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As filed with the Securities and Exchange Commission on March 27, 2000.
(File No. 0-30560)
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2 TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
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China Ventures Limited
(Name of Small Business Issuer in its Charter)
Cayman Islands N/A\
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Courvoisier Centre II, Suite 705, 601
Brickell Key Drive, Miami, Florida 33131 N/A
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(305) 535-9700
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Issuer's Telephone Number
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on
to be so Registered Which Each Class is to be Registered
- ------------------- ------------------------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Ordinary Shares
-----------------------
(Title of Class)
<PAGE>
INFORMATION REQUIRED IN
REGISTRATION STATEMENT
ITEM 1. BUSINESS.
GENERAL
China Ventures Limited was incorporated in the Cayman Islands in
December 1999. China Ventures is not an operating company and does not have
significant assets or conduct significant business. The registered office of
China Ventures is located at One Capital Place, Fourth Floor, P.O. Box 847,
Grand Cayman, Cayman Islands, British West Indies. China Ventures currently uses
office space located at Courvoisier Centre II, Suite 705, 601 Brickell Key
Drive, Miami, Florida, as its principal executive office. The telephone number
at its principal executive office is (305) 535-9700. China Ventures currently
has no employees.
The proposed business activities of China Ventures are that of a "blank
check" company. A "blank check" company is a development stage company that has
no specific business plan or purpose or has indicated that its business plan is
to engage in a merger or acquisition with an unidentified company or companies
and may issue "penny stock" securities as defined in the Exchange Act. The SEC
and many states have enacted statutes, rules and regulations limiting sales of
securities by "blank check" companies.
China Ventures was formed to provide a method for an as-yet
unidentified private company in the Republic of China to become a reporting
"public" company whose securities are qualified for trading in the United States
secondary market. There are certain perceived benefits to being a reporting
company with a class of publicly-traded securities qualified for trading in the
United States secondary market. These benefits are commonly thought to include
the following:
- the ability to register securities and use registered
securities to acquire assets or businesses; increased
visibility;
- the facilitation of borrowing from financial institutions;
- improved trading efficiency;
- shareholder liquidity;
- greater ease in subsequently raising capital;
- compensation of key employees through stock options;
- enhanced corporate image; and
- a presence in the United States capital markets.
There are also many disadvantages to becoming a reporting company with
a class of publicly-traded securities qualified for trading in the United States
secondary market, particularly with respect to becoming a "public" company by
merging with or being acquired by a blank check company. These disadvantages are
commonly thought to include the following:
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- companies that merge with or acquired by a blank check "shell"
company incur immediately the expenses of being a public
company without the benefit of receiving proceeds in a public
offering;
- companies that go public through public offerings tend to
attract financial analyst followers and increased visibility,
while companies that go public without a public offering
frequently receive little or no visibility;
- financial institutions make loans based upon a company's
financial statements and prospects, not its status as a
company with publicly-traded securities;
- a company's success in raising capital depends upon its
performance, not with merging with or being acquired by a
shell company;
- it may be expensive for a private company to go public by
merging with or being acquired by a shell company; and
- companies which go public by merging with or being acquired by
a shell company may find it difficult to raise money in the
future due to the negative public perception of these types of
public companies.
A business entity, if any, which may be interested in a business
combination with China Ventures may include the following:
- a company for whom a primary purpose of becoming public is the
use of its securities for the acquisition of assets or
businesses;
- a company which is unable to find an underwriter of its
securities or is unable to find an underwriter of securities
on terms acceptable to it;
- a company which wishes to become public with less dilution of
its common stock than may occur upon an underwriting;
- a company which believes that it will be able obtain
investment capital on more favorable terms after it has become
public; and
- a foreign company which may wish an initial entry into the
United States securities market;
PLAN OF OPERATION
China Ventures intends to merge with or acquire a business entity in
exchange for China Ventures' securities. No assurances can be given that China
Ventures will be successful in locating an appropriate Chinese entity or
successfully negotiating a transaction with such entity. China Ventures
currently has no business operations and there can be no assurances given as to
the nature of the target entity, as to whether China Ventures will be able to
enter into a business combination or as to the terms of the business
combination. In certain instances, a target entity may wish to become a
subsidiary of China Ventures or may wish to contribute assets to China Ventures
rather than merge. A business combination with a target entity may involve the
transfer to the target entity or its owners of the majority of the issued and
outstanding common stock of China Ventures, and the substitution by the target
business of its own management and board of directors.
Management believes that it will be required to raise additional funds
to sustain China Ventures during 2000. We cannot assure you that China Ventures
will be able to raise sufficient funds, either through the incurrence of debt or
the offering of equity securities. If China Ventures is unable to raise
sufficient capital to sustain its business, it will be forced to go out of
business. Management's
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ability to execute its business plan, as set forth below, is fully dependent on
its ability to raise the necessary funds.
China Ventures has no full time employees. Its officers and directors
have agreed to allocate a portion of their time to the activities of China
Ventures, without compensation. They anticipate that the business plan of China
Ventures can be implemented by each of them devoting a modest number of hours to
the business affairs of China Ventures. Consequently, conflicts of interest may
arise with respect to the limited time commitment by them. China Ventures'
officers and directors may in the future become involved with other companies
which have a business purpose similar to that of China Ventures. A conflict may
arise in the event that another company, or a company to be formed, with which
management is affiliated seeks a target business. The Memorandum and Articles of
Association of China Ventures provides that China Ventures may indemnify
officers and/or directors of China Ventures for liabilities, which can include
liabilities arising under the securities laws. Therefore, assets of China
Ventures could be used or attached to satisfy any liabilities subject to such
indemnification.
GENERAL BUSINESS PLAN
China Ventures' purpose is to seek, investigate and, if the
investigation warrants, merge with or otherwise acquire a business entity from
the People's Republic of China. If this attempt fails, China Ventures will not
restrict its search to any specific business, industry, or geographical location
and China Ventures may participate in a business venture of virtually any kind
or nature.
China Ventures may seek a business opportunity with an entity which has
recently commenced operations, or which wishes to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate purposes.
China Ventures may acquire assets and establish wholly-owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.
China Ventures anticipates that the selection of a business opportunity
in which to participate will be complex and extremely risky. Due to general
economic conditions, rapid technological advances being made in some industries
and shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, and providing liquidity for
shareholders and other factors. The officers and directors of China Ventures,
however, have not conducted market research and are not aware of statistical
data to support the perceived benefits of a merger or acquisition transaction
for the owners of a target business .
The analysis of new business opportunities will be undertaken by, or
under the supervision of, the officers and directors of China Ventures, who are
not professional business analysts. In analyzing prospective business
opportunities, management will consider such matters as the
- available technical, financial and managerial resources;
- working capital and other financial requirements;
- history of operations, if any;
- prospects for the future;
- nature of present and expected competition;
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- the quality and experience of management services which may be
available;
- the potential for further research, development, or
exploration;
- specific risk factors not now foreseeable but which then may
be anticipated to impact the proposed activities of China
Ventures;
- the potential for growth or expansion;
- the potential for profit;
- the perceived public recognition or acceptance of products,
services, or trades; AND
- name identification.
To the extent possible, China Ventures intends to utilize written
reports and personal investigation to evaluate factors. The Exchange Act
requires that any merger or acquisition candidate comply with certain reporting
requirements, which include providing financial statements audited in accordance
with generally accepted accounting principles to be included in the reports to
be filed by China Ventures under the Exchange Act. China Ventures will likely be
required to file an information statement under the Exchange Act prior to
consummating any transaction. Preparation of such information, including for
example, translation of applicable documents from Chinese to English, will
likely be costly and time-consuming. China Ventures will not acquire or merge
with any company for which audited financial statements cannot be obtained .
The officers and directors of China Ventures may not be experienced in
matters relating to the business of a target entity, but will primarily rely
upon their own efforts in accomplishing the business purposes of China Ventures.
It is anticipated that outside consultants or advisors may be used by China
Ventures to assist in the search for qualified target entities. If China
Ventures does retain an outside consultant or advisor, any cash fee earned by
the consultant will need to be paid by the prospective merger/acquisition
candidate, as China Ventures has limited cash assets with which to pay such
obligation. China Ventures may pay all or some of the consultant's or advisor's
fee with previously authorized but unissued shares.
ACQUISITION OPPORTUNITIES
We anticipate that any securities issued in a reorganization would be
issued in reliance upon an exemption from registration under applicable federal
and state securities laws, to the extent required. In some circumstances,
however, as a negotiated element of its transaction, China Ventures may agree to
register all or a part of such securities immediately after the transaction is
consummated or at specified times thereafter. If this registration occurs, of
which there can be no assurance, it may be undertaken by the surviving entity
after China Ventures has entered into an agreement for a business combination or
has consummated a business combination and China Ventures is no longer
considered a blank check company. The issuance of substantial additional
securities and their potential sale into any trading market which may develop in
China Ventures' securities may have a depressive effect on the market value of
China Ventures' securities if a market develops.
With respect to any merger or acquisition, negotiations with management
of the target entity are expected to focus on the percentage of China Ventures
which target entity shareholders would acquire in exchange for all of their
ownership in the target entity. Depending upon, among other things, the target
entity's assets and liabilities, China Ventures' shareholders prior to the
transaction will in all likelihood hold
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a minority percentage ownership interest in China Ventures following any merger
or acquisition. The percentage ownership will be subject to significant
reduction in the event China Ventures acquires a target entity with substantial
assets. Therefore, any merger or acquisition effected by China Ventures can be
expected to have a significant dilutive effect on the percentage of shares held
by China Ventures' shareholders at such time.
China Ventures will participate in a business opportunity only after
the negotiation and execution of appropriate agreements. Although the terms of
such agreements cannot be predicted, generally these agreements will require
certain representations and warranties of the parties, will specify certain
events of default, will detail the terms of closing and the conditions which
must be satisfied by the parties prior to and after such closing, will outline
the manner of bearing costs, including costs associated with China Ventures'
attorneys and accountants, and will include other important terms.
China Ventures will not acquire or merge with any entity which
cannot provide audited financial statements . China Ventures will be subject
to all of the reporting requirements included in the Exchange Act. Included
in these requirements is the duty of China Ventures to file audited financial
statements as part of its Current Report on Form 8-K to be filed with the SEC
upon consummation of a merger or acquisition, as well as a requirement to
file audited financial statements in its annual report on Form 10-K. If these
audited financial statements are not available at closing, or within time
parameters necessary to insure China Ventures' compliance with the
requirements of the Exchange Act, or if the audited financial statements
provided do not conform to the representations made by the target entity, the
closing documents may provide that the proposed transaction can voided at the
discretion of the present management of China Ventures.
China Ventures' officers and directors have agreed that they may
advance to China Ventures additional funds which China Ventures may need for
operating capital and for costs in connection with searching for or completing
an acquisition or merger. The officers and directors are under no obligation to
make any advances to China Ventures. In the event that officers or directors of
China Ventures do make advances, China Ventures does not intend to borrow funds
for the purpose of repaying advances made by officers or directors or to make
any payments to China Ventures' promoters, management or their affiliates.
COMPETITION
China Ventures will remain an insignificant participant among the firms
which engage in the acquisition of business opportunities. There are many
established venture capital and financial concerns which have significantly
greater financial and personnel resources and technical expertise than China
Ventures. In view of China Ventures's extremely limited financial resources and
limited management resources, China Ventures will continue to be at a
significant competitive disadvantage compared to China Ventures' competitors.
CONFLICTS OF INTEREST
Management may agree to pay finder's fees, as appropriate and allowed,
to unaffiliated persons who may bring a target business to China Ventures where
that referral results in a business combination. The amount of any finder's fee
will be subject to negotiation, and cannot be estimated at this time.
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Management has adopted certain policies involving possible conflicts of
interest, including prohibiting any of the following transactions involving
management or promoters or their affiliates or associates:
(i) Any lending by China Ventures to such persons; or
(ii) The issuance of any additional securities to such persons
prior to a business combination.
These policies have been adopted by the Board of Directors of China
Ventures, and any changes in these provisions would require the approval of the
Board of Directors. Management does not intend to propose any such action and
does not anticipate that any such action will occur.
There are no binding guidelines or procedures for resolving potential
conflicts of interest. Additionally, China Ventures' Articles of Association
provide for the indemnification of the officers and directors for actions taken
by these officers and directors on behalf of China Ventures, other than for
actions or inactions which amount to willful neglect on the part of the officer
or director.
DISPUTES
In the event that a shareholder of China Ventures becomes involved in a
dispute with China Ventures or its officers or directors, it may be difficult
for this shareholder to resolve this dispute. As a Cayman Islands corporation,
with a registered office in the Cayman Islands, a shareholder would likely be
required to bring any suit or cause of action in the Cayman Islands. This may be
difficult and costly for the China Ventures shareholders.
China Ventures is voluntarily filing this Registration Statement with
the Securities and Exchange Commission and is under no obligation to do so under
the Exchange Act.
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RISK FACTORS
China Ventures's business is subject to numerous risk factors,
including the following:
We have no operating history and minimal assets and, as a result, our
prospects are difficult to evaluate.
We have had no operating history nor any revenues or earnings from
operations. China Ventures has no significant assets or financial resources. We
will incur operating expenses without corresponding revenues, at least until the
consummation of a business combination. As a result we may incur a net operating
loss which will increase continuously until we can consummate a business
combination with a target entity. If we are unable to fund our business, we will
be forced to go out of business.
Our proposed operations are speculative and our business may fail.
The success of China Ventures' proposed plan of operation will depend
to a great extent on the operations, financial condition and management of the
target entity. While management intends to seek business combinations with
entities having established operating histories, management will be spending a
minimal amount of time dedicated to finding an appropriate target candidate. As
a result, there can be no assurance that we will be successful in locating
candidates meeting our criteria. In the event we complete a business
combination, the success of our operations will be dependent upon management of
the target entity and numerous other factors beyond our control. It is possible
that our resources will be depleted prior to consummating a business
combination.
Transactions involving "penny stocks" such as China Ventures are highly
regulated.
The Exchange Act defines "penny stock" as any equity security that has
a market price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require: (i)
that a broker or dealer approve a person's account for transactions in penny
stocks and (ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must (i) obtain financial
information and investment experience and objectives of the person; and (ii)
make a reasonable determination that the transactions in penny stocks are
suitable for that person and that person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the SEC relating to the
penny stock market, which, in highlight form, (i) sets forth the basis on which
the broker or dealer made the suitability determination and (ii) certify that
the broker or dealer received a signed, written agreement from the investor
prior to the transaction. Disclosure is also required to be made about the risks
of investing in penny stocks in both public offerings and in secondary trading,
and about commissions payable to both the broker or dealer and the registered
representative, current quotations for the securities and the rights and
remedies available to an investor in cases of fraud in penny stock transactions.
Finally, monthly statements have to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stocks.
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There is a scarcity of and tremendous competition for target candidates
and combinations.
China Ventures is and will continue to be an insignificant participant
in the business of seeking mergers with and acquisitions of business entities. A
large number of established and well-financed entities, including venture
capital firms, are active in mergers and acquisitions of companies which may be
merger or acquisition target candidates for China Ventures. Nearly all such
entities have significantly greater financial resources, technical expertise and
managerial capabilities than China Ventures and, consequently, China Ventures
will be at a competitive disadvantage in identifying possible target entities
and successfully completing a business combination. In addition, China Ventures
will also compete with numerous other small public companies in seeking merger
or acquisition candidates.
The costs of complying with our reporting obligations under the
Exchange Act may be prohibitive.
The Exchange Act requires companies subject thereto to provide certain
information about their operations including certified financial statements. The
time and additional costs that may be incurred by China Ventures to prepare
financial statements may cause China Ventures to cease operations even after a
business combination has been consummated. If China Ventures uses all of its
funds and is unable to consummate a business combination or raise additional
funds, it will be forced to go out of business.
Our management team has minimal experience in analyzing and acquiring
companies and expects to devote a minimal amount of time and effort to
finding an acquisition candidate.
Management has limited experience in the business of analyzing private
companies and in the securities industry. In addition, while seeking a business
combination, management anticipates devoting only a portion of its time to the
business of China Ventures. The combined limited experience and limited time
commitment of management may result in China Ventures' failure to enter into a
successful business combination.
We intend to enter into a business combination with a Chinese entity,
which will expose us to risks not associated with domestic entities.
This may expose us to many risks, including:
- economic downturns;
- currency exchange rate fluctuations;
- changes in governmental policy;
- international incidents;
- military outbreaks;
- government instability,
- nationalization of foreign assets;
- and government protectionism.
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We are not currently a party to and cannot guarantee that we will
become a party to any arrangement which would result in a business
combination.
Although we have commenced preliminary discussions with business
entities from the Republic of China, we currently have no arrangement or
agreement with respect to engaging in a merger with or acquisition of any
business entity. We have not established a specific length of operating history
or a specified level of earnings, assets, net worth or other criteria which we
will require a target business opportunity to have achieved, or without which we
would not consider a business combination with such business entity.
We may be able to pursue only one business opportunity which would
restrict our ability to diversify into other areas.
Our proposed operations, even if successful, will in all likelihood
result in us engaging in a business combination with only one business
opportunity. Consequently, our activities will be limited to those engaged in by
the business with which we merge or acquire. Our inability to diversify our
activities into a number of areas may subject us to economic fluctuations within
a particular business or industry and therefore increase the risks associated
with our operations.
China Ventures has, and will continue to have, no capital with which to
provide the owners of target entities.
Although China Ventures has no capital to provide to target entities,
management believes that China Ventures will be able to offer owners of target
entities the opportunity to acquire ownership interest in a publicly registered
company without incurring the cost and time required to conduct an initial
public offering. This, however, is no guarantee that the owners of a target
entity will enter into a business combination with China Ventures.
We depend on key individuals and they would be difficult to replace.
While seeking a business combination, management anticipates devoting
minimal hours to our business. Our officers and directors have not entered into
written employment agreements with us and are not expected to do so in the
foreseeable future. We have not obtained key man life insurance on our officers
and directors. Notwithstanding the combined limited experience and limited time
commitment of management, loss of the services of these individuals would
adversely affect development of our business and our likelihood of continuing
operations.
Our management may participate in other activities which may directly
or indirectly conflict with the activities in which we are
participating.
Our officers and directors participate in other ventures which may
compete directly or indirectly with us. Additional conflicts of interest and
non-arms length transactions may also arise in the future. Management has
adopted a policy that requires full disclosure of any potentially conflicting
relationships.
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The reporting requirements of the Exchange Act may delay or preclude
the acquisition of some target entities.
The Exchange Act requires companies whose securities are registered
under the Exchange Act to provide information about significant acquisitions
including audited financial statements for the acquired entity covering one or
two fiscal years, depending on the relative size of the acquisition. It is
likely that we will be required to prepare and file an information statement
with the SEC prior to the consummation of any transaction. Filing the
information statement will require us to prepare the financial statements for
any potential acquired company in conformity with generally accepted accounting
principles and to provide appropriate financial disclosure to China Ventures
shareholders. The cost and effort of such an undertaking may make a potential
acquisition less attractive to us.
The time and additional costs that may be incurred by some target
entities to prepare such audited financial statements may significantly delay or
essentially preclude our consummation of an otherwise desirable acquisition.
Acquisition prospects that do not have and are unable to obtain the required
audited financial statements will not be appropriate for acquisition.
A business combination may result in a change in control and a change
in our management.
A business combination involving the issuance of our common stock will,
in all likelihood, result in shareholders of a target entity obtaining a
controlling interest in us. Any such business combination may require our
officers and directors to sell or transfer all or a portion of our common stock
held by them, and to resign as members of the Board of Directors and as
officers. The resulting change in control could result in removal of our present
officers and directors and a corresponding reduction in or elimination of their
participation in our future affairs.
There is no assurance that a trading market will ever develop in our
securities.
We currently have no shares which have been registered for public sale
or are eligible to be sold in any public market. We may enter into a business
combination with a business entity that desires to establish a public trading
market for its shares if we have shares that are trading publicly. A target
entity may attempt to avoid what it deems to be adverse consequences of
undertaking its own public offering by seeking a business combination with China
Ventures. Such consequences may include, but are not limited to, time delays of
the registration process, significant expenses to be incurred in such an
offering, loss of voting control to public shareholders or the inability to
obtain an underwriter or to obtain an underwriter on terms satisfactory to the
target entity.
There is no guarantee that a business combination would result in
tax-free treatment.
Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination we may undertake. Currently, such
transactions may be structured so as to result in tax-free treatment to both
companies, pursuant to various federal and state tax provisions. We intend to
structure any business combination so as to minimize the federal and state tax
consequences to us and the target entity; however, we cannot assure you that any
business combination will meet the statutory requirements of a tax-free
reorganization or that the parties will obtain the intended tax-free treatment
upon a transfer of stock or assets. A non-qualifying
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reorganization could result in the imposition of both federal and state taxes
which may have an adverse effect on both parties to the transaction.
ITEM 2. FINANCIAL INFORMATION.
OVERVIEW.
China Ventures was formed in December 1999. To date, China Ventures
has financed its operations through the sale of equity securities. In
December 1999, China Ventures raised $15,000 through a private placement of
equity securities. Such funds have been used to fund the operations of China
Ventures to date, including the payment of costs and expenses related to the
formation of China Ventures, the private placement described above and the
filing of this Form 10. As of February 2000, these costs and expenses totaled
approximately $17,000. Following the effectiveness of this Form 10,
management estimates that its quarterly expenses will be approximately
$50,000. Accordingly, management will be required to raise additional funds
in the short-term to fund its operating costs and intends to raise such funds
through the sale of equity securities.
PLAN OF OPERATION.
China Ventures intends to merge with or acquire a business entity in
exchange for China Ventures' securities. Initially, China Ventures will attempt
to merge with or acquire a business entity from the People's Republic of China.
If this attempt is not successful, China Ventures anticipates seeking out a
target business through solicitation. This solicitation may include newspaper or
magazine advertisements, mailings and other distributions to law firms,
accounting firms, investment bankers, financial advisors and similar persons,
the use of one or more World Wide Web sites and similar methods. No estimate can
be made as to the number of persons who will be contacted or solicited.
ITEM 3. DESCRIPTION OF PROPERTY.
China Ventures owns no real property and at this time has no agreements
to acquire any property. China Ventures currently uses office space provided as
an accommodation by its attorney at Courvoisier Centre II, Suite 705, 601
Brickell Key Drive, Miami, FL 33131 to conduct its operations. It is not charged
for the use of this office space. China Ventures intends to use this office
space for its operations until it identifies and completes a transaction with an
operating company, at which time China Ventures expects to use the acquired
company's office as its executive office. China Ventures has no written
agreement for the use of this office space and may not be able to use this
office space until it completes an acquisition of an operating company.
Alternatively, it may be required to compensate its attorney for the use of the
office space.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The number of ordinary shares of China Ventures' owned by China
Ventures' directors and officers and by each person who owns legally and
beneficially more than five percent of China Ventures' issued and outstanding
ordinary shares on January 31, 2000, the address of each such person and the
percentage of the ordinary shares represented by such shares is set forth in the
following table. Unless otherwise indicated all ownership is both legal and
beneficial.
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name and Address Amount and Nature Percent of Class
of Beneficial of Beneficial
Owner Owner
- --------------------------------------------------------------------------------
<S> <C> <C>
Hong Yang 123,750 49.00%
11\F Huitong Building Finance
and Trade District
Haikou City
Hainan Province
Peoples Republic
of China P.C. 570125
James N. L. Chow 121,250 48.01%
52 Hoi Pong Road, Central
Lei Yue Mun, Kowloon, HK
All Executive Officers and
Directors as a Group 245,000 97.01%
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The names, ages and terms of office of directors and executive officers
of China Ventures are set forth in the following table:
<TABLE>
<CAPTION>
NAME AGE POSITIONS DIRECTOR SINCE
- ---- --- --------- --------------
<S> <C> <C> <C>
Hong Yang 41 Director; President December 1999
James N. L. Chow 42 Director; Secretary December 1999
</TABLE>
Hong Yang Mr. Yang, a citizen of the Peoples Republic of China, has
served as President of Hainan Zhiye General Company since
1992, a conglomerate based in China and focused on real
estate, hotels, restaurants, tourism, trading and ocean
transportation.
James N.L. Chow Mr. Chow, a citizen of Hong Kong, has been President of
Inter-Global Investments, Inc. since March 1997. During that
time, he has provided investment banking consulting services
for various companies in the United States. Prior thereto,
from August 1996 to March 1997, he was Regional Financial
Controller for Miramar Hotel & Investment Co., Ltd. in Hong
Kong. From September 1993 to August 1996, Mr. Chow was
Financial Controller for Miramar Hotel Management Group in The
People's Republic of China.
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Each director is elected by holders of a majority of the ordinary
shares to serve for a term of one year and until his successor is elected and
qualified, which is generally at the annual meeting of shareholders. Officers
serve at the will of the board, subject to possible future employment agreements
which would establish term, salary, benefits and other conditions of employment.
No employment agreements are currently contemplated.
ITEM 6. EXECUTIVE COMPENSATION.
None of the officers receives any compensation for the services
rendered to China Ventures.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Ricardo Bajandas, a partner in the law firm De La Pena, Villanueva &
Bajandas, LLP, is a shareholder of China Ventures and is acting as legal counsel
in connection with the formation of China Ventures and related matters. Through
February 4, 2000, China Ventures had incurred approximately $17,000 in legal
fees and expenses to Mr. Bajandas in connection with preparation and filing of
this Form 10.
ITEM 8. LEGAL PROCEEDINGS.
There is no litigation pending or threatened by or against China
Ventures.
ITEM 9. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is currently no market for China Ventures' ordinary shares .
The National Association of Securities Dealers, Inc., which administers
the NASDAQ Stock Market, has established certain criteria for initial and
continued eligibility for listing on the NASDAQ Stock Market. In order to
qualify for listing on the NASDAQ SmallCap Market, a company must have at least
(i) net tangible assets of $4,000,000 or market capitalization of $50,000,000 or
net income for two of the last three years of $750,000; (ii) public float of
1,000,000 shares with a market value of $5,000,000; (iii) a bid price of $4.00;
(iv) three market makers; (v) 300 shareholders and (vi) an operating history of
one year or, if less than one year, $50,000,000 in market capitalization. For
continued listing on the NASDAQ SmallCap Market, a company must have at least
(i) net tangible assets of $2,000,000 or market capitalization of $35,000,000 or
net income for two of the last three years of $500,000; (ii) a public float of
500,000 shares with a market value of $1,000,000; (iii) a bid price of $1.00;
(iv) two market makers; and (v) 300 shareholders.
There can be no assurances that, upon a successful merger or
acquisition, China Ventures will qualify its securities for listing on the
NASDAQ SmallCap Market or a national or regional exchange, or be able to
maintain the maintenance criteria necessary to insure continued listing. The
failure of China Ventures to qualify its securities or to meet the relevant
maintenance criteria after such qualification may result in the discontinuance
of the inclusion of China Ventures's securities.
In such events, trading, if any, in China Ventures's securities may
then continue in the over-the-counter market. In such case, a shareholder may
find it more difficult to dispose of, or to obtain accurate quotations as to the
market value of, China Ventures's securities.
Holders. There were 28 holders of ordinary shares of China Ventures'
as of January 31, 2000 with a total of 252,550 shares of common stock issued and
outstanding.
14
<PAGE>
Dividends. Dividends on the ordinary shares can be paid lawfully only
out of current and retained earnings and surplus of China Ventures, when, as and
if declared by the board of directors. China Ventures has not declared or paid
any dividends on the ordinary shares since inception and there is no assurance
dividends will be paid in the foreseeable future. The payment of dividends in
the future rests within the discretion of its board of directors and will
depend, among other things, upon China Ventures's earnings, its capital
requirements and its financial condition, as well as other factors which the
board of directors deems relevant.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
In December 1999, China Ventures issued and sold 2,500 ordinary shares
to 25 individuals for aggregate consideration of $15,000. China Ventures did not
sell these ordinary shares in reliance on any exemption from the United States
federal securities laws as all purchasers were residents of the Republic of
China.
On December 16, 1999, in connection with the formation of China
Ventures, Mr. Hong Yang received 123,750 ordinary shares, Mr. James Chow
received 121,250 ordinary shares and Mr. Ricardo Bajandas received 5,050
ordinary shares. Each of Mr. Yang, Mr. Chow and Mr. Bajandas paid par value as
consideration for the shares issued in connection with the formation of China
Ventures. Mr. Yang and Mr. Chow are residents of China. Mr. Bajandas is a
resident of the United States. Accordingly, no exemption was required for the
issuance of ordinary shares to Mr. Yang or Mr. Chow. Mr. Bajandas purchased his
ordinary shares of China Ventures in reliance on Rule 4(2) promulgated under the
Securities Act.
ITEM 11. DESCRIPTION OF SECURITIES.
The authorized capital stock of China Ventures consists of 50,000,000
ordinary shares , par value $.001 per share. The following statements relating
to the capital stock are summaries and do not purport to be complete. Reference
is made to the more detailed provisions of, and such statements are qualified in
their entirety by reference to, the Memorandum and Articles of Association, a
copy of which is filed as an exhibit to this registration statement.
Ordinary Shares
Holders of shares are entitled to one vote for each ordinary share on
all matters to be voted on by the shareholders. Holders of shares do not have
cumulative voting rights. Holders of ordinary shares are entitled to share
ratably in dividends, if any, as may be declared from time to time by the Board
of Directors in its discretion from funds legally available therefor. In the
event of a liquidation, dissolution or winding up of China Ventures, the holders
of ordinary shares are entitled to share pro rata all assets remaining after
payment in full of all liabilities.
Holders of ordinary shares have no preemptive rights to purchase China
Ventures's shares. There are no conversion or redemption rights or sinking fund
provisions with respect to the ordinary shares.
Dividends
China Ventures does not expect to pay dividends. Dividends, if any,
will be contingent upon China Ventures' revenues and earnings, if any, capital
requirements and financial conditions. The payment of dividends, if any, will be
within the discretion of China Ventures' Board of Directors. China Ventures
15
<PAGE>
presently intends to retain all earnings, if any, for use in its business
operations and accordingly, the Board of Directors does not anticipate declaring
any dividends in the foreseeable future.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Directors and Officers for the time being of China Ventures and any
trustee for the time being acting in relation to any of the affairs of China
Ventures and their heirs, executors, administrators and personal representatives
respectively shall be indemnified out of the assets of China Ventures from and
against all actions, proceedings, costs, charges, losses, damages and expenses
which they or any of them shall or may incur or sustain by reason of any act
done or omitted in or about the execution of their duty in their respective
offices or trusts, except such (if any) as they shall incur or sustain by or
through their own wilful neglect or default respectively and no such Director,
Officer or trustee shall be answerable for the acts, receipts, neglects or
defaults of any other Director, Officer or trustee or for joining in any receipt
for the sake of conformity or for the solvency or honesty of any banker or other
persons with whom any monies or effects belonging to China Ventures may be
lodged or deposited for safe custody or for any insufficiency of any security
upon which any monies of China Ventures may be invested or for any other loss or
damage due to any such cause as aforesaid or which may happen in or about the
execution of his office or trust unless the same shall happen through the wilful
neglect or default of such Director, Officer or trustee.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Item 15.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
China Ventures has not changed accountants since its formation and
there are no disagreements with the findings of its accountants.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
Financial Statements
Independent Auditor's Report dated December 21, 1999
Balance Sheet dated as of December 20, 1999
Statement of Operations from December 10 (date of
inception) to December 20, 1999
Statement of Changes in Stockholders' Equity from
December 10 (date of inception) to December 20, 1999
Statement of Cash Flows from December 10 (date of
inception) to December 20, 1999
Notes to Financial Statements
Exhibits
3.1(1) Memorandum and Articles of Association of China Ventures
Limited
4.1(1) Specimen Stock Certificate of China Ventures Limited
27 Financial Data Schedule
- ----------
1 Previously filed
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Amendment No. 2 to Form 10 to be signed on
its behalf by the undersigned thereunto duly authorized.
CHINA VENTURES LIMITED
Date: March 27, 2000 BY: /s/ James N. L. Chow
-------------- --------------------------------
James N.L. Chow, Secretary
17
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditor's Report dated December 21, 1999 F-2
Financial Statements:
Balance Sheet as of December 20, 1999 F-3
Statement of Operations from December 10 (date of inception)
to December 20, 1999 F-4
Statement of Changes in Shareholders' Equity from December 10 (date
of inception) to December 20, 1999 F-5
Statement of Cash Flows from December 10 (date of inception)
to December 20, 1999 F-6
Notes to Financial Statements F- 7
</TABLE>
F-1
<PAGE>
Angel A. Suarez, C.P.A.
9280 SW 21 Street
Miami, Florida 33165
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
China Ventures Limited
George Town
Grand Cayman Island, BWI
I have audited the accompanying balance sheet of China Ventures Limited (A
Development Stage Company) as of December 20, 1999 and the related statements of
operations and of cash flows for the period December 10 (date of inception) to
December 20, 1999. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements, based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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 statements presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position, results of operations and cash flows
of China Ventures Limited ( A Development Stage Company) as of December 20, 1999
and for the period December 10 (date of inception) to December 20, 1999 in
conformity with generally accepted accounting principles.
ANGEL A. SUAREZ, C.P.A.
Miami, Florida
December 21, 1999
Member: Florida Institute of Certified Public Accountants.
F-2
<PAGE>
CHINA VENTURES LIMITED
(A Development Stage Company)
BALANCE SHEET
December 20, 1999
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash $ 15,000
TOTAL CURRENT ASSETS $ 15,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses $ 5,200
--------
TOTAL CURRENT LIABILITIES 5,200
STOCKHOLDERS' EQUITY
Ordinary shares, $.001 par value, 50,000,000 shares
authorized and 252,550 shares issued 252
Additional Paid-in Capital 14,998
Stock subscription receivable (250)
Deficit accumulated during the development stage (5,200)
--------
9,800
$ 15,000
</TABLE>
The accompanying notes are part of these financial statements.
F-3
<PAGE>
CHINA VENTURES LIMITED
(A Development Stage Company)
STATEMENT OF OPERATIONS
From December 10 (date of inception) to December 20, 1999
<TABLE>
<CAPTION>
GENERAL AND ADMINISTRATIVE EXPENSES
<S> <C>
Legal and incorporation fees $5,200
------
NET LOSS FOR THE PERIOD - development stage $5,200
NET LOSS PER SHARE - development stage $ 0.02
</TABLE>
The accompanying notes are part of these financial statements.
F-4
<PAGE>
CHINA VENTURES LIMITED
(A Development Stage Company)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
From December 10 (date of inception) to December 20, 1999
<TABLE>
<S> <C>
ORDINARY SHARES
Par value of shares issued
December 10, 1999 - 252,550 shares
at $.001 per share $ 252
--------
Balance at December 20, 1999 $ 252
ADDITIONAL PAID-IN CAPITAL
Proceeds in excess of par value of ordinary
shares issued
December 10, 1999 - 2,500 shares
at $5.999 per share $ 14,998
--------
Balance at December 20, 1999 $ 14,998
STOCK SUBSCRIPTION RECEIVABLE
December 10, 1999 - 250,050 shares
at $.001 per share $ (250)
--------
Balance at December 20, 1999 $ (250)
--------
RETAINED EARNINGS
Deficit accumulated during the development stage $ (5,200)
--------
Balance at December 20, 1999 $ (5,200)
TOTAL Shareholders' EQUITY $ 9,800
</TABLE>
The accompanying notes are part of these financial statements.
F-5
<PAGE>
CHINA VENTURES LIMITED
(A Development Stage Company)
STATEMENT OF CASH FLOWS
From December 10 (date of inception) to December 20, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (5,200)
Increase in accrued expenses 5,200
NET CASH PROVIDED BY OPERATING ACTIVITIES --
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuing ordinary shares 15,000
NET CASH PROVIDED BY FINANCING ACTIVITIES 15,000
--------
CASH AT END OF YEAR $ 15,000
</TABLE>
The accompanying notes are part of these financial statements.
F-6
<PAGE>
CHINA VENTURES LIMITED
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - GENERAL INFORMATION
China Ventures Limited (the Company) was incorporated in the Cayman Islands on
December 10, 1999 for the principal purpose of facilitating a Chinese private
company to become a reporting public company whose securities are qualified for
trading in the United States secondary market. The Company will attempt to
locate and negotiate with a target business entity, initially from the People's
Republic of China, to effect a merger or some other business combination, in
exchange for the opportunity to acquire ownership interest in a publicly
registered company without incurring the cost and time required to conduct an
initial public offering. If this initial attempt fails, the Company will not
restrict its search to any specific business, industry or geographical location.
As of December 20, 1999 the Company is in the development stage and has not
started operations; accordingly these financial statements are prepared in
accordance with SFAS 7, "Accounting and Reporting by Development Stage
Enterprises" as issued by the Financial Accounting Standards Board.
The Company has elected a calendar year annual period.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING METHOD
The Company presents its financial statements under the accrual basis of
accounting, under which method revenues are recognized when earned rather than
when received, and expenses are recognized when incurred rather than when paid.
NOTE 3 - SUBSEQUENT EVENTS
The Company is in the process of voluntarily filing "Form 10, General Form for
Registration of Securities Pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934" to register its Common Stock (under Section 12(g) of the
Act). Under the Securities Exchange Act of 1934 as amended, the Company is under
no obligation to file this form.
NOTE 4 - RELATED PARTY TRANSACTIONS
A shareholder of the Company is acting as legal counsel. Legal fees and
incorporation costs in the amount of $5,200 are payable to a law firm in which
this shareholder is a partner.
F-7
<PAGE>
CHINA VENTURES LIMITED
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - CONTINGENCIES
The Company may not be successful in locating a target business with which to
merge or effect some other business combination. If the Company is successful in
its attempts, it may be exposed to many risks including economic downturns,
currency exchange rate fluctuations, changes in governmental policies,
international incidents, nationalization of foreign assets and government
protectionism, among others.
A business combination involving the issuance of ordinary shares of the Company
may result in shareholders of the target entity obtaining a controlling interest
and in changes in the present officers and directors.
The Memorandum and Articles of Association provide that the Company may
indemnify its officers and/or directors for liabilities; therefore, assets of
the Company could be used or attached to satisfy any liabilities subject to such
indemnification.
F-8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
CHINA VENTURES LIMITED - DECEMBER 20, 1999
</LEGEND>
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> DEC-10-1999
<PERIOD-END> DEC-20-1999
<EXCHANGE-RATE> 1
<CASH> 15,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,000
<CURRENT-LIABILITIES> 5,200
<BONDS> 0
0
0
<COMMON> 252
<OTHER-SE> 9,548
<TOTAL-LIABILITY-AND-EQUITY> 15,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,200)
<EPS-BASIC> (0.021)
<EPS-DILUTED> 0
</TABLE>
