U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2 TO FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
COHY CHINA COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 52-2220905
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
4695 MacArthur Court, 11th Floor, Newport Beach, California 92660
(Address of registrant's principal executive offices) (Zip Code)
(949) 798-6204
(Registrant's Telephone Number, Including Area Code)
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
Telephone: 949.660.9700
Facsimile: 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
Approximate date 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 securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, 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 of 1933, check the following box and list the Securities Act
of 1933 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 of 1933, 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
=======================================================================================================================
Title of each class Amount Proposed maximum Proposed maximum
of securities to be offering price aggregate Amount of
to be registered registered per share offering price registration fee
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $.001 par value 2,000,000 shares (1) $2.50 $5,000,000.00 $1,320.00
Common stock, $.001 par value 17,015,000 shares (2) $2.50 $42,537,500.00 $11,229.90
=======================================================================================================================
Total Registration Fees: $12,549.90
</TABLE>
(1) Represents shares offered for sale by Cohy China Communications
Corporation.
(2) Represents shares offered by selling shareholders. The offering price per
share for the selling security holders was estimated solely for the purpose
of calculating the registration fee pursuant to Rule 457 of Regulation C.
The 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, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
1
<PAGE>
Preliminary Prospectus
Cohy China Communications Corporation,
a Delaware corporation
19,015,000 shares of common stock
This prospectus relates to 19,015,000 shares of common stock of Cohy China
Communications Corporation ("Cohy China"), 17,015,000 of the shares are issued
and outstanding shares of common stock acquired by the selling security holders
in private placement transactions which were exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933. No national
securities exchange or the Nasdaq Stock Market lists the common stock being
offered by the selling security holders, and we have not applied for listing or
quotation with any national securities exchange or automated quotation system.
Additionally, we are registering 2,000,000 shares to be offered to a limited
number of persons. The 2,000,000 shares to be offered by us shall be offered and
sold:
o For a purchase price of $2.50 per share;
o Without any underwriting discounts or commissions; and
o If all of the shares offered by us are purchased, the proceeds to Cohy
China will be $5,000,000.00.
The shares of common stock have not been registered for sale by the selling
security holders under the securities laws of any state as of the date of this
prospectus. Brokers or dealers effecting transactions in the shares should
confirm the registration thereof under the securities laws of the states in
which transactions occur or the existence of any exemption from registration.
See "risk factors" on pages 5 to 8 for factors to be considered before investing
in the shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. The
selling security holders may not sell their securities until the registration
statement filed with the Securities and Exchange Commission is effective. In
addition, the company may not sell its securities until the registration
statement becomes effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
The date of this prospectus is August 21, 2000
Subject to Completion
2
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TABLE OF CONTENTS
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Prospectus Summary ......................................................................4
Risk Factors.............................................................................5
Use of Proceeds..........................................................................8
Determination of Offering Price..........................................................9
Dilution ................................................................................9
Selling Security Holders................................................................10
Plan of Distribution....................................................................11
Legal Proceedings.......................................................................12
Directors, Executive Officers, Promoters and Control Persons............................12
Security Ownership of Certain Beneficial Owners and Management..........................14
Description of Securities...............................................................15
Interest of Named Experts and Counsel...................................................15
Disclosure of Commission Position on Indemnification for Securities Act Liabilities.....15
Organization Within Last Five Years.....................................................16
Description of Business.................................................................16
Management's Discussion and Analysis of Financial Condition and Results of Operations...20
Description of Property.................................................................21
Certain Relationships and Related Transactions .........................................21
Market for Common Equity and Related Stockholder Matters................................22
Executive Compensation..................................................................23
Financial Statements....................................................................24
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....31
Legal Matters...........................................................................31
Experts.................................................................................31
Additional Information..................................................................31
Indemnification of Directors and Officers...............................................32
Other Expenses of Issuance and Distribution.............................................32
Recent Sales of Unregistered Securities.................................................33
Exhibits................................................................................33
Undertakings............................................................................33
Signatures ..........................................................................35
Power of Attorney.......................................................................35
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Outside Back Cover Page
Dealer Prospectus Delivery Obligation
Until _______, all dealers that effect transactions in these securities, whether
or not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligations to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
3
<PAGE>
Prospectus Summary
Our Business: Our principal business address is 4695 MacArthur Court, 11th
Floor, Newport Beach, California 92660; our main business
telephone number is 949.798.6204.
We are a developmental stage company and we intend to
develop, manufacture and market wireless television
communication systems and equipment for railway trains and
stations, and manufacture and market fibre optic exchange
equipment for telecom installations in China. In this
regard, we have entered into an agreement to enter into a
joint venture agreement. Our business plan will be dependent
on the success of the joint venture. The joint venture
agreement will give us the right to develop and market the
closed-circuit television system and the fiber-optic
exchange equipment. However, we do not yet own the rights to
the closed-circuit television system or the fiber-optic
exchange equipment. The closed-circuit television system
consists of a central processing unit, monitors and
earphones. The television system allows railway passengers
to watch and listen to video programs while they travel. We
anticipate that the charges for use of the television system
will be built into the price of the railway ticket. We will
generate revenue by selling the television system to China
railways under an exclusive supply arrangement with the
Ministry of Railways in China. Other than revenues generated
from the sale of the television system to China railways, we
do not anticipate any other sources of revenue within the
foreseeable future. We have not yet generated any revenues
from the sale of the television communication system or
fibre optic exchange equipment.
The implementation of our business plan is dependent on the
success of the sale of the common stock we are registering.
As such, we are awaiting the outcome of this offering before
we take any further steps to implement our business plan.
Except as described in this registration statement, we have
not taken any steps in furtherance of our business plan. We
are, however, continuing to monitor the activities of our
potential joint venture partner, Zhong-Nan Tien Company, a
privately owned Chinese company ("Zhong-Nan"). Zhong-Nan has
notified us that they are currently arranging for the review
by the Chinese Ministry of Railways of a working prototype
of the wireless television communication system and
equipment. However, such review has not yet occurred.
In order for the joint venture to occur, we must:
o Raise the $2,250,000.00 we have agreed to contribute to
the capital of the proposed joint venture company.
o Prepare and finalize a joint venture agreement.
o Obtain approval from the Chinese government for the
establishment of the joint venture company.
o File the joint venture company's Articles of
Association with the Chinese government.
o Appoint additional directors and officers and hire
personnel.
None of the foregoing conditions have been met; nor will we
be in a position to move forward with our business plan
until and unless we raise the necessary funds through the
sale of our securities we are registering with this
registration statement.
4
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Benjamin Leboe is our sole officer and director. We have no
employees. Mr. Leboe does not have experience in the sale of
closed-circuit television systems in China. However, Mr.
Leboe has executive management experience in the wireless
technology industry and managed the information technology
practice for an informational systems and management
consulting house. We anticipate adding four individuals to
our Board of Directors. Two of those individuals, Mr. Bao
Hua Liang and Mr. Rung Guang Wu have extensive experience in
the Chinese technology industry and both have been
instrumental in the development of the wireless controlled
closed-circuit television system. In addition, Dr. Kevin
Nagel has experience structuring both public and private
companies. Biographical information on Mr. Liang, Mr. Wu,
and Dr. Nagel are provided on Pages 13 and 14 of this
registration statement.
Our State of We were incorporated in Delaware on February 24, 2000.
Organization:
Number of Shares The selling security holders want to sell 17,015,000 shares
Being Offered: of our common stock. The offered shares were acquired by the
selling security holders in private placement transactions
which were exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933. We also
intend to sell 2,000,000 shares of our common stock being
registered pursuant to this registration statement. We will
sell the shares we are registering only to those individuals
who have received a copy of the prospectus. In addition, we
will attempt to sell only to those individuals or entities
whom have knowledge of Chinese companies. We believe that
most, if not all, of the shares we are registering will be
sold to business associates of Mr. Benjamin Leboe, our sole
officer and director, and our founding shareholders. The
termination date of the offering will occur six (6) months
from the date this registration statement is declared
effective by the Securities and Exchange Commission.
Estimated use of We will receive as much as $5,000,000 if all of the shares
proceeds: offered by us at $2.50 per share are purchased, and we
intend to use any proceeds from such sale for the purchase
of technology and equipment, corporate development and for
working capital. We will need a minimum of $2,500,000.00 to
contribute to the capital of the joint venture company. Of
the $2,500,000.00 contribution, $2,250,000.00 will be
applied to the authorized capital of the joint venture
company and $250,000.00 will be used for general and
administrative purposes. As discussed above, such funds are
necessary in order to carry out the first phase of our
business plan. The proceeds from the sale of the shares we
are registering will be immediately available for use by us.
The proceeds from the sale of the shares we are registering
will not be held in escrow. We will not receive any of the
proceeds from the sale of the shares offered by the selling
security holders.
RISK FACTORS
In addition to the other information specified in this prospectus, the following
risk factors should be considered carefully in evaluating our business before
purchasing any of the shares of our common stock. A purchase of the shares is
speculative in nature and involves a lot of risks. No purchase of our common
stock should be made by any person who is not in a position to lose the entire
amount of his or her investment.
Because we are a new company with losses since our formation and we anticipate
that we will lose money in the foreseeable future, we may not be able to achieve
profitable operations.
5
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We were incorporated in February, 2000, and we began operations immediately
thereafter. As of September 30, 2000, our losses were approximately $38,583.00.
We have not yet generated any revenues. We anticipate generating revenues within
the third quarter following the completion of financing; however, our prospects
must be considered speculative, considering the risks, expenses and difficulties
frequently encountered in the establishment of a new business, specifically the
risks inherent in the development of wireless telecommunications. We cannot
guarantee that unanticipated technical or other problems will not occur which
would result in material delays and future product and service commercialization
or that our efforts will result in successful product and service
commercialization. We cannot guarantee that we will be able to achieve
profitable operations.
If we are unable to raise the necessary funds, we will not be able to enter into
our planned joint venture agreement and our intended joint venture relationship
will not be consummated.
We have entered into an Agreement to Establish and Operate a Co-operative Joint
Venture . The joint venture company will be named Cohy Communications Ltd
("Joint Venture Co."). Under the joint venture agreement, we will own 90% of
Joint Venture Co. by virtue of a $2,250,000.00 infusion of capital into Joint
Venture Co. We plan to raise such funds from the sale of our common stock.
However, there is no guarantee that we will be able to raise such funds. If we
are unable to raise the necessary funds, our business operations will be
materially affected in that if we are unable to raise the $2,250,000.00, the
joint venture agreement will not be finalized and we will not have any
operations. Additionally, if we are unable to raise the $2,500,000.00 provided
for under the Agreement to Establish and Operate a Co-operative Joint Venture,
we will not be able to acquire the rights to the wireless-controlled,
closed-circuit television system. If we are unable to purchase the rights to the
television system, we will not have any operations.
We operate in a highly competitive industry and we may not have adequate
resources to market our products in order to compete successfully.
Competition in the wireless telecommunications products industry is intense. We
compete directly with other companies and businesses that have developed, and
are in the process of developing, wireless telecommunications which are
functionally equivalent or similar to our wireless communications systems.
Because our wireless communications systems is based on a new concept and new
technology, we believe there are currently few direct competitors marketing a
similar product. However, we expect that competitors may be in the process, or
will in the future, develop similar wireless telecommunications technology and
will market their products to our target customers, which will significantly
affect our ability to compete.
Should larger, better-financed companies develop technologies similar to ours,
our competitors will have substantially greater experience, financial and
technical resources and production, marketing and development capabilities than
we do. Those competitors will have greater financial resources and will be able
to afford to spend more resources than we can to market their products. We will
also be competing with respect to manufacturing efficiency. We cannot guaranty
that we will succeed in marketing, selling and distributing our products. We
cannot guaranty that our competitors will not succeed in marketing, selling and
distributing their products.
Our ability to succeed is uncertain because we currently have limited sources of
revenue and minimal marketing activities due to the lack of revenues.
We have not yet engaged in the marketing of the wireless telecommunications
technology. Therefore, our only current source of working capital is derived
from the sale of our common stock. We have not yet generated any revenues. Our
marketing activities are significantly limited and, to fund more sophisticated
marketing activities, we need to generate revenues. Based on our interactions
with potential customers, we hope that we will generate revenues in the third
quarter following the completion of financing.
Our ability to protect our proprietary technology may be limited, resulting in
the unauthorized use of our technology and resulting damages.
We will attempt to protect our proprietary technology through the enforcement of
patents and by applying for additional patent protection when appropriate. We
exclusively own any and all software and other technology that we develop and
6
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we regard such technology as proprietary. We may rely on a combination of
patent, trademark and trade secret laws, as well as contractual restrictions on
disclosure, copying and distribution, including, but not limited to,
confidentiality agreements with our employees and subcontractors, to attempt to
protect our intellectual property rights in our products and services. There is
a possibility that such patent, trademark and trade secret laws, as well as such
confidentiality agreements, may not be enforceable in certain jurisdictions. It
may be possible for unauthorized third parties to copy our products or to
reverse engineer or obtain and use information that we regard as proprietary. In
addition, because we anticipate distributing our products internationally, the
laws of certain countries in which our products may be distributed or utilized
may not protect our products and intellectual rights to the same extent as the
laws of the United States. There can be no assurance that third parties will not
assert infringement claims against us in the future or that any such assertion
will not result in costly litigation or require us to obtain a license to
intellectual property rights of third parties. If we are required to obtain such
licenses, there can be no assurance that such licenses will be available on
reasonable terms, or at all. Moreover, in the event we were forced to sue third
parties for patent infringement or unfair competition, such litigation can be
extremely costly and time consuming, resulting in significant adverse
consequences to our business and operations, even if we prevail in the lawsuit.
If we do not adapt to rapid technological change, our products may become
obsolete and unmarketable.
The wireless telecommunications industry is characterized by rapidly changing
technology, resulting in short product life cycles and rapid price declines. We
must continuously update our existing and planned products and services to keep
them current with changing technologies and must develop new products and
services, to take advantage of new technologies that could render our existing
products and services obsolete. Our future prospects are highly dependent on our
ability to increase the functionality of our products and services in a timely
manner and to develop new products that address new technologies and achieve
market acceptance. There can be no assurance that we will be successful in these
efforts. If we are unable to develop and introduce new and improved products and
services in a timely manner, due to resource constraints or technological or
other reasons, this inability could result in our products becoming unmarketable
and outdated. In particular, the introduction of new products and services are
subject to the inherent risk of development delays and delays in obtaining
regulatory approvals, all of which are beyond our control.
Our officers and directors may have conflicts of interest that may detract from
their services to Cohy China.
Therefore, our officers and directors may not devote sufficient time to our
affairs. The persons serving as our officers and directors have existing
responsibilities and may have additional responsibilities to provide management
and services to other entities. As a result, conflicts of interest between us
and the other activities of those persons may occur from time to time, in that
our officers and directors shall have conflicts of interest in allocating time,
services, and functions between the other business ventures in which those
persons may be or may become involved and our affairs.
We lack a public market for shares of our common stock, which may make it
difficult for investors to sell their shares.
There is no public market for shares of our common stock. We cannot guaranty
that an active public market will develop, or be sustained. Therefore, investors
may not be able to find purchasers for their shares of our common stock. Should
there develop a significant market for our shares, the market price for those
shares may be significantly affected by such factors as our financial results
and introduction of new products and services. Factors such as announcements of
new or enhanced products by us or our competitors and quarter-to-quarter
variations and our results of operations, as well as market conditions in the
high technology sector may have a significant impact on the market price of our
shares. Further, the stock market has experienced extreme volatility that has
particularly affected the market prices of stock of many companies and that
volatility often has been unrelated or disproportionate to the operating
performance of those companies.
We anticipate that we will need to raise additional capital to market and
distribute our wireless telecommunications technology and complete our
development.
To market and distribute the wireless telecommunications technology and complete
our development, we will be required to raise additional funds. We believe that
we may be able to acquire additional financing at commercially reasonable rates.
There can be no assurance that we will be able to obtain additional financing at
commercially reasonable rates. We
7
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anticipate that we will spend a lot of funds on the marketing and development of
our wireless telecommunications technology. Our failure to obtain additional
funds would significantly limit or eliminate our ability to fund our sales and
marketing activities. This would have a material adverse affect on our ability
to continue our operations.
We anticipate that we may seek additional funding through public or private
sales of our securities. That could include equity securities, or through
commercial or private financing arrangements. Adequate funds may not be
available when needed or on terms acceptable to us. In the event that we are not
able to obtain additional funding on a timely basis, we may be required to limit
any proposed operations or eliminate certain or all of our marketing programs,
either of which could have a material adverse affect on our results of
operations.
Our officers, directors and principal security holders own approximately 75.2%
of our outstanding shares of common stock which will allow these security
holders to exert significant influence over, or even control, matters requiring
approval of our security holders.
Our directors, officers and principal (greater than 5%) security holders, taken
as a group, together with their affiliates, beneficially own, in the aggregate,
approximately 75.2% of our shares of common stock. Mr. Benjamin Leboe, our sole
officer and director, owns 2.9% of our current outstanding common stock.
However, as discussed within this registration statement, should Cohy China be
cleared to participate on the Over-the-Counter Bulletin Board maintained by the
National Association of Security Dealers, Inc., Mr. Bao Huk Liang and Mr. Rung
Guang Wu have tentatively agreed to join our Board of Directors. Mr. Liang
currently owns 39.7% of our issued and outstanding common stock and Mr. Wu
currently owns 18.2% of our total issued and outstanding stock. Such
concentrated control of the Company may adversely affect the price of our common
stock. These security holders may also be able to exert significant influence
over, or even control, matters requiring approval by our security holders,
including the election of directors. In addition, certain provisions of Delaware
law could have the effect of making it more difficult or more expensive for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of us.
Information specified in this Prospectus contains "forward-looking statements"
which can be identified by the use of forward-looking terminology such as
"believes", "could", "possibly", "probably", "anticipates", "estimates",
"projects", "expects", "may", "will", or "should" or the negative thereof or
other variations thereon or comparable terminology. Such statements are subject
to certain risks, uncertainties and assumptions. No assurances can be given that
the future results anticipated by the forward-looking statements will be
achieved. The following matters constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties that could cause actual results to vary
materially from the future results covered in such forward-looking statements.
Among the key factors that have a direct bearing on our results of operations
are the effects of various governmental regulations, the fluctuation of our
direct costs and the costs and effectiveness of our operating strategy. Other
factors could also cause actual results to vary materially from the future
results covered in such forward-looking statements. Prospective purchasers of
shares must be prepared for the possible loss of their entire investment in Cohy
China. The order in which the above risk factors are presented is arbitrary, and
prospective purchasers of shares should not conclude, because of the order of
presentation of the above risk factors, that one risk factor is more significant
than the other risk factors.
Use of Proceeds
We will not receive any proceeds from the sale of shares of our common stock
being offered by the selling security holders. We will receive up to $5,000,000
if all of the shares of common stock offered by us at $2.50 per share are
purchased. Assuming all of the shares are purchased, we intend to use the
proceeds in the following manner:
o $1,000,000 for working capital which includes hiring technical staff,
purchasing inventory and commencing production;
o $1,000,000 for corporate development which includes hiring executive
management, paying fees and costs associated with reporting
requirements, assessing potential projects and developing sales and
marketing channels; and
o $3,000,000 for the purchase of technology and equipment which includes
manufacturing and assembly equipment.
8
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Determination of Offering Price
Factors Used to Determine Share Price. The offering price of the 2,000,000
shares of common stock being offered by us has been determined primarily by our
capital requirements and has no relationship to any established criteria of
value, such as book value or earnings per share. Additionally, because we have
no significant operating history and have not generated any revenues to date,
the price of the shares of common stock is not based on past earnings, nor is
the price of the shares indicative of current market value for the assets owned
by us. No valuation or appraisal has been prepared for our business and
potential business expansion.
The offering price of the shares being offered by the selling security holders
has no relationship to any established criteria of value, such as book value or
earnings per share. Additionally, because we have no significant operating
history and have not generated any revenues to date, the price of our commons
stock is not based on past earnings, nor is the price of the shares of our
common stock indicative of current market value for the assets owned by us. No
valuation or appraisal has been prepared for our business and potential business
expansion.
Dilution
We are intending to sell 2,000,000 shares of our common stock being registered
by this registration statement. We were initially capitalized by the sale of our
common stock. The following table sets forth the number of shares of common
stock purchased from us, the total consideration paid and the price per share.
The table assumes all 2,000,000 shares of common stock will be sold.
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Shares Issued Total Consideration
------------- ------------------- Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
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Private Placement Shareholders 14,780,000 77.7% $147,800.00 2.8% $0.01
Shares
----------------------------------------------------------------------------------------------------------------
Private Placement Shareholders 2,235,000 11.8% $134,100.00 2.7% $0.06
Shares
----------------------------------------------------------------------------------------------------------------
Purchasers of Shares(1) 2,000,000 Shares 10.5% $5,000,000.00 94.5% $2.50
================================================================================================================
Total 19,015,000 100% $5,281,900.00 100%
Shares
================================================================================================================
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(1) Assumes all the shares offered by us are purchased.
If all of the offered shares of our common stock are not sold, then the impact
of dilution on the ownership interests of purchasers of the offered shares will
be less; however, the impact of dilution on the value of the shares purchased
will be more.
The following table sets forth the difference between the offering price of the
shares of our common stock being offered by us, the net tangible book value per
share, and the net tangible book value per share after giving effect to the
offering by us, assuming that all of the shares of the common stock offered by
us are sold. Net tangible book value per share represents the amount of total
tangible assets less total liabilities divided by the number of shares
outstanding as of September 30, 2000.
================================================================================
Offering Price $2.50 per share
--------------------------------------------------------------------------------
Net tangible book value at 09/30/00 $0.01 per share
--------------------------------------------------------------------------------
Net tangible book value after giving effect to the offering $0.28 per share
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================================================================================
Per Share Dilution to New Investors $2.22 per share
--------------------------------------------------------------------------------
Percent Dilution to New Investors 88.8%
================================================================================
The shares offered for sale by the selling security holders are already
outstanding and, therefore, do not contribute to dilution.
Selling Security Holders
The following table sets forth the number of shares which may be offered for
sale from time to time by the selling security holders. The shares offered for
sale constitute all of the shares known to us to be beneficially owned by the
selling security holders. None of the selling security holders has held any
position or office with us, except as specified in the following table. Other
than the relationships described below, none of the selling security holders had
or have any material relationship with us.
--------------------------------------------------------------------------------
Selling Shareholders Number of Shares
--------------------------------------------------------------------------------
Donald Larsen 500,000
--------------------------------------------------------------------------------
Benjamin Leboe: President, Secretary, Sole Director 500,000
--------------------------------------------------------------------------------
Kevin Nagel(2) 500,000
--------------------------------------------------------------------------------
Millie Chiu 150,000
--------------------------------------------------------------------------------
Holly Wang 30,000
--------------------------------------------------------------------------------
Sherry Lee 10,000
--------------------------------------------------------------------------------
Vincent Chu 10,000
--------------------------------------------------------------------------------
Ko Fook Chiu 10,000
--------------------------------------------------------------------------------
Sau Hin Chiu 10,000
--------------------------------------------------------------------------------
Siu Mei Tsang 10,000
--------------------------------------------------------------------------------
Hsiu Chun Chiu 10,000
--------------------------------------------------------------------------------
Fung Chung 10,000
--------------------------------------------------------------------------------
Sue and Alex Hegedus 10,000
--------------------------------------------------------------------------------
Mark Donahue 10,000
--------------------------------------------------------------------------------
Elizabeth Leboe 10,000
--------------------------------------------------------------------------------
David Leboe 10,000
--------------------------------------------------------------------------------
Tammie and Dugg O'Rielly 10,000
--------------------------------------------------------------------------------
Susan Currie 10,000
--------------------------------------------------------------------------------
Jack Vanderstar 10,000
--------------------------------------------------------------------------------
Joan Norkum 10,000
--------------------------------------------------------------------------------
Elisabeth Donahue 10,000
--------------------------------------------------------------------------------
Dean Muscardin 10,000
--------------------------------------------------------------------------------
Oxford Capital Corporation 505,000
--------------------------------------------------------------------------------
Albion Investment Corporation 535,000
--------------------------------------------------------------------------------
Shangri-La Ventures Limited 505,000
--------------------------------------------------------------------------------
Dot Com Limited 535,000
--------------------------------------------------------------------------------
Bernie Kennedy 150,000
--------------------------------------------------------------------------------
Allison Briden 10,000
--------------------------------------------------------------------------------
Jarvis Tomkins 10,000
--------------------------------------------------------------------------------
Leo Donahue 10,000
--------------------------------------------------------------------------------
Linda and Richard McBurney 20,000
--------------------------------------------------------------------------------
Shirley George 10,000
--------------------------------------------------------------------------------
John McBurney 10,000
--------------------------------------------------------------------------------
Dallas Larsen 10,000
--------------------------------------------------------------------------------
TriStar Inc. 300,000
--------------------------------------------------------------------------------
Terence Dunn 10,000
--------------------------------------------------------------------------------
Ken Hewitt 10,000
--------------------------------------------------------------------------------
10
<PAGE>
--------------------------------------------------------------------------------
Victor Buck 10,000
--------------------------------------------------------------------------------
Andrew Adamson 10,000
--------------------------------------------------------------------------------
Tina Agger 10,000
--------------------------------------------------------------------------------
Alan Kerr 20,000
--------------------------------------------------------------------------------
Bao Hua Liang(1) 6,750,000
--------------------------------------------------------------------------------
Rung Guang Wu(1) 3,100,000
--------------------------------------------------------------------------------
Qi Lin 2,450,000
--------------------------------------------------------------------------------
Han Hong Wu 37,000
--------------------------------------------------------------------------------
Hong Lei Song 27,750
--------------------------------------------------------------------------------
Tao Zhang 27,750
--------------------------------------------------------------------------------
Jian Dong Zhang 35,150
--------------------------------------------------------------------------------
Wu Ji Wang 7,400
--------------------------------------------------------------------------------
Hong Dai 3,700
--------------------------------------------------------------------------------
Lu Hong Fan 3,700
--------------------------------------------------------------------------------
Lei Shi 3,700
--------------------------------------------------------------------------------
Wen Feng Guo 3,700
--------------------------------------------------------------------------------
Zao Yong Hou 3,700
--------------------------------------------------------------------------------
Yan Yuan 3,700
--------------------------------------------------------------------------------
Qi Liu 3,700
--------------------------------------------------------------------------------
Zheng Feng Yang 3,700
--------------------------------------------------------------------------------
Hua Shi 3,700
--------------------------------------------------------------------------------
Lu Sheng Yao 3,700
--------------------------------------------------------------------------------
Hong Mei Zhou 3,700
--------------------------------------------------------------------------------
Li Rong Wang 1,850
--------------------------------------------------------------------------------
Ya Ling Liu 1,850
--------------------------------------------------------------------------------
Shu Mei Wang 1,850
--------------------------------------------------------------------------------
Lu Li Chen 1,850
--------------------------------------------------------------------------------
Xiao Xu Tong 1,850
--------------------------------------------------------------------------------
----------
(1) Mr. Liang and Mr. Wu have tentatively agreed to join our Board of Directors
when, and if, our shares are ever listed on the Over-the-Counter Bulletin
Board.
(2) It is anticipated that Dr. Nagel will be Executive Vice-President of the
Joint Venture Company described more particularly within the section
entitled "The Structure of Our Operations" found on Page 16 of this
registration statement.
Plan of Distribution
We are registering 2,000,000 shares of our common stock in contemplation of
offering unrestricted common stock to a limited number of potential purchasers.
We do not currently have an agreement with these potential purchasers for the
sale of all or any portion of those 2,000,000 shares of our common stock. The
termination date of the offering will occur no later than 6 months from the date
this registration statement is declared effective by the Securities and Exchange
Commission. There is no minimum number of shares that must be purchased by each
prospective purchaser and the maximum number of shares we will sell is
2,000,000. We will not place the funds raised in an escrow account; therefore,
all funds will be available for immediate utilization.
The selling security holders may sell our common stock in the over-the-counter
market, or on any securities exchange on which our common stock is or becomes
listed or traded, in negotiated transactions or otherwise. The selling security
holders may sell our common stock at prices then prevailing or related to the
then current market price or at negotiated prices. The shares will not be sold
in an underwritten public offering.
The shares may be sold directly or through brokers or dealers. The methods by
which the shares may be sold include:
o purchases by a broker or dealer as principal and resale by such broker
or dealer for its account;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o privately negotiated transactions.
11
<PAGE>
Brokers and dealers engaged by selling security holders may arrange for other
brokers or dealers to participate. Brokers or dealers may receive commissions or
discounts from selling security holders (or, if any such broker-dealer acts as
agent for the purchaser of such shares, from such purchaser) in amounts to be
negotiated. Broker-dealers may agree with the selling security holders to sell a
specified number of such shares at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for a selling
security holder, to purchase as principal any unsold shares at the price
required to fulfill the broker-dealer commitment to such selling security
holder. Broker-dealers who acquire shares as principal may resell those shares
from time to time in the over-the-counter market or otherwise at prices and on
terms then prevailing or then related to the then-current market price or in
negotiated transactions and, in connection with such resales, may receive or pay
commissions.
The selling security holders and any broker-dealers participating in the
distributions of the shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933. Any profit on the sale
of shares by the selling security holders and any commissions or discounts given
to any such broker-dealer may be deemed to be underwriting commissions or
discounts. The shares may also be sold pursuant to Rule 144 under the Securities
Act of 1933 beginning one year after the shares were issued.
We have filed this registration statement, of which this prospectus forms a
part, with respect to the sale of the shares by the selling security holders.
There can be no assurance that the selling security holders will sell any or all
of the offered shares.
Under the Securities Exchange Act of 1934 and the regulations thereunder, any
person engaged in a distribution of the shares of our common stock offered by
this prospectus may not simultaneously engage in market making activities with
respect to our common stock during the applicable "cooling off" periods prior to
the commencement of such distribution. Also, the selling security holders are
subject to applicable provisions which limit the timing of purchases and sales
of our common stock by the selling security holders.
We have informed the selling security holders that, during such time as they may
be engaged in a distribution of any of the shares we are registering by this
Registration Statement, they are required to comply with Regulation M. In
general, Regulation M precludes any selling security holder, any affiliated
purchasers and any broker-dealer or other person who participates in a
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase, any security which is the subject of the distribution
until the entire distribution is complete. Regulation M defines a "distribution"
as an offering of securities that is distinguished from ordinary trading
activities by the magnitude of the offering and the presence of special selling
efforts and selling methods. Regulation M also defines a "distribution
participant" as an underwriter, prospective underwriter, broker, dealer, or
other person who has agreed to participate or who is participating in a
distribution.
Regulation M prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security, except
as specifically permitted by Rule 104 of Regulation M. These stabilizing
transactions may cause the price of our common stock to be more than it would
otherwise be in the absence of these transactions. We have informed the selling
security holders that stabilizing transactions permitted by Regulation M allow
bids to purchase our common stock if the stabilizing bids do not exceed a
specified maximum. Regulation M specifically prohibits stabilizing that is the
result of fraudulent, manipulative, or deceptive practices. Selling security
holders and distribution participants are required to consult with their own
legal counsel to ensure compliance with Regulation M.
Legal Proceedings
There are no legal actions pending against us nor have we received any
information or indication that there are any such legal actions contemplated. We
do not believe that any individual, entity or governmental agency is
contemplating legal action against us.
Directors, Executive Officers, Promoters and Control Persons
Executive Officers and Directors. Currently, Benjamin Leboe is our sole officer
and sole director. As such, we are dependent on the efforts and abilities of Mr.
Leboe. The interruption of the services of Mr. Leboe could have a material
adverse effect on our operations, profits and future development if suitable
replacements are not promptly obtained. We
12
<PAGE>
anticipate that we will enter into employment agreements with Mr. Leboe and with
key executives we add in the future. We cannot guaranty that each executive will
remain with us during or after the term of his or her employment agreement. In
addition, our success depends, in part, upon our ability to attract and retain
other talented personnel. Although we believe that our relations with our
personnel are good and that we will continue to be successful in attracting and
retaining qualified personnel, we cannot guaranty that we will be able to
continue to do so. Our officers and directors will hold office until their
resignations or removal. Our directors and principal executive officers are as
specified on the following table:
================================================================================
Name Age Position
--------------------------------------------------------------------------------
Benjamin Leboe 55 President, Secretary, Chief Executive Officer and
Sole Director
--------------------------------------------------------------------------------
Benjamin Leboe, age 55, is the President, Secretary, Chief Executive Officer and
the sole Director of Cohy China. From July 1995 to the present, Mr. Leboe has
been the owner and manager of Independent Management Consultants located in
British Columbia, Canada. In 1999 and into the year 2000, Mr. Leboe acted as
Chief Financial Officer of ePhone Telecom, Inc. From 1991 to June 1995, Mr.
Leboe held the office of Vice President and Chief Financial Officer of VECW
Industries Ltd. During this period he was also the President and a director of
CPT Pemberton Technologies Ltd., which trades on the Vancouver Stock Exchange
under the symbol "CPT". Mr. Leboe is a graduate of the University of British
Columbia and is a Chartered Accountant and Certified Management Consultant. He
also teaches business classes at Okanagan University College. Mr. Leboe was
Chief Financial Officer of e-Phone Telecom, Inc., a reporting issuer in the
United States.
Benjamin Leboe is our sole officer and director. We have no employees. We
anticipate adding four individuals to our Board of Directors. Specifically, Mr.
Bao Hua Liang, Mr. Rung Guang Wu and Dr. Kevin Nagel have tentatively agreed to
join our Board of Directors. We have not yet decided on the fifth member of our
Board of Directors.
Mr. Liang Bao Hua, age 47, prior to 1969, Mr. Hua studied communications in
Beijing, China. From 1969 to 1973, Mr. Hua worked for the Manufacturing and
Construction Group of Heilong Jiang. From 1973 to 1976, Mr. Hua studied at
Beijing Aviation University where he majored in Communications and Navigation.
From 1977 to 1982, Mr. Hua worked at the Microwave Research Lab of 607 Research
Institution of Ministry of Aviation. From 1982 to 1984, Mr. Hua worked at the
Design Department of 3535 Plant of Ministry of Aviation as an Engineer. From
1984 to 1989, Mr. Hua worked as a director at Zhejiang Shaoxing Wire Power
Plant. From 1989 to 1994, Mr. Hua worked as the general manager of Zhejiang
Shaoxing Nantian Communication Equipment Manufacture. From 1994 to 1996, Mr. Hua
was the general manager of Beijing Chinet Communication, Science & Technology
Development Co., Ltd. From 1996 to 1998, Mr. Hua worked as the general manager
of Beijing Li An Ming Communication Equipment Manufacturer Co., Ltd. From 1998
to present, Mr. Hua has been the Chairman of the Board of Directors of Cohy
Enterprise Investment Co., Ltd. Two projects by Mr. Hua have won the Provincial
Science & Technology Improvement Award. While managed by Mr. Hua, Zhejiang
Shaoxing Nantian Communication Equipment Manufacturer Co., Ltd. was listed
second in the Chinese National Similar Products of Post and Telecommunications
Industry.
From 1970 to 1978, Wu Rong Guang, age 50, worked as an accountant for Hunan
Projects Company. During this time, he also studied Economics at the Economy
Department of Hubei Finance and Economy College. From 1982 to 1983, Mr. Guang
was an assistant professor at the Economy Department of Hubei Finance and
Economy College. From 1983 to 1986, Mr. Guang studied for his Masters Degree in
Economics at the Investment Economy Department of Zhongnan Finance & Economy
University. From 1986 through 1989, Mr. Guang was a lecturer at the Investment
Economy Department of Zhongnan Finance and Economy University. From 1989 to
1991, Mr. Guang was the Head Accountant at Hong Kong China Overseas Construction
Project Co., Ltd. From 1991 to 1994, Mr. Guang was a Vice-Professor of
Investment Economy Department of Zhongnan Finance and Economy University where
he was appointed Deputy General Manager and Head Accountant of Hua He Industry
Development Company. From 1994 to present, Mr. Guang has been the Deputy General
Manager and Head Accountant of Gold Dragon Real Estate Company, Deputy General
Manager of Asset Management Company, and Director and Deputy General Manager of
HongKong Jialong (Group) Co., Ltd. Mr. Guang has
13
<PAGE>
participated in over 60 theses, as well as participating in the authorship of
over 10 books, among those a book called "Overseas Construction Accounting."
Dr. Kevin Nagel, age 43, has over 15 years of experience in economic analysis,
corporate finance and management consulting and has raised funding for companies
in the natural resource, agriculture, biotechnology, energy, computer, retail,
and telecommunications industries. Dr. Nagel was an advisor with respect to the
establishment of the Saskatchewan Energy Corporation, the Saskatchewan Property
Management Corporation and Westbridge Computer Corporation (now ISM), and, is
currently President, Chief Executive Officer and director of China IT
Corporation, a Delaware corporation. Previously, he was an Executive Vice
President for Healthtrac, Inc., a California corporation, senior advisor for
Bayer Inc.'s New Business Development Unit, and, Partner with Independent
Management Consultants of British Columbia. Dr. Nagel gained investment banking
experience with Pemberton Securities Inc. (now RBC Dominion Securities, Inc.)
and has also been a Senior Consultant with KPMG. He holds undergraduate, honors
and graduate degrees in economics and business administration. He earned a
doctorate (Ph.D.) which focused on organizational performance and functioning,
from the University of Victoria (Canada).
There are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining Mr. Leboe, Mr. Liang, Mr. Wu or Dr. Nagel from engaging in or
continuing any conduct, practice or employment in connection with the purchase
or sale of securities, or convicting Mr. Leboe, Mr. Liang, Mr. Wu or Dr. Nagel
of any felony or misdemeanor involving a security, or any aspect of the
securities business or of theft or of any felony, nor is Mr. Leboe, Mr. Liang,
Mr. Wu or Dr. Nagel an officer or director of any corporation or entity so
enjoined.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of May 31, 2000 by:
o each person or entity known by us to be the beneficial owner of more
than 5% of the outstanding shares of common stock;
o each of our directors and named executive officers; and
o each of our directors and executive officers as a group.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Title of Class Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Owner
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$.001 par value Bao Huk Liang 6,750,000(1) 39.7%
common stock No. 19 Xijing Road
Badachu High Technology Area
Beijing, China 100041
--------------------------------------------------------------------------------------------------
$.001 par value Rung Guang Wu 3,100,000(2) 18.2%
common stock No. 19 Xijing Road
Badachu High Technology Area
Beijing, China 100041
--------------------------------------------------------------------------------------------------
$.001 par value Qi Lin 2,450,000 14.4%
common stock No. 19 Xijing Road
Badachu High Technology Area
Beijing, China 100041
--------------------------------------------------------------------------------------------------
$.001 par value Benjamin Leboe 500,000 2.9%
common stock 4695 MacArthur Court, 11th Floor President, Secretary,
Newport Beach, California 92660 Chief Financial Officer
and Sole Director
--------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
(1) It is anticipated that Mr. Liang will join our Board of Directors when, and
if, we are cleared to participate on the Over-the-Counter Bulletin Board
maintained by the NASD.
(2) It is anticipated that Mr. Wu will join our Board of Directors when, and
if, we are is cleared to participate on the Over-the-Counter Bulletin Board
maintained by the NASD.
Beneficial Ownership. Mr. Leboe's two adult children, Elizabeth and David Leboe,
each own 10,000 shares of our common stock. Leo Donahue, Mr. Leboe's
father-in-law, owns 10,000 shares of our common stock.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. In accordance with Securities and Exchange
Commission rules, shares of our common stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within 60 days of the date of the table are deemed beneficially
owned by the optionees. Subject to community property laws, where applicable,
the persons or entities named in the table above have sole voting and investment
power with respect to all shares of our common stock indicated as beneficially
owned by them.
Changes in Control. We are not aware of any arrangements which may result in
"changes in control" as that term is defined by the provisions of Item 403(c) of
Regulation S-B.
Description of Securities
We are authorized to issue 100,000,000 shares of $.001 par value common stock.
Each share of common stock has equal rights and preferences, including voting
privileges. As of September 30, 2000, there were 17,015,000 shares of our common
stock issued and outstanding. We are also authorized to issue 50,000,000 shares
of preferred stock. As of September 30, 2000, there were no shares of our
preferred stock issued and outstanding.
Each shareholder of our common stock is entitled to a pro rata share of cash
distributions made to shareholders, including dividend payments. The holders of
our common stock are entitled to one vote for each share of record on all
matters to be voted on by shareholders. There is no cumulative voting with
respect to the election of our directors or any other matter. Therefore, the
holders of more than 50% of the shares voted for the election of those directors
can elect all of the directors. The holders of our common stock are entitled to
receive dividends when, and if, declared by our Board of Directors from funds
legally available therefore. Cash dividends are at the sole discretion of our
Board of Directors. In the event of our liquidation, dissolution or winding up,
the owners of common stock are entitled to share ratably in all assets remaining
available for distribution to them after payment of our liabilities and after a
provision has been made for each class of stock, if any, having any preference
in relation to our common stock. Holders of shares of our common stock have no
conversion, preemptive, or other subscription rights, and there are no
redemption provisions applicable to our common stock.
Dividend Policy. We have never declared or paid a cash dividend on our capital
stock. We do not expect to pay cash dividends on our common stock in the
foreseeable future. We currently intend to retain our earnings, if any, for use
in our business. Any dividends declared in the future will be at the discretion
of our Board of Directors and subject to any restrictions that may be imposed by
our lenders.
Interest of Named Experts and Counsel
No "expert", as that term is defined pursuant to Regulation Section 228.509(a)
of Regulation S-B, or our "counsel", as that term is defined pursuant to
Regulation Section 228.509(b) of Regulation S-B, was hired on a contingent
basis, or will receive a direct or indirect interest in us, or was a promoter,
underwriter, voting trustee, director, officer, or employee of the company, at
any time prior to the filing of this registration statement.
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
Article 8 of our Certificate of Incorporation provides, among other things, that
our officers shall not be personally liable to us or our shareholders for
monetary damages for breach of fiduciary duty as a director, except for
liability:
15
<PAGE>
o for any breach of such directors duty of loyalty to us or our security
holders;
o for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law;
o liability for unlawful payments of dividends or unlawful purchase or
redemption by us; or
o for any transaction from which such director derived any improper
personal benefit.
Accordingly, our directors may have no liability to our shareholders for any
mistakes or errors of judgment or for any act or omission, unless the act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
Section 17 of Article 3 of our Bylaws also provides that our officers and
directors shall be indemnified and held harmless by us to the fullest extent
permitted by the provisions of Section 145 of the Delaware General Corporation
Law.
Indemnification Agreements. We will enter into indemnification agreements with
each of our executive officers and directors. We will agree to indemnify each
such person for all expenses and liabilities, including criminal monetary
judgments, penalties and fines, incurred by such person in connection with any
criminal or civil action brought or threatened against such person by reason of
such person being or having been our officer or director or employee. In order
to be entitled to indemnification by us, such person must have acted in good
faith and in a manner such person believed to be in our best interest. With
respect to criminal actions, such person must have had no reasonable cause to
believe his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion the Securities and Exchange Commission such indemnification is
against public policy as expressed in that Act and is, therefore, unenforceable.
Organization Within Last Five Years
Transactions with Promoters. There have been no transactions with promoters.
Description of Business
Our Background. Cohy China Communications Corporation ("Cohy China") was
incorporated in the State of Delaware on February 24, 2000.
Our Business. We are a developmental stage company. We intend to develop,
manufacture and market wireless communication systems and equipment for railway
trains and stations and fibre optic exchange equipment for telecom installations
in China. In this regard, we hope to acquire the rights to a patented
wireless-controlled, closed-circuit television system together with an agreement
to be the sole supplier of such television system to China Rail, the railway
system in China. Under the agreement with China Rail, we will have the right to
provide the television system to China's 2,500 inter-city passenger trains. We
will also acquire an exclusive 25-year system supply and maintenance agreement
from China Rail.
For over a decade, the China Ministry of Railways has experimented with
installing closed-circuit television systems in selected trains to enhance the
comfort and satisfaction of passengers. A number of technological problems
including, but not limited to, vibration, linking between coaches, interference
and practical control systems interfered with early systems. In the late 1990's,
Cohy Enterprise Investment Co. Ltd. ("Cohy Enterprise"), a private Chinese
company, and Zhong-Nan Tien Company, a privately-owned Chinese company
("Zhong-Nan"), in cooperation with the China Railway Scientific and Technology
Development Company, designed and patented a system which we believe eliminated
the technological problems. Zhong-Nan owns the patent rights to the television
system and Cohy Enterprise funded the initial research and development which led
to the patents. The new and improved television system encompasses automatic
programming software with specially designed equipment. The television system
has been tested in the research labs of Cohy Enterprise and an application is
pending to conduct full tests on one or more trains. Installation approvals have
been received from Jinan and Harbin Railway in China. Cohy Enterprise's officers
and significant shareholders are also significant
16
<PAGE>
shareholders of Cohy China. In addition, both Cohy Enterprise and Zhong-Nan are
owned by Mr. Bao Huk Liang. Specifically, Mr. Bao Huk Liang is the President and
Chairman of the Board of Cohy Enterprise. Mr. Liang is a significant shareholder
of Cohy China and has agreed to join our Board of Director should we be cleared
to participate on the Over-the-Counter Bulletin Board maintained by the National
Association of Securities Dealers, Inc. Mr. Rung Guang Wu is a Vice President of
Cohy Enterprise as well as a significant shareholder of Cohy China. Mr. Wu has
also agreed to join our Board of Directors should we be cleared to participate
on the Over-the-Counter Bulletin Board maintained by the National Association of
Securities Dealers, Inc.
Except for the relationships described in the proceeding paragraph, there are no
other relationships between Cohy China and Zhong-Nan.
Products and Services.
The Television System. As part of the joint venture agreement (described in more
detail below) with Zhong-Nan, we will acquire from Zhong-Nan and Cohy Enterprise
the rights to market and sell the television system from Zhong-Nan along with
all agreements between Cohy Enterprise and China Railways Scientific and
Technological Development Company. Specifically, in 1999, Cohy Enterprise
entered into a Co-operative Agreement on Railway Train TV Project with China
Railway Scientific and Technological Development Company, a subsidiary of the
Academy of Science of Ministry of Railways, to become the exclusive supplier of
the television system to the railways of China. The term of the agreement
between Cohy Enterprise and China Railway Scientific and Technological
Development Company is 25 years. Cohy Enterprise has agreed to transfer all
their rights in their agreement with China Railway Scientific and Technological
Development Company to the joint venture company. The rights include the right
to market, sell and distribute the wireless-controlled, closed-circuit
television system. The first target market for the television system is China's
2,500 inter-city trains. We have been asked to supply one television system for
each train. We hope to eventually provide the television system to China's 3,900
railway stations. The television system will be comprised of automatic
programming equipment, television hardware and television earphones.
The television system is made up of:
o Railway train television automatic programming software and equipment.
Such software and equipment is protected by a Chinese patent. The
software and equipment controls programming and broadcasting
throughout each railway train. The software permits wireless program
adjustments to provide for variety, breaking news and special
announcements. Approximately 90 hours of selected programming is
available on demand.
o Railway train television sets. Approximately 160 will be required for
each railway train. The television sets will deliver convenient
viewing with sound broadcast via an FM transmitter.
o Railway train television earphones. Such earphones will be supplied to
each passenger upon purchase of a railway train ticket. We believe the
wireless transmission of sound/volume/language will provide a high
degree of passenger convenience and service.
We will require $2,500,000.00 to commence production and continue operations
through the next twelve months. We believe that cash flow from operations is
expected to be sufficient to fund subsequent growth, research and development.
The Structure of Our Operations. We have entered into an Agreement to Establish
and Operate a Co-operative Joint Venture with Zhong-Nan and Cohy Enterprise.
Cohy Enterprise was formed as a result of the 1999 merger of Cohy Communication
Science and Technology Development Co. Ltd., established in 1994, and Beijing Li
An Ming Communication Equipment Manufacture Co. Ltd., established in 1995.
Zhong-Nan and Cohy Enterprise have common owners who are also significant
shareholders of Cohy China. Zhong-Nan and Cohy Enterprise have been working
together on the research and development of the television system. In addition
to directing the research and development and requisite government approval
processes, Cohy Enterprise is planning production and marketing efforts pending
the commencement of the joint venture; as a result, both Zhong-Nan and Cohy
Enterprise are included within the Agreement
17
<PAGE>
to Establish and Operate a Co-operative Joint Venture. The joint venture company
will be named Cohy Communications Ltd. ("Joint Venture Co."). Under the joint
venture agreement, Zhong-Nan will own 10% of Joint Venture Co. by contributing
$250,000.00 and the technology necessary to market and distribute the
wireless-controlled, closed-circuit television system. We will own 90% of Joint
Venture Co. by virtue of a $2,250,000.00 infusion of capital into Joint Venture
Co. We plan to raise such funds from the sale of our common stock. However,
there is no guarantee that we will be able to raise such funds. If we are unable
to raise the necessary funds, our business operations will be materially
affected. If we are unable to raise the $2,250,000.00, the joint venture
agreement will not be finalized and we will not have any operations. In that
event, we will be forced to seek other viable business opportunities. However,
we have not yet identified any such business opportunities. In order for the
Joint Venture Co. to be successful, we must raise the necessary funds, finalize
contracts with China Railways, establish manufacturing facilities, hire
technical and management personnel, establish distribution strategies and
install and operate the wireless-controlled, closed-circuit television systems.
History of the Television System. Cohy Enterprise sponsored the research and
development of the patented television system. Cohy Enterprise has agreed to
provide Joint Venture Co. the facilities, documentation, books, records, test
results, contracts and personnel necessary to develop and manufacture the
television system. We will pay Cohy Enterprise an amount equal to its costs.
However, such amount shall not exceed $550,000.00.
Under the joint venture agreement, we will manage and run Joint Venture Co.
Specifically, we will appoint a majority of the Board of Directors of the Joint
Venture Co., as well as select the Chairman of the Board of Directors, the Chief
Executive Officer and the Chief Financial Officer. Zhong-Nan shall select Joint
Venture Co.'s Vice Chairman of the Board of Directors, General Manager and Chief
Engineer. We believe Joint Venture Co.'s Board of Directors shall consist of:
o Ms. Jiang Miu.
o Mr. Zhang Jian, co-holder of the patent for the television system.
o Mr. Liang Bao Hua, Chairman of The Board of Directors. Please refer to
Page 13 of this registration statement for Mr. Liang Bao Hua's
biographical information.
o Benjamin Leboe, our sole officer and director, will act as
Vice-Chairman of the Board of Directors and Chief Executive Officer.
Please refer to Page 13 of this registration statement for Mr. Leboe's
biographical information.
o Wu Rong Guang, President and Chief Operations Officer. Please refer to
Page 13 of this registration statement for Mr. Wu Rong Guang's
biographical information.
o Dr. Kevin Nagel, Executive Vice-President. Please refer to Page 14 of
this registration statement for Mr. Nagel's biographical information.
The joint venture agreement shall provide for 80% of Joint Venture Co.'s net
profit to be distributed to us and Zhong-Nan according to our respective
interests and 20% to be retained by Joint Venture Co. Specifically, 90% of 80%
of Joint Venture Co.'s net profit will be distributed to us and 10% of 80% of
Joint Venture Co.'s net profit will be distributed to Zhong-Nan.
Research and Development. We believe that design and development activities over
the past eighteen months have resulted in a fully complete system, extensively
tested and demonstrated. Some fine-tuning is anticipated for both the software
and hardware, none of which we expect to be technically difficult, time
consuming or costly. The Joint Venture Co. will conduct on-going research to
broaden applications for the technology, develop additional features and enhance
suitability for new markets.
Production and Delivery. We have made arrangements to produce, assemble and
package the television system in the China Investment High Technology Centre, BA
Du Chu High Tech Park, in Beijing. We expect to lease space for operations as
needed at a rent of $66 per square meter per annum. Cohy Enterprise will supply
production employees,
18
<PAGE>
estimated to peak at 150 in year four of full operations, on a contractual
basis, at cost. Additional locations for our operations are not planned at this
time.
Marketing. In July 1999, Cohy Enterprise researched and prepared a Railway
Television Feasibility Study. The opportunities identified in the study were
jointly explored and developed by Cohy Enterprise and the China Railway
Scientific and Technological Development Company. We believe the study has
confirmed initial market estimates that fourteen railway companies have 2,500
inter-city passenger trains to equip with the television system. Of these,
approximately 600 are "K Trains" which connect China's major cities. We hope
additional sales will come from supplying the 3,900 railway stations in China.
We are planning to meet China Railway's request to supply all 2,500 trains with
the television system. We anticipate the following installation schedule to
occur over the next 5 years:
-----------------------------------------------------------------------------
YEAR SYSTEMS INSTALLED PERCENTAGE OF TOTAL OF
2,500 SYSTEMS
-----------------------------------------------------------------------------
One 75 3%
-----------------------------------------------------------------------------
Two 150 6%
-----------------------------------------------------------------------------
Three 275 11%
-----------------------------------------------------------------------------
Four 300 12%
-----------------------------------------------------------------------------
Five 500 20%
-----------------------------------------------------------------------------
TOTAL 1,300 52%
-----------------------------------------------------------------------------
With an anticipated 10% replacement rate, after five years, we hope to establish
sales of about 130 television systems per year before considering further market
penetration, station installations or export opportunities. The key ingredients
required to meet these sales projections are the stated commitment by the
railway authorities to supply every major train with the television system and
the purchase of all necessary television system software and equipment from
Joint Venture Co. The Chinese railway authorities, Railway Ministry of China,
have granted Cohy Enterprise the right to act as the sole supplier for the
closed-circuit television technology for its passenger trains. As part of the
joint venture agreement, Cohy Enterprise has agreed to provide Joint Venture Co.
the facilities, documentation, books, records, test results, contracts and
personnel necessary to develop and manufacture the television system as well all
its rights obtained from the Railway Ministry of China. As discussed above, in
exchange, we will pay Cohy Enterprise an amount equal to its costs. However,
such amount shall not exceed $550,000.00.
As indicated above, we believe we will install a total of 1,300 television
systems within the first five years of our operations. In order for us to
successfully complete such installations, we must meet certain conditions. The
conditions, timing and related costs are outlined below. Meeting the following
conditions is dependent upon us raising a minimum of $2,500,000.00 from the sale
of the securities we are registering by this registration statement. We expect
to begin realizing revenue within the third quarter following the completion of
financing. It will take at least 6 months to complete the following conditions:
19
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Activity Estimated Time to Cost Source of Funds
Complete Activity
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Finalize the joint venture 1 month $50,000.00 This offering
agreement
--------------------------------------------------------------------------------------------------------------
Finalize the management agreement 1.5 months $25,000.00 This offering
--------------------------------------------------------------------------------------------------------------
Secure manufacturing facilities 1.5 months $25,000.00 This offering
--------------------------------------------------------------------------------------------------------------
Acquire manufacturing equipment 1.5 months 1,500,000.00 This offering
--------------------------------------------------------------------------------------------------------------
Hire management personnel 2 months $75,000.00 This offering
--------------------------------------------------------------------------------------------------------------
Hire additional employees 1.5 months $25,000.00 This offering
--------------------------------------------------------------------------------------------------------------
Secure sales contracts 6 months $100,000.00 This offering
--------------------------------------------------------------------------------------------------------------
Manufacturing the television 4 months $200,000.00 This offering
systems
--------------------------------------------------------------------------------------------------------------
General administration 6 months $500,000.00 This offering
--------------------------------------------------------------------------------------------------------------
Finalizing contracts and 6 months $100,000.00 Currently on hand
operational agreements
--------------------------------------------------------------------------------------------------------------
</TABLE>
The Data and Video Device. As part of its contribution to Joint Venture Co.,
Cohy Enterprise has agreed to transfer to Joint Venture Co. the rights to
manufacture and sell Cohy Enterprise's audio, data and video device consisting
of self-designed, inter-exchange telecom equipment, digital exchange equipment,
and fiber digital telecommunications equipment. We believe potential
applications include some that are related to railway communications
encompassing the same customers who will be acquiring the television system.
However, no sales of these products are projected in the first five years of
Joint Venture Co's operations.
Our Competition. To our knowledge, there are currently no other companies
producing a wireless controlled, closed-circuit railway train television system.
However, there can be no assurance that competitors have not or will not succeed
in developing technologies and products that are more effective than our
products or which would render our products obsolete and noncompetitive. Many of
our potential competitors have substantially greater experience, financial and
technical resources and production, marketing and development capabilities than
us, we expect to be the exclusive supplier to China railways for at least 20
years.
Employees. We currently have no employees. We anticipate using consultants for
business, accounting, engineering, and legal services on an as-needed basis
until full operations commence.
Facilities. Our executive and administrative offices are located at 4695
MacArthur Court, 11th Floor, Newport Beach, California 92660. We lease those
facilities from Regus.
Management's Discussion and Analysis of Financial Condition and Results of
Operation
Liquidity and Capital Resources. During the period from February 28, 2000
(inception), to September 30, 2000, we received $281,900.00 from the sale of
common stock. We also realized $38,900.00 from the issue of loans payable and
20
<PAGE>
$10,000.00 from an advance from a related party. After payment of development
and operating expenses, we had cash resources of $285,828.00 at September 30,
2000.
Results of Operations. We have not yet realized any revenue from operations. Our
expenses of approximately $43,658.00 consist of start-up costs from formation
through September 30, 2000.
Our Plan of Operation for the Next Twelve Months. Our plan of operation is
materially dependent on our ability to raise significant funds. In order to meet
our obligations under the joint venture agreement with Zhong-Nan, and realize a
90% ownership interest in Joint Venture Co. we must raise at least $2,
500,000.00. In addition, we must also be able to generate significant revenues
to use for marketing and distributing the wireless telecommunications television
system. We must also raise working capital to pay for our legal and accounting
fees over the next twelve months. If we are able to generate the necessary funds
to meet our obligations under the joint venture agreement with Zhong-Nan, and
are able to raise additional capital for our operating expenses, we expect our
operating expenses to be approximately $100,000.00 for the next twelve months.
If we are unable to generate sufficient funds to meet our obligations under the
joint venture agreement, then we anticipate that our expenses for the next
twelve months will be limited to the day-to-day expenditures necessary to
conduct business. We believe that we have sufficient funds in our bank account
to meet our short-term operating expenses.
Our forecast for the period for which our financial resources will be adequate
to support our operations involves risks and uncertainties and actual results
could fail as a result of a number of factors. We anticipate that we may need to
raise additional capital to develop, promote and conduct our operations. Such
additional capital may be raised through public or private financing as well as
borrowing and other sources. There can be no assurance that additional funding
will be available on favorable terms, if at all. If adequate funds are not
immediately available, we believe that our current cash resources will be
sufficient to pay our expenses over the next twelve-month period. Therefore, we
have not contemplated any plan of liquidation in the event that we do not
generate additional funds.
Description of Property
Property held by Cohy China. As of the dates specified in the following table,
Cohy China held the following property:
==========================================================================
Property June 30, 2000 September 30, 2000
--------------------------------------------------------------------------
Cash $315,455.00 $285,828.00
--------------------------------------------------------------------------
Property $0.00 $0.00
--------------------------------------------------------------------------
Our Facilities. We currently lease executive and administrative offices at 4695
MacArthur Court, 11th Floor, Newport Beach, California 92660. We currently lease
those facilities from Regus on a month-to-month basis. The amount paid for the
office space is not material.
Certain Relationships and Related Transactions
Conflicts Related to Other Business Activities. The persons serving as our
officers and directors have existing responsibilities and, in the future, may
have additional responsibilities, to provide management and services to other
entities in addition to us. As a result, conflicts of interest between us and
the other activities of those persons may occur from time to time.
We will attempt to resolve any such conflicts of interest in our favor. Our
officers and directors are accountable to us and our shareholders as
fiduciaries, which requires that our officers and directors exercise good faith
and integrity in handling our affairs. A shareholder may be able to institute
legal action on our behalf or on behalf of that shareholder and all other
similarly situated shareholders to recover damages or for other relief in cases
of the resolution of conflicts in any manner prejudicial to us.
Related Party Transactions. Mr. Liang Bao Hua, Mr. Wu Rong Guang and Mr. Wu Han
Hong are all shareholders of Cohy Enterprise, the company that will infuse the
wireless telecommunications technology, and related products, into the Joint
21
<PAGE>
Venture Co. Mr. Hua, Mr. Guang and Mr. Hong are shareholders of Cohy China. Mr.
Guang and Mr. Hua are also shareholders of Zhong-Nan, the company that has
agreed to enter into a joint venture agreement with us. Moreover, as discussed
earlier, when, and if, Cohy China is cleared to participate on the
Over-the-Counter Bulletin Board, Mr. Hua and Mr. Guang have tentatively agreed
to join our Board of Directors.
At June 30, 2000, we owed $10,000.00 to Access International Capital
Corporation, an entity controlled by certain shareholders. Access International
Capital Corporation loaned us the $10,000.00 for start-up expenses. This loan
was repaid subsequent to June 30, 2000.
Market for Common Equity and Related Stockholder Matters
Reports to Security Holders. Our securities are not listed for trading on any
exchange or quotation service. We are not required to comply with the timely
disclosure policies of any exchange or quotation service. However, should this
registration statement be declared effective by the Securities and Exchange
Commission, we will be deemed a reporting company. Should we become a reporting
company, we would be required to timely disclose all material changes or facts
with respect to our affairs and make required filings. Although we are not
required to deliver an annual report to security holders, we intend to provide
an annual report to our security holders, which will include audited financial
statements.
When, and if, we become a reporting company with the Securities and Exchange
Commission, the public may read and copy any materials filed with the SEC at the
SEC's Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549.
The public may also obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of that
site is http://www.sec.gov.
There are no outstanding options or warrants to purchase our shares, or
securities convertible into shares of our common stock. There are no outstanding
shares of our common stock that could be sold pursuant to Rule 144 pursuant to
the Securities Act of 1933, or that we have agreed to register under the
Securities Act of 1933 for sale by security holders. The approximate number of
holders of record of shares of our common stock is sixty-five (65).
There have been no cash dividends declared on our common stock. Dividends will
be declared at the sole discretion of our Board of Directors. We do not intend
to pay dividends in the foreseeable future.
Penny Stock Regulation. Shares of our common stock are subject to the rules
adopted by the Securities and Exchange Commission that regulate broker-dealer
practices in connection with transactions in "penny stocks". Penny stocks are
generally equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted on the
Nasdaq system, provided that current price and volume information with respect
to transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Securities and Exchange Commission, which
contains the following:
o a description of the nature and level of risk in the market for penny
stocks in both public offerings and secondary trading;
o a description of the broker's or dealer's duties to the customer and
of the rights and remedies available to the customer with respect to
violation to such duties or other requirements of Securities' laws;
o a brief, clear, narrative description of a dealer market, including
"bid" and "ask" prices for penny stocks and significance of the spread
between the "bid" and "ask" price;
o a toll-free telephone number for inquiries on disciplinary actions;
o definitions of significant terms in the disclosure document or in the
conduct of trading in penny stocks; and
o such other information and is in such form (including language, type,
size and format), as the Commission shall require by rule or
regulation.
22
<PAGE>
Prior to effecting any transaction in penny stock, the broker-dealer also must
provide the customer the following:
o the bid and offer quotations for the penny stock;
o the compensation of the broker-dealer and its salesperson in the
transaction;
o the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and
o month account statements showing the market value of each penny stock
held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
If any of our securities become subject to the penny stock rules, holders of
those securities may have difficulty selling those securities.
Executive Compensation - Remuneration of Directors and Officers
Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our Board of Directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf. Benjamin Leboe, our sole officer and director,
does not currently earn compensation in his capacity as an officer or director.
Shares Issued as Compensation for Services. As of September 30, 2000, no shares
had been issued as compensation for services, whether consulting or otherwise.
Employment Contracts. We anticipate we will enter into an employment contract
with Benjamin Leboe.
23
<PAGE>
Financial Statements
===============================================================================
Cohy China Communications Corporation
(a Development Stage Company)
Balance Sheet - Unaudited
September 30 June 30
(See Notice to Reader) 2000 2000
-------------------------------------------------------------------------------
Assets
Current
Cash $ 285,828 $ 315,455
========= =========
===============================================================================
Liabilities
Current
Accrued liabilities $ 3,611 $ 3,189
Loan payable (Note 3) 38,900 38,900
Due to related parties (Note 4) -- 10,000
--------- ---------
42,511 52,089
--------- ---------
Stockholders' Equity
Capital stock (Note 5) 17,015 17,015
Authorized:
100,000,000 common shares of $0.001 par value
50,000,000 preferred shares
Allotted:
17,015,000 shares
Additional paid-in capital 264,885 264,885
Deficit accumulated during the development stage (38,583) (18,534)
--------- ---------
243,317 263,366
--------- ---------
$ 285,828 $ 315,455
========= =========
===============================================================================
On behalf of the Board
Director Director
----------------------------- ---------------------------------
See accompanying notes to the financial statements.
24
<PAGE>
================================================================================
Cohy China Communications Corporation
(a Development Stage Company)
Statement of Operations - Unaudited
(See Notice to Reader)
--------------------------------------------------------------------------------
For the For the
period from three months
inception to ended
September 30 September 30
2000 2000
Revenue
Interest $ 5,075 $ 3,577
Bank charges 219 --
Communication 194 84
Insurance 539 --
Office 112 54
Professional fees 22,094 8,341
Regulatory 13,733 13,733
Rent 919 394
Travel 5,848 1,020
------------ ------------
Total expenses 43,658 23,626
------------ ------------
Net loss $ (38,583) $ (20,049)
============ ============
Weighted average number
of shares outstanding 13,189,315 17,015,000
============ ============
Loss per share - basic and diluted $ 0.00 $ 0.00
================================================================================
See accompanying notes to the financial statements.
25
<PAGE>
================================================================================
Cohy China Communications Corporation
(a Development Stage Company)
Statement of Cash Flows - Unaudited
(See Notice to Reader)
--------------------------------------------------------------------------------
For the For the
period from three months
inception to ended
September 30 September 30
2000 2000
Operating Activities
Net loss $ (38,583) $ (20,049)
Changes in non-cash operating
working capital
Accrued liabilities 3,611 422
--------- ---------
(32,972) (19,627)
--------- ---------
Financing Activities
Capital stock issued for cash, net 281,900 --
Issue of loan payable 38,900
Advances from related parties 10,000 --
Repayment of related parties (10,000) (10,000)
--------- ---------
320,800 (10,000)
--------- ---------
Net increase in cash 285,828 (29,627)
Cash, beginning of period -- 315,455
--------- ---------
Cash, end of period $ 285,828 $ 285,828
========= =========
================================================================================
See accompanying notes to the financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
================================================================================================
Cohy China Communications Corporation
(a Development Stage Company)
Statement of Stockholders' Equity - Unaudited
From inception to September 30, 2000
(See Notice to Reader)
------------------------------------------------------------------------------------------------
Common Shares Additional
-------------------- Paid-In
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Net loss for the period
from inception to
June 30, 2000 $ (18,534) $ (18,534)
--------- ---------
Balance,
June 30, 2000 17,015,000 $ 17,015 $ 264,885 (18,534) 263,366
Net loss
for the three
months ended
September 30, 2000 (20,049) (20,049)
---------- --------- ---------- --------- ---------
Balance,
September 30, 2000 17,015,000 $ 17,015 $ 264,885 $ (38,583) $ 243,317
========== ========= ========== ========= =========
================================================================================================
</TABLE>
See accompanying notes to the financial statements.
27
<PAGE>
================================================================================
Cohy China Communications Corporation
(a Development Stage Company)
Notes to the Financial Statements
September 30, 2000
--------------------------------------------------------------------------------
1. Operations and going concern
The Company was incorporated under the laws of the State of Delaware on February
24, 2000 to engage in international business.
The Company has not yet commenced its planned principal operations and it has
not yet earned any revenue from operations. In accordance with SFAS #7 it is
considered a development stage company.
The accompanying financial statements have been prepared on the basis that the
Company will continue as a going concern which assumes the realization of assets
and settlement of liabilities in the normal course of business. Since its
inception, the Company has been engaged in organizational and pre-operating
activities. Further, the Company has generated no revenues from operations and
incurred losses. Continuation of the Company's existence is dependent upon its
ability to obtain additional capital and sustain profitable operations. The
uncertainty related to these conditions raises substantial doubt about the
Company's ability to continue as a going concern. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Management's plans include completion of an offering to raise additional
capital.
--------------------------------------------------------------------------------
2. Summary of significant accounting policies
These financial statements are presented in U.S. dollars and in accordance with
accounting principles generally accepted in the United States.
Basis of presentation
These unaudited interim financial statements have been prepared on the same
basis as the annual audited financial statements. In the opinion of management,
these unaudited interim financial statements reflect all adjustments (consisting
of normal recurring adjustments) necessary for a fair presentation for each of
the periods presented. The results of operations for interim periods are not
necessarily indicative of results to be achieved for full fiscal years.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
28
<PAGE>
================================================================================
Cohy China Communications Corporation
(a Development Stage Company)
Notes to the Financial Statements
September 30, 2000
--------------------------------------------------------------------------------
2. Summary of significant accounting policies (Continued)
Financial instruments
The Company has various financial instruments that include cash, payables and
amounts due to related parties. It was not practicable to estimate the fair
value of the amounts due to related parties. The carrying values of other
financial instruments approximate their fair value.
Deferred income taxes
Deferred income taxes are provided for significant carryforwards and temporary
differences between the tax basis of an asset or liability and its reported
amount in the financial statements that will result in taxable or deductible
amounts in future periods. Deferred tax assets or liabilities are determined by
applying presently enacted tax rates and laws. A valuation allowance is required
when it is more likely than not that some portion or all of the deferred tax
asset will not be realized.
--------------------------------------------------------------------------------
3. Loans payable
This loan has no specific terms of repayment, but may be repaid by issuance of
stock at the option of the lenders. The price and number of the shares have not
yet been determined.
--------------------------------------------------------------------------------
4. Related party transactions
During the period, a total of $10,000 was paid to Access International Capital
Corporation, a company controlled by certain officers and/or directors, to repay
amounts previously advanced. The transaction was in the normal course of
business, and has been recorded at the exchange amount.
--------------------------------------------------------------------------------
5. Capital stock
Share certificates
The company has allotted but not yet issued share certificates representing
17,015,000 shares for which subscriptions have been received and accepted by the
company and full payment has been received. These shares are recorded as
allotted in the financial statements.
29
<PAGE>
================================================================================
Cohy China Communications Corporation
(a Development Stage Company)
Notes to the Financial Statements
September 30, 2000
--------------------------------------------------------------------------------
6. Income taxes
The potential tax benefits of the losses carried forward are offset by a
valuation allowance of the same amount as there is substantial uncertainty that
the losses carried forward will be utilized before their expiry.
30
<PAGE>
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
There have been no changes in or disagreements with our accountants since the
formation of Cohy China required to be disclosed pursuant to Item 304 of
Regulation S-B.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby has
been passed upon for Cohy China by Stepp & Beauchamp LLP, located in Newport
Beach, California.
EXPERTS
Our financial statements for the period from inception to June 30, 2000,
appearing in this prospectus and registration statement have been audited by
Grant Thornton, Chartered Accountants and are included in reliance upon such
reports given upon the authority of Grant Thornton as experts in accounting and
auditing.
31
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers
Article Eight of our Certificate of Incorporation provides, among other things,
that our directors shall not be personally liable to us or our shareholders for
monetary damages for breach of fiduciary duty as a director, except for:
o any breach of such director's duty of loyalty to us or our security
holders;
o acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o liability for unlawful payments of dividends or unlawful stock
purchase or redemption by us; or
o any transaction from which such director derived any improper personal
benefit.
Accordingly, our directors may have no liability to our shareholders for any
mistakes or errors of judgment or for any act of omission, unless such act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
Our Bylaws provide that we will indemnify our directors to the extent permitted
by Delaware General Corporation Law, including circumstances in which
indemnification is otherwise discretionary under the Delaware General
Corporation Law. Our Certificate of Incorporation also provides that to the
extent that Delaware General Corporation Law is amended to permit further
indemnification, we will so indemnify our directors.
Section 145 of the Delaware General Corporation law provides that a corporation
shall have the power to indemnify any person who was or is a party or is
threatened to be made a party to or is involved in any pending, threatened, or
completed civil, criminal, administrative, or arbitration action, suit, or
proceeding, or any appeal therein or any inquiry or investigation which could
result in such action, suit, or proceeding, because of his or her being or
having been our director, officer, employee, or agent or of any constituent
corporation absorbed by us in a consolidation or merger or by reason of his or
her being or having been a director, officer, trustee, employee, or agent of any
other corporation or of any partnership, joint venture, sole proprietorship,
trust, employee benefit plan, or such enterprise, serving as such at our request
or of any such constituent corporation, or the legal representative of any such
director, officer, trustee, employee, or agent, from and against any and all
reasonable costs, disbursements, and attorney's fees, and any and all amounts
paid or incurred in satisfaction of settlements, judgments, fines, and
penalties, incurred or suffered in connection with any such proceeding.
Indemnification Agreements. We anticipate that we will enter into
indemnification agreements with each of our executive officers pursuant to which
we will agree to indemnify each such officer for all expenses and liabilities,
including criminal monetary judgments, penalties and fines, incurred by such
person in connection with any criminal or civil action brought or threatened
against such person by reason of such person being or having been our officer or
director or employee. To be entitled to indemnification by us, such officer must
have acted in good faith and in a manner such officer believed to be in our best
interests and, with respect to criminal actions, such person must have had no
reasonable cause to believe his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
Other Expenses of Issuance and Distribution
We will pay all expenses in connection with the registration and sale of the
shares offered by the selling stockholders, except any selling commissions or
discounts allocable to sales of those shares, fees and disbursements of counsel
and other representatives of the selling stockholders, and any stock transfer
taxes payable by reason of any such sale. The estimated expenses of issuance and
distribution are set forth below.
32
<PAGE>
Registration Fees Approximately $12,549.90
Transfer Agent Fees Approximately $200.00
Costs of Printing and Engraving Approximately $300.00
Legal Fees Approximately $15,000.00
Accounting Fees Approximately $7,500.00
Recent Sales of Unregistered Securities
There have been no sales of unregistered securities within the last three (3)
years which would be required to be disclosed pursuant to Item 701 of Regulation
S-B, except for the following:
In or about March, 2000 and ending in May, 2000, we issued 17,015,000 shares of
our $.001 par value common stock for cash. Those shares were issued in reliance
upon an exemption from the registration requirements of the Securities Act of
1933 ("Act") specified by the provisions of Regulation S of the Act promulgated
by the Securities and Exchange Commission. Specifically, the issuances were made
to "non-U.S. persons outside of the United States of America" as that is defined
under applicable state and federal securities laws. The proceeds to Cohy China
were US$281,900. Such proceeds were used for working capital.
Exhibits
Copies of the following documents are filed with this registration statement,
Form SB-2, as exhibits:
Exhibit No.
1 Underwriting Agreement (Not Applicable)
2 Plan of Merger (Not Applicable)
3.1 Certificate of Incorporation
(Charter Document)
3.2 Bylaws
8. Opinion Re: Tax Matters (Not Applicable)
9. Voting Trust Agreement (Not Applicable)
11 Statement Re: Computation of Per Share Earnings*
10.1 Agreement with Zhong-Nan Tien Company and Cohy Enterprise Investment
Company (Material Contract)
15. Letter on Unaudited Interim Financial Information (Not Applicable)
23.1 Consent of Auditors
27. Financial Data Schedule
*Included in Financial Statements
Undertakings
A. Insofar as indemnification for liabilities arising under the 1933 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
33
<PAGE>
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the 1933 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 1933 Act and will be governed by the final
adjudication of such issue.
B. 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
1933 Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) (Section
230.424(b) of Regulation S-B) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the A Calculation of
Registration Fee@ table in the effective Registration Statement; and
(iii) To include any additional or changed material information
with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information
in the Registration Statement.
(2) That, for the purpose of determining any liability under the 1933
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.
34
<PAGE>
SIGNATURES
In accordance with the requirements of the 1933 Act, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing this Amendment No. 2 to Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Kelowna, B.C., Canada, on December 15, 2000.
Cohy China Communications Corporation,
a Delaware corporation
By: /s/Benjamin Leboe
---------------------------------------
Benjamin Leboe
Its: President, Secretary, Chief Financial
Officer, Controller and sole Director
In accordance with the requirements of the Securities Act of 1933, this
amendment to the registration statement was signed on this 15th day of
December 2000, by the following persons in the capacities and on the date
stated:
/s/ Benjamin Leboe December 15, 2000
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Benjamin Leboe
President, Chief Financial Officer, Controller, Secretary and sole Director
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