As filed with the Securities and Exchange Commission on June 26,
2000 Registration File No. ____________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ASIAN PACIFIC COMPANY, LTD.
(Name of small business issuer in its charter)
Nevada 5999 33-0299728
------------------ ----------------- ------------------
(State or Other (Primary Standard (IRS Employer
Jurisdiction of Industrial Classifi- Identification No.)
Organization) cation Code)
Asian Pacific Company, Ltd. Michael J. Morrison, Esq.
3465 Commercial Street 1495 Ridgeview Drive, Suite 220
Vancouver, B.C., Canada V5N 4E8 Reno, Nevada 89509
(604) 871-9930 (775) 827-6300
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(Address and telephone of registrant's (Name, address and telephone principal
executive offices number of agent for service) and principal place of business)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional common stock for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Securities . . . . Amount To Be Offering Price Aggregate Registration
To Be Registered . . Registered Per Share Offering Price Fee (1)
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Common stock:. . . .1,000,000 Shares $1.00 $4,000,000 $1,056.00
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(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c).
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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PROSPECTUS
==========
1,000,000 SHARES OF COMMON STOCK
ASIAN PACIFIC COMPANY, LTD.
We are offering up to a total of 1,000,000 shares of our common stock on a
self-underwritten basis, at an initial public offering price of $4.00 per share.
No fractional shares may be purchased. There is no minimum number of shares
which we must sell in this offering. We will commence the offering on the
effective date of this prospectus and continue for a period of 120 days, unless
we extend for an additional 90 days, or until we complete the offering,
whichever occurs sooner.
The purchase of shares in this offering is highly risky and you should very
carefully and thoroughly read the Risk Factors section of this prospectus,
beginning on Page 8.
These securities have not been approved or disapproved by the Securities and
Exchange Commission or the securities division of any state, nor has the
Commission or any state passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
Prior to this offering, there has been no public market for our common stock and
there is no assurance that a public market will result following the sale of the
shares being offered in this prospectus, or that any shares purchased in this
offering can be sold at or near the offering price, or at all.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Commission is effective. This prospectus is not an offer to sell the shares and
it is not a solicitation of an offer to buy the shares in any state where the
offer or sale is not permitted.
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Price Per Aggregate Proceeds to Us
Share Offering Price (1)(2)
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Common stock . . . . . .$4.00 $4,000,000 $3,950,000
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Subject to Completion, Dated: ____________________, 2000
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1. Mr. Simon Tam, our President, will act as our sales agent in this offering,
but he will receive no commissions for any shares he sells. He also will not
register as a broker-dealer pursuant to Section 15 of the Securities Exchange
Act of 1934, in reliance upon Rule 3a4-1, which sets forth those conditions
under which a person associated with an Issuer may participate in the offering
of the Issuer's securities and not be deemed to be a broker-dealer.
2. We calculated the net proceeds we will receive from this offering after
deducting $50,000 as the estimated costs for filing, printing, legal, accounting
and other miscellaneous expenses relating to the offering, which we will pay out
of the proceeds of this offering.
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TABLE OF CONTENTS
Page No.
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SUMMARY OF PROSPECTUS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Information about Our Company. . . . . . . . . . . . . . . . . . . . 7
The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Summary Financial Data. . . . . . . . . . . . . . . . . . . . . . . 8
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Risks related to our business and industry. . . . . . . . . . . . . 8
Our limited operating history makes it difficult for
you to evaluate our business and prospects. . . . . . . . . . . . 8
Fluctuations in our quarterly revenues and operating
results might lead to reduced prices for our stock. . . . . . . . . 8
We have a history of losses, we expect losses to
continue and we might not achieve or maintain profitability. . . . 8
We depend heavily upon our non-exclusive distribution
agreement from united digital communications limited and our
failure to maintain this agreement could seriously harm our business.
We anticipate that a significant portion of our revenues could
be derived from sales on our web site and system failures or
delays may harm our business. . . . . . . . . . . . . . . . . . . . . 9
If the products we offer fail to keep up with rapid
technological change and evolving industry standards, the
products we offer could become less competitive or obsolete. . . . . 9
If we are not successful in offering new products, demand
for the products we offer could decrease. . . . . . . . . . . . . . . 9
If we fail to accurately anticipate demand for the products
we offer, we may not be able to secure sufficient quantities. . . . . 10
If our supplier fails to produce quality products on time
and in sufficient quantities, our reputation and results of
operations could suffer. . . . . . . . . . . . . . . . . . . . . . . 10
We expect to face seasonality in our sales, which could
cause our quarterly operating results to fluctuate. . . . . . . . .
Our failure to develop brand recognition could limit or
reduce the demand for the products we offer. . . . . . . . . . . . . 10
We expect to increase our reliance on retailers to sell
the products we offer, and disruptions in this channel
could harm our ability to generate revenues from the sale
of our handheld computers. . . . . . . . . . . . . . . . . . . . . . 11
If we are unable to compete effectively with existing or
new competitors, our resulting loss of competitive position
could result in price reductions, fewer customer orders,
reduced margins and loss of market share. . . . . . . . . . . . . . . 11
Our management and internal systems might be inadequate
to handle our potential growth. . . . . . . . . . . . . . . . . . . 12
The products we offer may contain errors or defects,
which could result in the rejection of the products we
offer and damage to our reputation. . . . . . . . . . . . . . . . . 12
If we lose our key personnel, we may not be able
to manage our business successfully. . . . . . . . . . . . . . . 13
We depend on proprietary rights to develop and protect
our technology. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
We could be subject to claims of infringement of
third-party intellectual property, which could result in
significant expense and loss of intellectual property rights. . . 13
Our future results could be harmed by economic, political,
regulatory and other risks associated with international
sales and operations. . . . . . . . . . . . . . . . . . . . . . . . 13
We may pursue strategic acquisitions and we could fail to
successfully integrate acquired businesses. . . . . . . . . . . . . 14
We might need additional capital in the future and
additional financing might not be available. . . . . . . . . . . . 14
Risks associated with our company. . . . . . . . . . . . . . . . . 14
We Lack a Recent Operating History . . . . . . . . . . . . . . . . . 14
The Handheld Organizer Industry is Highly Speculative . . . . . . . 15
Our Continued Existence and Future Profitability is Highly
Dependent Upon the Success of Our Marketing Programs. . . . . . . . 15
We May be Delayed in or Unable to Comply with Government
Laws, Rules and Regulation Related to our Proposed Operations
Which May Severely Impact Our Proposed Business. . . . . . . . . . 15
Products Needed for Our Marketing Program May Not Always be
Available. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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RISKS RELATED TO THIS OFFERING. . . . . . . . . . . . . . . . . . . . . 15
You may be unable to resell any shares you may purchase in
this offering in the public markets. . . . . . . . . . . . . . . . . 15
We are Selling the Offering Without an Underwriter and May
be Unable to Sell any Shares. . . . . . . . . . . . . . . . . . . . 15
We Cannot Assure a Public Trading Market for the Shares. . 16
The price of our common stock is likely to be volatile and
subject to wide fluctuations. . . . . . . . . . . . . . . . . . . . 16
Provisions in our charter documents might deter a company
from acquiring us. . . . . . . . . . . . . . . . . . . . . . . . . . 16
Management could invest or spend the proceeds of this offering
in ways with which our stockholders might not agree. . . . . . . . 16
Future sales of shares by existing stockholders could affect
our stock price. . . . . . . . . . . . . . . . . . . . . . . . . . 16
You will incur immediate and substantial dilution. . . . . . . . . 17
SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS. . . . . .
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 17
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
DETERMINATION OF OFFERING PRICE. . . . . . . . . . . . . . . . . . . . . 19
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES. . . . . . . . . . . . . . 19
PLAN OF DISTRIBUTION; TERMS OF THE OFFERING. . . . . . . . . . . . . . . 20
Offering Will be Sold by Our Officer and Director . . . . . . . . . 20
Offering Period and Expiration Date. . . . . . . . . . . . . . . . 20
Procedures for Subscribing . . . . . . . . . . . . . . . . . . . . 20
Right to Reject Subscriptions. . . . . . . . . . . . . . . . . . . 21
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
INDUSTRY OVERVIEW. . . . . . . . . . . . . . . . . . . . . . . . . 21
BUSINESS STRATEGY. . . . . . . . . . . . . . . . . . . . . . . . . 22
PRODUCTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SALES AND MARKETING. . . . . . . . . . . . . . . . . . . . . . . . 22
CUSTOMER SERVICE AND SUPPORT. . . . . . . . . . . . . . . . . . . . 23
MANUFACTURERS AND SUPPLIERS. . . . . . . . . . . . . . . . . . . . 23
COMPETITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . 24
Government Regulations. . . . . . . . . . . . . . . . . . . . . . 24
Employees and Employment Agreements. . . . . . . . . . . . . . . 24
Office Facilities. . . . . . . . . . . . . . . . . . . . . . . . . 24
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . 24
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . 24
Plan of Operation. . . . . . . . . . . . . . . . . . . . . . . . . 25
Limited Operating History; Need for Additional Capital . . . . . . 25
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 25
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . 26
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Year 2000 Compliance. . . . . . . . . . . . . . . . . . . . . . . . 26
Recently issued accounting pronouncements. . . . . . . . . . . . . 26
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Officers and Directors. . . . . . . . . . . . . . . . . . . . . . . 27
Background of Officer and Director. . . . . . . . . . . . . . . . . 27
COMMITTEES OF BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . 27
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . 28
Summary Compensation Table. . . . . . . . . . . . . . . . . . . . . 28
Director compensation. . . . . . . . . . . . . . . . . . . . . . . 28
Options/SAR Grants in Last Fiscal Year. . . . . . . . . . . . . . . 29
1999 Employee Stock Option and Incentive Plan. . . . . . . . . . . 29
Limitation of Liability and Indemnification of Officers
and Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Indemnification of directors and executive officers and
limitation on liability. . . . . . . . . . . . . . . . . . . . . . 29
Anti-takeover effect. . . . . . . . . . . . . . . . . . . . . . . . 30
PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 30
Future Sales by Present Stockholders. . . . . . . . . . . . . . . . 31
DESCRIPTION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . 31
Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Non-Cumulative Voting . . . . . . . . . . . . . . . . . . . . . . . 32
Cash Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Stock Transfer Agent. . . . . . . . . . . . . . . . . . . . . . . . 32
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 32
LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 32
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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SUMMARY OF PROSPECTUS
=======================
Information about Our Company
--------------------------------
Our company was incorporated in the State of Minnesota on July 23, 1968, as
Vertec Corporation, and through a series of mergers and name changes, became
Asian Pacific Company, Ltd., a Nevada corporation. We intend to engage in the
business of marketing a handheld computer, similar to a Palm Pilot or
Handspring, both of which names are trademarks of their respective manufacturing
companies. We have entered into a non-exclusive Distribution Agreement with
United Digital Communication Limited to market its "Pulselink 1000" in the
United States and Canada.
Our administrative office is located at 3465 Commercial Street, Vancouver,
British Columbia, Canada V5N 4E8, telephone (604) 871-9930, and our registered
Statutory office is located at 1495 Ridgeview Drive, Suite 220, Reno, Nevada
89509. Our fiscal year end is December 31.
The Offering
-------------
Following is a brief summary of this offering. Please see the "Plan Of
Distribution; Terms of the Offering" section for a more detailed description of
the terms of the offering.
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Securities Being Offered Up to 1,000,000 Shares of
common stock, par value $.001.
Offering Price per Share $ 4.00
Offering Period The shares are being offered for a
period not to exceed 120 days, unless
extended by our Board of Directors for an
additional 90 days.
Net Proceeds to Our Company Approximately $3,950,000
Use of Proceeds We intend to use the proceeds
to pay for offering expenses and marketing
activities, and to generally expand our
business operations.
Number of Shares
Outstanding Before
the Offering: 13,279,000
Number of Shares
Outstanding
After the Offering: 14,279,000
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Summary Financial Data
------------------------
The following table provides selected financial data about our Company for the
years ended December 31, 1999 and 1998, and the 4-month period ended April 30,
2000. For detailed historical financial information, see the Financial
Statements included in this prospectus.
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Balance Sheet Data:. 12/31/98 12/31/99 4/30/00
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Cash . . . . . . . $ 0 $ 87,858 $ 112,479
Total assets . . . $ 0 $ 87,858 $ 112,479
Total liabilities. $ 0 $ 1,631 $ 555
Shareholders'
equity $ 0 $ 86,227 $ 111,924
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RISK FACTORS
=============
You should carefully consider the risks described below before making a
decision to buy our common stock. The risks and uncertainties described below
are not the only ones we face. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also materialize and impair
our business operations. If any of the following risks actually materializes,
our business could be harmed. In that case, the trading price of our common
stock could decline, and you might lose all or part of your investment. You
should also refer to the other information set forth in this prospectus,
including our financial statements and the related notes.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
===========================================
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR YOU TO EVALUATE OUR
BUSINESS AND PROSPECTS.
We incorporated in July 1968. We have not yet started selling our handheld
computer, but expect to do so not later than the third quarter 2000.
Accordingly, we are still in the early stages of development and have no recent
operating history upon which you can evaluate our business. The revenue and
income potential of the products we offer and business are unproven. You should
consider our chances of financial and operational success in light of the risks,
uncertainties, expenses, delays and difficulties associated with starting a new
business in a highly competitive field, many of which may be beyond our control.
If we fail to address these risks, uncertainties, expenses, delays and
difficulties, the value of your investment will decline.
FLUCTUATIONS IN OUR QUARTERLY REVENUES AND OPERATING RESULTS MIGHT LEAD TO
REDUCED PRICES FOR OUR STOCK.
Given our lack of operating history, you should not rely on
quarter-to-quarter comparisons of our results of operations as an indication of
our future performance. In some future periods, our results of operations could
be below the expectations of investors and public market analysts, if any choose
to follow our stock. In this event, the price of our common stock would likely
decline. Factors that are likely to cause our results to fluctuate include the
following:
- the announcement and timely introduction of new products by us and
our competitors;
- the timing and the availability of software programs that are compatible
with the products we offer;
- market acceptance of existing and future versions of the products we
offer;
- the seasonality of our product sales;
- our ability to avoid potential system failures on our Web site; and
- the price of products that both we and our competitors offer.
WE HAVE A HISTORY OF LOSSES, WE EXPECT LOSSES TO CONTINUE AND WE MIGHT NOT
ACHIEVE OR MAINTAIN PROFITABILITY.
Our accumulated deficit as of April 30, 2000 was $352,466. We had net
losses of $342,611 for the period from date of inception to April 30, 2000 and
$$234,198 in the first four months of fiscal 2000. To date we have funded our
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operations primarily through the sale of equity securities. Moreover, we expect
to incur significant operating expenses. Even if we ultimately do achieve
profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis. If our revenue grows more slowly than we anticipate,
or if our operating expenses exceed our expectations and cannot be adjusted
accordingly, our business will be harmed. See "Selected Consolidated Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a more complete description of our historical losses.
WE DEPEND HEAVILY UPON OUR NON-EXCLUSIVE DISTRIBUTION AGREEMENT FROM UNITED
DIGITAL COMMUNICATIONS LIMITED AND OUR FAILURE TO MAINTAIN THIS AGREEMENT COULD
SERIOUSLY HARM OUR BUSINESS.
We rely on a non-exclusive Distribution Agreement from United Digital
Communications Limited ("United") to obtain delivery of products for us to
market. Our failure to maintain this Agreement could seriously harm our
business. The Agreement is for a term of 10 years, expiring December 31, 2008,
and requires us to purchase a minimum of US$250,000 of product by August 31,
2003.
In addition, since our Agreement is "non-exclusive", United may grant
distribution rights to other parties who may compete with us in the U.S. and
Canada.
If we did not have distribution agreement for the United products, we would
be required to obtain a distribution agreement for a substitute product, if we
could get such an agreement, which could be less desirable and could be costly
in terms of cash and other resources
WE ANTICIPATE THAT A SIGNIFICANT PORTION OF OUR REVENUES COULD BE DERIVED FROM
SALES ON OUR WEB SITE AND SYSTEM FAILURES OR DELAYS MAY HARM OUR BUSINESS.
Although we have not yet generated any revenue through our web site, we
anticipate promoting our website as a source of business and revenue. As a
result, our business will depend on our ability to maintain and expand our
computer systems. We must also protect our computer systems against damage from
fire, water, power loss, telecommunications failures, computer viruses,
vandalism and other malicious acts and similar unexpected adverse events. In
addition, unanticipated problems affecting our systems could, in the future,
cause temporary interruptions or delays in the services we provide. Our
customers might become dissatisfied by any system failure or delay that
interrupts our ability to provide service to them or slows our response time.
Sustained or repeated system failures or delays would affect our reputation,
which would harm our business. Slow response time or system failures could also
result from straining the capacity of our systems due to an increase in the
volume of traffic on our Web site. We do not carry business interruption
insurance.
IF THE PRODUCTS WE OFFER FAIL TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGE AND
EVOLVING INDUSTRY STANDARDS, THE PRODUCTS WE OFFER COULD BECOME LESS COMPETITIVE
OR OBSOLETE.
The market for the products we offer is characterized by rapidly changing
technology, evolving industry standards, changes in customer needs, heavy
competition and frequent new product introductions. If our supplier fails to
modify or improve the products we offer in response to changes in technology or
industry standards, the products we offer could rapidly become less competitive
or obsolete. Our future success will depend, in part, on our ability to obtain
products from our supplier which: - use leading technologies effectively;
- continue to develop using state-of-the-art technical expertise;
- meet changing customer needs;
- time new product introductions in a way that minimizes the impact of
customers delaying purchases of existing products in anticipation of new
product releases;
- adjust the prices to increase customer demand;
- successfully advertise and market the products we offer; and
- influence and respond to emerging industry standards and other
technological changes.
Our supplier must respond to changing technology and industry standards in
a timely and cost-effective manner. Our supplier may not be successful in
effectively using new technologies, developing new products or enhancing the
existing products on a timely basis. These new technologies or enhancements may
not achieve market acceptance. We may need to locate additional or different
products using new technologies to respond to technological change. These
products may not be available to us on terms that we can accept.
IF WE ARE NOT SUCCESSFUL IN OFFERING NEW PRODUCTS, DEMAND FOR THE PRODUCTS WE
OFFER COULD DECREASE.
We depend on our ability to offer products that achieve rapid and broad
market acceptance. We may fail to identify new product opportunities
successfully and offer new products in a timely manner. In addition, product
innovations from our supplier may not achieve the market penetration or price
stability necessary for our company's profitability.
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We may change our business model to take advantage of new business
opportunities, including business areas in which we do not have extensive
experience. For example, we may seek to market products that rely on a wireless
infrastructure.
IF WE FAIL TO ACCURATELY ANTICIPATE DEMAND FOR THE PRODUCTS WE OFFER, WE MAY NOT
BE ABLE TO SECURE SUFFICIENT QUANTITIES
Because we have no operating history and have not yet begun selling our
products, we have very little information about demand for the products we
intend to offer. The demand for the products we intend to offer depends on many
factors and is difficult to forecast. Significant unanticipated fluctuations in
demand could cause problems in our operations.
If demand does not develop as expected, we could have excess products
resulting in excess inventories.
If demand exceeds our expectations, we will need to rapidly increase
delivery from our supplier, which may not be possible within our timeframe. Our
supplier might not be able to produce enough of the products we offer as fast as
we need them. The inability of our supplier to increase production rapidly
enough could cause us to fail to meet customer demand.
IF OUR SUPPLIER FAILS TO PRODUCE QUALITY PRODUCTS ON TIME AND IN SUFFICIENT
QUANTITIES, OUR REPUTATION AND RESULTS OF OPERATIONS WOULD SUFFER.
We depend on a third-party manufacturer (United) to produce sufficient
volume of the handheld devices we sell in a timely fashion and at satisfactory
quality levels. The cost, quality and availability of third-party manufacturing
operations are essential to the successful marketing and sale of the products we
offer. We have a distribution agreement with United under which we order
products. The absence of dedicated capacity under our manufacturing agreement
means that, with little or no notice, United could refuse to continue to
manufacture all or some of the products that we require or change the terms
under which it manufactures our products. If United were to stop manufacturing
the products we offer, we may be unable to replace the lost product supplier on
a timely basis and our results of operations could be harmed. In addition, if
United were to change the terms under which they supply products to us, our
product costs could increase and our profitability could suffer.
Our reliance on a third-party manufacturer exposes us to the following
risks outside our control:
- unexpected increases in product costs;
- interruptions in shipments if our supplier is unable to
complete production;
- inability to control quality of finished products;
- inability to control delivery schedules;
- unpredictability of product supplies; and
- potential lack of adequate capacity to fill all or a part of the orders
we require.
WE EXPECT TO FACE SEASONALITY IN OUR SALES, WHICH COULD CAUSE OUR QUARTERLY
OPERATING RESULTS TO FLUCTUATE.
We expect to experience seasonality in the sales of the products we offer.
We anticipate sales to be higher in our second fiscal quarter due to increased
consumer spending patterns on electronic devices during the holiday season. We
also expect that sales may decline during the summer months because of typical
slower consumer spending in this period. These seasonal variations in our sales
may lead to fluctuations in our quarterly operating results.
OUR FAILURE TO DEVELOP BRAND RECOGNITION COULD LIMIT OR REDUCE THE DEMAND FOR
THE PRODUCTS WE OFFER.
We believe that continuing to strengthen our brand will be critical to
increasing demand for, and achieving widespread acceptance of, our handheld
computer products. Most of our competitors and potential competitors have better
name recognition and powerful brands. Promoting and positioning our brand will
depend largely on the success of our marketing efforts, the ability of United to
deliver software that is engaging to our customers and the availability of high
quality support from third-party providers. To promote our brand, we expect to
increase our marketing expenditures and otherwise increase our financial
commitment to creating and maintaining brand loyalty among users. Brand
promotion activities may not yield increased revenues or customer loyalty and,
even if they do, any increased revenues may not offset the expenses we incur in
building and maintaining our brand.
10
<PAGE>
WE EXPECT TO INCREASE OUR RELIANCE ON RETAILERS TO SELL THE PRODUCTS WE OFFER,
AND DISRUPTIONS IN THIS CHANNEL WOULD HARM OUR ABILITY TO GENERATE REVENUES FROM
THE SALE OF OUR HANDHELD COMPUTERS.
We intend to sell the substantial majority of the products we offer
directly through our web site. We have no agreements with third-party retailers
to resell our products in their stores. We intend, however, to seek third-party
retailers to sell the products we offer and this may subject us to many risks,
including the following: - retailers may not maintain inventory levels
sufficient to meet customer demand;
- if we reduce the prices of the products we offer, we may have to
compensate retailers for the difference between the higher price they
paid to buy their inventory and the new lower prices;
- product returns could increase as a result of our strategic interest in
assisting retailers in balancing inventories;
- retailers may emphasize our competitors' products or decline to carry our
products;
- we may not be able to attract or retain a sufficient number of qualified
retailers;
- conflict may develop between our retail distribution channel and direct
sales through our Web site; and
- gross margins would decrease as sales through the retailers increase.
IF WE ARE UNABLE TO COMPETE EFFECTIVELY WITH EXISTING OR NEW COMPETITORS, OUR
RESULTING LOSS OF COMPETITIVE POSITION COULD RESULT IN PRICE REDUCTIONS, FEWER
CUSTOMER ORDERS, REDUCED MARGINS AND LOSS OF MARKET SHARE.
The market for handheld computing and communication products is highly
competitive and we expect competition to increase in the future. Most, if not
all, of our competitors or potential competitors have significantly greater
financial, technical and marketing resources than we do. These competitors may
be able to respond more rapidly than us to new or emerging technologies or
changes in customers requirements. They may also devote greater resources to the
promotion and sale of their products than we do.
The handheld computers we intend to offer compete with a variety of
handheld devices, including keyboard-based devices, sub-notebook computers,
smart phones and two-way pagers. Our principal competitors include:
- Palm;
- licensees of the Microsoft Windows CE operating system, including Casio,
Compaq, Hewlett-Packard and Sharp;
- Handspring;
- members of the Symbian consortium, including Psion, Ericsson and
Motorola; and
- other Palm OS operating system licensees, including Nokia, Sony and
QUALCOMM.
We expect our competitors to continue to improve the performance of their
current products and to introduce new products, services and technologies.
Successful new product introductions or enhancements by our competitors could
reduce sales and the market acceptance of the products we offer, cause intense
price competition or make the products we offer obsolete. To be competitive, we
must continue to invest significant resources in sales and marketing. We cannot
be sure that we will have sufficient resources to make these investments or that
we will be able to obtain products from our supplier which contain the
technological advances necessary to make the products we intend to offer
competitive. Increased competition could result in price reductions, fewer
customer orders, reduced margins and loss of market share. Our failure to
compete successfully against current or future competitors could seriously harm
our business.
OUR MANAGEMENT AND INTERNAL SYSTEMS MIGHT BE INADEQUATE TO HANDLE OUR POTENTIAL
GROWTH.
Any growth which we experience may place a significant strain on our
management and information systems and operational and financial resources. To
manage future growth, our management must continue to improve our operational
and financial systems and expand, train, retain and manage our employee base.
Our management may not be able to manage our growth effectively. If our systems,
procedures and controls are inadequate to support our operations, our expansion
would be halted and we could lose our opportunity to gain significant market
share. Any inability to manage growth effectively may harm our business.
THE PRODUCTS WE OFFER MAY CONTAIN ERRORS OR DEFECTS, WHICH COULD RESULT IN THE
REJECTION OF THE PRODUCTS WE OFFER AND DAMAGE TO OUR REPUTATION.
Our Pulselink 1000 handheld computer is complex and must meet stringent
user requirements. The products we offer must keep pace with the rapidly
changing handheld computing and communications market. Products as sophisticated
as ours are likely to contain undetected errors or defects, especially when
first introduced or when new models or versions are released. In addition, we
have not yet started selling the products we intend to offer. In the future, we
may experience delays in releasing new products as problems are corrected. The
12
<PAGE>
products we offer may not be free from errors or defects after commercial
shipments have begun, which could result in the rejection of the products we
offer, damage to our reputation and lost revenues. In addition, some undetected
errors or defects may only become apparent as new functions are added to the
handheld computers we offer. Also, consumers may return their handheld computer
for any reason within 30 days of purchase. In addition, the products we intend
to offer carry a manufacturer's warranty which provides that the products will
be free of defects for one year from date of purchase. Delays, costs and damage
to our reputation due to product defects could harm our business.
IF WE LOSE OUR KEY PERSONNEL, WE MAY NOT BE ABLE TO MANAGE OUR BUSINESS
SUCCESSFULLY.
Our future success depends to a significant extent on the continued service
of our key technical, sales and senior management personnel and their ability to
execute our growth strategy. In particular, we rely on Simon Tam, our President,
and Roland C. Tam, our Secretary, to provide management guidance. The loss of
the services of any of our senior level management, or other key employees,
could harm our business. Our future performance will depend, in part, on the
ability of our executive officers to work together effectively. Our executive
officers may not be successful in carrying out their duties or running our
company. Any dissent among executive officers could impair our ability to make
strategic decisions quickly in a rapidly changing market.
IF WE FAIL TO ATTRACT, RETAIN AND MOTIVATE QUALIFIED EMPLOYEES, OUR ABILITY TO
EXECUTE OUR BUSINESS PLAN WOULD BE COMPROMISED.
Our future success also depends on our ability to attract, retain and
motivate highly skilled employees. Competition for employees in our industry is
intense. Although we intend, in the future, to provide our employees with
compensation packages that include stock options, cash incentives and other
employee benefits, we may be unable to retain our key employees or to attract,
assimilate and retain other highly qualified employees in the future. For
example, after this offering, fluctuations in the market price of our common
stock could lead potential and existing employees to believe that our equity
incentives are less attractive, which could adversely affect our ability to
attract and retain qualified employees. We expect to experience difficulty in
hiring and retaining highly skilled employees with appropriate qualifications.
WE DEPEND ON PROPRIETARY RIGHTS TO DEVELOP AND PROTECT OUR TECHNOLOGY.
Our success and ability to compete substantially depends on proprietary
technologies which have been developed by our supplier, United, which has not
applied for U. S. patent, copyright, trade secret and/or trademark protection..
No U.S. or foreign patents have been filed. Even if applied for, patent
applications or trademark registrations may not be approved. Even if they are
approved, the patents or trademarks may be successfully challenged by others or
invalidated. In addition, any patents that may be granted may not provide any
significant competitive advantage. If United fails to protect or enforce any
intellectual property rights it may obtain, our competitive position could
suffer.
United may be required to spend significant resources to monitor and police
its intellectual property rights. Also, it may not be able to detect
infringement and may lose competitive position in the market. In addition,
competitors may design around the technology or develop competing technologies.
Intellectual property rights may also be unavailable or limited, which could
make it easier for our competitors to capture market share.
WE COULD BE SUBJECT TO CLAIMS OF INFRINGEMENT OF THIRD-PARTY INTELLECTUAL
PROPERTY, WHICH COULD RESULT IN SIGNIFICANT EXPENSE AND LOSS OF INTELLECTUAL
PROPERTY RIGHTS.
Our industry is characterized by uncertain and conflicting intellectual
property claims and frequent intellectual property litigation, especially
regarding patent rights. From time to time, third parties may assert patent,
copyright, trademark and other intellectual property rights to technologies that
are important to our business. We may receive notices of claims that the
products we offer infringe or may infringe these rights. Any litigation to
determine the validity of these claims, regardless of their merit or resolution,
would likely be costly and time consuming and divert the efforts and attention
of our management and technical personnel. We cannot assure you that we would
prevail in this litigation given the complex technical issues and inherent
uncertainties in intellectual property litigation. If this litigation resulted
in an adverse ruling, we could be required to: - pay substantial damages; or -
cease the sale of infringing products.
OUR FUTURE RESULTS COULD BE HARMED BY ECONOMIC, POLITICAL, REGULATORY AND OTHER
RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS.
We expect to introduce products for sale in selected international markets
in first quarter 2001. To the extent that our revenue from international
operations represents an increasing portion of our total revenue, we will be
subject to increased exposure to international risks. In addition, the facility
where the handheld computers we intend to offer are manufactured today is
located outside the United States, in China. The supplier of the product we
offer is based outside of the United States, in China, and is subject to a wide
variety of international risks. Accordingly, our future results could be harmed
by a variety of factors, including: - changes in foreign currency exchange
13
<PAGE>
rates;
- changes in a specific country's or region's political or economic
conditions, particularly in emerging markets;
- trade protection measures and import or export licensing requirements;
- development risks and expenses associated with customizing the products
we offer for local languages;
- potentially negative consequences from changes in tax laws;
- impact of natural disasters with an inability of the local government to
quickly provide recovery services;
- difficulty in managing widespread sales and manufacturing operations; and
- less effective protection of intellectual property.
WE MAY PURSUE STRATEGIC ACQUISITIONS AND WE COULD FAIL TO SUCCESSFULLY INTEGRATE
ACQUIRED BUSINESSES.
We expect to evaluate acquisition opportunities that could provide us with
additional product or services offerings, technologies or additional industry
expertise. Any future acquisition could result in difficulties assimilating
acquired operations and products, diversion of capital and management's
attention away from other business issues and opportunities and amortization of
acquired intangible assets. Integration of acquired companies may result in
problems related to integration of technology and management teams. Our
management has had limited experience in assimilating acquired organizations and
products. We could fail to integrate the operations, personnel or products that
we may acquire in the future. If we fail to successfully integrate acquisitions,
our business could be materially harmed. We presently have no prospects for
acquisition.
WE MIGHT NEED ADDITIONAL CAPITAL IN THE FUTURE AND ADDITIONAL FINANCING MIGHT
NOT BE AVAILABLE.
We currently anticipate that, if we sell all of the shares being offered,
which we cannot assure, our available cash resources, combined with the net
proceeds from this offering will be sufficient to meet our anticipated working
capital and capital expenditure requirements for the next 12 months. However,
our resources may prove to be insufficient for these working capital and capital
expenditure requirements. We may need to raise additional funds through public
or private debt or equity financing in order to: - take advantage of
opportunities, including the purchase or acquisition of complementary
businesses;
- identify new products or services; or
- respond to competitive pressures.
Any additional financing we need may not be available on terms acceptable
to us, or at all. If adequate funds are not available or are not available on
acceptable terms, we might not be able to take advantage of unanticipated
opportunities, locate new products or services to offer or otherwise respond to
unanticipated competitive pressures, and our business could be harmed. Our
forecast of the period of time through which our financial resources will be
adequate to support our operations is a forward-looking statement that involves
risks and uncertainties, and actual results could vary materially as a result of
a number of factors, including those set forth in this "Risk Factors" section.
RISKS ASSOCIATED WITH OUR COMPANY:
=====================================
We Lack a Recent Operating History
----------------------------------
Our company was incorporated in July, 1968 and was previously engaged in
the business of real estate management. However, we have not had any active
business operations for over 5 years. Although we are commencing new business
operations, we have not yet commenced our proposed business operations or
realized any revenues.
We have no real operating history upon which an evaluation of our future
prospects can be made. Such prospects must be considered in light of the
substantial risks, expenses and difficulties encountered by new entrants into
the competitive handheld computer industry. The high technology business is, by
nature, extremely speculative and changing rapidly. Our ability to achieve and
maintain profitability and positive cash flow is highly dependent upon a number
of factors, including our ability to penetrate existing markets. Based upon
current plans, we expect to incur operating losses in future periods as we incur
significant expenses associated with our marketing programs.
We cannot guarantee that we will be successful in realizing revenues or
achieving or sustaining positive cash flow in the future and any such failure
could have a material adverse effect on our business, financial condition and
14
<PAGE>
results of operations.
The Handheld Computer Industry is Highly Speculative
------------------------------------------------------
The high technology industry, in general, and the handheld computer
industry, in particular, is highly speculative in nature, involving many risks
which even a combination of knowledge and experience cannot overcome, often
resulting in unproductive efforts. We are in the very early stage of developing
our business and are dependent on the proceeds to be realized from the sale of
the shares in this offering for the funds necessary to carry out our planned
marketing program. We cannot guarantee that our marketing efforts will be
successful or that any revenue or profits will be realized.
Our Continued Existence and Future Profitability is Highly Dependent Upon the
Success of Our Marketing Programs
---------------------------------
The economic viability of our marketing program will be highly dependent
on, among many other factors, political issues, market conditions and general
economic conditions. During periods of economic downturn or slow economic
growth, coupled with eroding consumer confidence or rising inflation, the price
and/or sale of high technology products could be severely impacted. Such factors
would likely have an immediate effect on our business operations and/or
profitability. Currently, the handheld computer industry is undergoing, many
changes, due to many factors, including the rapid changes in technology, the
entry of additional competitors into the market and the resulting reduction in
prices for handheld computers. These constantly changing factors make it
difficult to conduct operations profitably in the handheld computer industry.
We May be Delayed in or Unable to Comply with Government Laws, Rules and
Regulation Related to our Proposed Operations Which May Severely Impact Our
Proposed Business
-----------------
Any marketing program we undertake will be subject to extensive laws, rules
and regulations, especially any efforts in China. In addition, existing, as well
as future legislation and regulations could cause additional expense, capital
expenditures, restrictions and delays in the marketing of the products we offer.
The extent to which future legislation and/or regulations might affect our
operations cannot be predicted. There is no assurance standards more stringent
than those presently in effect may not be enacted, which could adversely affect
our marketing program.
Products Needed for Our Marketing Program May Not Always be Available
---------------------------------------------------------------------
Competition and unforeseen limited sources of products we need for our
marketing programs could result in occasional spot shortages of supplies of
products. We cannot guarantee we will be able to obtain products which we
require, without interruption, as and when needed, or on terms favorable to us.
RISKS RELATED TO THIS OFFERING
==============================
You may be unable to resell any shares you may purchase in this offering in the
public markets.
---------------
The shares are defined as a penny stock under the Securities and Exchange
Act of 1934, and rules of the Commission. The Exchange Act and such penny stock
rules generally impose additional sales practice and disclosure requirements on
broker-dealers who sell our securities to persons other than certain accredited
investors who are, generally, institutions with assets in excess of $5,000,000
or individuals with net worth in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 jointly with spouse, or in transactions not recommended by
the broker-dealer. For transactions covered by the penny stock rules, a
broker-dealer must make a suitability determination for each purchaser and
receive the purchaser's written agreement prior to the sale. In addition, the
broker-dealer must make certain mandated disclosures in penny stock
transactions, including the actual sale or purchase price and actual bid and
offer quotations, the compensation to be received by the broker-dealer and
certain associated persons, and deliver certain disclosures required by the
Commission. Consequently, the penny stock rules may affect the ability of
broker-dealers to make a market in or trade our common stock and may also affect
your ability to resell any shares you may purchase in this offering in the
public markets.
We are Selling the Offering Without an Underwriter and May be Unable to Sell
any Shares
----------
The offering is self-underwritten, that is, we are not going to engage the
services of an underwriter to sell the shares; we intend to sell them through
our President and pay no commissions. We will hold investment meetings and
invite our friends, acquaintances and relatives in an effort to sell the shares
to them; however, there is no guarantee that we will be able to sell any of the
15
<PAGE>
shares. In the event we are unable to sell most of the shares in this offering,
we will be forced to reduce our proposed business operations until such time as
additional monies can be obtained, either through loans or financings.
<PAGE>
We Cannot Assure a Public Trading Market for the Shares
----------------------------------------------------------------
There is currently no trading in our common stock and we cannot guarantee
you that a trading market in our shares will develop in the near future, even if
this offering is successfully completed; or, if a trading market is developed,
that it can or will be sustained for any period of time. There is a high risk
that you may not be able to be resell any shares you purchase in this offering
at or near the offering price, and in fact, we cannot guarantee that you will be
able to sell your shares at all in the future.
THE PRICE OF OUR COMMON STOCK IS LIKELY TO BE VOLATILE AND SUBJECT TO WIDE
FLUCTUATIONS.
The market price of the securities of technology-related companies have
been especially volatile. Thus, the market price of our common stock is likely
to be subject to wide fluctuations. If our revenues do not grow or grow more
slowly than we anticipate, or, if operating or capital expenditures exceed our
expectations and cannot be adjusted accordingly, or if some other event
adversely affects us, the market price of our common stock could decline. In
addition, if the market for technology-related stocks or the stock market in
general experiences a loss in investor confidence or otherwise fails, the market
price of our common stock could fall for reasons unrelated to our business,
results of operations and financial condition. The market price of our stock
also might decline in reaction to events that effect other companies in our
industry even if these events do not directly affect us. The initial public
offering price of the common stock will be determined solely by us and may not
be representative of the price that will prevail in the open market. You might
be unable to resell your shares of our common stock at or above the offering
price. In the past, companies that have experienced volatility in the market
price of their stock have been the subject of securities class action
litigation. If we were to become the subject of securities class action
litigation, it could result in substantial costs and a diversion of management's
attention and resources.
PROVISIONS IN OUR CHARTER DOCUMENTS MIGHT DETER A COMPANY FROM ACQUIRING US.
We have adopted an indemnification provision which requires us to indemnify
our officers and directors from liability arising from their actions on behalf
of the company.. These provisions and other provisions under Nevada law could
make it more difficult for a third party to acquire us, even if doing so would
benefit our stockholders. See "Description of Capital Stock" for a more complete
description of the anti-takeover provisions of our charter and Nevada law.
MANAGEMENT COULD INVEST OR SPEND THE PROCEEDS OF THIS OFFERING IN WAYS WITH
WHICH OUR STOCKHOLDERS MIGHT NOT AGREE.
We have no specific allocations for the net proceeds of this offering.
Consequently, management will retain a significant amount of discretion over the
application of these proceeds. Because of the number and variability of factors
that will determine our use of these proceeds, our applications may vary
substantially from our current intentions to invest the net proceeds of the
offering in short-term, interest-bearing, investment-grade securities.
FUTURE SALES OF SHARES BY EXISTING STOCKHOLDERS COULD AFFECT OUR STOCK PRICE.
If our existing stockholders sell substantial amounts of our common stock
in the public market following this offering, the market price of our common
stock could decline. Based on shares outstanding as of April 30, 2000, upon
completion of this offering we will have outstanding approximately 14,279,000
shares of common stock. Of these shares, the 1,000,000 shares of common stock
sold in this offering will be freely tradeable, without restriction, in the
public market. In addition, 10,721,000 shares currently outstanding which have
been held in excess of two years will be eligible for sale, pursuant to Rule 144
(k) of the Securities Act of 1933. After the holding periods for an additional
2,558,000shares of common stock expire in July 2000, such shares will be
eligible for sale in the public market at various times, subject to volume
limitations under Rule 144. . In addition, the 1,500,000 shares reserved for
future issuance under our stock option and purchase plans will become eligible
for sale in the public market to the extent permitted by the provisions of
various vesting agreements, the lock-up agreements and Rules 144 and 701 under
the Securities Act. See "Shares Eligible for Future Sale" for more information
regarding shares of our common stock that may be sold by existing stockholders
after the closing of this offering.
16
<PAGE>
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price is substantially higher than the pro
forma net book value per share of the outstanding common stock. As a result, if
you purchase common stock in this offering, you will incur immediate and
substantial dilution in the amount of $3.71 per share. In addition, we have
issued options to acquire common stock at prices significantly below the initial
public offering price. To the extent these outstanding options are exercised,
you will be further diluted. See "Dilution" for a more complete description of
the dilution that you will incur.
SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made statements under the captions "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and in other sections of this prospectus that
are forward-looking statements. In some cases, you can identify these statements
by forward-looking words such as "may," "might," "will," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts," "potential" or
"continue," the negative of these terms and other comparable terminology. These
forward-looking statements, which are subject to risks, uncertainties and
assumptions about us, may include projections of our future financial
performance, our anticipated growth strategies and anticipated trends in our
business. These statements are only predictions based on our current
expectations and projections about future events. There are important factors
that could cause our actual results, level of activity, performance or
achievements to differ materially from the results, level of activity,
performance or achievements expressed or implied by the forward-looking
statements, including those factors discussed under the caption entitled "Risk
Factors." You should specifically consider the numerous risks outlined under
"Risks Factors."
Although we believe the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of any of these
forward-looking statements. We are under no duty to update any of these
forward-looking statements after the date of this prospectus to conform our
prior statements to actual results or revised expectations.
AVAILABLE INFORMATION
======================
We have filed this registration statement on Form SB-2, of which this
prospectus is a part, with the Commission . Upon completion of this
registration, we will be subject to the informational requirements of the
Exchange Act and, in accordance therewith, will file all requisite reports, such
as Forms 10-KSB, 10-QSB and 8-KSB, proxy statements, under Sec. 14 of the
Exchange Act, and other information with the Commission. Such reports, proxy
statements, this registration statement and other information, may be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street N.W., Judiciary Plaza, Washington, D.C. 20549. Copies of all
materials may be obtained from the Public Reference Section of the Commission's
Washington, D.C. office at prescribed rates. The Commission also maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
at http://www.sec.gov.
17
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USE OF PROCEEDS
=================
We have estimated the net proceeds from this offering to be approximately
$3,950,000, assuming all shares are sold, which we can't guarantee, after
deducting $50,000, for estimated offering expenses, including legal and
accounting fees.
We estimate that the net proceeds to us from the sale of shares of common stock
in this offering will be approximately $3,950,000, at an assumed initial public
offering price of $4.00 per share, after deducting the estimated offering
expenses payable by us.
The principal purposes of this offering are to obtain working capital, establish
a public market for our common stock and facilitate our future access to public
capital markets. We currently expect to use the net proceeds from this offering
for general corporate purposes, including sales and marketing expenses and
working capital. Our management will retain broad discretion in the allocation
of the net proceeds of this offering. The amounts we actually spend will depend
on a number of factors, including the amount of our future revenues and other
factors described elsewhere in this prospectus. We may use a portion of the net
proceeds to acquire or invest in complementary businesses, technologies,
products or services. We have no present commitments or agreements with respect
to any acquisition or investment. Pending these uses, we intend to invest the
net proceeds in short-term, interest-bearing, investment-grade securities.
In the event we raise less than the full amount of $4,000,000, we intend to
reduce our expeditures accordingly, on a pro rata basis as to anticipated uses.
18
<PAGE>
DETERMINATION OF OFFERING PRICE
==================================
The price of the shares we are offering was arbitrarily determined in order for
us to raise up to a total of $4,000,000 in this offering. The offering price
bears no relationship whatsoever to our assets, earnings, book value or other
criteria of value. Among the factors considered were our limited operating
history, the proceeds to be raised by the offering, the amount of capital to be
contributed by purchasers in this offering in proportion to the amount of stock
to be retained by our existing Stockholders, and our relative cash requirements.
CAPITALIZATION
==============
The following table sets forth our capitalization at April 30, 2000, on an
historical basis.
This table should be read in conjunction with the section entitled, Management's
Discussion and Analysis of Financial Condition and Results of Operations; our
Financial Statements and Notes; and other financial and operating data included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
4/30/00
--------------
<S> <C>
Stockholder's Equity:. . . . . . . $ 111,924
Common stock:
100,000,000 shares authorized,
par value $.001, issued and
outstanding . . . . . 13,279,000
</TABLE>
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES
=====================================================
Dilution represents the difference between the offering price and the net
tangible book value per share immediately after completion of this offering. Net
tangible book value is the amount that results from subtracting total
liabilities and intangible assets from total assets. Dilution arises mainly as a
result of our arbitrary determination of the offering price of the shares being
offered. Dilution of the value of the shares you purchase is also a result of
the lower book value of the shares held by our existing Stockholders.
As of April 30, 2000, the net tangible book value of our shares was $111,924, or
approximately $.008 per share, based upon 13,279,000 shares outstanding.
The following table illustrates the per share dilution to new investors,
assuming we sell all the shares offered, and does not give any effect to the
results of any operations subsequent to April 30,2000:
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Public Offering Price per Share $ 4.00
Net Tangible Book Value at April 30,2000 $ .008
Increase in Net Tangible Book Value per Share
Attributable to New Investors $ .282
Net Tangible Book Value After Offering $ .29
Immediate Dilution per Share to New Investors $ 3.71
</TABLE>
The following table summarizes the number and percentage of shares purchased,
the amount and percentage of consideration paid and the average price per Share
paid by our existing stockholders and by new investors in this offering:
<TABLE>
<CAPTION>
Total
Price Number of Percent of Consideration
Per Share Shares Held Ownership Paid
--------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Existing
Stockholders $ .034 13,279,000 93% $ 454,535
Investors in
This Offering $ 4.00 1,000,000 7% $4,000,000
</TABLE>
PLAN OF DISTRIBUTION; TERMS OF THE OFFERING
=================================================
Offering Will Be Sold By Our Officer and Director
---------------------------------------------------------
We intend to sell the shares in this offering through Simon Tam, our President,
who will receive no commission from the sale of any shares. He will not register
as a broker-dealer pursuant to Section 15 of the Securities Exchange Act of
1934, in reliance upon Rule 3a4-1, which sets forth those conditions under which
a person associated with an Issuer may participate in the offering of the
Issuer's securities and not be deemed to be a broker-dealer.
1. None of such persons are subject to a statutory disqualification, as that
term is defined in Section 3(a)(39) of the Act, at the time of his
participation; and,
2. None of such persons are compensated in connection with his or her
participation by the payment of commissions or other remuneration based
either directly or indirectly on transactions in securities; and
3. None of such persons are, at the time of his participation, an associated
person of a broker-dealer; and
4. All of such persons meet the conditions of Paragraph (a)(4)(ii) of Rule
3a4-1 of the Exchange Act, in that they (A) primarily perform, or are
intended primarily to perform at the end of the offering, substantial
duties for or on behalf of the Issuer otherwise than in connection with
transactions in securities; and (B) are not a broker or dealer, or an
associated person of a broker or dealer, within the preceding twelve
months; and (C) do not participate in selling and offering of securities
for any Issuer more than once every twelve months other than in reliance on
Paragraphs (a)(4)(i) or (a)(4)(iii).
Since the offering is self-underwritten, we intend to advertise and hold
investment meetings in various states where the offering will be registered and
will distribute this prospectus to potential investors at the meetings and to
our friends and relatives who are interested in our company and a possible
investment in the offering.
We are offering the shares subject to prior sale and subject to approval of
certain matters by our legal counsel.
Offering Period and Expiration Date
---------------------------------------
This offering will commence on the date of this prospectus and continue for a
period of 120 days, unless we extend the offering period for an additional 90
days, or unless the offering is completed or otherwise terminated by us.
Procedures for Subscribing
----------------------------
If you decide to subscribe for any shares in this offering, you will be required
to execute a Subscription Agreement and tender it, together with a check or
20
<PAGE>
certified funds, to us for acceptance or rejection.
All checks for subscriptions should be made payable to Asian Pacific Company,
Ltd.
Right to Reject Subscriptions
--------------------------------
We have the right to accept or reject subscriptions in whole or in part, for any
reason or for no reason. All monies from rejected subscriptions will be returned
immediately by us to the subscriber, without interest or deductions.
Subscriptions for securities will be accepted or rejected within 48 hours after
we receive them.
BUSINESS
========
General
-------
Our Company was incorporated in the State of Nevada on July 23, 1968. We are
preparing to engage in the marketing of a handheld computer called "Pulselink
1000", a Palm Pilot-type device with multi-language and handwriting recognition
functions, including both English and Chinese characters. The product contains a
suite of information management software, including real-time stock quotes,
data/time organizer, address book, note taking, audio dictionary, expense
management, to-do lists, games and a calculator. It also is capable of sending
and receiving e-mail.
We maintain our statutory registered agent's office at 1495 Ridgeview Drive,
Suite 220, Reno, Nevada 89509 and our business offices at 3465 Commercial
Street, Vancouver, British Columbia, Canada V5N 4E8.
INDUSTRY OVERVIEW
The handheld computing and communications industry is growing rapidly as
users, particularly mobile professionals, increasingly rely on electronic
management of critical personal and professional information, interaction with
Internet-based information resources and mobile voice and data communications.
This increased need for productivity and connectivity "anywhere, anytime" has
led to a wide array of handheld devices. Some handheld devices focus on handheld
computing functions, including calendar and contact management, while others
focus on communications functions, including voice and data communications,
paging, email and Internet access.
While demand for these devices has grown rapidly, we believe that product
evolution in this sector is still in its early stage. International Data
Corporation estimates that worldwide shipments of smart handheld devices will
grow from approximately 6.8 million units in 1998 to approximately 35.5 million
units in 2003. We believe that the emergence of more powerful, flexible devices
with increased functionality and broad consumer applications will further expand
the potential market for handheld computing and communications devices. Key
factors driving widespread consumer adoption of handheld computing and
communications devices include:
DEMANDS OF A MOBILE SOCIETY. As our society becomes ever more mobile,
consumers are demanding the same productivity and communications capability on
the road as they get at their desks. This demand is at the heart of a powerful
cycle: new devices enable new applications, which in turn enable greater
mobility, which only increases the demand for more functional devices.
Reductions in device size and cost and improvements in functionality, storage
capacity and reliability are all fostering these trends. Each turn of the cycle
drives increased volume, with the result that a product category once targeted
at upscale "mobile professionals" is increasingly becoming a mass consumer
product sector.
NEED FOR MOBILE INTERNET AND INTRANET ACCESS. The growing prominence of the
Internet and corporate intranets in users' everyday lives is increasing demand
for access "anywhere, anytime". Demand for mobile data Internet applications
such as email, stock quotes and trading, news, content and location-based
services continues to increase. In addition, workers and their employers are
demanding mobile access to corporate intranets to obtain critical business
information such as inventory levels and customer profiles.
IMPROVEMENT IN WIRELESS COMMUNICATIONS ENABLE COMPELLING APPLICATIONS.
Digital wireless communications have become widely adopted due to declining
consumer costs, expanding network coverage and the availability of extended
service features such as voice and text messaging. Digital wireless
technologies, which are currently designed for voice transmission and allow only
limited data transmission capabilities, are evolving towards more advanced
technologies enabling higher data transmission rates at lower costs. Widespread
deployment of these technologies in wireless networks will increasingly enable
the delivery of higher bandwidth applications such as streaming video and audio
to handheld communications devices. Dataquest estimates that the number of
wireless data subscribers worldwide will grow from approximately 14 million at
the end of 1998 to approximately 102 million at the end of 2003.
PROLIFERATION OF DIGITAL CONSUMER APPLICATIONS. The development of
applications for the digital delivery of consumer products and services, such as
photographs, music, video games, news, books, driving directions, weather and
stock quotes and trading, has accelerated as physical products and services are
increasingly being replaced with bytes of data. This trend has contributed to
the success of new consumer products such as MP3 players and digital cameras.
21
<PAGE>
GROWING, INNOVATIVE DEVELOPER COMMUNITY. As the handheld computing and
communications device market has grown to millions of units, a large and growing
community of independent developers is driving new applications and
functionality. Developers are creating software applications and complementary
hardware peripherals and accessories that address new markets. This innovation
is in turn creating new market opportunities and is stimulating increased demand
for handheld devices.
These trends are accelerating toward the emergence of a device that
integrates handheld computing applications and a broad range of communications
functions. Current handheld products provide consumers with limited choices,
typically between a simple device without expandability or a complex,
multi-function device that is expensive, heavy and difficult to use. We believe
the key challenge is one of design. The handheld device must be small, elegant
and easy to use, yet flexible enough to support a wide variety of personal
preferences and professional requirements.
BUSINESS STRATEGY
Our objective is to become a global market leader in the marketing of
handheld computing and communications products. Key elements of our strategy
include:
PENETRATE LARGE AND GROWING HANDHELD COMPUTING AND COMMUNICATIONS MARKET.
The Pulselink 1000 provides a product with functionality and competitive
pricing. This enables us to have immediate access to the large and growing
handheld computing and communications market. Our initial strategy is to enter
the market quickly by selling exclusively through our Web site. To further
expand our distribution, we intend to ship our products to selected retailers in
early Fall 2000. We also plan to expand our available market by entering
international markets as well as the education and government markets.
ESTABLISH A STRONG BRAND IDENTITY. Our goal is to establish Pulselink 1000
as a well-received brand in the consumer handheld computing market by creating
an image that is innovative, fun, smart, approachable, compelling and personal.
We will build on our brand awareness through advertising, strategic promotional
relationships and creative marketing.
PRODUCTS
The first product which we intend to distribute, the Pulselink 1000
handheld computer, is a personal organizer rich with many popular features. It
is a sleek, compact and lightweight handheld computer, with dimensions of
approximately 4.8" x 3.0" x 0.7", and an approximate weight of 5.4 ounces. Each
Pulselink 1000 includes ,as standard features, a stylus writing utensil,
infrared transceiver, desktop cradle with HotSynch button and attached cable for
connection to a personal/laptop computer, desktop interface software on compact
disk, liquid crystal display measuring 240 x 320, backlight display and a
leather case. The docking cradle, together with the bundled HotSynch
synchronization software, allows customers to easily and quickly synchronize, or
exchange, data between the Pulselink 1000 and their desktop or laptop computer.
The Pulselink 1000 features two megabytes of RAM memory and a Universal Serial
Bus (USB) docking cradle with desktop software.. The memory stores approximately
6,000 addresses, five years of appointments, 1,500 to do items, 1,500 memos and
200 e-mail messages. It is powered by two 1.5 volt AAA batteries
The standard model Pulselink 1000 features organizer applications,
including an address book, date book, to-do list, memo pad, 2 types of
calculators (normal and scientific), expense system, e-mail/browser software,
world clock and expansion slot for add-on enhancements, e.g., games, digital
camera and memory, which can be purchased separately.
The principal feature distinguishing the Pulselink 1000 from all current
competitors is its built-in e-mail/browser software, which is proprietary to
United.
The software which runs the device was developed exclusively by the
manufacturer, United, and is used exclusively in the Pulselink 1000. There are
presently no other companies licensed to use the software.
The Pulselink 1000 computer is the first and currently the only model
available from United. The product will be offered for a retail price of US$
269.00. The Pulselink 1000 is available in only one color: grey. .
SALES AND MARKETING
Our initial distribution strategy is to sell exclusively through our
pulselink1000.com Web site. We believe this will enable us to get to market
quickly, and provide us with detailed information about our initial purchasers.
We intend to continue to promote our Web site as the preferred site to buy our
products on the Internet. We intend to provide customers the ability to register
for ongoing communications with us via an e-newsletter, and we will enable
customers to register their product purchases on our site. We also intend to
22
<PAGE>
offer a broad array of accessories and cases on our site to continue to drive
traffic back to the site for incremental purchases.
To expand our market presence, we intend to extend our distribution
strategy in early Fall 2000 to include, initially, national retailers. We will
seek to enter into distribution agreements with retailers serving three major
segments of buyers -- consumer electronics purchasers, computer purchasers and
office supply purchasers -- with retail locations across the United States and
Canada. We intend to work closely with these retailers to provide a retail point
of purchase presence, and to enable an efficient channel for broad consumer
availability of our products.
We intend to approach English, German, Chinese and Japanese speaking l
markets in approximately the first quarter 2001. We plan to engage local
value-added distributors in all the major markets in the U.S. and Canada where
our localized language versions meet market needs.
We believe building brand awareness is important to our success. We intend
to use a variety of marketing programs to build awareness of our products
through mass-media advertising, targeted advertising, end user promotions,
public relations campaigns, strategic promotional efforts and in-store retail
merchandising.
CUSTOMER SERVICE AND SUPPORT
We intend to provide telephone-based customer support and technical support
to our customers through independent, third-party outsource vendors. We also
intend to provide customer support and technical support information to our
customers through our pulselink1000.com Web site. We anticipate that any retail
partner will provide first-line customer and technical support to their
customers. The manufacturer provides the Pulselink 1000 with a one-year limited
warranty. We provide no independent warranties.
MANUFACTURERS AND SUPPLIERS
All of our Pulselink 1000 handheld computers are manufactured by United at
its facilities in China on a purchase order basis. United procures components
and other supplies, manufactures, assembles and tests the products. By avoiding
any participation in the entire manufacturing process, we are able to focus on
marketing, thereby helping to minimize capital expenditures, conserve working
capital necessary to fund inventory, rely on a third party with more
manufacturing expertise than ourselves and avoid the need to find and maintain
facilities for manufacturing operations.
Manufactured devices will be sent to an independent, third-party
fulfillment center in the western U.S. Orders will be placed by end user
customers on our pulselink1000.com Web site, or will given over the telephone to
our third-party customer support center. They then match the product to the
order and confirm shipment, which initiates a credit card charge or invoice. We
have not yet entered into any arrangements with a support center or a
fulfillment center, but we have identified several parties with which we intend
to contact once we have completed this offering.
COMPETITION
The market for handheld computer products is highly competitive and we
expect competition to increase in the future. Most of our competitors or
potential competitors have significantly greater financial, technical and
marketing resources than we do. These competitors may be able to respond more
rapidly than us to new or emerging technologies or changes in customer
requirements. They may also devote greater resources to the development,
promotion and sale of their products than we do.
We believe that the principal competitive factors impacting the market for
our handheld computers are design, features, performance, price, brand and
availability. We anticipate that we will be able to compete favorably with many
of our current competitors with respect to some or all of these factors.
The Pulselink 1000 computers compete with a variety of handheld devices,
including keyboard-based devices, sub-notebook computers, smart phones and
two-way pagers. Our principal competitors include:
- Palm;
- licensees of the Microsoft Windows CE operating system, including Casio,
Compaq, Hewlett-Packard and Sharp;
- members of the Symbian consortium, including Psion, Ericsson and
Motorola; and
- other Palm OS operating system licensees, including Nokia, Sony and
QUALCOMM.
We expect our competitors to continue to improve the performance of their
current products and to introduce new products, services and technologies.
Successful new product introductions or enhancements by our competitors could
reduce the sales and market acceptance of our products, cause intense price
competition or make our products obsolete. To be competitive, we must continue
23
<PAGE>
to invest significant resources in , sales and marketing and customer support.
We cannot be sure that we will have sufficient resources to make these
investments or that we will be able to make the technological advances necessary
to be competitive. Increased competition could result in serious harm to our
business.
INTELLECTUAL PROPERTY
Our success depends upon our supplier's ability to maintain the proprietary
aspects of its technology and operate without infringing the proprietary rights
of others. We do not have any issued U.S. or foreign trademarks, but we will
applied for a number of U.S. trademarks, including Pulselink1000, palmcomputer,
and e-palm-computer.
It is possible that trademarks we have applied for, if issued, or our
potential future trademarks may be successfully challenged or that no trademark
will be issued from our trademark applications. Legal protections afford only
limited protection for our proprietary rights. Despite our efforts to protect
our proprietary rights, unauthorized parties may attempt to obtain and use
information that we regard as proprietary. Litigation may be necessary in the
future to enforce our intellectual property rights, to protect our proprietary
rights, to determine the validity and scope of the proprietary rights of others
or to defend against claims of infringement or invalidity. Any resulting
litigation could result in substantial costs and diversion of resources. Our
means of protecting our proprietary rights may not be adequate and our
competitors may independently develop technology that is similar to ours.
Government Regulations
-----------------------
We will be subject to all the laws, rules and regulations which govern the
import and sale of goods from China, together with all of the laws, rules and
regulations governing business activities, generally, in the United States.
Employees and Employment Agreements
--------------------------------------
At present, we have no employees, other than Simon Tam, our President and
Chairman of the Board, Roland C. Tam, our Secretary and Director and Raymond
K.M. Fung, our Treasurer and Director, none of whom who are presently
compensated for their services and do not have employment agreements with us. We
presently do not have pension, health, annuity, insurance, or similar benefit
plans; however, we do have a stock option plan, and we may adopt other benefit
plans in the future. There are presently no personal benefits available to any
officers, directors or employees.
Office Facilities
-----------------
We currently conduct our business operations from an office located at 3465
Commercial Street, Vancouver, B.C., Canada, consisting of 7,000 square feet. The
rent is competitive for similar space in the area.
Legal Proceedings
------------------
We are not involved in any pending legal proceedings and are not aware of any
threatened legal proceedings. .
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
==================================================
This registration statement contains forward-looking statements that involve
risks and uncertainties. The statements contained in this registration statement
that are not purely historical are forward-looking statements, including without
limitation statements regarding our expectations, projections, beliefs,
intentions or strategies regarding the future. All forward-looking statements
included in this document are based on information available to us on the date
hereof, and we assume no obligation to update any such forward- looking
statements. Our actual results may differ materially as a result of certain
factors, including those set forth in the Risk Factors section of this
registration statement. Potential investors should consider carefully the
following factors, as well as the more detailed information contained elsewhere
in this registration statement, before making a decision to invest in our
shares. The following discussion and analysis should be read in conjunction with
our Financial Statements and Notes included in this prospectus.
Selected Financial Data
-------------------------
We are a start-up, development stage company and have not yet generated or
realized any revenues from our business operations.
The following historical financial data for the years ended December 31, 1998,
December 31, 1999 and April 30, 2000, was derived from our financial statements,
audited by Mark Bailey & Co., Ltd., independent certified public accountants.
24
<PAGE>
<TABLE>
<CAPTION>
Balance Sheet Data
------------------ 12/31/98 12/31/99 4/30/00
======= ======== ========
<S> <C> <C> <C>
Assets:
Cash $ 0 $ 87,858 $ 112,479
------------ -----------
Total Assets $ 0 $ 87,858 $ 112,479
Liabilities:
Accounts payable $ 0 $ 1,631 $ 555
------------ ----------- ----------
Total Liabilities $ 0 $ 1,631 $ 555
Total Shareholders' Equity $ $ 86,227 111,924
Statements of Operations Data:
Revenues $ 0 $ 0 $ 0
General and Administrative Expenses $ 0 $100,227 $ 239,339
---------- ---------- ----------
Net Income/Loss $ 0 ($ 95,563) ($ 234,198)
Net Income/Loss per common share $ 0 $ .0073 $ .0178
Weighted average common shares outstanding 12,850,000 13,214,000 13,279,000
</TABLE>
Plan of Operation
---------------------
Assuming sale of all the shares in this offering and receipt of all the
proceeds, of which there is no guarantee, we estimate that we will use most of
the funds received during the next 12 months to develop and implement our
marketing program. We do not anticipate having to raise any additional funds
during the first 12 months if we receive the proceeds from the sale of all of
the shares in this offering.
In the event 50% or less of the shares are sold in this offering, we would
reduce our expenditures in the following order:
1. Our contingency fund would be reduced by ensuring that
our marketing programs were as close to budget as possible;
2. We would strictly manage all administrative, legal and
accounting costs in an effort to keep them to a minimum
while still ensuring compliance with all regulatory
requirements; and
3. We would take maximum advantage of the skills of our officers.
Only after minimizing the above costs, would we consider a reduction in our
proposed marketing efforts.
Limited Operating History; Need for Additional Capital
------------------------------------------------------------
There is little to no historical financial information about our Company upon
which to base an evaluation of our performance or to make a decision regarding
an investment in the shares. We are still in the organizational stages and have
not yet generated or realized any revenues from operations. We cannot guarantee
we will be successful in our business operations or will achieve significant
levels of market acceptance for our proposed business. Our business could be
subject to any or all of the problems, expenses, delays and risks inherent in
the establishment of a new business enterprise, including limited capital
resources, possible delays in the development of our business, possible cost
overruns due to price and cost increases in raw products and manufacturing
processes of our supplier in China, and the absence of an operating history.
Therefore, we cannot guarantee we will be able to achieve or maintain profitable
operations. Further, there is no assurance that we will not encounter unforeseen
difficulties that may deplete our capital resources more rapidly than
anticipated.
The timing and total amount of capital requirements cannot be predicted at this
time and we have no assurance that any financing will be available to us on
acceptable terms, as and when we need it, if at all. If such financing is not
available on satisfactory terms, as and when needed, we may be unable to
continue our exploration activities or expand our operations and our operating
results may be adversely affected. Equity financing could also result in
additional dilution to then existing shareholders.
We do not plan to purchase any significant equipment in the next 12 months.
Results of Operations
-----------------------
Period Ended April 30, 2000
We are a development stage company and have not yet generated or realized any
revenues during the last 5 years.
Since inception, we have used our common stock to raise money for our business
and to repay outstanding indebtedness. Net cash provided by financing activities
for the period ended April 30, 2000 was $442,000, as a result of proceeds
received from sales of our common stock.
25
<PAGE>
Liquidity and Capital Resources
----------------------------------
As of the date of this registration statement, we have yet to generate any
revenues from our business operations due to the preliminary nature of our
operations, substantial ongoing investment in exploration efforts, and
expenditures incurred to build the appropriate infrastructure to support our
proposed operations. Consequently, we have been substantially dependent on
public and private placements of our equity securities and shareholder loan
financing to fund our cash requirements.
We issued 364,000 shares at $.50 per share through an offering in July, 1999,
and issued 65,000 shares at $4.00 per share through an offering in March and
April 2000. The total proceeds we received from the offering were $442,000 in
cash.
As of April 30, 2000, our total assets were $112,479 and our total liabilities
were $555.
During 2000, we expect to incur significant costs for marketing and promotion of
our product. Significant additional funding will be required to meet any
additional operating and/or expansion requirements.
We are taking steps to raise equity capital; however, we cannot guarantee that
any new capital will be available to us or that adequate funds for operations,
whether from our revenues, financial markets, collaborative or other
arrangements with possible marketing partners, none of which are yet known or
expected, or from other sources, will be available as or when needed, or on
terms satisfactory to us. Our failure to obtain adequate additional financing
may require us to delay, curtail or scale back some or all of our sales and
marketing efforts and, potentially, to cease our operations. Any additional
equity financing may involve substantial dilution to our then-existing
shareholders.
Year 2000 Compliance
----------------------
The Year 2000 issue is the result of computer programs using two digits rather
than four to define the applicable year. Date-sensitive software may recognize a
date using 00 as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations, causing disruptions of operations,
including, among others, a temporary inability to process transactions, send
invoices or engage in similar normal business activities.
Due to the fact that 5 months have passed since the critical date, we do not
feel that the Year 2000 issue is at all material or even relevant to our
operations. We do recognize that people feel the Year 2000 issue could still
interrupt or adversely affect power, telephone and other utility services, and
to that extent, we would be affected like the rest of the world.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
-----------------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivatives and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative investments, including certain derivative
instruments embedded in other contracts, and for hedging activities. In July
1999, the FASB issued SFAS No. 137, Accounting for Derivative and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133. SFAS No.
137 deferred the effective date of SFAS No. 133 until fiscal years beginning
after June 15, 2000. We will adopt SFAS No. 133 during fiscal 2001. To date, we
have not engaged in derivative or hedging activities.
26
<PAGE>
MANAGEMENT
==========
Officers and Directors
------------------------
Each of our directors is elected by the Stockholders to a term of one year and
serves until his or her successor is elected and qualified. Each of our officers
is elected by the Board of Directors to a term of one year and serves until his
or her successor is duly elected and qualified, or until he or she is removed
from office. The Board of Directors has no nominating, auditing or compensation
committees.
The name, address, age and position of our present officers and directors are
set forth below:
<TABLE>
<CAPTION>
Name and Address Age Position(s)
----------------- ----- -------------
<S> <C> <C>
Simon Tam 42 President
3465 Commercial Street and Chairman
Vancouver, B.C., of the Board
Canada V5N 4E8
Roland C. Tam 44 Secretary and Director
#102 - 3070 Norland Aveune
Burnaby, B.C.,
Canada V5B 3A6
Raymond K.M. Fung 44 Treasurer and Director
#101 - 1668 West Broadway
Vancouver, B.C.,
Canada V6J 1X6
</TABLE>
The person named above has held his office/position since 1996 and is expected
to hold his office/position until the next annual meeting of our stockholders.
Background of Officers and Directors
----------------------------------------
Simon Tam has been the President and Chairman of the Board of Directors of the
Company since 1996. Mr. Tam has more than 10 years experience in the computer
industry. He co-founded two personal computer manufacturing and wholesale
distribution companies (Cynch Enterprises and Darius Technology Ltd.). He was
recognized as one of the top 40 under age 40 entrepreneurs of Business in
Vancouver in 1991, when he was the Vice President and COO of Darius Technology
Ltd., a Vancouver based public company. From 1991 to 1994, Mr. Tam was also the
President and a Director of Sino Pacific Company Ltd., a Vancouver based public
company involved in the mining industry. Mr. Tam has excelled in the areas of
corporate finance and management. He is presently President and a Director of
Consolidated PPM Development Corp. and Saxony Explorations Ltd., which are
Canadian Venture Exchange public companies, involved in the natural resources
sector. Mr.Tam devotes his time as required to the business of the Company.
Roland C. Tam has been the Secretary and a Director of the Company since 1998.
Mr. Tam has over 10 years experience in the personal computer wholesale
distribution industry as a sales manager. Currently, he is owner of Microdell
Computer Ltd., a British Columbia corporation engaged in the business of PC
sales and networking. From 1993 to present, Mr Tam was a Director of Saxony
Explorations Ltd., which is listed on the Canadian Venture Exchange and is
involved in the natural resources sector. From 1977 to 1987, Mr. Tam was sales
supervisor of Hostess Food Product. Mr. Tam studied at British Columbia
Institute Of Technology from 1979 to 1982, majoring in Marketing. Mr. Tam will
devote his time as required to the business of the Company.
Raymond K.M. Fung has been the Treasurer, Chief Financial Officer and a Director
of the Company since 1998. Mr. Fung currently owns and has operated a retail
personal computer store for more than 8 years. Current annual sales of his store
are $3,000,000. From 1982 to 1992, Mr. Fung was working for Budget Rent-A-Car in
the accounting department. Mr. Fung graduated in 1979 from Langara College with
a major in Accounting. Mr. Fung will devote his time as required to the business
of the Company.
COMMITTEES OF BOARD OF DIRECTORS
Our board of directors does not presently have any committees, but intends to
establish a compensation committee and an audit committee upon completion of
this offering..
27
<PAGE>
EXECUTIVE COMPENSATION
----------------------
Although our officers and directors have received stock options, none of them
have received cash compensation for their services and there are no plans to
give them cash compensation in the near future, unless and until we begin to
realize revenues from our business operations. At such time, our officers will
receive the following cash compensation:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Summary Compensation Table
==========================
Annual Long-Term Compensation
Compensation Awards Payouts
-----------------------------------------------------------------------------------------------------
Other Restricted Securities LTIP All
Name and Annual Stock Underlying Pay- Other
Principal Compen- Awards Options/ outs Comp.
Position(s) Year Salary sation SARs (#) ($)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Simon Tam 2000 $ 90,000 $ 50,000 0 1,015,000(3)(4) 0 0
CEO, President
and Director
Roland C. Tam 2000 $ 48,000. $ 20,000 0 15,000(4) 0 0
Chief Product Officer,
V.P.- Marketing and
Sales, Secretary and
Director
Raymond K.M. Fung 2000 $ 48,000. $ 20,000 0 15,000(4) 0 0
V.P., Treasurer and
Director
--------------------------------------------------------------------------------
<FN>
(3) Pursuant to resolution of the Board of Directors, Mr. Tam was granted stock
options to purchase up to a total of 1,000,000 shares of our common stock, at an
exercise price of $1.00 per share, to be vested as follows: 40% of the grant, or
400,000 shares, vested on the effective date of the resolution (07-09-1999) and
the balance of 60% of the grant, or 600,000 shares, will vest equally on a
monthly basis over a period of two years from the date of the resolution.
(4) On January 15, 2000, we granted stock options to all 3 members of our Board
of Directors to purchase a total of 15,000 shares of our common stock, at an
exercise price of $1.00 per share, for a period of three years.
</FN>
</TABLE>
DIRECTOR COMPENSATION
None of the board members receives a fee for attending board or committee
meetings. Each member of the board who is not our employee, or an employee of a
parent, subsidiary or affiliate of ours, will be eligible to participate in our
2000 Equity Incentive Plan, which will become effective immediately upon the
completion of this offering. Under this plan, the option grants to directors are
automatic and nondiscretionary. Each non-employee director who became a member
of our board of directors before the date of this offering will receive an
option to purchase 15,000 shares of our common stock. Each non-employee director
who becomes a member of our board of directors on or after the date of this
offering will be granted an option to purchase 15,000 shares of our common
stock. Immediately after each annual meeting of our stockholders, each
non-employee director will automatically be granted an additional option to
purchase 7,500 shares if the director has served continuously as a member of our
board since the date of the director's initial grant and for a period of at
least one year before the annual meeting.
Each option will have an exercise price equal to the fair market value of
our common stock on the date of grant. The options will have four-year terms and
will terminate three months after the date the director ceases to be a director
or 12 months if the termination is due to death or disability. All options
granted to non-employee directors will vest over a four year period at a rate of
25% of the total shares granted on the first anniversary of the date of grant,
and ratably over the next 36 months, so long as the non-employee continuously
remains our director or consultant. In the event of our dissolution or
liquidation or a "change in control" transaction, options granted to our
non-employee directors under the plan will become 100% vested and exercisable in
full.
28
<PAGE>
Options/SAR Grants in Last Fiscal Year
--------------------------------------
During the fiscal year ended December 31, 1999, the following officer and
director received options to purchase an aggregate of 1,000,000 shares, at an
exercise price of $1.00 per share, valid for a period of four (4) years, as
follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Individual Grants
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Percent Potential
of Total Realizable
Options/ Value at
SARs Assumed Annual
Number of Granted Rates of
Securities to Exercise Stock Price
Underlying Employees of Base Appreciation
Options/SARs in Fiscal Price Expiration For Option
Granted (#) Year ($/Sh) Date Term
--------------------------------------------------------------------------------
5% 10%
--------------------------------------------------------------------------------
Simon Tam 1,000,000 100% $ 1.00 07-09-2003 _____ _____
-------------------------------------------------------------------------------
</TABLE>
These options were granted on July 9, 1999, and were approved by Roland C. Tam
and Raymond K.M. Fung, Directors, who also deemed the exercise price to be the
fair value of the shares. None of the options have been exercised to date.
1999 Employee Stock Option and Incentive Plan
---------------------------------------------
The 1999 Employee Stock Option and Incentive Plan was adopted by the Board
of Directors and approved by the stockholders in July, 1999. The Plan provides
for the issuance of up to a maximum of 1,500,000 shares of restricted common
stock and is administered by the Board of Directors. As of December 31, 1999,
1,000,000 shares have been allocated under the Plan.
The Board of Directors, or a committee appointed by the Board, has sole
discretion to determine the type of award to be made under the Plan, the amount
awarded to any employee, and the factors to be considered in determining the
award, whether incentive stock options or non-qualified stock options. Options
may be granted only for shares of Common Stock.
Limitation of Liability and Indemnification of Officers and Directors
---------------------------------------------------------------------
Our Articles of Incorporation and By-Laws provide that our directors and
officers shall be indemnified by us to the fullest extent permitted by Nevada
law, as it now exists or may in the future be amended, against all expenses and
liabilities reasonably incurred in connection with their service for or on our
behalf. Nevada Revised Statute 78.7502, provides indemnification for any
officer, director, employee or agent of our corporation who is party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, provided he/she was acting in good
faith and in a manner which he/she reasonably believed to be in or not opposed
to the best interests of the corporation. The indemnification includes all
expenses, including attorney's fees, judgments, fines and settlement amounts.
In addition, the Articles of Incorporation provide that our directors will
not be personally liable for monetary damages to us for breaches of their
fiduciary duty as directors, unless they violated their duty of loyalty to us or
our stockholders, acted in bad faith, knowingly or intentionally violated the
law, authorized illegal dividends or redemptions or derived an improper personal
benefit from their action as directors.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION ON LIABILITY
--------------------------------------------------------------------------------
Pursuant to the Articles of Incorporation and By-Laws of the corporation, we may
indemnify an officer or director who is made a party to any proceeding,
including a law suit, because of his position, if he acted in good faith and in
a manner he reasonably believed to be in our best interest. In certain cases, we
may advance expenses incurred in defending any such proceeding. To the extent
that the officer or director is successful on the merits in any such proceeding
as to which such person is to be indemnified, we must indemnify him against all
expenses incurred, including attorney's fees. With respect to a derivative
action, indemnity may be made only for expenses actually and reasonably incurred
29
<PAGE>
in defending the proceeding, and if the officer or director is judged liable,
only by a court order. The indemnification is intended to be to the fullest
extent permitted by the laws of the State of Nevada.
As regards indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors or officers pursuant to the
foregoing provisions, we are informed that, in the opinion of the Commission,
such indemnification is against public policy, as expressed in the Act and is,
therefore, unenforceable.
ANTI-TAKEOVER EFFECT
The limitation of liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against our directors for breach of their fiduciary duty.
They may also reduce the likelihood of derivative litigation against directors
and officers, even though an action, if successful, might benefit us and other
stockholders. Furthermore, your investment may be adversely affected to the
extent we pay the costs of settlement and damage awards against directors and
officers as required by these indemnification provisions. At present, there is
no pending litigation or proceeding involving any of our directors, officers or
employees regarding which indemnification by the Company is sought, nor are we
aware of any threatened litigation that may result in claims for
indemnification.
PRINCIPAL STOCKHOLDERS
=======================
The following table sets forth, as of the date of this prospectus, the total
number of shares owned beneficially by each of our directors, officers and key
employees, individually and as a group, and the present owners of 5% or more of
our total outstanding shares. The table also reflects what such ownership will
be assuming completion of the sale of all shares in this offering, which we
can't guarantee. The stockholder listed below has direct ownership of his shares
and possesses sole voting and dispositive power with respect to the shares.
Unless otherwise indicated below, to our knowledge, all persons and
entities listed below have sole voting and investment power over their shares of
common stock, except to the extent that individuals share authority with spouses
under applicable law.
The number of shares beneficially owned by each stockholder is determined
in accordance with the rules of the Securities and Exchange Commission and does
not necessarily indicate beneficial ownership for any other purpose. Under these
rules, beneficial ownership includes those shares of common stock over which the
stockholder exercises sole or shared voting or investment power. It also
includes shares of common stock that the stockholder has a right to acquire
within 60 days after April 30, 2000, through the exercise of any option. The
percentage ownership of the outstanding common stock, however, is based on the
assumption, expressly required by the rules of the Securities and Exchange
Commission, that only the person or entity whose ownership is being reported has
converted options into shares of common stock.
<TABLE>
<CAPTION>
Name and Address No. of No. of Percentage of
Beneficial Shares Shares of Ownership
Owner (1) Before After Offering Before After
Offering - Offering Offering
----------------------- -------- -------------- --------------------
<S> <C> <C> <C> <C>
Simon Tam 1,015,000 (2) 1,015,000 (2) 8% 7%
C101-3477 Commercial Street
Vancouver, B.C.,
Canada V5N 4E8
Roland C. Tam 140,000 (3) 140,000 (3) .3% .1%
C101-3477 Commercial Street
Vancouver, B.C.,
Canada V5N 4E8
Raymond K.M. Fung 15,000 (4) 15,000 (4) .1% .1%
C101-3477 Commercial Street
Vancouver, B.C.,
Canada V5N 4E8
------------------
All Officers and
Directors as a Group 1,170,000 1,170,000 8.2% 7.2%
<FN>
(1) The persons named above may be deemed to be parents and promoters of our
Company, within the meaning of such terms under the Securities Act of 1933, by
virtue of his direct and indirect stock holdings.
(2) This figure includes options to acquire 1,015,000 shares.
(3) This figure includes options to acquire 15,000 shares.
(4) This figure includes options to acquire 15,000 shares.
</FN>
</TABLE>
30
<PAGE>
Future Sales by Existing Stockholders
-----------------------------------------
A total of 13,279,000 shares have been issued to the existing Stockholders, none
of which are restricted securities, as that term is defined in Rule 144 of the
Rules and Regulations of the SEC promulgated under the Act. Under Rule 144, such
shares can be publicly sold, subject to volume restrictions and certain
restrictions on the manner of sale, commencing one year after their acquisition.
Of that total, 152,000 of the issued and outstanding shares were sold in a
public offering pursuant to Regulation A, and are unrestricted securities and
may be publicly sold at any time, without restriction.
Shares purchased in this offering, which will be immediately resalable, and
sales of all of our other shares , could have a depressive effect on the market
price, if any, of our common stock and the shares we are offering.
Of these shares, all of the 1,000,000 shares of our
common stock sold in this offering will be freely tradable without restriction
or further registration under the Securities Act, unless the shares are
purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act. Any shares purchased by an affiliate may not be resold except
under an effective registration statement or an exemption from registration,
including an exemption under Rule 144 of the Securities Act. The remaining
13,279,000 shares of common stock held by existing stockholders are "restricted
securities" as that term is defined in Rule 144 under the Securities Act. These
restricted securities may be sold in the public market only if they are
registered or if they qualify for an exemption from registration under Rule 144
or Rule 701 under the Securities Act. These rules are summarized below.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year from the later of the date those shares of
common stock were acquired from us or from an affiliate of ours would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of:
(1) one percent of the number of shares of common stock then
outstanding, which will equal approximately 143,000 shares immediately
after this offering; or
(2) the average weekly trading volume of the common stock on the
Nasdaq National Market during the four calendar weeks preceding the filing
of a notice on Form 144 with respect to the sale of any shares of common
stock.
Sales of shares under Rule 144 are also subject to manner of sale
provisions and notice requirements and to the availability of current public
information about us. Affiliates may sell shares not constituting restricted
securities in accordance with the volume limitations and other restrictions, but
without regard to the one-year holding period.
RULE 144(K)
In addition, under Rule 144(k), a person who is not one of our affiliates
at any time during the three months before a sale, and who has beneficially
owned the shares proposed to be sold for at least two years from the later of
the date the shares were acquired from us or from an affiliate of ours,
including the holding period of any previous owner other than an affiliate, is
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
RULE 701
In general, under Rule 701 under the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchased shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell those shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with some of the restrictions,
including the holding period, contained in Rule 144.
DESCRIPTION OF SECURITIES
===========================
Common Stock
-------------
Our authorized capital stock consists of 100,000,000 shares of common stock, par
value $.001 per share. The holders of our common stock (i) have equal ratable
rights to dividends from funds legally available therefor, when, as and if
declared by our Board of Directors; (ii) are entitled to share ratably in all of
31
<PAGE>
our assets available for distribution to holders of common stock upon
liquidation, dissolution or winding up of our affairs; (iii) do not have
preemptive, subscription or conversion rights and there are no redemption or
sinking fund provisions or rights; and (iv) are entitled to one non- cumulative
vote per share on all matters on which stockholders may vote.
Prior to this offering, there was a total of 13,279,000 shares of common stock
issued and outstanding, held by 390 shareholders of record. All these
outstanding shares are fully paid for and non-assessable and all shares subject
of this offering, when issued, will be fully paid for and non-assessable. We
refer you to our Articles of Incorporation, By-Laws and the applicable statutes
of the State of Nevada for a more complete description of the rights and
liabilities of holders of our securities.
Non-cumulative Voting
----------------------
Holders of shares of our common stock do not have cumulative voting rights,
which means that the holders of more than 50% of the outstanding shares, voting
for the election of directors, can elect all of the directors to be elected, if
they so choose, and, in such event, the holders of the remaining shares will not
be able to elect any of our directors. After this offering is completed, the
present stockholders will own approximately 93% of our outstanding shares.
Cash Dividends
---------------
As of the date of this offering, we have not paid any cash dividends to
stockholders. The declaration of any future cash dividend will be at the
discretion of our Board of Directors and will depend upon our earnings, if any,
our capital requirements and financial position, our general economic
conditions, and other pertinent conditions. It is our present intention not to
pay any cash dividends in the foreseeable future, but rather to reinvest
earnings, if any, in our business operations.
Reports
-------
After we complete this offering, we will be subject to certain reporting
requirements and will furnish annual financial reports to our stockholders,
certified by our independent accountants, and may, in our discretion, furnish
unaudited quarterly financial reports.
Stock Transfer Agent
----------------------
The stock transfer agent for our securities is Transfer Online, 227 S.W. Pine,
Suite 300, Portland, Oregon 97204.
CERTAIN TRANSACTIONS
=====================
In July 1999, 3 immediate family members of Mssrs. Simon Tam, including Roland
C. Tam, purchased a total of 23,000 shares at a price of $.50 per share.
During July and August, 1999, the Company sold 341,000 shares of restricted
common stock to 11 unrelated third parties at a price of $.50 per share.
In March 2000, the Company sold 65,000 shares of restricted common stock to 9
unrelated third parties at a price of $4.00 per share.
LITIGATION
==========
We are not a party to any pending litigation and, to the best of our knowledge,
none is contemplated or threatened.
EXPERTS
=======
Our consolidated financial statement for the years ended December 31, 1999 and
December 31, 1999, and the period ended April 30, 2000, included in this
prospectus have been audited by Mark Bailey & Co., Ltd., Independent Certified
Public Accountants, 1495 Ridgeview Drive, Suite 200, Reno, Nevada 89509. We
include the financial statements in reliance on the report of Mark Bailey & Co.,
Ltd., given upon their authority as experts in accounting and auditing.
LEGAL MATTERS
==============
The law office of Michael J. Morrison, Chartered, 1495 Ridgeview Drive, Suite
220, Reno, Nevada 89509, telephone (702) 827-6300, fax number (702) 827-6311,
Mr. Morrison has passed upon the validity of the shares offered and certain
other legal matters and has represented us in connection with this offering.
32
<PAGE>
FINANCIAL STATEMENTS
=====================
Our fiscal year end is December 31. We will provide audited financial statements
to our stockholders on an annual basis; the statements will be prepared by an
Independent Certified Public Accountant. Our audited financial statements for
the years ended December 31, 1999 and December 31, 1999, and the period ended
April 30, 2000, immediately follow.
FINANCIAL STATEMENTS
ASIAN PACIFIC COMPANY, LTD.
(A DEVELOPMENT STAGE COMPANY)
FOR THE FOUR MONTHS ENDED
APRIL 30, 2000
AND
THE YEARS ENDED
DECEMBER 31, 1999, AND 1998
WITH
AUDIT REPORT OF
CERTIFIED PUBLIC ACCOUNTANTS
33
<PAGE>
TABLE OF CONTENTS
Independent Auditors' Report on the Financial Statements.......................2
Balance Sheets.................................................................3
Statements of Operations.......................................................4
Statements of Stockholders' Equity.............................................5
Statements of Cash Flows.......................................................6
Notes to Financial Statements..................................................7
34
<PAGE>
INDEPENDENT AUDITORS' REPORT
May 19, 2000
Board of Directors
Asian Pacific Company, Ltd.
We have audited the accompanying balance sheets of Asian Pacific Company, Ltd.
(a Company in the development stage) as of April 30, 2000, and December 31,
1999, and the related statements of operations, stockholders' equity and cash
flows for the four months ended April 30, 2000, and the years ended December 31,
1999, and 1998. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Asian Pacific Company, Ltd. (a
Company in the development stage), as of April 30, 2000, and December 31, 1999,
and the results of its operations and its cash flows for the four months ended
April 30, 2000, and the years ended December 31, 1999, and 1998, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 1 to the
financial statements, the Company is in the development stage, and existing cash
is insufficient to fund the Company's cash flow needs for the next year.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Mark Bailey & Co., Ltd.
Reno, Nevada
35
<PAGE>
<TABLE>
<CAPTION>
ASIAN PACIFIC COMPANY, LTD.
(A Company in the Development Stage)
BALANCE SHEETS
--------------
April 30, 2000, and December 31,1999
ASSETS
2000 1999
---- ----
CURRENT ASSETS
<S> <C> <C>
Cash $ 112,479 $ 87,858
Note and interest receivable (net of allowance for
doubtful accounts of $ 289,675 and $ 86,204) - -
---------------------------------------------
Total current assets 112,479 87,858
---------------------------------------------
DEFERRED TAX ASSET (NET OF VALUATION ALLOWANCE
OF $116,488 AND $36,860) - -
---------------------------------------------
Total assets $ 112,479 $ 87,858
=============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 555 $ 1,631
---------------------------------------------
Total current and total liabilities 555 1,631
---------------------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
--------------------
Common stock, $0.001 par value, 100,000,000 shares authorized, 13,279,000 and
13,214,000 shares issued and outstanding at
April 30, 2000, and December 31, 1999, respectively 13,279 13,214
Additional paid-in capital 441,256 181,426
Deficit accumulated during the
development stage (342,611) (108,413)
---------------------------------------------
Total stockholders' equity 111,924 86,227
---------------------------------------------
Total liabilities and stockholders' equity $ 112,479 $ 87,858
=============================================
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
ASIAN PACIFIC COMPANY, LTD.
(A Company in the Development Stage)
STATEMENTS OF OPERATIONS
For the Four Months Ended April 30, 2000, and the Years Ended
December 31, 1999, and 1998
CUMULATIVE FOR THE
DURING FOUR MONTHS FOR THE YEARS
DEVELOPMENT ENDED ENDED
STAGE APRIL 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
------------ -------------- ----------------- -----------------
$ - $ - $ - $ -
REVENUE
-------
INTEREST INCOME 9,855 5,141 4,714 -
---------------
COSTS AND EXPENSES
------------------
Operating and
administrative expenses (352,466) (239,339) (100,277) -
------------------------------------------------------------------------------------
Net loss $ (342,611) $ (234,198) $ (95,563) $ -
====================================================================================
Loss per share $ (0.0260) $ (0.0178) $ (0.0073) $ -
====================================================================================
ASIAN PACIFIC COMPANY, LTD.
(A Company in the Development Stage)
STATEMENTS OF CASH FLOWS
For the Four Months Ended April 30,2000, and the Years Ended
December 31, 1999, and 1998
CUMULATIVE FOR THE
DURING FOUR MONTHS FOR THE
DEVELOPMENT ENDED YEARS ENDED
STAGE APRIL 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
----------- -------------- ----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net loss $ (342,611) $ (234,198) $ (95,563) -
Adjustments to reconcile net loss:
Increase in allowance for doubtful accounts 289,675 203,471 86,204 -
Increase in accounts receivable (4,675) (3,471) (1,204) -
Increase (decrease) in accounts payable 555 (1,076) 1,631 -
Increase in deferred tax asset (116,488) (79,628) (32,491) -
Increase in valuation allowance
for deferred tax asset 116,488 79,628 32,491 -
----------------------------------------------------------------------------------
Net cash used in operating activities (57,056) (35,274) (8,932) -
----------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Issuance of note receivable (285,000) (200,000) (85,000) -
----------------------------------------------------------------------------------
Net cash used in investing activities (285,000) (200,000) (85,000) -
----------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds received from issuance of stock 454,535 259,895 181,790 -
----------------------------------------------------------------------------------
Net cash provided by financing activities 454,535 259,895 181,790 -
----------------------------------------------------------------------------------
Net increase in cash 112,479 24,621 87,858 -
Cash at October 10, 1988, (inception) and
December 31, 1999, 1998, and 1997 - 87,858 - -
----------------------------------------------------------------------------------
Cash at April 30, 2000, and
December 31, 1999, and 1998 $ 112,479 112,479 87,858 -
==================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION
No amounts were actually paid for either interest or income taxes for the four
months ended April 30, 2000, or the years ended December 31, 1999, and 1998
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
ASIAN PACIFIC COMPANY, LTD.
(A Company in the Development Stage)
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Four Months Ended April 30, 2000, and the Years Ended December 31, 1999, and 1998
Accumulated
Additional Deficit during
Common Paid-in the Development Total
Stock Capital Stage Equity
------- ------- --------------- ------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $ 12,850 $ - $ (12,850) $ -
Net income at December 31, 1998 - - - -
----------------------------------------------------------------
Balance at December 31, 1998 12,850 - (12,850) -
Issuance of 23,000 shares to
related parties for cash at $0.50
per share in July 1999 23 11,464 11,487
Issuance of 341,000 shares to
unrelated parties for cash at $0.50
per share in July 1999 341 169,962 170,303
Net loss at December 31, 1999 (95,563) (95,563)
----------------------------------------------------------------
Balance at December 31, 1999 13,214 181,426 (108,413) 86,227
Issuance of 65,000 shares to
unrelated parties at $4.00
per share in March 2000 65 259,830 259,895
Net loss at April 30, 2000 (234,198) (234,198)
----------------------------------------------------------------
Balance at April 30, 2000 $ 13,279 $ 441,256 $ (342,611) $ 111,924
================================================================
</TABLE>
38
<PAGE>
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated in the state of Nevada on October 10,
1988. The Company has been inactive since incorporation in 1988. On
January 20, 1999, the Company entered into a Distribution Agreement
with United Digital Communication, Limited to obtain the non-exclusive
right to distribute and market the Pulselink 1000, a portable palm-type
computer that can provide real time stock quotations with charts and
which can also be used as a pager, daytime organizer, address book and
calculator. The Company is in the development stage as its operations
principally involve market analysis and other business planning
activities, and no revenue has been generated from its business
activities.
These financial statements have been prepared assuming that the Company
will continue as a going concern. The Company is currently in the
development stage, and existing cash is insufficient to fund the
Company's cash flow needs for the next year, should the Company
commence operations. The Company plans to raise $4,000,000 by offering
to sell 1,000,000 shares of its common stock pursuant to a registration
statement to be filed under Form SB-2, promulgated under the Securities
Act of 1933, as amended. Management believes that the $442,000 already
raised, combined with the $4,000,000 expected to be raised by the
offering, will provide the Company with sufficient funding for its cash
flow needs for the future operations.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents. As of April 30, 2000, December
31, 1999, and December 31, 1998, the Company held no cash equivalents.
2. NOTE AND INTEREST RECEIVABLE
----------------------------
The receivables comprise the following:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Interest receivable $ 4,675 $ 1,204
Note receivable 285,000 85,000
Allowance for doubtful accounts (289,675) (86,204)
--------- --------
Interest and note receivable (net of
allowance account) $ -0- $ -0-
========= ========
</TABLE>
39
<PAGE>
3. FEDERAL INCOME TAXES
The Company recognizes deferred tax liabilities and benefits for the
expected future tax impact of transactions that have been accounted for
differently for book and tax purposes.
Deferred tax benefits and liabilities are calculated using enacted tax
rates in effect for the year in which the differences are expected to
reverse. The following is a schedule of the composition of the
provision for income taxes:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Current $ -0- $ -0- $ -0-
Deferred -0- -0- -0-
----------- ----------- -----------
Total provision for income taxes $ -0- $ -0- $ -0-
========== ========== ==========
</TABLE>
Deferred federal income taxes consist of future tax benefits and
liabilities attributed to:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Loss carryforward $ 116,488 $ 36,860 $ 4,369
Valuation allowance (116,488) (36,860) (4,369)
------------ ----------- ----------
Net deferred income tax $ -0- $ -0- $ -0-
============ =========== ==========
</TABLE>
The net change in the valuation account was $79,628, $32,491 and $0 in
2000, 1999, and 1998, respectively. The valuation allowance has been
estimated in an amount equal to the projected future benefit of the
loss carryforward because there is no assumption that the Company (not
yet having begun operations) will generate sufficient income to utilize
the tax benefit.
40
<PAGE>
3. FEDERAL INCOME TAXES (CONTINUED)
The following net operating loss carryforwards as of December 31, 1999,
will expire if not applied by the dates scheduled below:
<TABLE>
<CAPTION>
Year ending December 31 Net Operating Loss
----------------------- ------------------
<S> <C> <C>
2008 $ 12,850
2019 95,563
2020 234,198
-------
$342,611
</TABLE>
4. RELATED PARTY TRANSACTIONS
In July, 1999, five immediate family members of the President of the
Company, including one current officer and director, purchased a total
of 2,535,000 shares of the Company's common stock from unrelated third
parties for $125,000. Also in July, 1999, three immediate family
members of the President of the Company, including one current officer
and director, purchased a total of 23,000 shares of the Company's
common stock at a price of $.50 per share (see Note 7).
5. FAIR VALUE OF FINANCIAL INVESTMENTS
Financial Accounting Standards Board ("FASB") Statement No. 107,
"Disclosure About Fair Value of Financial Instruments," is a part of a
continuing process by the FASB to improve information on financial
statements. The following methods and assumptions were used by the
Company in estimating its fair value disclosures for such financial
instruments as defined by the Statement.
The carrying amount reported in the balance sheet for cash and note and
interest receivable approximates fair value at April 30, 2000.
The carrying amount reported in the balance sheet for accounts payable
approximates fair value at April 30, 2000, as it matures in less than
one year.
6. EMPLOYEE STOCK OPTION PLAN
The Company has adopted a non-compensatory stock option plan for its
employees that allows for issuance of 1,500,000 shares of common stock
to be purchased at $1.00 per share. The options expire four years from
the grant date of July 9, 1999.
7. STOCKHOLDERS' EQUITY
In 2000, the Company issued 65,000 shares of common stock to unrelated
parties at $4.00 per share, for a total of $260,000 in cash less $105
of offering costs.
In 1999, the Company issued 23,000 shares of common stock to one of its
officers and directors and two immediate family members of the
President of the Company at $0.50 per share, for a total of $11,500 in
cash less $13 of offering costs (see Note 4). The Company also issued
341,000 shares of its common stock to other unrelated parties at $0.50
per share, for a total of $170,500 in cash less $197 of offering costs.
8. CONTINGENCIES
The Company maintains amounts on deposit with financial institutions
which exceed federally insured limits. The Company has not experienced
any significant losses in such accounts, nor does the Company believe
it is exposed to any significant credit risk.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
==========================================
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under Nevada General Corporation Law to indemnify
its directors and officers to the extent provided in such statute. The
Registrant's Articles of Incorporation, as amended, provide that the Registrant
shall indemnify its executive officers and directors to the fullest extent
permitted by law either now or hereafter.
At present, there is no pending litigation or proceeding involving a director or
officer of the Registrant as to which indemnification is being sought, nor is
the Registrant aware of any threatened litigation that may result in claims for
indemnification by any officer or director.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses payable by the Registrant in connection
with the offering described in this registration statement will be as follows:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee . . . . . $ 1,056.00
NASD filing fee . . . . . . . . . . . . . . . . . . . . . . . 505.00
Printing expenses . . . . . . . . . . . . . . . . . . . . . . 1,500.00
Accounting fees and expenses. . . . . . . . . . . . . . . . . 10,000.00
Legal fees and expenses . . . . . . . . . . . . . . . . . . . 25,000.00
Fees and expenses (including legal fees) for qualification 5,000.00
under state securities laws
Registrar and Transfer Agent's fees and expenses. . . . . . . 3,500.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 3,439.00
----------
Total . . . . . . . . . . . . . . . . . . . . . . . .$50,000.00
==========
</TABLE>
All amounts except the Securities and Exchange Commission registration fee and
the NASD filing fee are estimated.
The Company is paying all of the expenses related to the sale of common stock
offered by the Company.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In July 1999, purchased the Company sold a total of 23,000 shares of restricted
common stock to 3 of the management's immediate family members, including Roland
C. Tam, at a price of $.50 per share.
During July and August, 1999, the Company sold 341,000 shares of restricted
common stock to 11 unrelated third parties at a price of $.50 per share.
In March 2000, the Company sold 65,000 shares of restricted common stock to 9
unrelated third parties at a price of $4.00 per share.
The three transactions described above were conducted in reliance upon an
exemption from registration provided under Section 4(2) of the Securities Act of
1933, based upon the fact that the sales were made by the Issuer in transactions
not involving any public offering. In addition, the sales to Roland C. Tam
involved transactions with an "accredited" investor and would also be exempt
under Section 4(6).
The restricted shares were issued in private placement transactions specifically
contemplated by Section 4(2) of the Act and Regulation D promulgated thereunder.
There was no general solicitation or advertising used in connection with the
offers and sales of the securities. Mr. Roland C. Tam is an officer and director
of the Registrant and is, therefore, by definition, an "accredited" investor.
The other investors had complete access to the kind of information normally
provided in a prospectus, including, but not limited to access to all the books
and records of the corporation, and are also, by virtue of their respective net
worth being in excess of $1,000,000, "accredited" investors.
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<PAGE>
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
EXHIBIT. . . DESCRIPTION
-------- ------------
3.1. . . . Articles of Incorporation, with Amendments
3.2. . . . Bylaws
5 . . . . Opinion and Consent of Michael J. Morrison, Esq.
10.1 . . . .Distribution Agreement with Addendums (2)
23 . . . Consent of Mark Bailey & Co. Ltd.,
Certified Public Accountants
ITEM 28. UNDERTAKINGS
I. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) To reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any additional or changed material information with respect to
the plan of distribution; and
43
<PAGE>
(2) That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes to provide to the purchasers in
this offering certificates in such denominations and registered in such names as
required to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the Act) may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that: (1) For purposes of
determining any liability under the Securities Act, the information omitted
from the form of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b) (1), or (4) or 497(h) under the
Securities Act shall be deemed to be part of the registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
44
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SIGNATURES
===========
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Vancouver, Province of British Columbia, Canada, on
June 21, 2000.
ASIAN PACIFIC COMPANY, LTD.
/s/ SIMON TAM, President, CEO and
Chairman of the Board
/s/ ROLAND C. TAM, Secretary and Director
/s/ RAYMOND K.M. FUNG, Treasurer,
Chief Financial Officer
and Director
45
