<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) March 16, 1998
JENSON INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
Nevada 0-12825 84-0916272
<S> <C> <C>
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
Room 1008-9, Shun Tak Centre, West Tower
168-200 Connaught Road, Central, Hong Kong N/A
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (852) 2548-0781
BEST MEDICAL TREATMENT GROUP, INC.
45110 Club Drive, Suite B, Indian Wells, California 92210
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
<PAGE> 2
The Current Report on Form 8-K, previously filed by the Registrant on March 27,
1998, is hereby amended to add thereto the following information and financial
data:
ITEM 1. CHANGE IN CONTROL OF REGISTRANT.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to a certain Share Exchange Agreement dated as of March 12,
1998 (the "Agreement") by and between Jenson International, Inc. (f/k/a/ Best
Medical Treatment Group, Inc.) (the "Company") and C.M. Cheng (the
"Shareholder"), the Company acquired from the Shareholder all of the outstanding
shares of Wonderwide Consultants Limited (BVI) ("Wonderwide") in exchange for
the issuance to the Shareholder of 2,230,000 shares of Common Stock of the
Registrant. The closing date of the transaction was March 16, 1998.
Section 2.04 of the Agreement provides that in the event that
Wonderwide's consolidated net income, as audited under United States generally
accepted accounting principles, is less than $2.5 million for the year ended
December 31, 1997, then the Shareholder will cancel that number of shares of
Common Stock necessary to increase Company earnings per share of Common Stock to
that level that would have existed had Wonderwide's 1997 earnings met the
minimum level stated above (before adjustment for any splits or new issuances
post closing). Wonderwide's consolidated net income, as audited under U.S.
generally accepted accounting principles for the fiscal year ended December 31,
1997, was $793,736. In accordance with Section 2.04 of the Agreement, an
aggregate of 1,886,022 shares of Common Stock issued to the Shareholder on the
closing date of the Agreement were automatically cancelled effective as of May
17, 1999 (which is the date of completion of the audit of Wonderwide's financial
statements for the fiscal year ended December 31, 1997).
Subsequent to the closing date of the Agreement, the Shareholder agreed
to transfer to Wonderwide all of the issued and outstanding capital stock of
Jenson International Travel Services Limited ("Jenson Travel") in exchange for
the issuance to the Shareholder by the Company of 1,275,673 shares of Common
Stock. The Shareholder also has agreed to contribute to the Company the sum of
RMB36,535,000, representing the approximate net income of the group tour
business now conducted by Jenson Travel for the years ended December 31, 1995,
1996, 1997 and 1998. In addition, the Shareholder has provided certain operating
advances to the Company from time to time, in the aggregate amount of
RMB70,000,000. With respect to such advances, the Company and the Shareholder
have agreed that (i) RMB36,535,000 shall be applied to offset in full the
obligation of the Shareholder to contribute to the Company an amount equal to
the approximate net income of the group tour business now conducted by Jenson
Travel for the years ended December 31, 1995, 1996, 1997 and 1998, and (ii) in
exchange for the remaining amount of such advances of RMB33,465,000, the Company
shall issue to the Shareholder an aggregate of 501,484 shares of Common Stock.
The foregoing transactions are described in an Investment Agreement dated as of
May 18, 1999 entered into by and between the Company and the Shareholder.
After giving effect to (i) the cancellation of 1,886,022 shares of
Common Stock pursuant to Section 2.04 of the Agreement, (ii) the issuance of
1,275,673 shares of Common Stock to the
2
<PAGE> 3
Shareholder in exchange for the contribution by the Shareholder to Wonderwide of
100% of the capital stock of Jenson Travel, and (iii) the issuance of 501,484
shares of Common Stock to shareholder in exchange for certain operating advances
previously made to the Company by the Shareholder, a total of 2,654,514 shares
of Common Stock are issued and outstanding, of which 2,121,135 shares are held
by the Shareholder.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
The following financial statements relating to the transaction
contemplated by the Share Exchange Agreement dated March 12, 1998 by
and between the Company and the Shareholder are filed herewith:
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
Independent Auditors Report
Audited consolidated balance sheets as of December
31, 1997 and 1996
Audited Consolidated Statements of Operations,
Shareholder's Equity and Cash Flows for each of the
three years in the period ended December 31, 1997
Notes to Financial Statements
(c) Exhibits.
10.4 Investment Agreement dated as of May 18, 1999
by and between Jenson International, Inc. and C.M.
Cheng
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
JENSON INTERNATIONAL, INC.
Date: May 20, 1999 By /s/ C.M. Cheng
--------------------------------------
C.M. Cheng
President
4
<PAGE> 5
WONDERWIDE CONSULTANTS LIMITED
AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited
liability)
Consolidated Balance Sheets as of
December 31, 1997 and 1996, and
Related Consolidated Statements
of Operations, Shareholder's
Equity, and Cash Flows for Each
of the Three Years in the Period
Ended December 31, 1997 and
Independent Auditors' Report
<PAGE> 6
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES (Incorporated in the British
Virgin Islands with limited liability)
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND 1996, AND RELATED
CONSOLIDATED STATEMENTS OF OPERATIONS, SHAREHOLDER'S EQUITY, AND CASH FLOWS FOR
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 AND INDEPENDENT
AUDITORS' REPORT
<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- ----
<S> <C>
INDEPENDENT AUDITORS' REPORT................................................................... F - 1
CONSOLIDATED BALANCE SHEETS.................................................................... F - 2
CONSOLIDATED STATEMENTS OF OPERATIONS.......................................................... F - 3
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY................................................ F - 4
CONSOLIDATED STATEMENTS OF CASH FLOWS.......................................................... F - 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..................................................... F - 6
</TABLE>
<PAGE> 7
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF WONDERWIDE CONSULTANTS
LIMITED
(Incorporated in the British Virgin Islands with limited liability)
We have audited the accompanying consolidated balance sheets of
Wonderwide Consultants Limited and its subsidiaries (the "Group") as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, shareholder's equity and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements
are the responsibility of the Group's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Wonderwide
Consultants Limited and its subsidiaries as of December 31, 1997 and
1996, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997 in conformity
with accounting principles generally accepted in the United States of
America.
Our audits also comprehended the translation of Renminbi amounts into
United States dollar ("US$") amounts and, in our opinion, such
translation has been made in conformity with the basis stated in note
2. Such US$ amounts are presented solely for the convenience of readers
in the United States of America.
We draw your attention to note 13 to the consolidated financial
statements which state that the Group is exposed to certain risks
through its operations in the People's Republic of China.
The accompanying financial statements have been prepared assuming that
the Group will continue as a going concern. As discussed in note 1 to
the consolidated financial statements, the deficiency in the Group's
working capital raises substantial doubt as to its ability to continue
as a going concern. Management's plans concerning these matters are
also discussed in note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
DELOITTE TOUCHE TOHMATSU
Hong Kong
May 18, 1999
F-1
<PAGE> 8
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 31,
--------------------------------------------
1996 1997 1997
---- ---- ----
RMB RMB US$
(note 2)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................ 1,573,885 816,557 98,380
Accounts receivable, net of allowance for
doubtful accounts of RMB693,891 and
RMB639,470 for 1996 and 1997,
respectively (notes 4 and 8a) .................. 1,566,832 15,430,374 1,859,081
Inventories ...................................... 932,507 779,198 93,879
Prepayments, deposits and other receivables ...... 311,317 410,570 49,467
----------- ----------- -----------
Total current assets ............................... 4,384,541 17,436,699 2,100,807
Property, plant and equipment, net of
accumulated depreciation and amortization
of RMB43,069,396 and RMB46,974,826 for
1996 and 1997, respectively (note 5) ............. 37,702,786 34,134,339 4,112,571
----------- ----------- -----------
Total assets ....................................... 42,087,327 51,571,038 6,213,378
----------- ----------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Short-term bank borrowings (note 6) .............. 23,281,069 24,964,050 3,007,717
Accounts payable ................................. 3,215,622 3,369,771 405,997
Accrued hotel advisory fee ....................... 3,125,395 3,345,359 403,055
Interest payable ................................. 2,500,722 2,600,106 313,266
Statutory provision for staff welfare and benefits
(note 7) ....................................... 8,217,229 9,376,307 1,129,676
Accrued expenses ................................. 5,229,572 5,579,487 672,227
Other creditors .................................. 1,299,811 1,431,002 172,410
Amount due to the principal shareholder (note 8b) 6,061,488 4,647,522 559,942
Income tax payable ............................... -- 513,000 61,807
----------- ----------- -----------
Total current liabilities .......................... 52,930,908 55,826,604 6,726,097
----------- ----------- -----------
Advances from the principal shareholder (note 8c) .. 70,000,000 70,000,000 8,433,735
----------- ----------- -----------
Commitments and contingencies (note 16)
Shareholder's equity:
Ordinary share capital, US$1 par value, 50,000
shares authorized, 1 share outstanding ...... 8 8 1
Additional paid-in capital ....................... 107,008 107,008 12,893
Accumulated deficit .............................. (80,950,597) (74,362,582) (8,959,348)
----------- ----------- -----------
Total deficiency of shareholder's equity ........... (80,843,581) (74,255,566) (8,946,454)
----------- ----------- -----------
Total liabilities and shareholder's equity ......... 42,087,327 51,571,038 6,213,378
----------- ----------- -----------
</TABLE>
See accompanying notes to the consolidated financial statements
F-2
<PAGE> 9
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------------
1995 1996 1997 1997
---- ---- ---- ----
RMB RMB RMB US$
(note 2)
<S> <C> <C> <C> <C>
Revenues:
Hotel operations:
Rooms............................................ 6,336,215 7,044,523 6,720,133 809,655
Food and beverage................................ 6,815,137 6,604,973 5,570,167 671,104
Other operating departments...................... 2,361,625 1,593,320 1,164,540 140,306
Sales tax........................................ (785,962) (748,531) (668,813) (80,580)
---------- ---------- ---------- ---------
14,727,015 14,494,285 12,786,027 1,540,485
Consultancy services............................... - - 15,480,000 1,865,060
Other.............................................. 248,434 518,085 135,977 16,383
Sales tax for consultancy services................. - - (387,000) (46,627)
---------- ---------- ---------- ---------
Total revenue........................................ 14,975,449 15,012,370 28,015,004 3,375,301
---------- ---------- ---------- ---------
Operating expenses:
Hotel operations by department:
Rooms.............................................. 1,643,261 1,770,583 1,782,072 214,707
Food and beverage.................................. 4,602,364 4,490,224 3,899,733 469,847
Other operating departments........................ 1,416,205 401,274 392,637 47,306
Other operating expenses:
Administrative and general......................... 4,007,651 2,972,634 2,370,281 285,576
Depreciation and amortization...................... 5,848,664 4,131,413 4,016,213 483,881
Electricity, gas and water......................... 2,542,991 2,727,601 2,365,605 285,013
Provision for staff welfare and benefits........... 896,096 1,074,382 809,845 97,572
Repairs and maintenance............................ 475,970 522,211 725,741 87,439
Salaries and allowances............................ 2,712,333 2,543,867 2,574,494 310,180
---------- ---------- ---------- ---------
Total operating expenses............................... 24,145,535 20,634,189 18,936,621 2,281,521
---------- ---------- ---------- ---------
Net operating (loss) income............................ (9,170,086) (5,621,819) 9,078,383 1,093,780
Interest expense....................................... (3,369,251) (1,837,040) (1,977,368) (238,237)
---------- ---------- ---------- ---------
(Loss) income before income taxes...................... (12,539,337) (7,458,859) 7,101,015 855,543
Income taxes (note 9).................................. - - 513,000 61,807
---------- ---------- ---------- ---------
Net (loss) income for the year......................... (12,539,337) (7,458,859) 6,588,015 793,736
---------- ---------- ---------- ---------
Unaudited pro forma information (notes 3 and 18):
Historical income before income taxes.................. 7,101,015 855,543
Pro forma adjustments :
Net group tour commission income..................... 12,621,000 1,520,602
Consulting fee payable to the principal shareholder.. (309,600) (37,301)
Management fee to a related company.................. (385,200) (46,409)
Pro forma income taxes............................... (1,764,000) (212,530)
---------- ---------
Pro forma net income for the year...................... 17,263,215 2,079,905
---------- ---------
</TABLE>
See accompanying notes to the consolidated financial statements
F-3
<PAGE> 10
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Ordinary share capital
----------------------------------------------
Amount Additional
Shares par value of paid-in Accumulated
outstanding US$1 each capital deficit
----------- --------- ------- -------
RMB RMB RMB
<S> <C> <C> <C> <C>
Balance at January 1, 1995.................. 1 8 107,008 (60,952,401)
Net loss.................................... - - - (12,539,337)
------- ------- -------- ----------
Balance at December 31, 1995................ 1 8 107,008 (73,491,738)
Net loss.................................... - - - (7,458,859)
------- ------- -------- ----------
Balance at December 31, 1996................ 1 8 107,008 (80,950,597)
Net income.................................. - - - 6,588,015
------- ------- -------- ----------
Balance at December 31, 1997................ 1 8 107,008 (74,362,582)
------- ------- -------- ----------
Translated to US$
Balance at December 31, 1997
(note 2).................................. 1 US$ 1 US$12,893 (US$8,959,348)
------- ------- --------- ------------
</TABLE>
See accompanying notes to the consolidated financial statements
F-4
<PAGE> 11
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------
1995 1996 1997 1997
---- ---- ---- ----
RMB RMB RMB US$
(note 2)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income .................................... (12,539,337) (7,458,859) 6,588,015 793,736
Adjustments to reconcile net (loss) income to
net cash provided by (used in) operating activities:
Depreciation and amortization .................... 5,848,664 4,131,413 4,016,213 483,881
Provision for doubtful accounts .................. 558,059 129,764 (54,421) (6,557)
(Gain) loss on disposal of fixed assets .......... (68,365) (148,878) 8,660 1,043
Changes in working capital components:
Accounts receivable ............................ (126,583) 21,926 (13,809,121) (1,663,750)
Inventories .................................... 618,250 118,025 153,309 18,471
Prepayments, deposits and other receivables .... (545,337) 354,003 (99,253) (11,958)
Accounts payable ............................... (1,867,542) 1,389 154,149 18,572
Accrued hotel advisory fee ..................... 2,000 101,709 219,964 26,502
Interest payable ............................... 1,005,247 53,818 99,384 11,974
Statutory provision for staff welfare and
benefits ..................................... 1,218,571 1,839,860 1,159,078 139,648
Accrued expenses ............................... 3,669,131 631,150 349,915 42,159
Other creditors ................................ 444,311 512,066 131,191 15,806
Amount due to the principal shareholder ........ 2,584,113 259,627 (1,413,966) (170,357)
Income tax payable ............................. -- -- 513,000 61,807
----------- ----------- ----------- -----------
Net cash provided by (used in) operating activities .... 801,182 547,013 (1,983,883) (239,023)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of fixed assets ............................. (92,232) (572,214) (616,426) (74,268)
Proceeds from the disposal of fixed assets ........... 181,000 746,000 160,000 19,277
----------- ----------- ----------- -----------
Net cash provided by (used in) investing activities .... 88,768 173,786 (456,426) (54,991)
----------- ----------- ----------- -----------
Cash flows from financing activities:
New bank borrowings .................................. -- -- 10,000,000 1,204,819
Repayment of bank borrowings ......................... (1,044,765) (69,062) (8,317,019) (1,002,050)
----------- ----------- ----------- -----------
Net cash provided by (used in) financing activities .... (1,044,765) (69,062) 1,682,981 202,769
----------- ----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents ... (154,815) 651,737 (757,328) (91,245)
Cash and cash equivalents
Beginning of the year ................................ 1,076,963 922,148 1,573,885 189,625
----------- ----------- ----------- -----------
End of year .......................................... 922,148 1,573,885 816,557 98,380
----------- ----------- ----------- -----------
Supplemental disclosures of cash flow information:
Interest paid ........................................ 2,364,004 1,783,222 1,877,984 226,263
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to the consolidated financial statements
F-5
<PAGE> 12
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. REORGANIZATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
for the share exchange transaction between Cheng Chao Ming and Jenson
International Inc. ("Jenson") (formerly known as Best Medical Treatment
Group Inc.), a company incorporated in Nevada, the United States of
America. Jenson acquired the Company on March 16, 1998 in a transaction
constituting a reverse acquisition. Accordingly, the Company's
principal shareholder, Cheng Chao Ming, became the majority shareholder
of Jenson since that date.
The consolidated financial statements include the accounts of
Wonderwide Consultants Limited (the "Company" or "Wonderwide") and its
subsidiaries, King Yuen Investment & Development Limited ("King Yuen"),
Qin Dynasty Hotel (Xian) Ltd. ("Qin Dynasty") and Malee Consultants
Limited ("Malee"), hereinafter collectively referred as the "Group".
Because the Group has been under common control for all periods
presented, the consolidated financial statements have been prepared to
reflect the consolidated financial position, results of operations and
cash flows of the Group at historical cost as if the structure of the
Group had been in existence at the beginning of the period presented in
a manner similar to the pooling-of-interests method. Accordingly, the
Group's consolidated financial statements include the financial
position, results of operations and cash flows of the Company, Malee,
King Yuen and Qin Dynasty as if the Company had been the holding
company of these companies for all periods presented.
On March 6, 1998, Wonderwide, a newly formed British Virgin Islands
("BVI") company, became the holding company of King Yuen, a company
incorporated in the Hong Kong Special Administrative Region ("HK"),
through the deferral of King Yuen's existing paid-in capital held by
Cheng Chao Ming, the principal shareholder of the Group under common
control, and the allotment of 900 shares of King Yuen's share capital
at the par value of HK$1,000 per share. The deferred shares, which are
not held by the Group, carry no rights to dividends or to receive
notice of or to attend or vote at any general meeting of the respective
companies or to participate in any distribution on winding up and only
entitle the holder to receive non-cumulative dividends for any
financial year in which King Yuen's net profits exceed
HK$1,000,000,000. The Company has been granted an option by the holders
of the deferred shares to acquire these shares at a nominal amount.
King Yuen was incorporated during 1985 for the sole purpose of
effecting a Sino-foreign co-operative joint venture agreement (the "CJV
Agreement") signed with an unrelated party in the People's Republic of
China ("PRC"), the PRC Joint Venture Partner, to establish Qin Dynasty.
The investment in Qin Dynasty by King Yuen was mainly financed by an
interest free advance from the principal shareholder, Cheng Chao Ming.
King Yuen had also signed a contract with an entity formerly associated
with Cheng Chao Ming, which was disposed of on December 28, 1994, to
provide certain consulting services to establish a temple theme park in
the PRC for the period from 1995 to 1999. This entity was beneficially
owned by and controlled by Mr. Lee Seow Pheng and Mr. Zhang Rui Lin.
F-6
<PAGE> 13
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
1. REORGANIZATION AND BASIS OF PRESENTATION - continued
Following a reorganization of Cheng Chao Ming's private businesses in
1996, the consultancy services under the contract were carried out by
Malee instead of King Yuen. On May 13, 1998, King Yuen, the entity
formerly associated with Cheng Chao Ming and Malee signed a new
contract to formalize the transfer of the consultancy contract business
to Malee and provide for similar services to be carried out by Malee
for the period from 1997 to 1999 ("Temple Contract").
On December 8, 1995, King Yuen entered into an arrangement with
Guangzhou Universal Ocean Biological Science Corporation to provide
consulting services to establish an ocean park in Xian. As part of the
above-mentioned reorganization of Cheng Chao Ming's private businesses
in 1996, the consulting services under the agreement have been provided
by Malee instead of King Yuen since 1997. On June 2, 1998, an agreement
was entered into to formalize this arrangement for the period from 1997
to 2000 (the "Ocean Park Contract").
On May 27, 1998, Wonderwide became the holding company of Malee, a
company incorporated in 1994 in the BVI, through the acquisition of the
Malee's existing paid-in capital held by Cheng Chao Ming. Malee is
principally engaged in providing consultancy services to PRC parties.
Apart from the accounts receivable and an interest free advance to the
principal shareholder, Malee had no other significant assets and
liabilities at May 27, 1998.
In addition, the group tour coordination business will be carried out
by Malee upon the formation of agency agreements with certain related
parties (see note 18).
Qin Dynasty is a Sino-foreign co-operative joint venture enterprise
registered in the PRC on November 20, 1986 and principally engaged in
the ownership and operation of a hotel in Xian. Qin Dynasty has an
original joint venture term of 15 years which was extended to 30 years
ending on November 20, 2016.
According to the CJV Agreement, the PRC Joint Venture Partner was
responsible for the injection of the land on which the hotel was built
and to make applications to the PRC authorities for the land use
rights. King Yuen was responsible for financing Qin Dynasty to build
the hotel for the amounts as stipulated in the CJV Agreement. King Yuen
is also responsible for operating the hotel. The hotel commenced
operations in July 1990. Qin Dynasty also entered into an agreement
with an unrelated party to provide hotel management advisory services
to the hotel. The advisory fee is payable at 1.75% of total hotel
revenues.
According to the CJV Agreement, the operating results of Qin Dynasty
shall be split between King Yuen and the PRC Joint Venture Partner at
the profit sharing ratios of 8 to 2 in the first 8 years of operations
and 6 to 4 thereafter. Upon termination of the joint venture, the
property, plant and equipment of Qin Dynasty shall be unconditionally
transferred to and owned by the PRC Joint Venture Partner. The
remaining assets and liabilities of Qin Dynasty shall be split between
King Yuen and the PRC Joint Venture Partner at the ratio of 7 to 3,
respectively.
F-7
<PAGE> 14
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
1. REORGANIZATION AND BASIS OF PRESENTATION - continued
After a year of operation of the hotel, a supplemental agreement to the
CJV Agreement has been reached between the parties that the PRC Joint
Venture Partner will enjoy a fixed annual return of RMB600,000 from Qin
Dynasty instead of the profit share in Qin Dynasty. Although annual
payments were made to the PRC Joint Venture Partner every year since
the commencement of operation of the hotel in July 1990, no formal
documentation of such supplemental agreement was made between the
parties until May 29, 1998. As a result, King Yuen is entitled to 100%
of Qin Dynasty's operating results after the payment of the annual
fixed fee to the PRC Joint Venture Partner. The annual fixed fee paid
and payable to the PRC Joint Venture Partner for each of the three
years in the period ended December 31, 1997 was RMB600,000 per year.
All significant intra-group transactions and balances have been
eliminated on consolidation.
The accompanying consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the
United States of America ("US GAAP") and are presented in Renminbi as
the operations of the Group are predominantly denominated in Renminbi.
This basis of accounting differs from that used in the preparation of
the statutory financial statements of the relevant PRC subsidiary which
are prepared in accordance with the accounting principles and relevant
financial regulations established by the Ministry of Finance of the
PRC.
These consolidated financial statements have been prepared on the
going-concern basis of accounting notwithstanding that the Group has a
deficiency in its working capital which assumes the Group will realize
its assets and discharge its liabilities in the normal course of
business. Should the Group be unable to continue as a going concern, it
may be required to realize its assets and settle its liabilities at
amounts substantially different from the current carrying values. The
Group's ability to continue as a going concern is dependent on the
continued financial support of its principal shareholder, Cheng Chao
Ming, who has signed a letter of financial support to the Group.
The Company and its subsidiaries are principally engaged in the
operation of a hotel and the provision of consulting services. As a
result, changes in the economic environment in which these operations
exist, including changes in the cost or availability of labor or
materials, could have a material impact on the Group.
2. SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION - Revenue represents the invoiced value for
services provided, net of discounts. Revenue is recognized when
services are rendered to customers.
INVENTORIES - Inventories consist primarily of food and beverage
products as well as consumable supplies and are stated at the lower of
cost or market value. Cost is calculated using the first-in, first-out
method.
F-8
<PAGE> 15
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
2. SIGNIFICANT ACCOUNTING POLICIES - continued
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is stated
at cost less accumulated depreciation and amortization. Expenditures
for normal repairs and maintenance that do not significantly extend the
life of the property, plant and equipment is expensed as incurred.
Depreciation and amortization are provided using the straight-line
method based on the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
<S> <C>
Buildings................................................... 25 years
Furniture and fixtures...................................... 5 years
Plant, machinery and equipment.............................. 5 to 10 years
Motor vehicles.............................................. 5 years
</TABLE>
IMPAIRMENT OF LONG-LIVED ASSETS - The Company regularly reviews its
long-lived assets for impairment whenever events or changes in the
circumstances indicate that the carrying amount of an asset may not be
recoverable based upon undiscounted cash flows expected to be produced
by such assets over their expected useful lives.
INCOME TAXES - Income taxes are determined using the liability method
which requires deferred taxes be adjusted to reflect the tax rates at
which future taxable amounts will be settled or recognized. The effects
of tax rate changes on future deferred tax liabilities and deferred tax
benefits, as well as other changes in income tax laws, are recognized
in net earnings in the period when such changes are enacted.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on
hand, cash accounts, interest-bearing savings accounts, and short-term
bank deposits with original maturities of three months or less.
FOREIGN CURRENCY TRANSLATION - The financial records and the statutory
financial statements of the Company's PRC subsidiary are maintained in
Renminbi. In preparing the financial statements, all foreign currency
transactions are translated into Renminbi using the applicable rates of
exchange, quoted by the Shenzhen Foreign Exchange Adjustment Center
(the "swap center") for the respective periods. Monetary assets and
liabilities denominated in foreign currencies have been translated into
Renminbi using the rate of exchange quoted by the swap center
prevailing at the balance sheet date. The resulting exchange gains or
losses have been credited or charged to the consolidated statements of
operations in the period in which they occur.
The Company's share capital is denominated in United States dollars
("US$") and for reporting purposes, the US$ share capital amounts have
been translated into Renminbi ("RMB") at the applicable rates
prevailing on the transaction date.
Translation of amounts from RMB into US$ is for the convenience of the
reader only and has been made at the swap center rate of US$1.00 =
RMB8.3 as quoted by the People's Bank of China on December 31, 1997. No
representation is made that the Renminbi amounts could have been, or
could be, converted into United States dollars at that rate or at any
other rate.
F-9
<PAGE> 16
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
2. SIGNIFICANT ACCOUNTING POLICIES - continued
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 disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
EFFECTS OF RECENT ACCOUNTING STANDARDS - In June 1997, the Financial
Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise", SFAS No.
131 establishes standards for the way that public enterprises report
information about operating segments in financial statements issued to
the public and also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS No.
131 defines operating segments as components of an enterprise about
which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits", which amends the
disclosure requirements for pensions and other postretirement benefits.
The Company's results of operations and financial position have not
been affected by implementation of SFAS No. 131 and No. 132. The
Standards are both effective for financial statements for periods
beginning after December 15, 1997 and require comparative information
for earlier years to be restated.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which amends SFAS No. 52, "Foreign
Currency Translation", to permit special accounting for a hedge of a
foreign currency forecasted transaction with a derivative. It
supersedes SFAS No. 80, "Accounting for Futures Contracts", No. 105,
"Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of
Credit Risk", and No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments". It amends SFAS
No. 107, "Disclosure about Fair Value of Financial Instruments", to
include in No. 107 the disclosure provisions about concentrations of
credit risk from No. 105. It also establishes reporting standards for
derivative instruments and for hedging activities.
SFAS No. 133 not yet adopted is effective for financial statements for
periods beginning after June 15, 1999 and requires comparative
information for earlier years to be restated. Due to the recent
issuance of this standard, management has been unable to fully evaluate
the impact, if any, it may have on future financial statement
disclosures.
F-10
<PAGE> 17
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
3. UNAUDITED PRO FORMA INFORMATION
UNAUDITED PRO FORMA INCOME STATEMENT ADJUSTMENTS - The objective of the
pro forma information is to show what the significant effects on the
historical net income for 1997 might have been had the Company
implemented its reorganization and the injection of the group tour
business into the Company by the principal shareholder, (which occurred
subsequent to December 31, 1997), at January 1, 1997. Adjustments have
been made to the pro forma information for the year ended December 31,
1997 to reflect (i) the injection of the group tour business into the
Company by the principal shareholder as described below and related tax
effect, (ii) the consulting fee payable to the principal shareholder of
the Company in respect of consultancy services, and (iii) the
management fee payable to a related company for the provision of
office, administrative and accounting services to the Group (see note
18e).
As stipulated in the agency agreements entered into on February 1,
1999, effective January 1, 1999 with four related party entities
(collectively referred to as the "Agents") in which Cheng Chao Ming has
beneficial ownership interests, the Agents have appointed Jenson
International Services Limited ("Jenson Travel"), a company acquired by
the Company on January 1, 1999, in which Cheng Chao Ming had beneficial
ownership interests, to handle their customers for the operation of the
Hong Kong, Macau and Xian stages of arranged trips. On February 1,
1999, effective January 1, 1999, Jenson Travel also entered into a
contract with an unrelated party, which was appointed as a
sub-contractor for the operation of the Xian stages of the trips and at
the same time, this unrelated party also entered into a contract with
Qin Dynasty to appoint Qin Dynasty as the sub-contractor for the
operation of the Xian stages of the trips. Jenson Travel will provide
customers with sight-seeing services and accommodation arrangement
services in Hong Kong and Macau whereas Qin Dynasty will provide these
services in Xian. The group tour commission income represents the
Group's share of the Agents' net income as stipulated in the agency
agreements less operating costs incurred.
On February 1, 1999, effective January 1, 1999, the Group entered into
a consulting contract with Cheng Chao Ming for consulting services
provided for the Temple Contract and the Ocean Park Contract. The
annual consulting fee payable to Cheng Chao Ming is fixed at 2% of the
consulting service fee income recognized by the Group as stipulated in
the two contracts.
On May 7, 1999, effective January 1, 1999, the Group entered into a
management agreement whereby a related company outside the Group in
which Cheng Chao Ming has a beneficial ownership interest will provide
office space, administrative and accounting services. The management
fee has been agreed upon at a monthly payment of HK$30,000.
F-11
<PAGE> 18
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
4. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
<TABLE>
<CAPTION>
As of December 31,
------------------
1996 1997
---- ----
RMB RMB
<S> <C> <C>
Accounts receivable - trade............................................ 2,260,723 2,174,844
- consulting fees.......................... - 13,895,000
Less: Allowance for doubtful accounts.................................. (693,891) (639,470)
--------- ----------
1,566,832 15,430,374
--------- ----------
</TABLE>
Changes to the allowance for doubtful accounts during the year were as
follows:
<TABLE>
<CAPTION>
As of December 31,
------------------
1995 1996 1997
---- ---- ----
RMB RMB RMB
<S> <C> <C> <C>
Balance as of beginning of year.......................... 6,068 564,127 693,891
Provided during the year................................. 559,268 131,625 1,413
Written off during the year.............................. (1,209) (1,861) (55,834)
------- ------- -------
Balance as of end of year................................ 564,127 693,891 639,470
------- ------- -------
</TABLE>
Subsequent to the balance sheet date, the accounts receivable for
consulting fees have been fully repaid.
F-12
<PAGE> 19
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
As of December 31,
------------------
1996 1997
---- ----
RMB RMB
<S> <C> <C>
At cost:
Buildings............................................................ 29,710,216 30,018,407
Furniture and fixtures............................................... 7,194,469 7,194,469
Plant, machinery and equipment....................................... 41,809,300 41,872,227
Motor vehicles....................................................... 2,058,197 2,024,062
---------- ----------
Total.............................................................. 80,772,182 81,109,165
Less: Accumulated depreciation and amortization...................... (43,069,396) (46,974,826)
---------- ----------
37,702,786 34,134,339
---------- ----------
</TABLE>
Additions, disposals and depreciation and amortization of property,
plant and equipment for each of the three years in the period ended
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1995 1996 1997
---- ---- ----
RMB RMB RMB
<S> <C> <C> <C>
At cost:
Additions.............................................. 92,232 572,214 616,426
Disposals - net book value............................. 112,635 597,122 168,660
Depreciation and amortization.......................... 5,848,664 4,131,413 4,016,213
</TABLE>
The Group has an annual operating lease commitment of RMB120,000 in
respect of the land on which the buildings are located until 2001. The
Group has obtained legal advice that the term can be extended to 2016
as the joint venture term of Qin Dynasty had already been extended to
that date and is in the process of applying for the extension. Details
of the operating lease commitments are described in note 16.
F-13
<PAGE> 20
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
6. SHORT-TERM BANK BORROWINGS
<TABLE>
<CAPTION>
As of December 31,
------------------
1996 1997
---- ----
RMB RMB
<S> <C> <C>
Short-term bank borrowings comprise:
Secured bank borrowings................................................ 15,963,640 17,658,445
Unsecured bank borrowings.............................................. 7,317,429 7,305,605
---------- ----------
23,281,069 24,964,050
---------- ----------
</TABLE>
Interest rates of the short-term bank borrowings are generally based on
London Interbank Offered Rates ("LIBOR") and the floating interest
rates on foreign currencies of the Bank of China. At December 31, 1996
and 1997, the interest rates of the short-term bank borrowing ranged
from 5.18% to 7.9% and 5.18% to 9.24%, respectively.
The bank borrowings are repayable on demand and there are no
significant covenants or financial restrictions relating to the Group's
short-term debt. The bank borrowings mature in December 1999.
Details of assets pledged by the Group are described in note 15.
7. STATUTORY PROVISION FOR STAFF WELFARE AND BENEFITS
As stipulated by PRC government regulations, Qin Dynasty shall make
provisions on various categories of staff welfare and benefits for all
their permanent staff in Xian. The aggregated rate of these statutory
provisions in Xian during the years ended December 31, 1995, 1996 and
1997 were approximately 83%, 83% and 68% of the basic salary of the
permanent staff of Qin Dynasty, respectively. The total provision of
staff welfare and benefits of the Group for the years ended December
31, 1995, 1996 and 1997 were RMB2,130,690, RMB2,023,504 and
RMB1,583,908, respectively.
The statutory provision for staff welfare and benefits in Xian includes
amounts for a defined contribution retirement plan (see note 11), staff
housing fund and inflation allowances.
The monthly contribution of the defined contribution retirement plan,
labour and medical insurance fund, staff housing fund and inflation
allowances for the years ended December 31, 1995 and 1996 were
calculated at 18%, 40%, 24% of the basic salary and RMB20 per person,
respectively, of the Qin Dynasty's permanent staff. The monthly
contributions of these provisions for the year ended December 31, 1997
were calculated at 20.5%, 17%, 30% of the basic salary and RMB 20 per
person, respectively, of the Qin Dynasty's permanent staff.
F-14
<PAGE> 21
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
8. RELATED PARTY TRANSACTIONS
(a) Personal guarantees from the principal shareholder
Included in accounts receivable as of December 31, 1997 were
trade receivables from two unrelated parties amounting to
RMB13,895,000 for which Cheng Chao Ming has given personal
guarantees to the Company for their repayment.
These trade receivables are related to two service contracts
signed between Malee and two unrelated parties on May 13, 1998
and June 2, 1998 to document previous consultancy service
arrangements provided to the unrelated parties for the
establishment of a temple and an amusement park in the PRC,
referred to as the Temple Contract and the Ocean Park
Contract, respectively (see note 1).
(b) Amount due to the principal shareholder
The amount due to the principal shareholder mainly represents
advances from Cheng Chao Ming to the Group. The amount is
interest free and has no fixed repayment terms. No material
movement was noted during the year ended December 31, 1997 and
the decrease in the year represented settlement from
consulting fees receivable.
(c) Advances from the principal shareholder
The advances from the principal shareholder is interest free.
Subsequent to the balance sheet date, the shareholder agreed
to convert it to equity of Jenson (see note 18).
F-15
<PAGE> 22
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
9. INCOME TAXES
The components of (loss) income before income taxes are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1995 1996 1997
---- ---- ----
RMB RMB RMB
<S> <C> <C> <C>
United States of America................................. - - -
BVI...................................................... - - 15,093,000
HK....................................................... - - -
PRC...................................................... (12,539,337) (7,458,859) (7,991,985)
---------- --------- ----------
(12,539,337) (7,458,859) 7,101,015
---------- --------- ----------
</TABLE>
No provision for income taxes for the years ended December 31, 1995 and
1996 has been made as the Company and its subsidiaries had no taxable
income in those years. The provision for income taxes of the Group for
the year ended December 31, 1997 was RMB513,000.
United States of America
The Company is subject to taxes in the United States of America but had
no taxable income for the years ended December 31, 1995, 1996 and 1997.
British Virgin Islands
The Company's subsidiaries incorporated in the British Virgin Islands
("BVI") are not taxed in the BVI. Under current BVI laws, dividends and
capital gains arising from the BVI subsidiaries' investments are not
subject to income taxes, and no withholding tax is imposed on payments
of dividends by the BVI subsidiaries to the Company. Subsidiaries in
the BVI had no taxable income for the years ended December 31, 1995 and
1996. The provision for income taxes of a BVI subsidiary in the PRC for
the year ended December 31, 1997 was RMB513,000.
Hong Kong
The Company's subsidiary incorporated in HK is subject to the Hong Kong
Profits Tax at the applicable tax rate (currently 16.0%) on its
assessable profits computed in accordance with the Inland Revenue
Ordinance in HK. The HK subsidiary has no assessable profits for the
years ended December 31, 1995, 1996 and 1997.
Under current HK laws, dividends and capital gains arising from the HK
subsidiary's investments are not subject to Hong Kong Profits Tax, and
no withholding tax is imposed on payments of dividends by the HK
subsidiary to the Company.
F-16
<PAGE> 23
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
9. INCOME TAXES - continued
PRC
The Company's subsidiary registered in the PRC other than HK are
subject to China income taxes at the applicable tax rate (currently
33%) on taxable income as reported in their statutory financial
statements in accordance with the relevant income tax laws applicable
to foreign enterprises. The subsidiary in the PRC had no taxable income
for the years ended December 31, 1995, 1996 and 1997.
A reconciliation between the credit (provision) for income taxes
computed by applying the statutory tax rates in the PRC for 1995, 1996
and 1997 to (loss) income before income taxes and the income tax
provision is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1995 1996 1997
---- ---- ----
RMB RMB RMB
<S> <C> <C> <C>
PRC statutory rate....................................... 33% 33% 33%
--------- --------- ---------
Credit (provision) for income taxes at statutory
rate on (loss) income before income taxes for
the year............................................... 4,137,981 2,461,423 (2,343,335)
Income not subject to income taxes....................... - - 4,467,690
Expiration of net operating loss carryforwards........... (1,779,915) (2,258,241) (2,209,183)
Decrease in valuation allowance.......................... (2,358,066) (203,182) (428,172)
--------- --------- ---------
Income tax provision..................................... - - (513,000)
--------- --------- ---------
</TABLE>
Operating losses of sino-cooperative joint ventures in the PRC can be
carried forward for a period of five years to offset future taxable
income. Expiration of net operating loss carryforwards represented the
net operating losses of Qin Dynasty which expired in each of the three
years in the period ended December 31, 1997.
F-17
<PAGE> 24
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
9. INCOME TAXES - continued
Deferred income taxes reflect the net tax effect of temporary
differences between the amounts of assets and liabilities for income
tax purposes compared with the respective amounts for financial
statement purposes. At December 31, 1996 and 1997 deferred income taxes
comprised the following:
<TABLE>
<CAPTION>
At December 31,
--------------------------
1996 1997
---- ----
RMB RMB
<S> <C> <C>
Deferred tax assets (liabilities):
Excess of tax over financial reporting depreciation.................... (177,852) (700,092)
Net operating loss carryforwards....................................... 12,260,413 13,197,651
Allowance for doubtful accounts........................................ 208,043 208,043
Allowance for obsolete inventories..................................... 57,507 70,681
---------- ----------
12,348,111 12,776,283
Valuation allowance.................................................... (12,348,111) (12,776,283)
---------- ----------
- -
---------- ----------
</TABLE>
10. FOREIGN CURRENCY EXCHANGE
The legal currency of the PRC is the Renminbi, which is subject to
foreign exchange controls and is not freely convertible at this time
into foreign exchange. The State Administration for Foreign Exchange
("SAFE") is the administrative body of the State Council and the
People's Bank of China that is empowered with the functions of
administering all matters relating to foreign exchange, including the
enforcement of foreign exchange control regulations.
On January 29, 1996 and effective from April 1, 1996, the State Council
promulgated new Regulations of the People's Republic of China for the
Control of Foreign Exchange ("Control of Foreign Exchange Regulations")
which superseded the 1980 regulations. The Control of Foreign Exchange
Regulations classify all international payments and transfers into
current account items and capital account (representing capital and
investment loan to be contributed) items. Current account items are no
longer subject to SAFE approval while capital account items still are.
The Control of Foreign Exchange Regulations were subsequently amended
on January 14, 1997. This latest amendment affirmatively states that
the State shall not restrict international current account payments and
transfers.
F-18
<PAGE> 25
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
10. FOREIGN CURRENCY EXCHANGE- continued
On June 18, 1996, the People's Bank of China ("PBOC"), authorized by
the State Council, further announced that, effective from July 1, 1996,
the sale and purchase of foreign exchange by foreign-invested
enterprises shall be included in the settlement and payment of foreign
exchange by banks. Concurrently, on amendment of the Provisional
Regulations, the "Regulations for the Administration of Settlement,
Sale and Payment of Foreign Exchange" effective from July 1, 1996, were
promulgated, which superseded the Provisional Regulations and abolished
the remaining restrictions on convertibility of foreign exchange in
current account items. However, receipt and payment of foreign exchange
in capital account items are still subject to restriction.
Except for foreign-invested enterprises or other enterprises which are
specially exempted by relevant regulations, all entities in the PRC
must sell their foreign exchange income to designated foreign exchange
banks.
Chinese enterprises (including foreign-invested enterprises, i.e. Qin
Dynasty) which require foreign exchange for transactions relating to
current account items, may, without the approval of the State
Administration of Foreign Exchange, effect payment from their foreign
exchange account or convert and pay at the designated foreign exchange
banks, on the strength of valid receipts and proof. Foreign-invested
enterprises which need foreign exchange for the distribution of profits
to the shareholders, and Chinese enterprises which in accordance with
regulations are required to pay dividends to shareholders in foreign
exchange may, on the strength of board resolutions on the distribution
of profits, effect payment from their foreign exchange account or
convert and pay at the designated foreign exchange banks.
Foreign-invested enterprises may also enter into foreign exchange
transactions in the remaining Swap Centers.
Convertibility of foreign exchange relating to capital account items,
such as direct investment and capital contributions, is still subject
to restriction, and prior approval from the SAFE and the relevant
branch must be sought. Although Qin Dynasty is restricted from
transferring funds to other group companies in the form of loans or
advances, it may distribute profits to the shareholders.
The unified exchange rate of the RMB equivalent of US$1.00 as of
December 31, 1995, 1996 and 1997 was RMB8.32, RMB8.32 and RMB8.30,
respectively.
11. RETIREMENT PLAN
Except for Qin Dynasty, the Group does not have any retirement plans in
operation during the years ended December 31, 1995, 1996 and 1997.
As stipulated by the PRC government regulations, the Qin Dynasty has a
defined contribution retirement plan for all its permanent staff. The
monthly contributions of Qin Dynasty for permanent staff to the defined
contribution retirement plan was calculated at 18%, 18% and 20.5% of
the basic salary of the permanent staff for the years ended December
31, 1995, 1996 and 1997, respectively. The pension costs expensed by
the Group during the years ended December 31, 1995, 1996 and 1997
amounted to RMB351,857, RMB413,939 and RMB506,355, respectively.
F-19
<PAGE> 26
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
12. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107
"Disclosure about Fair Value of Financial Instruments". The estimated
fair value amounts have been determined by the Company, using available
market information and appropriate valuation methodologies. However,
considerable judgment is necessarily required in interpreting market
data to develop estimates of fair value. Accordingly, these estimates
are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
The carrying amounts of cash and cash equivalents, short-term bank
borrowings, amount due to the principal shareholder, accounts
receivable and accounts payable are reasonable estimates of their fair
value due to the short maturity of the instruments.
13. CONCENTRATION OF RISKS
The Group's operating assets and primary source of income and cash
flows are its interest in the PRC subsidiary and services provided by
the BVI subsidiary in the PRC and in various countries. The PRC economy
has, for many years, been a centrally-planned economy, operating on the
basis of annual, five-year and ten-year state plans adopted by central
PRC governmental authorities which set out national production and
development targets. The PRC government has been pursuing economic
reforms since it first adopted its "open-door" policy in 1978. There is
no assurance that the PRC government will continue to pursue economic
reforms or that there will not be any significant change in its
economic or other policies, particularly in the event of any change in
the political leadership of, or the political, economic or social
conditions in, the PRC. There is also no assurance that the Group will
not be adversely affected by any such change in governmental policies
or any unfavorable change in the political, economic or social
conditions, the laws or regulations or the rate or method of taxation
in the PRC.
As many of the economic reforms which have been or are being
implemented by the PRC government are unprecedented or experimental,
they may be subject to adjustment or refinement which may have adverse
effects on the Group. Further, through state plans and other economic
and fiscal measures, it remains possible for the PRC government to
exert significant influence on the PRC economy.
The Group obtained foreign currency bank loans for working capital
purposes. For the risks relating to foreign currency, please refer to
note 10.
The Group's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and accounts receivable from
customers. Cash is maintained with major banks in the PRC. The Group's
business activities are with customers in the PRC and in various
countries. The Group periodically performs credit analyses and monitors
the financial condition of its clients in order to minimize credit
risk.
F-20
<PAGE> 27
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
14. SEGMENT INFORMATION
The Group has two reportable segments which are hotel operations and
consultancy services. The hotel operation includes a hotel and related
services provided in Xian, the PRC. The consultancy services are
provided to two unrelated parties in respect of the establishment of a
temple and an amusement park in the PRC.
The Group accounts for intersegment sales and transfers as if the sales
or transfers were to third parties, that is, at current market prices.
The Group's reportable segments are strategic business units that offer
different services. They are managed separately, other than the group
tour coordination and consultancy services which are managed by the
same management, because each business requires different marketing
strategies due to the different location of customers.
The following is a summary of information regarding the Group's
operations by principal activities for the year ended December 31,
1997:
<TABLE>
<CAPTION>
1997
---------------------------------------------------
Hotel Consultancy
operation services Total
--------- -------- -----
RMB RMB RMB
<S> <C> <C> <C>
Revenue from external customers........................ 12,922,004 15,093,000 28,015,004
----------
Total revenue for reportable segments.................. 28,015,004
----------
Segment (loss) profit.................................. (7,991,985) 15,093,000 7,101,015
----------
Income before income taxes............................. 7,101,015
----------
Segment assets......................................... 35,984,030 15,480,000 51,464,030
Corporate assets....................................... 107,008
----------
Consolidated total..................................... 51,571,038
----------
Supplemental information
Interest expenses.................................... 1,977,368 - 1,977,368
Depreciation and amortization........................ 4,016,213 - 4,016,213
Expenditures for segment assets...................... 616,426 - 616,426
----------
</TABLE>
The Group did not provide consultancy services and was only engaged in
the hotel operation for the years ended December 31, 1995 and 1996.
Cheng Chao Ming, substantially the sole individual involved in
providing the consultancy services, did not allocate any of his
compensation for consulting services since the amount would not have
been material (see note 3).
F-21
<PAGE> 28
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
14. SEGMENT INFORMATION - continued
The Group operated in the PRC for the three years ended December 31,
1997 and all long-lived assets of the Group were located in the PRC at
December 31, 1995, 1996 and 1997.
Revenue from two customers of the Group's consultancy services
represents RMB15,093,000 of the Group's consolidated revenue in 1997.
15. PLEDGE OF ASSETS
The net book value of the property, plant and equipment pledged to
banks as of December 31, 1996 and 1997 amounted to RMB22,758,893 and
RMB21,986,421, respectively.
16. COMMITMENTS AND CONTINGENCIES
The Group had no capital commitments as of December 31, 1996 and 1997.
The Group leases land in the PRC on which the Group's hotel is located.
The annual rental payment of RMB120,000 is fixed until 2001.
The Group has an annual commitment of RMB600,000 (see notes 1) payable
to the PRC Joint Venture Partner in accordance with a supplemental
agreement of the sino-foreign co-operative joint venture agreement
until 2016.
Total rental expense charged to operations during the years ended
December 31, 1995, 1996 and 1997 was RMB796,732, RMB738,000 and
RMB743,615, respectively.
At December 31, 1997, the minimum future rental commitments under
non-cancelable leases payable over the remaining terms of the leases
are:
<TABLE>
<CAPTION>
Payable to
the PRC
Land Venturer
---- --------
RMB RMB
<S> <C> <C> <C>
1998................................................................... 120,000 600,000
1999................................................................... 120,000 600,000
2000................................................................... 120,000 600,000
2001................................................................... 120,000 600,000
2002................................................................... - 600,000
2003 through 2016...................................................... - 8,400,000
------- ----------
480,000 11,400,000
------- ----------
</TABLE>
F-22
<PAGE> 29
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
17. LITIGATION
In August 1988, Qin Dynasty signed a loan agreement (the "Loan
Agreement") with a finance company in the PRC (the "Plaintiff" ) to
raise a loan of US$2 million. According to the Loan Agreement, the loan
bore interest at the 6-months LIBOR rate plus 0.8% per annum and was
repayable 24 months after the first drawn down date in 4 equal half
yearly installments of US$500,000. The loan is secured by a RMB 10
million deposit (approximately equivalent to the loan amount on the
drawn down date) provided by Cheng Chao Ming to the Plaintiff and
earned interest from the Plaintiff at a fixed annual interest rate of
7.2%. The Plaintiff was required to refund the deposit to Cheng Chao
Ming in 4 equal half yearly installments of RMB2,500,000 on the
maturity dates of the 4 half yearly principal installments of US$
500,000 at April 3, 1991, September 3, 1991, April 3, 1991 and
September 3, 1992, respectively. However, neither Qin Dynasty repaid
any portion of the loan nor did the Plaintiff request for settlement
during the period because the Company contends there was a verbal
agreement (the "Verbal Agreement") between the parties that the
quarterly principal repayment of US$500,000 should be treated as being
set-off with RMB2,500,000 of the deposit in case of default in
repayment.
The Plaintiff demanded its first request for the settlement of the US$
2 million in March 1994 and Qin Dynasty refused to repay the loan in
view of the existence of the Verbal Agreement.
The Plaintiff then brought legal action against Qin Dynasty and the
verdict was made by the court in the PRC in May 1996 in accordance
with the PRC laws that the first three installments of loan repayment
with an aggregated value of US$1.5 million should be set-off with
RMB7.5 million of Cheng Chao Ming's deposit. Qin Dynasty, however,
should repay the forth loan installment of US$500,000 to the
Plaintiff in return for the refund of the RMB2,500,000 deposit to
Cheng Chao Ming. All related interest income, expenses and penalty
interest for the delay of repayment in respect of the US$500,000
loan principal and RMB2,500,000 deposit should be computed and
settled in accordance with the loan agreement. Respective liabilities
arising from the loan by Qin Dynasty have been accrued in accordance
with the verdict as of December 31, 1997.
The Plaintiff has lodged an appeal. However, the Company's directors
believe that no adverse event will be brought to the Group concerning
the pending litigation.
F-23
<PAGE> 30
WONDERWIDE CONSULTANTS LIMITED AND SUBSIDIARIES
(Incorporated in the British Virgin Islands with limited liability)
18. SUBSEQUENT EVENTS
(a) Subsequent to December 31,1997, Jenson International, Inc.
issued 140,000 shares of its common stock to an unaffiliated
party (the "Consultant") in accordance with a consultancy
service agreement signed on January 2, 1998 for services
provided by the Consultant prior to March 16, 1998.
The consultancy fee of US$21,000 had been determined based on
the fair value of the common stock to be issued as of the date
of these shares being granted to the Consultant and was
accrued by Jenson as professional expenses in January 1998.
(b) On March 16, 1998, Jenson acquired all of the outstanding
ordinary share capital of the Company from Cheng Chao Ming
through the issuance of 1,895,500 shares to Cheng Chao Ming in
accordance with a share exchange agreement.
(c) Subsequent to December 31, 1997, the Group had entered into
contracts for the renovation of the hotel in Xian amounting to
approximately RMB17,380,000.
(d) On January 1, 1999, the Company entered into a sale and
purchase agreement to acquire, for a contribution of
HK$200,000, the entire issued share capital of Jenson
International Travel Services Limited ("Jenson Travel") in
which Cheng Chao Ming had beneficial ownership interests.
(e) As stipulated in the agency agreements entered into on
February 1, 1999, effective January 1, 1999, with four related
party entities, (collectively referred to as the "Agents") in
which Cheng Chao Ming has beneficial ownership interests, the
Agents have appointed Jenson Travel to handle their customers
within the Hong Kong, Macau and Xian stages of arranged trips.
On February 1, 1999, effective January 1, 1999, Jenson Travel
also entered into a contract with an unrelated party, which
was appointed as a sub-contractor for the operation of the
Xian stages of the trips and at the same time, this unrelated
party also entered into a contract with Qin Dynasty to appoint
Qin Dynasty as the sub-contractor for the operation of the
Xian stages of the trips. Jenson Travel will provide customers
with sight-seeing services and accommodation arrangement
services in Hong Kong and Macau whereas Qin Dynasty will
provide these services in Xian.
(f) On February 1, 1999, effective January 1, 1999, the Group
entered into a consulting contract with Cheng Chao Ming for
consulting services provided for the Temple Contract and the
Ocean Park Contract. The annual consulting fee payable to
Cheng Chao Ming is fixed at 2% of the consulting service fee
income recognized by the Group as stipulated in the two
consulting contracts.
(g) On May 7, 1999, effective January 1, 1999, the Group entered
into a management agreement whereby a related company outside
the Group in which Cheng Chao Ming has a beneficial ownership
interest will provide office space, administrative and
accounting services. The management fee has been agreed upon
at a monthly payment of HK$30,000.
(h) Subsequent to the balance sheet date, Cheng Chao Ming agreed
to forego repayment on the advances made by him of
RMB70,000,000 in exchange for 501,484 shares of common stock
of Jenson.
F-24
<PAGE> 31
INDEX TO EXHIBITS
10.4 Investment Agreement dated as of May 18, 1999 by and between Jenson
International, Inc. and C.M. Cheng
<PAGE> 1
EXHIBIT 10.4
INVESTMENT AGREEMENT
This INVESTMENT AGREEMENT (this "Agreement") is made as of the 18th day
of May, 1999, by and between JENSON INTERNATIONAL, INC., a Nevada corporation,
formerly known as Best Medical Treatment Group, Inc. (the "Company"), and CHENG
CHAO MING, an individual (the "Shareholder").
RECITALS:
WHEREAS, the Company and the Shareholder have previously entered into
that certain Share Exchange Agreement dated as of March 12, 1998 (the "Share
Exchange Agreement");
WHEREAS, pursuant to the Share Exchange Agreement, the Shareholder
contributed to the Company 100% of the issued and outstanding capital stock of
Wonderwide Consultants Limited (B.V.I.) ("Wonderwide") in exchange for the
issuance to the Shareholder by the Company of 2,230,00 shares of the Company's
common stock, US$.001 par value per share (the "Common Stock");
WHEREAS, Section 2.04(b) of the Share Exchange Agreement provides for
the cancellation of certain shares of Common Stock issued to the Shareholder in
respect of the transactions contemplated thereby upon the occurrence of certain
conditions described therein;
WHEREAS, the Shareholder has provided certain interest free advances to
the Company from time to time, in the aggregate amount of RMB70,000,000, and the
Shareholder desires that such advances be capitalized. The Company has agreed to
issue to the Shareholder shares of Common Stock based on an independent
valuation;
WHEREAS, subsequent to the closing date of the Share Exchange
Agreement, the Shareholder agreed to transfer to Wonderwide all of the issued
and outstanding capital stock of Jenson International Travel Services Limited
("Jenson Travel") in exchange for the issuance to the Shareholder by the Company
of shares of Common Stock;
WHEREAS, the Shareholder has agreed to contribute to the Company the
sum of RMB36,535,000, representing the approximate net income of the group tour
business now conducted by Jenson Travel for the years ended December 31, 1995,
1996, 1997 and 1998; and
WHEREAS, the Company and the Shareholder desire to enter into this
Agreement to memorialize the terms and conditions of the transactions described
above.
AGREEMENT:
NOW THEREFORE, in consideration of the mutual promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and Shareholder agree
as follows:
<PAGE> 2
1. Cancellation of Shares.
(a) The parties acknowledge and agree that, for purposes of
Section 2.04(b) of the Share Exchange Agreement, Wonderwide's consolidated net
income, as audited under U.S. GAAP for the fiscal year ended December 31, 1997,
was US$793,736. In accordance with the terms and conditions of the Share
Exchange Agreement, an aggregate of 1,886,022 shares of Common Stock issued to
the Shareholder on the closing date of the Share Exchange Agreement were
automatically cancelled effective as of May 17, 1999 (which is the date of
completion of the audit of Wonderwide's financial statements for the fiscal year
ended December 31, 1997). Upon cancellation of such shares, all obligations of
the Shareholder under Section 2.04(b) of the Share Exchange Agreement shall be
satisfied in full. In addition, the Company hereby irrevocably waives any claim,
cause of action or other right it may have had against the Shareholder, whether
arising under the Share Exchange Agreement or otherwise, that may have been
based, in full or in part, on the failure of Wonderwide to achieve consolidated
net income, as audited under U.S. GAAP for the fiscal year ended December 31,
1997, of US$2.5 million or on any representation or warranty of any party in
respect thereof.
(b) The parties acknowledge that the conditions for the
release of all shares held in escrow pursuant to Section 7.02 of the Share
Exchange Agreement shall be deemed to have been timely satisfied. Accordingly,
all 334,500 share of Common Stock held in escrow shall be available to the
Shareholder to submit for cancellation pursuant to Section 2.04(b) of the Share
Exchange Agreement as described in subsection (a) above.
(c) The Shareholder agrees to surrender to the Company all
certificates representing shares of Common Stock cancelled pursuant to Section
2.04(b) of the Share Exchange Agreement as described in subsection (a) above
(with the exception of certificates representing shares of Common Stock held in
escrow pursuant to Section 7.02 of the Share Exchange Agreement, which shall be
surrendered to the Company by the escrow agent).
2. Jenson Travel.
(a) Effective as of January 1, 1999, the Shareholder
transferred to Wonderwide all of the issued and outstanding capital stock of
Jenson Travel. In exchange therefor, the Company agrees to issue to the
Shareholder an aggregate of 1,275,673 shares of Common Stock. Such shares shall
be issued immediately upon execution of this Agreement, and upon issuance such
shares shall be fully paid and nonassessable. The parties acknowledge that such
exchange ratio was determined based upon an independent third-party valuation
report dated as of January 1, 1999 and that it is intended to reflect receipt of
consideration by the Company in an amount that approximates the fair value of
the shares of Common Stock issued to the Shareholder in respect thereof.
(b) The Shareholder hereby agrees contribute to the Company
the sum of RMB36,535,000 (the "Group Tour Contribution"), representing the
approximate net income of the certain group tour businesses for the years ended
December 31, 1995, 1996, 1997 and 1998, which group tour businesses were
previously conducted by the Shareholder but are now conducted by Jenson Travel
from January 1, 1999. Notwithstanding the obligation of the
2
<PAGE> 3
Shareholder to make such contribution, the parties acknowledge and agree that
such amount shall be offset in full by certain advances previously made by the
Shareholder to the Company as described in Section 3 of this Agreement.
3. Previous Advances.
(a) The parties acknowledge and agree that the Shareholder
has, without any obligation or pre-existing liability to do so, made various
advances to the Company from time to time in the aggregate amount of
RMB70,000,000 and, in exchange therefor, the Company agrees to issue shares of
Common Stock to the Shareholder. The obligation of the Shareholder to make the
Group Travel Contribution described in Section 2(b) of this Agreement shall be
used to partially offset the aggregate amount owing from the Company to the
Shareholder in respect of such previous advances. As a result of such offset,
the aggregate net balance of the previous advances made to the Company by the
Shareholder shall be RMB33,465,000.
(b) In exchange for the aggregate net previous advances of
RMB33,465,000, the Company agrees to issue to the Shareholder an aggregate of
501,484 shares of Common Stock. Such shares shall be issued immediately upon
execution of this Agreement, and upon issuance such shares shall be fully paid
and nonassessable. The parties acknowledge that such exchange ratio was
determined based upon an independent third-party valuation report dated as of
December 31, 1998 and that it is intended to reflect receipt of consideration by
the Company in an amount that approximates the fair value of the shares of
Common Stock issued to the Shareholder in respect thereof.
4. Acknowledgement of Capitalization and Share Holdings. The parties
acknowledge and agree that, as of the date of this Agreement and after giving
effect to the transactions contemplated hereby, a total of 2,654,514 shares of
Common Stock shall be issued and outstanding, of which 2,121,135 shares shall be
held by the Shareholder.
5. Representations and Warranties of the Shareholder. In respect of the
acquisition by the Shareholder of shares of Common Stock from the Company (the
"Securities") as described in Sections 2(a) and 3(b) above, the Shareholder
represents and warrants to the Company that (i) the Shareholder is acquiring the
Securities for his or its own account for investment purposes only and not with
a view to the distribution or sale of such Securities within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), (ii) the Shareholder
is an "accredited investor," as such term is defined in Rule 501 promulgated
under the Securities Act, (iii) the Shareholder has read this Agreement and the
audited annual financial statements of Wonderwide for the three years ended
December 31, 1997 and of the Company for the year ended December 31, 1998,
together with all such other information that the Shareholder may have requested
from the Company in order to make an investment decision (the "Supplemental
Information") and is capable of evaluating and understanding this Agreement and
the Supplemental Information, (iv) the Shareholder has been provided with all
information requested from the Company and has been afforded the opportunity to
ask questions and receive answers concerning the terms and conditions of the
Company and the Supplemental Information, (v) the Shareholder understands the
significant risks involved with an investment in the Securities, (vi) the
Shareholder understands that the Securities have not been and will not be
registered under the
3
<PAGE> 4
Securities Act or registered or qualified under any state securities or blue sky
laws and that the Securities must be held indefinitely unless they are
subsequently registered under the Securities Act and applicable state securities
and blue sky laws or an exemption from such registration is available, and (vii)
the Shareholder understands that no federal or state agency has passed upon the
Securities or made any finding or determination as to the fairness of the
investment or any recommendation or endorsement of the Securities.
6. Miscellaneous.
(a) Notices. All notices and other communication provided for
in this Agreement shall be in writing and delivered (by hand or by recognized
courier services), telecopied or mailed (registered or certified), addressed as
follows:
(i) if to the Company:
Jenson International Inc.
Room 1008-9
Shun Tak Centre, West Tower
168-200 Connaught Road, Central
Hong Kong
Attn: Mr. Jimmy Chow
Facsimile: (852) 2546-3910
with a copy to:
Squire, Sanders & Dempsey L.L.P.
40 North Central Avenue Suite 2700
Phoenix, Arizona 85004
Attn: Christopher D. Johnson, Esq.
Facsimile: (602) 253-8129
(ii) if to the Shareholder:
Mr. Cheng Chao Ming
Room 1008-9
Shun Tak Centre, West Tower
168-200 Connaught Road, Central
Hong Kong
Facsimile: (852) 2546-3910
Any notice or communication shall be deemed to have been given when
delivered, telecopied or mailed as aforesaid.
(b) Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns. Neither party
4
<PAGE> 5
may assign or delegate its rights or obligations under this Agreement without
the prior written consent of the other party.
(c) Further Assurances. The Company and the Shareholder shall
take such actions and execute and deliver such instruments as either party may
reasonably request to further perfect, evidence or consummate the transactions
contemplated by this Agreement.
(d) Waiver. A waiver on the part of any party hereto of any
term, provision or condition of this Agreement or breach thereof shall not
constitute a precedent, nor bind either party hereto to a waiver of any other
term, provision or condition of this Agreement or any other or succeeding breach
of the same or any other term, provision or condition thereof.
(e) Amendments. This Agreement shall not be modified, amended
or otherwise changed without the written agreement of each of the parties
hereto.
(f) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) Entire Agreement. This Agreement contains the entire
understanding between the parties relating to its subject matter, and this
letter supersedes all prior agreements, understandings, representations and
statements, oral or written, between the Company and the Shareholder relating to
the matters which are the subject of this Agreement.
(h) Severability. If any one or more of the provisions
contained in this Agreement, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(i) Governing Law. This Agreement and the Note shall be
governed by and construed in accordance with the laws of the State of Nevada,
without regard to conflict of law principles.
[signature page follows]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Investment
Agreement on the date above first written.
JENSON INTERNATIONAL INC., a Nevada corporation
By: /s/ Xiong P. Paul
------------------------------------------------
Title: Director
---------------------------------------------
/s/ Cheng Chao Ming
---------------------------------------------------
Mr. Cheng Chao Ming
6
