As filed with the Securities and Exchange Commission on March 16, 1998
Registration No. 333-38543
===================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT #2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
ASPAC COMMUNICATIONS, INC.
---------------------------------
(Exact Name of registrant as specified in its charter)
Delaware 4812 95-4652797
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification Number)
organization) Code Number)
2049 Century Park East, Suite 1200
Los Angeles, California 90067
310/712-3288
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Marc F. Mayeres, President
2049 Century Park East, Suite 1200
Los Angeles, California 90067
310/712-3288
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to: Cassidy & Associates, 1504 R Street, N.W.
Washington, D.C. 20009, 202/387-5400
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following box. / X /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Amount
Title of Each Amount Offering Aggregate of
Class of Securities to be Price Offering Registra-
to be Registered Registered Per Share Price tion Fee
<S> <C> <C> <C> <C>
Shares of Common
Stock, $.0001 par
value 900,000 $10.00 $9,000,000 $2,700
Shares of Common
Stock by Selling
Securityholder 901,000 (1) N.A. N.A. N.A.
Total $9,000,000 $2,700(2)
</TABLE>
(1) There is no current market for the shares and the dollar amount of
the shares to be registered is de minimis based upon the estimated
per share book value ($.0001).
(2) Previously paid by electronic transfer.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION
STATEMENT ON SUCH DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
[Legend for Red Herring Prospectuses]
The information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale of
these securities in any state in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws
of any such state.
<PAGE>
PROSPECTUS
ASPAC COMMUNICATIONS, INC.
900,000 Shares of Common Stock at $10 per Share;
901,000 Shares of Common Stock to be Sold by the Holders Thereof
This Prospectus is being furnished by Aspac Communications, Inc.,
a development stage Delaware corporation, (the "Company") for the offer
and sale of 900,000 shares of Common Stock of the Company, $.0001 par
value per share (the "Company Shares") at $10 per Company Share. SEE
"PROSPECTUS SUMMARY." The Company is offering a minimum of
300,000 Company Shares (the "Minimum Offering") and a maximum of
900,000 Company Shares (the "Maximum Offering"). All funds received
by the Company with respect to the sale of the first 300,000 Company
Shares will be deposited in a special escrow account to be established by
the Company at Wells Fargo Bank, N.A. If 300,000 Company Shares are
not sold within one hundred eighty days (180) following the effective date
of the registration statement of which this Prospectus is a part (the
"Effective Date"), the Offering will automatically terminate and all funds
received from the sale of the Company Shares will be returned to the
purchasers thereof with interest thereon. Once funds from the sale of
900,000 Company Shares have been received, the Company will not
accept any further purchasers and any funds tendered therefor will be
returned. There can be no assurance that the Minimum Offering will be
sold. SEE "RISK FACTORS--If Minimum Offering Is Not Sold". The
Company Shares are being offered for sale by the officers and directors of
the Company, including Mr. Marc F. Mayeres, President, Ms. Ming
Zhang, Secretary and Mr. Liancheng Ji, director, who will not receive any
remuneration for such sales. The officers and directors are relying on the
provisions of Rule 3a4-1 of the Securities Exchange Act of 1934 (the
"Exchange Act") in the sale by them of the sale of the Company Shares.
SEE "PLAN OF DISTRIBUTION".
The Company is a recently operational development stage Delaware
corporation, with limited operations and capital and no revenues. SEE
"THE COMPANY." The Company intends to develop
telecommunications in the Far East, including China, and the United States
by the construction and development of telephone and communication
systems, including Internet services, and, possibly, the acquisition of
existing telecommunication systems and networks. SEE "BUSINESS".
The offering price of the Company Shares was determined
arbitrarily by the Company and is not necessarily related to asset or book
value, net worth or any other established criteria of value. SEE "PLAN
OF DISTRIBUTION" for a discussion of the factors used to determine
such offering price. There is no current public trading market for the
Shares. SEE "RISK FACTORS--No Current Trading Market for the
Company's Securities."
The registration statement of which this Prospectus is a part also
relates to the sale of 901,000 shares of the Company's Common Stock (the
"Selling Securityholders Shares") by the respective holders thereof (the
"Selling Securityholders"). (The Selling Securityholders' Shares and the
Company Shares are hereinafter referred to collectively as the "Shares").
The Selling Securityholders will receive the proceeds from the sale of the
securities being offered by them. The Company will not receive any of
the proceeds from such sales. The Selling Securityholders' Shares may be
offered from time to time by the Selling Securityholders through ordinary
brokerage transactions in the over-the-counter market, in negotiated
transactions or otherwise, at market prices prevailing at the time of sale or
at negotiated prices. The securities being offered by Selling
Securityholders are expected to become tradeable on or about the date of
this Prospectus. Sales of the securities being offered by Selling
Securityholders, or even the potential of such sales, may likely have an
adverse effect on the market prices of the Company Shares being offered
by the Company. All costs incurred in the registration of the Company
Shares and the Selling Securityholders' Shares are being borne by the
Company.
The Selling Securityholders may be deemed to be "underwriters" as
defined in the Securities Act of 1933, as amended (the "Securities Act").
If any broker-dealers are used by the Selling Securityholders, any
commissions paid to broker-dealers and, if broker-dealers purchase any
Selling Securityholders' Shares as principals, any profits received by such
broker-dealers on the resales of the Selling Securityholders' Shares may be
deemed to be underwriting discounts or commissions under the Securities
Act. In addition, any profits realized by the Selling Securityholders may
be deemed to be underwriting commissions. Brokerage commissions, if
any, attributable to the sale of the Selling Securityholders' Shares will be
borne by the Selling Securityholders. The Company has agreed to
indemnify the Selling Securityholders against certain liabilities, including
liabilities under the Act.
The Selling Securityholders' Shares offered by this Prospectus may
be sold from time to time by the Selling Securityholders, or by
transferees, commencing on the date of this Prospectus. No underwriting
arrangements have been entered into by the Company or, to the
Company's knowledge, the Selling Securityholders. The distribution of
the Selling Securityholder's Shares by the Selling Securityholders may be
effected in one or more privately-negotiated transaction or through sales to
one or more dealers for resale of such Selling Securityholder's Shares as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or negotiated prices. Usual and
customary or specifically negotiated brokerage fees or commissions may
be paid by the Selling Securityholders in connection with sales of the
Selling Securityholders' Shares.
Unless otherwise specifically provided, all currency amounts in this
document are expressed in United States dollars and are preceded by "$".
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" CONTAINED IN THIS PROSPECTUS
BEGINNING ON PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE COMPANY WILL REGISTER OR QUALIFY THE
OFFERING IN THE STATES OF CALIFORNIA, NEW YORK,
WASHINGTON, FLORIDA, ILLINOIS, AND NEVADA ONLY.
PURCHASERS OF THE SHARES IN THE OFFERING MUST BE
RESIDENTS OF THOSE STATES. SEE "RISK FACTORS--LIMITED
STATE OFFERING" AND "PLAN OF DISTRIBUTION"
<TABLE>
<CAPTION>
Underwriting Proceeds
Discounts to Company
Price to and Com- or Other
Public missions(1) Persons (2)
<S> <C> <C> <C>
Per Share $10 -0- $20
Minimum Offering-- $3,000,000 -0- $3,000,000
300,000 Shares of
Common Stock
Maximum Offering-- $9,000,000 -0- $9,000,000
900,000 Shars of
Common Stock
</TABLE>
(1) The officers and directors of the Company are offering the
Company Shares for sale. The Company does not intend to use an
underwriter. If, however, an underwriter were to be used, which
is not currently anticipated, discounts or commissions would not
exceed 10% of the offering price.
(2) Does not include an estimated $135,200 in expenses of issuance
and distribution of this Offering which funds have been or will be
borrowed by the Company from a shareholder. SEE "BUSINESS--
Shareholder Loan".
The date of this Prospectus is March ____, 1998.
<PAGE>
CERTAIN SECURITIES DESCRIBED HEREIN ARE OFFERED
BY THE SELLING SECURITYHOLDERS SUBJECT TO PRIOR SALE,
WITHDRAWAL, CANCELLATION OR MODIFICATION OF THE
OFFERING, WITHOUT NOTICE. IN ADDITION, THE RIGHT IS
RESERVED TO CANCEL ANY CONFIRMATION OF SALE EVEN IF
THE PURCHASE PRICE HAS BEEN PAID, IF IN THE OPINION OF
THE COMPANY OR ANY PARTICIPATING BROKER-DEALER,
COMPLETION OF SUCH SALE WOULD VIOLATE FEDERAL OR
STATE SECURITIES LAWS OR A RULE OR POLICY OF THE
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
FOLLOWING THE COMPLETION OF THIS OFFERING,
CERTAIN BROKER-DEALERS MAY BE THE PRINCIPAL MARKET
MAKERS FOR THE SECURITIES OFFERED HEREBY. UNDER
THESE CIRCUMSTANCES, THE MARKET BID AND ASKED PRICES
FOR THE SECURITIES MAY BE SIGNIFICANTLY INFLUENCED BY
DECISIONS OF THE MARKET MAKERS TO BUY OR SELL THE
SECURITIES FOR THEIR OWN ACCOUNT. NO ASSURANCE CAN
BE GIVEN THAT ANY MARKET MAKING ACTIVITIES OF THE
MARKET MAKERS, IF COMMENCED, WILL BE CONTINUED.
FOR A PERIOD OF AT LEAST ONE YEAR FOLLOWING
CLOSING OF THIS OFFERING, THE COMPANY WILL BE
REQUIRED BY THE SECURITIES EXCHANGE ACT OF 1934 TO
FILE PERIODIC REPORTS AND OTHER INFORMATION WITH THE
SECURITIES AND EXCHANGE COMMISSION. SUCH MATERIAL
MAY BE INSPECTED AT THE COMMISSION'S PRINCIPAL
OFFICES AT JUDICIARY PLAZA, 450 FIFTH STREET, N.W.
WASHINGTON, D.C. 20459 AND COPIES MAY BE OBTAINED ON
PAYMENT OF CERTAIN FEES PRESCRIBED BY THE
COMMISSION. THE COMPANY WILL FURNISH TO HOLDERS OF
ITS COMMON STOCK ANNUAL REPORTS CONTAINING AUDITED
FINANCIAL STATEMENTS EXAMINED AND REPORTED UPON,
AND WITH AN OPINION EXPRESSED BY AN INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANT. THE COMPANY MAY ISSUE
OTHER UNAUDITED INTERIM REPORTS TO ITS SHAREHOLDERS
AS IT DEEMS APPROPRIATE.
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained
elsewhere in this Prospectus. Reference is made to, and this summary is
qualified by, the more detailed information set forth in this Prospectus,
which should be read in its entirety.
The Company Aspac Communications, Inc. is a recently operational
development stage corporation incorporated in
Delaware on June 1, 1994.
The Offering The Company currently has limited operations and
assets and no revenue. The Company intends to
develop and/or construct telecommunication and
Internet networks and systems in the Far East
including the People's Republic of China ("PRC" or
"China"), and elsewhere, including the United
States. SEE "BUSINESS--Business Plan." The
Company intends to build its own systems, purchase
existing networks or systems, or enter into joint
ventures with third parties for the development,
construction or purchase of telecommunication
systems or Internet networks. The Company intends
to develop and manage such telecommunication and
Internet systems. The Company may need to raise
additional capital to construct such
telecommunications systems or to acquire existing
systems. SEE "RISK FACTORS--Need for
Additional Financing to Commence of Continue
Operations Even if Minimum Offering Sold".
Transfer Agent The Company currently acts as its own transfer
agent. SEE "DESCRIPTION OF SECURITIES --
Transfer Agent and Registrar."
Selling Securityholders
Securities 901,000 Shares of Common Stock registered hereby
and owned by Selling Securityholders to be offered
for sale by such securityholders. SEE "SELLING
SECURITYHOLDERS." The Selling
Securityholders' Shares constitute an aggregate of
25% of the issued and outstanding Common Stock of
the Company as of the date hereof.
Limited State
Registration The Company anticipates that a substantial portion of
Company Shares will be sold to investors located
outside the United States. The Company will
register or qualify the Shares only in the states of
California, New York, Washington, Florida, Illinois,
and Nevada. Offers and sales in the Offering can be
made only to entities resident in those states. SEE
"RISK FACTORS--Limited State Offering" and
"Plan of Distribution".
Trading Market The Company intends to apply initially for admission
to quotation of the Shares on the NASD OTC
Bulletin Board and to apply for listing on the Nasdaq
SmallCap Market at such time, if any, as it qualifies.
However, there can be no assurance that the Shares
will be so listed. SEE "RISK FACTORS--No
Current Trading Market for the Company's
Securities" and "DESCRIPTION OF SECURITIES--
Admission to Quotation on Nasdaq SmallCap Market
or NASD OTC Bulletin Board".
SELECTED FINANCIAL DATA
The Company's fiscal year ends September 30. The following
table sets forth selected financial information concerning the Company as
of September 30, 1997:
Balance Sheet Data:
Current assets $30,200
Total assets 157,727
Current Liabilities 169,224
Stockholders' deficit (11,497)
The selected financial data above is a summary only and has been
derived from and is qualified in its entirety by reference to the Company's
financial statements and the report related thereto of Weinberg &
Company, Certified Public Accountants, included elsewhere in this
Prospectus. SEE "EXPERTS" and "FINANCIAL STATEMENTS."
THE COMPANY
The Company was incorporated in the State of Delaware on June 1,
1994. The Company has limited operations and no revenue to date. The
Company intends to engage in the development, construction and
acquisition of telecommunication systems and Internet services. The
Company intends to offer to business and residential customers enhanced
telecommunication services including, but not limited to, local, regional,
and international telephone service, fixed (land) and cellular line systems,
Internet access, and paging, mobile and facsimile transmission capability.
The Company will concentrate its services in the Far East, including
China and, as opportunities arise, in the United States. The Offering
herein is considered a "blind pool". SEE "BUSINESS".
EMPLOYEES
The Company presently has two officers and one employee. The
Company does not expect to hire any additional employees before the
Effective Date of the registration statement of which this Prospectus forms
a part.
OFFICES
The Company is qualified to do business in California and the
United States offices of the Company are located at 2049 Century Park
East, Suite 1200, Los Angeles, California 90067. Its telephone number is
310/712-3288 and its fax number is 310/712-3286. On August 28, 1997,
the Company entered into a 6-month lease agreement, followed by a
month-to-month basis thereafter on the same terms, with Barrister
Executive Suites, Inc. for such offices. The Company is provided with an
office suite at a rent of $1,600 per month and is provided access to
conference room facilities shared with other business tenants. The
Company does not believe that it currently needs additional space.
However, upon closing of the Offering and the addition of more
employees, of which there can be no assurance, the Company will
determine whether to remain in its current space or to move to larger
office space.
SUBSIDIARY
On October 10, 1997, the Company formed a wholly-owned
subsidiary, Aspac Holdings, Inc., under the laws of the Cayman Islands.
The Company may conduct some of its operations through this subsidiary
including entering into certain contracts or other agreements with third
parties.
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN
NATURE AND INVOLVE A HIGH DEGREE OF RISK. THE
SECURITIES OFFERED HEREBY SHOULD BE PURCHASED ONLY
BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT. THEREFORE, EACH PROSPECTIVE INVESTOR
SHOULD, PRIOR TO PURCHASE, CONSIDER VERY CAREFULLY
THE FOLLOWING RISK FACTORS, AS WELL AS ALL OF THE
OTHER INFORMATION SET FORTH ELSEWHERE IN THIS
PROSPECTUS AND THE INFORMATION CONTAINED IN THE
FINANCIAL STATEMENTS, INCLUDING ALL NOTES THERETO.
RISKS RELATING TO OPERATING IN CHINA AND ELSEWHERE IN
THE FAR EAST
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES
The Company's sole director and its Selling Securityholders reside
outside the United States. All of the assets of these persons are, and the
Company anticipates that a substantial portion of the assets that may
developed or acquired by the Company will be located outside the United
States. As a result, it may not be possible for investors to effect service
of process within the United States upon such persons, or to enforce
against the Company's assets or against such persons judgments obtained
in United States courts predicated upon the liability provisions, and most
particularly the civil liability provisions, of the United States securities
laws or state corporation or other law.
INVESTMENT IN FAR EAST GENERALLY
The Company anticipates that it will initially focus its development
efforts on telecommunication projects and opportunities located in China
and the Far East. Because of government controls and lack of established
information systems, information regarding projects in which the Company
may participate located in China and the Far East will be difficult for
United States investors to obtain and investors will be unable to track the
progress of the Company. In addition, if the Company begins operations
in China or the Far East it will be subject to the risks incident to the
ownership and operation of businesses therein. These risks include,
among others, the risks of internal political or civil unrest, war, or
government restrictions. These risks are dynamic and difficult to quantify.
The Company will be subject to the risks normally associated with changes
in general national economic conditions or local market conditions,
competition, patronage, changes in market rates, and the need to
periodically upgrade and replace equipment to maintain desirability, and to
pay the costs thereof. Although many of the governments of the countries
of the Far East have liberalized policies on international trade, foreign
ownership and development, investment, and currency repatriation,
increasing both international trade and investment accordingly, such
policies might change unexpectedly. The Company will be effected by the
rules and regulations regarding foreign ownership of real and personal
property, including telecommunication switching stations, land lines and
other property. Such rules may change quickly and dramatically which
may have an adverse impact on ownership and may result in a loss without
recourse of property or assets of the Company. Hong Kong is in a period
of transition from control over it by Great Britain to control by China. It
is uncertain what changes may result from such transition in regard to
business, foreign property ownership, restrictions on development, taxes
or other factors.
INVESTMENT IN CHINA IN PARTICULAR
Because the operations of the Company are expected to be based to
a substantial extent in China, the Company will be subject to the rules and
restrictions governing China's legal and economic system as well as
general economic and political conditions in that country. These include
the following:
Political and Economic Matters. Under its current leadership, the
government of the People's Republic of China ("PRC") has been pursuing
economic reform policies, which include the encouragement of private
economic activity and greater economic decentralization. There can be no
assurance, however, that the Chinese government will continue to pursue
such policies, or that such policies will be successful if pursued. Changes
in policies made by the Chinese government may result in new laws,
regulations, or the interpretation thereof, confiscatory taxation, restrictions
on imports, currency devaluations or the expropriation of private
enterprise which may, in turn, adversely affect the Company.
Furthermore, business operations in China can become subject to the risk
of nationalization, which could result in the total loss of ownership and
control of any assets or operations that may be developed by the Company
in China. Also, economic development may be limited by the imposition
of austerity measures intended to reduce inflation, the inadequate
development of an infrastructure, and the potential unavailability of
adequate power and water, transportation, communication networks, raw
materials and parts.
Legal System. The PRC's legal system is a civil law system based
on written statutes. Unlike the common law system in the United States,
decided legal cases in the PRC have little value as precedents.
Furthermore, the PRC does not have a well-developed body of laws
governing foreign enterprises. Definitive regulations and policies with
respect to such matters as the permissible percentage of foreign investment
and permissible rates of equity returns have not yet been published,
statements regarding these evolving policies have been conflicting, and any
such policies, as administered, are likely to be subject to broad
interpretation and modification, perhaps on a case-by-case basis. As the
legal system in the PRC develops with respect to such new forms of
enterprise, foreign investors may be adversely affected by new laws,
changes in existing laws (or interpretation thereof) and the preemption of
provincial or local laws by national laws. The Company's operations in
China, if any are developed of which there can be no assurance, will be
subject to administrative review and approval by various national and local
agencies of the PRC government. Management intends that the
Company's operations will comply with applicable administrative
requirements; however, there is no assurance that the Company will be
able to timely obtain the necessary administrative approvals for any
projects that the it determines to develop.
Inflation/Economic Policies. In recent years, the Chinese economy
has experienced periods of rapid growth and high rates of inflation, which
have, from time to time, led to the adoption by the PRC government of
various corrective measures designed to regulate growth and contain
inflation. In 1995, China's overall inflation rate was estimated to be
14.8%, compared to 21.4% in 1994 and 13.2% in 1993. High inflation
has in the past and may in the future cause the PRC government to impose
controls on prices, or to take other action which could inhibit economic
activity in China, which in turn could affect the Company's development
or operations.
Foreign Currency Exchange. The Renminbi ("Rmb"), the currency
of China, is not a freely convertible currency. Both conversion of Rmb
into foreign currencies and the remittance of Rmb abroad are subject to
the PRC government approval. The Company intends to develop
telecommunication systems in the Far East including China and anticipates
that initially it may earn revenues, if any, and incur costs, in Rmb.
Prior to January 1, 1994, Rmb earned within China were not freely
convertible into foreign currencies except with government permission, at
rates determined at swap centers, where the exchange rates often differed
substantially from the official rates quoted by the People's Bank of China.
On January 1, 1994, the People's Bank of China introduced a managed
floating exchange rate system based on the market supply and demand and
proposed to establish a unified foreign exchange inter-bank market among
designated banks. In place of the official rate and the swap center rate,
the People's Bank of China publishes a daily exchange rate for Rmb based
on the previous day's dealings in the inter-bank market. It is expected that
swap centers will be phased out. However, the unification of exchange
rates does not imply full convertability of Rmb into United States Dollars
or other foreign currencies. Payment for imported materials and
remittance of earnings outside of China are subject to the availability of
foreign currency which is dependent on the foreign currency denominated
earnings of the entity or allocated to the Company by the government at
official exchange rates.
Approval for exchange at the exchange center is granted to
enterprises in China for valid reasons such as purchases of imported goods
and remittance of earnings. While conversion of Rmb into dollars or
other foreign currencies can generally be effected at the exchange center,
there is no guarantee that it can be effected at all times. There is still
uncertainty as to how foreign enterprises will be treated under this new
system or whether the system will be changed again in the future. In the
event of shortages of foreign currency, the Company may be unable to
convert sufficient Renminbi into foreign currency to enable it to comply
with foreign currency payment obligations it may have.
PRC Regulation of the Telecommunications Industry. The
Ministry of Posts and Telecommunications (the "MPT") regulates the
telecommunications industry in China. The MPT directly or indirectly
regulates entry into the telecommunications industry, scope of permissible
business, interconnection and transmission line arrangements, technology
and equipment standards, and other aspects of the Chinese
telecommunications industry. Such regulation may limit the Company's
flexibility to respond to certain development opportunities. In addition,
changes in the regulations or policies governing such regulatory
framework could have an adverse effect on the Company. The Company
may have to obtain certain licenses, if required, from the MPT in order to
commence its proposed business. There is no assurance that it will be
able to obtain such licenses, or if obtained, that they will not be untimely
revoked or suspended. The rates that the Company will be permitted to
charge for telecommunications services, if any are developed, are subject
to regulation by the State Planning Commission, the MPT, and relevant
Provincial Price Bureaus. Once authorized by such regulatory agencies,
there can be no assurance that changes in the tariffs and rates would not
have a material adverse effect on any Company business and results of
operations, if any had been developed.
RISK FACTORS CONCERNING THE COMPANY
THE COMPANY IS A DEVELOPMENT STAGE COMPANY WITH
LIMITED OPERATING History
The Company, organized on June 1, 1994, is a development stage
company and has recently begun operations as of the date of this
Prospectus. Without an operating history, there is only a limited basis
upon which a potential investor may evaluate the Company's prospects for
its ability to construct, develop and manage telecommunications systems
and Internet networks. To date, the Company's efforts have been limited
to organizational activities and the preparation of the registration statement
of which this Prospectus is a part. The Company has limited resources
and has had no revenues to date.
The Company's proposed operations are subject to all of the risks
inherent in the establishment of a new business enterprise, including the
absence of an operating history. The likelihood of the success of the
Company must be considered in light of the problems, expenses,
difficulties, complications and delays frequently encountered in connection
with a new business and the competitive environment in which the
Company will operate. No assurance can be given that the operations of
the Company will result in any revenues or that the Company will be
profitable. SEE "BUSINESS."
SUCCESS OF PLAN OF OPERATIONS AND SHAREHOLDER
INFORMATION DEPENDENT ON MANAGEMENT
The ability of the Company to successfully effect its business
objectives and to develop, construct, manage and acquire
telecommunication systems and Internet networks will be largely
dependent upon the efforts of its Management including Mr. Marc F.
Mayeres, President of the Company and Liancheng Ji, a director of the
Company. As the Company anticipates operations in China and elsewhere
in the Far East, shareholders may have difficulty in obtaining information
from sources other than the Company, including foreign local or national
government agencies, about the Company's activities and development of
its projects in China or such other countries in the Far East. Shareholders
will be dependent upon Management for reports of the Company's
development and activities and expenditure of proceeds. The Company
has entered into an employment agreement with Mr. Mayeres. SEE
"MANAGEMENT". The Company has not obtained any "key man" life
insurance on the lives of any of its officers or the director. The loss of
the services of the key executives or director could have a material
adverse effect on the Company's ability to successfully achieve its business
objectives. The officers of the Company will work full time on the
development and operations of the Company. Mr. Liancheng Ji will
devote such time as a director as reasonably necessary to assist the
Company in developing its telecommunications systems and Internet
network in China and elsewhere in the Far East.
CONTROL BY SELLING SECURITYHOLDERS
Management does not currently own any securities of the Company
and will not own any of the securities of the Company following the
Offering. The current Selling Securityholders own 100% of the
outstanding shares of the Company, of which 25% are being offered for
sale by the holders thereof. SEE "DESCRIPTION OF SECURITIES".
LIMITED TELECOMMUNICATIONS INDUSTRY EXPERIENCE
The Company's Management has limited experience in owning,
constructing, developing or managing telecommunications and Internet
systems although the sole director of the Company has both education and
experience in such areas and has worked in the telecommunications field
in the Far East for over 30 years. Although the Company plans to hire
consultants, and professional operating technicians and specialists, there
can be no assurance that these professionals will be available on terms
acceptable to the Company. SEE "BUSINESS" and "MANAGEMENT."
In order to supplement the business experience of Management, the
Company may employ accountants, technical experts, appraisers,
attorneys, or other consultants or advisors in China, the Far East or the
United States. Furthermore, it is anticipated that such persons may be
engaged by the Company on an independent basis without a continuing
fiduciary or other obligation to the Company. As of the date of this
Prospectus, the Company has not entered into any agreements or
arrangements with any such technical support.
IF MINIMUM OFFERING IS NOT SOLD
If the Minimum Offering (300,000 Company Shares) is not sold by
the Company within 180 days of the Effective Date, all funds received by
the Company will be returned to the investors thereof with interest at the
same rate as paid by the escrow bank. Investors should be aware that
investment funds will be held in an escrow account maintained by the
Company and investors will not be entitled to a return of their investment
during such 180 day period.
POSSIBLE NEED FOR ADDITIONAL FINANCING TO COMMENCE
OR CONTINUE OPERATIONS EVEN IF MINIMUM OFFERING
SOLD
If the Minimum Offering is sold, the Company will receive
$3,000,000 gross proceeds and if the Maximum Offering is sold, the
Company will receive $9,000,000 in gross proceeds. Although the
Company can commence initial operations if the Minimum Offering is
sold, the Company will be limited in implementing its business plan for
the development, construction and management of telecommunication and
Internet systems and for the acquisition of existing telecommunication
systems and will likely need to obtain additional funds in order to develop
such telecommunications or Internet systems. The Company may seek
additional sources of capital, including an additional offering of its equity
securities, an offering of debt securities or obtaining financing through a
bank or other entity. The Company has not established a limit as to the
amount of debt it may incur nor has it adopted a ratio of its equity to a
debt allowance.
If the Company needs to obtain additional financing, there is no
assurance that financing will be available, from any source, or that it will
be available on terms acceptable to the Company, or that any future
offering of securities will be successful. The Company could suffer
adverse consequences if it is unable to obtain additional capital when
needed. SEE "BUSINESS" and "USE OF PROCEEDS".
The pace of the Company's development of telecommunication and
Internet systems and the possible acquisition of existing systems is directly
related to the amount of capital available to the Company for such
purposes. The greater the number of Company Shares that are sold, the
greater the amount of proceeds available to the Company to enter into
development or construction projects or to acquire existing
telecommunication systems.
COMPETITION FROM OTHER MORE ESTABLISHED ENTITIES
Even if the Maximum Offering is sold, the Company will be a
small participant in the telecommunications industry and it will face
competition from well financed entities already established and actively
engaged in related or identical projects to those in which the Company
plans to participate. Many of such entities have significantly greater
financial resources, technical expertise and managerial capabilities than the
Company and, consequently, the Company may be at a competitive
disadvantage. SEE "BUSINESS--Competition."
PURCHASERS WILL EXPERIENCE IMMEDIATE AND
SUBSTANTIAL DILUTION IN VALUE OF SHARES
Purchasers of the Company Shares offered herein will incur
immediate and substantial dilution in the pro forma net tangible book value
of their Common Stock. The unaudited estimated per share book value as
of December 31, 1997, prior to the Offering, is $.0114. SEE
"DILUTION".
ISSUANCE OF FUTURE SHARES MAY DILUTE VALUE OF
SHARES HELD BY SHAREHOLDERS
The Certificate of Incorporation of the Company authorizes the
issuance of a maximum of 100,000,000 shares of Common Stock, $.0001
par value and 20,000,000 shares of non-designated preferred stock, $.0001
par value. As of the date hereof there are 3,604,000 shares of Common
Stock outstanding and no shares of preferred stock outstanding. The
future issuance of all or part of the remaining authorized Common Stock
may result in dilution in the percentage of the Company's Common Stock
held by the Company's then existing shareholders. Moreover, any
Common Stock issued in the future may be valued on an arbitrary basis by
the Company. The issuance of the Common Stock of the Company as part
of the Company's participation in a project or acquisition or for the
payment for services or as compensation, may have the effect of diluting
the value of shares held by investors, and might have an adverse effect on
any trading market, should a trading market develop for the Company's
shares.
POTENTIAL ADVERSE EFFECTS OF AUTHORIZATION OF
PREFERRED STOCK
The Company has 20,000,000 authorized shares of non-designated
preferred stock of which none have been issued as of the date hereof. The
Company may, without further action or vote by shareholders of the
Company, designate and issue the shares of preferred stock. The terms of
any series of preferred stock, which may include priority claims to assets
and dividends and special voting rights, could adversely affect the rights of
holders of the Common Stock and thereby reduce the value of the
Common Stock. The designation and issuance of preferred stock
favorable to current Management or current shareholders could make the
possible takeover of the Company or the removal of Management of the
Company more difficult and discourage hostile bids for control of the
Company which bids might have provided shareholders with premiums for
their shares.
NO INTENTION OF PAYING DIVIDENDS
Should the proposed operations of the Company be profitable, it is
likely that the Company would retain much or all of its earnings in order
to finance future growth and expansion. The Company has not and does
not presently intend to pay dividends and dividends are unlikely to be paid
in the foreseeable future.
FACTORS BEYOND THE COMPANY'S CONTROL
Numerous conditions beyond the Company's control may
substantially affect its success. Such conditions include, but are not
limited to, fluctuations in costs of goods and services including Internet
access charges, line use charges by third-party carriers, availability of
telecommunications equipment, import/export restrictions, weather
conditions, equipment shortages, political unrest, as well as competition
from other businesses.
RISK FACTORS CONCERNING THE OFFERING
NO CURRENT TRADING MARKET FOR THE COMPANY'S
SECURITIES
There is currently no established public trading market for the
Shares. No assurance can be given that an active trading market in the
Company's securities will develop after completion of the Offering, or, if
developed, that it will be sustained. No assurance can be given that the
market price of the Company's securities will not fall below the initial
public offering price. The Company intends to apply for admission to
quotation of the Shares on the NASD OTC Bulletin Board and, if and
when qualified, of which there can be no assurance, it intends to apply for
admission to quotation on the Nasdaq SmallCap Market. SEE
"DESCRIPTION OF SECURITIES". The Company is a development
stage company with limited operations and no revenues. There can be no
assurance that such a listing can now be obtained or will be obtained once
operations and revenues are established. There can be no assurance that a
regular trading market for the Common Stock will develop or that, if
developed, it will be sustained. Various factors, such as the Company's
operating results, changes in laws, rules or regulations, general market
fluctuations, changes in financial estimates by securities analysts and other
factors may have a significant impact on the market price of the securities.
The market price for the securities of public companies often experience
wide fluctuations which are not necessarily related to the operating
performance of such public companies such as high interest rates or impact
of overseas markets.
REGISTRATION OR QUALIFICATION OF THE SECURITIES IN A
LIMITED NUMBER OF STATES
The Company anticipates that a substantial portion of Company
Shares will be sold to investors located outside the United States. The
Company will register or qualify the offer and sale of the Shares in
California, New York, Washington, Florida, Illinois, and Nevada.
Purchasers of the Shares who are residents of the United States must be
residents in one of these states. The Company will not accept purchases
from residents not located in a state in which the Shares have been
qualified or registered. The Offering may not achieve the Minimum
Offering amount or the Maximum Offering amount due to this limited
registration.
RESALES OF THE SHARES UNDER STATE SECURITIES LAWS--
THE NATIONAL SECURITIES MARKET IMPROVEMENT ACT OF
1996
Currently, the Company intends to register the Offering only in
California, New York, Washington, Florida, Illinois, and Nevada. The
Company will not accept shareholders who are not resident of these states
or such other state in which registration or qualification is not required.
The National Securities Market Improvement Act of 1996
("NMSIA") limits the authority of states to impose restrictions upon sales
of securities made pursuant to Sections 4(1) and 4(3) of the Securities Act of
companies which file reports under Sections 13 or 15(d) of the Securities
Exchange Act. Sales of the Shares in the secondary trading market will be
made pursuant to Section 4(1) (sales other than by an issuer, underwriter
or broker). It is anticipated that the Company Shares will be immediately
eligible for resale in the secondary market.
ARBITRARY DETERMINATION OF OFFERING PRICE
The initial public offering price of the Company Shares has been
arbitrarily determined by the Company and does not necessarily bear any
relationship to the Company's assets, net worth or other established
criteria of value. SEE "PLAN OF DISTRIBUTION" for a discussion of
the factors used to determine such offering price.
MANAGEMENT HAS DISCRETION IN APPLICATION OF
PROCEEDS
Management of the Company has considerable discretion over the
use and expenditure of the proceeds from the sale of the Company Shares
offered herein. The Company intends to use the funds raised in this
Offering and additional capital (if such can be obtained, of which there is
no assurance) for the development of telecommunication and Internet
networks, marketing, working capital, administrative and other matters.
SEE "USE OF PROCEEDS". To the extent that the Company finds
changes are necessary or appropriate in order to address changed
circumstances and/or opportunities, Management may find it necessary to
adjust the use of the Company's capital, including the proceeds of this
Offering. As a result of the foregoing, the success of the Company may
be substantially dependent upon the discretion and judgment of the
Management with respect to the application and allocation of the net
proceeds hereof.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF
OFFICERS AND DIRECTORS
The Certificate of Incorporation and By-Laws of the Company
provide that the Company shall indemnify its officers and directors against
losses sustained or liabilities incurred which arise from any transaction in
such officer's or director's respective managerial capacity unless such
officer or director violates a duty of loyalty, did not act in good faith,
engaged in intentional misconduct or knowingly violated the law, approved
an improper dividend, or derived an improper benefit from a transaction.
The Company's Certificate of Incorporation and By-Laws also provide for
the indemnification by it of its officers and directors against any losses or
liabilities incurred as a result of the manner in which such officers and
directors operate the Company's business or conduct its internal affairs,
provided that in connection with these activities they act in good faith and
in a manner which they reasonably believe to be in, or not opposed to, the
best interests of the Company, and their conduct does not constitute gross
negligence, misconduct or breach of fiduciary obligations. SEE
"MANAGEMENT--Indemnification".
PENNY STOCK REGULATION
Penny stocks generally are equity securities with a price of less
than $5.00 per share other than securities registered on certain national
securities exchanges or quoted on the Nasdaq Stock Market, provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or system. The Company's
securities may be subject to "penny stock" rules that impose additional
sales practice requirements on broker-dealers who sell such securities to
persons other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 together with their spouse).
Broker-dealer practices in connection with transaction in "penny
stocks" are regulated by certain penny stock rules adopted by the
Securities and Exchange Commission. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the risks in the penny stock
market. The broker-dealer must also provide the customer with current
bid and offer quotations for the penny stock, the compensation received by
the broker-dealer and its salesperson in the transaction, and monthly
account statement showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules generally
require that prior to a transaction in a penny stock, the broker-dealer must
make a special written determination that the penny stock is a suitable
investment for the purchaser and the broker-dealer must receive the
purchaser's written agreement to the transaction. These disclosure
requirements may have the effect of reducing the level of trading activity
in the secondary market for a stock that becomes subject to the penny
stock rules. If the Company's securities become subject to the penny
stock rules, investors in this Offering may find it more difficult to sell
their securities.
ADDITIONAL SHARES ENTERING PUBLIC MARKET WITHOUT
ADDITIONAL CAPITAL PURSUANT TO RULE 144
No shares of stock of the Company were issued prior to September
26, 1997. All the issued and outstanding shares of the Company, to the
extent not sold or transferred pursuant to this Offering, are "restricted
securities" as such term is defined in Rule 144 ("Rule 144") promulgated
under the Securities Act. In general, under Rule 144, if adequate public
information is available with respect to a company, a person who has
satisfied a one-year holding period as to his restricted securities or an
affiliate who holds unrestricted securities may sell, within any three month
period, a number of that company's shares that does not exceed the greater
of one percent of the then outstanding shares of the class of securities
being sold or the average weekly trading volume during the four calendar
weeks prior to such sale. Sales of restricted securities by a person who is
not an affiliate of the company (as defined in the Securities Act) and who
has satisfied a two year holding period may be made without any volume
limitation. Pursuant to such Rule 144, after expiration of the holding
period certain shares of Common Stock now restricted for trading will
become eligible for trading in the public market without any payment
therefore or increase to the Company's capitalization. Possible or actual
sales of the Company's outstanding Common Stock by all or some of the
present stockholders may have an adverse effect on the market price of the
Company's Shares should a public trading market develop.
SHARES ELIGIBLE FOR SALE PURSUANT TO RULE 415
A Selling Securityholder may offer and sell the Selling
Securityholder Shares at a price and time determined by the particular
Selling Securityholder. The timing of such sales and the price at which
the Selling Securityholder Shares are sold by the individual Selling
Securityholder could have an adverse effect upon the public market for the
Shares, should one develop.
CERTAIN TAX CONSIDERATIONS
The Company will be subjected to taxes imposed on it in the
jurisdiction in which it operates. Further, its income is subject to United
States federal and state income taxes when distributed, deemed distributed
or otherwise attributed to, the Company, which is a United States
corporation. Complex tax rules apply for purposes of determining the
calculation of those United States taxes, the availability of a credit for
foreign taxes imposed and the timing of the imposition of United States
tax. Normally all foreign income earned by a United States multinational
corporation eventually will be subject to United States tax. In order to
relieve double taxation, the United States federal tax law generally allows
United States corporations a credit against their United States tax ability in
the year the foreign earnings become subject to United States tax in the
amount of the foreign taxes paid on those earnings. The credit is limited
under complex limitation rules. Further, complex rules exist for allocating
and apportioning interest, research and development expenses and certain
other expense deductions between the United States and foreign sources.
These rules can prevent United States multinational companies from
crediting all of the foreign taxes they pay against their United States taxes.
To the extent such credits are not allowed, foreign source income bears a
tax burden higher than the United States tax rate.
USE OF PROCEEDS
If the Maximum Offering is sold, the proceeds to the Company will
be $9,000,000 and if the Minimum Offering is sold, the proceeds to the
Company will be $3,000,000. There are no anticipated underwriting fees,
discounts or commissions to be paid. The Company anticipates that it may
utilize certain Company Shares for use in acquiring or leasing equipment
or existing telecommunications systems. Such usage will benefit the
Company by decreasing the amount of cash required to obtain such
equipment or services, but the Company will not receive any proceeds
usable for other matters directly from such use of its Company Shares.
The following table sets forth the Company's anticipated use of
proceeds from the Offering:
MINIMUM MAXIMUM
OFFERING OFFERING
Total Proceeds $ 3,000,000 $ 9,000,000
Offering Expenses (1) 135,200 135,200
Initial capitalization of
one or more of potential
projects(2) 1,650,000 2,700,000
Working capital including
equipment, furnishings,
salaries and rent 1,214,800 3,164,800
Capitalization of additional
telecommunications projects --- 3,000,000
(1) The Company has obtained a loan from Finhorn Enterprises
Limited, a shareholder and Selling Securityholder, for payment of
some of these initial offering expenses. SEE "BUSINESS--
Shareholder Loan".
(2) SEE "BUSINESS--Current Operations". If none of the projects
currently being initially discussed by the Company and generally
described in "BUSINESS--Current Operations" is finalized, the
Company anticipates locating another project or projects of similar
estimated costs.
The foregoing represents the Company's best estimate of the net
proceeds of the Offering based on current planning and business
conditions. The exact allocation of the proceeds for the purposes set forth
above and the timing of the expenditures may vary significantly depending
upon the exact amount of funds raised, the time and cost involved in
locating existing telecommunication systems for purchase or obtaining
necessary regulatory approvals for construction of new telecommunication
systems, the status of competing entities, availability and delivery of
supplies and equipment, and other factors.
The Company believes that the proceeds from the Minimum
Offering will be sufficient to fund its operations for the next 12 months,
although such development would be at a reduced pace than if the
Maximum Offering proceeds were received. If an amount less than
Maximum Offering is raised, the Company may be required to delay,
scale back or eliminate parts of its development plan or obtain funds
through additional financing, including loans or offerings of its securities.
The Company has obtained a loan from a certain shareholder (see
"BUSINESS--Shareholder Loan"), and has no other agreements or
understandings with respect to any future financing or loan agreements.
DILUTION
Purchasers of the Company Shares will experience immediate and
substantial dilution in the value of their Shares after purchase. Dilution
represents the difference between the initial public offering price per share
paid by the purchasers in the Offering and the net tangible book value per
share immediately after completion of the Offering. Net tangible book
value per share represents the net tangible assets of the Company (total
assets less total liabilities), divided by the number of shares of Common
Stock outstanding upon closing of the Offering.
As of December 31, 1997, the Company had a net tangible book
value (on an unaudited basis) of $41,193 or $.0114 per share.
If the Minimum Offering is sold, the net tangible book value of the
Company would be $2,905,993 or $0.7444 per share. If the Maximum
Offering is sold, the net tangible book value of the Company would be
$8,905,993 or $1.9774 per share. This represents a per share increase of
$0.7330 if the Minimum Offering is sold and $1.9660 if the Maximum
Offering is sold. This represents an immediate dilution to investors in the
Offering of $9.2556 per share if the Minimum Offering is sold and
$8.0226 per share if the Maximum Offering is sold. The following table
illustrates such effect:
<TABLE>
<CAPTION>
Minimum Maximum
Offering Offering
<S> <C> <C>
Initial public price per Unit $ 10.00 $ 10.00
Net tangible book value before Offering $41,193 $41,193
Increase per share attributable to
new investors $0.7330 $1.9660
Pro forma net tangible book value
per share after Offering $0.7440 $1.9774
Dilution per share to new investors $9.2556 $8.0226
</TABLE>
The following table sets forth, on a pro forma basis, the differences
between existing shareholders and new investors in the Offering with
respect to the number of shares of Common Stock purchased from the
Company, the total consideration paid to the Company and the average
price per share paid by existing shareholders and by new investors:
Minimum Offering:
Percent
Percent Of Total Average
of Consid- Consid-
Outstanding eration eration Price Per
Number Shares Paid Paid Share
Existing
Shareholders 3,604,000 92% $90,100 3% $0.025
New Investors 300,000 8% 3,000,000 97% $10.00
Total 3,904,000 100% 3,090,100 100%
Maximum Offering:
Percent
Percent Of Total Average
of Consid- Consid-
Outstanding eration eration Price Per
Number Shares Paid Paid Share
Existing
Shareholders 3,604,000 80% $90,100 1% $0.025
New Investors 900,000 20% 9,000,000 99% $10.00
Total 4,504,000 100% 9,090,100 100%
BUSINESS
GENERAL
The Company intends to engage in the development, acquisition
and possible sale of telecommunications and Internet services to offer a
broad range of local and regional, international, and enhanced
telecommunication and Internet services including but not limited to
cellular and fixed line telephone service to individuals, business and
residential customers. The Company will concentrate its services in the
Far East, including China, and in the United States. The Company may
locate an existing telecommunications or Internet systems which it may
acquire as part of the development of its operating network. The
Company intends to offer local and international calling services, as well
as customized telecommunications and Internet services to its clients.
Since inception, the principal activity of the Company has been
directed to organizational efforts. As of the date hereof, the Company has
hired a full-time President (see "MANAGEMENT") and has entered into
preliminary discussions for participation in several telecommunication
projects. The Company has not entered into any definitive agreements.
Start-up costs incurred by the Company have been provided by the initial
sale of certain securities of the Company and by loans from one of its
current shareholders. No other initial financing has been obtained. There
is no agreement or understanding pursuant to which the current
shareholders will continue to make such loans or purchase stock.
The Company anticipates that if the Minimum Offering is sold it
will need to raise funds within the next 24 months to develop and/or
construct or to participate in additional telecommunications projects and
Internet systems. Even if the Maximum Offering is sold, the Company
may determine to raise additional funds in order to develop a greater
number of telecommunication systems. Management may use various
methods to raise such funds including debt obligations such as loans from
banks or other sources or debt securities and/or investors' equity. If
financing is arranged, of which there can be no assurance, Management
anticipates that repayment of debt and debenture obligations will be made
from earnings from operations or sales of the telecommunications and
Internet systems and/or equity interest in the Company. The Company has
not established any ratio governing its equity to debt limits nor any limit
upon the debt which may be incurred.
On November 6, 1997, the Company entered into an employment
agreement with Marc F. Mayeres to serve as President of the Company.
SEE "MANAGEMENT--Employment Agreements". The Company has
entered into a loan agreement with a shareholder for payment of certain
expenses. SEE "BUSINESS--Shareholder Loan". There is no agreement
pursuant to which the current shareholders must make additional loans or
purchase additional stock.
CURRENT OPERATIONS
The Company has begun discussions regarding several
opportunities for participation in developing certain telecommunication
networks. These discussions are all in the preliminary stages and potential
investors should be alerted that there is no assurance that the Company
will finalize any of these discussions or that agreements will be reached or
conducted on any of the terms outlined below.
JOINT VENTURE WITH CHINA UNITED TELECOMMUNICATIONS CORPORATION
("China Unicom"). The Company is currently in discussion with China
United Telecommunications Corporation, Hebei Branch ("Hebei Unicom")
located in Shijiazhuang, Hebei Province, China and its affiliates for
possible participation in the construction and development of wire-line and
wireless telephone networks in Hebei Province in China. Hebei Unicom is
an authorized public telephone operator in China. Liancheng Ji, the
director of the Company, was Vice President of Hebei Unicom until
January, 1998 and is now Vice-President of China Unicom, Paging
Division. The Company and Hebei Unicom have executed a preliminary
letter of intent to participate in a cooperative joint venture for the
construction, development and servicing of a 200,000-subscriber wire-line
telephone network. This project would constitute the first phase of a
2,000,000-subscriber wire-line telephone project in the Hebei Province.
Pursuant to the letter of intent, the Company and Hebei Unicom agree to
finalize the terms, participation arrangement, and capital contributions of
each party as discussions progress. The letter of intent specifies that no
agreement has been reached and that any such agreement would be subject
to receipt of necessary company, governmental, regulatory and other
approvals. The letter of intent is preliminary only and there is no
assurance that any discussions will be continued or pursued. The letter of
intent does not provide any guarantees or penalties if either party does not
continue the discussions described therein.
The possible telecommunication construction and development in
the Hebei Province would be an expansion of the existing current wire-line
and wireless telephone network. The current wire-line telephone
penetration rate in Hebei Province is only 5.3 per 100 capita and the
penetration rate for wireless telephone is 0.52 per 100. These penetration
rates are below the international standards for developed and developing
countries and the Company believes that there is a great demand for
immediate increase in network capability and services.
The Company anticipates that any joint venture agreed to with
Hebei Unicom would continue for approximately 25 years, a customary
duration. The Company anticipates that it may be responsible for
constructing and developing the telephone expansion network and would
also assisting in obtaining equipment, goods and materials not available in
China; introducing and overseeing modern and efficient operating and
management techniques; recruiting qualified foreign personnel and
international consultants; and assisting in raising capital for the network
construction. However, no agreement has been reached or finalized and
there is no assurance that any agreement will be reached or that the if
reached will be finalized or approved.
INTERNET JOINT VENTURE. The Company is in preliminary discussions
with a Chinese telecommunications partner for the possible development of
a nationwide internet network in China. If the Company were to enter
into such a joint venture, the Company would form a joint venture
company in which the Company would anticipate holding at least a 49%
interest. The joint venture company would intend to provide internet
access service throughout China commencing its operations in the major
metropolitan areas providing its clients with access to the World Wide
Web, electronic mail transfer, individual web pages, research engines,
news and updates, on-line shopping and other services as are customarily
available by Internet Service Providers. The joint venture would continue
for a period of 30 years and anticipates being able to admit up to
5,000,000 customers to the network in approximately 7 years.
JOINT VENTURE WITH A CALIFORNIA TELECOMMUNICATIONS COMPANY.
The Company is in preliminary discussions with a California-based
telecommunications company for the possible cooperation in developing
new telecommunication technologies and using such new technologies, as
well as those previously developed by the California company, the
construction and development of telecommunications networks in China
and, possibly, elsewhere.
The current telephone system in China (as well as many other
countries in the Far East and Europe) are based on Synchronous Digital
Hierarchy ("SDH") technologies while the majority of telephone systems
in the United States, for instance, are based on Asynchronous Transfer
Mode ("ATM") technologies. Many European countries have started to
transfer to the ATM system. The Company would develop ATM access
network technologies to enhance the compatibility and efficiency of the
current SDH telephone networks and to use the new technologies in
constructing and developing telephone and internet networks to ensure
those networks would be compatible with international standards.
SHAREHOLDER LOAN
On October 2, 1997, Finhorn Enterprises Ltd, a shareholder of the
Company, loaned the Company $60,000 repayable in 12 months at an
annual interest rate of 5%. The loan is renewable upon the expiration of
the one-year term for another year at a 7% annual interest rate. The
Company anticipates that it will repay the loan from revenues generated
from operations or, if no revenues have been generated from operations at
such time that the loan is payable, then the Company will use what
proceeds from the Offering are available at such time to repay the loan.
On October 27, 1997, the Company borrowed an additional $100,000
from Finhorn Enterprises Ltd. on the same terms as the earlier loan.
Proceeds from both loans, aggregating $160,000, are for the payment of
expenses of this Offering, including legal fees, and initial working capital.
SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS".
BUSINESS PLAN
The Company plans to seek opportunities for the development and
construction of telecommunications and Internet networks either by itself
or in cooperation with other entities. The Company intends to establish
and develop, either through construction and development or through
acquisition of existing systems, one or more telecommunications and/or
Internet networks consisting of fixed and/or cellular line services to be
selected in specific target areas in the Far East, including China, and, if
the opportunity is available, in the United States.
The Company intends to establish a network communication system
for business and residential subscribers to provide intraconnection between
cellular and fixed line services and to provide subscribers with capability
to make domestic and international long distance calls. The Company
plans to establish and offer nationwide an Internet access system in China
and anticipates that its network systems will interconnect with the MPT
Systems which will allow the Company's subscribers to communicate with
fixed line and cellular users of other networks and to make and receive
domestic and international long distance calls.
The Company anticipates that it will commence operations by
entering into joint venture relationships with other established
telecommunication companies, either in the United States or elsewhere, for
the initial development and construction of telecommunication and Internet
networks or for the expansion and improvement of existing network. The
Company anticipates that it will participate in a series of such joint
ventures while, if funds are available therefor, initiating
telecommunications projects in which it is the sole participant. The
Company anticipates that as it participates in a growing number of such
projects, it will be able to develop, in China initially, compatible
telecommunications systems and Internet access to a wide variety of
geographic locations.
The Company anticipates that it will be able to work with the MPT
and its agents to establish an interconnection arrangement to allow the
Company to utilize the existing MPT network equipment and connections.
Fees charged for such usage will be passed to the customer as part of the
utilization tariff. The Company intends to utilize current computer
systems to provide network operation management, customer service and
marketing. The Company intends to construct its own transceiver station
sites or to lease such sites from the MPT or third-party owners or acquire
receiving stations already existing.
The Company intends to focus on controlling costs and providing
efficient operations through the use of advanced management information
systems and by retaining and attracting qualified personnel. The Company
intends to focus on marketing its telecommunications system in its selected
target areas. The Company intends to offer subscribers certain value
added services such as call forwarding, call waiting, conference calling,
facsimile transmission services, and modem access to the Internet and
World Wide Web. The Company will develop its value added services
package as it identifies its target market and the demographics therein.
The Company's principal business objective is to provide
telecommunications systems, including cellular, fixed line and Internet
services, to residential and businesses customers in countries in the Far
East, including China, and in the United States. The Company intends to
reach its objectives through the development of its telecommunication
network and/or by the acquisition of existing telecommunication networks,
or both.
TELECOMMUNICATIONS IN GENERAL
The global market for telecommunications services is undergoing
significant deregulation and reform. The Company believes that the
industry is being shaped by the (i) deregulation and privatization of
telecommunication markets worldwide; (ii) diversification of services
through technological innovation; and (ii) globalization of major carriers.
It is anticipated that the industry generally will experience considerable
growth in terms of traffic volume and revenue and development of new
markets. According to the International Telecommunication Union
("ITU"), a worldwide telecommunications organization under the auspices
of the United Nations, the international telecommunications industry
accounted for $52.8 billion in revenues and 60.3 billion minutes of use in
1995. The ITU projects that international telecommunications revenues
will approach $76 billion by the year 2000 with the volume of traffic
expanding to 107.0 billion minutes of use.
TELECOMMUNICATIONS INDUSTRY IN CHINA
According to the PRC Ministry of Posts and Telecommunications
(the "MPT"), with a population of 1,198,000,000 in 1994 China had
27,300,000 fixed line telephone subscribers (2.17% penetration) and
1,570,000 cellular subscribers (.13% penetration). By 1996 with a
population of 1,226,000,000 (2.28% growth) the telecommunications
usage doubled to 54,950,000 fixed line telephone subscribers (4.49%
penetration) and 6,950,000 cellular subscribers (.57% penetration). As the
Chinese economy shifts from a centrally planned economy to a more
market-oriented economy, the telecommunications industry has become
one of the fastest developing industries in China. Although the Chinese
telecommunications network has become one of the largest in the world in
terms of number of subscribers, the penetration rates remain relatively low
indicating significant potential for further rapid growth. The Company
believes that the market will be driven by the demand for
telecommunication services from the increase of world-competitive
businesses and industries and from individual personal use.
THE MINISTRY OF POSTS AND TELECOMMUNICATIONS AND
GOVERNMENT REGULATION
The PRC has developed its Ninth Five-Year Plan in which
development of the telecommunications industry in China will continue to
be a high priority for the government. The Five-Year Plan's goal is to
double, by the year 2000, China's telecommunications capacity and
business volume from that of 1995. The MPT System has primary
responsibility for implementing the plan in regard to the
telecommunications industry. The MPT System has historically regulated
all public telecommunications services in China. The MPT directly or
indirectly regulates entry into the telecommunications industry, scope of
permissible business, interconnection and transmission line arrangements,
technology and equipment standards, and other aspects of the Chinese
telecommunications industry. The Company believes that such emphasis
on growth of the telecommunications industry, coupled with Management's
familiarity with working with the MPT, will facilitate the obtaining of
support for development of the Company's operations from the MPT.
ACQUISITION OF EXISTING TELECOMMUNICATIONS SYSTEMS
AND PURCHASES OF EQUIPMENT
In addition to constructing or developing its own
telecommunications and Internet systems by itself or in joint venture with
others, the Company may acquire existing telecommunications systems. It
is possible that the consideration paid for the acquisition of existing
telecommunications systems, if any such acquisitions are made of which
there can be no assurance, and/or the purchase of telecommunications and
Internet equipment, if any such purchases are made of which there can be
no assurance, or the payment for services of technicians, professionals or
employees, if any such services are used of which there can be no
assurance, may consist in whole or in part of the Company's Common
Stock, although the Company may also use cash and/or debt. If the
Company were to issue substantial additional securities for acquisitions,
such issuance may dilute the value of Shares, and might have an adverse
effect on any trading market that may develop in the Company's securities
in the future. If the Company were to incur indebtedness that substantially
changed the capital structure of the Company, the Company's shareholders
would most likely be exposed to a greater risk of loss of their investment
in the Company.
Securities issued in any such transaction are likely to rely on
exemptions from registration under applicable federal and state securities
laws. In some circumstances, however, as a negotiated element of such a
transaction, the Company may agree to register the securities either at the
time the transaction is consummated or at specified times thereafter. The
issuance of substantial additional securities and their potential sale into any
trading market which may develop in the Common Stock may have a
depressive effect on such market.
COMPUTER SYSTEMS REDESIGNED FOR YEAR 2000
Many existing computer programs use only two digits to identify a
year in such program's date field. These programs were designed and
developed without consideration of the impact of the change in the century
for which four digits will be required to accurately report the date. If not
corrected, many computer applications could fail or create erroneous
results by or following the year 2000. Many of the computer programs
containing such date language problems have been corrected by the
companies or governments operating such programs. In acquiring any
existing telecommunication system or Internet network, the Company will
consider the existence of a date language problem and the costs to correct
such problem as one of the factors in determining whether such acquisition
would be appropriate. Management does not know what steps, if any,
have been taken by the governments in the countries in the Far East,
particularly China, to correct or address such date language problem or if
any such steps are required. The Company anticipates that it will be
leasing some telecommunication equipment, including switching stations,
landlines, etc., from the PRC and interconnecting with the
telecommunications systems now operated by the PRC and that any failure
of the PRC's computer systems or telecommunication delivery systems due
to such computer date language problem could have a severe impact on
any operations of the Company that have been developed.
BUSINESS ENVIRONMENT FOR OPERATIONS
The Company believes that the Far East, including Hong Kong and
China, has a vigorous economy. Foreign investment in the Far East has
grown considerably in the last 10 years. China has allowed the
establishment of foreign private enterprise and has encouraged
development of China as a manufacturing and business center. However,
China remains a Communist country with tight governmental controls.
There can be no assurance of the government's continued encouragement
or permission of private investment in China. Nor can there be any
assurance as to continued ownership of businesses by foreign entities in
China.
COMPETITION
There are a great number of participants in the telecommunications
and Internet services field. Some of the participants are large international
corporations that have substantial resources and technical expertise while
there are also many start-up companies. All these companies will compete
with the Company for acquisition of existing telecommunications systems
and for development of new markets. Although the market penetration of
telecommunications services in China is small, the Company anticipates
that many international and start-up firms will begin entering the Chinese
telecommunications market. The Company will be a small participant. In
view of the Company's limited financial resources and limited
Management experience, the Company may be at a competitive
disadvantage compared to the Company's competitors. Management
believes that the close familiarity of certain of its officers and directors
with business and economic conditions in China and other areas in the Far
East and elsewhere, and knowledge of the Chinese language, as well as
the familiarity of certain of its officers and directors with the United
States, the English language and, generally, the American and
international business communities, will be useful in meeting such
competition.
THE OFFERING
The Company is offering 900,000 Company Shares for sale at a
per Company Share price of $10. The Minimum Offering is 300,000
Company Shares and the Maximum Offering is 900,000 Company Shares.
The Company Shares are being offered for sale by the officers and
director of the Company. The offering price of the Company Shares was
determined arbitrarily by the Company and is not necessarily related to
asset or book value, net worth or any other established criteria of value.
There is no current public trading market for the Shares. SEE "PLAN OF
DISTRIBUTION".
The Selling Securityholders are offering 901,000 Selling
Securityholder Shares for sale on a continuous or delayed basis pursuant to
Rule 415 under the Securities Act. SEE "RISK FACTORS--Shares
Available for Sale Pursuant to Rule 415" and "RISK FACTORS--
Additional Shares Entering Public Market without Additional Capital
Pursuant to Rule 144. The amount of discounts or commissions, if any,
which may be paid by the Selling Securityholders on the sale of their
securities registered herein is not now known.
The Company is applying for admission to the NASD OTC Bulletin
Board for the Shares; however, there can be no assurance that the Shares
will be so listed. SEE "RISK FACTORS--No Current Trading Market for
the Company's Securities" and "DESCRIPTION OF SECURITIES--
Admission to Quotation on the Nasdaq SmallCap Market or NASD OTC
Bulletin Board".
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PLAN OF OPERATIONS
The Company is a development stage company, the objective of
which is to develop telecommunication systems and Internet networks in
the Far East, including China, and in the United States. To date, the
Company's efforts have been limited to organizational activities, including
developing a business plan, identifying and commencing discussions with
potential joint venture participants for telecommunication projects and
identifying and negotiating with qualified management necessary for the
successful implementation of the Company's business plan.
LIQUIDITY
The Company has generated no revenues to date and does not
anticipate to being able to generate revenues in the near future until that
time, if ever, that it has begun offering telecommunication and Internet
services. The Company believes that the acquisition of existing systems
will provide the Company with the quickest method to begin operations
and, possibly, receipt of revenues.
The Company has incurred a loss since inception, resulting in an
unaudited net loss as of December 31, 1997, of $48,907. The Company
anticipates that it will continue to incur losses for the foreseeable future
until such time, if ever, that the Company is able to generate sufficient
revenues to finance its operations.
On October 2, 1997, Finhorn Enterprises Ltd, a shareholder of the
Company, loaned the Company $60,000 repayable in 12 months at an
annual interest rate of 5%. The loan is renewable upon the expiration of
the 12-month term for another 12 months at a 7% annual interest rate.
The Company anticipates that it will repay the loan from revenues
generated from operations or, if no revenues have been generated from
operations at such time that the loan is payable, then the Company will use
what proceeds from the Offering are available at such time to repay the
loan. On October 27, 1997, the Company borrowed an additional
$100,000 from Finhorn Enterprises Ltd. on the same terms as the earlier
loan. Proceeds from both loans, aggregating $160,000, are for the
payment of expenses of this Offering, including legal fees, and initial
working capital. There are no agreements or understandings for additional
loans to be provided by Finhorn Enterprises Ltd., or any other shareholder
or entity, to the Company.
CAPITAL RESOURCES
Substantially all of the Company's expenditures subsequent to this
offering will be attributable to the development or acquiring
telecommunication networks. The Company may use the Company Shares
registered herein to purchase existing telecommunications systems and
equipment and other materials. The Company may also incur debt in the
development of such telecommunication systems. The Company has made
no commitments to date for any specific expenditure.
MANAGEMENT
OFFICERS AND DIRECTORS
The officers and directors of the Company are as follows:
Name Title
Marc F. Mayeres President
Ming Zhang Secretary
Liancheng Ji Director
All directors of the Company hold office until the next annual
meeting of shareholders or until their successors are elected and qualified.
The By-laws permit the Board of Directors to fill any vacancy and such
director may serve until the next annual meeting of shareholders or until a
successor is elected and qualified. The Director does not receive any
remuneration for his services as a director. The Director may be
reimbursed by the Company for expenses incurred in attending meetings of
the Board of Directors.
The principal occupation and business experience for each officer
and director of the Company for at least the last five years are as follows:
Marc F. Mayeres, 56, has served as President of the Company
since November, 1997. Since November 1, 1997, Mr. Mayeres has been
the unpaid president of IDN Telecom, Inc., a privately-held California
telecommunications research company. Mr. Mayeres serves primarily as a
consultant to IDN Telecom usually at non-business hours and anticipates
no reduction in the time spent on business of the Company. From 1996 to
1997, Mr. Mayeres was Vice President of Finance & Administration and
Chief Financial Officer of Thomsen Machinery, Inc., Gardena, California.
Thomsen Machinery, Inc. is a subsidiary of Putzmeister Werk AG
Germany, an international supplier of industrial and commercial cement
and concrete pumping equipment. From 1994-1995, Mr. Mayeres served
as a business consultant, including developing accounting systems and
preparing feasibility studies regarding certain proposed corporate activities.
From 1992-1994, Mr. Mayeres was Vice President and Treasurer-
Worldwide of SPI Pharmaceuticals, Inc., Costa Mesa, California. SPI
Pharmaceuticals has over 3200 employees worldwide with 7 subsidiaries.
Mr. Mayeres handled worldwide treasury functions including the global
cash management, foreign exchange management, banking contracts and
negotiations, fund sourcing, international refinancings, and repatriation of
a $7.5 million dividend from Yugoslavia. From 1989 to 1991, Mr.
Mayeres was Director of International Finance for Whirlpool Corporation,
Benton Harbor, Michigan. The Whirlpool Corporation has approximately
16,000 employees with 31 subsidiaries. From 1967 to 1989, Mr. Mayeres
was employed by The Quaker Oats Company, Chicago, Illinois in several
positions, culminating from 1983 to 1989 as Director of International
Finance. The Quaker Oats Company has approximately 9,000 employees
with 28 subsidiaries. Mr. Mayeres received his Chartered Accountant
degree from the Belgian College of Chartered Accountants in Antwerp,
Belgium in 1967 and the equivalent of a Bachelors of Science Degree in
Chemistry from the Catholic University of Louvain, Louvain, Belgium, in
1962.
Ming Zhang, 26, serves as Secretary of the Company. Ms. Zhang,
a resident of Los Angeles, was born in Hunan, China and is fluent in
Chinese and English. Ms. Zhang is a Certified Public Accountant
candidate and received her Bachelor of Science in Accounting from the
University of Kentucky in December, 1994. From 1995-1997 was
employed by America Catch, Inc., Los Angeles, California, a wholly-
owned subsidiary of Beijing Catch Telecommunication Group, as the
Assistant to the President. America Catch's primary business is to seek
investment opportunities in the United States and to expand its Beijing
business and operations in the United States.
Liancheng Ji, 58, serves as a Director of the Company. Mr. Ji is a
citizen of China and resides in Beijing, China. Since January, 1998, Mr.
Ji has been Vice President of China Unicom, Paging Division. China
Unicom is the second largest telecommunications provider in China.
From 1995 to 1998, Mr. Ji was the Senior Engineer and Vice President of
Hebei United Telecommunications, Inc. ("Hebei Unicom"), Hebei
Province, China which specializes in telecommunication projects in Beijing
and Hebei Province. Hebei Unicom is the Hebei branch of China
Unicom. The Company has entered into a letter of intent with Hebei
Unicom regarding preliminary discussions for entering into a joint venture
for the development of a wire-line telephone network. SEE "BUSINESS-
- -Current Operations". From 1994-1995 Mr. Ji was the president of
Beijing United Telecommunications, Inc., the Beijing branch of China
Unicom, specializing in telecommunication projects in Beijing. From
1990-1994, Mr. Ji was the Vice President of Beijing Catch
Telecommunication Group which is the third largest telecommunication
service provider in China. From 1967 to 1989, Mr. Ji was the Senior
Engineer and Senior Operating Officer of China Institute of Electronic
System Engineering. Mr. Ji received his Bachelor of Science degree in
Telecommunication Engineering from China Northwestern Electronic
Engineering University.
EXECUTIVE COMPENSATION
Officers and directors receive compensation as determined by the
Company from time to time by vote of the Board of Directors. Such
compensation might be in the form of stock options. The Secretary of the
Company receives a salary of $3,500 per month but has agreed to defer
payment of such if requested by the Company in order to minimize cash
requirements. The President of the Company received a signing bonus of
$7,000 which was paid $5,000 in November, 1997 and $2,000 in January,
1998, in exchange for 90 days of consulting services. Beginning
February, 1998, the President will receive $7,000 per month but he has
agreed to defer $3,500 per month until closing of the Offering. The
following table sets forth the total compensation paid or accrued by the
Company on behalf of the President of the Company during 1997. The
Company commenced paying salaries in September, 1997. The Company
provides health insurance for its employees and officers. No officer of the
Company receives a salary and/or bonus in excess of $100,000. SEE
"MANAGEMENT--Employment Agreements".
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
OTHER LONG-TERM ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS COMPENSATION COMPENSATION
Marc F. Mayeres(1) 1997 (1) -- -- -- --
President
(1) Mr. Mayeres employment began on November 6, 1997 and he
received a $7,000 signing bonus in exchange for 90 days of
consulting services, paid $5,000 in 1997 and $2,000 in 1998.
Commencing February, 1998, Mr. Mayeres receives $7,000 per
month of which he has agreed to defer $3,500 per month until
closing of the Offering.
EMPLOYMENT AGREEMENTS
On November 6, 1997, the Company entered into an employment
agreement with Mr. Marc F. Mayeres to serve as President of the
Company. The terms of the agreement require the full-time services of
Mr. Mayeres to the activities of the Company and provide for
compensation at the rate of $7,000 per month, one-half of which is
deferred until the closing of the Offering. The agreement provides for
medical insurance and payment of expenses incurred on behalf of the
Company. The agreement expires at the end of six months with the option
that upon the agreement of both parties, a new agreement will be executed
providing a salary of $100,000 annually.
PAYMENT OF FEES TO DIRECTORS, ADVISORS AND AFFILIATES
Under certain circumstances, the Company may pay fees to
individuals or entities who are directors, advisors or affiliates of the
Company. In the event that an unsalaried affiliate arranged financing, or
identified a subsequently acquired telecommunications system or available
equipment or otherwise in an arms length transaction that ordinarily would
generate a "finders" fee, such a fee, calculated in a reasonable and
customary manner, might be paid. In general, an "affiliate", as defined
under federal securities law, is any person directly or indirectly
controlling, controlled by, or under common control with, such other
person, including any officer, director, partner or employee of such other
person. No such payments have been made or incurred to date by the
Company to its director.
TIME DEVOTED TO COMPANY OPERATIONS
The officers of the Company devote full working time to the affairs
of the Company. Mr. Ji, the director of the Company, anticipates
devoting substantial time to the affairs of the Company.
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES
AND AGENTS
The Certificate of Incorporation and By-laws of the Company
provide that the Company shall, to the fullest extent permitted by
applicable law, as amended from time to time, indemnify all directors of
the Company, as well as any officers or employees of the Company to
whom the Company has agreed to grant indemnification.
Section 145 of the Delaware General Corporation Law ("DGCL")
empowers a corporation to indemnify its directors and officers and to
purchase insurance with respect to liability arising out of their capacity or
status as directors and officers provided that this provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) arising under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from
which the director derived an improper personal benefit.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any
other rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of shareholders or otherwise.
The effect of the foregoing is to require the Company to indemnify
the officers and directors of the Company for any claim arising against
such persons in their official capacities if such person acted in good faith
and in a manner that he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was
unlawful.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, MAY BE
PERMITTED TO DIRECTORS, OFFICERS OR PERSONS
CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING
PROVISIONS, IT IS THE OPINION OF THE SECURITIES AND
EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS
THEREFORE UNENFORCEABLE.
REVERSE STOCK SPLIT
On February 23, 1998, the Board of Directors approved and the
shareholders consented to a one-for-twenty-five reverse stock split of the
Company's issued and outstanding shares of Common Stock. All shares
numbers herein reflect such reverse stock split unless otherwise noted.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Effective
Date of this Prospectus regarding the beneficial ownership of the
Company's Common Stock by each officer and director of the Company
and by each person who owns in excess of five percent of the Company's
Common Stock.
Shares of Percentage
Name, Position and Address Common Stock of Shares
Beneficially of Class
Owned Owned
Finhorn Enterprises Limited (1) 2,464,000 68.37%
c/o East Asia Corporate Services Limited
Columbus Centre Building
Wickhams Cay
PO Box 901
Road Town, Tortola, B.V.I.
Serenadia Investment Limited (1) 800,000 22.20%
c/o AMS Financial Services Limited
P.O. Box 116, Road Town, Tortola
British Virgin Islands
Marc F. Mayeres -0- 0%
30902 Clubhouse Drive, #44F
Laguna Niguel, California 92677
Ming Zhang -0- 0%
3701 Glendon Avenue
Los Angeles, California 90034
Liancheng Ji -0- 0%
Building #2
Shizipuo Dongli
Dongcheng District
Beijing, China
All Officers, Directors -0- 0%
and Shareholders as a Group
(3 Persons)
_________________
(1) A British Virgin Islands corporation.
SALES BY SELLING SECURITYHOLDERS
The registration statement of which this Prospectus is a part also
relates to the offer and sale of up to 901,000 Selling Securityholders'
Shares being offered and sold by the Selling Securityholders. All of such
securities will become tradeable on the Effective Date of this Prospectus.
Sales of the securities being offered by Selling Securityholders, or
even the potential of such sales, would likely have an adverse effect on the
market price of the Company Shares being offered for sale by the
Company. The freely tradeable Shares of the Common Stock (the "public
float") upon effectiveness of the Registration Statement of which this
Prospectus is a part and upon consummation of the transactions
contemplated herein will be 1,201,000 shares of Common Stock if the
Minimum Offering is reached (1,801,000 shares if the Maximum Offering
is reached), of which 901,000 are to be sold by the Selling
Securityholders.
SELLING SECURITYHOLDERS
The following table sets forth the beneficial ownership of the
securities of the Company held by each person who is a Selling
Securityholder and by all Selling Securityholders as a group.
Percent of Common
Common Stock Owned Stock Owned
Name and Address of Prior to After Prior to After Offering, if
Minimum Maximum
Offering Offering
Finhorn Enterprises
Limited(3) 2,464,000 1,848,000 68.37% 47.33% 41.03%
c/o East Asia Corporate
Services Limited
Columbus Centre Building
Wickhams Cay
PO Box 901
Road Town, Tortola, B.V.I.
Serenadia Investment
Limited(4) 800,000 600,000 22.20% 15.36% 13.32%
c/o AMS Financial Services
Limited
P.O. Box 116, Road Town,
Tortola
British Virgin Islands
Gain Best International
Limited(5) 180,000 135,000 4.99% 3.47% 2.99%
1 Dakengyan, Haidian District
Beijing, China
Global Bridge Profits
Limited(6) 160,000 120,000 4.44% 3.07% 2.66%
c/o Trident Trust Company Limited
P.O. Box 146, Road Town
Tortola, B.V.I
__________
(1) Based upon 3,604,000 shares of Common Stock outstanding prior
to offering.
(2) Assumes sales if Minimum Offering resulting in a total of
3,904,000 shares outstanding and if Maximum Offering resulting in
a total of 4,504,000 shares outstanding.
(3) The named Selling Securityholder is a British Virgin Island
company engaged in investing in telecommunication networks and
telecommunication-related companies and is offering 616,000
Shares for sale herein. Mr. Ma, Guang-Ming is its beneficial
owner and sole director.
(4) The named Selling Securityholder is a British Virgin Island
company engaged in researching and developing telecommunication
equipment and investing in telecommunication networks and is
offering 200,000 Shares of sale herein. Mr. Song, Yong-An is its
beneficial owner and sole director.
(5) The named Selling Securityholder is a British Virgin Island
company engaged in investing in researching and developing
electronic equipment and financial investment and is offering
45,000 Shares for sale herein. Mr. Chen, Yan is its beneficial
owner and sole director.
(6) The named Selling Securityholder is a British Virgin Island
company engaged in developing paging technologies and
manufacturing pagers and investing in telecommunications networks
and is offering 40,000 Shares for sale herein. Mr. He, Yi is its
beneficial owner and sole director.
None of the Selling Securityholders nor their beneficial owners
have any relationship with each other or with officers or the director of
the Company.
The Shares owned by the Selling Securityholders are being
registered pursuant to Rule 415 of the General Rules and Regulations of
the Securities and Exchange Commission, which Rule pertains to delayed
and continuous offerings and sales of securities. In regard to the Selling
Securityholders' Shares offered under Rule 415, the Company has given
certain undertakings in Part II of the Registration Statement of which this
Prospectus is a part which, in general, commit the Company to keep this
Prospectus current during any period in which offers or sales are made
pursuant to Rule 415. The Company is bearing all expenses in connection
with the registration of the Selling Securityholders' Shares offered by this
Prospectus.
DESCRIPTION OF SECURITIES
AUTHORIZED CAPITAL
The total number of authorized shares of stock of the Company is
one hundred million (100,000,000) shares of Common Stock having a par
value of $.0001 per share and twenty million (20,000,000) shares of non-
designated preferred shares, $.0001 par value.
INCORPORATION
The Company was incorporated in the state of Delaware on June 1,
1994 under the name TPG Management Corporation. The Company's
Certificate of Incorporation, By-laws and corporate governance, including
matters involving the issuance, redemption and conversion of securities,
are subject to the provisions of the Delaware General Corporation Law, as
amended and interpreted from time to time.
COMMON STOCK
The Company's Certificate of Incorporation authorizes the issuance
of 100,000,000 shares of Common Stock, $.0001 value per share, of
which 3,604,000 shares were outstanding prior to the commencement of
this Offering.
Holders of shares of Common Stock are entitled to one vote for
each share on all matters to be voted on by the stockholders. Holders of
Common Stock do not have cumulative voting rights. Holders of
Common Stock are entitled to share ratably in dividends, if any, as may
be declared from time to time by the Board of Directors in its discretion
from funds legally available therefor. In the event of a liquidation,
dissolution or winding up of the Company, the holders of Common Stock
are entitled to share pro rata all assets remaining after payment in full of
all liabilities. All of the outstanding shares of Common Stock are, and the
shares of Common Stock offered by the Company pursuant to this offering
will be, when issued and delivered, fully paid and non-assessable.
Holders of Common Stock have no preemptive rights to purchase
the Company's Common Stock. There are no conversion or redemption
rights or sinking fund provisions with respect to the Common Stock.
All outstanding shares of Common Stock are validly issued, fully
paid and nonassessable, and all Shares to be sold and issued as
contemplated hereby will be fully paid and nonassessable when sold in
accordance with the terms hereof and pursuant to a valid and current
prospectus. The Board of Directors is authorized to issue additional
shares, on such terms and conditions and for such consideration as the
Board may deem appropriate without further stockholder action.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance
of 20,000,000 shares of Preferred Stock, $.0001 par value per share, of
which no shares were issued prior to this Offering. The Board of
Directors is authorized to provide for the issuance of shares of Preferred
Stock in series and, by filing a certificate pursuant to the applicable law of
the State of Delaware, to establish from time to time the number of shares
to be included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof without any further vote
or action by the shareholders. Any shares of Preferred Stock so issued
would have priority over the Common Stock with respect to dividend or
liquidation rights. Any future issuance of Preferred Stock may have the
effect of delaying, deferring or preventing a change in control of the
Company without further action by the shareholders and may adversely
affect the voting and other rights of the holders of Common Stock. At
present, the Company has no plans to issue any Preferred Stock nor adopt
any series, preferences or other classification of Preferred Stock.
ADDITIONAL INFORMATION DESCRIBING STOCK
The above descriptions concerning the Common and Preferred
Stock of the Company do not purport to be complete. Reference is made
to the Company's Certificate of Incorporation and By-Laws which are
included in the registration statement of which this Prospectus is a part and
which are available for inspection at the Company's offices. Reference is
also made to the applicable statutes of the State of Delaware for a more
complete description concerning rights and liabilities of shareholders.
ADMISSION TO QUOTATION TO NASDAQ SMALLCAP MARKET
OR NASD OTC BULLETIN BOARD
To qualify for admission to quotation on the Nasdaq SmallCap
Market, an equity security must, in relevant summary, (1) be registered
under the Securities Exchange Act of 1934; (2) have at least three
registered and active market makers, one of which may be a market maker
entering a stabilizing bid; (3) for initial inclusion, be issued by a company
with $4,000,000 in net tangible assets, or $50,000,0000 in market
capitalization, or $750,000 in net income in two of the last three years (if
operating history is less than one year then market capitalization must be
at least $50,000,000); (4) have at a public float of at least 1,000,000
shares with a value of at least $5,000,000; (5) have minimum a bid price
of $4.00 per share; and (6) have at least 300 beneficial shareholders.
If a company's securities do not qualify for admission to quotation
on the Nasdaq SmallCap Market they will trade over-the-counter until such
future time, if any, at which the securities qualify for admission to
quotation on the Nasdaq Stock Market and the Company then applies.
The Company will apply for listing of the Shares on the NASD
OTC Bulletin Board if it does not meet the requirements for admission to
quotation on the Nasdaq SmallCap Market. The over-the-counter market
differs from national and regional stock exchanges in that it (1) is not cited
in a single location but operates through communication of bids, offers and
confirmations between broker-dealers and (2) securities admitted to
quotation are offered by one or more broker-dealers rather than the
"specialist" common to stock exchanges. To qualify for listing on the
NASD OTC Bulletin Board, an equity security must have one registered
broker-dealer, known as the market maker, willing to list bid or sale
quotations and to sponsor such a Company listing.
TRADING OF SHARES
There are no outstanding options, warrants to purchase, or
securities convertible into, the shares of the Company. The Company has
not agreed with any shareholders, to register their shares for sale, other
than for this registration. The Company does not have any other public
offerings in process or proposed.
TRANSFER AGENT AND REGISTRAR
The transfer agent for the Company's securities will be selected by
the Company.
REPORTS TO SHAREHOLDERS
The Company will furnish to holders of the Shares annual reports
containing audited financial statements examined and reported upon, and
with an opinion expressed by, an independent certified public accountant.
The Company may issue other unaudited interim reports to its
shareholders as it deems appropriate.
PLAN OF DISTRIBUTION
THE OFFERING
The Company is offering 900,000 Company Shares at an offering
price of $10 per Company Share. The Company may, without liability,
accept or reject subscriptions, in whole or in part. The Company is
offering a minimum of 300,000 Company Shares ($3,000,000) and a
maximum of 900,000 Company Shares ($9,000,000). Once funds from
the sale of 900,000 Company Shares have been received, the Company
will not accept any further purchasers and any funds tendered therefor will
be returned. There can be no assurance that the Maximum Offering will
be sold or that the Minimum Offering will be sold.
MINIMUM OFFERING AND ESCROW ACCOUNT
All funds received by the Company with respect to the sale of the
first 300,000 Company Shares will be deposited in a special escrow
account to be established by the Company at Wells Fargo Bank, N.A. If
300,000 Company Shares are not sold within one hundred eighty days
(180) following the effective date of the registration statement of which
this Prospectus is a part, the Offering will automatically terminate and all
funds received from the sale of the Company Shares will be returned to
the purchasers thereof with interest, at the same rate as paid by the escrow
bank. At the time that the 300,000 Company Shares have been sold (the
Minimum Offering) prior to the 180-day period, the Company will release
the funds from the escrow account for deposit into the working account of
the Company. Although the Company will continue to sell the Offering to
attempt to reach the Maximum Offering (900,000 Shares), such released
funds will be used at that time by the Company as described herein. SEE
"USE OF PROCEEDS".
ARBITRARY DETERMINATION OF OFFERING PRICE
The offering price of the Company Shares has been determined
arbitrarily by the Company. Among the factors considered were the
Company's potential operations, current financial conditions and financial
requirements of the Company, estimates of the business potential and
prospects of the Company, the market demand for telecommunication and
Internet services particularly in the Far East and China, the economics of
the industry in general, the general condition of the equities market, and
other factors.
LIMITED STATE REGISTRATION
The Company anticipates that it will primarily sell the Company
Shares outside the United States. The Company will qualify or register
the sales of the Company Shares only in the states of New York,
California, Washington, Florida, Illinois, and Nevada. The Company will
not accept subscriptions from investors resident in other states. SEE
"RISK FACTORS--Limited State Offering"
SALE OF THE COMPANY SHARES
The Company anticipates that the majority of its Company Shares
will be sold outside the United States. The Company Shares are being
offered through the Company's officers and director and no sales
commission will be paid to any officer or director of the Company but the
Company will reimburse its officers and director for expenses incurred in
connection with the offer and sale of the Company Shares. The officers
and director of the Company are relying on Rule 3a4-1 of the Exchange
Act as a "safe harbor" from the registration as a broker-dealer in
connection with the offer and sales of the Company Shares. In order to
rely on such "safe harbor" provisions provided by Rule 3a4-1, an officer
or director must (1) not be subject to a statutory disqualification; (2) not
be compensated in connection with such selling participation by payment
of commissions or other remuneration based either directly or indirectly on
such transactions; and (3) not be an associated person with a broker or
dealer; and (4) (i) restrict participation to transactions involving offers and
sale of the securities, and (ii) perform substantial duties for the issuer after
the close of the offering not connected with transactions in securities, and
has not been associated with a broker or dealer for the preceding 12
months, and does not participate in selling an offering of securities for any
issuer more than once every 12 months, and (iii) restrict participation to
written communications or responses to inquiries of potential purchasers.
The officers and directors of the Company intend to comply with the
guidelines enumerated in Rule 3a4-1.
COMPANY USE OF A BROKER-DEALER
The Company may locate a broker-dealer who may offer and sell
the Company Shares on terms acceptable to the Company. If the
Company determines to use a broker-dealer, such broker-dealer must be a
member in good standing of the National Association of Securities
Dealers, Inc. and registered, if required, to conduct sales in those states in
which it would sell the Company Shares. The Company anticipates that it
would not pay in excess of 10% as a sales commission for any sales of the
Company Shares. If a broker-dealer were to sell the Company Shares, it
is likely that such broker-dealer would be deemed to be an underwriter of
the securities as defined in Section 2(11) of the Securities Act and the
Company would be required to obtain a no-objection position from the
National Association of Securities Dealers, Inc. regarding the underwriting
and compensation terms entered into between the Company and such
potential broker-dealer. In addition, the Company would be required to
file a post-effective amendment to the registration statement of which this
Prospectus is a part to disclose the name of such selling broker-dealer and
the agreed underwriting and compensation terms.
SALE OF THE SELLING SECURITYHOLDER SHARES
The Company will receive the proceeds from the sale of the
Company Shares. The Company will not receive any proceeds from the
sale of the Selling Securityholders' Shares by the Selling Securityholders
pursuant to this Prospectus. The Selling Securityholders' Shares may be
sold to purchasers from time to time directly by and subject to the
discretion of the Selling Securityholders. In the event that the Selling
Securityholders offer their securities for sale, the Selling Securityholders
may from time to time offer for sale their Selling Securityholder Shares
through underwriters, dealers or agents, who may receive compensation in
the form of underwriting discounts, concessions or commissions from the
Selling Securityholders and/or the purchasers of the Shares for whom they
may act as agents. Any underwriters, dealers or agents who participate in
the distribution of the Selling Securityholders' Shares may be deemed to
be "underwriters" under the Securities Act and any discounts, commissions
or concessions received by any such underwriters, dealers or agents may
be deemed to be underwriting discounts and commissions under the
Securities Act.
At the time a particular offer is made by or on the behalf of the
Selling Securityholders, a Prospectus, including any necessary supplement
thereto, will be distributed which will set forth the number of Shares being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, the purchase price paid by any
underwriter for Shares purchased from the Selling Securityholders, any
discounts, commissions and other items constituting compensation from the
Selling Securityholders, any discounts, commissions or concessions
allowed, reallowed or paid to dealers, and the proposed selling price to the
public.
Selling Securityholders' Shares may be sold from time to time in
one or more transactions: (i) at an offering price that is fixed or that may
vary from transaction to transaction depending upon the time of sale or (ii)
at prices otherwise negotiated at the time of sale. Such prices will be
determined by the Selling Securityholders or by agreement between the
Selling Securityholders and any underwriters.
Under applicable rules and regulations promulgated under the
Exchange Act, any person engaged in a distribution of securities may not
simultaneously bid for or purchase securities of the same class for a period
of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, the Selling Securityholders
will be subject to applicable provisions of the Exchange Act and the rules
and regulations thereunder, in connection with transactions in Shares
during the effectiveness of the registration statement of which this
Prospectus is a part.
The Company will pay all of the expenses incident to the
registration of the Shares (including registration pursuant to the securities
laws of certain states) other than commissions, expenses, reimbursements
and discounts of underwriters, dealers or agents, if any.
LEGAL MATTERS
LEGAL PROCEEDINGS
The Company is not a party to any litigation and Management has
no knowledge of any threatened or pending litigation against the Company.
LEGAL OPINION
Cassidy & Associates, Washington, D.C. has given its opinion as
attorneys-at-law that the Shares, when sold pursuant to the terms hereof,
will be fully paid and non-assessable.
EXPERTS
The financial statements in this Prospectus have been included in
reliance upon the report of Weinberg & Company, P.A., Certified Public
Accountants, and upon the authority of such firm as expert in accounting
and auditing. The Company's fiscal year end is September 30.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-1
(the "Registration Statement") under the Securities Act with respect to the
securities offered hereby. This Prospectus does not contain all the
information contained in the Registration Statement. For further
information regarding the Company and the securities offered hereby,
reference is made to the Registration Statement, including all exhibits and
schedules thereto, which may be inspected without charge at the public
reference facilities of the Commission's Washington, D.C. office, 450
Fifth Street, N.W., Washington, D.C. 20549. Each statement contained
in this Prospectus with respect to a document filed as an exhibit to the
Registration Statement is qualified by reference to the exhibit for its
complete terms and conditions.
The Company will be subject to the informational requirements of
the Exchange Act and in accordance therewith will file reports and other
information with the Commission. Reports, proxy statements and other
information filed by the Company can be inspected and copied on the
Commission's home page on the World Wide Web at http://www.sec.gov
or at the public reference facilities of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, as well as the following
Regional Offices: 7 World Trade Center, Suite 1300, New York, N.Y.
10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois. 60661-2511. Such material can also be inspected at the
New York, Boston, Midwest, Pacific and Philadelphia Stock Exchanges.
Copies can be obtained from the Commission by mail at prescribed rates.
Request should be directed to the Commission's Public Reference Section,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company intends to furnish its stockholders with annual
reports containing audited financial statements and such other reports as
may be required by law. <PAGE>
INDEX TO FINANCIAL STATEMENTS
ASPAC COMMUNICATIONS, INC.
(A Development Stage Company)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 - ACCOUNTANTS' REVIEW REPORT
PAGE 2 - CONSOLIDATED BALANCE SHEET AS OF
DECEMBER 31, 1997
PAGE 3 - CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY FOR THE PERIOD FROM
SEPTEMBER 26, 1997 (INCEPTION) TO DECEMBER
31, 1997
PAGE 4 - CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS FROM OCTOBER 1, 1997 TO
DECEMBER 31, 1997 AND FROM SEPTEMBER 26,
1997 (INCEPTION) TO
DECEMBER 31, 1997
PAGE 5 - CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIODS FROM OCTOBER 1, 1997 TO
DECEMBER 31, 1997 AND FROM SEPTEMBER 26,
1997 (INCEPTION) TO DECEMBER 31, 1997
PAGE 6 - 10 - NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS AS OF DECEMBER 31, 1997
<PAGE>
ACCOUNTANTS' REVIEW REPORT
To the Board of Directors of:
Aspac Communications, Inc.
We have reviewed the accompanying consolidated balance sheet of Aspac
Communications, Inc. and Subsidiary (A Development Stage Company) as
of December 31, 1997 and the related consolidated statements of operations,
changes in stockholder's equity and cash flows for the periods from October
1, 1997 to December 31, 1997 and September 26, 1997 (Inception) to
December 31, 1997, in accordance with Statements on Standards for
Accounting and Review Service issued by the American Institute of Certified
Public Accountants. All information included in these financial statements
is the representation of the management of Aspac Communications, Inc. and
Subsidiary.
A review consists principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express any such an
opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them
to be in conformity with generally accepted accounting principles.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
February 24, 1998
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
CURRENT ASSETS
Cash $ 91,107
Capital stock subscription 30,000
Prepaid expenses 2,110
TOTAL CURRENT ASSETS 123,217
PROPERTY AND EQUIPMENT
Furniture and equipment 11,603
Less: accumulated depreciation 603
TOTAL PROPERTY AND EQUIPMENT 11,000
OTHER ASSETS
Organization costs 2,700
Deferred offering costs 123,650
Other assets 2,540
TOTAL OTHER ASSETS 128,890
TOTAL ASSETS $263,107
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses $ 1,914
Capital stock subscription payable 60,000
Notes payable 160,000
TOTAL CURRENT LIABILITIES 221,914
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value
20,000,000 shares authorized
Common stock, $0.0001 par value,
100,000,000 shares authorized,
3,604,000 shares issued and outstanding 361
Additional paid-in capital 89,739
Accumulated deficit during
development stage (48,907)
TOTAL STOCKHOLDERS' EQUITY 41,193
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $263,107
See accompanying notes to financial statements.
2
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM SEPTEMBER 26, 1997
(INCEPTION) TO DECEMBER 31, 1997
ACCUMULATED
DEFICIT
ADDITIONAL DURING
COMMON PAID-IN DEVELOPMENT
STOCK CAPITAL STAGE TOTAL
Common stock issuance $ 1 $ 199 $ - $ 200
Net loss from September
26, 1997 (Inception)
to September 30, 1997 - - (11,697) (11,697)
Balance at
September 30, 1997 1 199 (11,697) (11,497)
Common stock issuance 360 89,540 - 89,900
Net loss from
October 1, 1997 to
December 31, 1997 - - (37,210) (37,210)
BALANCE AT
DECEMBER 31, 1997 $ 361 $ 89,739 $ (48,907) $ 41,193
See accompanying notes to financial statements.
3
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS FROM OCTOBER 1, 1997 TO DECEMBER 31, 1997 AND
SEPTEMBER 26, 1997 (INCEPTION) TO DECEMBER 31, 1997
Oct. 1, 1997 Sept. 26, 1997
to (Inception) to
Dec. 31, 1997 Dec. 31, 1997
NET SALES $ - $ -
OPERATING EXPENSE
Salaries 21,800 26,860
Rent 4,800 6,550
Office supplies and expenses 2,099 4,163
Payroll taxes 1,670 2,275
Telephone expenses 1,069 2,269
Parking fees 1,100 1,100
Insurance 1,032 1,032
Other taxes 939 1,839
Legal and professional fees 640 640
Depreciation 485 603
Bank charges 195 195
Other expenses 160 160
Total operating expenses 35,989 47,686
OTHER INCOME (EXPENSE)
Interest income 432 432
Interest expense (1,653) (1,653)
Total other income (expense) (1,221) (1,221)
NET LOSS DURING DEVELOPMENT STAGE $ (37,210) $(48,907)
NET LOSS PER COMMON SHARE (0.014) (0.019)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,610,696 2,476,536
See accompanying notes to financial statements.
4
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS FROM OCTOBER 1, 1997 TO DECEMBER 31, 1997 AND
SEPTEMBER 26, 1997 (INCEPTION) TO DECEMBER 31, 1997
Oct. 1, 1997 Sept. 26, 1997
to (Inception) to
Dec. 31, 1997 Dec. 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (37,210) $ (48,907)
Adjustments to reconcile net loss
to net cash used in
operating activities:
Depreciation 485 603
Changes in assets and liabilities
(Increase) decrease in:
Prepaid expenses (2,110) (2,110)
Other assets (140) (2,540)
Increase (decrease) in:
Accrued expenses (5,155) 1,914
Net cash used in
operating activities (44,130) (51,040)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (6,358) (11,603)
Deferred offering costs (3,650) (3,650)
Organizational costs (2,700) (2,700)
Payments under stock purchase
subscription agreement (60,000) (90,000)
Net cash used in
investing activities (72,708) (107,953)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings 130,000 160,000
Proceeds from sale of common stock 89,900 90,100
Repayment of advances (12,155) -
Net cash provided by
financing activities 207,745 250,100
INCREASE IN CASH AND CASH EQUIVALENTS 90,907 91,107
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 200 -
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 91,107 $ 91,107
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - NONCASH
TRANSACTION:
The company incurred debt in the total amount of $150,000 under
a stock subscription agreement. At December 31, 1997, the unpaid
portion of this debt amounted to $60,000.
See accompanying notes to financial statements.
5
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Business Activity
Aspac Communications, Inc. (formerly known as TPG Management
Corporation) was incorporated in the State of Delaware on June 1,
1994. On September 26, 1997 the Corporation's name was changed to
Aspac Communications, Inc. (the Company). Prior to September 26,
1997, no stock had ever been issued in the Company.
The Company is operating as a Development Stage Company and intends
to develop and/or construct telecommunication and internet networks
in the Far East including the People's Republic of China. The
Company is also considering operating in other parts of the world,
including the United States.
(B) Principles of Consolidation
The accompanying consolidated financial statements includes the
accounts of Aspac Holdings, Inc., a wholly owned subsidiary of the
Company incorporated on October 10, 1997 under the laws of the
Cayman Islands. All significant intercompany balances and
transactions have been eliminated in consolidation. As of the date
of this report, the subsidiary has had no ongoing activities with
the exception of establishment of a bank account and the incurrance
of organization costs.
(C) Use of Estimates
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles. The
preparation of financial statements in accordance with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(D) Cash and Cash Equivalents
For purposes of the statement of cash flow, the Company considers
all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
6
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
(E) Property and Equipment
Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated economic useful lives of 3
to 7 years. Expenditures for maintenance and repairs are charged
to expense as incurred. Major improvements are capitalized.
(F) Earnings Per Share
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS
128) in February 1997. This pronouncement establishes standards
for computing and presenting earnings per share and is effective
for financial statements issued for periods ending after December
15, 1997. SFAS 128 has been adopted by the Company as of December
31, 1997.
G) Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future
tax consequences, SFAS 109 generally considers all expected future
events other than enactments of changes in the tax law or rates.
The Company's available deferred tax asset arising from the current
period's operating loss has not been reflected in the financial
statements because a deferred tax valuation allowance has been
recorded for the entire amount.
7
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
(H) New Accounting Pronouncements
The Financial Accounting Standards Board has recently issued several
new accounting pronouncements. Statement No. 129, "Disclosure of
Information about Capital Structure" establishes standards for
disclosing information about an entity's capital structure, is
effective for financial statements for periods ending after December
15, 1997 and has been adopted by the Company as of December 31,
1997. Statement No. 130, "Reporting Comprehensive Income"
establishes standards for reporting and display of comprehensive
income and its components, and is effective for fiscal years
beginning after December 15, 1997. Statement No. 131, "Disclosures
about Segments of an Enterprise and Related Information" establishes
standards for the way that public business enterprises report
information about operating segments in annual financial statements
and requires that those enterprises report selected information
about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers,
and is effective for financial statements for periods beginning
after December 15, 1997. The Company believes that its future
adoption of Statements 130 and 131 will not have a material effect
on the Company's financial position or results of operations.
NOTE 2 - NOTES PAYABLE
On October 2, 1997 and October 27, 1997, a current shareholder of
the Company executed two promissory notes for $60,000 and $100,000,
respectively. The $60,000 Note included $30,000 that had been
advanced prior to September 30, 1997 in connection with a payment
under the stock purchase subscription agreement (Note 3), with the
balance of the note proceeds deposited directly into the Company's
bank accounts. The $100,000 note proceeds were deposited in their
entirety in the Company's bank accounts. Both notes are for a one-
year period, can be prepaid or extended, and bear interest at 5%
per annum. If the notes are extended past the maturity dates, the
interest rate will increase to 7% per annum.
8
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
NOTE 3 - INVESTMENT IN TPG CAPITAL CORPORATION
On September 26, 1997, the Company entered into an agreement with
First Agate Capital Corporation, a non-related company, to provide
services generally related to the filing of a Registration Statement
with the Securities and Exchange Commission. As consideration for
the services to be provided, the Company entered into a Subscription
Agreement to purchase 30,000 shares of common stock of TPG Capital
Corporation, a nonrelated Delaware Corporation in the amount of
$150,000. As of December 31, 1997, the Company has paid $90,000
toward this Agreement. As of the balance sheet date, the remainder
of the Company's liability under this Agreement has been recorded as
a current liability and a value has
been placed on these shares based upon the TPG Capital Corporation's
current balance sheet. The difference between the valuation
allocated to the shares subscribed to ($30,000) and the total
Subscription price ($150,000) has been capitalized as a part of
deferred offering costs in the amount of $120,000.
NOTE 4 - FORM S-1 REGISTRATION STATEMENT
Form S-1 Registration Statement
On October 23, 1997, as amended on December 10, 1997, the Company
filed a Form S-1 Registration Statement under the Securities Act of
1933 for the sale of 450,000 shares of common stock at a proposed
offering price of $20.00 per share. As of the date of this report,
the Registration Statement has not been declared effective, and all
costs incurred to date in connection with the filing have been shown
on the accompanying balance as deferred offering costs. As of the
date of this report, it is the intent of the Company to file an
amended Form S-1 Registration Statement changing the number of
shares being offered from 450,000 to 900,000 and the per share
offering price from $20 to $10.
9
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
NOTE 5 - SUBSEQUENT EVENTS
(A) Reverse Stock Split
On February 23, 1998 the Board of Directors approved and the
shareholders consented to a one-for-twenty five reverse stock split
of the Company's issued and outstanding common stock. As a result
of the reverse stock split, the Company's quantity of outstanding
common stock was reduced to 3,604,000 from 90,100,000, and an amount
of $8,650 was transferred from the common stock account to the
additional paid-in capital account at December 31, 1997. All share
quantities and per share amounts in this report have been restated
to reflect this reverse stock split.
(B) Joint Venture
On February 10, 1998 the Company signed a letter of intent to enter
into one or more cooperative joint venture agreements with a
corporation currently operating in China. The Director of the
Company is an employee of the joint venture partner. The joint
ventures will allow the Company to participate in the construction
and development of and provision of services for a 200,000
subscriber wire-line telephone network, which constitutes the first
phase of a 2,000,000 subscriber wire-line telephone project, and
other projects in China. Under mutual intentions expressed in the
letter of intent, the Company or its wholly owned subsidiary and the
other party to the joint venture will form one or more Sino-foreign
cooperative joint ventures and contribute pro-rata capital
contributions in the form of cash and/or tangible assets, as agreed
by both parties.
10
<PAGE>
ASPAC COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997
ASPAC COMMUNICATIONS, INC.
CONTENTS
PAGE 1 - INDEPENDENT AUDITORS' REPORT
PAGE 2 - BALANCE SHEET AT SEPTEMBER 30, 1997
PAGE 3 - STATEMENT OF CHANGES IN STOCKHOLDER'S
DEFICIENCY FOR THE PERIOD FROM SEPTEMBER
26, 1997 (INCEPTION) TO SEPTEMBER 30, 1997
PAGE 4 - STATEMENT OF OPERATIONS FOR THE PERIOD FROM
SEPTEMBER 26, 1997 (INCEPTION) TO SEPTEMBER 30, 1997
PAGE 5 - STATEMENT OF CASH FLOWS FOR THE PERIOD FROM
SEPTEMBER 26, 1997 TO SEPTEMBER 30, 1997
PAGE 6 - 10 - NOTES TO FINANCIAL STATEMENTS AS OF SEPTEMBER
30, 1997
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Aspac Communications, Inc.
We have audited the accompanying balance sheet of Aspac Communications, Inc. (a
development stage company) as of September 30, 1997, and the related statements
of operations, changes in stockholder's deficiency, and cash flows for the
period from September 26, 1997 (inception) to September 30, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aspac Communications, Inc. as
of September 30, 1997, and the results of its operations and its cash flows for
the period from September 26, 1997 (inception), to September 30, 1997, in
conformity with generally accepted accounting principles.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
February 23, 1998
<PAGE>
ASPAC COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
CURRENT ASSETS
Cash $ 200
Capital stock subscribed 30,000
TOTAL CURRENT ASSETS 30,200
PROPERTY AND EQUIPMENT
Furniture and Equipment 5,245
Less: accumulated depreciation 118
TOTAL PROPERTY AND EQUIPMENT 5,127
Deferred offering costs 120,000
Other assets 2,400
TOTAL ASSETS $157,727
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
CURRENT LIABILITIES
Loan and advances from officers and
future shareholders $ 42,155
Capital stock subscription payable 120,000
Accrued expenses 7,069
TOTAL CURRENT LIABILITIES 169,224
STOCKHOLDER'S DEFICIENCY
Preferred stock, $0.0001 par value
20,000,000 authorized -
Common stock, $0.0001 par value
100,000,000 shares authorized,
8,000 shares issued and outstanding 1
Additional paid-in capital 199
Accumulated deficit during development
stage (11,697)
TOTAL STOCKHOLDER'S DEFICIENCY (11,497)
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY $157,727
See accompanying notes to financial statements.
2
<PAGE>
ASPAC COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIENCY
FOR THE PERIOD FROM SEPTEMBER 26, 1997
(INCEPTION) TO SEPTEMBER 30, 1997
ACCUMULATED
DEFICIT
ADDITIONAL DURING
COMMON PAID-IN DEVELOPMENT
STOCK CAPITAL STAGE TOTAL
Common stock
issuance $ 1 $199 $ 200
Net Loss - - $(11,697) $(11,697)
BALANCE AT
SEPTEMBER 30, 1997 $ 1 $199 $(11,697) $(11,497)
See accompanying notes to financial statements
3
<PAGE>
ASPAC COMMUNICATIONS, INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM SEPTEMBER 26, 1997
(INCEPTION)TO SEPTEMBER 30, 1997
NET SALES $ -
OPERATING EXPENSES
Salaries 5,060
Office supplies & expenses 2,064
Rent 1,750
Telephone expenses 1,200
Payroll taxes 605
Other taxes 900
Depreciation 118
Total operating expenses 11,697
NET LOSS DURING DEVELOPMENT STAGE $(11,697)
NET LOSS PER COMMON SHARE $ (1.46)
WEIGHTED AVERAGE COMMON
SHARE OUTSTANDING 8,000
See accompanying notes to financial statements.
4
<PAGE>
ASPAC COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM SEPTEMBER 26, 1997
(INCEPTION) TO SEPTEMBER 30, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(11,697)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 118
Changes in current liabilities
Increase (decrease):
Accrued expenses 7,069
Net Cash Used in Operating
Activities (4,510)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,245)
Payment under stock purchase
subscription agreement (30,000)
Increase in other assets (2,400)
Net Cash Used In Investing
Activities (37,645)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from future shareholders 42,155
Proceeds from sale of common stock 200
Net Cash Provided By Financing
Activities 42,355
Net increase in cash and cash
equivalents 200
Cash and cash equivalents
beginning of period -
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 200
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-NON CASH TRANSACTION
The Company incurred debt in the total amount of $150,000 under a
stock subscription agreement. At September 30, 1997 the unpaid
portion of this debt amounted to $120,000.
See accompanying notes to financial statements.
5
<PAGE>
ASPAC COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Business Activity
Aspac Communications, Inc. (formerly known as TPG Management
Corporation) was incorporated in the State of Delaware on June 1,
1994. On September 26, 1997 the Corporation's name was changed to
Aspac Communications, Inc.(the Company). Prior to September 26,
1997, no stock had ever been issued in the Company.
The Company is operating as a Development Stage Company and intends
to develop and/or construct telecommunication and internet networks
in the Far East including the People's Republic of China. The
Company is also considering operating in other parts of the world,
including the United States.
(B) Use of Estimates
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles. The
preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
(C) Cash and Cash Equivalents
For purposes of the statement of cash flow, the Company considers
all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
(D) Property and Equipment
Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated economic useful lives of 3
to 7 years. Expenditures for maintenance and repairs are charged to
expense as incurred. Major improvements are capitalized.
(E) Earnings Per Share
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" in
February 1997.
6
<PAGE>
ASPAC COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
This pronouncement establishes standards for computing and
presenting earnings per share and is effective for the Company's
Fiscal 1997 year-end financial statements. The Company's management
has determined that this standard will not have a significant impact
on the Company's computation or presentation of net income per
common share.
(F) Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future
tax consequences, SFAS 109 generally considers all expected future
events other than enactments of changes in the tax law or rates.
(G) New Accounting Pronouncements
The Financial Accounting Standards Board has recently issued several
new accounting pronouncements. Statement No. 129, "Disclosure of
Information about Capital Structure" establishes standards for
disclosing information about an entity's capital structure, and is
effective for financial statements for periods ending after December
15, 1997. Statement No. 130, "Reporting Comprehensive Income"
establishes standards for reporting and display of comprehensive
income and its components, and is effective for fiscal years
beginning after December 15, 1997. Statement No. 131, "Disclosures
about Segments of an Enterprise and Related Information" establishes
standards for the way that public business enterprises report
information about operating segments in annual financial statements
and requires that those enterprises report selected information
about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers,
and is effective for financial statements for periods beginning
after December 15, 1997. The Company believes that its future
adoption of these statements will not have a material effect on the
Company's financial position or results of operations.
7
<PAGE>
ASPAC COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997
NOTE 2 - LOAN PAYABLE - OFFICERS AND FUTURE STOCKHOLDERS
Prior to September 30, 1997, certain officers of the Company and a
future stockholder (see Subsequent Events) had advanced funds on
behalf of the Company for the purchase of furniture and equipment,
lease deposit, stock purchase subscription payment, and sundry other
expenses. These amounts were either reimbursed in cash after
September 30, 1997, or converted into a note payable in October
1997.
NOTE 3 - CAPITAL STOCK
The Company has authorized 20,000,000 of non-designated preferred
stock of which none have been issued as of the date hereof. In
addition, the Company has authorized 100,000,000 shares of common
stock, $.0001 par value. As of September 30, 1997, 200,000 shares
(8,000 shares after giving effect to the reverse stock split
discussed in Note 5(E) of common stock were issued and outstanding
upon the payment of $200 in cash to the Company on September 26,
1997 (see Subsequent Events for additional stock issuances).
NOTE 4 - INVESTMENT IN TPG CAPITAL CORPORATION
On September 26, 1997 the Company entered into an agreement with
First Agate Capital Corporation, a non-related company, to provide
services generally related to the filing of a Registration Statement
with the Securities and Exchange Commission. As consideration for
the services to be provided, the Company entered into a
Subscription Agreement to purchase 30,000 shares of common stock of
TPG Capital Corporation, a nonrelated Delaware Corporation in the
amount of $150,000. As of September 30, 1997, the Company has paid
$30,000 toward this Agreement. As of the balance sheet date, the
remainder of the Company's liability under this agreement has been
recorded as a current liability and a value has been placed on these
shares based upon the TPG Capital Corporation's current balance
sheet. The difference between the valuation allocated to the shares
subscribed to($30,000) and the total subscription price($150,000)
has been capitalized as a part of deferred offering costs, in the
amount of $120,000.
8
ASPAC COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997
NOTE 5 - SUBSEQUENT EVENTS
(A) Affiliated Company
On October 10, 1997, the Company formed a wholly-owned subsidiary
under the laws of the Cayman Islands. As of the date of this report
the subsidiary has had no on-going activities with the exception of
the establishment of a bank account. Future financial statements
will be consolidated and include the subsidiary's financial
statements.
(B) Notes Payable
On October 2, 1997 and October 27, 1997, a current shareholder of
the Company executed two promissory notes for $60,000 and $100,000,
respectively. The $60,000 Note included $30,000 that had been
advanced prior to September 30, 1997 in connection with a payment
under the stock purchase subscription agreement (Note 4), with the
balance of the note proceeds deposited directly into the Company's
bank accounts. The $100,000 note proceeds were deposited in their
entirety in the Company's bank accounts. Both notes are for a one-
year period, can be prepaid or extended, and bear interest at 5%
per annum. If extended past the maturity date, the interest rate
would increase to 7% per annum.
(C) Common Stock Issuances
In October 1997, the Company issued an additional 89,900,000 shares
(3,596,000 shares after giving effect to the reverse stock split
discussed in Paragraph E) of its common stock in exchange for cash
consideration paid by the stockholders in the amount of $89,900.
(D) Form S-1 Registration Statement
On October 23, 1997, as amended on December 10, 1997, the Company
filed a Form S-1 Registration Statement under the Securities Act of
1933 for the sale of 450,000 shares of common stock at a proposed
offering price of $20.00 per share. As of the date of this report,
the Registration Statement has not been declared effective, and the
costs incurred to date in connection with the filing have been shown
on the accompanying balance as deferred offering costs. As of the
date of this report, it is the intent of the Company to file an
amended Form S-1 Registration Statement changing the number of
shares being offered from 450,000 to 900,000 and the per share
offering price from $20 to $10.
9
<PAGE>
ASPAC COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997
NOTE 5 - SUBSEQUENT EVENTS (CONT'D)
(E) Reverse Stock Split
On February 23, 1998 the Board of Directors approved and the
shareholders consented to a one-for-twenty five reverse stock split
of the Company's issued and outstanding common stock. As a result
of the reverse stock split, the Company's outstanding common shares
were reduced to 8,000 from 200,000, and an amount of $19 was
transferred from the common stock account to the additional paid-in
capital account on September 30,1997. All share quantities and per
share amounts in this report have been restated to reflect this
reverse stock split.
(F) Joint Venture
On February 10, 1998 the Company signed a letter of intent to enter
into one or more cooperative joint venture agreements with a
corporation currently operating in China. The Director of the
Company is an employee of the joint venture partner. The joint
ventures will allow the Company to participate in the construction
and development of and provision of services for a 200,000
subscriber wire-line telephone network, which constitutes the first
phase of a 2,000,000 subscriber wire-line telephone project, and
other projects in China. Under mutual intentions expressed in the
letter of intent, the Company or its wholly owned subsidiary and the
other party to the joint venture will form one or more Sino-foreign
cooperative joint ventures and contribute pro-rata capital
contributions in the form of cash and/or tangible assets, as agreed
by both parties.
10
<PAGE>
No dealer, salesman or any other person
has been authorized to give any information
or to make any representations other than
those contained in this prospectus, and, if
given or made, such information or
representations may not be relied on as
having been authorized by the Company or by
any of the Underwriters. Neither the
delivery of this Prospectus nor any sale
made hereunder shall under any
circumstances create an implication that
there has been no change in the affairs of
the Company since the date hereof. This
Prospectus does not constitute an offer to
sell, or solicitation of any offer to buy,
by any person in any jurisdiction in which
it is unlawful for any such person to make
such offer or solicitation. Neither the
delivery of this Prospectus nor any offer,
solicitation or sale made hereunder, shall
under any circumstances create any
implication that the information herein is
correct as of any time subsequent to the
date of the Prospectus.
------------------------
TABLE OF CONTENTS
Page
Prospectus Summary
The Company
Use of Proceeds
Dilution
Risk Factors
Business
The Offering
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Management
Security Ownership of Certain
Beneficial Owners and Management
Sales by Selling Securityholders
Selling Securityholders
Description of Securities
Plan of Distribution
Legal Matters
Experts
Available Information
Index to Financial Statements
Until 90 days after the release of the
registered securities from the Escrow
Account, all dealers effecting transactions
in the registered securities, whether or not
participating in this distribution, may be
required to deliver a prospectus. This is
in addition to the obligations of dealers to
deliver a Prospectus when acting as
underwriters and with respect to their
unsold allotments or subscriptions.<PAGE>
ASPAC COMMUNICATIONS, INC.
900,000 Shares of Common Stock;
901,000 Shares of Common Stock
to be Sold by the Holders Thereof
----------
PROSPECTUS
----------
March ____, 1998
=======================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in
connection with this Registration Statement. All of such
expenses are estimates, other than the filing fees payable to
the Securities and Exchange Commission.
Filing Fee - Securities and Exchange Commission $ 2,700
Fees and Expenses of Accountants 5,000
Fees and Expenses of Counsel 120,000
Blue Sky Fees and Expenses 5,500
Printing and Engraving Expenses 1,000
Miscellaneous Expenses 1,000
Total $ 135,200(1)
(1) The Company has obtained a loan from one of the
shareholders of the Company for payment of these
expenses which loan will be repaid from proceeds of the
Offering.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is incorporated in Delaware. Under Section
145 of the General Corporation Law of the State of Delaware, a
Delaware corporation has the power, under specified
circumstances, to indemnify its directors, officers, employees
and agents in connection with actions, suits or proceedings
brought against them by a third party or in the right of the
corporation, by reason of the fact that they were or are such
directors, officers, employees or agents, against expenses
incurred in any action, suit or proceeding. The Certificate
of Incorporation and the By-laws of the Company provide for
indemnification of directors and officers to the fullest
extent permitted by the General Corporation Law of the State
of Delaware.
The General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a
provision eliminating the personal liability of a director to
the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director provided that such
provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section
174 (relating to liability for unauthorized acquisitions or
redemptions of, or dividends on, capital stock) of the General
Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper
personal benefit. The Company's Certificate of Incorporation
contains such a provision.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
As listed below, the Company issued shares of its Common
Stock par value $.0001 per share to the following entities for
the consideration as listed. These sales were not made within
the United States or to United States citizens or residents.
However, such sales were made in compliance with Regulation D
of the Securities Act of 1933.
<PAGE>
Pre-Reverse Post-Reverse
Stock Split Stock Split
Number Number of
Date Shareholder of Shares Shares Consider-
ation
9/26/97 Finhorn Enterprises Limited 200,000 8,000 $ 200
10/16/97 Gain Best International
Limited 4,500,000 180,000 4,500
10/16/97 Serenadia Investment Limited 300,000 12,000 300
10/27/97 Serenadia Investment Limited 19,500,000 780,000 19,500
10/27/97 Global Bridge Profits Limited 4,000,000 160,000 4,000
10/27/97 Superior Gain Enterprises
Limited 3,500,000 140,000 3,500
10/27/97 Crowned Eagle Worldwide, Ltd. 3,000,000 120,000 3,000
10/27/97 Finhorn Enterprises Limited 55,100,000 2,204,000 55,100
On February 23, 1998, the Company approved a one-for-
twenty-five reverse stock split of its outstanding shares of
Common Stock.
On February 27, 1998, Crowned Eagle Worldwide, Ltd. and
Superior Gain Enterprises Limited sold their shares of Common
Stock (140,000 and 120,000 post-split, respectively) to
Finhorn Enterprises Limited at a sales price $.025 per share
(post-reverse stock split), which is the per share price
originally paid for such shares.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
3.1** Restated Certificate of Incorporation of the Company
3.2** By-Laws of the Company
4.1** Form of Common Stock Certificate
5.1* Opinion of Cassidy & Associates
10.1** Lease Agreement
10.2** Employment agreement with Marc F. Mayeres
10.3 Promissory Notes with Finhorn Enterprise Limited
10.4 Letter of Intent with Hebei Unicom
24.1 Consent of Accountant
24.2* Consent of Cassidy & Associates (included in Exhibit 5)
27* Financial Data Schedule
- ---------------
* To be filed by Amendment.
** Previously filed.
(b) The following financial statement schedules are
included in this Registration Statement.
None.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
(b) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission is that such
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(c) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under
the Securities Act of 1933, the information omitted from the
form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule
424(b)(1) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it
was declared effective.
(ii) For the purpose of determining any liability
under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, Aspac Communications, Inc. certifies that it
has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this
Amendment #2 to the Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, California on the
10th day of March, 1998.
ASPAC COMMUNICATIONS, INC.
By: /s/ Marc F. Mayeres
President
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment #2 to the Registration
Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
/s/ Liancheng Ji Director March 10, 1998
NON-NEGOTIABLE PROMISSORY NOTE
$ 60,000 Date: October 2, 1997
FOR VALUE RECEIVED, the undersigned, ASPAC
COMMUNICATIONS, INC., a Delaware corporation located at 2049
Century Park East, #1200, Los Angeles, California (hereinafter
referred to as the "Maker") hereby promises to pay to the
order of Finhorn Enterprises, Ltd., or its designee
(hereinafter referred to as the "Holder"), c/o East Asia
Corporate Services Limited, Columbus Centre Building, Wickhams
Cay, P.O. Box 901, Road Town, Tortola, B.A.I. or at such other
place as the holder hereof may from time to time designate in
writing, the principal sum of Sixty Thousand ($60,000) as
reduced by the amount of any prepayment thereof (the "Unpaid
Principal") on October 1, 1998, unless extended by the Holder
(the "Maturity Date"), together with interest on the amount of
the Unpaid Principal beginning as of the date hereof at the
rate of Five (5%) percent per annum. This Promissory Note is
extendable upon the Maturity Date with the Holder's written
consent for another year at the rate of Seven (7%) percent per
annum.
1. PREPAYMENT. The Unpaid Principal of this Promissory
Note may be prepaid in part or in full by the Maker, without
penalty. Any such prepayment shall be first applied to reduce
the Unpaid Principal amount.
2. EVENTS OF DEFAULT AND REMEDIES. The failure by the
Maker to make payment of the Unpaid Principal balance and
interest of this Promissory Note when due shall be deemed an
Event of Default upon which the Holder, at its election, shall
be entitled to exercise any and all other available remedies
to enforce payment hereof.
3. TRANSFERABILITY. This Promissory Note may not be
transferred, assigned, sold, or hypothecated by the Holder.
4. SUCCESSORS. All the rights and interest arising
under this Promissory Note shall inure to the successors of
the Makers and of the Holder.
5. PRESENTMENT. Except as set forth herein, the Maker
waives presentment, demand and presentation for payment,
notice of nonpayment and dishonor, protest and notice of
protest and expressly agrees that this Promissory Note or any
payment hereunder may be extended from time to time by the
Holder without in any way affecting the liability of the
Maker.
6. AMENDMENTS. This Note may not be altered, amended,
changed or terminated, nor may any of its provisions be
waived, except by an agreement in writing signed by the Holder
and the Maker.
7. NOTICES. Any notice to be given to any party shall
be in writing and may be delivered by personal service,
facsimile transmission, registered or certified mail, return
receipt requested, with postage thereon fully prepaid, or by
overnight delivery courier.
8. ARBITRATION. Any disputes arising from this
Agreement, except for requests for injunctive or other
equitable relief, shall be decided by the American Arbitration
Association according to their rules and regulations then in
effect.
9. GOVERNING LAW. This Promissory Note shall be
governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the Maker has executed this
Promissory Note as of this 2nd day of October, 1997.
WITNESS: MAKER:
/s/ Ming Zhang
<PAGE>
NON-NEGOTIABLE PROMISSORY NOTE
$ 100,000 Date: October 27, 1997
FOR VALUE RECEIVED, the undersigned, ASPAC
COMMUNICATIONS, INC., a Delaware corporation located at 2049
Century Park East, #1200, Los Angeles, California (hereinafter
referred to as the "Maker") hereby promises to pay to the
order of Finhorn Enterprises, Ltd., or its designee
(hereinafter referred to as the "Holder"), c/o East Asia
Corporate Services Limited, Columbus Centre Building, Wickhams
Cay, P.O. Box 901, Road Town, Tortola, B.A.I. or at such other
place as the holder hereof may from time to time designate in
writing, the principal sum of Sixty Thousand ($60,000) as
reduced by the amount of any prepayment thereof (the "Unpaid
Principal") on October 1, 1998, unless extended by the Holder
(the "Maturity Date"), together with interest on the amount of
the Unpaid Principal beginning as of the date hereof at the
rate of Five (5%) percent per annum. This Promissory Note is
extendable upon the Maturity Date with the Holder's written
consent for another year at the rate of Seven (7%) percent per
annum.
1. PREPAYMENT. The Unpaid Principal of this Promissory
Note may be prepaid in part or in full by the Maker, without
penalty. Any such prepayment shall be first applied to reduce
the Unpaid Principal amount.
2. EVENTS OF DEFAULT AND REMEDIES. The failure by the
Maker to make payment of the Unpaid Principal balance and
interest of this Promissory Note when due shall be deemed an
Event of Default upon which the Holder, at its election, shall
be entitled to exercise any and all other available remedies
to enforce payment hereof.
3. TRANSFERABILITY. This Promissory Note may not be
transferred, assigned, sold, or hypothecated by the Holder.
4. SUCCESSORS. All the rights and interest arising
under this Promissory Note shall inure to the successors of
the Makers and of the Holder.
5. PRESENTMENT. Except as set forth herein, the Maker
waives presentment, demand and presentation for payment,
notice of nonpayment and dishonor, protest and notice of
protest and expressly agrees that this Promissory Note or any
payment hereunder may be extended from time to time by the
Holder without in any way affecting the liability of the
Maker.
6. AMENDMENTS. This Note may not be altered, amended,
changed or terminated, nor may any of its provisions be
waived, except by an agreement in writing signed by the Holder
and the Maker.
7. NOTICES. Any notice to be given to any party shall
be in writing and may be delivered by personal service,
facsimile transmission, registered or certified mail, return
receipt requested, with postage thereon fully prepaid, or by
overnight delivery courier.
8. ARBITRATION. Any disputes arising from this
Agreement, except for requests for injunctive or other
equitable relief, shall be decided by the American Arbitration
Association according to their rules and regulations then in
effect.
9. GOVERNING LAW. This Promissory Note shall be
governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the Maker has executed this
Promissory Note as of this 27th day of October, 1997.
WITNESS: MAKER:
/s/ Ming Zhang
LETTER OF INTENT
This Letter of Intent sets forth, as of February 10, 1998, certain
intentions on the part of ASPAC Communications, Inc. ("ASPAC") with
offices at 2049 Century Park East, Suite 1200, Los Angeles, California
90066 U.S.A. and China United Telecommunications Corporation, Hebei
Branch ("Hebei Unicom") with offices at No. 125 Zhongshan West Road,
23 Fl. S.J.Z. International Trading Center, Shijiazhuang, Hebei, P.R.
China.
WHEREAS, Hebei Unicom intends to enter into one or more Sino-
foreign cooperative joint venture with ASPAC or its wholly owned
subsidiary in order to participate in the construction and development of
and to provide services for a 200,000-subscriber wire-line telephone
network (the "Hebei Wire-Line Project") which constitutes the first phase
of a 2,000,000-subscriber wire-line telephone project, and other projects in
the Hebei Province.
NOW THEREFORE, ASPAC and Hebei Unicom hereby specify
their mutual intentions as follows:
1. ASPAC or its wholly owned subsidiary, and Hebei Unicom
or its affiliate(s) intend to form one or more Sino-foreign cooperative joint
venture(s) ("ASPAC JV") in which the equity interest percentage of each
party will be finalized in an agreement;
2. Pro-rata capital contributions of the ASPAC JV will be
made by ASPAC and Hebei Unicom in the form of cash and/or tangible
assets as agreed by both parties.
3. It is understood that the finalization and implementations of
the structure recited above are subject to:
(a) all necessary agreements by the relevant parties;
(b) the execution of all relevant final agreements, and
(c) the receipt of all necessary governmental, regulatory
and other approvals.
ASPAC Communications, Inc. China United Tele-
communications Corporation,
Hebei Branch
By: /s/ Marc Mayeres By: /s/ Li Zhang Suo
Title: President Title: General Director
WEINBERG & COMPANY, P.A.
6100 Glades Road, Suite 314
Boca Raton, Florida 33434
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Form S-1, Registration Statement,
Amendment #2 of our reports for the year ended September 30, 1997 dated
February 23, 1998 and December 31, 1997 dated February 24, 1998 relating
to the audit and review, respectively, of Aspac Communications, Inc. and to
the reference to our Firm under the caption "Experts", to be filed with the
Washington, D.C. Office of the U.S. Securities and Exchange Commission on
March 12, 1998 or as soon thereafter as is reasonably practicable.
WEINBERG & COMPANY, P.A.
Certified Public Accountants
Boca Raton, Florida
March 11, 1998
