SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
INITIAL REPORT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended May 31, 1999
------------
Commission file number ___________
SUNFLOWER (USA), LTD. _____
------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 82-0349651
------------------------- -----------------------------
(State of incorporation) (I.R.S. Employer I.D. Number)
764 Industry Drive, Building 16, Tukwila, Washington 98188
----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (206)-394-9701 or 394-9702
--------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes , No X .
----- -----
The Registrant's revenues for its most recent fiscal year ended May 31, 1999
were $18,172,423.
As of May 31,1999, the Registrant has 4,536,667 shares of common stock
outstanding. The aggregate market value (based on average high bid and low ask
price of such common equity as quoted on the OTC Electronic Bulletin Board) of
common stock held by non-affiliates of the Registrant (578,333 shares) was
approximately $1,677,165.
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements made in this Annual Report are "forward-looking
statements" (within the meaning of the Private Securities Litigation Reform Act
of 1995) regarding the plans and objectives of management for future operations.
Such statements involve known and unknown risks, uncertainties and other factors
that may cause actual results, performance or achievements or SunFlower (USA)
Ltd., a Nevada corporation (the "Company") to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements the forward-looking statements made in this Report
are based on current expectations that involve numerous risks and uncertainties.
The Company's plans and objectives are based, in part, on assumptions involving
the growth and expansion of business. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future economic,
competitive and market conditions and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
the control of the Company. Although the Company believes that its assumptions
underlying the forward-looking statements are reasonable, and of the assumptions
could prove inaccurate and, therefore, there can be no assurance that the
forward-looking statements made in this Report will prove to be accurate. In
light of the significant uncertainties inherent in the forward-looking
statements made in this Report, particularly in view of the Company's early
stage of operations in the United States, inclusion of such information should
not be regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
REVERSE MERGER
The Company with the exact name of SunFlower (USA) Ltd. It was originally
incorporated under the laws of the State of Washington as Lucky Three Mining Co.
on February 13, 1979. During 1979, the Company successfully made a public
offering of its common stock. On August 11, 1995 the Lucky Three Mining Co.
changed its name to Pellet America Corporation, a Nevada corporation ("Pellet"),
through a merger, and reincorporated in the State of Nevada. Pellet was
incorporated on July 18, 1995. The name of Pellet was changed to SunFlower (USA)
Ltd., after a reverse merger with SunFlower Industry (BVI) Co. Ltd. on October
5, 1998.
During the reverse merger, the shareholders of Pellet at a shareholders meeting,
approved the acquisition of SunFlower Industry (BVI) Co. Ltd., for stock. Pellet
issued 9,500,000 shares of its common stock for all the outstanding share of
SunFlower Industry (BVI) Co. Ltd., which owns all of the stock of SunFlower
Industry Co. Ltd., which is located in the People's Republic of China (PRC). The
shareholders, at that same meeting, voted to change the name of Pellet America
Corporation to SunFlower (USA), Ltd. The shareholders of Pellet also elected a
new board of directors and simultaneously accepted the resignation of the
incumbent directors. On March 1, 1999, the company's shareholders approved a 3
for 1 reverse stock split, effective March 1, 1999. Consequently, there are
4,166,666 shares of common stock outstanding on March 1, 1999.
2
<PAGE>
THE COMPANY
SunFlower (USA), Ltd. (the "Company") owns 100% of its subsidiary - Sun
Flower Industry Co. Ltd. (a Sino-foreign joint venture enterprise), which
occupies 364,000 square feet of modern manufacturing space and modern offices,
located at the City of Sheng Yang, Manchuria, of the PRC. The main business of
the Company is operated by its PRC subsidiary - SunFlower Industry Co. Ltd.,
which has been in operation in PRC since 1992.
The Company is in the business of manufacturing and sales of non-ferric metals
such as copper and nickel alloy. The Company also manufactures copper tubing and
sheet. With assets over 45 million US dollars, the Company is the 46th largest
private enterprise, and the third largest manufacture of copper wire and tubing
in the PRC. The Company's main business is the manufacture of copper wire used
by electric utilities and transformer manufactures. Total annual production
capacity of the Company will be increased from 20,000 metric tons to 30,000
metric tons of copper and alloy products when the expansion is completed within
the next few months. The Company sells its products through its own sales
force mostly within the PRC. Sales and profit of the Company has been
increasing in the past three years. The amounts have reached approximate $18.2
million in annual sales and approximate $2.5 million in net profits for the
fiscal year ended on May 31, 1999. The Company is in an expansion mode and
plans to enter into the alloy and copper markets in the US. It will also
continue its sales growth and increasing market presence in the PRC alloy
markets.
The Company's shares of common stock are listed on the OTC "BB" (or NASDAQ),
under the symbol "SFLW". The Company has 50,000,000 shares of authorized common
stock and approximate 4,536,667 shares of common stock outstanding on August 31,
1999.
Signature Stock Transfer, Inc., located at 14675 Midway Road, Suite 221,
Dallas, Texas 75244, serves as the transfer agent and registrar for the
Company's common stock.
THE MARKET
The Company focuses it products in the copper and alloy industry.
Presently, most of the products are sold in the PRC. As the PRC economy
continues to grow, the market of the Company also continue to expand. Through
the sales and marketing efforts, product recognition and after sales services,
the Company becomes the third largest manufacturer of copper pipe and wire in
the PRC. Currently, copper pipes and alloy products are ready to market in the
US, using SunFlower (USA) Ltd. brand name. It is to expand its sales and make
the Company a global player.
3
<PAGE>
COMPETITION
Two largest manufacturers of the copper products (i.e. Lou Yang Copper
Industry Co., and Shanghai Copper Work Co.) are the potential competitors of the
Company. However, these are largest factories are state/government owned
enterprises, and are not profit motivated. In addition, all state owned
enterprises are responsible for many social welfare programs, such as operating
medical clinics, schools to take care of its employees and local communities.
Consequently, these two largest copper producing companies are not a real threat
to the Company. The Company is able to take advantage of its operational
efficiency of the privately owned enterprises and to expand its market share. In
1998, the Company is rated as the most effective and the largest privately owned
copper and non-ferric alloy manufacturer in PRC.
SALES AND MARKETING
The Company manufactures many different types of copper products and non-ferric
metal alloys, including copper pipes, sheets, wires, belts, white copper, nickel
alloy, and non-oxygen coppers. The Company sells and promotes its products
through its own sales and marketing forces. Most of the sales were made in the
PRC market. The Company has started its sales in small quantities, to Germany
and Japan in early 1999. In July 1999, it also establishes an office at Tukwila,
Washington, in order to expand the operations in North America.
The Company receives sales orders mainly from electrical utilities and power
generating industries. The products are used in the high-voltage power
transmission, turbines, electrical cables, heat exchangers, refrigerators and
air conditioners.
MAJOR CUSTOMERS
The Company's major customers are Harbin Turbine Manufacturing Company,
Northeast Electric Authority, Shen Yang Cable Factory, Northeast Transmission &
Transformer Manufacturing Company, First Automotive Work Company and
governmental agencies of the PRC. Many of these customers have been customers of
the Company since 1992.
STRATEGY
The Company is position itself aggressively to expand the sales both in the US
and PRC markets. A vertical integration strategy has been adopted by the Company
leveraging on the in-expensive PRC labor force and its US company name, in order
to expand its existing low-end products to cover the high-end products. To
implement the product integration strategy, the Company will acquire an American
company of high-end products. The acquisition will allow the Company's immediate
US market presence and sales, so that the Company will become a major player in
the global markets.
As the PRC economy continues to grow strongly at a rate over 7% each year, the
Company has started to expand its manufacturing facilities, equipment and
machinery in 1998 and 1999. The objective of upgrading its product quality and
expanding its product capacities is to capture more of the market share in PRC.
Through the investment in resources and capital in the recent years, the Company
has received the ISO-9002 International Quality Certificate for the production
excellence in 1999. In addition, the annual manufacturing volume is approaching
30,000 metric tons in 1999.
4
<PAGE>
BUSINESS FORECAST
The current national policy of the PRC is to restructure or shut down most
of the ineffective state-owned factories and enterprises in the metal/alloy
industry. Management has formulated plans to seize upon this historic
opportunity to expand it penetration in the non-ferrous metal industry in the
PRC by expansion of its facilities and/or by acquisition of other factories.
The Company has in place an experienced and successful management team with many
years of experience working together in the industry. Upon completion of the
facilities under construction, the Company will further increase its output
annually and become the Number 2 copper producer in the PRC.
With the combination of 1) growing PRC markets, 2) new sales in the US and 3)
implementation of vertical integration, the Company is to cover the entire
spectrum of copper and alloy product lines. It is the Management's objective to
achieve a minimum sale and profit growth of 18% annually over the next 5 years.
The Management is confident that the initial US sales will be made in the near
future and the expected annual sales will reach $80,000,000 for the fiscal year
ended on May 31, 2003.
EMPLOYEES
As of May 31, 1999, the Company employed approximately 878 full time
personnel. The majority of the employees are stationed in the Company's
subsidiary located in Shen Yang City, Manchuria of PRC. Historically, the
Company has had no difficulty in hiring additional employees, and it anticipates
that it will be able to hire additional employees in the future as needed, in
connection with the growth of its business.
In July 1999, the Company started to hire full time staff in the US to operate
its US office located at Tukwila, Washington, in the suburban of Seattle. At
the present, three (3) full time employees work in the US office. The number of
US employees expects to increase to meet its operational needs.
RESEARCH AND DEVELOPMENT
None of the Company's employees are engaged solely in research and
development. However, Mr. C. R. Wong, Senior Engineer, and Mr. Chung Kwa,
Engineer, as well as certain other employees devote a substantial portion of
their time to research and development activities in its PRC facilities.
During the fiscal year ended May 31, 1999 and 1998, the Company spent
approximately $211,000 and $208,000 respectively, on research and product
development activities, none of these costs were borne by customers. The Company
continues to conduct research and product development for possible additions to
its product line and to incorporate new technologies into its manufacturing
processes to ensure its manufacturing costs remain competitive.
5
<PAGE>
AWARDS
The Company's products have been rated by government agencies as the finest
quality, and having been so rated, its orders from governmental agencies and the
private sector have continued to increase. The Company has been appraised as an
"advanced Enterprise" by the regulatory agencies. In addition, many honors and
awards of excellence have been received from governmental for the quality of its
products, which include:
- - Winner of the 1997 "Shen Yang City Technology Enterprise Award";
- - Winner of the " AAA Enterprise Award", awarded by the Lian Ning Province;
- - Recipient of the "Best Utilities Industry Supplier Award";
- - Recipient of the "Excellent Defense Contractor Award";
PATENTS AND OTHER INTELLECTUAL PROPERTY
It is the practice of the Company to seek patent protection for its
products and technology. After the establishment of its United States
Operations, the Company will conduct an internal review of its products and
technologies to determine if patent applicants should be filed in the United
States Patent and Trademark Office.
PRODUCT LIABILITY AND WARRANTIES
It is the policy of the Company to replace any defective product within a
reasonable time after delivery to the customer should the product prove to be
defective. As a result, the Company's quality control standards and
procedures followed by the Company, there are only very few occasions of
product complaints by its customers.
ITEM 2. PROPERTIES
The manufacturing facilities of the Company are on a 10 acres of land
located at the Technology & Economic Zone of Shen Yang City, Manchuria, PRC.
The total manufacturing facilities occupy 320,000 square feet of space and the
administrative offices occupy 42,000 square feet.
As result of the recent expansion, the Company now owns four (4) major plants as
well as various ancillary facilities such as a tool shop, boiler rooms (2),
laboratories (4), a warehouse, employee & executive dining rooms (4), a worker
dormitory and car garages etc, on the same premises. Factory No.1 the existing
plant (55,750 square feet) is constructed in 1992. It produces various copper
sheets and strips. Factory No. 2 is the new plant (98,750 square feet). It is
completed in 1998 and produces various types of copper pipes. Factory No.3
(43,808 square feet) is completed in 1999. It manufactures various kinds of
copper wires and other alloy products. Factory No. 4 (77,601 square feet) has
completed of its building in 1999. Equipment needs to be installed. It is
designated to manufacture high-end metal pipes. Most of the major machines such
as annealing equipment, and automated pipe production equipment are purchased
from the United States or Japan. As a result of the expansion, the total Company
assets is increased by $14,522,931 to $45,522,931 in 1999 as comparing to
$31,027,887 in 1998. As the expansion is financed by debts and operating
profits, the liabilities of the Company has been increased in portion to its
asset increase, during the current year.
6
<PAGE>
In July 1999, the Company leases an executive office in the suburban area of
Seattle, with the address of 764 Industry Drive, Tukwila, Washington 98188. The
Tukwila office is to be used as its operating base to conduct business and sales
activities in the US.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently involved in any litigation and is not aware of
any threatened litigation involving the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTER OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year ended
May 31, 1999 to a vote of security holders.
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
THE TITLE AND CLASS OF ISSUER'S SECURITIES
The Company has only one (1) class of equity securities authorized, which
is 50,000,000 shares designated common stock. The par value of the Issuer's
Common Stock is $0.001.
REVERSE STOCK SPLITS AND NAME CHANGE
On March 1, 1999, the Board of Directors of the Company approved a 1-for-3
reverse stock split on its common stocks in the amount of 12,500,000 shares and
reduced the stock outstanding to approximately 4,166,666 shares. In late March
1999, the Board of Directors also approved an issuance of maximum of 400,000 new
common shares, subscribed below, to raise maximum of one million dollars of
equity capital. Consequently, the Company's common shares outstanding were
increased to approximate 4,536,667 shares as of August 31, 1999.
ISSUING NEW COMMON STOCK
The Company offered for sales of approximately 400,000 shares of Common
Stock to raise a maximum of $1,000,000 in 1999. Two separate offerings were
made: 1) The first offering was for sales of approximate 210,000 shares at
$2.50 and 2) the second offering was for sale of approximate 180,000 shares at
$2.80. These offerings were made in reliance upon and exemption from
registration under the federal and state securities laws provided by Regulation
D; Rule 504 of the Securities and Exchange Commission. In the offerings, the
net proceeds after deduction of sales commission, professional fees, are
approximately $ 820,000. These proceeds are used to acquire equipment and
inventory. Mr. John. P Boesel, III, Syndication Manager, of Yee, Desmond,
Schroder & Allen, is the lead broker for the two offerings. As a result, the
Company has approximate 4,536,667 shares outstanding on August 31, 1999.
7
<PAGE>
<TABLE>
<CAPTION>
MARKET PRICE
BID ASK
------ -----
HIGH LOW HIGH LOW
1998
<S> <C> <C> <C> <C>
Oct. 5 - Dec. 31. $2.125 $0.25 $3.125 $0.125
1999
Jan. 1 - Mar. 31. $ 2.25 $0.75 $ 2.25 $ 1.25
Apr. 1 - Jun. 30. $ 2.75 $2.25 $ 3.00 $ 2.25
Jul. 1 - Sep. 30 $ 4.00 $2.75 $ 4.25 $2.875
</TABLE>
The bid and ask prices of the Common Stock on September 23, 1999 were $3.5
and $3.75, respectively, as quoted on the Bulletin Board under the symbol "SFLW"
As of September 23, 1999, there were approximate 1,051 stockholders of the
Common Stock.
DIVIDENDS
Since inception, the Company has not paid or declared any cash dividends on
its Common Stock. The Company 's Board of Directors does not currently plan to
issue cash dividend. However, the Company may consider distributing profit
through cash dividends, when the financial situations justify such a practice.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements contained in this initial report on Form 10-SB concerning
the Company's business outlook or future economic performance; anticipated
profitability, gross billings, commissions and expenses or other financial
items; and statements concerning assumptions made or exceptions as to any future
events, conditions, performance or other matter are "forward-looking statements"
as that term is defined under the Federal Securities Laws. Forward-looking
statements are subject to risks, uncertainties and other factors, which would
cause actual results to differ materially from those stated in such statements.
Such risks, uncertainties and factors include, but are not limited to, (i) the
uncertain acceptance of Company's products in the United States, (ii) the
uncertain result of Company's proposed merger of a US company to its vertical
integration strategy, (iii) that the Company has expanded and grown rapidly and
there can be no assurance that the Company will continue to be able to grow
profitably or manage its growth, (iv) risks associated with the political,
economic situation in PRC and the currency exchange rates between RMB of PRC and
US Dollars,(v) competition, (vi) the Company lack of experience in doing
business in the United States, (vii) the loss of services of key executives,
individuals could have a material adverse effect on the Company's business,
financial condition or operating results, (viii) litigation and labor disputes
because of operations and /or transactions in both US and overseas, and (ix)
possible tax exposures, as the Company is subject to various taxes from more
than one tax authorities, and (x) the control of the Company by Edward Liu.
8
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth selected operations data for the periods
indicated.
<TABLE>
<CAPTION>
Fiscal Year Ended May 31
------------------------
1999 1998
---------- -----------
<S> <C> <C>
Net Sales . . . . . . . . . 18,172,423 15,851,299
Cost of goods sold. . . . . 14,341,179 13,157,055
Gross profit. . . . . . . . 3,831,244 2,694,244
Selling Expenses. . . . . . 146,060 179,721
General & Administration. . 742,903 401,486
Other income (expenses) . . 788,792 (299,595)
Provision for income taxes. 1,250,051 0
Net income. . . . . . . . . 2,481,022 1,813,442
</TABLE>
NET SALES
The Company's net sales for fiscal year of 1999 increased $2,321,124 or
14.64 % to $18,172,423 from $15,851,299 for fiscal year of1998. The increase was
primarily due to continuing high customer acceptance of the products, effective
sales effort, supported by the expanding manufacturing capacity, and continuing
economic growth in PRC.
COST OF GOODS SOLD
The Company's cost of goods sold for the fiscal year of 1999 was
approximately $14,341,179 an increase of approximately $1,184,124, or 9%, from
approximately $13,157,055 for 1998. Such increase reflects the higher sales
volume recorded in 1999.
SELLING EXPENSES
The Company's selling totaled approximately $146,060 in 1999, which
represents a decrease of $33,661, or 18.73% from approximately $179,721 in
1998. The decease was primarily the result of continuing strong demand for the
Company's high quality products by its existing customers. The high acceptance
of Company's product in the market, resulted in lower sales cost of the company.
GENERAL & ADMINISTRATIVE EXPENSES
The Company's general and administrative expenses totaled approximately $742,903
in 1999, an increase of approximately $341,417 or 85%. The increase was
primarily due to continuing expansion of its operations in the US and the NASDAQ
listing related expenses.
9
<PAGE>
OTHER INCOME/(EXPENSES)
Due to the price change of copper raw material, the Company sold some of its
copper material in the amount of approximate US$843,000 and realized profit
during the current year. This income is recorded under other expense accounts
to offset the other expenses. While in the past years, no such sales activities
were incurred. The Company management believes that similar activities may be
continue in the future, to maximize the Company's profitability.
PROVISION FOR INCOME TAXES
The Company made an income tax provision for its subsidiary's profit
incurred in the PRC. The tax provision of $1,250,051 was made based on
approximately 30% of the 1999 income before tax of $3,731,073. While in the past
no such a tax provision was made, as the Company entitled a tax exemption status
in accordance with the PRC income tax rules and regulations in 1998 and 1997. As
the PRC tax rules and regulations are being modified, the Management took a
conservative approach and recorded the 1999 income tax provision to discharge
its potential tax liabilities in the PRC. No tax provision is made in the US,
since the Company has not engages in operational activities until after May 31,
1999.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its operations through a combination
of cash generated from the operations, bank financings and distributions from
the retained earnings. For the fiscal ended May 31, 1999, the Company's
operating activities provided cash of $3,587,124 as its source of fund. The
Company's changes in the financial positions of operating assets and liabilities
also provided additional cash of approximately $19,172,227 for the fiscal year
ended May 31, 1999. On the other hand, the Company's investing activities
absorbed approximately $22,645,079 of cash during the fiscal year. As a result
of the above activities, the Company resulted in a net cash in- flow of $114,272
in the current year.
The Company believes that funds available in 1999 will be adequate to meet its
operating requirements, and its expansion needs. As discussed in ITEM 5 that the
Company has started its equity capital raising activities, the Company may
continue to use its equity financing, operating income and debt financing to
expand its operations both in the US and PRC and meet its growth objective and a
vertical integration strategy.
Other than the foregoing and the risk factors discussed below, the
Management knows no trends, demands, or uncertainties that are reasonably likely
to have a material impact on the Company's short term liquidity or capital
resources.
INFLATION
It is believed that inflation has not had a material impact on the
Company's business in recent years.
10
<PAGE>
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards 133 - Accounting for Derivative
Instruments and Hedging Activities (SFAS 133) was recently issued. SFAS 133
established accounting and reporting standards for derivative financial
instruments and for hedging activities. The Company does not currently engage
in any activities that would be covered by SFAS 133.
YEAR 2000 COMPLIANCE
The Company has implemented a Year 2000 (Y2K) program aimed at ensuring
that its Company systems, applications and equipment will function properly
beyond 1999. As a part of this program, the Company conducted an assessment of
its equipment and machinery during August of 1998. The Company's machinery does
not have timers or date counters; therefore, are not subject to Year 2000
problems. The Company continuously seeks to upgrade and improve its computer
systems and software to better service customers and to support its growth. As a
result, all of the Company's computer systems and software have been recently
acquired or upgraded, and the Company believes they are Year 2000 compliant,
though there can be no assurance in this regard.
Because the Company replaced or upgraded its computer systems and software
in conjunction with its normal business practices, it has not allocated
additional resources or attributed additional costs to the Year 2000 compliance.
The Company will continue to assess and test newly purchased machinery and
computer-related hardware and software to ensure such items comply with Year
2000.
OPERATING RISKS
The Company's main operations are conducted in the PRC. Accordingly, the
business, financial conditions and operations may be influenced by the
political, economic and legal environment in the PRC. The Company's operations
maybe subjected to special considerations and risks not typically associated
with companies in North America. The risk are specified as follows:
POLITICAL CONSIDERATIONS
The Company's business may be adversely affected by political, economic and
social uncertainties in China. A change in policies by the Chinese government
could adversely affect the Company's interest by, among other things, changes in
laws, regulations, or the interpretation thereof, confiscatory taxation,
restrictions on currency conversion, imports and sources of suppliers, or the
expropriation of private enterprises. Although the Chinese government has been
pursuing economic reform policies for the past 17 years, no assurance can be
given that the Chinese government will continue to pursue such policies or that
such policies may not be significantly altered, especially in the event of a
change in leadership, social or political disruption or unforeseen circumstances
affecting China's political, economic and social life.
11
<PAGE>
ECONOMIC CONSIDERATIONS
The economy of China differs significantly from the United States economy in
such respects as structure, level of development, gross national product, growth
rate, capital reinvestment, resource allocation and self-sufficiency, rate of
inflation and balance of payments position, among others. Since the early 1950s,
the economy of China has been a planned economy subject to five-year and annual
plans adopted by central authorities, which set forth production goals. Only
recently the Chinese government encouraged substantial private economic
activities. The Chinese economy has experienced significant growth in the past
five years, but such growth has been uneven among various sectors of the
economy. There can be no guarantee that the government's pursuit of economic
reforms will be consistent or effective. Action by the central government of
China could have a significant adverse effect on economic conditions in China.
Further, much of the economic activity is export driven and, therefore, affected
by developments in the economies of China's principal trading partners.
LEGAL SYSTEMS
In December 1982, the National People's Congress of China amended the
Constitution of China to authorize foreign investment and to guarantee the
"lawful rights and interest" of foreign investors in China. Despite the
subsequent activity and progress in developing the legal system, China does not
have a comprehensive system of laws. Enforcement of existing laws may be
uncertain and sporadic and implementation and interpretation thereof
inconsistent. The Chinese judiciary is relatively inexperienced in enforcing the
laws that exist, leading to a higher than usual degree of uncertainty as to the
outcome of any litigation. Even where adequate law exists in China, it may be
impossible to obtain swift and equitable enforcement of such law or to obtain
enforcement of a judgment by a court of another jurisdiction.
While Chinese law expressly protects the status and rights of Sino-foreign joint
venture enterprises, including their right to use land during the term of their
respective joint venture contracts, the states reserves the right, in extreme
and exceptional circumstances, to terminate the joint venture and provide
compensation therefor. In such an event, a joint venture's right to use land
would terminate and all plant and facilities would revert to the state in
exchange for just compensation.
GOVERNMENT CONTROL OF CURRENCY CONVERSION AND EXCHANGE RATE RISKS
The Company receives its revenues in the PRC in Renminbi, which is not freely
convertible into foreign exchange. However, the Company requires foreign
currency to fund a portion of its operations. For example, the Company
requires, and expects to require in the future, U.S. dollars to purchase
equipment for expansion projects. In addition, revenues will need to be
converted into United States dollars, Hong Kong dollars and other currencies in
the amounts needed for the Company to discharge obligations denominate in
foreign currency. The PRC Government imposes control over its foreign currency
reserves in part through direct regulation of the conversion of Renminbi into
foreign exchange and through restriction on foreign imports.
12
<PAGE>
In general, domestic enterprises operating in the PRC must price and sell their
goods and services in the PRC in Renminbi and are also required, with certain
exceptions, to sell all their foreign exchange revenues to designated foreign
exchange banks in the PRC. In addition, domestic enterprises much provide
satisfactory evidence of their need for foreign currency before converting
Renminbi to foreign currency through designated foreign exchange banks. However,
according to regulations, which took effect on July 1, 1996, foreign investment
enterprises may be able to access foreign exchange from both designated foreign
exchange banks and swap center, provided that such foreign exchange will be used
for current account transactions.
Prior to January 1, 1994, there was significant volatility in the exchange rate
of Renminbi to U.S. dollars Although the Renminbi to U.S. dollar exchange rate
has been relatively stable since January 1, 1994 and the PRC government has
stated its intention to intervene in the future to support the value of the
Renminbi, there can be no assurance that exchange will not again become volatile
or that the Renminbi will not devalue significantly against the U.S. dollar.
Exchange rate fluctuations may adversely affect the Company's financial
performance and ability to meet its obligations because of its current and
future foreign currency denominated liabilities and may materially adversely
affect the value, translated into U.S. dollars, of the Company's net fixed
assets, earnings and any declared dividends.
The current restrictions and uncertainties relating to the currency conversion
system in the PRC give rise to risks affecting the ability of the Company to
obtain adequate foreign exchange at acceptable rates to meet its foreign
exchange needs.
ENVIRONMENTAL LIABILITY EXPOSURE
The Company's manufacturing facilities are subject to PRC national and local
environmental protection regulations which currently impose fees for the
discharge of waste substances, require the payment of fines for pollution, and
provide for the closure by the PRC Government of any facility that fails to
comply with orders requiring it to cease of improve upon certain activities
causing environmental damage. The Company believes its environmental protection
facilities and systems are adequate for it to comply with the existing national,
provincial, and local environmental protection regulations. However, there can
be no assurance that the PRC national, provincial, or local authorities will not
impose additional or more stringent regulations which would require additional
expenditure on environmental matters or changes in the Company's processes or
systems.
FOREIGN CORRUPT PRACTICES ACT OF 1977
The Company management is aware of that it is subject to the U.S. Foreign
Corrupt Practices Act of 1977. The Act generally prohibits U.S. companies from
engaging in bribery or other prohibited payments to foreign officials for the
purpose of obtaining or retaining business. Foreign companies, including some
tat may compete with the Company, are not subject to these prohibitions. It is
Directors and executive officers best believe that no violation of the Foreign
Corrupt Practices Act by the Company is incurred.
13
<PAGE>
DEPENDENCE ON PRINCIPAL CUSTOMERS
During the fiscal year ended May 31, 1999, sales to 10 major customer
accounted for over 60% of the Company's sales. The dollar value of sales to
these customers is expected to increase steadily over the next several years due
to the fact that the Company is the only alloy manufacturer in the PRC, which
can produce certain products to meet the specifications and quality of its
customers. The Company maintains excellent relationships with its customers and
provides a high level of customer service. Upon completion of its expansion,
the Company will be in a position to continue to meet the demands of its
customers and, in addition to supplying its present line of products, will be
able to expand its offering of types of products.
RELIANCE ON KEY PERSONNEL
Despite that most of the key personnel and employees have been with the
Company for over 4 years, the operation of Company is dependent on the services
of its top ranking officers and employees. The possible loss of their services
or the inability to attract qualified personnel will have a material adverse
affect on the Company. No assurances can be given that the Company will be able
to continuing retain or attract such qualified personnel in the future.
ACCOUNTING FOR STOCK OPTIONS
In October 1995, the FASB issued Statement of Financial Accounting
Standards no. 123 "Accounting for Stock Based Compensation" (SFAS123), which
established the "fair value" method of accounting for stock based compensation
arrangements. The company has not adopted any Stock Option Plan as of May 31,
1999. But the Board of Directors may plan to adopt a stock option plan in the
future to reward the exceptional contributions to the Company by its management
and employees.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the audited consolidated financial statement of the Company on Item 14.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There are no changes in and disagreements with accountants on accounting
and financial disclosure.
14
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL CONSULTANTS
The Director and executive officers of the Company are appointed annually
at the first meeting of the Company's Board of Directors held after each annual
meeting of stockholders. Each executive officer will hold office until his
successor is duly elected and qualified, until his resignation or until he shall
be removed in the manner provided by the Company's By-Laws. The entire Board of
Directors will be up for election at the next annual meeting of stockholders.
Non-executive Directors, which will be appointed, will have a three year term of
the non-executive directorship with the Company. The present term of office of
each Director will expire at the next annual meeting of stockholders.
MANAGEMENT
The Directors and executive officers of the Company were appointed on
October 5, 1998. As of May 31, 1999, the names and titles are as follows:
EDWARD LIU, AI DANG, 35, a Chairman & Director. He is also currently
Chairman & Director of the Board of the Company's PRC subsidiary. He has been a
Director and Chairman of the Board of that company since March, 1994. Mr. Liu
began his business career in 1988 as the factory manager of the Shen Jin
Automobile Repair Company. He then organized and became general manager of the
Shen Jin Enterprise Company Limited in 1990. In 1992, he founded SunFlower
Industry Company Limited with his own resources and the resources of his family
members and close friends. He is very influential business leader in the Shen
Yang City business and political community. He serves as a City Council Member
of Shen Yang City Counsel and as a Member of the Economics Committee of Shen
Yang City. His is the Vice President of the Chamber of Commerce of Shen Yang
City and a member of the Private Enterprise Association of Shen Yang City. He
has received various awards from Shen Yang City as "The 10 Best Entrepreneurs"
in Shen Yang City, as the "Best Young Executive", and as the "Excellent Manger".
Mr. Liu earned a Bachelor Degree in Business Administration (1988) from the
University of Shen Yang, PRC.
PAUL MENG, XIAN BAO, 35, President & Director. He is also currently
President & Director of the Company's PRC subsidiary. He has been a Director of
that company since March, 1994. Form 1984 to 1992, he was a Manager of the
Transportation Authority of Shen Yang City. He joined SunFlower Industries,
Ltd. in 1992 and was elevated to President in 1996. Mr. Meng received a
Bachelors Degree in Management (1984) from the University of Manchuria.
JOY KING ZHANG, XIAO JUN, 35, a Director and Vice President (North
America). Mr. ZHANG has been a Director of the Company since October 5, 1998. He
is also currently a Director of the Company's PRC subsidiary. He was the General
Manager of Northeast electric transmission & Transformation Group International,
Ltd., which is a subsidiary of Northeast Electric Transmission & Transformation
Co. Ltd., a listed public company traded on the Hong Kong Stock Exchange (Trade
#0042). Mr. Zhang earned a Bachelors Degree of Engineering (1987) and a Master
Degree in Economics from the University of Liao Ning (1991).
15
<PAGE>
WHITTY LIU, HUI DI, 35, is Director, Secretary & Treasurer. She is also
currently a Director, Secretary and Treasurer of the Company PRC's subsidiary.
She has been a Director of that company since March of 1994. Ms. Liu has more
than twenty years of experiences in cash management and accounting. She is the
sister of Edward Liu; the Chairman of the Company. She earned a Bachelor of
Science Degree from the University of Shen Yang (1975).
VIRGINIA TONG, ZHI QIN, 42, a Director and Vice President of Finance. She
is also currently a Director of the Company PRC's subsidiary. She has been a
Director of that Company since March of 1995. From 1980 through 1991, she was a
manager of a Shen Yang City Government. She is a member of the Accountants
Association, and the Private Enterprise Association of Shen Yang City. Ms. Tong
earned a Bachelor Degree in finance (1997) from the Shen Yang Institute of
Finance.
CHRISTINA ZHANG, XUE MEI, 40, a Director and Vice President of Sales. She
is also currently a Director of the Company PRC's subsidiary. She has been a
Director of that Company since March of 1995. She is a member of the Sales and
Marketing Association of Shen Yang City. Ms Zheng earned a Bachelors Degree in
Chinese Literature (1988) from the University of Liao Ning.
ZHAO BO YU, 56, a Director of Engineering. He joined the Company in 1992 as an
engineer. Mr. Zhao was associated by the Shen Yang Metal Factory Company from
1967 until 1992. He earned a Bachelor Degree in Non-ferrous metallurgy (1967).
NATHAN GOLDENTHAL, MD, 46, a Director. He has been the Director since October of
1998. Dr. Goldenthal has over 15 years of industrial management experience
related to waste recycling.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of October 18th, 1999, the outstanding
Common stock of the Company owned of record or beneficially by each person who
owned of record, or was known by the Company to own beneficially, more than
5% of the Company's common stock, and the name and shareholdings of each
Executive Officer and Director and all Executive Officers and Directors
as a group.
16
<PAGE>
<TABLE>
<CAPTION>
Name Shares Owned Percentage of Shares Owned
- -------------------------------------------- ------------ ---------------------------
<S> <C> <C>
Edward LIU, Ai Dang (1)
Chairman & Director 2,200,000 48.49%
- -------------------------------------------- ------------ ---------------------------
Paul MENG, Xian Bao (1)
President, Director 240,000 5.29%
- -------------------------------------------- ------------ ---------------------------
Whitty LIU, Hui Di (1)
Director, Treasurer &
Secretary. . . . . . . . . . . . . . . . . . 240,000 5.29%
- -------------------------------------------- ------------ ---------------------------
Joy King ZHANG, Xiao
Jun, (1) Director & VP. . . . . . . . . . . 120,000 2.65%
- -------------------------------------------- ------------ ---------------------------
Virginia TONG, Zhi Qin,
(1) Director &
Vice-President Finance . . . . . . . . . . . 80,000 1.76%
- -------------------------------------------- ------------ ---------------------------
Christina ZHANG, Xue
Mei, (1) Director and
Vice-President Sales . . . . . . . . . . . . 80,000 1.76%
- -------------------------------------------- ------------ ---------------------------
Nathan GOLDENTHAL,
M.D. (1) Director 333 0.0073%
- -------------------------------------------- ------------ ---------------------------
ALL EXECUTIVE
OFFICERS &
DIRECTORS AS A
GROUP (Seven Individuals). . . . . . . . . . 2,960,333 65.25%
- -------------------------------------------- ------------ ---------------------------
<FN>
All shares are held beneficially and of record and each record shareholder has
sole voting and investment power.
(1) These individuals are the Executive Officers and Directors of the Company and
may be deemed to be "parents or founders" of the Company as that term is defined in the
Rules and Regulations promulgated under the 1933 Act. The address at which each
Executive Officer and Director can be reached is the Company's headquarters, located at
764 Industry Drive, Building 16, Tukwila, WA. 98188.
</TABLE>
BOARD COMMITTEES
During the fiscal year ended May 31, 1999, the Director of the Company did
not formulate any formal committee. The Company is planning to formulate an
Audit Committee in the future.
FAMILY RELATIONSHIPS
There are only one family relationship among Directors. That is Mr. Edward
Liu and Ms. Witty Liu are brother and sister, who are the controlling
shareholders of the Company.
17
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the securities laws of the United States, the Company's Directors,
its Executive Officers (and certain other officers) and any persons holding more
than 5% of the Company's outstanding voting securities are required to report
their ownership in the Company's securities and any changes in that ownership to
the Securities and Exchange Commission. Based solely upon the Company's
reliance upon the written representations of its Directors and officers, the
Company believes that it is in compliance with Section 16(a) of the Exchange
Act.
ITEM 10. EXECUTIVE COMPENSATION
None of the executive and/or Director with total annual salary, pension,
other compensations and bonus exceeds $60,000.
STOCK INCENTIVE PLAN
The Company's Board of Directors has not adopted any Stock Incentive Plan
as of May 31, 1999. The Company is considering formulate such a plan in the
future to encourage its Directors, executive officers and employees to bring in
better operation results and to maximize the value of common stock. Stock
options may be granted to eligible participations in the form of Incentive Stock
Options (ISO's) under the Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") or options which do not qualify as ISO's (non-Qualify Stock
Options or "NQSO's")
DIRECTOR COMPENSATION
All authorized out-of-pocket expenses incurred by a Director on behalf of
the Company will be subject to reimbursement upon receipt by the Company of
required supporting document of such expenses. Although Directors may be
eligible to participate in the Company's future stock option and / or incentive
plan(s), Directors do not receive any additional compensation nor an annual
Director's fee at the present time.
INDEMNIFICATION AND LIMITATION ON LIABILITY OF DIRECTORS
The Company's Articles of Incorporation provide that the Company shall
indemnify, to the fullest extent permitted by the Nevada law, any Director,
officer, employee or agent of the corporation made or threatened to be made a
party to a proceeding, by reason of the former or present office of the person,
against judgments, penalties, fines, settlements and reasonable expenses
incurred by the person in connection with the proceeding if certain standards
are met. At present, there is no pending litigation or proceeding involving any
Director, officer, employee or agent of the Company where indemnification will
be required or permitted. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to Directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
18
<PAGE>
The Company's Articles of Incorporation limit the liability of its
Directors to the fullest extent permitted by the Nevada law. Specifically,
Directors of the Company will not be personally liable of monetary damages for
breach of fiduciary duty as Directors, except for (i) any breach of the duty of
loyalty to the Company or its stockholders, (ii) acts or omissions not in good
faith or that involved intentional misconduct or a knowing violation of law,
(iii) dividends or other distributions of corporate assets that are in
contravention of certain statutory or contractual restrictions, (iv) violations
of certain laws, or (v) any transaction from which the Director derives an
improper personal benefit. Liability under federal securities law is not
limited by the Articles. The officers of the Company will dedicate sufficient
time to fulfill their fiduciary obligations to the Company's affairs. The
Company ahs no retirement, pension or profit sharing plans for its officers and
Directors.
EMPLOYMENT CONTRACTS
The Company has entered into simple written employment agreements with its
executive officers as of May 31, 1999. When it becomes necessary, a more
detailed written employment contracts maybe entered between the Company and its
key personnel.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
None
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For a description of certain arrangements between the Company and its
affiliates, please see the discussion on ITEMS 1, 5, 6 and 9. There have been no
arrangements between the Company and any of its affiliates. The Company
currently does not have in force or effect any policies, procedures or controls
with respect to entering into future transactions with its officers, Directors,
affiliates or a related party.
ITEM 13. EXHIBITS AND REPROTS ON FORM 8-K
EXHIBITS
The exhibits as indexed below are included as part of this Form 10-SB. As
the Form 10-SB is the first filing to the Commission, no exhibits have
previously been filed as part of a Registration Statement pursuant to item 601
or Regulation S-B:
19
<PAGE>
REPORTS ON FORM 8-K
None.
ITEM 14
FINANCIAL STATEMENTS
The following financial statements of the Company are filed with this
report and can be found on the pages indicated below:
<TABLE>
<CAPTION>
Description Page No.
- ------------------------------------------------------------------- --------
<S> <C>
Independent Report on audited consolidated financial statements . 1
Consolidated Statements of Income and Retained Earnings . . . . . . 2
Consolidated Balance Sheet. . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Cash Flows. . . . . . . . . . . . . . . . 4
Notes to the Consolidated Financial Statements. . . . . . . . . . . 5-12
</TABLE>
<PAGE>
DICKSON V. LEE
CERTIFIED PUBLIC ACCOUNTANT, L.L.C.
_____________________________________________________________________
Main Address: 110 East 59th Street, 6th Floor, New York, New York 10022
- ------------ Telephone: (212) 909-0397 Fax: (212) 909-0322
Hong Kong Address: 19/F, 114-120 Lockhart Road, Wanchai, Hong Kong
- ------------------- Telephone: (852) 2882-5699 Fax: (852)2504-5336
China Address: Suite 2503, United Plaza, Shenzhen, China
- -------------- Telephone: (755) 271-0062 Fax: (755) 271-0389
_____________________________________________________________________
INDEPENDENT AUDITED REPORT
To The Board of Directors of
SunFlower (USA), Ltd.
764 Industry Drive,
Building 16,
Tukwila, WA 98188
We have audited the accompanying consolidated balance sheets of SunFlower (USA),
Ltd. as of May 31, 1999, and the related consolidated statements of income,
retained earnings, and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SunFlower, Ltd. as
of May 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ Dickson V. Lee, Certified Public Accountant, LLC
New York, New York
August 2, 1999
1
<PAGE>
<TABLE>
<CAPTION>
SUNFLOWER (USA), LTD.
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
Fiscal years ended May 31
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Sales (Note 2j). . . . . . . . . . $18,172,423 $15,851,299 $11,677,032
Cost of sales. . . . . . . . . . . 14,341,179 13,157,055 10,036,571
----------- ----------- -----------
Gross profit . . . . . . . . . . . 3,831,244 2,694,244 1,640,461
Selling expenses . . . . . . . . . 146,060 179,721 76,246
General & administration expenses. 742,903 401,486 397,791
----------- ----------- -----------
Operating profit . . . . . . . . . 2,942,281 2,113,037 1,166,424
Financial expenses (Note 2k) . . . 121,414 299,595 118,890
Other income (Note 2l) . . . . . . 910,206 0 0
----------- ----------- -----------
Income before tax. . . . . . . . . 3,731,073 1,813,442 1,047,534
Provision for income tax (Note 2m) 1,250,051 0 0
----------- ----------- -----------
Net Income . . . . . . . . . . . . $ 2,481,022 $ 1,813,442 $ 1,047,534
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
STATEMENT OF RETAINED EARNINGS
- ---------------------------------
<S> <C> <C> <C>
Retained Earnings, June 1 $ 812,814 $ 1,999,372 $ 951,838
Net Income. . . . . . . . 2,481,022 1,813,442 1,047,534
Less: Distribution. . . . (1,566,265) (3,000,000) 0
------------ ------------ ----------
Retained Earnings, May 31 $ 1,727,571 $ 812,814 $1,999,372
============ ============ ==========
</TABLE>
The notes on pages 5 to 9 form an integral part of these financial statements
2
<PAGE>
<TABLE>
<CAPTION>
SUNFLOWER (USA), LTD.
CONSOLIDATE BALANCE SHEET
For the period ended May 31
Assets 1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents . . . . . . $ 894,237 $ 779,965 $ 1,589,263
Accounts receivable (Note 2c) . . . . 3,635,170 780,778 235,753
Inventories less allowance (Note 2g). 4,707,556 6,824,447 2,327,180
Deposits and other advances (Note 2d) 7,311,523 13,640,964 14,917,991
------------ ------------ ------------
Total current assets. . . . . . . . . . 16,548,486 22,026,154 19,070,187
Fixed Assets (Note 2e)
Land & Building . . . . . . . . . . . 11,587,956 2,150,761 2,031,738
Machine & Others. . . . . . . . . . . 18,915,596 3,640,331 3,196,273
Less: Acc depreciation (Note 2e)
Land & Building . . . . . . . . . . . (608,176) (240,927) (171,218)
Machine & Others. . . . . . . . . . . (1,537,316) (1,558,432) (1,131,144)
------------ ------------ ------------
Fixed assets (net). . . . . . . . . . . 28,358,060 3,991,733 3,925,649
Other Assets
Construction in progress (Note 2f). . . 616,385 5,010,000 4,990,000
Total Assets. . . . . . . . . . . . . . $45,522,931 $31,027,887 $27,985,836
============ ============ ============
1999 1998 1997
Liabilities
Current liabilities
Accounts payable. . . . . . . . . . . $ 1,226,323 $ 1,662,981 $ 1,819,633
Bank Loans (Note 3) . . . . . . . . . 4,928,837 7,006,855 11,494,230
Other payables (Note 2h). . . . . . . 10,098,031 3,555,710 4,081,532
------------ ------------ ------------
Total current liabilities . . . . . . . 16,253,191 12,225,546 17,395,395
Long Term Liabilities (Note 3). . . . . 12,501,205 2,948,563 60,949
------------ ------------ ------------
Total Liabilities . . . . . . . . . . . 28,754,396 15,174,109 17,456,344
Owners' Equity (Note 4)
Paid in Capital (Note 5). . . . . . . 15,040,964 15,040,964 8,530,120
Retained earnings . . . . . . . . . . 1,727,571 812,814 1,999,372
------------ ------------ ------------
Total owners' equity. . . . . . . . . . 16,768,535 15,853,778 10,529,492
Total Liabilities
and Owners' Equity. . . . . . . . . . . $45,522,931 $31,027,887 $27,985,836
============ ============ ============
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SUNFLOWER (USA), LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED MAY 31
Cash flows from operating activities 1999 1998 1997
------------- ------------ -------------
<S> <C> <C> <C>
Net Income/(Loss) . . . . . . . . . . . . . . . . . . . . $ 2,481,023 $ 1,813,442 $ 1,047,534
Depreciation. . . . . . . . . . . . . . . . . . . . . . . 1,106,101 496,997 440,968
------------- ------------ -------------
3,587,124 2,310,439 1,488,502
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . (2,854,392) (545,025) (89,234)
Deposits, prepayments and other receivables . . . . . . . 6,329,441 1,277,027 (7,030,861)
Inventories (net) . . . . . . . . . . . . . . . . . . . . 2,116,891 (4,497,267) (707,218)
Accounts Payable. . . . . . . . . . . . . . . . . . . . . (436,658) (156,652) 1,010,011
Bank Loan . . . . . . . . . . . . . . . . . . . . . . . . (2,078,018) (4,487,375) (613,720)
Other payable and changes . . . . . . . . . . . . . . . . 6,542,321 (525,822) (2,680,796)
Long term liabilities . . . . . . . . . . . . . . . . . . 9,552,642 2,887,614 0
------------- ------------ -------------
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . 19,172,227 (6,047,500) (10,111,818)
Cash flows from investing activities:
Land & buildings acquired . . . . . . . . . . . . . . . . (9,437,195) (119,023) (187,581)
Machinery & others acquired . . . . . . . . . . . . . . . (15,275,265) (444,058) (370,635)
Long term investment. . . . . . . . . . . . . . . . . . . 0 0 0
Construction in progress. . . . . . . . . . . . . . . . . 4,393,615 (20,000) (75,066)
Depreciation written back . . . . . . . . . . . . . . . . (759,969) 0 0
Paid Up Capital . . . . . . . . . . . . . . . . . . . . . 0 6,510,844 8,117,313
Profit Distribution . . . . . . . . . . . . . . . . . . . (1,566,265) (3,000,000) 0
------------- ------------ -------------
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . (22,645,079) 2,927,763 7,484,031
Total cash increase . . . . . . . . . . . . . . . . . . . . 114,272 (809,298) (1,139,285)
Cash and cash equivalents at beginning of the year (June 1) 779,965 1,589,263 2,728,548
Cash and cash equivalents at end of the year (May 31) . . . 894,237 779,965 1,589,263
------------- ------------ -------------
Net increase in cash and cash equivalents . . . . . . . . . $ 114,272 ($809,298) ($1,139,285)
============= ============ =============
</TABLE>
The notes on pages 5 to 9 form an integral part of these financial statements.
4
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1). GENERAL
-------
SunFlower (USA), Ltd. (the Company) is registered in the State of Nevada, with
the place of business located at 764 Industry Drive, Building 16, Tukwila,
Washington 98188. It owns 100% of its subsidiary - SunFlower Industry (BVI)
Co. Ltd. (SunFlower (BVI)), which is incorporated in British Virgin Islands.
SunFlower (BVI) owns 100% of its subsidiary - SunFlower Industry Co. Ltd. (Sun
Flower), located in Sheng Yang City, People's Republic of China (PRC).
The Company's main activities are operated by its PRC subsidiary SunFlower,
which has been in operation since 1992. The Company engages in the
manufacturing and marketing of different types of alloys and copper products,
such as copper pipes, sheets, wires, plates, belts, white copper, yellow copper
and nickel alloy, etc. The Company receives its orders mainly from the utility
and power generating industries. Its products are used in the high-voltage
power transmission, turbines, electrical cables, heat exchangers, refrigerators
and air conditioners. Some products are sold to the Germany and Japan in the
current year.
2) PRINCIPAL ACCOUNTING POLICIES AND PRACTICE
----------------------------------------------
A) FISCAL YEAR ENDING MAY 31
The Company's fiscal year ends on May 31 of the following year. This fiscal year
policy has been adopted consistently in the past years.
B) BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries (See Note 1, General). All material intra-company balances and
transactions have been eliminated on consolidation.
C) ACCOUNTS RECEIVABLE
Accounts receivable is the sales amount to be received and is recorded net of
provisions for doubtful amounts.
D) DEPOSITS, ADVANCES AND OTHER RECEIVABLES
The balance includes deposits paid for purchase of raw materials & fixed assets,
advances given to company's employees for business travels and conferences,
short term loans to the company directors, prepayments and notes receivable (See
Note 9, Related Party Transactions). The breakdowns are summarized as follows:
5
<PAGE>
<TABLE>
<CAPTION>
May 31, 1999 May 31, 1998 May 31, 1997
------------- ------------- -------------
<S> <C> <C> <C>
- - Deposits, advances $ 7,158,246 $ 11,635,283 $ 13,932,649
- - Prepayment . . . . 93,036 1,305,946 857,631
- - Notes receivables. 60,241 699,735 127,711
------------- ------------- -------------
$ 7,311,523 $ 13,640,964 $ 14,917,991
</TABLE>
E) PROPERTY, PLANT AND EQUIPMENT, AND DEPRECIATION EXPENSES
Company constructs major factory buildings and purchases equipment to expand its
manufacturing facilities in the current year. Consequently, the balance of its
fixed assets increased materially as of May 31, 1999 (See Note 3, Bank Loans).
Fixed assets are recorded at historical costs. Depreciation expenses are
calculated to write off asset costs after deducting the scrap values on a
straight line basis over the expected useful lives. The Company's policy
requires proper maintenance to ensure the useful lives of the fixed assets.
In 1999, the Company elected to update the useful lives of Machinery and
Equipment from 8 years to 18 years, to better reflect the lives of assets. The
resulting depreciation effect of this accounting policy does not materially
change the Company's operational results.
Detailed depreciation expenses of the Company for the past three years are as
follows:
<TABLE>
<CAPTION>
May 31, 1999 May 31, 1998 May 31, 1997
------------- ------------- -------------
<S> <C> <C> <C>
- - Building . . $ 345,772 $ 69,709 $ 64,598
- - Mach & Equip $ 760,329 $ 427,288 $ 376,370
</TABLE>
F) CONSTRUCTION IN PROGRESS
The amount of expansion while in progress is recorded under the Construction In
Progress account. When the construction is completed, the balance of the
Construction In Progress account is then transferred to the Property, Plant &
Equipment account.
G) INVENTORIES
Inventories are stated at a predetermined manufacturing cost during the year.
The cost includes direct materials, direct labor and manufacturing overheads.
Costs are then adjusted at the year end to reflect the actual value of the
inventories. Inventories are recorded on the "first-in first-out" basis. The
components of inventories are as follows:
6
<PAGE>
<TABLE>
<CAPTION>
May 31, 1999 May 31, 1998 May 31, 1997
------------- ------------- -------------
<S> <C> <C> <C>
- - Raw Materials. . $ 108,205 $ 3,522,968 $ 1,354,423
- - Work In Progress $ 3,622,814 $ 2,249,784 $ 446,652
- - Finished Goods . $ 976,537 $ 1,051,695 $ 526,105
------------- ------------- -------------
$ 4,707,556 $ 6,824,447 $ 2,327,180
</TABLE>
H) OTHER PAYABLES
The balance includes various payables including deposits received, accrued
expenses, notes payables, short term loans to the company by related companies.
I) FOREIGN CURRENCY TRANSLATION
The Company maintains its books and records in PRC currency (RMB) and translates
RMB into United States dollars. Foreign currency transactions are translated
into United States dollars at the applicable rates of exchange prevailing at the
dates of the transactions. Monetary assets and liabilities denominated at
applicable rates prevailing at the balance sheet date. Exchange differences
resulting from the above translation policy are included in the statement of
income.
J) SALES/REVENUE RECOGNITION
Product sales/revenue is recognized upon transfer of title of goods, this is in
accordance with the Generally Accepted Accounting Principle.
K) FINANCIAL EXPENSES
In the current year, interest expenses directly related to finance of Company's
purchase of new machinery and construction of buildings are capitalized as cost
of fixed assets, to properly reflect nature of these expenses.
L) OTHER INCOME
Due to the price change of copper raw material, the Company sold some of its
copper materials and realized profit during the current year. While in the past
years, no such sales activities were incurred. Per Company management, the
activities will continue in the future to maximize the Company's profitability.
(See Note 2g, Inventories).
M) INCOME TAX
The Company and its subsidiaries are subject to income taxes on an entity basis
on income arising in or derived from the tax jurisdiction in which they operate.
The current provision for income tax is provided at the applicable tax rates in
accordance with the relevant income tax laws and tax credits, when applicable,
may be applied. The accounts for income tax under the provision of Statement of
Financial Accounting Standard No. 109, which requires recognition of deferred
tax assets and liabilities for the expected future tax consequence of events,
using the liability method.
7
<PAGE>
3) BANK LOANS
-----------
As a result of a major expansion of the Company's manufacturing facilities,
loans from banks were secured to finance the expansion. The outstanding loan
balance amounted to US$4,928,837, being the portion repayable within one year,
is reflected under the Current Liabilities. The remaining loan balance of
US$12,501,205 is shown under the Long Term Liabilities.
4) STOCK AND SHAREHOLDERS
------------------------
The Company has 50,000,000 shares of authorized common stock with par value of
US$0.01 per share. No preferred stock is authorized and outstanding. During
the second quarter of the current year, the outstanding common shares of
12,500,000 were reduced to 4,166,667 common shares.
The Company's shares are listed and traded on the OTC "BB" (or NASDAQ), under
the symbol SFLW on October 4, 1998. Signature Stock Transfer, Inc. in Dallas,
Texas, serves as transfer agent and registrar for the Company's common stock.
During the forth quarter of the current year, approximate 370,000 additional
common shares were authorized to issue to the public in order to raise US$1
million (See Note 13).
Principal shareholding of the Company before the US$1 million fund raising is as
follows:
<TABLE>
<CAPTION>
Name Title Shares Percentage
Owned Owned
<S> <C> <C> <C>
Edward LIU. . . . . Chairman/Secretary 2,200,000 52.800%
Paul MENG . . . . . Director/President 240,000 5.760%
Witty LIU . . . . . Director 240,000 5.760%
J.K. Xiao Jun ZHANG Director 120,000 2.880%
Virginia TONG . . . Director 80,000 1.920%
Nathan GOLDENTHAL . Director 333 0.008%
Christina ZHANG . . Director 80,000 1.920%
Total officers and directors as a group 2,960,333 71.050%
</TABLE>
5) PAID-IN-CAPITAL
---------------
The total paid in capital of the Company as of May 31, 1999 is US$15,040,964,
which is the same in 1998.
6) COMMITMENT AND CONTINGENCIES
------------------------------
No commitments and contingencies were noted as at May 31, 1999.
8
<PAGE>
7) YEAR 2000 ISSUES
------------------
The Company has implemented a Year 2000 (Y2K) program aimed at ensuring that its
Company systems, applications and equipment will function properly beyond 1999.
As a part of this program, the Company conducted an assessment of its equipment
and machinery during August, 1998. The Company's machinery do not have timers
or date counters and, therefore, are not subject to Year 2000 problems. The
Company continuously seeks to upgrade and improve its computer systems and
software to better service customers and to support its growth. As a result,
all of the Company's computer systems and software have been recently acquired
or upgraded, and the Company believes they are Year 2000 compliant, though there
can be no assurance in this regard.
Because the Company replaced or upgraded its computer systems and software in
conjunction with its normal business practices, it has not allocated additional
resources or attributed additional costs to Year 2000 compliance. The Company
will continue to assess and test newly purchased machinery and computer-related
hardware and software to ensure such items comply with Year 2000.
8) INFLATION
---------
It is believed that inflation has not had a material impact on the Company's
business in recent years.
9) RELATED PARTY TRANSACTIONS
----------------------------
The Company has some facilities shared with its affiliated companies. The
financial effects of the shared facilities are not material. All other related
party transactions are reviewed and disclosed when material, in accordance with
FASB-57.
10) OPERATING RISKS
----------------
The Company's main operations are conducted in the PRC. Accordingly, the
business, financial conditions and results on operations may be influenced by
the political, economic and legal environment in the PRC. The Company's
operations may be subjected to special considerations and risks not typically
associated with Companies in North America.
11) FOREIGN CORRUPT PRACTICES ACT
--------------------------------
The Company is subject to the U.S. Foreign Corrupt Practices Act of 1977, which
generally prohibits U.S. companies from engaging in bribery or other prohibited
payments to foreign officials for the purpose of obtaining or retaining
business. Foreign companies, including some that may compete with the Company,
are not subject to these prohibitions. During the audit, no violation of the
Foreign Corrupt Practices Act by the Company is noted.
9
<PAGE>
12) RETIREMENT PLAN
----------------
The Company's employees in the PRC are all hired on a contractual basis, which
Company has no obligations for pension liabilities to the employees. In
addition, Company has no post-retirement or post-employment benefit plans.
13) SUBSEQUENT EVENT
-----------------
Company started raising its capital of US$1 million from the public pursuant to
Regulation D-Rule 504 to finance its factory expansion. A substantial amount of
the fund was raised before May 31, 1999. It was noted that the entire US$1
million fund was raised in August 1999. As a result, there were approximately
additional 370,000 common shares issued.
10
<PAGE>
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANT
SunFlower (USA),Ltd.
Tukwila, Washington
We hereby consent to the incorporation by reference of our report dated August
2,1999 relating to the consolidated financial statement of SunFlower (USA).Ltd.
appearing in the Company's Annual Report on Form 10-SB for the year ended May
31,1999.
We also consent to the reference to us under the caption "Experts" in your
financial statements.
/s/ Dickson V. Lee
-------------------------------
Dickson V. Lee, CPA, L.L.C.
New York, New York
October 1,1999
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be singed on its
behalf by the undersigned, thereunto duly authorized
SUNFLOWER (USA), LTD.
By: /s/ Edward Ai Dong Liu
----------------------------
Edward Ai Dong Liu
Chairman of the Board and Chief Executive Officer
Dated : October 18,1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------- ------------------------------ ---------------
<S> <C> <C>
/s/ Edward Liu Chairman of the Board October 12,1999
- -----------------------
Edward A.D. Liu & Chief Executive Officer
/s/ Paul X. B. Meng President and Director October 12,1999
- -----------------------
Paul X. B. Meng
/s/JoyKing Zhang Vice President October 12,1999
- -----------------------
JoyKing, Zhang Xiao Jun & Director
/s/ Virginia Tong Vice President October 12,1999
- -----------------------
Virginia Z.Q. Tong & Director of Finance
/s/ Whitty Liu Director, Treasury & Secretary October 12,1999
- -----------------------
Whitty H.D. Liu
/s/ Christina Zhang Director & October 12,1999
- -----------------------
Christina X.M. Zhang VP-Marketing
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ----------- -----
<C> <S>
2.0 Articles of Merger - Lucky Three Mining Co. into Pellet America Corporation
2.1 Agreement and Plan of Merger - Lucky Three Mining Co. and
Pellet America Corporation
3.0 Amended Articles of Incorporation - Changing the name of Pellet
America Corporation to SunFlower (USA), Ltd.
3.1 Articles of Incorporation - Pellet America Corporation
3.2 By-laws - SunFlower (USA), Ltd.
4.1 Specimen Stock Certificate - SunFlower (USA), Ltd.
4.2 Certificate of Existence with Status in Good Standing -
SunFlower (USA), Ltd.
21.0 Subsidiary - Certificate of Incorporation (translated) of SunFlower
Industry Co. Ltd.
</TABLE>
<PAGE>
EXHIBIT NO. 2.0
ARTICLES OF MERGER
LUCKY THREE MINING CO., a Washington corporation
INTO
PELLET AMERICA CORPORATION, a Nevada corporation
Pursuant to the provisions of the Washington Business Corporation Act,
Chapter 23B.II RCW, the undersigned corporation hereby submits the following
Articles of Merger for filing of the purpose of merging LUCKY THREE MINING CO.,
a Washington corporation ("LUCKY THREE") into PELLET AMERICA CORPORATION, a
Nevada corporation ("PELLET AMERICA").
ARTICLE I
The Agreement and Plan of Merger of LUCKY THREE into PELLET AMERICA is
attached as Exhibit A.
ARTICLE II
The merger was duly approved by the Directors and Shareholders of LUCKY
THREE, and by the Directors and Shareholders of PELLET AMERICAN pursuant to the
Washington Business corporation Act, LUCKY THREE is the sole shareholder of
PELLET AMERICA.
ARTICLES III
THE EFFECTIVE DATE OF THIS MERGER IS August 15, 1995, or at such later date
as the Articles of Merger are filed in the States of Washington and Nevada.
DATED this 11th day of August, 1995
PELLET AMERICA CORPORATION
By: /s/ Terrence J Dunne
----------------------
Name: Terrence J Dunne
Its Secretary / Treasurer and Director
<PAGE>
LUCKY THREE MINING CO.
By: /s/ Terrence J Dunne
----------------------
Name: Terrence J Dunne
Its Secretary / Treasurer and Director
STATE OF WASHINGTON }
} ss.
Country of Spokane }
I, the undersigned, a Notary Public duly commissioned to take
acknowledgements and administer oaths in the State of Washington, certify that
Terrence J. Dunne personally appeared before me and executed the above document.
WITNESS my hand and notarial seal this 11th day of August, 1995.
/s/
-------------------
NOTARY PUBLIC in an for the State of Washington,
Residing at Spokane. My Commission Expires: 4/15/98
PELLET AMERICA CORPORATION
By: /s/ Donald D Houser
----------------------
Name: Donald D Houser
Its President
Address of Merging Company is
Pellet America Corporation
Suite 1100 Washington Trust Bank Bldg,
Spokane, WA 99024
Attn.: Mr. Terrence J. Dunne
<PAGE>
LUCKY THREE MINING CO.
By: /s/ Donald D Houser
----------------------
Name: Donald D Houser
Its President
STATE OF WASHINGTON }
} ss.
Country of Spokane }
I, the undersigned, a Notary Public duly commissioned to take
acknowledgements and administer oaths in the State of Washington, certify that
Donald D Houser personally appeared before me and executed the above document.
WITNESS my hand and notarial seal this 11th day of August, 1995.
/s/
-------------------
NOTARY PUBLIC in an for the State of Washington,
Residing at Spokane. My Commission Expires: 4/15/98
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is made and entered into this 11th day of
August, 1995, by and between LUCKY THREE MINING CO, a Washington corporation
with corporate offices located at Suite 900 West 717 Sprague, Washington Trust
Bank Building, Spokane, WA 99204 ("LUCKY THREE"), and PELLET AMERICA
CORPORATION, a Nevada corporation with corporate offices located at Suite 900
West 717 Sprague, Washington Trust Bank Building, Spokane, WA 99204 ("PELLET
AMERICAL" or the "surviving Corporation")
RECITALS
A) PELLET AMERICA is a corporation organized under the laws of the State of
Nevada and has authorized capital stock outstanding of 50,000,000 shares of
common stock with a par value of $0.001 per share of which 1,000 shares are
issued and outstanding, and held by LUCKY THREE
B) Pellet America was organized for the purpose of moving the State of
Domicile of the Surviving Corporation to Nevada, and is a wholly owned
subsidiary of LUCKY THREE. The merger qualifies for short form merger status
transactions pursuant to Section 368 of the Internal Revenue Code.
B) The Board of Directors of LUCKY THREE and PELLET AMERICA, responsively,
advisable LUCKY THREE to merge with and into PELLET AMERICA.
NOW, THEREFORE, a consideration of the mutual covenants and agreements contained
herein, LUCKY THREE and PELLET AMERICA, hereby agree to the following Agreement
and Plan of Merger.
1. Name of Corporations LUCKY THREE will merge with PELLET AMERICA, PELLET
AMERICA will be the Surviving Corporation.
2. Terms and Conditions of Merger The effective date of merger shall be
August 15, 1995 or the date, which the Articles of Merger are filed with the
Secretary of State of Nevada and Washington, occurs after August 15, 1995. Upon
the effective date of the merger the separate corporate existence of LUCKY THREE
shall cease. Other property owned by LUCKY THREE or PELLET AMERICA shall be
vested as PELLET AMERICA without reversion or impairment, and the Surviving
Corporation shall have all of LUCKY THREE, and PELLET AMERICA.
3. Governing Law The laws of the State of Nevada shall govern the Surviving
Corporation.
4. Name The name of the Surviving Corporation shall be PELLET AMERICA
CORPORATION.
<PAGE>
5. Registered Office The address of the registered office of the Surviving
Corporation shall be 400 West King Street, Suite 404 Coven City, Nevada 89703,
and the name of the registered agent at the registered office is Capital
Document Services, Inc.
6. Accounting The assets and liabilities of PELLET AMERICA< and LUCKY THREE
(collectively the "Constituent Corporation") as of the effective date of the
merger shall be taken up on the books of the Surviving Corporation t the amount
at which they are craned at the respective books of the Constituent
Corporations.
7. Articles of Incorporation The Articles of Incorporation of PELLET AMERICA
as presently formulated shall the Articles of Incorporation of the Surviving
Corporation.
8. Bylaws. The Bylaws of PELLET AMERICA as of the effective date of the
merger shall be the Bylaws of the Surviving Corporation until the same shall be
aimed or amended in accordance with the provisions thereof.
9. Directors. The Directors of PELLET AMERICA as of the effective date of
the merger shall be the directors of the Surviving Corporation until respective
successors are duly elected and qualified.
10. Shares of LUCKY THREE PELLET AMERICA are currently a wholly owned
subsidiary of LUCKY THREE and upon completion of the merger, the separate
corporate existence of LUCKY THREE shall cease. Upon completion of the merger,
the shareholders of LUCKY THREE will receive share of PELLET AMERICA on a one
share issued in PELLET AMERICA for each twenty-five shares of LUCKY THREE stock
held. The shares of PELLET AMERICA currently owned by LUCKY THREE will be
cancelled upon completion of the merger so that the only shares of PELLET
AMERICA issued after the merger will be owned by the current shareholders of
LUCKY THREE.
11. Approval. This action is being undertaken pursuant to the laws of the
States of Nevada and Washington upon the current and approval of the Board of
Directors of each of the Constituent Corporation. The shareholders of LUCKY
THREE have also approved the transaction. The Board of Directors of LUCKY THREE
has adopted this Agreement and Plan of Merger in completion with the
requirements of Nevada and Washington law.
12. Counterparts This agreement and Plan of Merger may be executed in any
number of counterparts, and all such counterparts and copies shall be and
constitute an original instrument.
<PAGE>
IN WITNESS WHEREOF, this agreement and Plan of Merger has been adopted by the
undersigned, corporations as of this 11th day of August, 1995.
PELLET AMERICA CORPORATION
By: /s/ Terrence J Dunne
----------------------
Name: Terrence J Dunne
Its Secretary / Treasurer and Director
LUCKY THREE, INC.
By: /s/ Terrence J Dunne
----------------------
Name: Terrence J Dunne
Its Secretary / Treasurer and Director
<PAGE>
EXHIBIT 3.0
AMENDED ARTICLES
OF ARTICLES OF INCORPORATION
PELLET AMERICA CORPORATION
We the undersigned Howard Ovesen, President and Kip Eardley, Secretary or
Pellet America Corporation do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened,
held on the 10th day of September, 1998, adopted a resolution to amend the
original articles as follows:
ARTICLES I Is hereby amended to read a follows:
The name of the corporation is: SunFlower (USA), Ltd.
THE NUMBER OF SHARES OF THE CORPORATION OUTSTANDING AND ENTITLED TO VOTE ON AN
AMENDMENT TO THE ARTICLES OF INCORPORATION IS 2,628,778; THAT THE SAID CHANGE
AND AMENDMENT HAVE BEEN CONSENTED TO AND APPROVED BY A MAJORITY VOTE OF THE
STOCKHOLDER HOLDING AT LEAST A MAJORITY OF EACH CLASS OF STOCK OUTSTANDING AND
ENTITLED TO NOTE THEREON.
/s/
--------------
President
/s/
--------------
Secretary
State of Utah )
) ss.
Country of Salt Lake )
ON OCTOBER 5TH, 1998, PERSONALLY APPEARED BEFORE ME, A NOTARY PUBLIC HOWARD
OVESON AND KIP EARDLEY WHO ACKNOWLEDGED THAT THEY EXECUTED THE ABOVE INSTRUMENT.
/s/
--------------
Notary Public
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
PELLET AMERICA CORPORATION
Pursuant to the provisions of the Nevada Business Corporation Act, the
following Articles of Incorporation of PELLET AMERICA CORPORATION are submitted
for filing.
ARTICLE 1. NAME.
The name of the corporation is PELLET AMERICA CORPORATION.
ARTICLE 2. PURPOSES.
This corporation is organized for the following purposes:
a) To research, develop, manufacture, market, and / or license portable
pelleting plants and related technology.
b) To engage in any business, trade or activity, which may lawfully be
conducted by a corporation organized under the Nevada Business Corporation Act.
c) To engage in all such activities as incidental or conductive to the
attainment of the purposes of this corporation or any of them and to exercise
any and all powers authorized or permitted to be done by a corporation under any
laws that may be now or hereafter applicable or available to this corporation.
The foregoing clauses of this Article 2 shall each be construed as purposes and
powers, and the matters expressed in each clause shall be in no way limited or
restricted by reference to or inference from the terms of any other clauses, but
shall be regarded as independent purposes and powers; and nothing contained in
these clauses shall be deemed in any way to limit or exclude any power, right or
privilege given to this corporation by law or otherwise.
<PAGE>
ARTICLES 3. SHARES.
The total number of shares of capital stock which the corporation is
authorized to issue is Fifty Million (50,000,000) shares of Ocmmo9n Stock having
a par value of $0.001 per share (the "Common Stock").
ARTICLE 4. PRE-EMPTIVE RIGHTS.
Shareholders of the corporation shall have no pre-emptive rights to acquire
additional shares or treasury shares issued by the corporation.
ARTICLE 5. DIRECTOR LIABILITY.
A director of the corporation shall not be personally liable to the
corporation its shareholders for monetary damages for conduct as a director,
except for the liability of the director for: (i) acts or omissions that involve
intentional misconduct or a knowing violation of law by the director, (ii)
conduct which violates the Nevada Business Corporation Act, pertaining to
un-permitted distributions to shareholders or loans to directors, or (iii) any
transaction form which the director will personally receive a benefit in money,
property, or services to which the director is not legally entitled. If the
Nevada Business Corporation Act (the "Act") is amended to authorize corporate
action further eliminating or limiting the personal liability directors, then
the liability of a director of the corporation shall be eliminated or limited to
the fullest extent permitted by the Act, as so amended. Any repeal or
modification of the forgoing paragraph by the shareholders of the corporation
shall not adversely affect any right or protection of a director of the
corporation existing at the time of such repeal or modification.
ARTICLE 6. INDEMNIFICATION.
The corporation shall indemnify its directors against all liability,
damage, or expenses resulting from the fact that such person is or was a
director, to the maximum extent and in all circumstances permitted by law;
except that the corporation shall not indemnify a director against liability
damage, or expenses resulting from the director's gross negligence.
<PAGE>
ARTICLE 7. NO CUMULATIVE VOTING
At each election of directors, every shareholder entitled to vote at such
election has the right to vote in person or by proxy the number of shares of
stock held by such shareholder for as many persons as there are directors to be
elected. No cumulative voting for directors will be permitted.
ARTICLE 8. AMENDMENTS TO ARTICLES OF INCORPORATION.
This corporation reserves the right to amend or repeal any provisions
contained in these Articles of Incorporation in any manner now or
hereafter permitted by stature. All rights of the shareholders of this
corporation are subject to this reservation.
ARTICLE 9. SHAREHOLDER APPROVAL.
The affirmative vote of a simple majority (50% plus one share) of all of
the votes entitled to be cast on the matter shall be required and sufficient,
valid, and effective, after due consideration and reconsideration of such action
by the Board of Directors, as required by law, to approve and authorize the
following acts of the corporation.
a) An amendment to these Articles of Incorporation;
b) The merger of this corporation into another corporation or the merger of
one or more corporations into this corporation,
c) The acquisition by another corporation of all of the outstanding shares
of one or more classes or series of this corporation, or
d) The sale, lease, exchange, or other disposition by this corporation of
all, or substantially all, of its property other than in the usual course of
business.
ARTICLE 10. REGULATION OF INTERNAL AFFAIRS.
The provisions for the regulation of the internal affairs of the
corporation shall be set froth in the Bylaws.
<PAGE>
ARTICLE 11. BY LAWS.
The Board of Directors shall have the power to adopt, amend or repeal the Bylaws
for this corporations, subject to the power of the shareholders to amend or
repeal such Bylaws.
ARTICLE 12. DIRECTORS.
The Board of Directors of this corporation shall consist of at lease three,
but not more than nine directors. The number of directors may be increased or
decreased form time to time by the Board of Directors in the manner set forth in
the Bylaws.
The initial directors shall consist of five persons as follows:
Mr. Donald Hauser West 717 Sprague Avenue, Suite 1100, Spokane,
Washington 99204
Mr. Terrence J. Dunne West 717 Sprague Avenue, Suite 1100, Spokane,
Washington 99204
Mr. Wallace Bartley 90 Baywood Village Drive, Washington 98382
Mr. Jeffrey Wornbolt 321 Emerald Drive, Kellez, Idaho 83837
Mr. Eart Mithague East 18811 Grace Court, Washington 99027
The named individuals shall serve until the Next Annual Meeting of
Shareholders and until their successors are elected and qualified unless they
resign or are removed.
ARTICLE 13. REGISTERED OFFICE AND AGENT.
The address of the Registered Office of this corporation is located at 400
West King Street, Suite 404, Carson City, Nevada 89703, and the name of its
initial Registered Agent at such address is Capital Documents, Inc.
ARTICLE 14. INCORPORATOR.
The name and address of the incorporator is Terrence J Dunne, 1100 Washington
Trust Financial Center, Spokane, Washington 99204
IN WITNESS WHEREOF, the undersigned, being the incorporator of this
corporation, executed these Articles of Incorporation and certified to the truth
of the facts herein stated this 6th day of July, 1995.
By: /s/ Terrence J. Dunne
-------------------------------------
Name: Terrence J. Dunne, Incorporator
<PAGE>
STATE OF WASHINGTON }
} ss.
County of Spokane }
I, the undersigned, a Notary Public duly commissioned to take
acknowledgements and administer oaths in the State of Washington, certify that
Terrence J. Dunne, being the Incorporator of the corporation referred to in the
foregoing Articles of Incorporation, personally appeared before me and swore to
the truth of the facts therein stated.
WITNESS my hand and notary seal this 6th day of July, 1995.
/s/
-------------------
NOTARY PUBLIC in an for the State of Washington,
Residing at Spokane. My Commission Expires: 4/15/98
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
SUNFLOWER (USA), LTD.
INDEX
ARTICLE I - OFFICES
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING
2. SPECIAL MEETINGS
3. PLACE OF MEETING
4. NOTICE OF MEETING
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE
6. VOTING LIST
7. QUORUM
8. PROXIES
9. VOTING
10. ORDER OF BUSINESS
a) Roll Call
b) Proof of notice of meeting or waiver of notice
c) Reading of minutes of preceding meeting
d) Reports of Officers
e) Reports of Committees
f) Election of Directors
g) Unfinished Business
h) New Business
11. INFORMAL ACTION BY STOCKHOLDERS
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS
2. NUMBER, TENURE AND QUALIFICATIONS
3. REGULAR MEETINGS
4. SPECIAL MEETINGS
5. NOTICE
6. QUORUM
7. MANNER OF ACTING
8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES
9. REMOVAL OF DIRECTORS
10. RESIGNATION
11. COMPENSATION
12. EXECUTIVE AND OTHER COMMITTEES
<PAGE>
ARTICLE IV - OFFICERS
1. NUMBER
2. REMOVAL
3. VACANCIES
4. PRESIDENT
5. CHAIRMAN OF THE BOARD
6. SECRETARY
7. TREASURER
8. SALARIES
ARTICLE V - STOCK
1. CERTIFICATES
2. NEW CERTIFICATES
3. RESTRICATIONS OF TRANSFER
ARTICLE VI - CONTRACTS, LOANS, CHECKS, AND DEPOSITS
1. CONTRACTS
2. LOANS
3. CHECKS, DRAFTS, ETC.
4. DEPOSITS
ARTICLE VII - FISCAL YEAR
ARTICLE VIII - DIVIDENDS
ARTICLE IX - SEAL
ARTICLE X - WAIVER OF NOTICE
ARTICLE XI - AMENDMENTS
<PAGE>
BY-LAWS
OF
SUNFLOWER (USA), LTD.
ARTICLE I - OFFICES
The principal office of the corporation in the State of Nevada shall be located
at 1200 South Eastern Avenue, in the city of Las Vegas, county of Clark. The
corporation may have such other offices, either within or without the State of
incorporation as the board of directors may designate or as the business of the
corporation may from time to time require.
ARTICLE II-STOCKHOLDERS
1. ANNUAL MEETING. The annual meeting of the stockholders shall be held
on the 2nd Wednesday of August in each year, beginning with the year 1994 at the
hour of 1 o'clock P.M. local time for the purpose of the election of directors
and for the transaction of such other business as may come before the meeting.
If the day fixed for the annual meeting shall be a legal holiday such meeting
shall be held on the next succeeding business day.
2. SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the president or by a director, and shall be called by the president at the
request of the holders of not less than fifty one (51) percent of all the
outstanding shares of the corporation entitled to vote at the meeting.
3. PLACE OF MEETING. The directors may designate any place, either
within or without the state unless otherwise prescribed by statute, as the place
of meeting for any annual meeting or for any special meeting called by the
directors. A waiver of notice signed by all stockholders entitled to vote at a
meeting may designate any place, either within or without the state unless
otherwise prescribed by statute, as the place for holding such meeting. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal office of the corporation.
4. NOTICE OF MEETING. Written or printed notice stating the place, day
and hour of the meeting and, in the case of a special meeting is called, shall
be delivered not less than ten (10) days nor more than twenty (20) days before
the date of the meeting, either personally or by mail, by the direction of the
president, or secretary, or the director calling the meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
<PAGE>
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. Forte purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof or stockholders entitled to receive
payment of any dividend, or in order to make a determination of stockholders for
any other proper purpose, the directors of the corporation may entitled to
notice of or to vote at a meeting of stockholders, such books shall be closed
for at least twenty (20) days immediately preceding such meeting. In lieu of
closing the stock transfer books, the directors may fix in advance a date as the
record date for any such determination of stockholders, such date in any case to
be not more than twenty (20) days and, in case of a meeting of stockholders, not
less than ten (10) days prior to the date on which the particular action
requiring such determination of stockholders entitled to notice of or to vote at
a meeting of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the directors declaring such dividend is adopted, as The case
may be, shall be the record date for such determination of stockholders. When a
determination of stockholders entitled to vote at any meeting of stockholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof
6. VOTING LIST. The officer or agent having charge of the stock
transfer books for the shares of the corporation shall make, at least ten (10)
days before each meeting of stockholders, a complete list of stockholders
entitled to vote at such meeting, or any adjournment thereof, arranged in
alphabetical order, with the address of and number of shares held by each, which
list, for a period of the (10) days prior to such meeting, shall be kept on file
at the principal office of the corporation and shall be subject to inspection by
any stockholder at any time during usual business hours, Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any stockholder during the whole time of the meeting. The
original transfer book shall be prima facie evidence as to who are the
stockholders entitled to examine such list or transfer books or to vote at the
meeting of stockholders.
7. QUORUM. At any meeting of stockholders fifty one (51) percent of the
outstanding shares of the corporation entitled to vote, represented in person or
by proxy, shall constitute a quorum at a meeting of stockholders, if less than
said number of the outstanding shares are represented at a meeting, a majority
of the outstanding shares so represented may adjourn the meeting from time to
time without further notice. At such adjourned meeting at which a quorum shall
be present or represented, any business may be transacted which might have been
transacted at the meeting originally noticed. The stockholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
8. PROXIES. At all meetings of the stockholders, a stockholder may vote
by proxy executed in writing by the stockholder or by his duly authorized
attorney in fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting.
9. VOTING. Each shareholder entitled to vote in accordance with the
terms and provisions of the certificate of incorporation and these by-laws shall
be entitled to one vote, in person or by proxy, for each share of stock entitled
to vote held by such shareholder. Upon the demand of any stockholder, the vote
for directors and upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of Nevada.
<PAGE>
10. ORDER OF BUSINESS The order of business at all meetings of the
stockholders, shall be as follows:
a. Roll Call.
b. Proof of notice of meeting or waiver of notice.
c. Reading of minutes of preceding meeting.
d. Reports of Officers.
e. Reports of Committees.
f. Election of Directors.
g. Unfinished Business.
h. New Business.
11. INFORMAL ACTION BY STOCKHOLDERS. Unless otherwise provided by law, any
action required to be taken at a meeting of the stockholder, or any other action
which may be taken at a meeting of the stockholders, may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the stockholders entitled to vote with respect to the subject
matter thereof
ARTICLE III- BOARD OF DIRECTORS
1. GENERAL POWERS. The business and affairs of the corporation shall be
managed by its board of directors. The directors shall in all cases act as a
board, and they may adopt such rules and regulations for the conduct of their
meetings and the management of the corporation, as they may deem proper, not
inconsistent with these by-laws and the laws of the State of Nevada.
2. NUMBER, TENURE AND QUAILFIICATIONS. The number of directors of' the
corporation shall be a minimum of one (1) and a maximum of eleven (11). Each
director shall hold office until the next annual meeting of stockholders and
until his successor shall have been elected and qualified.
3. REGULAR MEETINGS. A regular meeting of the directors, shall be held
without other notice than this by-law immediately after, and at the same place
as, the annual meeting of stockholders. The directors may provide, by
resolution, the time and place for holding of additional regular meetings
without other notice than such resolution.
4. SPECIAL MEETINGS. Special meetings of the directors may be called by
or at the request of the president or arty two directors. The person or persons
authorized to call special meetings of the directors may fix the place for
holding any special meeting of the directors called by them.
5. NOTICE. Notice of any special meeting shall be given at least one day
previously thereto by written notice delivered personally, or by telegram or
mailed to each director at his business address. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
<PAGE>
6. QUORUM. At any meeting of the directors fifty (50) percent shall
constitute a quorum for the transaction of business, but if less than said
number is present at a meeting, a majority of the directors present may adjourn
the meeting from time to time without further notice.
7. MANNER OF ACTING. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the directors.
8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created directorships
resulting from an increase in the number of directors and vacancies occurring on
the board for any reason except the removal of directors without cause may be
filled by a vote of the majority of the directors then in office, although less
than a quorum exists. Vacancies occurring by reason of the removal of directors
without cause shall be filled by vote of the stockholders, A director elected to
fill a vacancy caused by resignation, death or removal shall be elected to hold
office for the unexpired term of his predecessor.
9. REMOVAL OF DIRECTORS. Any or all of the directors may be removed for
cause by vote of the stockholders or by action of the board. Directors may be
removed without cause only by vote of the stockholders.
10. RESIGNATION. A director may resign at any time by giving written notice
to the board, the president or the secretary of the corporation. Unless
otherwise specified in the notice, the resignation shall take effect upon
receipt thereof by the board or such officer, and the acceptance of the
resignation shall not be necessary to make it effective
11. COMPENSATION. No compensation shall be paid to directors, as
such, for their services, but by resolution of the board a fixed sum and
expenses for actual attendance at each regular or special meeting of the board
may be authorized. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
12. EXECUTIVE AND OTHER COMMITTEES. The board, by resolution, may designate
from among its members an executive committee and other committees, each
consisting of one (1) or more directors. Each such committee shall serve at the
pleasure of the board.
<PAGE>
ARTICLE IV - OFFICERS
1. NUMBER. The officers of the corporation shall be the president, a
secretary and a treasurer, each of whom shall be elected by the directors, Such
other officers and assistant officers as may be deemed necessary may be elected
or appointed by the directors.
2. ELECTION AND TERM OF OFFICE. The officers of the corporation to be
elected by the directors shall be elected annually at the first meeting of the
directors held after each annual meeting of' the stockholders, Each officer
shall hold office until his successor shall have been duly elected an shall have
qualified or until his death or until he shall resign or shall have been removed
in the manner hereinafter provided.
3. REMOVAL Any officer or agent elected or appointed by the directors
may be removed by the directors whenever in their judgement the best interest of
the corporation would be sewed thereby, but such removal shall be without
prejudice to contract rights, if any, of the person so removed
4. VACANCIES. A vacancy in any office because of death, resignation removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term,
5. PRESJDENT. The president shall be the principal executive officer of the
corporation and, subject to the control of the directors, shall in general
supervise and control all of the business and affairs of the corporation. He
shall, when present, preside at all meetings of the stockholders and of the
directors. He may sign, with the secretary or any proper officer of the
corporation thereunto authorized by the directors, certificates for shares of
the corporation, any deeds, mortgages, bonds, contracts, or other instruments
which the directors have authorized to be executed, except in cases where the
directors or by these by-laws to some other officer or agent of the corporation,
or shall be required by law to be otherwise signed or executed; and in general
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the directors from time to time.
6. CHAIRMAN OF THE BOARD. In the absence of the president or in the event of
his death, inability or retinal to act, the chairman of the board of directors
shall assume the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The
chairman of the board of directors shall perform such other duties as from time
to time may be assigned to him by the directors.
7. SECRETARY. The secretary shall keep the minutes of' the stockholders' and
of the directors' meetings in one or more books provided for that purpose, see
that all notices are duly given in accordance with the provisions of these
by-laws or as required, be custodian of the corporate records and of the seal of
the corporation and keep a register of the post office address of each
stockholder which shall be furnished to the secretary by such stockholder, have
general charge of the stock transfer books of the corporation and in general
perform all the duties incident to the office of secretary and such other duties
as from time to time may be assigned to him by the president or by the
directors.
<PAGE>
8. TREASURER. If required by the directors, the treasurer shall give a bond
for the faithful discharge of his duties in such sum and with such surety or
sureties as the directors shall determine. He shall have charge and custody of
and be responsible for all funds and securities of the corporation; receive and
give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such money in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.
9. SALARIES. The salaries of the officers shall be fixed from time to time
by the directors and no officer shall be prevented from receiving such salary by
reason of fact that he is also a director of the corporation.
ARTICLE V - STOCK
1. CERTIFICATES.
The shares of stock shall be represented by consecutively numbered certificates
signed in the name of the Corporation by its President or Vice President and the
Secretary or an Assistant Secretary, and shall be sealed with the seal of the
Corporation, or with a facsimile thereof The signatures of the Corporation's
officers on such certificates may also be facsimiles if the certificate is
countersigned by a transfer agent, or registered by a registrar other than the
Corporation itself or an employee of the Corporation. In case any officer who
has signed or whose facsimile signature has been placed upon such certificate
shall have ceased to be an officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of its issue, Certificates of stock shall be in such form consistent with
law as shall be prescribed by the Board of Directors. No certificate shall be
issued until the shares represented thereby are frilly paid.
2. NEW CERTIFICATES.
No new certificates evidencing shares shall be issued unless and until the old
certificate or certificates, in lieu of which the new certificates is issued,
shall be surrendered for cancellation, except as provided in paragraph 2 of this
Article V.
3. RESTRICTIONS OF TRANSFER.
NO CERTIFICATE SHALL BE ISSUED OR REISSUED WITHOUT A RESTRICTION OF
TRANSFERABILITY CLEARLY IMPRINTED THEREUPON UNLESS REGISTERED AS REQUIRED BY LAW
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
ARTICLE VI- CONTRACTS, LOANS, CHECKS, AND DEPOSITS
1. CONTRACTS. The directors may authorize any officer or officers,
agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
<PAGE>
2. LOANS. No loans shall be contracted on behalf of the corporation and
no evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the directors. Such authority may be general or confined to
specific instances,
3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment
of money1 notes or other evidences of indebtedness issued in the name of the
corporation, shall be signed by such officer or officers, agent or agents of the
corporation and in such manner as shall from time to time be determined by
resolution of the directors.
4. DEPOSITS. All funds of the corporation not otherwise employed shall
be deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositaries as the directors may select.
ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of June each year.
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
The directors shall provide a corporate seal which shall be circular in form and
shall have inscribed thereon the name of the corporation, the state of
incorporation, year of incorporation and the words, "Corporate Seal".
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be given to
any stockholder or director of the corporation under the provisions of these
bylaws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE XI - AMENDMENTS
These by-laws may be altered, amended or repealed and new bylaws may be adopted
by a vote of the stockholders representing a majority of all the shares issued
and outstanding, at any annual stockholders' meeting or at any special
stockholders' meeting when the proposed amendment has been set out in the notice
of such meeting.
<PAGE>
SunFlower (USA), Ltd.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and officers of the Issuer, all whose terms will expire at the
next annual meeting of the stockholders or at such time as their successors
shall be elected and qualified, are as follows:
Edward Ai Dang LIU, 34, has been a Director and Chairman of the Board of the
Issuers since October 5, 1998. He is also currently a Director and Chairman of
the Board of the Issuer's subsidiary SunFlower Industries, Ltd., located in The
Peoples Republic of China. He has been a Director Chairman of the Board and
President of that company since March, 1994. Mr. Liu began his business career
in 1988 as the factory manager of the Shen Jin Automobile Repair Company. He
then organized and became general manager of the Shen Jin Enterprise Company
Limited in 1990. In 1992 he founded SunFlower Industry Company Limited with his
own and the resources of his family members and close friends. He is a very
influential business leader in the Shen Yang City business and political
community. He serves as a city council member of Then Yang City Counsel and as a
member of the Economics Committee of Shen Yang City. He is the Vice President of
the Chamber of Commerce of Shen Yang City and a member of the Private Enterprise
Association of Shen Yang City. He has also received awards from Shen Yang City
as one of the 10 Best Entrepreneurs in Shen Yang City, as the Best Young
Executive, and as Excellent Manager. Mr. Liu has a degree in Business
Administration (1988) from the University of Shen Yang, PRC.
Paul Xian Bao MENG, 35, has been a Director and President of the Issuer since
October 5, 1998. He is also currently a Director and President of the Issuer's
subsidiary SunFlower Industries, Ltd. located in The Peoples Republic of China.
He has been a director of the Company since March, 1994. From 1984 to 1992 he
was a manager for the Transportation Authority of Shen Yang City. He joined Sun
Flower Industries, Ltd in 1992 and was elevated to president in 1996. Mr. Meng
received a Bachelors Degree in Management (1984) from the University of
Manchuria.
JoyKing Xiao Jun ZHANG, 34, has been a Director of the Issuer since October 5,
1998. He is also currently a Director of the Issuer's subsidiary SunFlower
Industries, Ltd., located in The Peoples Republic of China. He has been a
Director since January, 1998. Mr. Chang is not an employee of the Issuer. He is
the General Manager of Northeast Electric Transmission & Transformation Group
international Group International, Ltd. Northeast Electric Transmission &
Transformation Group International Group International, Ltd. is a subsidiary of
Northeast Electric Transmission & Transformation Co. Ltd., a listed public
company waded on the Hong Kong Stock Exchange (Trade#0042). Mr. Chang received a
Bachelors degree in Engineering (1987) and earned a Masters degree in Economics
from the University of Liao Ning (1991).
<PAGE>
Whitty H D LIU, 47, has been a Director, Secretary and Treasurer of the Issuer
since October 5,1998. She is also currently a Director, Secretary and Treasurer
of the Issuer's subsidiary SunFlower Industries, Ltd., located in The Peoples
Republic of China. She has been a Director since March, 1994. Ms Liu has more
than twenty years of experience in finance and accounting. She is the sister of
Edward Liu the Chairman of the Company. She earned a Bachelor of Science degree
from the University of Shen Yang (1975).
Virginia S. C. TONG, 41, has been a Director and Vice President of Finance of
the Issuer since October 5, 1998. She is also currently a Director of the
Issuer's subsidiary SunFlower Industries, Ltd., located in The Peoples Republic
of China. She has been a Director since March 1995. From 1980 thin 1991 she was
manager a Shen Yang governmental agency. She is a member of the Accountants
Association, and a member of the Private Enterprise Association of Shen Yang
City. Ms Tong earned a degree in finance with a major in Industrial Accounting
(1997) from the Shen Yang Institute of Finance.
Christina Xue Mei ZHANG, 39, has been a Director and Vice President of sales of
the Issuer since October 5, 1998. She is also currently a Director of the
Issuer's subsidiary SunFlower Industries, Ltd., located in The Peoples Republic
of China. She has been a Director since March, 1995. She is a member of the
Sales and Marketing Association of Shen Yang City. Ms Zhang earned a Bachelors
degree in Chinese Literature (1988) from the University of Liao Ning.
Zhao B YU, 55, has been a Director and a Vice President of Engineering of the
Issuer since October 5, 1998. He is also currently a Director of the Issuer's
subsidiary SunFlower Industries, Ltd., located in The Peoples Republic of
China. He has been a director and Vice President of Engineering since 1992. He
was employed from 1967 till 1992 by the Shen Yang Metal Factory Company located
in Shen Yang City. He earned a Bachelor Degree in Non-ferrous Metallurgy (1967).
Nathan Goldenthal, MD, 45, has been a Director of the Issuer since October 5,
1998. He is also currently a Director of the Issuer's subsidiary SunFlower
Industries, Ltd., located in The Peoples Republic of China Dr. Goldenthal has
over 15 years of industrial management experience related to waste-recycling. He
has been a Director since October, 1998.
<PAGE>
EXHIBIT 4.1
SPECIMEN STOCK CERTIFICATE - SUNFLOWER (USA) LTD.
*********************************************************************
---------------------------------------------------------------------
This certificate reflects New Post Split Shares of
SUNFLOER (USA) LTD.
Subject to a 1 New Share for 3 Old Shares - Round Up All Fractions
Name Change & Reverse Stock Split
Effective Date - March 1, 1999 - New Cusip No. 86736Y 20 4
NUMBER SHARES
XXXXX XXXXX
SUNFLOWER, LTD.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
PAR VALUE $0.001 NEW CUSIP NO. 86736Y 20 4
COMMON SOTCK
THIS CERTIFIES THAT XXXXXXXX
is the owner of XXXXXXXXX
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK PAR VALUE OF $0.0001
EASH OF
SUNFLOWER, LTD.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar. Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
DATED: 10/21/1999
/s/ Countersigned and Registered:
- -----------------------
CHAIRMAN OF THE BOARD & SECRETARY SIGNATURE STOCK TRANSFER, INC.
(Dallas, Texas) Transfer Agent
/s/ By /s/
- ---------------------------- -------------------------
PRESIDENT & C.E.O. Authorized Signature
*********************************************************************
---------------------------------------------------------------------
<PAGE>
EXHIBIT 4.2
CERTIFICATE OF EXISTENCE
WITH STATUS IN GOOD STANDING
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify I am, by the laws of said State, the custodian of the records
relating to filings by corporations, limited liability companies, limited
partnerships, and limited liability partnerships pursuant to Title 7 of the
Nevada Revised Statutes which are either present in a status of good standing or
were in good standing for a time period subsequent of 1976 and am the proper
officer to execute this certificate.
I further certify that the records of the Nevada Secretary of State, at the date
of this certificate evidence, SUNFLOWER (USA), LTD. (Formerly know as Pellet
America Corporation from July 18, 1995 to December 31,1998), as a corporation
duly organized under the laws of Nevada and existing under and by virtue of the
laws of the State of Nevada since July 18, 1995, and is in good standing in this
state.
IN WITHNESS WHEREOF, I have hereto set my hand
and affixed the Great Seal of State, at my office,
in Carson City, Nevada, on January 1, 1999.
/s/
----------------
Secretary of State
By
/s/
----------------
Certification Clerk
<PAGE>
EXHIBIT NO. 21.0
SUBSIDIARY - CERTIFICATE OF INCORPORATION (TRANSLATED) OF SUNFLOWER INDUSTRY CO.
LTD.
The People Republic of China
----------------------------
Corporate Legal Entity
BUSINESS OPERATION LICENCE
(Copy)
Registration No. 020062-1/1
---------------------------
THE CORPORATE HAS BEEN FULLY APPROVED TO REGISTERED; HAVING THE LEGAL ENTITY
STATUS AND IS APPROVED TO OPERATE
<PAGE>
Name of Corporation (Chinese) omitted
(English) SunFlower Industry Co., Ltd.
(SHENYANG SHENGFA
COPPER CO., LTD.)
Address Kunming Lake Street, Shenyang Economic & Technology
Development Zone, PRC
Status Joint Venture with Hong Kong Capital
Nature of Business Copper products such as plates, belts, wires and sticks
etc.
Registered Capital RMB 4,080,000
President Edward LIU, Ai Dang
Vice President Paul MENG, Xian Bao
General Manager Paul MENG, Xian Bao
General Manager Virginia TONG, Zhi Qin
Assistant Christina ZHANG, Xue Mei
Subsidiary
Date of Commencement (From March 1, 1992 To February 28, 2007)
Date of Expiry (From March 1, 1992 To February 28, 2007)
THE PEOPLE REPUBLIC OF CHINA
NATIONAL BUSINESS ADMINISTRATIVE BUREAU
/s/ Wong Ton Hou
---------------------------------------
Bureau Chief: Wong Ton Hou
Date March 25, 1999
Date of the copy expiry (March 1, 2000)
<PAGE>
