approval. The Registrant believes this will
be a long-term project, if approved. In addition, the Super Port project will
require substantial cash investments which Registrant is not currently capable
of funding and, therefore, will be required to find a venture partner, such as a
major oil company, to participate and provide the necessary funding. Registrant
has not contacted any such potential partner and will not do so unless and until
the project is approved by all necessary Malaysian governmental agencies. In
addition, the acquisition of the two LPG facilities will require cash payments
from Registrant, which Registrant anticipates will have to be generated from the
sale of its common stock in private placement transactions, if and when the
projects receive the requisite governmental approvals.
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
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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
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<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>
Name of Officer, Director Aggregate Number Percentage of Total
Principal Shareholder of Shares Received Outstanding Shares
- ------------------------ ------------------ -------------------
<S> <C> <C>
Stephen Chow 5,400,000 42%
Extensiview Ltd. 1,475,000 11%
Paul Tong 110,000 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.
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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 complete its current projects in China,
while seeking purchasers for the projects in their current stage of development.
Registrant's current projects involve resorts, amusement parks and entertainment
complexes; however, Registrant may, if the opportunity arises and seems
feasible, seek 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.") Registrant will also seek to diversify its business by expanding into
technology projects on a joint venture basis. Registrant is currently involved
in discussions and negotiations for various technology-related projects.
Four(4) Real Estate 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, 1999, 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
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(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 is now
open and 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
operation is seasonal. 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
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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 on 6,000 square meters. 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.
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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, 1999, 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
10-KSB.
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
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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. However, Registrant
believes this will be a long-term project and does not anticipate any work will
be done on this project during calendar year 2000.
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 80 full-time employees, including its
officers and directors. Registrant subcontracts out all of the work on its
development projects to unrelated third parties.
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ITEM 2. DESCRIPTION OF PROPERTY
=========================
The property 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. 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
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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 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.
11
<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 $2,169,145 through December 31, 1999. Registrant's cash
and cash equivalents decreased from $71,690 at December 31, 1998 to $5,628 at
December 31, 1999.
Registrant 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 and for December 31, 1999 of $41,926. 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 3. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
=====================================================
During the fourth quarter of the fiscal year covered by the report, no matters
were submitted to a vote of security holders.
12
<PAGE>
PART II
=========
ITEM 5. MARKET FOR COMMON EQUITY 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 a Form 10-SB to comply with the Eligibility Rule, and on approximately
December 15, 1999, its shares commenced trading again on the OTC BB 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>
December 31, 1999 2.00 1.00
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 December 31, 1999, there were 168 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
13
<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 Small Cap 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 6. MANAGEMENT'S DISCUSSION AND ANALYSES
======================================
This annual report 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. In addition, several recent accounting pronouncements (SOP
98-1, 98-5, SFAS 133 and SAB 101 on revenue recognition) may have an effect on
the Registrant, and Registrant intends to consult with its independent certified
public accountants to determine the nature and extent of such effect.
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 year ended December 31, 1999 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).
14
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
- ------------------
12/31/98 12/31/99
======== =========
<S> <C> <C>
Cash and cash equivalents . . $ 71,690 $ 5,628
Subscription receivable . . . . . . . . 91,980 -
Prepayments 393,818 133,059
Inventories . . . . . . . . . . . . . . 29,045 3,905
Other assets. . . . . . . . . . . . . 20,405 43,690
---------- ---------
Total current assets. . . . . $ 606,938 $ 186,282
Land usage rights 469,814 469,814
Land improvement 4,274,312 4,274,312
Construction in progress. . . . 1,564,530 1,656,970
Property and equipment(net) . . . . 1,424,053 1,363,294
---------- ----------
Total assets. . . . . . . . $ 8,339,647 7,950,672
Due to a shareholder. . . . . $ 236,922 $ 714,204
Accounts payable. 579,289 542,821
Others payable 126,447 159,150
Accrued expenses. . . . . . . . . 95,737 180,890
----------- -----------
Total current liabilities . $ 1,038,395 $ 1,597,065
Total shareholders'
equity 7,301,252 $ 6,353,607
</TABLE>
<TABLE>
<CAPTION>
Statements of operations data:
- ------------------------------
Year Year
Ended Ended
December 31, 1998 December 31, 1999
------------------ -----------------
<S> <C> <C>
Sales. . . . . . $188,583 $ 41,926
Cost of sales .. $ 94,845 $104,214
Selling expenses $175,744 $ 84,547
General and
administrative
expenses $975,567 $1,071,710
Other Income, net $ (46,058) $(60,400)
Net loss . . . . . $(1,011,515) $(1,158,145)
Net loss per
common share $ (.08) $ (09)
Weighted average
common shares
Outstanding 12,294,905 12,955,530
</TABLE>
15
<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 $2,169,660 through December 31, 1999. Registrant's
cash and cash equivalents decreased from $71,690 at December 31, 1998 to $5,628
at December 31, 1999.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998:
Revenue from the operation of the Water Park's restaurant and swimming pool for
the twelve months ended December 31, 1999 amounted to $41,926 and for the year
ended December 31, 1998, it amounted to $188,583. 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 $84,547
for the twelve months ended December 31, 1999 are mainly salary and depreciation
expenses.
Registrant had no other revenues for the year ended December 31, 1999, as all of
its other projects were in the construction/development stage through December
1999. Revenues realized in 1999 were attributable to the opening of Shilong
Water World in summer seasons of 1999.
The cost of sales for the year ended December 31, 1999 was $104,214. Selling,
general and administrative expenses were $1,156,257 for the year ended December
31, 1999. Other income for the year ended December 31, 1999 was $60,400.
The main items included in 1999 cost of sales are food material and salary
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 $351,620 consulting fees, $163,354 salary expenses and $120,000 CEO
compensation.
Net cash provided by financing activities decreased from $1,491,273 for the year
ended December 31, 1998 to $569,262 for the year ended December 31, 1999, as a
result of the decrease in proceeds of sale of Common Stock and advance from
shareholders of registrant.
Registrant's net loss for the year ended December 31, 1999 was a deficit of
$1,158,145, or a deficit of $.09 per share, based on 12,955,530 weighted average
shares outstanding at December 31, 1999.
The large deficit for the year ended 1999 was attributed to the costs associated
with the general and administrative expenses of $1,071,710.
16
<PAGE>
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997:
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 Water World is a seasonal
operation, which will reduce potential revenues from the project.
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
$988,883, 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.
The large deficit of 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 year ended December 31, 1999, Registrant has generated negative cash
flow from its operations for the twelve 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.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Expenditures for acquisition of properties and fixed assets decreased from
$1,470,510 for the year ended December 31, 1998 to $81,628 for the year ended
December 31, 1999. Payments for construction materials increased from $444 for
the year ended December 31, 1998 to $92,440 for the year ended December 31,
1999.
17
<PAGE>
Proceeds from common stock subscription decreased from $1,778,680 for the twelve
months ended December 31, 1998 to $91,980 for the twelve months ended December
31, 1999.
As of December 31, 1999, Registrant had total assets of $7,950,672 and total
liabilities of $1,597,065.
Year Ended December 31, 1998 and Year ended December 31, 1997:
Expenditures for acquisition of properties and fixed assets increased from $966
for the year 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 year 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 year 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 year 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.
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
18
<PAGE>
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, 1999, Registrant's total assets and total liabilities were
$7,950,672 and $1,597,065, respectively.
Registrant has begun operations at its Shilong Water World and has yet to reach
break-even in terms of both cash flow and profitability.
Total cash inflows from financing activities of $569,262 generated from proceeds
of sale of common stock and advance from shareholder, were used for payment of
the general and administrative expenses.
19
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
====================================
Audited financial statements of Registrant for the year ended December 31, 1998
and the year ended December 31, 1999, were audited by BDO International, 29/F
Wing On Centre, 111 Connaught Road Central, Hong Kong. The audited statements
immediately follow:
[BDO Logo Appears Here] BDO International
Certified Public Accountants
29th Floor Wing on Centre
111 Connaugh Road Central
Hong Kong
Telephone (852) 2541-5041
Fax (852) 2815-0002
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, 1999 and 1998 and the related consolidated
statements of operations, changes in shareholders' equity and cash flows for the
years ended December 31, 1999 and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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, 1999 and 1998, and the consolidated results of
their operations and cash flows for the years ended December 31, 1999 and 1998,
in conformity with generally accepted accounting principles in the United States
of America.
By: /s/ BDO International
---------------------
Certified Public Accountants
Hong Kong, January 17, 2000 except
Note 13 as to which the date is January 25, 2000
20
<PAGE>
<TABLE>
<CAPTION>
ASIAN STAR DEVELOPMENT, INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in US Dollars)
December 31,
------------
1999 1998
---- ----
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 5,628 $ 71,690
Subscription receivable - 91,980
Prepayments 133,059 393,818
Inventories (Note 3) 3,905 29,045
Other assets 43,690 20,405
------------ -----------
Total current assets 186,282 606,938
Land usage rights (Note 4) 469,814 469,814
Land improvement (Note 4) 4,274,312 4,274,312
Construction in progress (Note 4) 1,656,970 1,564,530
Property and equipment, net (Note 5) 1,363,294 1,424,053
------------ -----------
Total assets $7,950,672 8,339,647
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Due to a shareholder (Note 6) $ 714,204 $ 236,922
Accounts payable 542,821 579,289
Others payable 159,150 126,447
Accrued liabilities 180,890 95,737
------------ -----------
Total current liabilities $ 1,597,065 $ 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, 12,955,530
shares issued and outstanding (Note 10) 12,956 12,956
Additional paid-in capital (Notes 10 and 11) 8,510,311 8,207,831
Stock subscribed - 91,980
Accumulated losses (2,169,660) (1,011,515)
------------ -----------
Total shareholders' equity 6,353,607 7,301,252
------------ -----------
Total liabilities and shareholders' equity $ 7,950,672 $ 8,339,647
=========== ===========
See accompanying summary of accounting policies and notes to consolidated
financial statements.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
ASIAN STAR DEVELOPMENT, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Expressed in US Dollars)
Year ended
December 31,
------------
1999 1998
---- ----
<S> <C> <C>
Revenue, net $ 41,926 $ 188,583
Cost of sales 104,214 94,845
--------------- ------------
Gross (loss)/profit (62,288) 93,738
Selling expenses (84,547) (175,744)
General and administrative expenses (1,071,710) (975,567)
Other income, net 60,400 46,058
--------------- ------------
Loss before income tax (1,158,145) (1,011,515)
Income tax provision (Note 7) - -
-------------- ------------
Net loss before minority interest (1,158,145) (1,011,515)
Less: loss in a subsidiary attributed to minority interest - -
-------------- -------------
Net loss attributed to common shareholders $ (1,158,145) $ (1,011,515)
============= ============
Net loss per common share - Basic and diluted $ (0.09) $ (0.08)
============= =============
Weighted average number of common shares
outstanding 12,955,530 12,294,905
============= =============
See accompanying summary of accounting policies and notes to consolidated financial statements
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
ASIAN STAR DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Expressed in US Dollars)
Common Stock
------------------------ Additional Total
Number Paid-in Accumulated Stock Shareholders'
of Shares Amount Capital Losses Subscribed Equity
--------- ------ ------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 11,788,830 $11,789 $4,702,626 $ - $ - $ 4,714,415
Rule 504 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
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
Stock subscription received - - 91,980 - (91,980) -
Stock-based compensation (Note 11) - - 90,500 - - 90,500
CEO notional compensation (Note 12) - - 120,000 - - 120,000
Net loss - - - (1,158,145) - (1,158,145)
----------- -------- ----------- ----------- ------------ -----------
Balance at December 31, 1999 12,955,530 $12,956 $8,510,311 $ (2,169,660) $ - $6,353,607
========== ======= ========== ============= ============ ============
See accompanying summary of accounting policies and notes to consolidated financial statements
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
ASIAN STAR DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in US Dollars)
Year ended
December 31,
------------
l999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,158,145) $ (1,011,515)
Adjustment to reconcile net loss to
net cash provided by operating activities
Depreciation and amortisation of fixed assets 113,850 49,617
Stock issued for consulting service 90,500 450,000
Recognition of deferred expense 225,000 -
Non-cash compensation expense 120,000 799,314
Prepayments 35,759 (393,818)
Inventories 25,140 (29,045)
Other assets (23,285) (19,825)
Accounts payable (36,468) 579,289
Others payable 32,703 92,587
Accrued expenses 85,153 (27,802)
------------- -------------
NET CASH (USED)/PROVIDED BY OPERATING ACTIVITIES (489,793) 488,802
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for overhead - (471,742)
Payments for land improvement - -
Payments for construction materials (92,440) (444)
Proceeds from disposal of fixed assets 28,537 -
Acquisition of properties and fixed assets (81,628) (1,470,510)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (145,531) (1,942,696)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock subscription 91,980 1,778,680
Advance from (Repayment to) a shareholder 477,282 (287,407)
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 569,262 1,491,273
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS (66,062) 37,379
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 71,690 34,311
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,628 $71,690
============= =============
SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT
NON-CASH TRANSACTIONS
Capital injection in Honpar Shilong for:
Land usage rights $ - $ 234,905
Land improvement - 231,668
Construction in progress - 11,805
See accompanying summary of accounting policies and notes to consolidated financial statements
</TABLE>
24
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 companies,
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
interests 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 a 30% discount 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 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.
25
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
NOTE 1 - BACKGROUND AND REORGANIZATION (Cont'd)
After this combination, the total subsidiaries and equity structure are as
follows:
<TABLE>
<CAPTION>
Name Incorporated in Equity Interest
- ---- --------------- ---------------
<S> <C> <C>
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%
Able Wealth Investments Limited British Virgin Islands 100%
</TABLE>
The Company did not have any operating activities in 1997 and has suffered
losses of $1,158,145 and $1,011,515 in 1999 and 1998 respectively, and had
negative working capital in 1999 and 1998. 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 an 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
intercompany 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 PRC
joint venture partners 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 was 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. However, to date there have been no cumulative translation
adjustments. 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.
26
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES (Cont'd)
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 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.
27
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES (Cont'd)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less.
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 cover the enactment
in the near future date. A valuation allowance will be provided due to the
uncertainty that deferred tax benefit will be realized.
28
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES (Cont'd)
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, 1999
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.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121 (SFAS No. 12l) "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 antidilutive.
29
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES (Cont'd)
STOCK-BASED COMPENSATION
The Company adopted Statement of Financial Accounting Standards No. 123 (SFAS
No. 123), "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-employee, 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
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, 2000.
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, 2001 to affect its
financial statements.
NOTE 3 - INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of:
December 3l,
------------
1999 1998
---- ----
<S> <C> <C>
Merchandise and service goods $3,109 $20,275
Spare parts and supplies 796 8,770
------- --------
$3,905 $29,045
</TABLE>
30
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
NOTE 4 - PROJECTS UNDER CONSTRUCTION
<TABLE>
<CAPTION>
Projects under construction consist of the following:
Shilong Shilong Maple Shilong
Town Water World City Town Hall Total
---- ----------- ---- --------- -----
<S> <C> <C> <C> <C> <C>
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. 12/31/1998 $6,308,656
============
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 358,661 - 139,920 - 498,581
Overhead 112,827 - 495,312 550,250 1,158,389
------------
Balance 12/31/1999 $6,401,096
============
</TABLE>
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 are waiting for the 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 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)
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 the 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.
31
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
NOTE 4 - PROJECTS UNDER CONSTRUCTION (Cont'd)
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 a local Chinese 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 Centre Ltd. ("Honstar"). The construction has commenced and
certain concrete structural work was completed.
Shilong Town Hall (land usage term: 70 years)
The Shilong Town 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
Town Government to build a commercial complex including retail and office space,
residential space and a town hall theater with approximately 1,000 seats on the
aforementioned parcel of land. In addition, Honpar Shilong is required to allow
the Shilong Town Government to freely use the town hall theater. The Land usage
rights 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 rights 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, 1999, a total of RMB4 million ($469,814)
instalment payments were made by Honpar Shilong against the RMB50 million land
usage rights.
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 Holding Limited
("HHHL") in exchange for 3,870,968 restricted common stock of the Company. These
terms have never been materialized and negotiation on new terms have been
undergoing between the Company and HHHL. No agreed terms have been reached up to
now.
32
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
NOTE 5 - PROPERTY AND EQUIPMENT, NET
<TABLE>
<CAPTION>
Property and equipment consists of: December 31,
------------
1999 1998
---- ----
<S> <C> <C>
Building premises $ 393,606 $ 332,586
Water amusement park facilities 982,915 964,765
Vehicles - 20,171
Office furniture, fixture and equipment 56,971 59,168
Kitchen equipment and facilities 96,265 101,424
------------ -----------
1,529,757 1,478,114
Less: Accumulated depreciation (166,463) (54,061)
------------ -----------
$ 1,363,294 $ 1,424,053
============ ===========
</TABLE>
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company, from time to time, received from or made repayment 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, 1999 and 1998, the amount due to the shareholder is $714,204
and $236,922 respectively.
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, 1999, Dragon Villa
suffered a tax loss, no provision for income taxes is required accordingly. For
the years ended December 31, 1999 and 1998 the Company suffered tax losses.
Significant components of the Company's estimated deferred tax assets as of
December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
December 3l,
------------
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets and liabilities:
Net operating loss carry forward $ 686,123 $ 333,961
Property and equipment (38,937) 13,382
--------- ---------
Not deferred tax assets 647,186 347,343
Valuation allowance for deferred tax assets (647,186) (347,343)
--------- ---------
Net deferred tax assets $ - $ -
========= =========
</TABLE>
33
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
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, 1999 is as
follows:
<TABLE>
<CAPTION>
Total
Investment
Per Project Costs Years Remaining to
Per Agreement Incurred Complete the Project Per
Project or Contract to Date Agreement or Contract
- ------- ----------- ------- ---------------------
<S> <C> <C> <C>
Shilong Town $24,200,000 $576,461 Six
Shilong Water World 3,630,000 1,468,797 No time limit
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 three years
------------- -----------
$89,401,000 $6,711,504
=========== ==========
</TABLE>
One of the Company's subsidiary, Honpar (Shilong) Properties Limited, has been
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 RMB7,682,860 (equivalent to $929,626). The management of the
Company has denied and defended vigorously against the claim and believes that
the realisation 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 1999 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 and related interpretations in accounting
for the minority share of attributable losses arising from the operation of
Shilong Water World under the entity of Dragon Villa. The 20% loss of $67,815
attributable to the minority shareholder was recognised by the Company as all
the joint ventures have deficiencies in assets and no capital contribution has
been made by the minority shareholder as of the balance sheet date.
34
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
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 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 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. The following table presents the shareholders' equity of Honpar
Shilong as of December 31, 1997 and 1998.
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Translation
Stock Capital Earnings Adjustment Total
----- ------- -------- ---------- -----
<S> <C> <C> <C> <C> <C>
Balance, 01/01/97 $ 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>
35
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
NOTE 11 - STOCK OPTIONS
On 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 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 and were
exercisable for one year. During the year ended December 31, 1999, none of these
options had been exercised.
During 1999, 100,000 options with an exercise price of $1.25 per share and
50,000 options with an exercise price of $1.50 per share were granted to
consultants. The options vest immediately and are exercisable for one year.
Accordingly, a total of 150,000 shares of common stock will be reserved by the
Company for issuance upon exercise of the granted stock options. Compensation
expense of $90,500 was recorded related to these options.
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.
<TABLE>
<CAPTION>
Granting Options Exercise Vesting Expiring
Date Granted Price Period Date
---- ------- ----- ------ ----
<S> <C> <C> <C> <C> <C>
Options granted to
non-employees 2/24/99 100,000 $1.25 None 2/23/00
3/11/99 50,000 $1.50 None 3/10/00
--------
Total options granted 150,000
=======
</TABLE>
The weighted average exercise price at December 31, 1999 is $1.33. The weighted
average fair value of options issued or extended during 1999 was $0.6. The
following assumptions were used to determine the fair value of options:
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ----------
<S> <C> <C>
Expected life 1 year 1 year
Volatility 80% 69%
Expected dividend yield - -
Risk free rate 4.82% 5.50%
================ =========
</TABLE>
36
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
NOTE 11 - STOCK OPTIONS (Cont'd)
The Company applies APB Opinion No. 25 and related interpretations in accounting
for its stock options granted to employees. In 1998, the difference of $164,240
between the option exercise price of $1.5 and market price of $2.0 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 increased to the pro forma amounts as follows:
<TABLE>
<CAPTION>
December 31,
------------
1999 1998
---- ----
<S> <C> <C>
Net loss attributed to common shares
As reported $ (1,158,145) $ (1,011,515)
Pro forma (1,158,145) (1,111,636)
Basic loss per share
As reported $ (0.09) $ (0.08)
Pro forma (0.09) (0.09)
============= ==============
</TABLE>
A summary of the status of the Company's stock options as of December 31, 1999
and 1998 are presented as follows:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
------ -----
<S> <C> <C>
Outstanding at January 1, 1998 - $ -
Options granted to non-employees 640,000 $1.50
Options granted to employees 328,480 $1.50
-------
Outstanding at December 31, 1998 968,480 $1.50
Options granted to non-employees 150,000 $1.33
Options expired (968,480) $1.50
-------
Outstanding at December 31, 1999 150,000 $1.33
======= =====
</TABLE>
37
<PAGE>
ASIAN STAR DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
NOTE 11 - STOCK OPTIONS (Cont'd)
The following table summarizes information about stock options outstanding as of
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisable Price
- -------------- ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$1.25 - $1.50 150,000 0. 16 Years $1.33 150,000 $1.33
======= =======
</TABLE>
Using Black Scholes option pricing model, the Company determined that the fair
value of 968,480 options granted during 1998 was $779,435.
Subsequent to the year end the Company granted options to key employees and
consultants to purchase 1,300,000 shares of the Company's common stock at $1.25
per share.
NOTE 12 - CEO NOTIONAL COMPENSATION
CEO of the Company waived his personal salary of $120,000 in each fiscal years
ended December 31, 1999 and 1998. The Company recorded this amount as part of
additional paid-in capital.
NOTE 13 - POST BALANCE SHEET EVENT
On January 13, 2000, one of the Company's subsidiaries, Able Wealth Investments
Limited, entered into a sale and purchase agreement with the owner of two Hong
Kong incorporated companies. Through this agreement, Able Wealth Investments
Limited acquires the entire equity shares of these two Hong Kong companies which
operate a cafeteria business in Hong Kong. According to the agreement, the
purchase consideration is $445,162 (equivalent to HK$3,450,000) which shall be
paid by issuing 261,860 restricted shares of the Company at $1.7 per share.
On January 25, 2000, the Company entered into an agreement to acquire an
existing LPG cylinder manufacturing plant and an associated LPG bottling plant
in the state of Kelantan, Malaysia. The project also includes the exclusive
right to install a deep-water port for tankers. The total project cost is
estimated to be $2.3 billion.
38
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
==================================================
Registrant has not had any changes in or disagreements with Accountants since
inception.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
==================================================================
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 59 President, CEO and
Room 930, Block B, Chairman of the Board
East Wing
New World Office Bldg.
Tsimshatsui, Kowloon,
Hong Kong
Sang Chan 63 Director and Treasurer
Room 930, Block B,
East Wing
New World Office Bldg.
Tsimshatsui, Kowloon,
Hong Kong
Paul Lam 58 Director and Secretary
Room 930, Block B,
East Wing
New World Office Bldg.
Tsimshatsui, Kowloon,
Hong Kong
Dr. Paul Tong 58 Director
Room 930, Block B,
East Wing
New World Office Bldg.
Tsimshatsui, Kowloon,
Hong Kong
</TABLE>
39
<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
40
<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.
41
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
========================
The following table sets forth certain information relating to the aggregate
annual remuneration the Registrant pays to its officers and directors:
<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 -
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, 1999.
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:
42
<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 11. 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 December 31,1999,
there were 12,955,530 shares of Common stock outstanding.
43
<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"). None of the options were
exercised and they all elapsed.
(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.
44
<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 12. 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.
45
<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 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K.
=========================================
EXHIBITS
a) All required exhibits, including the Company's Articles of Incorporation, and
Bylaws, are attached to the Company's Form 10-SB, filed on December 1, 1999. All
previously filed exhibits are incorporated herein by reference.
b) Reports on Form 8-K: No reports were on filed on Form 8K during the quarter
ended December 31, 1999.
Exhibit No. Document Description
- ----------- ---------------------
3.1 Articles of Incorporation and any Amendments-
Incorporated by reference to the Form 10-KSB,
filed December 1, 1999
3.2 Bylaws- Incorporated by reference to the Form 10-KSB,
filed December 1, 1999
8 Consent of BDO International,
Certified Public Accountants
27 Financial Data Schedule
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: March 28,2000
Chief Executive Officer and President
By: /s/ SANG CHAN Dated: March 28,2000
Chief Financial Officer
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
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001046883
<NAME> Asian Star Development, Inc.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5628
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 3905
<CURRENT-ASSETS> 186282
<PP&E> 1363294
<DEPRECIATION> 0
<TOTAL-ASSETS> 7950672
<CURRENT-LIABILITIES> 1597065
<BONDS> 0
0
0
<COMMON> 12956
<OTHER-SE> 8510311
<TOTAL-LIABILITY-AND-EQUITY> 7950672
<SALES> 41926
<TOTAL-REVENUES> 95296
<CGS> 104214
<TOTAL-COSTS> 104214
<OTHER-EXPENSES> 1151311
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1158145)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1158145)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
