UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the Fiscal Year Ended December 31, 2007
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for The Transition Period From ______________To ________________
Commission file number: 000-50559
SCIENTIFIC ENERGY, INC
(Name of Small Business Issuer in Its Charter)
Utah 87-0680657
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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27 Weldon Street, Jersey City, New Jersey 07306
(Address of principal executive offices including zip code)
(201) 985-8100
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Common Stock, Par Value $0.01
Securities registered pursuant to Section 12(g) of the Act
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. ( )
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirement for the past 90 days. Yes (X) No ( )
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes ( ) No (X)
The issuer's revenues for its most recent fiscal year were: none.
The number of shares of our common stock outstanding on March 31, 2008 was
4,915,855 shares.
Transitional Small Business Disclosure Format (check one): Yes ( ) No (X)
TABLE OF CONTENTS
Page
Part I. ------
Item 1. Description of Business................................... 3
Item 1A. Risk Factors.............................................. 5
Item 2. Description of Property................................... 8
Item 3. Legal Proceedings......................................... 8
Item 4. Submission of Matters to a Vote of Security Holders....... 9
Part II.
Item 5. Market for Common Equity and Related Stockholder Matters.. 9
Item 6. Management's Discussion and Analysis or Plan of Operation. 10
Item 7. Financial Statements...................................... 13
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 24
Item 8A (T). Controls and Procedures................................. 25
Item 8B. Other Information......................................... 26
Part III.
Item 9. Directors and Executive Officers of the Registrant........ 26
Item 10. Executive Compensation.................................... 28
Item 11. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters............... 30
Item 12 Certain Relationships and Related Transactions, and
Director Independence.................................... 30
Item 13 Exhibit List and Reports on Form 8-K...................... 31
Item 14 Principal Accountants Fees and Services................... 32
Signatures........................................................... 32
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PART I
Item 1. Description of Business
Background
Scientific Energy, Inc. (the "Company") was incorporated under the laws of the
State of Utah on May 30, 2001. The Company had not engaged in material
operations or realized revenues for several years. Prior to April 2006, the
business plan of the Company was to develop and manufacture various energy
generation devices and energy efficient mechanisms for use in currently
available products. The current business plan of the Company is to acquire
energy related technologies, equipment and crude oil or natural gas fields in
Asia crude oil rich countries.
On April 13, 2006, there was a change in control of the Company effected
pursuant to a Share Purchase Agreement by and among Todd Crosland, Jana Meyer,
Mark Clawson and Dale Gledhill (collectively the "Sellers"), and Kelton Capital
Group Limited (the "Buyer"). Each of the Sellers was a director of the Company.
Under the Share Purchase Agreement, the Buyer acquired from the Sellers an
aggregate of 790,500 shares of the Company's issued and outstanding common
stock, representing approximately 86.3% of the Company's outstanding shares at
that time, for the aggregate cash purchase price of $539,929.
In connection with the change in control, the four members of the Company's
Board of Directors, Todd Crosland, Jana Meyer, Mark Clawson and Dale Gledhill,
tendered their resignations as the Company's directors and executive officers.
On May 1, 2006, Mary Jiang was elected as a Director and Corporate Secretary
(resigned on April 23, 2007). On May 8, 2006, Stanley Chan was elected as the
Company's President, Chief Executive Officer, Chief Financial Officer and a
Director.
We have not been involved in any bankruptcy, receivership or similar proceeding.
Description of Business
The Company had not engaged in material operations or realized revenues for
several years. On April 13, 2006, Kelton Capital Group Ltd acquired a majority
of the Company's issued and outstanding common stock. Prior to April 2006, the
business plan of the Company was to develop and manufacture various energy
generation devices and energy efficient mechanisms for use in currently
available products.
In April 2007, the Company acquired certain heavy drilling equipment, facilities
and contract rights associated with crude oil drilling and service business from
PT Prima Jasa Energy, an Indonesian crude oil drilling and service firm ("PJE"),
for $300,000. At the same time, the Company entered into a long-term drilling
services agreement with PJE, pursuant to which PJE will provide crude oil
drilling and services to the Company. Under the agreement, PJE agrees to provide
drilling, marketing, and equipment maintenance services to the Company by
utilizing the equipment and other assets the Company purchased from PJE.
In October 2007, the Company sold all drilling equipment, facilities and
associated contract rights the Company purchased from PJE to Bermon Capital
Holdings Limited for $400,000, and intends to enter into mining and natural
resources industry in China.
On January 21, 2008, the Company, through its wholly owned subsidiary PDI Global
Ltd., entered into an agreement with China Resources Developmnent Group Ltd., a
Hong Kong company. Under the agreement, a joint venture company (the "JVC") will
be established in Hong Kong, and the Company will invest $39,600,000 Hong Kong
dollars (approximately USD$5.14 million) into the JVC to get 72% of the JVC's
capital shares, and China Resources Development Group Ltd. will, jointly with
its partner, invest $15,400,000 Hong Kong dollars (approximately USD$1.98
million) into the JVC to receive 28% of the JVC's capital shares. The purpose
of this transaction is for the Company to set up a business entity in China to
gain access to mineral products, mineral resources and sales channel in China.
On January 25, 2008, the Company entered into a Subscription Agreement with
eighteen investors, pursuant to which the Company agreed to issue, in a private
placement, an aggregate of 90,000,000 shares of the Company's restricted common
stock to non-U.S. investors, at a purchase price of $0.06 per share, for an
aggregate of purchase price of $5.4 million. The proceeds received will be used
to acquire mineral products in China and for the Company's general operating
expenses.
Resources of Revenue
The following is the description of the Company's business for the year ended
December 31, 2007. In 2007, the Company generated its revenue primarily from the
service fees it earned when oil companies, all of which were in the Republic of
Indonesia, engaged PJE to provide drilling services for them. For the year ended
December 31, 2007, the Company's income from discontinued operations was $375.
Business Strategy
In 2007, the Company did not have its own work force, facilities or experience
to implement its business plan. The Company's business strategies in 2007 were
to (i) rely on strategic relationship with third parties to provide services;
(ii) selectively acquire more energy related assets, technologies, equipment,
services, businesses or oilfields.
Marketing and Sales
The initial target market of the Company's drilling services was those small or
middle size crude oil companies that do not have their own rigs and other
drilling equipment in Republic of Indonesia. The Company is a development stage
company and at present does not have its own work force and expertise in the
industry. During 2007, the Company engaged PT Prima Jasa Energy to provide all
services, including searching for and development of new clients, and collection
of accounts receivable under the operating contract rights on behalf of us.
Government Contracts
There are no government contracts at this time.
Patents, trademarks, franchises, concessions, royalty agreements or labor
contracts
We don't own any patents, trademarks, copyrights, franchises, concessions,
royalty agreements, or labor contracts.
Product Research and Development
To date we have not conducted any product research and development. We do not
plan to conduct any product research and development activities in the next
twelve months.
Employees
We have two full time employees at this time. None of our employees are covered
by collective bargaining agreements, and we believe our relationships with our
employees to be satisfactory.
Item 1A. Risk Factors
An investment in us involves a high degree of risk. Investors should carefully
consider the risks below before making an investment decision. Our business,
financial condition or results of operations could be materially adversely
affected by any of these risks. In such case, the trading price of our common
stock could decline and investors could lose all or part of their investment.
Risks Related to Our Business
We are a development-stage company and until recently had no operating history,
which makes it difficult to evaluate our business and prospects.
We were formed in May 2001, and until April 2007 had no history of meaningful
operations, which makes it difficult to evaluate our business and prospects. As
an early stage company, we are subject to all the risks, uncertainties, expenses
and difficulties inherent in a new business, and there are no assurances that
we will be successful in realizing revenues or in achieving or sustaining
positive cash flow at any time in the future. In October 2007, the Company has
ceased its oil drilling service business and intends to enter into mining and
natural resources industry in China. The Company's proposed business plan may
not be successful, and you may lose part or all of your investment in our common
stock.
Our business will require substantial capital and we have limited financial
resources.
The Company's sources of working capital are limited. Its current proposed
business plan calls for significant additional capital, and we anticipate that
we may incur losses in the near future. If such additional capital needs are met
through the issuance of equity or convertible debt securities, existing
stockholders' ownership percentage will be reduced.
Additional financing could be sought from a number of sources, including but not
limited to additional sales of equity or debt securities, or loans from the
Company's officers or directors or from affiliates or other financial
institutions. The Company may not, however, be able to sell any securities or
obtain any such additional financing when needed, or do so on terms and
conditions acceptable or favorable to us. If financing is not available, the
Company may be forced to abandon its business plan or its entire business, or
dissolve. If the Company successfully enters into a financing transaction, any
additional equity or equity-linked financing would be dilutive to stockholders,
and additional debt financing, if available, may involve restrictive covenants.
We have experienced continued losses and expect to incur losses in the future.
If we do not achieve profitability, our financial condition and stock price
could suffer.
The Company historically incurred significant losses. As of December 31, 2007,
the company's accumulated deficit was $849,535. The Company may incur operating
losses and negative cash flow from operations to continue for the foreseeable
future. At this time, the Company cannot predict when it will operate
profitably, if at all. If the Company fails to achieve or maintain
profitability, its stock price may decline.
Our directors have other business and management responsibilities which may
cause conflicts of interest in the allocation of their time and services to our
business.
Stanley Chan, our sole officer, has other management responsibilities and
business interests apart from our business. Therefore, it is possible that a
conflict of interest with regard to his time may arise based on his involvement
in other activities. His other activities will prevent him from devoting full-
time to our operations which could slow our operations and may reduce our
financial results because of the slow down in operations. Mr. Chan intends to
limit his role in his other business activities and devote more of his time to
the Company after we attain a sufficient level of revenue and are able to
provide sufficient officers' salaries.
Our business may be severely disrupted if we lose the services of our CEO or
fail to successfully recruit qualified managerial personnel having experience
in business.
We are highly dependent upon the continued service and performance of
Mr. Stanley Chan, our sole officer, who is also our principal shareholder. The
loss of Mr. Chan may significantly delay or prevent the achievement of our
business objectives. We do not maintain key-man insurance on the life of
Mr. Chan.
We believe that our future success will also depend in on our continued ability
to identify, hire, train and motivate qualified personnel. Competition for
qualified individuals is intense. There can be no assurance that we will be able
to retain existing employees or that we will be able to find, attract and
retain qualified personnel on acceptable terms, and our failure to attract and
retain qualified personnel could impair our ability to implement our business
plan.
Our sole officer and director is located outside of the U.S. It is difficult to
effect service of process and enforcement of legal judgments upon us and our
officers and directors.
Our sole officer and director are located outside of the United States. As a
result, it may be difficult to effect service of process within the United
States and enforce judgment of the US courts obtained against us and our
executive officers and directors. Particularly, our shareholders may not be able
to:
o Effect service of process within the United States on us or any of our
executive officers and directors;
o Enforce judgments obtained in U.S. courts against us based upon the civil
liability provisions of the U.S. federal securities laws;
o Enforce, in a court outside of the U.S. judgments of U.S. courts based
on the civil liability provisions of the U.S. federal securities laws; and
o Bring an original action in a court in China to enforce liabilities
against us or any of our executive officers and directors based upon the U.S.
federal securities laws.
Risks Related to Investment in Our Securities
A few of our existing shareholders own a large percentage of our voting stock
and will have a significant influence over matters requiring stockholder
approval and could delay or prevent a change in control.
As of December 31, 2007, Stanley Chan, our CEO and the sole director,
beneficially owned 2,390,500 shares, or approximately 48.6%, of our outstanding
common stock. As a result, if acting together with other shareholders, he may
have the ability to determine the outcome of matters submitted to our
stockholders for approval, including the election of directors and any merger,
consolidation or sale of all or substantially all of our assets. In addition,
these persons, if acting together, may have the ability to control the
management and affairs of our company, which could have a material adverse
effect on the value of the common stock.
There has been low volume and therefore inactive for our common stock, our stock
price may be volatile or may decline regardless of our operating performance,
and you may not be able to resell your shares at or above your stock purchase
price.
If you purchase shares of our common stock, you may not be able to resell those
shares at or above your original purchase price. An active or liquid market in
our common stock may not develop or, if it does develop, it may not be
sustainable. The market price of our common stock may fluctuate significantly
in response to numerous factors, many of which are beyond our control.
Our common stock is considered a "penny stock."
The SEC has adopted regulations which generally define "penny stock' to be an
equity security that has a market price of less than $5.00 per share, subject to
specific exemptions. Our common stock is deemed a "penny stock." Brokers and
dealers effecting transactions in "penny stock" must disclose certain
information concerning the transaction, obtain a written agreement from the
purchaser and determine that the purchaser is reasonably suitable to purchase
the securities. These rules may restrict the ability of brokers or dealers to
sell our common stock and may affect our shareholders' ability to sell shares.
Our shareholders may find it difficult to obtain accurate quotations of the
stock, and may find few buyers to purchase such stock and few market makers to
support its price.
We have never declared or paid dividends on our capital stock and we do not
anticipate paying any cash dividends in the foreseeable future.
We have never declared or paid dividends on our common stock and we do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to fund the development and growth of
our business. Any future determination to pay dividends will be at the
discretion of our Board of Directors and will be dependent upon our financial
condition, operating results, capital requirements, applicable contractual
restrictions and other such factors as our Board of Directors may deem relevant.
Item 2. Description of Property
We lease our corporate office space, approximately 250 square feet, in Jersey
City, New Jersey, under a six-month lease, which was expired and is currently on
month-by-month basis. The rent is $480 per month. If we require additional
space, we believe that we will be able to obtain such space on commercially
reasonable terms.
Item 3. Legal Proceedings
We are not aware of any pending or threatened legal proceeding that, if
determined in a manner adverse to us, could have a material adverse effect on
our business and operations.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL
BUSINESS ISSUER PURCHASE OF EQUITY SECURITIES
Market Information
Our common stock is quoted on the OTC Bulletin Board under the symbol "SCGY.OB."
There is currently not an active trading market for the shares. Accordingly, we
are not including a history of reported trades in the public market through
December 31, 2007. The last reported trade for our shares on November 19, 2007
was $0.16 per share.
Record Holders
As of December 31, 2007, we had approximately 234 holders of record of our
common stock.
Dividends
We have never paid cash dividends and have no plans to do so in the foreseeable
future. Our future policy will be determined by our board of directors and will
depend upon a number of factors, including our financial condition and
performance, our cash needs and expansion plans, income tax consequences, and
the restrictions that applicable laws and our credit arrangements may impose.
Securities Authorized for Issuance under Equity Compensation Plans
We do not have any compensation plan under which equity securities are
authorized for issuance.
Stock Option
We have not issued and do not have outstanding any options to purchase shares
of our common stock.
Warrants
We have not issued and do not have outstanding any warrants to purchase shares
of our common stock.
Convertible Securities
We have not issued and do not have outstanding any securities convertible into
shares of our common stock or any rights convertible or exchangeable into shares
of our common stock.
Transfer Agent
Our transfer agent is Interstate Transfer Company, which is located at 6084
South 900 East, Suite 101, Salt Lake City, Utah 84121. Its telephone number is
(801) 281-9746.
Recent Sales of Unregistered Securities
On May 23, 2006, the Company entered into a Stock Purchase Agreement with Kelton
Capital Group Ltd., the controlling shareholder of the Company, and each of ten
(10) individual investors (collectively the "Investors") in a private placement.
Pursuant to the agreement, the Company sold and Investors purchased an aggregate
of 4,000,000 shares of the Company's common stock for an aggregate consideration
of $400,000. Under the Agreement, Kelton purchased 1,600,000 shares, and each of
ten (10) individual investors purchased 240,000 shares of the Company's common
stock at a price of $0.1 per share.
The securities described above were offered and sold in reliance upon exemptions
from registration provided by Regulation S and/or Section 4(2) promulgated under
the Securities Act of 1933, as amended. The agreements executed in connection
therewith contain representations and warranties to support the Company's
reasonable belief that the investors had access to information concerning the
Company's operations and financial conditions, the investors are acquiring the
securities for their own account and not with a view to the distribution
thereof. At the time of their issuance, the securities described above were
deemed to be restricted securities for purposes of the Securities Act and the
certificates representing the securities were borne legends to that effect. All
investors are not a "U.S. Person" as that term is defined in Regulation S
promulgated under the Securities Act of 1933. No directed selling efforts were
made in the United States, and no underwriters were involved in this
transaction.
Item 6. Management's Discussion and Analysis or Plan of Operation
This report contains certain forward-looking statements that involve risks and
uncertainties. We use words such as "anticipate," "believe," "expect," "future,"
"intend," "plan," and similar expressions to identify forward-looking
statements. These statements are only predictions. Although we believe that the
expectations reflected in these forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this report. Our actual results
could differ materially from those anticipated in these forward-looking
statements.
Overview
The Company had not engaged in material operations or realized revenues for
several years. On April 14, 2006, Kelton Capital Group Ltd. acquired a majority
of the Company's issued and outstanding common stock. Prior to April 2006, the
Company was to develop and manufacture various energy generation devices and
energy efficient mechanisms for use in currently available products.
In April 2007, the Company acquired certain heavy drilling equipment, facilities
and contract rights associated with crude oil drilling and service business from
PT Prima Jasa Energy, an Indonesian crude oil drilling and service firm ("PJE"),
for $300,000. At the same time, the Company entered into a long-term drilling
services agreement with PJE, pursuant to which PJE will provide crude oil
drilling and services to the Company. Under the agreement, PJE agrees to provide
drilling, marketing, and equipment maintenance services to the Company by
utilizing the equipment and other assets the Company purchased from the PJE.
In October 2007, the Company sold all drilling equipment, facilities and
associated contract rights the Company purchased from PJE to Bermon Capital
Holdings Limited for $400,000, and intends to enter into mining and natural
resources industry in China.
On January 21, 2008, the Company, through its wholly owned subsidiary PDI Global
Ltd., which was incorporated under the laws of Territory of the British Virgin
Islands on January 21, 2008, entered into an agreement with China Resources
Development Group Ltd., a Hong Kong company. Under the agreement, a joint
venture company (the "JVC") will be established in Hong Kong, and the Company
will invest $39,600,000 Hong Kong dollars (approximately USD$5.14 million) into
the JVC to get 72% of the JVC's capital shares, and China Resources Development
Group Ltd. will, jointly with its partner, invest $15,400,000 Hong Kong dollars
(approximately USD$1.98 million) into the JVC to receive 28% of the JVC's
capital shares. The purpose of this transaction is for the Company to set up a
business entity in China to gain access to mineral products, mineral resources
and sales channel in China.
Results of Operations
For the Year Ended December 31, 2007 Compared to the Year Ended December 31,
2006:
Revenues
In October 2007, the Company discontinued its drilling service operations.
Accordingly, the Company generated no revenue from continuing operations for the
year ended December 31, 2007. The Company's net income from discontinued
operations was $375. For the year ended December 31, 2006, the Company had not
conducted any active operations, and therefore, no revenue was generated during
this period.
Operating Expenses
For the year ended December 31, 2007, the Company's general and administrative
expenses were $55,485 compared to $35,652 for the same period of the prior year.
The largest expense items were salary expense ($32,000, or 57.7%), accounting
and other professional fees ($11,625 or 20.9%), and office rent ($5,760, or
10.4 %).
Other Income (Expense)
For the year ended December 31, 2007, the Company had other income of $118,238,
which was derived from gain on disposal of subsidiary. For fiscal 2006, the
Company had other expense of $100, which was interest expense.
Net Income (Loss)
For the year ended December 31, 2007, the Company had a net income of $63,128,
or $0.01 per share, as compared to a net loss of $35,752, or $0.01 per share,
for the prior year.
Liquidity and Capital Resources
Since inception, the Company has funded its operations primarily by equity
capital and short-term loans from its directors and officers. On May 23, 2006,
the Company entered into a stock purchase agreement with Kelton Capital Group
Ltd., the controlling shareholder of the Company, and nine individual investors
in a private placement. Pursuant to the agreement, the Company issued an
aggregate of 4,000,000 shares of its common stock for an aggregate consideration
of $400,000 in cash.
As of December 31, 2007, the Company had cash and cash equivalents of $455,304.
For the year ended December 31, 2007, the Company used $13,900 in operating
activities, primarily due to net income of $63,128, increase in depreciation
expense of $18,517, and increase in salary payable of $20,000.
For the year ended December 31, 2007, the Company's investing activities
provided net cash of $99,839, primarily from the purchase and disposal of an
operating subsidiary.
During the year ended December 31, 2007, the Company had no financing
activities.
The Company's sources of working capital are limited. Its current proposed
business plan calls for significant additional capital. To finance any business
operations, it may be necessary for the Company to raise additional funds
through public or private financings. Additional funds may not be available on
terms that are favorable to us, and, in the case of equity financings, would
result in dilution to our stockholders. There can be no assurance that such
additional financing, when and if necessary, will be available to us on
acceptable terms, or at all.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies
Our financial statements and related public information are based on the
application of generally accepted accounting principles in the United States
("GAAP"). GAAP requires the use of estimates, assumptions, judgments and
subjective interpretations of accounting principles that may have an impact on
the assets, liabilities, revenue and expense amounts reported. These estimates
can also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use of estimates and underlying accounting assumptions adhere to
GAAP and are consistently applied. We base our estimates on historical
experience and on various assumptions that we believe are reasonable under the
circumstances. Actual results may differ materially from these estimates under
different assumptions or conditions. We continue to monitor significant
estimates made during the preparation of our financial statements.
Our significant accounting policies are summarized in Note 2 to our financial
statements. While all of these significant accounting policies impact our
financial condition and results of operations, we view certain of these policies
as critical. Policies determined to be critical are those policies that have the
most significant impact on our financial statements. Our critical accounting
policies are discussed below.
Impairment of Long-Lived Assets
Long-lived assets, including our property and equipment, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets might not be recoverable. Conditions that would
necessitate an impairment assessment include a significant decline in the
observable market value of an asset, a significant change in the extent or
manner in which an asset is used, or any other significant adverse change that
would indicate that the carrying amount of an asset or group of assets is not
recoverable. For long-lived assets used in operations, impairment losses are
only recorded if the asset's carrying amount is not recoverable through its
undiscounted, probability-weighted cash flows, including estimated net proceeds
if we were to sell a long-lived asset. When applicable, we measure the
impairment loss based on the difference between the carrying amount and
estimated fair value.
We periodically review our long-lived assets, in light of our history of
operating losses, but under the methodology described above, we have not been
required to record any impairment losses. Should applicable external factors
such as competition, governmental regulations or other market conditions change
in such a way as to be materially adverse to our business, impairment losses
might be required in the future.
Item 7. Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Scientific Energy, Inc.
(A development stage company)
We have audited the accompanying balance sheets of Scientific Energy, Inc. (A
development stage company)(the Company) as of December 31, 2007 and 2006 and the
related statements of operations, stockholders' equity and cash flows for the
years then ended and for the period from May 30, 2001 (inception) to December
31, 2007. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
2007 and 2006, and the results of its operations and its cash flows for the
years then ended and for the period from May 30, 2001 (inception) to December
31, 2007, in conformity with accounting principles generally accepted in the
United States of America.
/s/ Child, Van Wagoner & Bradshaw, PLLC
---------------------------------------
Child, Van Wagoner & Bradshaw, PLLC
Salt Lake City, Utah
April 2, 2008
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SCIENTIFIC ENERGY, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
December 31,
--------------------------------
2007 2006
----------------- --------------
Current Assets:
Cash and cash equivalents................................ $ 455,304 $ 369,365
---------------- -------------
Total Current Assets................................ 455,304 369,365
Property, Plant, & Equipment:
Furniture and fixtures................................... 313 152
Office equipment......................................... 1,222 1,222
---------------- -------------
Total Property, Plant, & Equipment.................. 1,535 1,574
Less: Accumulated depreciation...................... (435) (156)
---------------- -------------
Net Fixed Assets.................................... 1,100 1,218
---------------- -------------
Total Assets............................................. $ 456,404 $ 370,583
================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable......................................... $ 2,750 $ 57
Salary payable........................................... 20,000 -
---------------- --------------
Total Current Liabilities........................... 22,750 57
Stockholders' Equity:
Preferred stock: par value $0.01, 25,000,000 shares authorized;
none issued and outstanding............................ - -
Common stock: par value $0.01; 100,000,000 shares authorized;
4,915,855 shares issued and outstanding................ 49,159 49,159
Additional paid-in capital............................... 1,234,030 1,234,030
Deficit accumulated during the development stage......... (849,535) (912,663)
---------------- --------------
Total stockholders' equity.......................... 433,654 370,526
---------------- --------------
Total Liabilities and Stockholders' Equity............... $ 456,404 $ 370,583
================ ==============
See accompanying notes to financial statements
|
SCIENTIFIC ENERGY, INC.
(A Development Stage Company)
Statements of Operations
For the Years ended December 31, 2007 and 2006
and May 30, 2001 (inception) to December 31, 2007
Cumulative
Since May 30, 2001
(Inception) to
2007 2006 December 31, 2007
---------------- -------------- -------------------
Service Revenue.................................. $ - $ - $ -
Cost of Goods Sold............................... - - -
---------------- --------------- -----------------
Gross Profit..................................... - - -
Expenses
Research and development......................... - - 68,090
General and administrative....................... 55,485 35,652 629,811
Write-down of technology and royalties........... - - 250,040
---------------- --------------- -----------------
Total expenses.............................. 55,485 35,652 947,941
Loss from operations............................. (55,485) (35,652) (947,941)
Other income (expense)
Interest expense................................. - (100) (20,207)
--------------- --------------- -----------------
Total other income (expense)................ - (100) (20,207)
Net loss before discontinued operations.......... (55,485) (35,752) (968,148)
Income (loss) from discontinued operations....... 375 - 375
Gain on disposal of subsidiary................... 118,238 - 118,238
--------------- --------------- -----------------
Net income (loss)................................ $ 63,128 $ (35,752) $ (849,535)
=============== =============== ================
Basic and diluted income (loss) per share........ $ 0.01 $ (0.01)
=============== ===============
Weighted average common shares outstanding....... 4,915,855 3,348,732
=============== ===============
See accompanying notes to financial statements.
|
SCIENTIFIC ENERGY, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
CUMULATIVE FROM MAY 30, 2001 (INCEPTION) THROUGH DECEMBER 31, 2007
Since
May 30, 2001
Additional (Inception) of
Common Stock Paid-In Development Total
Shares Par Value Capital Stage Equity
------------------ -------------- -------------- -------------- -------------
Balance at May 30, 2001 (Inception) - $ - $ - $ - $ -
May 30, 2001, Issued Common
Stock for Technology 20,000,000 200,000 50,040 - 250,040
Net Loss - - - (168,773) (168,773)
---------------- ------------- -------------- -------------- -------------
Balance at December 31, 2001 20,000,000 200,000 50,040 (168,773) 81,267
Retroactive Adjustment for 1:17.8
Reverse Stock Split October 24, 2004 (18,876,512) (188,765) 188,765 - -
Retroactive Adjustment for 1:10
Reverse Stock Split January 25, 2007 (1,011,133) (10,111) 10,111 - -
---------------- -------------- ------------- -------------- ------------
Restated Balance at December 31, 2001 112,355 1,124 248,916 (168,773) 81,267
Net Loss - - - (572,409) (572,409)
---------------- -------------- ------------- -------------- ------------
Balance at December 31, 2002 112,355 1,124 248,916 (741,182) (491,142)
December 5, 2003, Spin off from
Parent Company - - 541,776 - 541,776
Net Loss - - - (7,379) (7,379)
---------------- -------------- -------------- --------------- -------------
Balance at December 31, 2003 112,355 1,124 790,692 (748,561) 43,255
November 17, 2004, Issued Common
Stock for Consulting Services 12,000 120 1,080 - 1,200
Net Loss - - - (84,098) (84,098)
---------------- --------------- -------------- --------------- -------------
Balance at December 31, 2004 124,355 1,244 791,772 (832,659) (39,643)
September 9, 2005, Issued Common
Stock for Debt 491,500 4,915 44,235 - 49,150
September 9, 2005, Issued Common
Stock for Consulting Services 300,000 3,000 27,000 - 30,000
Net Loss - - - (44,252) (44,252)
---------------- --------------- -------------- --------------- -------------
Balance at December 31, 2005 915,855 9,159 863,007 (876,911) (4,745)
May 23, 2006, Issued Common
Stock for cash 4,000,000 40,000 360,000 - 400,000
May 31, 2006, contributed capital
By shareholders - - 11,023 - 11,023
Net Loss - - - (35,752) (35,752)
---------------- ---------------- -------------- -------------- -------------
Balance at December 31, 2006 4,915, 855 49,159 1,234,030 (912,663) 370,526
Net Income - - - 63,128 63,128
---------------- ---------------- -------------- -------------- -------------
Balance at December 31, 2007 4,915,855 $ 49,159 $ 1,234,030 $ (849,535) $ 433,654
================ ================ ============== ============== =============
See accompanying notes to financial statements
|
SCIENTIFIC ENERGY, INC.
(A Development Stage Company)
Statements of Cash Flows
For the Years Ended December 31, 2007 and 2006
and May 30, 2001 (inception) to December 31, 2007
May 30, 2001
(Inception) to
2007 2006 December 31, 2007
---------------- --------------- -------------------
Cash Flows from Operating Activities:
Net income (loss)........................................ $ 63,128 $ (35,752) $ (849,535)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation.......................................... 18,517 156 18,673
Gain on disposal of subsidiary........................ (118,238) - (118,238)
Write-down of technology and royalties................ - - 250,040
Stock issued for expenses............................. - - 31,200
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable................ 2,693 (1,511) 2,750
Increase (decrease) in salary payable.................. 20,000 - 20,000
-------------- ---------------- ---------------
Net cash used in operating activities............... (13,900) (37,107) (645,110)
-------------- ---------------- ---------------
Cash Flows from Investing Activities:
Purchase of subsidiary................................... (300,000) - (300,000)
Proceeds from sale of subsidiary......................... 400,000 - 400,000
Purchase of property, plant and equipment............... (161) (1,374) (1,535)
-------------- ---------------- ---------------
Net cash provided by (used in) investing activities. 99,839 (1,374) 98,465
-------------- ---------------- ---------------
Cash Flows from Financing Activities:
Principal payment on shareholder loans................... - - (39,915)
Proceeds from shareholder loans.......................... - (3,720) 630,841
Issuance of common stock................................. - 400,000 400,000
Contributed capital by shareholder....................... - 11,023 11,023
--------------- ---------------- --------------
Net cash provided by financing activities........... - 407,303 1,001,949
--------------- ---------------- --------------
Increase in cash and cash equivalents.................... 85,939 368,822 455,304
--------------- ---------------- ---------------
Cash and cash equivalents, beginning of period........... 369,365 543 -
Cash and cash equivalents, end of period................. $ 455,304 $ 369,365 $ 455,304
=============== ================ ===============
Supplemental disclosure of cash flow information:
Interest paid in cash................................. $ - $ - $ 6,620
============== ================ ================
Income taxes paid in cash............................. $ - $ - $ -
============== ================ ================
Supplemental Disclosure of non-cash investing and financing activities:
Common stock exchanged for technology................. $ - $ - $ 250,040
============== =============== ================
Note payable converted to company stock............... $ - $ - $ 590,926
============== =============== ================
Contributed capital by shareholders for expenses...... $ - $ - $ 31,200
============== =============== ================
See accompanying notes to financial statements
|
SCIENTIFIC ENERGY, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2007
Note 1. Nature of Operations and Basis of Presentation
Scientific Energy, Inc. (the "Company") was incorporated under the laws of the
State of Utah on May 30, 2001. The business plan of the Company is to acquire
energy - related technologies, equipment and crude oil or natural gas fields. As
of December 31, 2007, the Company was in the development stage.
Note 2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash equivalents includes
cash on hand and demand deposits held by banks.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of credit risk
such as foreign exchange contracts, options contracts or other foreign hedging
arrangements.
Use of Estimates
The preparation of financial statements in conformity with the accounting
principles generally accepted in the United States of America requires the
Company to make estimates and judgments that affect the reported amounts of
assets and liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. Actual results could vary from those
estimates, and those variances might be significant.
Property, Plant, and Equipment
Property, plant, and equipment are carried at cost less accumulated
depreciation, which is computed using the straight-line method over the useful
lives of the assets. Upon disposal of assets, the cost and related accumulated
depreciation are removed from the accounts and any gain or loss is included in
income. Property and equipment are depreciated over their estimated useful lives
as follows:
Computer equipment 5 years
Furniture and fixtures 7 years
Depreciation expense for the years ended December 31, 2007 and 2006 was $18,517
and $156, respectively.
Income (loss) per Share
Income (loss) per common share is computed pursuant to the provisions of SFAS
No. 128, "Earnings Per Share" (SFAS 128). Under SFAS 128, basic income (loss)
per common share is computed by dividing net income (loss) available to common
stockholders by the weighted average number of common shares outstanding during
the period, excluding unvested restricted common stock. Diluted loss per common
share reflects the additional dilution for all potentially dilutive securities
such as unvested restricted common stock and convertible preferred stock. We
have corrected the weighted shares outstanding as of December 31, 2006, as it
was previously improperly reported as 1,527,480 in our 10-KSB filed with the
Securities and Exchange Commission on April 19, 2007.
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, or
SFAS 157, which establishes a framework for measuring fair value and expands
disclosures about the use of fair value measurements subsequent to initial
recognition. Prior to the issuance of SFAS 157, which emphasizes that fair value
is a market-based measurement and not an entity-specific measurement, there
were different definitions of fair value and limited definitions for applying
those definitions under GAAP. SFAS 157 is effective for us on a prospective
basis for the reporting period beginning January 1, 2008. We are evaluating the
impact of SFAS 157 on our financial position, results of operations and cash
flows.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities, or SFAS 159. SFAS 159 expands
opportunities to use fair value measurements in financial reporting and permits
entities to choose to measure certain financial instruments at fair value.
SFAS 159 is effective for fiscal years beginning after November 15, 2007. We do
not expect the adoption of SFAS 159 to have a material impact on its results of
operations and financial condition.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, or
SFAS 141(R). SFAS 141(R) establishes principles and requirements for how the
acquirer of a business recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree. SFAS 141(R) also provides guidance for recognizing and
measuring the goodwill acquired in the business combination and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. The provisions of
SFAS 141(R) are effective for financial statements issued for fiscal years
beginning after December 15, 2008. We are currently assessing the financial
impact of SFAS 141(R) on our consolidated financial statements.
In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements - An Amendment of ARB No. 51, or SFAS 160.
SFAS 160 amends Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," or ARB 51, to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. This statement also amends certain of ARB 51's consolidation
procedures for consistency with the requirements of SFAS 141(R). In addition,
SFAS 160 also includes expanded disclosure requirements regarding the interests
of the parent and its noncontrolling interest. The provisions of SFAS 160 are
effective for fiscal years beginning on or after December 15, 2008. Earlier
adoption is prohibited. We are currently assessing the financial impact of SFAS
160 on our financial statements.
Note 3 - Principal Stockholder
As of December 31, 2007, Kelton Capital Group Ltd., controlled by Stanley Chan,
our president and CEO, owned 2,390,500 shares, or 48.6%, of our common stock.
Other than Stanley Chan, no persons own 5% or more of the Company's issued and
outstanding shares.
Note 4- Capital Stock
The Company is authorized to issue 100,000,000 shares of common stock, $0.01 par
value, and 25,000,000 shares of preferred stock, $0.01 par value. As of
December 31, 2007, there were 4,915,855 shares of the Company's common stock
issued and outstanding, and none of the preferred shares were issued and
outstanding.
On May 23, 2006, the Company entered into a Stock Purchase Agreement with Kelton
Capital Group Ltd., the controlling shareholder of the Company, and each of ten
individual investors in a private placement. Pursuant to the Agreement, the
Company sold and investors purchased an aggregate of 4,000,000 shares of the
Company's common stock for an aggregate consideration of $400,000 in cash.
On January 25, 2007, the Company amended its Articles of Incorporation to affect
a reverse stock split of the Company's common stock in which every ten (10)
outstanding shares would be combined into one (1) share. All share transactions
disclosed in these financial statements give retroactive effect to this 1:10
reverse split.
Note 5 - Additional Paid-In Capital
In connection with the change in control of the Company, on May 31, 2006, the
selling shareholders paid off all liabilities (Accounts Payable, Note Payable-
Shareholder) of the Company by using their personal funds in an aggregate amount
of $11,023, which was recorded as additional paid-in capital.
Note 6 - Transactions with Related Parties
On April 14, 2006, there was a change in control of the Company effected
pursuant to a Share Purchase Agreement by and among Todd Crosland, Jana Meyer,
Mark Clawson and Dale Gledhill (collectively the "Sellers"), and Kelton Capital
Group Limited (the "Buyer"). Each of the Sellers was a director of the Company.
Under the Share Purchase Agreement, the Buyer acquired from the Sellers an
aggregate of 790,500 shares of the Company's issued and outstanding common
stock, representing approximately 86.3% of the Company's outstanding shares at
that time, for the aggregate cash purchase price of $539,929.
On May 23, 2006, the Company entered into a stock purchase agreement with Kelton
Capital Group Ltd., a company controlled by Stanley Chan, our president and CEO.
Under the agreement, Kelton purchased 1,600,000 shares of the Company's common
stock at a price of $0.10 per share.
Note 7 - Acquisition and Sale of Assets
On April 21, 2007, the Company entered into an Asset Purchase Agreement with PT
Prima Jasa Energy, an Indonesian crude oil drilling and service corporation
("PJE"), for the acquisition of certain of PJE's assets, including certain heavy
drilling equipment, facilities and contract rights associated with its crude oil
drilling and service business. The purchase price for the assets was $300,000.
The transactions were closed April 30, 2007.
On April 21, 2007, the Company also entered into a long-term Drilling Services
Agreement with PJE, pursuant to which PJE will provide crude oil drilling and
services to the Company as an independent contractor. Under this contract PJE
will utilize the equipment and other assets purchased by the Company under the
Asset Purchase Agreement to provide drilling services under the operating
contract rights the Company acquired from PJE under the Asset Purchase
Agreement. Under the contract PJE will also search for and develop new clients
on behalf of the Company, will maintain the equipment purchased, and will
collect accounts receivable under the operating contract rights on behalf of the
Company. The Services Agreement commenced on May 1, 2007.
On October 29, 2007, the Company entered into an Asset Purchase Agreement with
Bermon Capital Holdings Limited, a Hong Kong corporation, for the sale of the
Company's certain assets for $400,000. The assets sold include certain heavy
drilling equipment, facilities and associated contract rights, which the Company
purchased in April 2007 for $300,000 from PT Prima Jasa Energy, an Indonesian
crude oil drilling and service company.
Note 8 - Subsequent Event
On January 21, 2008, the Company, through its wholly owned subsidiary PDI Global
Ltd., which was incorporated under the laws of Territory of the British Virgin
Islands on January 21, 2008, entered into an agreement with China Resources
Development Group Ltd., a Hong Kong company. Under the agreement, a joint
venture company (the "JVC") will be established in Hong Kong, and the Company
will invest $39,600,000 Hong Kong dollars (approximately USD$5.14 million) into
the JVC to get 72% of the JVC's capital shares, and China Resources Development
Group Ltd. will, jointly with its partner, invest $15,400,000 Hong Kong dollars
(approximately USD$1.98 million) into the JVC to receive 28% of the JVC's
capital shares. The purpose of this transaction is for the Company to set up a
business entity in China to gain access to mineral products, mineral resources
and sales channel in China.
On January 25, 2008, the Company entered into a Subscription Agreement with
eighteen investors, pursuant to which the Company agreed to issue, in a private
placement, an aggregate of 90,000,000 shares of the Company's restricted common
stock to non-U.S. investors, at a purchase price of $0.06 per share, for an
aggregate of purchase price of $5.4 million. The proceeds received will be used
to acquire mineral products in China and for the Company's general operating
expenses.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On June 8, 2006, in connection with a change in control, the Company dismissed
Robison, Hill & Co. and engaged Child, Van Wagoner & Bradshaw, PLLC, as the
Company's principal accountants for the Company's fiscal year ending December
31, 2006, and the interim periods for 2006. The decision to change principal
accountants was approved by the Company's Board of Directors.
None of the reports of Robison, Hill & Co. on the Company's financial statements
for either of the past two years or subsequent interim period contained an
adverse opinion or disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles.
There were no disagreements between the Company and Robison, Hill & Co., on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which, if not resolved to the satisfaction of
Robison, Hill & Co., would have caused them to make reference to the subject
matter of the disagreement in connection with its report. Further, Robison, Hill
& Co. has not advised the Company that:
(i) internal controls necessary to develop reliable financial statements did
not exist; or
(ii) information has come to the attention of Robison, Hill & Co. which made
it unwilling to rely upon management's representations, or made it unwilling to
be associated with the financial statements prepared by management; or
(iii) the scope of the audit should be expanded significantly, or information
has come to the attention of Robison, Hill & Co. that they have concluded will,
or if further investigated might, materially impact the fairness or reliability
of a previously issued audit report or the underlying financial statements, or
the financial statements issued covering the fiscal year ended December 31,
2005.
Prior to its engagement, neither the Company nor anyone on behalf of the Company
had previously consulted with Child, Van Wagoner & Bradshaw, PLLC in any matter
regarding either (i) the application of accounting principles to a specified
transaction, either completed or proposed; or (ii) the type of audit opinion
that might be rendered on the Company's financial statements; and neither was
a written report nor oral advice provided to the Company that Robison, Hill &
Co. concluded was an important factor considered by the Company in reaching a
decision as to the accounting, auditing or financial reporting issued; or (iii)
any matter that was either the subject matter of a disagreement as defined in
Item 304(a)(1)(iv) of Regulation S-B, respectively, between the Company and
Robison, Hill & Co. as there were no such disagreements, or any other reportable
event as defined in Item 304(a)(1)(iv) of Regulation S-B.
Item 8A(T). CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
The principal executive officer and principal financial officer of the Company
has evaluated the effectiveness of the Company's disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
period covered by this report. Based on such evaluation, the principal executive
officer and principal financial officer of the Company has concluded that, as
of the end of such period, the Company's disclosure controls and procedures are
effective.
Management's Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal control over
financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the
Exchange Act as a process designed by, or under the supervision of, the
principal executive and principal financial officers of the Company, and
effected by the Company's management and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and procedures that:
* pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of assets;
* provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures are being
made only in accordance with authorizations of the Company's management; and
* provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risks that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management of the Company assessed the effectiveness of the Company's internal
control over financial reporting as of December 31, 2007. In making this
assessment, the Company's management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework.
Based on their assessment, the Company's management concluded that, as of
December 31, 2007, the Company's internal control over financial reporting was
effective.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to the attestation by the
Company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management's report in this annual report.
(b) Changes in Internal Control Over Financial Reporting
There have been no significant changes in the Company's internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fourth quarter of 2007 that have materially affected,
or are reasonably likely to materially affect, the Company's internal control
over financial reporting.
Item 8B. Other Information
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons and
Corporate Governance; Compliance with Section 16(a) of the Exchange Act
Directors and Officers
The following table sets forth the name, age, position and term of directorship,
as applicable, of the Company's director and executive officer as of the date
hereof.
Name Age Position
------------ ----- ----------------------------------------------------------
Stanley Chan 53 President, Chief Executive Officer, Chief Financial
Officer and Director
|
Stanley Chan has been a Director, Chief Executive Officer, Chief Financial
Officer, Secretary, and Chairman of the Company since May 8, 2006. Additionally,
since 2000, Mr. Chan has been the President and Chairman of the Board of
Directors of Tianlong Trading Co., Ltd, an import and export company. He is
also the President and Chairman of Kelton Investments Group, Ltd. a private
investment company. Mr. Chan has more than ten years of experience in import-
export business and financial investment.
Mr. Chan has never held any position in a reporting company.
Directors are elected annually and hold office until the next annual meeting of
shareholders or until their respective successors are duly elected and
qualified. Officers are appointed by, and serve at the discretion of the
Company's Board of Directors.
Significant Employees
There are no significant employees other than our executive officers.
Family Relationships
Not applicable.
Involvement in Certain Legal Proceedings
During the past five years no director or executive officer of the company (i)
has been involved as a general partner or executive officer of any business
which has filed a bankruptcy petition; (ii) has been convicted in any criminal
proceeding nor is subject to any pending criminal proceeding; (iii) has been
subjected to any order, judgment or decree of any court permanently or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities; and (iv) has been
found by a court, the Commission or the Commodities Futures Trading Commission
to have violated a federal or state securities or commodities law.
Audit, Nominating and Compensation Committees
Our Board of Directors does not have standing audit, nominating or compensation
committees, and our Board of Directors performs the functions that would
otherwise be delegated to such committees. Currently, our Board of Directors
believes that the cost of establishing such committees, including the costs
necessary to recruit and retain qualified independent directors to serve on our
Board of Directors and such committees and the legal costs to properly form and
document the authority, policies and procedures of such committees are not
justified under our current circumstances. However, we anticipate that our Board
of Directors will seek qualified independent directors to serve on the Board and
ultimately form standing audit, nominating and compensation committees.
Director Independence
We are presently not required to comply with the director independence
requirements of any securities exchange, which requires that a majority of a
company's directors be independent. The board of directors of the Company
intends to appoint additional members, each of whom will satisfy such
independence requirements.
Review, approval and ratification of related party transactions
Given our small size and limited financial resources, we had not adopted formal
policies and procedures for the review, approval or ratification of
transactions, such as those described above, with its executive officers,
directors and significant stockholders. Yet, all such transactions were approved
and ratified by our sole director. We intend to establish such policies and
procedures so that such transactions will, on a going-forward basis, be subject
to the review, approval or ratification of our board of directors, or an
appropriate committee thereof.
Indebtedness of Executive Officers and Directors
No executive officer, director or any member of these individuals' immediate
families or any corporation or organization with whom any of these individuals
is an affiliate is or has been indebted to us since the beginning of our last
fiscal year.
Code of Ethics
We have formally adopted a written Code of Business Conduct and Ethics which
applies to directors, officers, senior management, and certain other employees
of the Company, including its principal executive officer, principal financial
officer, principal accounting officer or controller or persons performing
similar functions.
Compliance with Section 16(a) of Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
officers and directors of the Company as well as persons who own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and grater-than-10% shareholders are required by the
regulations of the Securities and Exchange Commission to furnish the company
with copies of all Section 16(a) forms that they file.
To our knowledge, based solely on a review of the copies of such reports
furnished to us, all Section 16(a) requirements applicable to our officers,
directors and greater-than-10% shareholders were satisfied during the fiscal
year ended December 31, 2007.
Item 10. Executive Compensation
The following tables set forth the compensation of the Company's executive
officers during the last two fiscal years:
Summary Compensation Table
Summary Compensation Table
-----------------------------------------------------------------------------------------------------
Non- Nonquali-
Equity fied
Incentive Deferred All
Name and Stock Option Plan Compensation Other
Principal Salary Bonus Awards Awards Compensation Earnings Compensation Total
Position Year ($) ($) ($) ($) ($) ($) ($) ($)
-----------------------------------------------------------------------------------------------------
Stanley Chan 2007 - - - - - - - -
CEO and 2006 - - - - - - - -
President
------------------------------------------------------------------------------------------------------
|
At the end of the last completed fiscal year, there were no "most highly
compensated executive officers" as that term is defined in Item 402(a)(2) of
Regulation S-B, and there were no additional individuals for whom disclosure
would have been made in this table but for the fact that the individual was not
serving as our executive officer.
Outstanding Equity Awards at Fiscal Year-End Table
The Company does not have any equity incentive plans. No option or stock awards
have been granted to any of our executive officers or directors since our
inception. Pursuant to Item 402(a)(4) of Regulation S-B, the Outstanding Equity
Awards at Fiscal Year-End Table is omitted because there has been no
compensation awarded to, earned by, or paid to any of the named executive
officers or directors required to be reported in that table.
Compensation of Directors
The members of the Board of Directors are not compensated by us for their
service as members of the Board of Directors, but may be reimbursed for
reasonable expenses incurred in connection with attendance of meetings of the
board of directors. There are no arrangements pursuant to which directors are
or will be compensated in the future for any services provided as a director.
Employment Contracts, Termination of Employment, Change-in-Control Arrangements
The Company has not entered employment agreements with its executive officers.
There are no compensatory plans or arrangements, including payments to be
received from us, with respect to a named executive officer, if such plan or
arrangement would result from the resignation, retirement or any other
termination of such executive officer's employment with us or form a change-
in-control of us or a change in the named executive officer's responsibilities
following a change-in-control.
Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
The following table sets forth certain information regarding the common stock
beneficially owned as of March 25, 2008 by (i) each person who is known by us
to own beneficially or exercise voting or dispositive control over 5% or more
of the common stock; (ii) each of our directors and director nominees; (iii)
each of our current Named Executive Officers; and (iv) all current executive
officers and directors as a group. There were 4,915,855 shares of our common
stock outstanding as of March 25, 2008. We have no other classes of voting
securities outstanding.
Name and Address Amount and Nature Percentage of
Title of Class of Beneficial Owner of Beneficial Ownership Common Stock (1)
-------------- ------------------------ ------------------------- ------------------
Common Stock Stanley Chan (2) 2,390,500 shares (3) 48.6%
27 Weldon Street
Jersey City, NJ 07306
Common Stock All officers and 2,390,500 shares 48.6%
Directors as a group
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Notes:
(1) Beneficial ownership is determined in accordance with Rule 13d-3
promulgated by the Commission under the Securities Exchange Act of 1934 and
generally includes voting or investment power with respect to securities. Except
as indicated, we believe each holder possesses sole voting and investment power
with respect to all of the shares of voting stock owned by that holder, subject
to community property laws where applicable. In computing the number of shares
beneficially owned by a holder and the percentage ownership of that holder,
shares of common stock subject to options or warrants held by that holder that
are currently exercisable or are exercisable within 60 days after the date of
the table are deemed outstanding. Those shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person or group.
(2) Mr. Chan is our president, chief executive officer, chief financial officer
and a director.
(3) Represents 2,390,500 shares held by Kelton Capital Group Limited.
Item 12. Certain Relationships and Related Transactions
There is no material relationships between us and our current directors and
executive officers other than the transactions and relationships described
below:
Transactions with Related Persons
On April 13, 2006, Kelton Capital Group Limited, a company controlled by Stanley
Chan, the President and CEO of the Company, acquired an aggregate of 790,500
shares, or approximately 86.3%, of the Company's issued and outstanding common
stock, from former directors and officers of the Company, for the aggregate cash
purchase price of $539,929.
On May 23, 2006, the Company entered into a Stock Purchase Agreement with Kelton
Capital Group Ltd., controlled by Stanley Chan, the President and CEO of the
Company. Pursuant to the agreement, the Company issued 1,600,000 shares of its
common stock to Kelton for $160,000 in cash.
Parents
None
Promoters and Control Persons
Please refer to the transactions disclosed above "Transactions with Related
Persons."
Item 13. Exhibit List and Reports on Form 8-K.
No. Exhibit
2.1 Share Purchase Agreement dated April 13, 2006, by and among by Todd
Crosland, Jana Meyer, Mark Clawson, Dale Gledhill and Kelton Capital
Group Limited.
3.1 Amended Articles of Incorporation dated January 25, 2007
3.2 Articles of Incorporation (incorporated by reference to Exhibit 3.1
to the registrant's Registration Statement on Form SB-2 filed on June
2, 2004).
3.3 Bylaws (incorporated by reference to Exhibit 3.2 to the registrant's
Registration Statement on Form SB-2 filed on June 2, 2004).
10.1 Form of Stock Purchase Agreement dated as of May 23, 2006
(incorporated by reference to Exhibit 10.1 to the registrant's Current
Report on Form 8-K filed on May 23, 2006).
14.1 Code of Business Conduct and Ethics (incorporated by reference to
Exhibit 14.1 to the registrant's Annual Report on Form 10-KSB filed on
April 19, 2007).
31.1* Rule 13a-14(a)/15d-14(a)(a) Certification of CEO and CFO
32.1* Section 1350 Certifications of CEO and CFO
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* Filed herewith.
Item 14. Principal Accountants Fees and Services
Audit Fees: The aggregate fees billed by the Company's auditors for
professional services rendered in connection with the audit of the Company's
financial statements for the years ended December 31, 2007 and 2006 and reviews
of the Company's interim financial statements included in the Company's Forms
10-KSB for fiscal 2007 and 2006 were $21,000 and $6,600, respectively.
Audit-Related Fees: The Company's auditors did not bill any additional fees for
assurance and related services that are reasonably related to the performance of
the audit or review of the Company's financial statements and are not reported
under "Audit Fees" above.
Tax Fees: None.
All Other Fees: None.
Board Approval of Services: It is the policy of the Board of Directors of the
Company to approve the engagement to render audit or non-audit services before
the accountant is engaged by the Company. The Board approved of 100% of the
services provided by the independent accountant in 2007 and 2006.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: April 15, 2008
By: /s/ Stanley Chan
--------------------------------------
Stanley Chan
President, Chief Executive Officer,
Chief Financial Officer and Director
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