U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT #2 to
FORM 10-SB
General Form for Registration of Securities
of Small Business Issuers
Under Section 12(b) or (g) of
the Securities Exchange Act of 1934
ASPAC COMMUNICATIONS, INC.
-----------------------------
(Name of Small Business Issuer)
Delaware 95-4652797
(State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification Number
2049 Century Park East, Suite 1200
Los Angeles, California 90067
------------------------------------------------------------
(Address of Principal Executive Offices including Zip Code)
310/712-3288
(Issuer's Telephone Number)
Securities to be Registered Under Section 12(b) of the Act:
None
Securities to be Registered Under Section 12(g) of the Act: Common Stock,
$.0001 Par Value
(Title of Class)
PART I
ITEM 1.
BUSINESS
GENERAL
The Company was incorporated in the State of Delaware on June
1, 1994. The Company has limited operations and no revenue to date.
Since inception, the principal activity of the Company has been
directed to its organizational efforts. As of the date hereof, the
Company has hired a full-time President and has entered into certain
preliminary discussions for the participation in 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. The Company has
obtained a verbal agreement and understanding from one of its
shareholders, Finhorn Enterprises Limited that such shareholder will
financially assist the Company through loans or stock purchases or
securing third-party financing for the Company. See
"BUSINESS--Shareholder Loan and Additional Future Borrowing".
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 intends to
concentrate its services in the Far East, including China, and in
the United States. The Company may locate 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.
The proposed business activities described herein may classify
the Company as a blank check company. See "GLOSSARY". The
Securities and Exchange Commission and many states have enacted
statutes, rules and regulations limiting the sale of securities of
blank check companies. The Company is voluntarily filing this
Registration Statement with the Securities and Exchange Commission
and is under no obligation to do so under the Securities Exchange
Act of 1934. The filing of the Company's Form 10-SB will make it a
reporting company pursuant to the Securities Exchange Act of 1934.
The Company believes that as a reporting company it will more easily
have the ability to use registered securities to make acquisitions
of assets or businesses and it will have increased visibility in the
financial community.
The Company may determine to raise funds in order to develop
telecommunication systems. Management may use various methods to
raise such funds including debt obligations such as loans from banks
or other sources of 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.
On August 3, 1998, the Company extended such employment with Mr.
Mayeres for an additional three years. See "EXECUTIVE COMPENSATION
Employment Agreements". The Company has entered into loan
agreements with certain shareholders for payment of certain
expenses. There is no written agreement pursuant to which the
current shareholders must make additional loans or purchase
additional stock, although the Company has received the verbal
commitment from Finhorn Enterprises Limited to financially assist
the Company. See"BUSINESS--Shareholder Loan and Additional Future
Borrowing".
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. On
February 10, 1998, the Company and Hebei Unicom 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. During September, 1998, Ms. Zhang, the secretary
of the Company, visited the Beijing office of Hebei Unicom to
discuss proposed terms of the joint venture with the officers of
Hebei Unicom. As of the date hereof, such terms continue to be
discussed and no final agreement has been reached.
The present negotiations anticipate that upon establishment
of the joint venture with Hebei Unicom, the Company will be
responsible for contributing a pro-rata amount of capital
(approximately $2,100,000) based on its joint venture equity
percentage, which under current negotiations would be 70%. The
majority shareholder of the Company, Finhorn Enterprises Limited,
has agreed to arrange the financing for the Company's initial
investment in the joint venture. Any additional required capital
will be arranged through financing with local banks or other local
financing sources. No such additional financing has been arranged
and there is no assurance that any such financing will be available
when, and if, required.
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 in additional to its capital
contribution 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. On September 29, 1998, the Company
signed a Preliminary Cooperation Agreement with Beijing Change
Electronic Co., Ltd. to jointly construct and develop a nationwide
internet network to provide access to the World Wide Web, electronic
mail transfer, business and individual web pages, search engines,
news and updates, on-line shopping, and other services as
customarily available by an internet service provider. Beijing
Change Electronic Co., Ltd. is a high-tech company specialized in
research and development of telecommunications equipment, including
paging, data transmission and wireless receiving equipment. The
terms of the joint venture are in discussion and no final agreement
has been reached. The present negotiations anticipate that upon
establishment of the joint venture with Beijing Change Electronic
Co., Ltd., the Company will be responsible for contributing
approximately $7,000,000. The majority shareholder of the Company,
Finhorn Enterprises Limited., has agreed to arrange the financing
for the Company's initial investment in the joint venture. Any
additional required capital will be arranged through financing with
local banks or other local financing sources. No such additional
financing has been arranged and there is no assurance that any such
financing will be available when, and if, required.
Joint Venture, Possible Merger or Acquisition with IDN
Telecom, Inc., a California Telecommunications Company. The Company
is in discussions for merger or stock acquisition with IDN Telecom,
Inc., a California-based company specializing in research and
development of advanced telecommunication equipment and systems.
The technology developed by this company would allow the Company to
build advanced and cost-efficient telecommunication networks. The
officers of the Company have become unpaid officers and advisors to
IDN Telecom, Inc. They have also been appointed to IDN Telecom's
board of directors. As of the date hereof, the officers of the
Company have assisted IDN Telecom, Inc. in preparing a financial
review and financial options regarding possible terms and structure
of a business combination. The Company and IDN Telecom, Inc. are
discussing the possible exchange of the outstanding stock of IDN
Telecom, Inc. for shares of common stock of the Company. No
agreement has been executed, but discussions between the Company and
IDN Telecom, Inc. are continuing. If an agreement is reached, the
Company will file a Form 8-K discussing the terms thereof and
including financial statements of IDN Telecom, Inc.
TPG Capital Corporation. On September 26, 1997, the
Company entered into an agreement with First Agate Capital
Corporation, a non-related Delaware corporation, to provide services
generally related to the filing of a registration statement with the
Securities and Exchange Commission. First Agate Capital Corporation
is an affiliate of Cassidy & Associates, the law firm which prepared
this registration statement. 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
non-related Delaware corporation which is an affiliate of Cassidy &
Associates, in the amount of $150,000. As of December 31, 1997, the
Company had paid $90,000 toward this agreement. See "FINANCIAL
STATEMENTS".
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. The
Company may be considered a blank check company. See "GLOSSARY".
SHAREHOLDER LOAN AND ADDITIONAL FUTURE BORROWING
On October 2, 1997, Finhorn Enterprises Limited, 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 be required to locate alternate
methods of financing including, possibly, debt or equity offerings
of its securities. On October 27, 1997, the Company borrowed an
additional $100,000 from Finhorn Enterprises Limited on the same
terms as the earlier loan. Proceeds from both loans, aggregating
$160,000, are for the payment of expenses including legal fees, and
initial working capital.
On July 31, 1998 and October 30, 1998, the Company borrowed
$31,0000 and $30,000, respectively, from Finhorn Enterprises Limited
repayable in 24 months at an interest rate of 5% for the first year
and 7% for the second year. On September 15, 1998, and on September
30, 1998, the Company borrowed $9,000 and $20,000 from Amy Ming
Zhang, secretary of the Company, and Serenadia Investment Limited,
respectively, repayable in 24 months at an interest rate of 5% for
the first year and 7% for the second year.
Finhorn Enterprises Limited has orally agreed to arrange
sufficient funding for the Company's future operating expenses,
including providing loans or arranging loans from other sources. In
addition, the President of the Company has agreed to defer part of
his salary until sixty days after the Company starts public trading
of its securities or such other date as may be agreed to by the
parties.
AVAILABLE INFORMATION AND PERIODIC REPORTS
Upon effectiveness of its Registration Statement on Form
10-SB, the Company will be subject to the informational requirements
of the Securities Exchange Act of 1934 (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. Even in the event it is no longer required
to do so under the Exchange Act, the Company intends to voluntarily
file the periodic reports required by such Exchange Act.
RISK FACTORS
THE FOLLOWING RISK FACTORS, AS WELL AS ALL OF THE OTHER INFORMATION
SET FORTH ELSEWHERE IN THIS PROSPECTUS INCLUDING THE INFORMATION
CONTAINED IN THE FINANCIAL STATEMENTS AND ALL NOTES THERETO, CONTAIN
IMPORTANT INFORMATION REGARDING THE COMPANY AND OTHER MATTERS.
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
hereof. The Company could be considered a "blank check" company.
See "GLOSSARY". 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
including the preparation and filing of a registration statement on
Form S-1 on October 23, 1997 and its subsequent withdrawal on June
10, 1998, and the preparation of this registration statement. 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."
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES
The Company's sole director resides outside the United
States. The Company anticipates that a substantial portion of the
assets that may be developed or acquired by it will be located
outside the United States and, as a result, it may not be possible
for investors to effect service of process within the United States
upon such person, or to enforce against the Company's assets or
against such person 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. In
July, 1997, the control of Hong Kong was transferred from Great
Britain to China. As a result, Hong Kong is still in a period of
transition. 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, etc.
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 convertibility 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 (which is currently being
reformed to be part of the Ministry of Information Industry)(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.
CHINESE RESTRICTIONS ON FOREIGN JOINT VENTURES
On September 1, 1993, the MPT promulgated the "Interim
Regulations on Approving and Administrating the Operation of
Liberalized Telecommunication Services" (the "Interim Regulations")
which specify that foreign parties, including Sino-Foreign joint
ventures (SFJV") may not invest in, own or participate in operating
telecommunications system in China. While foreign investment,
ownership and operation of telecommunications in China is
prohibited, there is no prohibition on foreign investment
enterprises participating in building, transferring ownership of,
maintaining and servicing telecommunications networks in China
(referred to as "BTSM"). BTSM is an acceptable method of a foreign
company participating in the Chinese telecommunications network.
The joint venture transactions currently being negotiated by the
Company fall within the BTSM model. However such transactions will
need approval by the Chinese government. Management believes that
such approval will be obtained without difficulty but there can be
no assurance that the Chinese government will not revise its
position on the BTSM joint venture model and refuse approval. Such
refusal would severely restrict the Company's ability to enter into
joint ventures in China.
The State Council of China recently approved in principle to
ban Chinese-Chinese-foreign joint ventures ("CCFJV") which are
created when a foreign company forms a joint venture with a Chinese
company, creating a Chinese entity in principle, which in turn forms
a new joint venture with a Chinese telecom operator. This complex
structure has been used as a way to circumvent China's ban on
foreign participation in the operation of telephone networks. The
recent approvals by the State Council reaffirm the Interim
Regulations on the use of this structure and foreign entities'
participation in telephone network operation. The recent State
Council action does not impact on the Company's proposed
transactions as the Company intends to participate in the
construction, management and profit sharing, not operation, of the
telephone systems utilizing the BTSM model. However, there can be
no assurance that the State Council or other agency may not in the
future restrict or prohibit the BTSM model or other type of
transaction contemplated by the Company. Any such action would
severely impact on the Company's ability to pursue its business in
China.
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. 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.
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.
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 hereof, the Company has entered into agreements with
two consultants to recommend to the Company applicable
telecommunications technologies and to assist the Company in
locating joint venture partners. See "ITEM 6. EXECUTIVE COMPENSATION"
POSSIBLE NEED FOR ADDITIONAL FINANCING TO COMMENCE OR CONTINUE
OPERATIONS
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 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. 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.
COMPETITION FROM OTHER MORE ESTABLISHED ENTITIES
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.
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 20,020,000
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, equipment shortages, political unrest,
as well as competition from other businesses.
NO CURRENT TRADING MARKET FOR THE COMPANY'S SECURITIES
There is no established public trading market for the
securities of the Company. No assurance can be given that an active
trading market in the Company's securities will develop or, if
developed, that 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. The Company has applied for quotation on the NASD
OTC Bulletin Board. There is no assurance that the Company's
securities will be accepted for quotation thereon. See "MARKET
PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS."
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.
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 may find it more difficult to
sell their securities.
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 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 Common Stock should a public trading
market develop.
THE NATIONAL SECURITIES MARKET IMPROVEMENT ACT OF 1996
The National Securities Market Improvement Act of 1996
("NMSIA") limits the authority of states to impose restrictions upon
sales of securities made pursuant to SectionSection4(1) and 4(3) of
the Securities Act of companies which file reports under
SectionSection13 or 15(d) of the Securities Exchange Act. Sales of
the Company's Common Stock in the secondary trading market, when
eligible, will be made pursuant to Section4(1) (sales other than by
an issuer, underwriter or broker).
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.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Registration Statement contains forward-looking
statements and information that is based upon management's beliefs
and assumptions, as well as information currently available to
management. When used in this document the words "anticipates,"
"estimates ," "believes," "expects," "intend" and similar
expressions are intended to identify forward-looking statements.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company, or industry results, to
be materially different from any future results, performance or
achievements or expectations expressed or implied by such
forward-looking statements. The Company disclaims any obligation to
update any such factors or to announce the result of any revisions
to any of the forward-looking statements contained herein to reflect
future development.
OTHER BUSINESS CONSIDERATIONS
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 the shares currently held by
shareholders 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 (the "Year 2000 problem"). 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. Many foreign countries, including China, have not
disclosed their anticipated Year 2000 problems nor any steps to
correct such problems. It is impossible to predict what the
severity or scope of the date language problem will be in such
countries or what technology will be available at that time to
correct such problems. 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. Management does not believe that either IDN Telecom,
Inc. or Hebei Unicom, Inc., the companies with which the Company is
in discussions for possible business transactions, have assessed the
Year 2000 problem nor implemented any remedial measures. Such
failure to address the Year 2000 problem could have severe
consequences on the business operations of those companies.
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 director 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 director with the United States, the English language
and, generally, the American and international business communities,
will be useful in meeting such competition.
GLOSSARY
"Blank Check" Company As defined in Section 7(b)(3) of the
Securities Act, a "blank check" company is
a development stage company that has no
specific business plan or purpose or has
indicated that its business plan is to
engage in a merger or acquisition with an
unidentified company or companies and is
issuing "penny stock" securities as
defined in Rule 3a51-1 of the Exchange Act.
The Company ASPAC Communications Corporation, a
Delaware corporation.
Exchange Act The Securities Exchange Act of 1934, as
amended.
"Penny Stock" Security As defined in Rule 3a51-1 of the Exchange
Act, a "penny stock" security is any
equity security other than a security (i)
that is a reported security (ii) that is
issued by an investment company (iii) that
is a put or call issued by the Option
Clearing Corporation (iv) that has a price
of $5.00 or more (except for purposes of
Rule 419 of the Securities Act) (v) that
is registered on a national securities
exchange (vi) that is authorized for
quotation on the Nasdaq Stock Market,
unless other provisions of Rule 3a51-1 are
not satisfied, or (vii) that is issued by
an issuer with (a) net tangible assets in
excess of $2,000,000, if in continuous
operation for more than three years or
$5,000,000 if in operation for less than
three years or (b) average revenue of at
least $6,000,000 for the last three years.
Securities Act The Securities Act of 1933, as amended.
Small Business Issuer As defined in Rule 12b-2 of the Exchange
Act, a "Small Business Issuer" is an
entity (i) which has revenues of less than
$25,000,000 (ii) whose public float (the
outstanding securities not held by
affiliates) has a value of less than
$25,000,000 (iii) which is a United
States or Canadian issuer (iv) which is
not an Investment Company and (v) if a
majority-owned subsidiary, whose parent
corporation is also a small business issuer.
ITEM 2.
PLAN OF OPERATION
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 March 31, 1998, of $122,515. 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 be required to locate alternate
methods of financing including, possibly, debt or equity offerings
of its securities. On October 27, 1997, the Company borrowed an
additional $100,000 from Finhorn Enterprises Limited on the same
terms as the earlier loan. Proceeds from both loans, aggregating
$160,000, are for the payment of expenses including legal fees, and
initial working capital.
On July 31, 1998 and October 30, 1998, the Company borrowed
$31,0000 and $30,000, respectively, from Finhorn Enterprises Limited
repayable in 24 months at an interest rate of 5% for the first year
and 7% for the second year. On September 15, 1998, and on September
30, 1998, the Company borrowed $9,000 and $20,000 from Amy Ming
Zhang, the Secretary of the Company, and Serenadia Investment
Limited, respectively, repayable in 24 months at an interest rate of
5% for the first year and 7% for the second year.
Finhorn Enterprises Limited has agreed to arrange sufficient
funding for the Company's operating expenses, including providing
loans or arranging loans from other sources. The President of the
Company has agreed to defer part of his salary until sixty days
after the Company starts public trading of its securities or such
other date as may be agreed to by the parties.
CAPITAL RESOURCES
Substantially all of the Company's expenditures will be
attributable to the development or acquiring telecommunication
networks. The Company may use the its securities, including either
its common or preferred stock, 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.
FUNDING FOR POTENTIAL JOINT VENTURES
The Company is currently in negotiations for participation in
two joint ventures, one with Hebei Unicom and one with Beijing
Change Electronic Co., Ltd. Based upon the current discussion, the
Company anticipates that it would be required to contribute
approximately $2,100,000 in the joint venture with Hebei Unicom and
approximately $7,000,000 in the joint venture with Beijing Change
Electronic Co., Ltd. See "BUSINESS Current Operations". The
majority shareholder of the Company, Finhorn Enterprises Limited,
has agreed to arrange the financing for the Company's initial
investment in the joint venture(s).
ITEM 3. DESCRIPTION OF PROPERTY.
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. The
Company has entered into a lease agreement with Barrister Executive
Suites, Inc., an unaffiliated office-suite rental company, for its
office suite at a rent of $1,755 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.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information as of the
date hereof 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. Each shareholder has sole investment power and sole voting
power over the securities listed.
Name, Position Shares of Percentage of
and Address Common Stock Shares of
Beneficially Class Owned (1)
Owned
Finhorn Enterprises Limited (2) 12,320,000 61.53%
c/o East Asia Corporate Services Limited
Columbus Centre Building
Wickhams Cay
PO Box 901
Road Town, Tortola, B.V.I.
Serenadia Investment Limited (3) 4,000,000 19.98%
c/o AMS Financial Services Limited
P.O. Box 116, Road Town, Tortola
British Virgin Islands
Marc F. Mayeres -0- 0%
President
30902 Clubhouse Drive, #44F
Laguna Niguel, California 92677
Ming Zhang -0- 0%
Secretary
3701 Glendon Avenue
Los Angeles, California 90034
Liancheng Ji -0- 0%
Director
Building #2
Shizipuo Dongli
Dongcheng District
Beijing, China
All Officers, Directors -0- 0%
and Shareholders as a Group
(3 Persons)
________________
(1) Based on 20,020,000 shares of common stock outstanding.
(2) A British Virgin Islands corporation engaged in investing in
telecommunication networks and telecommunication-related
companies. None of the officers of the Company nor its
director or any other shareholder are affiliated with this
company.
(3) A British Virgin Islands corporation engaged in researching
and developing telecommunication equipment and investing in
telecommunication networks. None of the officers of the
Company nor its director or any other shareholder are
affiliated with this company.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
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.
ITEM 6. 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. 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
PRINCIPAL POSITION YEAR SALARY BONUS
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
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. Effective August 6, 1998, the
Company entered into a revised three-year employment
agreement with Mr. Mayeres. The terms of the revised
agreement require the full-time services of Mr. Mayeres to
the activities of the Company and provide for compensation
at the rate of $100,000 per year, payable $3,500 monthly,
with the remainder deferred until 60 days after the Company
has begun public trading of its securities or at such other
date as mutually agreed by both parties. The agreement
provides for medical insurance and payment of expenses
incurred on behalf of the Company.
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.
CONSULTING AGREEMENTS
On May 15, 1998, the Company entered into a two-year
agreement with Li-Ping Wang pursuant to which Ms. Li-Ping
will provide the Company with assistance in (i) obtaining a
200,000 line wire-line or 100,000 line wireless
telecommunication project or a 10-province paging network
and (ii) locating a joint venture partner for such project
and (iii) identifying local financing for such project. As
consideration for such services the Company issued to Ms.
Li-Ping 1,000,000 (post-forward stock split) shares of its
Common Stock and may elect to issue incentive bonus options
at some future time.
On May 21, 1998, the Company entered into a four-year
agreement with Lei He pursuant to which Mr. Lei will provide
the Company with assistance in locating opportunities in
China for investment in applicable telecommunications
technology for development of the Company's market and
identification of potential local joint venture partners.
As consideration for such services the Company issued to Mr.
Lei 1,000,000 (post-forward stock split) shares of its
Common Stock and may elect to issue incentive bonus options
at some future time.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
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 be required to locate
alternate methods of financing including, possibly, debt or
equity offerings of its securities.
On October 27, 1997, the Company borrowed an
additional $100,000 from Finhorn Enterprises Limited on the
same terms as the earlier loan. Proceeds from both loans,
aggregating $160,000, are for the payment of expenses
including legal fees, and initial working capital.
On July 31, 1998 and October 30, 1998, the Company
borrowed $31,0000 and $30,000, respectively, from Finhorn
Enterprises Limited repayable in 24 months at an interest
rate of 5% for the first year and 7% for the second year.
On September 15, 1998, and on September 30, 1998, the
Company borrowed $9,000 and $20,000 from Amy Ming Zhang, the
secretary of the Company, and Serenadia Investment Limited,
respectively, repayable in 24 months at an interest rate of
5% for the first year and 7% for the second year.
Finhorn Enterprises Limited has agreed to arrange
sufficient funding for the Company's operating expenses,
including providing loans or arranging loans from other
sources. The President of the Company has agreed to defer
part of his salary until sixty days after the Company starts
public trading of its securities or such other date as may
be agreed to by the parties.
ITEM 8. 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.
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 stock was reduced to 3,604,000
shares.
On May 26, 1998 the Board of Directors approved and
the shareholders consented to a five-for-one stock split of
the Company's issued and outstanding common stock. As a
result of the stock split (plus certain additional stock
issuances), the Company's outstanding common stock was
increased to 20,020,000 shares. All share quantities and
per share amounts herein have been restated to reflect the
reverse and forward stock splits.
INCORPORATION
The Company was incorporated in the state of Delaware
on June 1, 1994 under the name TPG Management Corporation,
which name was subsequently changed. 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 20,020,000 shares were outstanding
as of the date hereof.
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 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. 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 have been issued as
of the date hereof. 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.
LOCK-UP AGREEMENTS
There are no lock-up agreements entered into by any
shareholder with the Company.
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, as amended, and By-Laws which are included as
exhibits to this registration statement 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 may qualify
to 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 has applied for quotation of its
securities on the NASD OTC Bulletin Board . 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.
TRANSFER AGENT AND REGISTRAR
The Company has engaged U.S. Stock Transfer Corp.,
1745 Gardena Avenue, Glendale, California 91204
(818/502-1404) to act as its transfer agent.
REPORTS TO SHAREHOLDERS
The Company will furnish to its shareholders 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.
PART II
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
(A) MARKET PRICE. There is no trading market for the
Company's Common Stock at present and there has been no
trading market to date. There is no assurance that a
trading market will ever develop or, if such a market does
develop, that it will continue. The Company has retained
Corporate Relations & Management, Inc., Salt Lake City,
Utah, as a consultant to manage the Company's interface with
the brokerage community and to assist and advise the Company
on its application to the NASD OTC Bulletin Board. The
Company has filed an application for quotation on the NASD
OTC Bulletin Board through J. Alexander Securities.
The Securities and Exchange Commission has adopted
Rule 15g-9 which establishes the definition of a "penny
stock," for purposes relevant to the Company, as any equity
security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per
share, subject to certain exceptions. For any transaction
involving a penny stock, unless exempt, the rules require:
(i) that a broker or dealer approve a person's account for
transactions in penny stocks and (ii) the broker or dealer
receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's
account for transactions in penny stocks, the broker or
dealer must (i) obtain financial information and investment
experience and objectives of the person; and (ii) make a
reasonable determination that the transactions in penny
stocks are suitable for that person and that person has
sufficient knowledge and experience in financial matters to
be capable of evaluating the risks of transactions in penny
stocks. The broker or dealer must also deliver, prior to
any transaction in a penny stock, a disclosure schedule
prepared by the Commission relating to the penny stock
market, which, in highlight form, (i) sets forth the basis
on which the broker or dealer made the suitability
determination and (ii) that the broker or dealer received a
signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks
of investing in penny stocks in both public offerings and in
secondary trading, and about commissions payable to both the
broker-dealer and the registered representative, current
quotations for the securities and the rights and remedies
available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held
in the account and information on the limited market in
penny stocks.
In order to qualify for listing on the Nasdaq SmallCap
Market, a company must have at least (i) net tangible assets
of $4,000,000 or market capitalization of $50,000,000 or net
income for two of the last three years of $750,000; (ii)
public float of 1,000,000 shares with a market value of
$5,000,000; (iii) a bid price of $4.00; (iv) three market
makers; (v) 300 shareholders and (vi) an operating history
of one year or, if less than one year, $50,000,000 in market
capitalization. For continued listing on the Nasdaq
SmallCap Market, a company must have at least (i) net
tangible assets of $2,000,000 or market capitalization of
$35,000,000 or net income for two of the last three years of
$500,000; (ii) a public float of 500,000 shares with a
market value of $1,000,000; (iii) a bid price of $1.00; (iv)
two market makers; and (v) 300 shareholders.
At such time as the Company may qualify, if ever, the
Company may apply for listing of its securities in the
over-the-counter ("OTC") market if the Company does not meet
the qualifications for listing on the Nasdaq SmallCap
Market. The OTC 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. The Company may apply for listing on the NASD
OTC Bulletin Board or may offer its securities in what are
commonly referred to as the "pink sheets" of the National
Quotation Bureau, Inc. 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 the company
for listing on the Bulletin Board.
If the Company is unable to satisfy the requirements
for quotation on the Nasdaq SmallCap Market or becomes
unable to satisfy the requirements for continued quotation
thereon, and trading, if any, is conducted in the OTC
market, a shareholder may find it more difficult to dispose
of, or to obtain accurate quotations as to the market value
of, the Company's securities.
(B) HOLDERS. There are six holders of the Company's
Common Stock.
(C) DIVIDENDS. The Company has not paid any
dividends to date, and has no plans to do so in the
immediate future.
ITEM 2. LEGAL PROCEEDINGS.
There is no litigation pending or threatened by or
against the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
The Company originally engaged John C. MacLean, CPA,
Bowie, Maryland, to prepare the initial audit for the
Company. Because Mr. MacLean's schedule became too full to
provide time to continue to service the Company and to
travel to California, the Company engaged the accounting
firm of Weinberg & Company, Boca Raton, Florida. No report
contained any adverse opinion or disclaimer of opinion and
no disagreements existed with the former accountant.
ITEM 4. 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.
Pre-Reverse Post-Reverse
And Forward and Forward
Stock Split Stock Split
Number Number of Consid-
Date Shareholder of Shares Shares eration
9/26/97 Serenadia Investment, Ltd. 200,000 40,000 $ 200
10/16/97 Gain Best International, Ltd. 4,500,000 900,000 4,500
10/16/97 Serenadia Investment, Ltd. 300,000 60,000 300
10/27/97 Serenadia Investment, Ltd. 19,500,000 3,900,000 19,500
10/27/97 Global Bridge Profits, Ltd. 4,000,000 800,000 4,000
10/27/97 Superior Gain Enterprises, Ltd. 3,500,000 700,000 3,500
10/27/97 Crowned Eagle Worldwide, Ltd. 3,000,000 600,000 3,000
10/27/97 Finhorn Enterprises, Ltd. 55,100,000 11,020,000 55,100
5/26/98 Li-Ping Wang 1,000,000
5/26/98 Lei He 1,000,000
On February 23, 1998, the Company approved a
one-for-twenty-five reverse stock split of its outstanding
shares of Common Stock. On May 26, 1998, the Company
approved a five-for-one forward 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 (600,000 and 700,000 post-reverse and forward
split, respectively) to Finhorn Enterprises Limited at a
sales price $.025 per share which is the per share price
originally paid for such shares.
ITEM 5. 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.
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.
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
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 (Except for Notes 3, 4 and 5(C)(D)(E) and (F)
as to which the date is June 10, 1998)
ASPAC COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
CURRENT ASSETS
Cash $ 200
TOTAL CURRENT ASSETS 200
PROPERTY AND EQUIPMENT
Furniture and Equipment 5,245
Less: accumulated depreciation 118
TOTAL PROPERTY AND EQUIPMENT 5,127
Other assets 2,400
TOTAL ASSETS $ 7,727
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
CURRENT LIABILITIES
Loan and advances from officers and
future shareholders $ 42,155
Advisory services agreement 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,
40,000 shares issued and outstanding 4
Additional paid-in capital 196
Accumulated deficit during development
stage (161,697)
TOTAL STOCKHOLDER'S DEFICIENCY (161,497)
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY $ 7,727
See accompanying notes to financial statements.
2
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 $ 4 $196 $ 200
Net Loss - - $(161,697) $(161,697)
BALANCE AT
SEPTEMBER 30, 1997 $ 4 $196 $(161,697) $(161,497)
See accompanying notes to financial statements
3
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
LOSS FROM OPERATIONS (11,697)
OTHER EXPENSES
Registration costs - withdrawn Form S-1 150,000
NET LOSS DURING DEVELOPMENT STAGE $(161,697)
NET LOSS PER COMMON SHARE $ (4.04)
WEIGHTED AVERAGE COMMON
SHARE OUTSTANDING 40,000
See accompanying notes to financial statements.
4
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 $(161,697)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 118
Write off of deferred registration costs 120,000
Changes in current liabilities
Increase (decrease):
Accrued expenses 7,069
Net Cash Used in Operating
Activities (34,510)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,245)
Increase in other assets (2,400)
Net Cash Used In Investing
Activities ( 7,645)
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
securities advisory service agreement and related stock subscription
agreement. At September 30, 1997 the unpaid portion of this debt
amounted to $120,000 (See note 4).
See accompanying notes to financial statements.
5
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 and it was dormant.
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
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. The
deferred tax asset arising from the available net
operating loss has not been reflected in the financial
statements because it has been offset by a valuation
allowance for the entire amount.
(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
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 (40,000 shares after
giving effect to the reverse stock split and the
five-for-one stock split discussed in Notes 5(E) and 5(F)
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 advisory and other
services generally related to securities and the filing of
a Form S-1 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
that is related to First Agate Capital through a common
principal, 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 . The total cost of this agreement
($150,000) has been accounted for as registration costs
and expensed in the statement of operations because the
Form S-1 registration statement was subsequently withdrawn
(See Note 5(D)).
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 advisory
services and 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 (17,980,000 shares after giving effect
to the reverse stock split and five-for-one stock split
discussed in Paragraphs (E) and (F)) 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 had not been declared effective, and it was
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. The S-1 Registration was
subsequently withdrawn on June 10, 1998 and the related
registration costs were expensed.
9
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.
(See (F) for subsequent five-for-one stock split)
(F) Stock Split
On May 26, 1998, the board of directors approved and the
shareholders consented to a five-for-one stock split of
the Company's issued and outstanding common stock. As a
result of the stock split, the Company's outstanding
common shares were increased to 40,000 from 8,000 and an
amount of $3 was transferred from the additional-paid-in
capital account to the common stock account on September
30, 1997. All share quantities and per share amounts in
this report have been restated to reflect this stock split
and the reverse stock split discussed in (E) above.
(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
ASPAC COMMUNICATIONS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998
UNAUDITED
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 - CONSOLIDATED BALANCE SHEET AS OF JUNE 30,
1998 (UNAUDITED)
PAGE 2 - CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS'DEFICIENCY FOR THE PERIOD FROM
SEPTEMBER 26, 1997 (INCEPTION) TO JUNE 30,
1998 (UNAUDITED)
PAGE 3 - CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
PERIODS FROM OCTOBER 1, 1997 TO JUNE 30, 1998
AND FROM SEPTEMBER 26, 1997 (INCEPTION) TO
JUNE 30, 1998 (UNAUDITED)
PAGE 4 - CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
PERIODS FROM OCTOBER 1, 1997 TO JUNE 30, 1998
AND FROM SEPTEMBER 26, 1997 (INCEPTION) TO
JUNE 30, 1998 (UNAUDITED)
PAGE 5 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS
OF JUNE 30, 1998 (UNAUDITED)
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash $ 1,514
Prepaid expenses 3,474
TOTAL CURRENT ASSETS 4,988
PROPERTY AND EQUIPMENT
Furniture and equipment 11,603
Less: accumulated depreciation 1,954
TOTAL PROPERTY AND EQUIPMENT 9,649
OTHER ASSETS
Organization costs 2,430
Other assets 2,398
TOTAL OTHER ASSETS 4,828
TOTAL ASSETS $ 19,466
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accrued expenses $ 37,927
Advisory services agreement payable 60,000
Notes payable 170,000
TOTAL CURRENT LIABILITIES 267,927
STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.0001 par value
20,000,000 shares authorized -
Common stock, $0.0001 par value,
100,000,000 shares authorized,
20,020,000 shares issued and outstanding 2,002
Additional paid-in capital 88,098
Accumulated deficit during development stage (338,561)
TOTAL STOCKHOLDERS' DEFICIENCY (248,461)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 19,466
See accompanying notes to financial statements.
2
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM SEPTEMBER 26, 1997
(INCEPTION) TO JUNE 30, 1998
(UNAUDITED)
ACCUMULATED
DEFICIT
ADDITIONAL DURING
COMMON PAID-IN DEVELOPMENT
STOCK CAPITAL STAGE TOTAL
Common stock issuance $ 4 $ 196 $ - $ 200
Net loss from September
26, 1997 (Inception)
to September 30, 1997 - - (161,697) (161,697)
Balance at
September 30, 1997 4 196 (161,697) (161,497)
Common stock issuance 1,998 87,902 - 89,900
Net loss from
October 1, 1997 to
June 30, 1998 - - (176,864) (176,864)
BALANCE AT
JUNE 31, 1998 $2,002 $ 88,098 $(338,561) $(248,461)
See accompanying notes to financial statements.
3
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS FROM OCTOBER 1, 1997 TO JUNE 30, 1998 AND
SEPTEMBER 26, 1997 (INCEPTION) TO JUNE 30, 1998
(UNAUDITED)
Oct. 1, 1997 Sept. 26, 1997
to (Inception) to
June 30,1998 June 30, 1998
NET SALES $ - $ -
OPERATION EXPENSES
Salaries 82,115 87,175
Rent 14,555 16,305
Office supplies & expenses 3,612 5,676
Payroll taxes 5,299 5,904
Payroll process 325 325
Telephone expenses 2,791 3,991
Parking fees 4,600 4,600
Insurance 3,962 3,962
Other taxes 7,728 8,628
Legal and professional fees 30,234 30,234
Consulting fees 2,000 2,000
Travel expenses 1,044 1,044
Depreciation 1,835 1,954
Amortization of organization costs 270 270
Bank charges 208 208
Other expenses 2,847 2,847
Total operating expenses 163,425 175,122
LOSS FROM OPERATIONS (163,425) (175,122)
OTHER INCOME (EXPENSE)
Registration costs-withdrawn Form S-1 (8,650) (158,650)
Interest income 856 856
Other income 8 8
Interest expense (5,653) (5,653)
Total other income (expense) (13,439) (163,439)
NET LOSS DURING DEVELOPMENT STAGE $ (176,864) $ (338,561)
NET LOSS PER COMMON SHARE (0.0107) (0.0208)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 16,566,080 16,268,850
See accompanying notes to financial statements.
4
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS FROM OCTOBER 1, 1997 TO JUNE 30, 1998 AND
SEPTEMBER 26, 1997 (INCEPTION) TO JUNE 30, 1998
(UNAUDITED)
Oct. 1, 1997 Sept. 26, 1997
to (Inception) to
June 30, 1998 June 30, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (176,863) $ (338,561)
Adjustment to reconcile net loss
to net cash used in
operating activities:
Depreciation 1,835 1,953
Amortization 270 270
Write off registration costs 0 120,000
Changes in assets and liabilities
(Increase) decrease in:
Prepaid expenses (3,474) (3,474)
Other assets - (2,398)
Increase (decrease) in:
Accrued expenses 30,858 37,927
Net cash used in
operating activities (147,374) (184,283)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (6,357) (11,603)
Organizational costs (2,700) (2,700)
Payments under advisory
service agreement (60,000) (60,000)
Net cash used in
investing activities (69,057) (74,303)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings 140,000 170,000
Proceeds from sale of common stock 89,900 90,100
Repayment of advances (12,155) -
Net cash provided by
financing activities 217,745 260,100
INCREASE IN CASH AND CASH EQUIVALENTS 1,314 260,100
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 200 -
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 1,514 1,514
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - NONCASH TRANSACTION:
The company incurred debt in the total amount of $150,000 under a securities
advisory service aggrement and related stock subscription agreement. At
June 30, 1997, the unpaid portion of this debt amounted to $60,000.
See accompanying notes to financial statements.
5
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMEN STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998
(UNAUDTED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial
statements have been prepared in accordance with
generally accepted accounting principles and the rules
and regulations of the Security and Exchange Commission
for the interim financial information. Accordingly,
they do not include all the information and footnotes
necessary for a comprehensive presentation of financial
position and results of operations.
It is management's opinion, however that all material
adjustments (consisting of normal recurring
adjustments) have been made which are necessary for a
fair financial statements presentation. The results
for the interim period are not necessarily indicative
of the results to be expected for the year.
For further information, refer to the consolidated
financial statements and footnotes include in the
company's Form 10 for the year ended September 30, 1997
and six months ended March 31,1998.
NOTE 2 - NOTES PAYABLE
On May 30, 1998, a current shareholder of
the Company executed a promissory note for $10,000.
The $10,000 note proceeds were deposited in their
entirety into the Company's bank accounts. The notes
is for a one-year period, can be prepaid or extended,
and bear interest at 5% per annum. If the note is
extended past the maturity date, the interest rate will
increase to 7% per annum. On October 2, 1997 and
October 27, 1997, a current shareholder had also
executed two promissory notes for $60,000 and $100,000,
respectively, having the same terms and conditions as
the new $10,000 note. Therefore, as June 30, 1998,
notes payable aggregated $170,000.
NOTE 3 - STOCK SPLIT
On May 26, 1998, the board of directors
approved and the shareholders consented to a
five-for-one stock split of the Company's issued and
outstanding common stock. As a result of the stock
split, the Company's outstanding common shares were
increased to 18,020,000 from 3,604,000. Concurrent
thereto, an additional 2,000,000 shares were issued for
consulting services. As a result of these
transactions, an amount of $1,641 was transferred from
the additional-paid-in-capital account to the common
stock account.
NOTE 4 - SUBSEQUENT EVENT
On September 30, 1998, the Company executed
a Preliminary Cooperation Agreement to enter into a
Sino-foreign joint venture with a corporation currently
operating in China. The joint venture will allow the
Company or its wholly owned subsidiary and/or its
participating strategic partner(s) to participate in
the construction and development of a nationwide
internet network in China and other telecommunication
projects as well as research, development, and
manufacturing of telecom equipment when opportunity
rises. Under this Preliminary Cooperation Agreement,
the Company will contribute capital equivalent to seven
million dollars to the joint venture company towards
its registered capital, accounting for 70 percent of
the total registered capital of the joint venture
company. The contribution will be in cash or tangible
assets approved by the two parties.
On November 9, 1998, the Company executed a
Agreement and Plan of Reorganization (the "Agreement")
with IDN Telecom, Inc. ("IDN"), a California
corporation. The effective date of the Agreement is
November 12, 1998 and the closing date of the Agreement
is March 31, 1998, which can be accelerated or extended
with both parties' consents. Upon closing of the
Agreement, the Company will issue 20,030,000 shares of
common stock of the Company to IDN's current
shareholders in exchange of 100 percent of IDN's common
stocks outstanding.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City
of Los Angeles, California on the 15th day of December 1998.
ASPAC COMMUNICATIONS, INC.
/s/ Marc F. Mayeres
Marc F. Mayeres
President
Pursuant to the requirements of the Securities Act of 1934, as
amended, this amended 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 December 15, 1998
WEINBERG & COMPANY PA
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in the Form 10-SB Registration Statement
of Aspac Communications, Inc. our reports for the year ended September
30, 1997 and six months ended March 31, 1998, dated February 23, 1998
(except for Notes 3, 4, and 5(c)(d)(e) and (f), as to which the date
is June 10, 1998 and May 13, 1998 (except for Notes 3, 4, 5 and 7, as
to which the date is June 10, 1998), respectively, relating to the financial
statements of Aspac Communications, Inc. which appear in such Form 10-SB.
WEINBERG & COMPANY, PA
Certified Public Accountants
Boca Raton, Florida
December 16, 1998
