U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED
DECEMBER 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROMTO
COMMISSION FILE NUMBER 000-29865
CATHAYONE INC.
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(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0489616
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2100 PINTO LANE, LAS VEGAS, NEVADA 89106
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
212/888-1758
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(ISSUER'S TELEPHONE NUMBER)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange 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 requirements for the past 90 days. Yes X No
--- ---
Number of shares outstanding of each of the issuer's classes of common equity,
as of December 31, 2000: 35,158,319
CATHAYONE INC. & SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000 (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying draft unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
In the opinion of management, the draft unaudited condensed consolidated
financial statements contain all adjustments consisting only of normal recurring
accruals considered necessary to present fairly the Company's financial position
at December 31, 2000, the results of operations for the year then.
NOTE 2 - EARNINGS (LOSS) PER SHARE
The following represents the calculation of earnings (loss) per share:
Period of March 1, 2000 (Inception)
December 31, 2000
BASIC& FULLY DILUTED
Net Loss $(1,433,368)
Less- preferred stock dividends --
Net Loss $(1,433,368)
------------
Weighted average number
Of common shares 32,208,319
------------
Basic & Fully Diluted*
loss per share $ (.045)
============
* The Company had no common stock equivalents during the period presented
NOTE 3 - PRINCIPLES OF CONSOLIDATION
The unaudited consolidated financial statements for December 31, 2000 and the
year then ended include the accounts of CathayOne Inc. ("CathayOne"), a Delaware
corporation, and its wholly owned subsidiary, Cathay Bancorp Limited
("Bancorp"), a Hong Kong corporation. On June 30, 2000, the Company acquired
all of the issued and outstanding common shares of CMD Capital, Limited ("CMD"),
a Hong Kong corporation.
NOTE 4 - NATURE OF BUSINESS AND RECENT REORGANIZATION
Pursuant to the share exchange agreement dated June 14, 2000, the Company
acquired 100% of the issued and outstanding shares of Bancorp in exchange for
the issue of 21,750,000 shares of the Company's common stock. Bancorp was
incorporated on March 1, 2000 under the laws of Hong Kong. The transaction is
treated as a reverse merger in accordance with Accounting Principles Board (APB)
opinion No. 16, whereby the shareholders of Bancorp received approximately 83.8%
of the then outstanding shares of the Company. The transaction has been
accounted for using the purchase method of accounting, with Bancorp being
identified as the acquirer for accounting purposes. The merger was treated as a
tax-free reorganization for federal and state income tax purposes.
On July 5, 2000, the Company incorporated three new Hong Kong subsidiaries:
Cathay B Trade, Limited ("BTrade"), Cathay Entertainment Limited
("Entertainment"), and Cathay Investment, Limited ("Invest"). Entertainment will
hold the Company's interest in the entertainment ventures on behalf of Bancorp
and Investment will hold the Company's interests in CMD. BTrade will be used for
future projects.
The Company has moved from Utah to Delaware and was renamed CathayOne Inc.
upon the effectiveness of its merger into CathayOne Inc., its newly formed and
Wholly owned Delaware subsidiary on August 29, 2000. Under the terms of the
merger, CathayOne Inc. is the surviving company. CathayOne Inc. succeeded to
all of the assets and liabilities of the Company immediately prior to the
merger, and the Company's Board of Directors and its incumbent officers
immediately prior to the merger are the Board of Directors and officers of
CathayOne Inc. immediately after the merger.
NOTE 5 - ACQUISITION OF CMD CAPITAL LIMITED
Pursuant to an agreement dated June 30, 2000, the Company acquired 100% of the
issued and outstanding shares of CMD in exchange for the issuance of 2,800,000
shares of the Company's common stock. As at the date of purchase, CMD's assets
included 70% of the common stock of PRC Investment Journal Inc. ("PRC") whose
assets included 100% ownership of the PRCInvest.com website (the "PRC Website").
Pursuant to an underlying joint venture contract, CMD is required to provide
funding of $3,000,000 to PRC for continued development of PRC and the PRC
Website. Pursuant to a cooperation agreement dated April 22, 2000, CMD is
required to provide $2,000,000 to be used to develop a Hong Kong version of the
PRC Website. The transaction has been accounted for using the purchase method of
accounting.
NOTE 6 - COMMITMENTS
On June 28, 2000, the Company entered into a Sino-Foreign Cooperative Joint
Venture Contract to establish a joint venture named Capital Entertainment
Company Limited. The Company holds 50% of the Joint Venture's registered
capital. The Joint Venture will be responsible for constructing and managing
a series of entertainment websites, including "estage" and "TalkShow". For
its share of the equity, the Company, via its Entertainment subsidiary, will
contribute $10,000,000 in several installments, which may be in the form of
cash, technology and/or equipment. Of this amount, $660,000 already has been
invested. The specific date of each installment will be determined by the
needs of the project, provided that a total of $2,000,000 is contributed
within 30 days after the issuance of the Joint Venture's business license. A
second installment of $3,000,000 will be due within 90 days after the
issuance of the business license, and the final installment of $5,000,000
will be due by January 31, 2001. Entertainment presently is in technical
default in the timing of its payment obligations, but expects to remedy the
situation in due course by way of either a renegotiation of the Joint Venture
agreement, or by withdrawing from participation.
Pursuant to an agreement dated June 15, 2000 between SNet Communications (HK)
Limited ("SNet") and Bancorp, the Company has issued 500,000 shares of common
stock valued at $4 per share to SNet and will pay $700,000 to SNet. Upon
completion of the entertainment websites to be owned by the Joint Venture, the
Company will issue 250,000 shares of the Company's common stock to SNet. Upon
obtaining the necessary license to operate talk show programs, the Company will
issue 250,000 shares of the Company's common stock to SNet. To date, the Company
has issued the 500,000 shares discussed above to SNet, valued at $4 per share.
In the event that the Joint Venture is canceled, or the agreement is
renegotiated, then the further obligations of the company to SNet will either be
greatly reduced or eliminated.
Pursuant to a joint venture contract dated April 22, 2000, CMD agreed to
establish a joint venture for the purpose of establishing an investment
information portal in China, with a version to be created for Hong Kong. For
its share of the equity, the Company will contribute $3,000,000. CMD will
hold 70% of the joint venture's registered capital. The contributions will be
determined by the needs of the project provided that for the China portal,
$100,000 was paid within 10 working days after execution of the contract,
$700,000 must be paid within 22 days of obtaining a business license, which
includes the first $100,000, $1,400,000 must be paid within 140 days after
the launch of the website and $900,000 must be paid within 280 working days
after receipt of a business license. Pursuant to a cooperation agreement
dated April 22, 2000, CMD will contribute $2,000,000 to the Hong Kong version
of the PRC Website, of which $100,000 must be paid within 10 days after the
agreement takes effect and of which $600,000 must be paid within 22 working
days after the agreement takes effect (this amount includes the initial
$100,000). $600,000 must be paid within 70 working days and $800,000 within
140 working days after the official publication of the Hong Kong version. This
project along with funding is on hold and well remain on hold until either
funding is developed for the project or the project is sold.
NOTE 7 - RELATED PARTY TRANSACTIONS
During the Year ended December 31, 2000, the Company incurred web
development costs of $ 137,229 from another public company having a director in
common with the Company. The other company also has made advances on behalf of
the Company and, as of December 31, 2000, $ 639,948 included in accounts payable
and accruals is due to the other company.
During the Year ended December 31, 2000, the Company incurred fees with
directors and officers in the amount of $ 170,000. Of this amount $50,000 is
included in accounts payable and accruals at December 31, 2000.
Please see Note 6 above for the detailed terms of the transaction between the
Company and SNet. The Company has issued 500,000 shares of common stock to
SNet, valued at $4 per share, and will pay $700,000 to Snet upon the
reaching of certain operational thresholds, as described above in Note 6, the
Company will issue an additional 500,000 shares of common stock to SNet. SNet
currently owns 5,420,000 shares of the Company's common stock, which
constitutes 18.52% of the Company's issued and outstanding common stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following information should be read in conjunction with the consolidated
financial statements and the accompanying notes thereto included in Item 1 of
this Report.
FORWARD LOOKING STATEMENTS
When used in this Report on Form 10-KSB the words or phrases "will
likely result," "are expected to," "will continue," "is anticipated," or similar
expressions are intended to identify "forward looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
are subject to certain risks and uncertainties, including but not limited to
changes in interest rates, the Company's dependence on debt financing and
securitizations to fund operations, and fluctuations in operating results. Such
factors, which are discussed in Management's Discussion and Analysis of
Financial Condition and results of Operations, could affect the Company's
financial performance and could cause the Company's actual results for future
periods to differ materially from any opinion or statements expressed herein
with respect to future periods. As a result, the Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made.
The following financial review and analysis is intended to assist in
understanding and evaluating the financial condition and results of operations
of the Company and its subsidiaries for the year ended December 31, 2000
and the period of March 1, 2000 (Inception) to December 31, 2000.
Company Overview
CathayOne Inc. (the "Company") is a publicly traded Delaware corporation whose
purpose is to develop a foreign entertainment content as well as provide foreign
entertainment into China and its greater China Region. While the Company is
located in the United States, the Company has positioned itself to take
advantage of the appetite for foreign entertainment content and foreign
entertainment in China.
The Company's principal objective is to maximize shareholder value. Management
believes that the best returns for investments in the next decade will be in the
People's Republic of China, Hong Kong, Macao and Taiwan (collectively, "Greater
China"). The Greater China market is increasingly looking outward in its
appetite for foreign content entertainment, as well as in its utilization of
Internet applications. The Company believes it can capitalize on the growth in
information technology, and will initially focus on developing companies in the
following markets: entertainment, including music, theater and sporting events;
business-to-government-to-business e-commerce.
It seeks well-managed entities with existing revenue flows and either existing
cash flow or the likelihood of achieving positive cash flow over the short term.
The Company may take an active role in providing guidance and introducing
strategic relationships and, in certain circumstances, may take an active role
in the management of the companies in which it invests.
The Company will provide its North American expertise in management,
entertainment contacts, and financial acumen to its joint venture operations in
China. As the Company matures, it will seek to enhance value and liquidity for
its shareholders.
Though the Company still strongly believes in the afore-referenced, the recent
downturn in both the traditional and non-traditional capital markets has forced
the Company to suspend various development activities and actively seek to
restructure the company from cost, administration, and direction perspectives.
Though the Company is placing its various ventures and activities on hold, the
company is pursuing through its previous efforts related to entertainment
ventures, opportunities to produce entertainment projects which are intended to
provide a dramatic short-term ROI. Once funds are provided, either by the
capital markets or internal generation, the Company will re-address the
currently suspended projects and then re-activate them on an ROI basis.
Results of Operations
General and administrative expenses for the period of March 1, 2000 to December
31, 2000 were $1,433,368.
Liquidity and Capital Resources
On December 31, 2000, the Company had cash of $ 63,772 and a working capital
deficit of $ 1,839,166. Factors attributable to the increase in the working
capital deficit include an increase in the Company's accounts payable and an
increase in accrued expenses. Net cash provided by operating activities was
$ 997,228 for the period of March 1, 2000 (Inception) to December 31, 2000. Cash
used in investing activities totaled $ 934,056 due to the Company's initial
investment in an unrelated foreign entity. Cash provided by financing activities
totaled $ 500,000 for the period of March 1, 2000 (Inception) to December 31,
2000 due to the issuance of common stock. Due to the development of the Company
and the proposed commitments as outlined in the preceding notes, the Company
will require additional cash funds within the next twelve months. The Company
proposes to accomplish this through various debt and equity placements. If the
Company fails to raise capital, it would materially and adversely affect the
Company.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is the subject of a certain litigation claiming the Company failed
to pay commissions for the placement of securities. The company believes it has
honored its obligations and contracts in this regard and feels the claim is
spurious, and is confident of prevailing in the suit.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On November 27, 2000, the Company issued 200,000 shares of its common stock in a
private placement. Proceeds, net of commissions, amounted to $450,000 which
were used for general corporate purposes.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Pursuant to a written consent dated as of June 30, 2000, in lieu of a special
meeting, a majority of the shareholders of the Company authorized a change in
the Company's state of incorporation from Utah to Delaware, the merger of the
Company into its wholly owned subsidiary, CathayOne Inc., CathayOne Inc. being
the surviving company. The foregoing changes became effective August 29, 2000.
ITEM 5. OTHER INFORMATION
On June 28, 2000, the Company entered into a Sino-Foreign Cooperative Joint
Venture Contract to establish a joint venture named Capital Entertainment
Company Limited. The Company holds 50% of the Joint Venture's registered
capital. The Joint Venture will be responsible for constructing and managing
a series of entertainment websites, including "estage" and "TalkShow". For
its share of the equity, the Company, via its Entertainment subsidiary, will
contribute $10,000,000 in several installments, which may be in the form of
cash, technology and/or equipment. Of this amount, $500,000 already has been
invested. The specific date of each installment will be determined by the
needs of the project, provided that a total of $2,000,000 is contributed
within 30 days after the issuance of the Joint Venture's business license. A
second installment of $3,000,000 will be due within 90 days after the
issuance of the business license, and the final installment of $5,000,000
will be due by January 31, 2001. Entertainment presently is in technical
default in the timing of its payment obligations, but expects to remedy the
situation in a manner as previously referenced in Note 6 above.
Pursuant to an agreement dated June 15, 2000 between SNet and Bancorp,
the Company has issued 500,000 shares of common stock valued at $4 per
share to SNet and will pay $700,000 to SNet. Upon completion of the
entertainment websites to be owned by the Joint Venture, the Company
will issue 250,000 shares of the Company's common stock to SNet. Upon
obtaining the necessary license to operate talk show programs, the Company will
issue 250,000 shares of the Company's common stock to SNet. To date, the Company
has issued the 500,000 shares discussed above to SNet, valued at $4 per
share. SNet currently owns 5,420,000 shares of the Company's common stock,
which constitutes 18.52% of the Company's issued and outstanding common stock.
Pursuant to a joint venture agreement and cooperation agreement dated April 22,
2000, CMD Capital Limited (CMD), CMD agreed to establish a joint venture for the
purpose of establishing an investment information portal in China, with a
version to be created for Hong Kong. For its share of the equity, the Company
will contribute $3,000,000. The Company will hold 70% of the joint venture's
registered capital. The contributions will be determined by the needs of the
project provided that, for the China portal, $100,000 was paid within 10
working days after execution of the contract, $700,000 must be paid within 22
days of obtaining a business license, which includes the first $100,000,
$1,400,000 must be paid within 140 days after the launch of the website and
$900,000 must be paid within 280 working days after receipt of a business
license. Pursuant to a cooperation agreement dated April 22, 2000, CMD will
contribute $2,000,000 to the Hong Kong version of the website, of which
$100,000 must be paid within 10 days after the agreement takes effect, and of
which $600,000 must be paid within 22 working days after the agreement takes
effect, which includes the first $100,000, $600,000 within 70 working days
and $800,000 within 140 working days after the official publication of the
Hong Kong version. This project is currently on hold and will remain so until
funds are obtained to pursue the project or the project is sold.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
3.1 (i) Articles of Incorporation of the Company, as amended, are
incorporated herein by reference to the Company's Registration
Statement on Form 10-SB, filed on March 8, 2000, and the
Company's Quarterly Reports on Form 10-QSB for the Quarters
ended June 30, 2000 and September 30, 2000.
(ii) Bylaws of the Company, incorporated herein by reference to the
Company's Registration Statement on Form 10-SB, filed on March
8, 2000.
10.1 Compensation Agreement between Bancorp, a wholly-owned subsidiary of the
Company, and SNet, dated June 15, 2000.*
10.2 Joint Venture Contract between CMD Capital Limited and China
Investment Journal, dated April 22, 2000.*
10.3 Sino-Foreign Cooperative Joint Venture Contract, dated June 28, 2000,
among Entertainment, SNet and Capital Cultural Company.*
10.4 Cooperation Agreement between Hong Kong China Market Development
Company Limited and China Investment Journal, dated April 22, 2000.*
27 Financial Data Schedule
b) Current Reports on Form 8-K
1) Form 8-K/A, dated June 23, 2000, was filed on September 5, 2000, amending
the Company's Form 8-K filed on July 7, 2000 to include a Consolidated
Balance Sheet as of June 30, 2000, a Consolidated Statement of Operations
for the three months ended June 30, 2000 and the period of March 1, 2000
(Inception) to June 30, 2000, a Consolidated Statement of Cash Flows for
the period of March 1, 2000 (Inception) to June 30, 2000 and a Pro Forma
Statement of Operations for the twelve months ended June 30, 2000,
reflecting two acquisitions of the Company.
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*Previously filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
CATHAYONE INC.
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CATHAYONE, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET - UNAUDITED
DECEMBER 31, 2000
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ASSETS
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Current Assets
Cash $ 63,772
Investments 2,928,110
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Total Current Assets 2,991,882
Fixed Assets
Equipment 5,946
Total Assets $ 2,997,828
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LIABILITIES
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Current Liabilities
Accounts Payable & Accrued Expenses 1,902,938
STOCKHOLDERS' EQUITY
---------------------
Common Stock ($.001 par value, 100,000,000
Authorized, 35,158,319 issued and outstanding) 34,858
Additional Paid-in-capital 2,493,400
Retained Deficit (1,433,368)
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Total Stockholders' Equity 1,094,890
------------
Total Liabilities &
Stockholders' Equity $ 2,997,828
============
-1-
CATHAYONE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS - UNAUDITED
FOR THE PERIOD OF REORGANIZATION ( MARCH 1, 2000 ) THROUGH DECEMBER 31, 2000*
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General & Administrative Expenses:
----------------------------------
Administrative & Office Expenses $ 16,431
Bank Charges 333
Public Trading Expenses 4,320
Commissions 50,000
Consulting Fees 404,803
Postage 782
Investor Relations 12,747
Insurance 43,081
Internet 600
Professional Fees 744,493
Promotions 235
Development Expenses 83,770
Rent 42,742
Salaries 12,202
Telephone 12,021
Travel 4,448
Taxes 360
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Net loss $(1,433,368)
============
Net loss per common share,
Basic & fully Diluted $ (.05)
============
Weighted Average Shares 32,208,319
============
*Also Cumulative-to-date since inception
-2-
CATHAYONE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY - UNAUDITED
FOR THE PERIOD OF REORGANIZATION (MARCH 1, 2000) THROUGH DECEMBER 31, 2000*
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Common Common Paid-in- Retained
Shares Stock Capital Deficit
---------- ------- ---------- ----------
Balances, Mar.1, 2000 -0- -0- -0- -0-
Common stock issued in
connection with reorganization
And recapitalization 28,458,319 28,458 -0- -0-
Common stock issued in
connection with CMD
acquisition 500,000 500 1,993,600 -0-
Common stock issued in 5,700,000 5,700 -0- -0-
escrow for potential financing
Common stock issued
investor 200,000 200 499,800 -0-
Net Loss for the period -0- -0- -0- 1,433,368
---------- ------- ---------- ----------
Balances, Dec. 31, 2000 34,858,319 $34,858 $2,493,400 $1,433,368
========== ======= ========== ==========
-3-
CATHAYONE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS - UNAUDITED
FOR THE PERIOD OF REORGANIZATION ( MARCH 1, 2000 ) THROUGH DECEMBER 31, 2000*
==============================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
-----------------------------------------
Net Loss $(1,433,368)
Adjustments to reconcile net loss to
net cash provided by operating activities
Stock issued 34,858
(Increase) decrease
in operating assets:
Prepaid Expenses (500)
Increase (decrease)
in operating liabilities:
Accounts payable & accrued expenses 2,396,238
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NET CASH USED IN OPERATING
ACTIVITIES $ 997,228
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CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Expenditure for fixed assets (5,946)
Investment in foreign operations (928,110)
------------
NET CASH USED IN INVESTING
ACTIVITIES (934,056)
------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS $ 63,772
------------
Cash, beginning of period $ -0-
------------
Cash, end of year $ 63,772
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NON-CASH FINANCING ACTIVITIES:
------------------------------
Stock issued for investment in foreign
operations $ 2,000,000
============