U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB/A
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities
Exchange Act of 1934
T.Z.F. INTERNATIONAL INVESTMENTS, INC.
(Name of Small Business Issuer in its charter)
Nevada 88-0404186
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Unit 1, 3071 No. 5 Road
Richmond, B.C., Canada V6X 2T4
(Address of Principal Office) Zip Code
Issuer's telephone number: (604) 718-2188
Securities to be registered under Section 12(b) of the Act:
Title of each class to be so registered - N/A
Name of each exchange on which each class is to be registered - N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
PART I -
Item 1. DESCRIPTION OF BUSINESS
Background
The Company was incorporated under the laws of Nevada on
September 14, 1998, as Sabai Sabai Enterprises, Corp. It was
initially formed to engage in the business of importing low-priced
quality products from Southeast Asia for distribution throughout North
America. The Company spent several months engaged in the process
of raising capital and seeking to implement its original business plan,
but never commenced any commercial operations relating to its initial
business plan.
On March 30, 2000, there was a change in control of the
Company. On that date, T.Z.F. International Herbs Investment, Inc.,
a British Columbia corporation (the "BC Company"), purchased
1,000,000 shares of the issued and outstanding common stock of the
Company, representing 62.5% of the issued and outstanding stock, for
a purchase price of $140,000. This stock purchase was completed as
the first step in a business acquisition transaction between the
Company and the BC Company. In conjunction with closing of the
stock purchase transaction, the then current officers and directors of
the Company resigned and successors designated by the BC Company
were appointed.
The second step in the business acquisition transaction was
completed on April 30, 2000. On that date, the BC Company
surrendered its 1,000,000 shares in the Company for cancellation. At
the same time, the Company acquired all of the issued and outstanding
stock of the BC Company in exchange for issuance of 18,451,843
shares of its common stock (as adjusted to account for a subsequent
10:1 forward split of the Company's issued and outstanding common
stock). In May 2000, following completion of the forward split, the
Company authorized the issuance of 250,000 restricted shares as
compensation for consulting services. Following these transactions,
the Company had a total of 24,701,843 shares issued and outstanding,
of which 18,451,843 shares, or approximately 74.20%, were owned
by the persons who had previously been shareholders of the BC
Company.
The BC Company, which is now a wholly-owned subsidiary of
the Company, is the entity through which the Company plans to
conduct its business operations. It owns the formula and all
distribution and intellectual property rights, including trademark,
patent and industry design rights, to Snow Lotus Tea products.
On May 25, 2000, the Company changed its name to T.Z.F.
International Investments, Inc. The Company, and its wholly-owned
subsidiary, the BC Company, are both based in Richmond, British
Columbia, Canada.
The Product
The only product of the Company which is currently being
distributed is Snow Lotus Tea, which is primarily an extract of the
snow lotus flower which grows in high elevations in the mountains of
Tibet and neighboring Chinese provinces. In addition to the snow
lotus flower, the product also incorporates other Chinese herbal
ingredients, including Chin-Chiao (Gentiana macrophylla), Dong Quai
(Angelica sinensis), and Dang-Shen (Salvia mitiorrhiza).
Through the BC Company, the Company owns the formula,
distribution and intellectual property rights, including trademark,
patent and industrial design rights, in connection with the "Snow
Lotus Tea" series products. It acquired those rights from Shenzhen
Hungyunda Enterprises Co. Ltd. of China pursuant to an Assignment
Agreement dated December 15, 1999. Prior to the execution of the
Assignment Agreement, the BC Company was licensed to develop,
market, and distribute the "Snow Lotus Tea" products in North
America, but did not own the formula rights. In consideration for the
assignment, Shenzhen Hungyunda was issued 6,000,000 Common B
Shares in the BC Company. In conjunction with the share exchange
on April 30, 2000, such shares were converted into 6,000,000 shares
of common stock in the Company.
The Company purchases the ingredients for the product from
Chinese herbs material wholesale agents in China. The product is
manufactured for the Company in Beijing, China, by Zhong Jia Yi
Medical and Pharmaceutical Technology Company, and is then
imported into Canada by the Company for resale. Qing Liu, who is a
director of the Company, was the president of Zhong Jia Yi Medical
and Pharmaceutical Technology Company from 1996 - 1997.
In, October, 1998, the Canadian Food Inspection Agency
approved the sale of Snow Lotus Tea in Canada as a food product,
and the Company is currently focusing its efforts on selling the
product in two markets in Canada. One is the health food and
supplements market, in which the product is being marketed as a
health food supplement. The other market consists of local
Traditional Chinese Medicine practitioners, Naturopathic clinics and
the Chinese community throughout Canada, in which the product is
considered to be a Chinese formula natural remedy for arthritis.
In the future, the Company intends to apply to the U.S. Food
and Drug Administration for permission to sell Snow Lotus Tea as a
food product in the U.S. It is not known when, or whether, the
Company is likely to receive permission from the FDA to sell its
product in the United States. In the future, the Company may also
elect to seek approval from appropriate governmental agencies in both
Canada and the U.S. to market Snow Lotus Tea as an over-the-
counter medicine for the treatment of the symptoms of arthritis.
However, the process of obtaining approval for sale of any product as
an over-the-counter medicine is extremely time-consuming and
expensive. As a result, the Company may never have the funds or
other resources required to initiate that process.
The Company has filed trademark applications in the United
States and Canada for the tradename "Snow Lotus."
The product is sold in ready-to-drink form and is intended to
be consumed in small quantities (one or two spoonfuls at a time). To
date, approximately 35,000 bottles (500 ml/bottle) have been
produced for the Company and the Company has contracted for the
production of an additional 50,000 bottles. The total capacity of the
manufacturing facility is approximately 75,000 bottles per month.
Research and Development
The Company itself has not expended funds for research and
development regarding its Snow Lotus Tea product, and instead has
relied upon research contracted to and conducted by other
organizations. For example, various limited research studies
regarding the efficacy of Snow Lotus Tea in treating rheumatoid
arthritis have been conducted by the Society for Therapeutic
Alternatives Using Natural Chinese Healing Methods ("STAUNCH"),
of British Columbia, Reviere Consulting, Chinese Medicine and
Acupuncture Specialists of Vancouver, and the International College
of Traditional Chinese Medicine ("TCM") in Vancouver. Each of
these studies was limited in scope and may not fairly indicate the
efficacy of Snow Lotus Tea in the treatment of arthritis.
The Market
As of the date of this registration statement, the Company
remains in the development stage. It's only current market for sale of
the Snow Lotus Tea is in Canada, and for the period from January,
2000 through June, 2000, it had total sales of only approximately
$9,500. As of July 1, 2000, the Company executed a new exclusive
distribution agreement with Expediter Sales, Ltd., of Vancouver,
British Columbia, pursuant to which the distributor is obligated to sell
a minimum of one container load (approximately 25,000 bottles) per
month commencing August 1, 2000. At current prices (approximately
$15/bottle, U.S.) a full container load would result in approximately
$375,000 in gross revenue for the Company.
Competition
The Company's product is being marketed through retail
outlets in the health food and supplements market. In this market,
product knowledge is an essential part of the sale of any given product
although price is also an important factor. Other products similar to
Snow Lotus Tea are available in this market, and they are generally
sold through price point displays in retail stores. However, the
Company does not believe that there are other products which are
currently available as herbal drinks or health food supplements which
are targeted at arthritis and which have no known side effects.
Administrative Offices
The Company currently maintains a mailing address at Unit 1,
3071 No. 5 Road, Richmond, B.C., Canada V6X 2T4. The
Company's telephone number there is (604) 718-2188. Other than
this mailing address, the Company does not maintain any other office
facilities, and does not anticipate the need for maintaining office
facilities at any time in the foreseeable future. The Company pays rent
in the amount of CAD $3,300 (approximately $2,220 U.S. dollars)
per month for the use of this office space. The lease is for three
years, and commenced on July 1, 1999.
Employees
The Company has 10 full-time employees and frequently also
uses part-time assistance and contract services. Management of the
Company also expects to use consultants, attorneys, and accountants
as necessary.
Risk Factors
An investment in the outstanding securities of the Company
should be considered to be extremely risky. The following discussion
of risk factors is not intended to provide an exhaustive list of all of
the risks which may be associated with an investment in the
Company. Any person considering such an investment should
carefully consider all of the risks involved, including, but not limited
to, the risk factors discussed below, before making an investment
decision.
Limited Operating History. The Company was formed in
December, 1998, and itself has no operating history or revenues from
operations. On April 30, 2000, it acquired all of the issued and
outstanding stock of the BC Company which thereby became a
wholly-owned subsidiary of the Company. The BC Company was
incorporated in May, 1998, and has only a limited operating history.
As a result, in conducting operations through the BC Company, the
Company faces all of the risks inherent in a new business venture,
including all the unforeseen costs, expenses, problems, and difficulties
to which such ventures are subject.
Early Stage Product Development. The Company is
conducting pre-clinical studies and research studies on Snow Lotus
Tea and other potential products. The results of research, pre-clinical
studies and clinical trials are inherently unpredictable. Furthermore,
successful completion of pre-clinical studies would justify human
testing but would not be predictive of successful human testing. To
date, the only commercially available product developed by the
Company is Snow Lotus Tea. There is no assurance that the
Company will be able to develop any other commercial products or
that it will be capable of producing Snow Lotus Tea or any other
products in commercial quantities at reasonable cost; that it will be
able to successfully market its products; or that it will be able to
generate an acceptable return on its investment in research and
development through product sales, royalties, license fees, milestone
payments or other potential sources of revenue.
No Market for Stock. At the present time, there is no public
market for the Company's common stock and there is no assurance
that a market will develop in the future. Although the Company's
outstanding shares have been approved for trading on the "Pink
Sheets" maintained by the National Quotations Bureau, there has
been no trading in such shares. Even if a market should develop in
the future, there is no assurance that it will be maintained. Thus,
persons who purchase shares of the Company may find it to be
difficult or impossible to liquidate their investment, because of the
lack of a market or the difficulty in maintaining a market. There is
currently no person or entity which is obligated to make or maintain a
market in the Company's shares.
No Assurance of Success or Profitability. There is no
assurance that the operations to be carried on by the BC Company
will be successful or that they will ever will generate significant
revenues or profits. From inception (May, 1998) through December,
1999, the subsidiary corporation generated no significant revenues and
incurred losses of approximately $482,000. The likelihood of success
of such operations must be considered in light of the problems,
expenses, difficulties, complications and delays frequently encountered
in connection with development of a new business.
Need for Additional Financing. The Company will require
additional funds to continue research and product development, to
initiate marketing activities, and to implement the terms of its business
plan. As of July 15, 2000, the Company and the BC Company (its
wholly-owned subsidiary), had received gross proceeds of
approximately CAD $3,858,965(approximately $2,597,083 U.S.
dollars) from the private placement of securities. They believe that
their current resources, together with the additional proceeds from the
on-going private placement offering (assuming the maximum offering
is completed), will enable them to maintain their current and planned
operations through the next 24 months. However, there is no
assurance that the Company will successfully complete the private
placement offering. There is also no assurance that unforeseen
circumstances or a change in operations may not consume available
resources more rapidly than currently planned or anticipated or require
additional capital to fully implement marketing efforts and other
aspects of the business plan. To the extent that the capital resources of
the Company and the BC Company are insufficient to meet current or
planned operating requirements, they will be required to seek
additional funds through equity or debt financing, collaborative or
other arrangements with corporate partners, licensees or others, and
from other sources, which may have the effect of diluting the holdings
of existing shareholders. No assurance can be given that additional
financing will be available when needed or that such financing will be
available on terms acceptable to the Company. If adequate funds are
not available, the Company would be required to delay, trim or
eliminate its research and product development programs or other
programs or services which are currently part of the business plan, or
may be required to alter the business plan, which is likely to have a
material adverse effect on the Company.
Dependence on Key Personnel. The success of the Company
depends upon a few key personnel. Significant disruption in the
Company's operations could be expensive if one or more of these
individuals were to become unavailable. The Company does not
currently have employment contracts with any of its key personnel.
As a result, those persons could elect to terminate their employment
with the Company at any time.
Governmental Regulation. There are substantial regulations
applicable to the advertising and sale of food products or over-the-
counter medicines. In October, 1998, the Canadian Food Inspection
Agency approved the sale of Snow Lotus Tea in Canada as a food
product. The Company intends to file an application with the U.S.
Food and Drug Administration for permission to sell Snow Lotus Tea
as a food product in the U.S., but as of the date of this registration
statement, has not yet done so. Accordingly, it is not known when, or
whether, the Company is likely to receive permission from the FDA to
sell Snow Lotus Tea in the U.S. In the future, the Company could
elect to seek approval from governmental agencies in both the U.S.
and Canada to market Snow Lotus Tea as an over-the-counter
medicine for treatment of the symptoms of arthritis. However, the
process of obtaining approval for sale of any product as an over-the-
counter medicine is extremely expensive and time-consuming. There
is no assurance that the Company would ever have the resources
necessary to complete all of the necessary research and clinical trials
required prior to submission of an application for sale of Snow Lotus
Tea, or any other product, as an over the counter medicine, and even
is such an application was submitted, there is no assurance that it
would be approved.
Patent or Copyright Protection. The Company's success will
depend upon its ability to obtain patents, obtain exclusive rights to
patents, maintain trade secret protection and operate without infringing
upon the proprietary rights of third parties. The Company has
attempted to protect its products and technologies through a
combination of patent and trade secret laws. There can be no
assurance that pending patent applications will be successful or that
others will not develop functionally equivalent or superior products or
technology that does not infringe the Company's patents. Accordingly,
the Company may be vulnerable to competitors which develop
competing products or competing technology, whether independently,
or as a result of acquiring access to the Company's trade secrets.
Sources of Raw Materials. The Company's Snow Lotus Tea product
is primarily an extract of the snow lotus flower which grows in high
elevations in the mountains of Tibet and neighboring Chinese
provinces, and also incorporates other Chinese herbal ingredients. The
Company currently purchases these herbs from Chinese herbs material
wholesale agents in China. The possibility that the Company may be
unable, from time to time, to obtain sufficient quantities of necessary
herbs is a significant risk, and in many respects this risk is beyond the
control of the Company. In addition, even if the necessary herbs are
available, their quality may vary or the Company may be unable to
purchase them at prices which are low enough to allow it to produce
its Snow Lotus Tea product at a competitive price. Even temporary
changes in the availability, price or quality of the herbal ingredients
would have a material effect on the operations and potential
profitability of the Company.
Competition. Many of the Company's competitors have
significantly greater resources and greater experience in the industry.
However, the Company is not currently aware of other similar
products with the same curative effects which are also free from side
effect. The Company's future is dependent on securing technological
superiority in its products, and maintaining such superiority in the face
of new developments. The Company plans to form strategic
partnerships to accelerate the development and distribution of its
products, conduct multi-dimensional marketing, and continue its
research and development. The Company also plans to acquire
manufacturing and research and development facilities in China.
There can, however, be no assurance that the Company will be
successful in these enterprises.
Dependence on Key Personnel. In the early stages of its
operations, the success of the Company's will be dependent upon a
few key personnel. Significant disruption in the Company's operations
could be experienced if one or more of these individuals were to
become unavailable.
Dependence on Strategic Partners and Others. The Company's
strategy is to establish collaborative arrangements to conduct later
stage development and commercialization of its products. There can
be no assurance, however, that the Company will be able to establish
future collaborations on favorable terms, if at all, or that its current or
future collaborative arrangements will be successful. Furthermore,
once a collaborative arrangement is established and the Company
becomes dependent upon the arrangement for development and
commercialization of its products, a collaborative partner may delay or
abandon development of the Company's product for a variety of
reasons which may invalidate the product's commercial value, and
which may also adversely affect the Company's business.
Market Acceptance. As of the date of this registration
statement, the Company's Snow Lotus Tea product has been approved
for sale in Canada as a food product. It has not been approved for
sale in the U.S. or any other countries as a food product, nor has it
been approved for sale in any country as an over-the-counter medicine.
There is no assurance that the Company's products, if approved for
sale in other countries as either a food product or an over-the-counter
medicine, will achieve market acceptance. The extent of acceptance of
the Company's products by consumers and by persons in the
healthcare industry will depend upon a number of factors, including,
but not limited to, recognition of the efficacy of the product, product
availability, brand name recognition, the availability and cost of
competitive products, relative safety and efficacy of competitive
products, and the like. There is no assurance that the Company's
products will be successful in achieving market acceptance as either a
food product or as an over-the-counter medicine.
Potential Product Liability. Testing and proposed
commercialization of food products and human therapeutic products
involves inherent risk of product liability claims and associated adverse
publicity. There can be no assurance that the Company will be able to
obtain or maintain sufficient insurance coverage on acceptable terms
with coverage which is adequate to provide necessary protection. Such
insurance is expensive, difficult to obtain and may not be available in
the future on acceptable terms, or at all. An inability to obtain
sufficient insurance coverage on reasonable terms or to otherwise
protect against potential product liability claims, could prevent or
inhibit the commercialization of the Company's potential products.
Manufacturing Uncertainties. The Company's ability to
commercialize its products will depend upon its ability to manufacture
such products, either directly or through third parties, at a competitive
cost and in accordance with any applicable regulatory requirements.
The Company's products must be manufactured in commercial
quantities at an acceptable cost and with sufficient quality, consistency,
purity and stability to make them marketable. If the Company is
unable to make adequate arrangements for manufacture of its products,
either through ownership of a manufacturing facility or through
contracting with third parties, it would have a material adverse affect
upon the Company's business and potential profitability.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS
Plan of Operation
During the fiscal year ending December 31, 2000, and during
the twelve months following the date hereof, the Company plans to
complete its registration under the Securities Exchange Act of 1934 in
order to voluntarily become a fully-reporting company, expand the
marketing of its product in Canada, raise additional capital, and
complete the acquisition of a pharmaceutical manufacturing business in
China. There is no assurance as to when or whether the Company will
be successful in doing so.
During the period from September 14, 1998 (inception) through
the date of this registration statement, the Company has engaged in no
significant operations other than organizational activities and
acquisition of capital as noted above. On April 30, 2000, the
Company acquired 100% of the issued shares of the BC Company by
the issuance of 18,451,843 shares of common stock in exchange for all
issued and outstanding stock of the BC Company.
As a result of the acquisition of all of the issued and
outstanding stock of the BC Company, as of June 30, 2000 (the date
of Pro Forma Consolidated Financial Statements included in this
registration statement), the Company had total assets of $5,762,668,
including current assets of $1,647,688, of which $1,418,183 was in the
form of cash and short-term deposits. Included in the Company's
assets are technology rights valued at $4,038,229 which is the value
assigned to the acquisition of the formula, distribution and intellectual
property rights, including trademark, patent and industrial design
rights, for the "Snow Lotus Tea" series products. The BC Company,
which is the Company's wholly-owned subsidiary, acquired these
assets from Shenzhen Hungyunda Enterprises Co. Ltd. of China
pursuant to an Assignment Agreement dated December 15, 1999.
The consideration consisted of issuance of 6,000,000 Common B
Shares in the capital stock of the BC Company. Upon completion of
the share exchange on April 30, 2000, the Common B shares held by
Shenzhen Hungyunda Enterprises Co Ltd were exchanged for
6,000,000 shares of common stock of the Company.
Between January 10, 2000 and March 16, 2000, the BC
Company raised a total of CAD $537,000 (approximately $361,401
U.S. dollars) through the offering and sale of units at a price of CAD
$1.00 (approximately $0.6730 U.S. dollars) per unit. The units
consisted of one Class B common stock and one warrant to purchase
an additional share of common stock at a price of CAD $1.50 per
share (approximately $1.0096 U.S. dollars). Beginning on or about
March 17 and continuing until the date of completion of the share
exchange on April 30, 2000, the BC Company was actively engaged in
a private placement offering of up to 6,600,000 units, each of which
consisted of one Class B Preferred Share and one purchase warrant to
acquire one Class B Preferred Share at a price of CAD $1.50 per share
(approximately $1.0096 U.S. dollars). As of April 30, 2000, the BC
Company had sold a total of 2,214,643 such units and received gross
offering proceeds of CAD $3,321,964.50 (approximately $2,235,682
U.S. dollars). In the event all such units were sold, the gross offering
proceeds would be CAD $9,900,000 (approximately $6,662,700 U.S.
dollars).
As part of the share exchange on April 30, 2000, all of the
outstanding Class B Shares of the BC Company, including those sold
in the private offering, were converted, on a one-to-one basis, into
shares of common stock of the Company, and the warrants were
converted into warrants representing the right to acquire one share of
common stock of the Company at a price of CAD $1.50
(approximately $1.0096 U.S. dollars). Since completion of the share
exchange, the subsidiary has not actively continued with the private
placement offering. However, on or about July 4, 2000, the subsidiary
received subscription proceeds totaling CAD $510,000 (approximately
$343,230 U.S. dollars) for the purchase of an additional 340,000 units.
In lieu of issuing shares and warrants in the subsidiary to the
purchasers of those units, the Company issued them 340,000 of its
own shares, together with warrants to acquire an additional 340,000
shares at a price of CAD $1.50 per share (approximately $1.0096
U.S. dollars).
The Company intends to modify and continue the offering
during the fiscal year ending December 31, 2000. As modified, it is
expected that the offering will be for units priced at CAD $1.50
(approximately $1.0096 U.S. dollars) per unit, with each unit
consisting of one share of common stock in the Company and one
warrant to purchase an additional share of common stock in the
Company at a price of CAD $1.50 (approximately $1.0096 U.S.
dollars).
The proceeds of the offering are intended to be used primarily
for working capital, implementation of a marketing program and for
acquisition of certain fixed assets, including a manufacturing facility.
The Company has signed an agreement to acquire all of the
issued and outstanding stock of Tian An Investments Limited, a
British Virgin Islands company with an office in Hong Kong. Tian
An's only asset is its 100% ownership of Tian An (Xiamen)
Pharmaceuticals Ltd., a manufacturer of Chinese traditional and herbal
medicine and other drugs. On or about July 5, 2000, the Company
paid HK $6,638,318.09 (approximately $851,000 U.S. dollars) as an
installment towards payment of the total purchase price of
approximately HK $21,500,000 (approximately $2,757,000 U.S.
dollars). The Company is currently conducting its due diligence
investigation with respect to the proposed acquisition. In the event
the Company is satisfied with the results of its due diligence
investigation, a second payment of HK $6,261,681.91 (approximately
$803,000 U.S. dollars) required to be made on or before October 20,
2000. The purchase transaction is scheduled to close December 20,
2000, and payment of the balance (HK $8,600,000) of the purchase
price (approximately $1,103,000 U.S. dollars) will be due at closing.
Need for Additional Capital
The Company's existing capital, together with the gross
proceeds from the sale of the remaining units which are intended to be
offered and sold as part of the private placement described above, is
expected to be sufficient to enable it to meet its cash needs, including
completing its registration under the Securities Exchange Act of 1934,
compliance with its reporting obligations under such Act following
completion of its registration, and costs expected to be incurred for
normal business operations for a period of approximately 24 months.
Item 3. Description of Property.
The Company currently maintains a mailing address at Unit 1,
3071 No. 5 Road, Richmond, B.C., Canada V6X 2T4. The Company's
telephone number there is (604) 718-2188. Other than this mailing
address, the Company does not maintain any other office facilities, and
does not anticipate the need for maintaining office facilities at any
time in the foreseeable future. The Company pays rent in the amount
of approximately CAD $3,100 (approximately $2,100 U.S. dollars) per
month for the use of this office space. The lease is for three years, and
commenced on July 1, 1999.
Item 4. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth, as of the date of this
Registration Statement, the stock ownership of each executive officer
and director of T.Z.F. International Investments, Inc., of all executive
officers and directors as a group, and of each person known by T.Z.F.
International Investments, Inc. to be a beneficial owner of 5% or more
of its Common Stock. Except as otherwise noted, each person listed
below is the sole beneficial owner of the shares and has sole
investment and voting power as such shares. No person listed below
has any options, warrants or other rights to acquire additional
securities of T.Z.F. International Investments, Inc., except as may be
otherwise noted.
<TABLE>
<CAPTION>
Number of of
Name and Shares Owned Class
Address Beneficially Owned
<S> <C> <C>
Xin Chen
3381 Fleming Street
Vancouver, B.C. V5N 3V6 5,100,000<F1> 20.65%
Chung Yu
3381 Fleming Street
Vancouver, B.C. V5N 3V6 2,450,000<F1> 9.92%
Qing Liu
#308 - 8625 Logan Street
Vancouver, B.C. V6P 3T3 2,450,000<F1> 9.92%
Robert L. Hallam
5501 Nancy Greene Way
North Vancouver, B.C.
V7R 4R6 0<F1> 0%
Hong Li
3381 Fleming Street
Vancouver, B.C. V5N 3V6 0<F1> 0%
Chun Sheng Guo
3381 Fleming Street
Vancouver, B.C. V5N 3V6 0<F1> 0%
Shenzhen Hengyunda Enterprises
Co. Ltd.
Shenzhen, China 6,000,000 24.29%
All directors and executive
officers (6 persons) 10,000,000 40.48%
<FN>
<F1> The person listed is an officer, a director, or both, of the Company.
</FN>
</TABLE>
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and executive officers currently serving the Company are
as follows:
<TABLE>
<CAPTION>
Positions Held and
Name Age Tenure
<S> <C> <C>
Chung Yu 40 CEO, President and a
Director since February 1999
Qing Liu 45 Vice President and a
Director since February 1999
Xin Chen 37 Chairman and a Director
since February 1999
Robert L. Hallam 55 Director since
February 2000
Hong Li 39 Director since
February 2000
Chun Sheng Guo 35 Director since
February 2000
</TABLE>
The directors named above will serve until the next annual
meeting of the Company's stockholders. Thereafter, directors will be
elected for one-year terms at the annual stockholders' meeting.
Officers will hold their positions at the pleasure of the board of
directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement, plan or
understanding between any of the directors or officers of the Company
and any other person pursuant to which any director or officer was or
is to be selected as a director or officer, and there is no arrangement,
plan or understanding as to whether non-management shareholders will
exercise their voting rights to continue to elect the current directors to
the Company's board. There are also no arrangements, agreements or
understandings between non-management shareholders and
management under which non-management shareholders may directly
or indirectly participate in or influence the management of the
Company's affairs.
Biographical Information
Chung Yu.
Mr. Chung Yu is President and CEO of the Company, as well
as a director. Mr. Chung Yu is the honorary president of the Canadian
Chinese Herbal Professional & Merchants Association, Vice-Chairman
of the Canadian Chinese Chamber of Commerce, and a member of the
Chinese Entrepreneurial Society of Canada. Mr. Chung Yu was the
former director and vice-president of Hong Kong KunZe Enterprise
Ltd., president of China Hua Pu Group, and a director of RoRo
International Trading, Ltd. With over 12 years as the president of
China Hua Pu Group, Mr. Yu will contribute his expertise to the
startup and management of the Company.
Qing Liu.
Mr. Liu is the Vice President for North America & Asia and is
Vice President and a director of the Company. From 1995 to 1999,
Mr. Liu was the Chairman and President of Beijing T.Z.F. Commerce
and Trade Group, Chairman of the Board of Directors of Beijing
YoungHeng Advertising Company, President of Beijing Kai Huan
medicine manufacturing company, and the President of Beijing Zhong
Jia Yi Medical and Pharmaceutical Technology Development
Company. Mr. Liu is the honorary Chairman of the S.T.A.U.N.C.H.
(The Society for Therapeutic Alternatives Using Natural Chinese
Healing Methods) Foundation in Canada and a committee member of
the Chinese Business Association of Canada.
Xin Chen
Mr. Chen is Chairman of the board of directors of the
Company. He is the president and Chief Executive Officer of the
XinHai Group, the honorary Dean of the Finance Faculty and visiting
professor at JiangXi Finance University and a visiting professor at the
Beijing Commerce University. Mr. Chen is also Chairman of the
board of directors of the Ning Bo Success Industry Inc., which is listed
on the Shen Zhen Stock Exchange in China.
Robert L. Hallam.
Mr. Hallam is a director of the Company. He was the
President and Director of Robert L. Hallam Environmental
Management, Ltd., Director of Knight Piesold, Ltd., and President,
Director and CEO of Hallam Knight Piesold, Ltd. Mr. Hallam
recently became Director of Tai Li Environment Engineering, Ltd., a
firm based in Kumming, Yunnan, China. In 1995, Mr. Hallam
established a new company, Oriental Express Trading Corporation, of
which he is a Director and 50% owner. This new company has been
involved in the export of Canadian products, primarily
telecommunications equipment, to the People's Republic of China and
the importing of Chinese herbal medicines for the treatment of AIDS
patients.
Hong Li.
Mr. Li is a director of the Company, and is involved with
introducing investors from Asia. Mr. Li was the Secretary of the
Board of Directors of Shenzhen Tianyuan Industry, Inc., and was
responsible for raising capital. Mr. Li was also the Vice President of
Hainan Heng Tai Group, Ltd. Presently, Mr. Li is the director of
ShenZhen Xinhai Industrial & Trading, Ltd., and is a director and
CEO of NingBo Success Industry, Inc.
Chung Sheng Guo.
Mr. Guo is a director of the Company. Since 1994, he has
worked for ShenZhen Xinhai Industrial & Trading, Ltd. as the
manager. In this capacity, he specialized in import and export, and
projects for overseas investment. Mr. Guo will be responsible for the
production of Snow Lotus Tea in China.
Indemnification of Officers and Directors
As permitted by Nevada law, the Company's Articles of
Incorporation provide that the Company will indemnify its directors
and officers against expenses and liabilities they incur to defend, settle,
or satisfy any civil, criminal, administrative or investigative proceeding
brought against them on account of their being or having been
Company directors or officers to the fullest extent permitted by
Nevada law unless, in any such action, they are adjudged not to have
met the standard of conduct required by Nevada law to make it
permissible for the Company to provide indemnification. Insofar as
indemnification for liabilities arising under the Securities Act of 1933
may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been
informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed
in that Act and is, therefore, unenforceable.
Exclusion of Liability
Pursuant to the Nevada General Corporation Law, the
Company's Articles of Incorporation exclude personal liability for its
directors for monetary damages based upon any violation of their
fiduciary duties as directors, except as to liability for any breach of the
duty of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or any transaction from which a director
receives an improper personal benefit. This exclusion of liability does
not limit any right which a director may have to be indemnified and
does not affect any director's liability under federal or applicable state
securities laws.
Item 6. Executive Compensation.
By directors' resolution dated December 1, 1998, Mr. Chung
Yu, Mr. Xin Chen, and Mr. Qing Liu will each be paid a management
fee of CAD $8,000 (approximately $5,384 U.S. dollars) per month
effective as of the date of the resolution. Payment of such management
fees may be deferred until such time as the Company has had a public
offering, or as the Board of Directors decides in view of the
Company's financial resources. As of June 30, 2000, the Company
had paid a portion of the management fees due, and a portion of such
fees was accrued but unpaid.
As at June 30, 2000, the accrued but unpaid portion of the
management fees are as follows:
<TABLE>
<CAPTION>
Total fees
incurred Xin Chen Chung Yu Eric Liu Total
<S> <C> <C> <C> <C>
$102,296 $102,296 $102,296 $306,888
Total fees
paid 25,549 53,336 77,277 156,162
Amount
unpaid $76,747 $48,960 $25,019 $150,726
</TABLE>
Item 7. Certain Relationships and Related Transactions.
A finder's fee of $129,900 was incurred by the Company,
representing a fee due to Mr. Wang Yong of 10% of $1,299,000
of equity financing. The fee was paid by Mr. Xin Chen on
behalf of the Company, of which $107,159 was reimbursed to
Mr. Xin Chen. The amount of $22,741 is still owing to Mr. Xin
Chen as at June 30, 2000.
Item 8. Description of Securities.
Common Stock
The Company's Articles of Incorporation authorize the issuance
of 100,000,000 shares of Common Stock. Each record holder of
Common Stock is entitled to one vote for each share held on all
matters properly submitted to the stockholders for their vote.
Cumulative voting for the election of directors is not permitted
by the Articles of Incorporation.
Holders of outstanding shares of Common Stock are entitled to
such dividends as may be declared from time to time by the
Board of Directors out of legally available funds; and, in the
event of liquidation, dissolution or winding up of the affairs of
the Company, holders are entitled to receive, ratably, the net
assets of the Company available to stockholders after distribution
is made to the preferred stockholders, if any, who are given
preferred rights upon liquidation. Holders of outstanding shares
of Common Stock have no preemptive, conversion or redemptive
rights. All of the issued and outstanding shares of Common
Stock are, and all unissued shares when offered and sold will be,
duly authorized, validly issued, fully paid, and nonassessable.
To the extent that additional shares of the Company's Common
Stock are issued, the relative interests of then existing
stockholders may be diluted.
Transfer Agent
The Company's transfer agent is Signature Stock
Transfer, 14675 Midway Road, Suite 221, Dallas, Texas 75244.
The telephone number of the transfer agent is (972) 788-4193.
Reports to Stockholders
The Company plans to furnish its stockholders with an
annual report for each fiscal year ending December 31 containing
financial statements audited by its independent certified public
accountants. In the event the Company enters into a business
combination with another company, it is the present intention of
management to continue furnishing annual reports to
stockholders. Additionally, the Company may, in its sole
discretion, issue unaudited quarterly or other interim reports to
its stockholders when it deems appropriate. The Company
intends to comply with the periodic reporting requirements of the
Securities Exchange Act of 1934.
PART II
Item 1. Market Price and Dividends on the Registrant's
Common Equity and Other Shareholder Matters
The Company's common stock is currently approved for
trading on the "Pink Sheets" of the National Quotation's Bureau
under the symbol TZII. However, there is currently no trading
activity in such securities. As of the date of this registration
statement, there are approximately 40 holders of record of the
Company's common stock. No dividends have been paid to date
and the Company's Board of Directors does not anticipate paying
dividends in the foreseeable future.
Item 2. Legal Proceedings
The Company is not a party to any pending legal
proceedings, and no such proceedings are known to be
contemplated.
No director, officer or affiliate of the Company, and no
owner of record or beneficial owner of more than 5.0% of the
securities of the Company, or any associate of any such director,
officer or security holder is a party adverse to the Company or
has a material interest adverse to the Company in reference to
pending litigation.
Item 3. Changes in and Disagreements with Accountants.
On May 1, 2000, the Company appointed Moen &
Company, Chartered Accountants, 1400 IBM Tower, 701 West
Georgia Street, Vancouver, B.C. as their independent auditor.
Prior to Moen & Company, the Company had engaged Parker &
Co., Chartered Accountants, as their independent auditor.
Item 4. Recent Sales of Unregistered Securities.
Since September 14, 1998 (the date of inception) the
Company has sold its Common Stock to the persons listed in the
table below in transactions summarized as follows:
<TABLE>
<CAPTION>
Date Aggregate Purchase
of Purchase Price
Name Sale Shares Price Per Share
<S> <C> <C> <C> <C>
Daisy Fisher 9/15/98 500,000 $1,250 $.0025
Fred Fisher 9/15/98 500,000 $1,250 $.0025
James Canten 2/3/99 10,000 $1,000 $.10
Kusum Subasingha 3/2/99 20,000 $2,000 $.10
Patrick Lynch 2/3/99 20,000 $2,000 $.10
Donald Laroque 2/3/99 10,000 $1,000 $.10
Issac Maly 2/3/99 10,000 $1,000 $.10
Michael Mulley 2/3/99 10,000 $1,000 $.10
Donald H. Petch 1/3/99 5,000 $500 $.10
Sajid McKenley 2/3/99 5,000 $500 $.10
Richard Campbell 2/18/99 20,000 $2,000 $.10
Conni Seltzer 2/18/99 20,000 $2,000 $.10
Fee Wai Quan 2/19/99 20,000 $2,000 $.10
Frank Del Vecchio 2/28/99 10,000 $1,000 $.10
Anchana
Chayawatana 2/17/99 30,000 $3,000 $.10
David F. Knapel 2/17/99 30,000 $3,000 $.10
Manoj Batra 2/17/99 20,000 $2,000 $.10
Patama Indhasolasa 2/17/99 10,000 $1,000 $.10
Kanyarat Panya 2/17/99 20,000 $2,000 $.10
Jariya Tookjitt 2/17/99 10,000 $1,000 $.10
Nutjaree Saengjan 2/17/99 20,000 $2,000 $.10
Pramron Samgjinda 2/17/99 20,000 $2,000 $.10
Loy Nongoee 2/18/99 10,000 $1,000 $.10
Buaruch Vantadee 2/18/99 20,000 $2,000 $.10
Kumpoun Meegrad 2/18/99 15,000 $1,500 $.10
Piyavadee Petchavy 2/18/99 20,000 $2,000 $.10
Wanna Chaisana 2/18/99 20,000 $2,000 $.10
Chanaout Asvanund 2/18/99 25,000 $2,500 $.10
Nisant Wongtham 2/18/99 10,000 $1,000 $.10
Raewat Palalert 2/18/99 30,000 $3,000 $.10
Preeya Premget 2/19/99 20,000 $2,000 $.10
Nupit Wongchompu 2/19/99 25,000 $2,500 $.10
Boonpend Sibua 2/19/99 15,000 $1,500 $.10
Sayun Subthaivorn 2/19/99 20,000 $2,000 $.10
Sukarnya Daingdrum 2/19/99 10,000 $1,000 $.10
Paul Spagnolo 2/3/99 10,000 $1,000 $.10
William Semeluk 2/19/99 10,000 $1,000 $.10
Brigita Roebe 2/18/99 20,000 $2,000 $.10
</TABLE>
Each of the sales listed above was made for cash in reliance
under United States law, either upon an exemption from registration
under Section 4(2) of the Securities Act of 1933, or upon an
exemption from registration under Section 3(b) of the Securities Act of
1933 and by Rule 504 of Regulation D promulgated thereunder. Based
upon the Subscription Agreement executed by each of the purchasers,
and based upon the pre-existing relationship between the cash
subscribers and the Company's officers and directors, the Company
had reasonable grounds to believe immediately prior to making an
offer to the private investors, and did in fact believe, when such
subscriptions were accepted, that such purchasers (1) were purchasing
for investment and not with a view to distribution, and (2) had such
knowledge and experience in financial and business matters that they
were capable of evaluating the merits and risks of their investment and
were able to bear those risks. The purchasers had access to pertinent
information enabling them to ask informed questions. The shares were
issued without the benefit of registration. An appropriate Rule 144
restrictive legend is imprinted upon each of the certificates
representing the shares issued pursuant to Section 4(2) and
stop-transfer instructions have been entered in the Company's transfer
records. No restrictive legend is included on the certificates
representing the shares issued pursuant to Section 3(b) and Rule 504,
and such shares have been designated as "free trading" shares in the
records of the transfer agent. All such sales were effected without the
aid of underwriters, and no sales commissions were paid.
Since May 15, 1998 (the date of inception) the Company's
wholly-owned subsidiary, T.Z.F. International Herbs Investment, Inc.,
has sold its common stock and preferred stock to the persons listed in
the table below in transactions summarized as follows:
<TABLE>
<CAPTION>
Date Aggregate Purchase
of Purchase Price
Name Sale Shares Price Per Share
<S> <C> <C> <C> <C>
Xin Chen 5/15/98 5,100,000 $34,325 $.0067
Chung Yu 5/15/98 2,450,000 $16,489 $.0067
Qing Liu 5/15/98 2,450,000 $16,489 $.0067
Shenzhen Hengyunda
Enterprises
Co., Ltd. 12/15/99 6,000,000 $4,632,229 $.6730
John Leong 1/10/00 25,000 $16,826 $.6730
Qi Zhang 1/10/00 100,000 $67,304 $.6730
Heping Chen 2/18/00 10,000 $6,730 $.6730
Anna Xiu
Mei Cui 3/15/00 165,000 $111,051 $.6730
Symonds Wai
Ming Wong 3/15/00 135,000 $90,860 $.6730
Lily Hong Qian 3/16/00 102,000 $68,650 $.6730
Andy Lau 3/16/00 40,200 $27,056 $.6730
Lily Hong Qian 3/23/00 53,334 $53,843 $1.0096
Anna Xiu
Mei Cui 4/15/00 29,068 $29,346 $1.0096
Anna Xiu
Mei Cui 4/15/00 134,541 $135,827 $1.0096
Jiangping Bao 4/30/00 541,000 $546,170 $1.0096
Jianguang Liu 4/30/00 171,000 $172,634 $1.0096
Bihui Nan 4/30/00 392,000 $395,746 $1.0096
Shirong Wang 4/30/00 213,000 $215,036 $1.0096
Jun Xia 4/30/00 200,000 $201,911 $1.0096
Honyan Zhao 4/30/00 140,700 $142,045 $1.0096
Ji Xue Yu 7/4/00 60,000 $60,576 $1.0096
Guang Yu Yang 7/4/00 80,000 $80,768 $1.0096
Shenzhen Shidai Chuangye
Investment Ltd. 7/4/00 200,000 $201,920 $1.0096
</TABLE>
With the exception of the sale to Andy Lau which was in payment of
a finders fee, each of the sales listed above was made for cash in a
private offering under the Securities Act (British Columbia), and each
of the purchasers was a non-U.S. resident. Each subscriber was
required to represent, among other things, that he or she was making
the investment for his or her own account and not with a view to
distribution of the securities, that he or she would not sell, transfer,
assign or otherwise dispose of the securities except in compliance with
all applicable securities laws, and that he or she is not a U.S. person,
did not purchase the units for the account of a U.S. person, was not
offered the securities in the United States, and did not execute or
deliver the Subscription Agreement in the United States. On or about
April 30, 2000, all of the shares listed above were exchanged for
common stock of the Company pursuant to the share exchange
agreement between the Company and its wholly-owned subsidiary.
Item 5. Indemnification of Directors and Officers
The Articles of Incorporation and the Bylaws of the Company
provide for indemnification of officers, directors or controlling persons
to the fullest extent permitted by Nevada law.
FINANCIAL STATEMENTS AND EXHIBITS
Audited financial statements for T.Z.F. International
Investments, Inc. as and for the years ended December 31, 1999 and
1998, and unaudited consolidated financial statements for T.Z.F.
International Investments, Inc., as of June 30, 2000 and for the six
month period then ended, are attached. See following pages.
T.Z.F. INTERNATIONAL INVESTMENTS, INC.
Financial Statements
For the years ended December 31, 1999, and December 31, 1998.
SABAI SABAI ENTERPRISES, CORP.
INDEX to Financial Statements as at 31 December 1999 and 1998
Auditors' Report
Statement of Financial Position
Statement of Losses and Deficit
Statement of Cash Flows
Statement of Changes in Stockholders' Equity
Notes to the Financial Statements
AUDITORS' REPORT
To the stockholders of Sabai Sabai Enterprises, Corp.
We have audited the statements of financial position of Sabai Sabai
Enterprises, Corp. as at 31 December 1998 and 1999 and the
statements of losses and deficit, of cash flows and of changes in
stockholders' equity for the period from 15 September 1998 (the date
of incorporation) to 31 December 1998 and for the period from 1
January 1999 to 31 December 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in Canada, which are in substantial agreement with those in
the United States of America. Those standards require that we plan
and perform an audit to obtain reasonable assurances whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures to 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
presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at 31 December
1998 and 1999 and the result of its operations, cash flows and changes
in stockholders' equity for the period from 15 September 1998 to 31
December 1998, and for the period from 1 January 1999 to 31
december 1999 in accordance with generally accepted accounting
principles in the United States of America.
These financial statements have been prepared assuming that the
Company will continue as a going concern. As stated in Note 2 to the
financial statements, the Company will require an infusion of capital to
sustain itself. This requirement for additional capital raises substantial
doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Vancouver, British Columbia, Canada
4 February 2000
Parker & Co.
Chartered Accountants
SABAI SABAI ENTERPRISES, CORP.
Statement of Financial Position
Audited
<TABLE>
<CAPTION>
AS AT 31 DECEMBER 1999 1998
<S> <C> <C>
CURRENT ASSETS
Cash $54,370 $1,759
Total Current Assets 54,370 1,759
TOTAL ASSETS $54,370 $1,759
AS AT 31 DECEMBER 1999 1998
CURRENT LIABILITIES
Accounts payable $ 500 $ 374
Total current liabilities 500 374
STOCKHOLDERS' EQUITY
Share Capital, Note 3 1,600 1,000
Additional paid-in
capital 60,900 1,500
Total share capital 62,500 2,500
Deficit (8,630) (1,115)
Total stockholders'
equity 53,870 1,385
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $54,370 $ 1,759
</TABLE>
SABAI SABAI ENTERPRISES, CORP.
Statement of Losses and Deficit
Audited
<TABLE>
<CAPTION>
From the date of
Incorporation,
For the 15 September
Year Ended 1998 to
31 December 31 December
1999 1998
<S> <C> <C>
REVENUE
Sales $ 0 $ 0
Interest Earned 956 -
Total Revenue 956 -
EXPENSES
Office Supplies - 38
Accounting 874 695
Legal 1,000 -
Consulting 5,400 -
Bank Charges 157 32
Registration and filing fees 270 350
Transfer agent fees 770 -
Total expenses 8,471 1,115
LOSSES (7,515) (1,115)
INCOME TAXES, NOTE 4 - -
NET LOSS (7,515) (1,115)
DEFICIT, BEGINNING (1,115) -
DEFICIT, ENDING ($8,630) ($1,115)
LOSS PER SHARE, NOTE 5 ($0.01) ($0.00)
</TABLE>
SABAI SABAI ENTERPRISES, CORP.
Statement of Cash Flows
Audited
<TABLE>
<CAPTION>
From the date of
Incorporation,
For the 15 September
Year Ended 1998 to
31 December 31 December
1999 1998
<S> <C> <C>
CASH PROVIDED (USED) FROM OPERATIONS
From operation
Net loss ($7,515) ($1,115)
Changes in working capital other than cash
Accounts payable 126 374
126 374
Total cash provided (used)
from operations (7,389) (741)
CASH PROVIDED (USED) BY
INVESTMENT ACTIVITY - -
CASH PROVIDED (USED) BY FINANCING ACTIVITY
Proceeds from issuance
of common stock 60,000 2,500
Total cash provided by financing 60,000 2,500
CASH CHANGE 52,611 1,759
CASH BEGINNING 1,759 -
CASH ENDING $54,370 $1,759
COMPRISED OF:
Cash $54,370 $1,759
</TABLE>
SABAI SABAI ENTERPRISES, CORP.
Statement of Changes in Stockholders' Equity
From the Date of Incorporation, 15 September 1998 to 31 December 1999
Audited
<TABLE>
<CAPTION>
ADDITION-
COMMON COMMON AL RETAINED
STOCK STOCK PAID IN EARNINGS
ISSUED AMOUNT CAPITAL (DEFICIT)
<S> <C> <C> <C> <C>
CONSIDERATION
Private placement
for cash on 25
September 1998 1,000,000 $1,000 $1,500
Net loss from
date of incorporation to
31 December 1998 ($1,115)
Balance as at 31 December
1998 1,000,000 1,000 1,500 (1,115)
Private placement
for cash on 17
February 1999 600,000 600 59,400
Net loss for the year ended
31 December 1999 (7,515)
Balance as at 30 September
1999 1,600,000 $1,600 $60,900 ($8,630)
</TABLE>
SABAI SABAI ENTERPRISES, CORP.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 31 December 1999
Audited
Note 1 THE CORPORATION AND ITS BUSINESS
Sabai Sabai Enterprises, Corp. was incorporated in the State of
Nevada, United States of America on 14 September 1998 under the
Nevada Revised Statutes, Chapter 78, Private Corporations.
The Company has offices in Vancouver, British Columbia, Canada.
The Company has been organized to engage in any lawful activity.
No going concern business activity had started as at the date of these
financial statements. The fiscal year end of the Company is 31
December.
Note 2 SUMMARY OF ACCOUNTING PRINCIPLES
These financial statements have been prepared in United States of
America dollars, which have been rounded to the nearest whole dollar
except for the net loss per share which has been rounded to the nearest
cent, using United States of America Generally Accepted Accounting
Principles. These accounting principles are applicable to a going
concern, which contemplates the realization and liquidation of
liabilities in the normal course of business. Current business activity
has not yet begun and insufficient revenue has been generated to
sustain the Company as a going concern without the infusion of
additional capital.
Revenue will be recorded as a sale at the time the goods are shipped
from the Company's warehouse. Costs are recorded at the time an
obligation to pay occurs and are expensed at the time the benefit to the
Company is matched to revenue or, if there is no matching revenue, to
the period in which the benefit is realized.
Note 3 SHARE CAPITAL
The authorized capital stock is 25,000,000 shares of common stock
with a par value of $0.001.
1,600,000 shares of common stock have been issued as follows:
<TABLE>
<CAPTION>
SHARE
CONSIDERATION DATE ISSUED CAPITAL
<S> <C> <C> <C>
Private placement
for cash 25 Sep 1998 1,000,000 $1,000
Balance as at 31 Dec 1998 1,000,000 1,000
Private placement
Cash 17 Feb 1999 600,000 600
Balance as at 31 Dec 1999 1,600,000 $1,600
ADDITIONAL
PAID IN
CAPITAL TOTAL
<S> <C> <C>
Private placement
for cash $1,500 $2,500
Balance as at 1,500 2,500
Private placement
Cash 59,400 60,000
Balance as at $60,900 $62,500
</TABLE>
On 25 September 1998 the Company issued 1,000,000 common shares
with a par value o $0.001 for $0.0025 per share. These shares are
"control securities" which cannot be sold except pursuant to certain
limitations and restrictions.
On 17 February 1999 the Company issued 600,000 common shares
with a par value of $0.001 for $0.10 per share.
Note 4 INCOME TAXES
Income taxes on losses have not been reflected in these financial
statements as it is not virtually certain that these losses will be
recovered before the expiry period of the loss carry forwards.
The accumulated losses carried forward are as follows:
YEAR INCURRED AMOUNT
1998 ($1,115)
1999 ( 7,515)
($8,630)
Note 5 LOSS PER SHARE
Basic loss per share is computed by dividing losses available to
common stockholders by the weighted-average number of
common shares during the period. Diluted loss per share
amounts that would have resulted if dilutive common stock
equivalents had been converted to common stock. No stock
options were available or granted during the period presented.
Accordingly, basic and diluted loss per share are the same for all
periods presented.
Note 6 RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real property. Office
services are provided by the President of the Company. Such
costs are immaterial to the financial statements and accordingly
have not been reflected therein. The officers and directors of the
Company are involved in other business activities. If a specific
business opportunity becomes available, such persons may face a
conflict in selecting between the Company and their own
business interests. The Company has not formulated a policy for
the resolution of such conflicts.
TZF INTERNATIONAL INVESTMENTS, INC.
(formerly Sabai Sabai Enterprises Corp.)
INDEX to Consolidated Financial Statements as at June 30, 2000
Independent Accountants' Review Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Stockholders' Equity
Notes to the Financial Statements
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Directors and Shareholders of
T.Z.F. International Investments, Inc. (formerly Sabai Sabai
Enterprises, Corp.)
(A Nevada Corporation)
(A Development Stage Company)
We have reviewed the accompanying Consolidated Balance Sheet
of T.Z.F. International Investments, Inc. (formerly Sabai Sabai
Enterprises, Corp.) (A Nevada Corporation) (A Development
Stage Company) as of June 30, 2000, and the Consolidated
Statements of Operations, Cash Flows and Changes in
Stockholders' Equity for the six month period then ended.
These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data and
making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying financial
statements for them to be in conformity with United States
generally accepted accounting principles (GAAP).
Moen and Company
Chartered Accountants
Vancouver, British Columbia, Canada
September 5, 2000
TZF INTERNATIONAL INVESTMENTS, INC.
(formerly Sabai Sabai Enterprises Corp.)
Consolidated Balance Sheets
June 30, 2000 and 1999 - unaudited
<TABLE>
<CAPTION>
ASSETS 2000 1999
<S> <C> <C>
CURRENT ASSETS
Cash and short term
deposit (note 3) $1,418,183 $ 59,243
Accounts receivable,
(note 4) 17,591 -
Prepaid expense and
deposit (note 5) 5,382 -
Inventories, at lower of cost
or market (note 2) 206,532 -
1,647,688 59,243
Fixed Assets, at cost
(note 2) 78,592 -
Less: accumulated
amortization (2,201) -
76,751 -
Intangible assets, technology rights
at cost (note 6) 4,038,229 -
$5,762,668 $ 59,243
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
(note 7) $125,246 -
Accrued payroll deductions payable
(note 8) 51,151 -
Management fees payable
(note 9) 150,726 -
Due to related parties, unsecured,
non-interest bearing, with no
specific terms of repayment
(note 10(b)) 76,585 -
403,708 -
Stockholders' Equity
Capital stock (note 11)
Authorized: 100,000,000 common
shares at $0.0001 par value
Issued: 24,701,843 common shares
(1999 - 1,600,000 shares) 2,470 1,600
Additional paid-in capital 5,665,362 60,900
280,000 Shares subscribed but
unissued 282,676 -
Deficit, accumulated during the
development stage (591,752) (3,257)
Cumulative translation
(note 2) 204 -
5,358,960 59,243
$5,762,668 $ 59,243
</TABLE>
Approved on behalf of the board:
"Johnson Chung Yu," Director
"Eric Liu," Director
See Accompanying Notes and Independent Accountants' Review Report.
TZF INTERNATIONAL INVESTMENTS, INC.
(formerly Sabai Sabai Enterprises Corp.)
Consolidated Statements of Operations - unaudited
(page 1 of 2)
<TABLE>
<CAPTION>
Cumulative From
Inception Date Quarter Quarter
of Sep. 15, 1998 ended ended
to June 30, June 30, June 30,
2000 2000 1999
<S> <C> <C> <C>
Revenue
Sales $ 1,630 $ 1,630 $ -
Interest and other
income 2,002 431 -
3,632 2,061 -
Selling costs 19,040 19,040 -
Administration Costs
Advertising 67,304 67,304 -
Bank charges and
interest 407 186 50
Depreciation 2,201 2,201 -
Deferred lease expenses
write-off 5,046 5,046 -
Investor relations,
consulting fees and
financing costs 91,512 86,112 -
License, dues and
insurance 372 372 -
Management fees 21,537 21,537 -
Medical reports 814 814 -
Office costs 3,439 2,936 100
Rental and leases 8,206 8,206 -
Professional fees 77,388 74,455 1,375
Salary and benefits 7,911 7,911 -
Stock-based
compensation 252,400 252,400 -
Telephone and
utilities 967 967 -
Transfer agency and
filing fees 1,575 - 500
Travel and
promotion 32,327 32,327 -
Vehicle expenses 2,938 2,938 -
576,344 565,712 2,025
Loss for the period $591,752 $582,691 $ 2,025
Basic loss per share $(0.03) $(0.00)
Diluted loss per
share $(0.03) $(0.00)
Weighted average number
of common shares used to
compute basic and fully
diluted loss per share 16,667,862 1,600,000
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report.
TZF INTERNATIONAL INVESTMENTS, INC.
(formerly Sabai Sabai Enterprises Corp.)
Consolidated Statements of Operations - unaudited
(page 2 of 2)
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, June 30,
2000 1999
<S> <C> <C>
Revenue
Sales $ 1,630 -
Interest and other
income 1,046 -
2,676 -
Selling costs 19,040 -
Administration Costs
Advertising 67,304 -
Bank charges and
interest 218 67
Depreciation 2,201 -
Deferred lease expenses
write-off 5,046 -
Investor relations,
consulting fees and
financing costs 86,112 -
License, dues and
insurance 372 -
Management fees 21,537 -
Medical reports 814 -
Office costs 3,401 100
Rental and leases 8,206 -
Professional fees 74,819 1,475
Salary and benefits 7,911 -
Stock-based
compensation 252,400 -
Telephone and utilities 967 -
Transfer agency and
filing fees 185 500
Travel and promotion 32,327 -
Vehicle expenses 2,938 -
566,758 2,142
Loss for the period $538,122 $ 2,142
Basic loss per share $(0.06) $(0.00)
Diluted loss per
share $(0.06) $(0.00)
Weighted average number
of common shares used to
compute basic and fully
diluted loss per share 9,133,947 1,500,000
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report.
TZF INTERNATIONAL INVESTMENTS, INC.
(formerly Sabai Sabai Enterprises Corp.)
Consolidated Statements of Cash Flows - unaudited
(page 1 of 2)
<TABLE>
<CAPTION>
Cumulative From
Inception Date Quarter Quarter
of Sep. 15, 1998 ended ended
to June 30, June 30, June 30,
2000 2000 1999
<S> <C> <C> <C>
Cash derived from (used for)
Operating Activities
Loss for the period $(591,752) $(582,691) $ (2,025)
Items not requiring use of cash
Depreciation 2,201 2,201 -
Deferred lease expense
write-off 5,046 5,046 -
Stock-based compensation 252,400 252,400 -
Cumulative translation 204 204 -
Changes in non-cash working capital items
Accounts receivable (17,591) (4,374) -
Prepaid expenses and
deposit (5,382) - -
Inventories (206,532) - -
Subscriptions receivable - 374,546 -
Accounts payable and
accrued 125,246 9,654 (374)
Accrued payroll deductions
pay 51,151 5,384 -
(385,009) 62,370 (2,399)
Financing activities
Issuance of shares
for cash 1,377,203 - -
Advances on share
subscriptions 282,676 282,676 -
Management fees payable 150,726 (17,479) -
Due to related parties 76,585 15,830 -
1,887,190 281,027 -
Investing activities
Capital assets purchased (78,952) (19,025) -
Deferred lease expense (5,046) - -
(83,998) (19,025) -
Cash, increase during
the period 1,418,183 324,372 (2,399)
Cash, opening balance of
subsidiary 1,040,372
Cash, beginning of period 53,439 61,642
Cash, end of period $1,418,183 $1,418,183 $ 59,243
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report.
TZF INTERNATIONAL INVESTMENTS, INC.
(formerly Sabai Sabai Enterprises Corp.)
Consolidated Statements of Cash Flows - unaudited
(page 2 of 2)
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, June 30,
2000 1999
<S> <C> <C>
Cash derived from (used for)
Operating Activities
Loss for the period $(583,122) $ (2,142)
Items not requiring use of cash
Depreciation 2,201 -
Deferred lease expense
write-off 5,046 -
Stock-based compensation 252,400 -
Cumulative translation 204 -
Changes in non-cash working capital items
Accounts receivable (4,374) -
Prepaid expenses and
deposit - -
Inventories - -
Subscriptions receivable 374,546
Accounts payable and
accrued 9,154 (374)
Accrued payroll deductions
pay 5,384 -
61,439 (2,516)
Financing activities
Issuance of shares for cash - 60,000
Advances on share
subscriptions 282,676 -
Management fees payable (17,479) -
Due to related parties 15,830 -
281,027 60,000
Investing activities
Capital assets purchased (19,025) -
Deferred lease expense - -
(19,025) -
Cash, increase during
the period 323,441 57,484
Cash, opening balance of
subsidiary 1,040,372
Cash, beginning of period 54,370 1,759
Cash, end of period $1,418,183 $ 59,243
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report.
TZF INTERNATIONAL INVESTMENTS, INC.
(formerly Sabai Sabai Enterprises Corp.)
Consolidated Statements of Changes in Stockholders' Equity
From Date of Inception on September 15, 1998 to June 30, 2000
(page 1 of 3)
<TABLE>
Number of Additional
Common Par Paid-in
Shares value Capital
<S> <C> <C> <C>
9/25/98 issuance of common
stock for cash 1,000,000 $ 1,000 $ 1,500
Net loss for the year ended
December 31, 1998
Balance,
December 31, 1998 1,000,000 1,000 1,500
2/17/99 issuance of common
stock for cash 600,000 600 59,400
Net loss for the year ended
December 31, 1999
Balance,
December 31, 1999 1,600,000 1,600 60,900
4/30/00 cancellation of
common stock and transfer
of par value to paid-in
capital (1,000,000) (1,000) 1,000
Balance, April 30, 2000
before forward split 600,000 600 61,900
5/15/00 10 to 1 forward
split 6,000,000 600 61,900
5/15/00 issuance of common
stock for services 250,000 25 252,375
5/15/00 issuance of common stocks for
the BC Company 18,451,843 1,845 5,351,087
Net loss 6 months ended
June 30, 2000
Cumulative translation
24,701,843 2,470 5,665,362
Shares subscribed and fully
paid but unissued 280,000 28 282,648
Balance,
June 30, 2000 24,981,843 $ 2,498 $5,948,010
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report.
TZF INTERNATIONAL INVESTMENTS, INC.
(formerly Sabai Sabai Enterprises Corp.)
Consolidated Statements of Changes in Stockholders' Equity
From Date of Inception on September 15, 1998 to June 30, 2000
(page 2 of 3)
<TABLE>
Deficit
Accumulated
Total During The
Capital Development Cumulative
Stock Stage Translation
<S> <C> <C> <C>
9/25/98 issuance of common
stock for cash $ 2,500
Net loss for the year
ended December 31, 1998 (1,115)
Balance,
December 31, 1998 2,500 (1,115)
2/17/99 issuance of common
stock for cash 60,000
Net loss for the year
ended December 31, 1999 (7,515)
Balance,
December 31, 1999 62,500 (8,630)
4/30/00 cancellation of
common stock and transfer
of par value to paid-in
capital
Balance, April 30, 2000
before forward split 62,500 (8,630)
5/15/00 10 to 1 forward
split 62,500 (8,630)
5/15/00 issuance of common
stock for services 252,400
5/15/00 issuance of common stock
for the BC Company 5,352,932
Net loss 6 months ended
June 30, 2000 (583,122)
Cumulative translation 204
5,667,832 (591,752) 204
Shares subscribed and fully
paid but unissued 282,676
Balance,
June 30, 2000 $5,950,508 ($591,752) $204
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report.
TZF INTERNATIONAL INVESTMENTS, INC.
(formerly Sabai Sabai Enterprises Corp.)
Consolidated Statements of Changes in Stockholders' Equity
From Date of Inception on September 15, 1998 to June 30, 2000
(page 3 of 3)
<TABLE>
Total
Stockholders'
Equity
<S> <C>
9/25/98 issuance of
common stock for cash $ 2,500
Net loss for the year
ended December 31, 1998 (1,115)
Balance,
December 31, 1998 1,385
2/17/99 issuance of common
stock for cash 60,000
Net loss for the year
ended December 31, 1999 (7,515)
Balance,
December 31, 1999 53,870
4/30/00 cancellation of
common stock and transfer
of par value to paid-in
capital
Balance, April 30, 2000
before forward split 53,870
5/15/00 10 to 1 forward
split 53,870
5/15/00 issuance of common
stock for services 252,400
5/15/00 issuance of common stock
for the BC Company 5,352,932
Net loss 6 months ended
June 30, 2000 (583,122)
Cumulative translation 204
5,076,284
Shares subscribed and fully
paid but unissued 282,676
Balance,
June 30, 2000 $5,358,960
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report.
TZF INTERNATIONAL INVESTMENTS, INC.
(Formerly Sabai Sabai Enterprises Corp.)
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2000
(In U.S. Dollars)
(Unaudited)
Note 1. ORGANIZATION AND NATURE OF BUSINESS
The Company was incorporated under the laws of the State of
Nevada on September 15, 1998, as Sabai Sabai Enterprises, Corp.
Pursuant to a stock purchase agreement dated March 30, 2000,
T.Z.F. International Herbs Investment Inc., ("BC Company") purchased
1,000,000 shares of the issued and outstanding common stock of the
Company. These shares were purchased in anticipation of the
subsequent completion of a share exchange transaction between the
Company and the BC Company. In conjunction with completion of
the share exchange transaction these shares were cancelled, effective
April 30, 2000, and as a result, the amount of the par value of $1,000
attributable to such shares was transferred to paid-in capital.
Pursuant to the terms of the share exchange, effective as of
April 30, 2000, the Company acquired all of the issued and
outstanding stock of the BC Company in exchange for the issuance of
18,451,843 shares of its authorized but previously unissued shares,
which were valued at $5,352,932 for purposes of the acquisition, made
up of par value of $18,452 and additional paid-in capital of
$5,334,480. Assets and liabilities of the BC Company at the date of
acquisition on April 30, 2000, were as follows:
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and short term deposits $ 1,040,372
Accounts receivable 13,217
Capital stock subscriptions receivable 374,546
Prepaid expense and deposit 5,382
Inventories 206,532
Deferred lease expense, net of amortization 5,047
Fixed assets, net 59,927
Intangible assets, technology rights 4,038,229
5,743,252
Liabilities
Accounts payable and accrued 114,917
Accrued payroll deductions payable 45,767
Management fees payable 168,205
Due to related parties 60,755
389,644
Net assets including cumulative translation 5,353,608
Cumulative translation, included in above,
Booked in stockholders' equity of Sabai Sabai (676)
Net value in exchange for 18,451,843 common
Shares off Sabai Sabai and net equity on date of
acquisition of the BC Company $ 5,352,932
</TABLE>
In May 2000 the Company completed a 10:1 forward split of
its outstanding stock. This forward split increased the number of issued
and outstanding shares from 600,000 (1,600,000 previously outstanding
less the 1,000,000 shares which were cancelled) to 6,000,000.
Subsequent to completion of the share exchange on April 30,
2000, the BC Company (the Company's wholly-owned subsidiary)
received subscriptions for 340,000 additional shares. The Company
elected to convert such shares to shares of its own common stock on
the same terms as it completed the share exchange. Therefore,
effective as of July 4, 2000 the Company issued 340,000 additional
shares in exchange for shares of the BC Company.
In May 2000, following completion of the forward split the
Company authorized the issuance of 250,000 restricted shares as
compensation for consulting services at a price of $1.50 per share to
the following:
<TABLE>
<CAPTION>
Number of Consideration Equivalent
Name Shares Cad$ to US$
<S> <C> <C> <C>
Robert Gelfand 50,000 $75,000 $ 50,480
Fred Fisher 200,000 300,000 201,920
250,000 $375,000 $252,400
</TABLE>
T.Z.F. International Herbs Investment Inc., which is now a
wholly-owned subsidiary of the Company, owns the formula and all
distribution and intellectual property rights, including trademark, patent
and industry design rights, for Snow Lotus Tea products.
On May 25, 2000, the Company changed its name to T.Z.F.
International Investments, Inc. The Company and its wholly-owned
subsidiary, the BC Company, are both based in Richmond, British
Columbia, Canada.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, T.Z.F.
International Herbs Investment Inc. All significant intercompany
transactions and balances have been eliminated.
Basis of presentation
These consolidated financial statements have been prepared in
accordance with Accounting Principles Generally Accepted in the
United States ("USGAAP).
Development stage company
The accompanying consolidated financial statements have been
prepared in accordance with the provisions of Statement of Financial
Accounting Standard No. 7, "Accounting and Reporting by
Development Stage Enterprises".
Use of estimates
The preparation of financial statements in conformity with
USGAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from
those estimates.
Cash and cash equivalents
Cash and cash equivalents consists of cash on deposit and
highly liquid short-term interest bearing securities with a maturity at
the date of purchase of three months or less.
Income Taxes
Provisions for income taxes are based on taxes payable or
refundable for the current year and deferred taxes on temporary
differences between the amount of taxable income and pretax
financial income and between the tax bases of assets and liabilities and
their reported amounts in the financial statements. Deferred tax assets
and liabilities are included in the financial statement at currently
enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or settled
as prescribed in FASB Statement No. 109, Accounting for Income
Taxes. As changes in tax laws or rate are enacted, deferred tax assets
and liabilities are adjusted through the provision for income taxes.
Compensated absences
Employees of the corporation are entitled to paid vacations,
sick days and other time off depending on job classification, length of
service and other factors. It is impractical to estimate the amount of
compensation for future absences, and accordingly, no liability has
been recorded in the accompanying financial statements. The
corporation's policy is to recognize the costs of compensated absences
when paid to employees.
Net loss per share
The Company adopted Statement of Financial Accounting
Standards No. 128 that requires the reporting of both basic and diluted
earnings per share. Basic earnings per share is computed by dividing
net income available to common shareowners by the weighted average
number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contacts to issue common stock were exercised or
converted into common stock. In accordance with FASB 128, any
anti-dilution effects on net loss per share are excluded.
Disclosure about fair value of financial instruments
The Company has financial instruments, none of which are held
for trading purposes. The Company estimates that the fair value of all
financial instruments at June 30, 2000 as defined in FASB 107, does
not differ materially from the aggregate carrying values of its financial
instruments recorded in the accompanying balance sheet. The estimated
fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies.
Considerable judgment is required in interpreting market data to
develop the estimates of fair value, and accordingly, the estimates are
not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
Fixed assets
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is recorded on the following rates:
Office equipment - 20% per annum on the declining balance
basis
Leasehold improvement - allocated on a straight-line
basis over the term of lease
Vehicles - 30% per annum on the declining balance basis
Computer equipment - 30% per annum on the declining
balance basis
As at June 30, 2000, the fixed assets and accumulated
depreciation are as follows:
<TABLE>
<CAPTION>
Accumulated Net Book
At Cost Depreciation Value
<S> <C> <C> <C>
Office equipment $ 10,882 $ 306 10,576
Leasehold improvements 35,225 1,068 34,157
Vehicles 19,025 476 18,549
Computer equipment 13,820 351 13,469
$ 78,952 $ 2,201 $ 76,751
</TABLE>
Long-lived assets
Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," requires that long-lived
assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset in question
may not be recoverable. This standard did not have a material effect
on the Company's results of operations, cash flows or financial
position.
Foreign currency translation
The functional currency of the parent Company T.Z.F.
International Investments, Inc. is the United States Dollar and of
T.Z.F. International Herbs Development Inc. is the Canadian Dollar
and the reporting currency on a consolidated basis is the United States
Dollar.
The assets, liabilities, and operations of the Company are
expressed in the functional currency of the Company in United States
Dollars. Operations of the subsidiary, T.Z.F. International Herbs
Development Inc. are in Canadian Dollars and in conformity with US
GAAP they are translated into the reporting currency, the United
States Dollar.
Monetary assets and liabilities are translated at the current rate
of exchange.
The weighted average exchange rate for the period is used to
translate revenue, expenses, and gains or losses from the functional
currency to the reporting currency.
The gain or loss on translation is reported as a separate
component of stockholders' equity and not recognized in net income.
Gains or losses on remeasurement are recognized in current net
income.
Gains or losses from foreign currency transactions are
recognized in current net income.
Fixed assets are measured at historical exchange rates that
existed at the time of the transaction.
Depreciation is remeasured at historical exchange rates that
existed at the time the underlying related asset was acquired.
An analysis of the changes in the cumulative translation
adjustment as disclosed as part of stockholders' equity, is as follows:
<TABLE>
<CAPTION>
Year Ended
June 30, December 31,
2000 1999 1998
<S> <C> <C> <C>
Beginning balance $ - $ - $ -
Change during the
period 204 - -
Ending balance $ 204 $ - $ -
</TABLE>
Fixed assets are translated at historical exchange rates that
existed at the time of the transaction.
The effect of exchange rate changes on cash balances is
reported in the statement of cash flows as a separate part of the
reconciliation of change in cash and cash equivalents during the
period.
Concentration of credit risk
Financial instruments that potentially subject the Company to a
significant concentration of credit risk consist primarily of cash and
cash equivalents which are not collateralized. The Company limits its
exposure to credit loss by placing its cash and cash equivalents with
high credit quality financial institutions.
Inventories
The inventories are recorded at lower of cost or market. As at
June 30, 2000 the inventories total $206,532.
Note 3. CASH AND CASH EQUIVALENTS - $1,418,183
The total for cash and equivalents as at June 30, 2000, is made
up as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash in bank current accounts $1,059,374
Short term deposits - one month term GIC 358,809
Total $1,418,183
</TABLE>
Note 4. ACCOUNTS RECEIVABLE - $17,591
This balance represents the following:
<TABLE>
<CAPTION>
<S> <C>
Goods and Services Taxes refundable $ 14,360
Trade account receivable 3,231
Total $ 17,591
</TABLE>
Note 5. PREPAID EXPENSE AND DEPOSIT - $5,382
The balance of prepaid expense and deposit as at June 30,
2000, is the deposit for two months payment of office lease in
Richmond, B.C. Canada.
Note 6. TECHNOLOGY RIGHTS
By agreement dated December 15, 1999, Shenzhen Hengyunda
Enterprises Co. Ltd. of P.R. China agreed to sell and assign certain
information and rights relating to a series of products known as the
Snow Lotus Tea series products to the BC Company.
The BC Company agreed to pay consideration of $4,038,229
for acquisition of these assets, through the issuance of 6,000,000 Class
B common shares which were valued for purposes of the acquisition,
at a price of CAD$1.00 per share, making the total consideration of
CAD$6,000,000 (US$4,038,229).
Shenzhen Hengyunda Enterprises Co. Ltd. has warranted that
there are no charges or encumbrances against the rights being
acquired.
This agreement included the sale, assignment and transfer of all
the right, title and interest in and to the Product Information and all
the rights to use, exploit, develop or otherwise deal with the Product
Information or the Project, including the right to register any
Intellectual Property in connection with the Product, the same to be
held and enjoyed by the BC Company and its successors and assigns
as fully and effectively as the same would have been held and enjoyed
by Shenzhen Hengyunda Enterprises Co. Ltd. had this transfer and
assignment not been made.
Shenzhen Hengyunda Enterprises Co. Ltd. further agreed to
execute and deliver all such documents and further assurances as may
be necessary or desirable to give effect to the sale and assignment.
Amortization of the cost of the technology will commence
when the products relating to the technologies are available to be
marketed; which is expected to be effective July 1, 2000. The
amortization period is for ten years on a straight-line basis.
Note 7. ACCOUNTS PAYABLE AND ACCRUED - $111,785
Details of the total of accounts payable and accrued as at June
30, 2000, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Zhong Jia Yi Medical Ltd., Manufacturing costs $ 45,170
Advertising contract payable 13,461
Gao Chungye, finders' fee 37,455
Blake, Cassels & Graydon, legal fees 18,660
Frascona, Joiner, Goodman and Greenstein, P.C.
Accrued legal fees 5,000
Parker & Co., C.A., accrued accounting fee 500
Moen and Company, accrued accounting fee 5,000
Total 125,246
</TABLE>
Note 8. ACCRUED PAYROLL DEDUCTIONS PAYABLE -
$51,151
Detail of the total of accrued payroll deductions payable as at
June 30, 2000, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Accrued payroll deductions for Mr. Xin Chen $ 25,575
Accrued payroll deductions for Mr. Eric Liu 25,576
Total $ 51,151
</TABLE>
Note 9. MANAGEMENT FEES PAYABLE - $150,726
Detail of the total of management fees payable as at June 30,
2000, are as follows:
Mr. Xin Chen $ 76,747
Mr. Chung Yu 48,960
Mr. Eric Liu 25,019
Total $150,726
Note 10. RELATED PARTY TRANSACTIONS
a) By a director resolution, each of Mr. Eric Liu, Director
and Vice-president of the Company, Mr. Chung Yu, Director and CEO
of the Company and Mr. Xin Chen, Director and Chairman of the
Company will be paid CAD$8,000 per month as remuneration
effective December 1, 1998. Payment of such director's fees may be
deferred until such time as the Company has had a public offering, or
as the Board of Directors otherwise decides in view of the financial
situation of the Company.
As at June 30, 2000, management fees payable for which
payment was deferred total $150,726 (see note 9).
b) The amount of $76,585 is due to related parties as at
June 30, 2000. This amount is unsecured, non interest bearing, with no
specific terms of repayment. Details are as follows:
Mr. Xin Chen $ 22,741
Mr. Chung Yu 53,844
Total 76,585
c) A finder's fee of $129,900 was incurred by the Company,
representing a fee due to Mr. Wang Yong of 10% of $1,299,000 of
equity financing. The fee was paid by Mr. Xin Chen on behalf of the
Company, of which $107,159 was reimbursed to Mr. Xin Chen. The
amount of $22,741 is still owing to Mr. Xin Chen as at June 30, 2000,
as outlined in (b) above.
Note 11. CAPITAL STOCK
a) Authorized: 100,000,000 common shares with a par value
of $0.001.
b) Issued and outstanding as at June 30, 2000 are as
follows:
<TABLE>
<CAPTION>
(page 1 of 2)
Issued Number of Share
Date Shares Capital
<S> <C> <C> <C>
Private placement 09/25/98 1,000,000 $ 1,000
Balance 12/31/98 1,000,000 1,000
Private placement 02/17/99 600,000 1,000
Balance 12/31/99 1,600,000 1,600
Cancellation of
common stock 4/30/00 (1,000,000) (1,000)
Balance, before
forward split 4/30/00 600,000 $ 600
10:1 forward split 5/15/00 6,000,000 600
Issuance of stock
for services 5/15/00 250,000 25
Acquisition of the
BC company 5/15/00 18,451,843 1,845
Balance 6/30/00 24,701,843 2,470
Shares subscribed
but unissued 280,000 $ 280
</TABLE>
<TABLE>
<CAPTION>
(page 2 of 2)
Additional
Paid-in
Capital Total
<S> <C> <C>
Private placement $ 1,500 $ 2,500
Balance 1,500 2,500
Private placement 59,400 60,000
Balance 60,900 62,500
Cancellation of
common stock 1,000
Balance, before
forward split $ 61,900 $ 62,500
10:1 forward split 61,900 62,500
Issuance of stock
for services 252,375 252,400
Acquisition of the
BC company 5,351,087 5,352,932
Balance 5,665,362 5,667,832
Shares subscribed
but unissued 282,396 282,676
</TABLE>
c) Outstanding Warrants of the BC Company at June 30, 2000
537,000 warrants to purchase 537,000 common shares
exercisable at CAD$1.00 per share until December 17, 2000, and
thereafter exercisable at CAD$2.00 per share until December 17, 2001.
1,874,643 warrants to purchase 1,874,643 common shares
exercisable at CAD$1.50 per share until December 17, 2000, and
thereafter exercisable at CAD$2.50 per share until December 17, 2001.
It is expected that these warrants will be assigned to the
Company as part of the acquisition of 100% of the shares of the BC
Company by the Company.
Note 12. INCOME TAXES
a) The most recent Federal Income Tax filing for the Company
for the US was for the year ended December 31, 1999, disclosing no
income taxes payable to the US Internal Revenue Service.
b) The most recent Federal Income Tax filing for the BC
Company for Canada was for the year ended December 31, 1999.
There is no indication of any income taxes payable to the
Canadian Customs and Revenue Agency, except the amount
included in payroll deductions payable, as disclosed in note 10, above.
There is a loss carried forward in Canadian operations that may be
applied towards future profits, as follows:
Year Amount
2006 $ 19,393
2007 305,438
2008 515,187
Total $840,018
No deferred income taxes are recorded as an asset. A reserve
has been claimed which offsets the amount of tax credit available from
use of the loss carry forward, because there is presently no indication
that these tax losses will be utilized.
Note 13. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and short
term deposit, accounts receivable, prepaid expense and deposit,
inventories, accounts payable and accrued, accrued payroll deductions
payable, management fees payable and balances due to related parties.
It is management's opinion that the Company is not exposed to
significant interest,currency or credit risks arising from these financial
instruments. The fair value of these financial statements approximated
their carrying values.
Note 14. LEASE OBLIGATIONS
a) Canon Copier (NP-3825) Lease
On October 1, 1999, the Company entered into a 48 month
lease with Dominion Technologies for a Canon Copier to be used by
the Company. Lease payments are expensed as they are incurred.
Lease obligations are as follows:
2000 CAD$ 664
2001 CAD$ 1,327
2002 CAD$ 1,327
2003 CAD$ 995
b) Computer Lease
On October 1, 1999, the Company entered into a 36 month
lease with Dominion Technologies for computer equipment to be used
by the Company. Lease payments are expensed as they are incurred.
Lease obligations are as follows:
2000 CAD$ 1,474
2001 CAD$ 2,947
2002 CAD$ 2,210
c) Vehicles Lease
On July 29, 1999, the Company entered into a 36 month lease
with Mercedes-Benz Credit of Canada Inc. for two vehicles to be used
by the Company. Lease payments are expensed as they are incurred.
Lease obligations are as follows:
2000 CAD$ 10,463
2001 CAD$ 20,927
2002 CAD$ 12,207
d) Lease of Premises
The Company entered into a lease for offices on April 26, 1999
with Omnia Overseas Trading Ltd. for three years for monthly rent
and costs of CAD$3,133.51, commencing on July 1, 1999.
The first and the last months rent of CAD$6,631.15 is due at
the time of signing. This amount has been paid and is recorded as
prepaid expense and deposit as at June 30, 2000.
Summary of lease obligations
Equivalent
Year CDN$ US$
2000 $ 31,402 $ 21,135
2001 62,803 42,269
2002 34,545 23,250
2003 995 670
$161,146 $108,458
Note 15. PENSION AND EMPLOYMENT LIABILITIES
The Company does not have liabilities as at June 30, 2000, for
pension, post-employment benefits or post-retirement benefits. The
Company does not have a pension plan.
Note 16. DISTRIBUTORSHIP AGREEMENT
As at June 23, 2000, the BC Company signed a Distribution
Agent Agreement with Expediter Sales Ltd., a B.C. Corporation.
The BC Company granted Expediter Sales Ltd. an exclusive
right to sell Snow Lotus Tea within Canada for a period of two years
effective on the date of the Distribution Agent Agreement.
Expediter Sales Ltd. has agreed to sell no less than 22,152
bottles per month of Snow Lotus Tea, and the sales price for Expediter
Sales Ltd. is CAD$18.00 per bottle. The BC Company may terminate
this agreement without notice if Expediter Sales Ltd. cannot reach the
above sales for three consecutive months.
Subsequent to June 30, 2000, the BC Company has delivered
22,152 bottles of Snow Lotus to Expediter Sales Ltd. (see note 17).
Note 17. SUBSEQUENT EVENTS
Financing
Subsequent to the six months ended June 30, 2000, the BC
Company issued 340,000 common shares at a price of CAD$1.50
per share and new subscribers have been committed to purchase
561,798 shares at a price of CAD$1.50 per share.
Distributorship Agent Agreements
Subsequent to June 30, 2000, the BC Company signed the
following Distribution Agent Agreement:
As at August 6, 2000, the BC Company signed a Distribution
Agent Agreement with Gordford Kingdom Ltd., a Hong Kong
Corporation.
The BC Company granted Gordford Kingdom Ltd. an exclusive
right to sell Snow Lotus Tea within the territory of Hong Kong for a
period of two years commencing December 1, 2000.
Gordford Kingdom Ltd. has agreed to order a minimum of
132,912 bottles of Snow Lotus Tea within the first year and will
expect to order 265,824 bottles in the second year at a price of
US$12.88 per bottle CIF Hong Kong.
Sales
Subsequent to June 30, 2000, Snow Lotus Tea delivered to
Expediter Sales Ltd. as follows:
<TABLE>
<CAPTION>
Date of Number of Price per Value
Delivery Bottles Bottle CAD $
<S> <C> <C> <C>
7/14/00 10,200 CAD$18 $183,000
7/21/00 1,800 CAD$18 32,400
7/27/00 1,800 CAD$18 32,400
8/3/00 1,800 CAD$18 32,400
8/4/00 1,800 CAD$18 32,400
8/14/00 2,160 CAD$18 38,880
8/15/00 2,592 CAD$18 46,656
22,152 $398,736
</TABLE>
Acquisition of Tian An Investments Limited
The BC Company signed an agreement dated June 17, 2000
and amended on August 22, 2000, to acquire 100% of issued and
outstanding shares of Tian An Investment Limited ("Tian An"), a
British Virgin Islands company with an office in Hong Kong.
Tian An's only asset is its 100% ownership of Tian An
(Xiamen) Pharmaceuticals Ltd., a manufacturer of Chinese traditional
and herbal medicine. On July 5, 2000, the BC Company paid
HK$6,638,318.09 as an installment towards payment of the total
purchase price of HK$21,500,000. The Company is currently
conducting its due diligence investigation with respect to the proposed
acquisition. In the event it is satisfied with the results of its due
diligence investigation, a second payment of HK$6,261,681.91 is
required to be made on or before October 20, 2000. The purchase
transaction is scheduled to close December 20, 2000, and payment of
the balance (HK$8,600,000) of the purchase price will be due at
closing.
Source of funds for payment of the purchase is expected to be
derived from debt and equity financing.
NOTE 18. UNAUDITED FINANCIAL INFORMATION
The accompanying financial statements as of June 30, 2000 are
unaudited. These financial statements include all of the adjustments
which, in the opinion of management, are necessary to a fair
presentation of financial position and results of operations. All such
adjustments are of a normal and recurring nature. These financial
statements should be read in conjunction with the Company's audited
financial statements at December 31, 1999.
PART III
Item 1. INDEX TO EXHIBITS
Exhibit No. Document
2.1 Agreement for Share Exchange (incorporated by
reference from Registration Statement Form 10SB filed
with the Securities and Exchange Commission on
August 21, 2000.)
2.2 Stock Purchase Agreement (incorporated by reference
from Registration Statement Form 10SB filed with the
Securities and Exchange Commission on August 21,
2000.)
3.1 Articles of Incorporation (incorporated by reference
from Registration Statement Form 10SB filed with the
Securities and Exchange Commission on August 21,
2000.)
3.1a Amendment to Articles of Incorporation (incorporated
by reference from Registration Statement Form 10SB
filed with the Securities and Exchange Commission on
August 21, 2000.)
3.2 Bylaws (incorporated by reference from Registration
Statement Form 10SB filed with the Securities and
Exchange Commission on August 21, 2000.)
4.1 Specimen Stock Certificate (incorporated by reference
from Registration Statement Form 10SB filed with the
Securities and Exchange Commission on August 21,
2000.)
27 Financial Data Schedule - June 30, 2000
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act
of 1934, the registrant caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
T.Z.F. INTERNATIONAL INVESTMENTS, INC.
By: /s/ ________________________________
Chung Yu, President
Date: September 29, 2000
