SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 6, 2004
BUY IT CHEAP.COM, INC.
-----------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
Delaware 0-13337 22-2497491
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(State of Incorporation) (Commission File (IRS Employer
Number) Identification No.)
100 Wall Street, 15th Floor, New York, NY 10005
-----------------------------------------------
(Address of principal executive offices)
(201) 200-9394
-----------------------------
Registrant's Telephone Number
1800 Bloomsbury Avenue, Ocean NJ 07712
--------------------------------------------
(Former Address, if changed since last report)
Item 2 Acquisition or Disposition of Assets
On May 6, 2004 the Registrant acquired 100% of the outstanding capital
stock of Cashtech Investment Limited, a British Virgin Island corporation
("Cashtech"). Cashtech is a holding company which owns 70% of the outstanding
capital stock of Heilongjiang ZhongQiang Power-Tech Co., Ltd., a China limited
liability company ("ZQ Power-Tech").
In exchange for ownership of Cashtech, the Registrant issued 9,720,000
shares of its common stock. It also issued 725,503 shares of Series D
Preferred Stock. Each share of Series D Preferred Stock is convertible into
100 shares of the Registrant's common stock. At the closing of the
acquisition, the Registrant also issued 1,080,000 shares of common stock and
80,610 shares of Series D Preferred Stock to Warner Technology & Investment
Limited, which had served as advisor to Cashtech in connection with the
transaction.
The new Board of Directors and majority shareholders of the Registrant
have commenced the process of changing the name of the Registrant to
"Advanced Battery Technologies, Inc." They expect the name change to become
effective near the end of June 2004.
Security Ownership of Certain Beneficial Owners and Management
After the acquisition, there were 19,842,582 shares of the Registrant's
common stock outstanding and 806,113 shares of Series D Preferred Stock
(convertible into 80,611,300 common shares) outstanding - or a total of
100,453,882 common shares outstanding on a fully- diluted basis. The
following table sets forth the number of shares beneficially owned by each
person who, as of the closing, owned beneficially more than 5% of the
Registrant's common stock, as well as the ownership of such shares by each
member of the Registrant's Board of Directors and the shares beneficially
owned by the new officers and directors as a group.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (1) of Class (1)
--------------------------------------------------------------------------
Zhiguo Fu 39,119,160 38.94%
Heilongjiang ZhongQiang
Power-Tech Co., Ltd.
Weiyou Road, Shuangcheng
Heilongjiang 150100
People's Republic of China
John C. Leo 2,000,000(2) 1.95%
100 Wall Street, 15th Floor
New York, NY 10006
All directors as a group
(2 persons) 41,119,160(2) 40.13%
Warner Technology & Investment
Corp 9,141,000 9.10%
701 East Linden Avenue
Linden, NJ 07036
Xiuhua Tang 8,276,332 8.24%
Heilongjiang ZhongQiang
Power-Tech Co., Ltd.
Weiyou Road, Shuangcheng
Heilongjiang 150100
People's Republic of China
_________________________________________
(1) For purposes of this table all shares of Series D Preferred Stock are
treated as having been converted into common shares.
(2) Includes 2,000,000 common shares which the Registrant has contracted to
issue to Mr. Leo for services as a member of the Board of Directors when
there are sufficient authorized shares.
Directors and Executive Officers
This table identifies the officers and the members of the Registrant's
Board of Directors after the acquisition. Directors serve until the next
annual meeting of shareholders and until their successors are elected and
qualify. Officers serve at the pleasure of the Board of Directors.
Director
Name Age Position with the Company Since
-------------------------------------------------------------------------
Zhiguo Fu 54 Chairman, Chief Executive 2004
Officer
John C. Leo 39 Chief Financial Officer,
Secretary, Director 2004
Zhiguo Fu. Mr. Fu organized Heilongjiang ZhongQiang Power-Tech Co.,
Ltd. in 2002, and has served as its Chairman since then. In January 2004 he
and the other shareholders of ZQ Power-Tech contributed 70% of its shares to
Cashtech. In 1993 Mr. Fu founded Heilongjiang Goangsha Group, and he served
as its Chairman until 2000. During that period Heilongjiang Goangsha Group
had over 3,000 employees and was engaged in several hundred construction
projects. Heilongjiang Goangsha Group was sold in 2000, at which time it had
annual revenue in excess of $25 million. Previously Mr. Fu had twenty years
experience in construction management.
John C. Leo. Since 2001 Mr. Leo has served as President of Venture
Capital Partners LLC, a private merchant banking and corporate consulting
firm located in Jersey City, NJ. During 2001 Mr. Leo was a Securities
Principal and Senior OTC Trader for AM Capital LLC, located in New York, NY.
Previously, from 1997 until 2001, Mr. Leo was a Securities Principal, OTC
Trader with M.H. Meyerson and Company, Inc., an investment banking and
brokerage firm in Jersey City, NJ. Mr. Leo currently also serves as a member
of the Board of Directors of Atlantis Business Development Corp., a publicly-
traded company.
Nominating and Audit Committee
The Board of Directors does not have a nominating committee or an audit
committee, due to the small size of the Board. Moreover, the Board of
Directors does not have an audit committee financial expert, because the new
Board was only constituted with the acquisition of Cashtech. The Board of
Directors intends to recruit an audit committee financial expert to join the
Board of Directors at the earliest opportunity.
Code of Ethics
The Company does not have a written code of ethics applicable to its
executive officers. The Board of Directors has not adopted a written code of
ethics because there are so few members of management.
Executive Compensation
This table itemizes the compensation paid to Zhiguo Fu by ZQ Power-Tech
for services as its Chief Executive Officer during 2003 and the last four
months of 2002. There was no officer of Cashtech or ZQ Power-Tech whose
salary and bonus for services rendered during the year ended December 31,
2003 exceeded $100,000.
Year Salary
Zhiguo Fu................. 2003 $ 8,712
2002 2,904
Related Party Transactions
Zhigou Fu. Since founding ZQ Power-Tech, Zhiguo Fu has contributed
$6,428,894 to the capital of that company, and received in return 47.6% of
the capital stock of that company. Mr. Fu continues to own a significant
portion of 30% of ZQ Power-Tech that is not owned by Cashtech.
John C. Leo. Mr. Leo is a business associate of David H. Zhou.
Mr. Zhou is the President of Warner Technology & Investment Corp., which
served as a consultant to Cashtech in connection with its acquisition by the
Registrant and entry into U.S. capital markets. Mr. Leo assisted Warner
Technology in providing those services. Warner Technology received a 9%
interest in the Registrant at the closing of the acquisition of Cashtech in
consideration of its consulting services.
Cashtech Investment Limited
Cashtech was organized in January 2004 as a corporation under the laws of
the British Virgin Islands. In March 2004 Cashtech acquired ownership of 70%
of the capital stock of ZQ Power-Tech in exchange for all of the outstanding
capital stock of Cashtech. On May 6, 2004 the Registrant acquired all of the
outstanding capital stock of Cashtech.
Cashtech has not engaged in any business activity other than the activity
of owning 70% of ZQ Power-Tech.
Heilong ZhongQiang Power-Tech Co., Inc.
ZQ Power-Tech is a limited liability company that was organized under the
laws of the People's Republic of China in August 2002. ZQ Power-Tech's offices
and manufacturing facility are located in northern China, in the Province of
Heilongjiang, in the Economy & High-Tech Development Zone of Shuangcheng,
which is a suburb of Harbin. The location is approximately 1,000 km northeast
of Beijing.
The Harbin Institute of Technology is one of the leading technological
institutions in Asia. Two of its engineering professors now serve on ZQ
Power-Tech's Scientific Advisory Board, along with a professor of engineering
at the China Engineering Academy. This close association with the Harbin
Institute provides ZQ Power-Tech with a rich source of technological talent,
such that ZQ Power-Tech's research staff is filled by experienced engineers,
many with masters and Ph.D degrees.
Business of ZQ Power-Tech
ZQ Power-Tech designs, manufactures and markets rechargeable polymer
lithium-ion ("PLI") batteries. PLI batteries produce a relatively high
average of 3.8 volts per cell, which makes them attractive in terms of both
weight and volume. Additionally, they can be manufactured in very thin
configurations and with large footprints. PLI cells can be configured in
almost any prismatic shape, and can be made thinner than 0.0195 inches (0.5
mm) to fill virtually any shape efficiently. This combination of power and
versatility makes rechargeable PLI batteries particularly attractive for use
in consumer products such as portable computers, personal digital assistants
(PDA's) and cellular telephones.
ZQ Power-Tech's batteries combine high-energy chemistry with state-of-
the-art polymer technology. Every battery component is solid, which means
that there are no liquids that need to be contained by bulky, heavy cell
housings. The result is a safe, thin, lightweight rechargeable battery with
a wide operating temperature range. Similar to lithium-ion prismatic
rechargeable cells, the ZQ Power-Tech polymer cells do not exhibit a memory
problem. This means that they can be recharged at any state of charge,
without first having to be completely discharged.
At the present time, ZQ Power-Tech produces only one finished product.
This is a miner's lamp equipped with a rechargeable PLI battery that ZQ Power-
Tech sells to an agency of the Chinese government. All of ZQ Power-Tech's
other contracts are for battery cells, which are sold on an OEM basis as a
component of a finished product. Among ZQ Power-Tech's current customers are
Hansek Trading Co., Ltd., which installs ZQ Power-Tech battery cells in its
portable computers, and SEIKI (Japan) Co., Ltd., which is using a ZQ Power-
Tech battery in its electric motor scooters. ZQ Power-Tech expects to be
selling battery cells for a wide variety of end products by the end of 2004.
ZQ Power-Tech has produced an automobile battery under a contract from
the government of Harbin. This rechargeable PLI battery weighs approximately
500 pounds, and is designed for commuter vehicles. It permits a top speed of
120 mph, and a travelling distance of 240 miles per charge. The battery
discharges 5% of its energy per hour, when not in use, so daily recharging is
necessary. The battery can be recharged in 3 to 4 hours.
ZQ Power-Tech has focused its initial marketing activities in southeast
Asia, primarily China, Taiwan and Japan. As it expands its manufacturing
capacity, ZQ Power-Tech intends to expand its marketing efforts worldwide.
Facilities
ZQ Power-Tech owns a 72,000 square meter campus where its offices and
manufacturing facility are located. The campus is 24 km from the nearest
airport. The nearest port is Da lian.
ZQ Power-Tech's present production facility consists of 30,000 square
meters of factory buildings, including 8,000 square meters dedicated to
electrical vehicle batteries. Its current daily production capacity is 5,000
PLI batteries and 5,000 Ah PLI batteries (for electrical vehicles). In
November 2003 ZQ Power-Tech received ISO9001 certification pertaining to
Manufacturing and Quality Control Approval.
ZQ Power-Tech is currently engaged in a program of facilities expansion
aimed at achieving production capacity of $20,000,000 for 2004 and $40,000,000
for 2005. In addition to building additional factories on its campus, ZQ
Power-Tech has an ongoing training program for production workers. ZQ Power-
Tech expects that in June 2004 it will add 185 production workers to its
current 274 employees, which will double ZQ Power-Tech's production capacity.
Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations. ZQ Power-Tech recorded its first significant
revenues in the first quarter of 2004, ending March 31, 2004. All but a
trace of the $476,009 in sales recorded in that quarter were made to two
customers. By the end of the quarter, however, ZQ Power-Tech had a backlog
of orders for 2004 delivery in excess of $4.5 million, substantially
enlarging its customer list.
ZQ Power-Tech realized a 44% gross margin on its sales in the first
quarter of 2004. The gross margin ratio in the future will depend considerably
upon which of ZQ Power-Tech's products are dominating sales. So it is
premature to predict whether the 44% level achieved in the recent quarter
will be maintained.
The general and administrative expenses recorded in the quarter ended
March 31, 2004 were disproportionate to revenue, exceeding 50% of net sales.
Indeed, the general and administrative expenses recorded in the recent quarter
were 123% greater than general and administrative expenses recorded for the
entirety of 2003. ZQ Power-Tech's ongoing expansion program was the primary
reason for the sharp increase in general and administrative expenses in the
recent quarter. At the same time, ZQ Power-Tech incurred significant expenses
in connection with its efforts to effect a reverse merger in a U.S. public
company. Both of these factors will continue to swell general and
administrative expenses for the immediate future. However the expected
increase in ZQ Power-Tech's net sales should result in a better ratio of
expenses to sales.
ZQ Power-Tech reported a net loss of $73,154 for the period ended March
31, 2004. However, because Cashtech owns only 70% of ZQ Power-Tech, the loss
was reduced by $21,946 on Cashtech's statements of operations. If, in the
future, ZQ Power-Tech reports earnings, the earnings will be similarly
discounted by 30% on Cashtech's statements of operations, as long as
there remains 30% of ZQ Power-Tech that is not owned by Cashtech.
During the year ended December 31, 2003 ZQ Power-Tech's activities were
focused on development of its product line and the build-out of its
manufacturing facility. Revenues during the year were negligible, while
research and development expense totaled $493,114, leading to a net loss of
$608,713. However, that investment in research and development has given ZQ
Power-Tech a platform for its near-term operations, which will permit it to
conform research and development expenses to the growth of the business. In
the first quarter of 2004, for example, research and development expense was
reduced to $23,833, reflecting the present focus on expanding production and
marketing.
Financial Condition. To date, the development and initial operations
of ZQ Power-Tech have been financed primarily by contributions to capital
made by Zhiguo Fu, the Registrant's Chairman. At March 31, 2004 ZQ Power-
Tech had a working capital deficit of $207,131. The principal factors in the
deficit were customer deposits totaling $451,423, which will be amortized
as products are delivered, and an unsecured note payable to a Chinese
institutional lender in the amount of $362,451. The note is due on June 1,
2004.
Despite its negative working capital, ZQ Power-Tech has sufficient
liquidity to fund its near-term operations. The principal capital resource
available is $5,439,884 in property, plant and equipment and construction in
process, which ZQ Power-Tech owns without lien. Based on the substantial
backlog of orders that ZQ Power-Tech has accumulated, it believes that secured
financing will be available to it on favorable terms when needed. Until then,
if short-term cash shortages occur, Mr. Fu has committed to provide financing
as needed. In addition, the Shuangcheng Science and Technology Bureau has
committed to grant $604,105 to ZQ Power-Tech if its products have achieved
international standards or the standards of the local bureau by the end of
2004.
Based upon the financial resources available to ZQ Power-Tech, management
believes that it has sufficient capital and liquidity to sustain operations
for the foreseeable future.
Risk Factors
This Report contains certain forward-looking statements regarding the
business and financial prospects of ZQ Power-Tech. These statements represent
Management's present intentions and its present belief regarding the company's
future. Nevertheless, there are numerous risks and uncertainties that could
cause our actual results to differ from the results suggested in this Report.
Among the more significant factors are:
1. ZQ Power-Tech has only recently initiated marketing. It is not yet
known whether it will be able to sell its products in quantities
sufficient to support significant growth and profitable operations.
2. A number of competitors who have capital resources far greater than
those of ZQ Power-Tech dominate the market for rechargeable batteries.
If one or more of them chose to compete aggressively with ZQ Power-Tech,
it might prevent ZQ Power-Tech from effectively expanding its customer
base.
3. If the current growth rate of the economy of China were to be
significantly reduced or if China were to experience a recession, the
market for ZQ Power-Tech's products would be reduced, and the capital
available to fund its expansion program might also be reduced.
Because these and other risks may cause the Registrant's actual results
to differ from those anticipated by Management, the reader should not place
undue reliance on any forward-looking statements that appear in this Report.
Readers should also take note that the Registrant will not necessarily make
any public announcement of changes affecting these forward-looking statements,
which should be considered accurate on this date only.
FINANCIAL STATEMENTS AND EXHIBITS
Financial Statements
Buy It Cheap.com, Inc.: Pro Forma Combined Financial Statements
Cashtech Investment Limited and Subsidiary: Consolidated Financial
Statements
Heilongjiang ZhongQiang Power-Tech Co., Ltd.: Financial Statements for
the Years Ended December 31, 2003 and 2002
Exhibits
10. Share Exchange Agreement dated April 13, 2004 between Buy It
Cheap.com, Inc. and the shareholders of Cashtech Investment
Limited.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BUY IT CHEAP.COM, INC.
Dated: May 20, 2004 By: /s/John Leo
--------------------------------
John Leo
Chief Financial Officer
* * * * *
Buy It Cheap.Com, Inc.
Pro-Forma Combined Financial Statements
The Unaudited Pro-Forma Combined Statements of Operations of the Company
for the fiscal year ended June 30, 2003 and the nine-month period ended
March 31, 2004 (the "Pro-Forma Statement of Operations") and the
Unaudited Pro-Forma Combined Balance Sheet of the Company as of March
31, 2004 (the "Pro-Forma Balance Sheet") and together with the Pro-
Forma Statements of Operations (the "Pro-Forma Combined Financial
Statements"), have been prepared to illustrate the effect of the merger
with Cashtech Investment Limited & Subsidiary on May 6, 2004 as if such
transaction took place at the beginning of the periods presented. The
Pro-Forma Combined Financial Statements do not purport to be indicative
of the results of operations or financial position of the Company that
would have actually been obtained had such transactions been completed
as of the assumed dates and for the periods presented, or which may be
obtained in the future. The Pro-Forma adjustments are described in the
accompanying notes and are based upon available information and certain
assumptions that the Company believes are reasonable. The Pro-Forma
Combined Financial Statements should be read in conjunction with the
historical financial statements of the Company.
Buy It Cheap.Com, Inc.
Pro-Forma Balance Sheet
As of March 31, 2004
Buy It Cashtech
Cheap.Com, Investment Pro-Forma Proforma
Inc. Limited & Adjustments Balances
Historical Subsidiary
Data Historical
Data
------------------------------------------------
Assets
Current Assets
Cash $ 148 $ 55,693 $ (148) $ 55,693
Accounts receivable - 422,000 - 422,000
Inventories - 204,767 - 204,767
Loan to officers - 28,059 - 28,059
Loan to employees - 22,677 - 22,677
Prepaid expenses - 344,130 - 344,130
Loan receivable, others - 61,698 - 61,698
Other Current Assets 1,000 - (1,000) -
----------------------------------------------
Total Current Assets 1,148 1,139,024 (1,148) 1,139,024
Property and equipment 891 2,527,482 (891) 2,527,482
Construction in process - 2,912,402 - 2,912,402
Right to use land and power, net - 438,903 - 438,903
Patents, net - 101,704 - 101,704
----------------------------------------------
Total Assets 2,039 7,119,515 (2,039) 7,119,515
==============================================
Liabilities and Stockholder's Equity
Current Liabilities
Accounts payable and accrued
expenses 161,097 314,854 (5,019) 470,932
Notes payable - 362,451 - 362,451
Convertible notes payable 16,198 - - 16,198
Current maturities of long term
debt - 10,873 - 10,873
Customer deposits - 451,423 - 451,423
Welfare payable - 27,455 - 27,455
Taxes payable - 31,394 - 31,394
Loan payable, others - 147,705 - 147,705
Due to officers and directors 5,559 - (5,559) -
Deposit, other 29,500 - (29,500) -
----------------------------------------------
Total Current Liabilities 212,354 1,346,155 (40,078) 1,518,431
Long-term debt, excluding
current maturities - 8,155 - 8,155
Minority Interest In
Consolidated Subsidiary - 1,729,562 - 1,729,562
----------------------------------------------
Total Liabilities 212,354 3,083,872 (40,078) 3,256,148
----------------------------------------------
Stockholders' Equity (Impairment)
Preferred stock - Series C 10 - - 10
Convertible Preferred stock -
Series D - - 806 A 806
Common stock 9,190 50,000 (39,200) A 19,990
Additional paid in capital 787,140 4,627,386 (128,619) A 5,285,907
Accumulated deficit (255,555) (682,475) 205,052 A (732,978)
Exchange reserve - 40,732 - 40,732
Treasury stock (751,100) - - (751,100)
----------------------------------------------
Total Stockholders'
Equity (Impairment) (210,315) 4,035,643 38,039 3,863,367
----------------------------------------------
Total Liabilities and
Stockholders' Equity $ 2,039 $ 7,119,515 $ (2,039) $7,119,515
===============================================
A - See Note 1 to the Pro-Forma Combined Financial Statement
Buy It Cheap.Com, Inc
Unaudited Pro-Forma Combined Statement of Operations
Fiscal Year Ended June 30, 2003 Nine Months Ended March 31, 2004
------------------------------------------------ ----------------------------------------------
Buy It Cashtech Proforma Buy It CashTech ProForma
Cheap.Com Investment ProForma Combined Cheap.Com Investment ProForma Combined
Inc. Limited Adjustments Company Inc. Limited Adjustments Company
& Subsidiary & Subsidiary
Net Sales $ - $ - $ - $ - $ - $ 487,301 $ - $ 487,301
Cost of Goods Sold - - - - - 275,954 - 275,954
---------------------------------------------- --------------------------------------------
Gross Profit - - - - - 211,347 211,347
---------------------------------------------- --------------------------------------------
Selling & direct
operating costs 2,831 - - 2,831 1,112 9,895 - 11,007
General &
administrative
expenses 28,553 69,948 1,161 99,662 16,846 307,226 - 324,072
Research &
development expenses - - - - - 516,947 - 516,947
--------------------------------------------- --------------------------------------------
Total Operating
Expenses 31,384 69,948 1,161 102,493 17,958 834,068 - 852,026
--------------------------------------------- --------------------------------------------
Loss From Operations (31,384) (69,948) (1,161) (102,493) (17,958) (622,721) - (640,679)
--------------------------------------------- --------------------------------------------
Other Income (Expense)
Miscellaneous income - - - - - 143 - 143
Interest income - - - - - 223 - 223
Interest expense - - - - - (12,118) - (12,118)
--------------------------------------------- --------------------------------------------
Total Other Expenses - - - - - (11,752) - (11,752)
--------------------------------------------- --------------------------------------------
Minority Interest In
Consolidated Subsidiary - 20,985 - 20,985 - 190,342 - 190,342
--------------------------------------------- --------------------------------------------
Net Loss $(31,384) $ (48,963) $ (1,161) (81,508) $(17,958) $ (444,131) $ - $ (462,089)
============================================= ============================================
Loss per share,
basic and diluted $ - $ - $ - $ - - $ (0.01) $ - $ (0.02)
============================================= ============================================
Weighted Average
Common Stock
outstanding 9,040,427 50,000,000 - - 9,040,427 50,000,000 - 19,840,582
================================================ ===============================================
Buy It Cheap.Com, Inc.
Notes to the Pro-Forma Combined Financial Statements
Note 1.
On May 6, 2004, a closing occurred pursuant to a share exchange
agreement between the Company and the shareholders of Cashtech
Investment Limited ("Cashtech"). For accounting purposes, this
transaction is treated as an acquisition of the Company by Cashtech
and a recapitalization of Cashtech.
The share exchange resulted in the issuance of 9,720,000 shares of
common stock and 725,503 shares of Series D Convertible Preferred
Stock of the Company in exchange for all of issued and outstanding
shares of Cashtech. Pursuant to the transaction, the Company required
the issuance to Warner Technology & Investment Corp ("Warner") of
1,080,000 shares of common stock and 80,160 shares of Series D
Convertible Preferred Stock for the consulting agreement. The holder
of a share of Series D Convertible Preferred Stock shall have the
right to convert each whole share of Series D Convertible Preferred
Stock into 100 shares of common stock, $.001 par value. The
shareholders of Cashtech own approximately 82% of the issued and
outstanding stock of the Company as a result of this transaction.
The Pro-Forma Combined Balance Sheet is that of Cashtech and the
Company at March 31, 2004. The Pro-Forma Combined Statements of
Operations are those of Cashtech and the Company for the twelve-month
and nine-month periods ended June 30, 2003 and March 31, 2004,
respectively.
To the Board of Directors and Stockholders of.
Cashtech Investment Limited and Subsidiary
We have reviewed the accompanying consolidated balance sheet of
Cashtech Investment Limited and Subsidiary as of March 31, 2004, and
the consolidated statements of operations and cash flows for the
period from January 20, 2004 (date of inception) to March 31, 2004.
These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquires of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements for them
to be in conformity with generally accepted accounting principles.
Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
April 30, 2004
Cashtech Investment Limited and Subsidiary
Consolidated Balance Sheets
March 31, 2004
Assets
Current Assets
Cash $ 55,693
Accounts receivable 422,000
Inventories 204,767
Loan to officers 28,059
Loan to employees 22,677
Prepaid expenses 344,130
Loan receivable, others 61,698
---------
Total Current Assets 1,139,024
Property, plant and equipment, net 2,527,482
Construction in process 2,912,402
Rights to use land and power, net 438,903
Patents, net 101,704
---------
Total Assets 7,119,515
=========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses 314,854
Notes payable 362,451
Current maturities of long term debt 10,873
Customer deposits 451,423
Welfare payable 27,455
Taxes payable 31,394
Loan payable, others 147,705
---------
Total Current Liabilities 1,346,155
Long-term debt, excluding current maturities 8,155
Minority Interest In Consolidated Subsidiary Net Assets 1,729,562
---------
Total Liabilities 3,083,872
---------
Stockholders' Equity
Common stock, $0.001 par value; 50,000,000 shares
authorized, issued and outstanding 50,000
Additional paid in capital 4,627,386
Accumulated deficit (682,475)
Exchange reserve 40,732
---------
Total Stockholders' Equity 4,035,643
---------
Total Liabilities and Stockholders' Equity $ 7,119,515
=========
See notes to the consolidated financial statements and accountants' report.
Cashtech Investment Limited and Subsidiary
Consolidated Statements of Operations
For the Period from January 20, 2004 (Date of Inception) to March 31, 2004
Net Sales $ 476,009
Cost of goods sold 266,566
----------
Gross Profit 209,443
----------
Selling expenses 7,105
General and administrative expenses 244,707
Research and development costs 23,833
----------
Total Operating Expenses 275,645
----------
Loss from Operations (66,202)
----------
Other Income (Expense)
Miscellaneous income 40
Interest income 99
Interest expense (7,091)
----------
Total Other Expense (6,952)
----------
Minority Interest In Consolidated Subsidiary 21,946
----------
Net Loss (51,208)
==========
Loss Per Share
Loss Per Common Share, basic and diluted $ -
==========
Weighted Average Number of Common Shares
Outstanding, basic and diluted 50,000,000
==========
See notes to the consolidated financial statements and accountants' report.
Cashtech Investment Limited and Subsidiary
Consolidated Statements of Cash Flows
For the Period from January 20, 2004 (Date of Inception) to March 31, 2004
Cash Flows From Operating Activities
Net Loss $ (51,208)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 43,334
Minority interest in consolidated subsidiary (21,946)
Decrease (increase) in assets
Accounts receivable (421,939)
Inventories (101,992)
Prepaid expenses (12,692)
Taxes receivable 28,495
Increase (decrease) in liabilities
Accounts payable and accrued expenses 265,396
Customer deposits 451,354
Welfare payable 6,909
Taxes payable 31,394
---------
Net Cash Provided by Operating Activities 217,105
---------
Cash Flow From Investing Activities
Cash paid for property, plant and equipment (60,005)
Cash paid for construction in process (91,772)
Cash paid for patents (6,360)
---------
Net Cash Used by Investing Activities (158,137)
---------
Cash Flow From Financing Activities
Payments on loans payable, others (37,527)
Proceeds from loans receivable, others 33,326
Proceeds from officers loans 71,361
Payments on employees loans (75,778)
Payments on long-term debt (2,720)
---------
Net Used by Financing Activities (11,338)
---------
Net Increase in Cash 47,630
Cash at Beginning of Period 8,063
---------
Cash at End of Period $ 55,693
=========
See notes to the consolidated financial statements and accountants' report.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 4,492
=========
See notes to the consolidated financial statements and accountants' report.
Cashtech Investment Limited and Subsidiary
Notes to the Consolidated Financial Statements
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Item 310 of Regulation S-B.
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, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the period from January 20, 2004 (date of inception)
through March 31, 2004 are not necessarily indicative of the results that may
be expected for the fiscal year ended December 31, 2004.
Principles of Consolidation - The consolidated financial statements include
the accounts of Cashtech Investment Limited (the "Company"), and its 70% owned
subsidiary, Heilongjiang ZhongQiang Power-Tech Co., Ltd. (the "Subsidiary").
All significant intercompany balances and transactions have been eliminated
in consolidation.
Cashtech Investment Limited was organized in the British Virgin Islands as an
International Business Company on January 20, 2004, and as a holding company.
On March 1, 2004, the Company acquired 70% ownership of the Subsidiary (see
"BUSINESS COMBINATION" below).
The Subsidiary had been in the development stages from the date of inception
(August 20, 2002) to December 31, 2003. The Subsidiary has been considered as
an normal operating company starting from January 1, 2004.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts equal to the estimated
losses that will be incurred in the collection of all receivables. The
estimated losses are based on a review of the current status of the existing
receivables. The Company expects all receivables to be collected; Therefore,
no allowance is provided.
Inventories
Inventories are valued at the lower of cost (determined on a first-in, first-
out basis) or market.
Depreciation and Amortization
The cost of property, plant and equipment is depreciated for financial reporting
purposes on a straight-line basis over the estimated useful lives of the assets:
39 years for buildings and improvements, 5-10 years for machinery and
equipment, and vehicle. Rights to use land and power are amortized over the
shorter of the estimated useful lives or the underlying lease term. Patents
are amortized over 40 years. Repairs and maintenance expenditures which do
not extend the useful lives of the related assets are expensed as incurred.
Construction in Process
Construction in process is charged as incurred and amounted to $2,912,402 as
of March 31, 2004.
Patents
Patents are capitalized when the Company determines there will be a future
benefit derived from such assets, and are stated at cost. Amortization is
computed the straight-line method over the estimated useful life of the asset,
generally forty years.
Cashtech Investment Limited and Subsidiary
Notes to the Consolidated Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Revenue Recognition
Sales revenue is recognized at the date of shipment to customers, at which
time, no other significant obligations of the Company exist, other than
normal warranty support.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense was $725 for
the period ended March 31, 2004.
Shipping and Handling Costs
Shipping and handling costs for the products transportation operations are
charged to costs of goods sold as incurred
Research and Development Costs
Research and development is charged to operations as incurred.
Basic Loss Per Common Share
Net income (loss) per common share is calculated utilizing the weighted average
number of common shares outstanding during the period. The number of shares
used in the computation was 50,000,000 for the period ended March 31, 2004.
The effect of assuming the exchange of any stock options, warrants and
convertible notes would be anti dilutive at March 31, 2004.
Translation of Foreign Currencies
The financial statements of the Company are measured in Chinese Yuan and then
translated to U.S. dollars. All balance sheet accounts have been translated
using the current rate of exchange at the balance sheet date. Results of
operations have been translated using the average rates prevailing throughout
the year. Translation gains or losses resulting from the changes in the
exchange rates from year-to-year are accumulated in a separate component of
members' equity, presented under the "Exchange reserve" caption.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the bases of (list the balance sheet
elements with different bases for financial and tax purposes) for financial and
income tax reporting. The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses that are
available to offset future income taxes. There were no income taxes provided
for the period from January 20, 2004 (date of inception) through March 31,
2004.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
BUSINESS COMBINATION
On March 1, 2004, shareholders holding 70% ownership of the Subsidiary agreed
to the transfer of their shares to obtain 100% ownership in the Company. The
Company is the legal parent of the Subsidiary since inception, with the
transaction being treated as a reverse merger and recapitalization of the
Subsidiary, which is treated as the accounting acquirer. The Subsidiary was
founded in the People's Republic of China on August 20, 2002. The Subsidiary,
located in NO1 Weiyou Road Shuangcheng Heilongjiang Province 150100 P.R.China,
is primarily engaged in manufacturing mine-used polymer lithium-ion batteries,
electrical motorcycle-used polymer lithium-ion batteries, and electrical
autocar-used polymer lithium-ion batteries in China. The accompanying
statement of operations includes the activity of the Subsidiary for the
period from January 20, 2004 (date of Company inception) to March 31, 2004.
CONCENTRATIONS OF BUSINESS AND CREDIT RISK
The Company provides credit in the normal course of business. The Company
performs ongoing credit evaluations of its customers and maintains allowances
for doubtful accounts based on factors surrounding the credit risk of
specific customers, historical trends, and other information.
Since inception, the Company had no sales and purchases in 2002 and three
months ended March 31, 2003. The Company had significant sales to two customers
representing 75.77% and 24.18% of total revenues for three months ended March
31, These two significant customers, Hong Kong Yi-Her Group and ShanXi Sze-
Dar safety supplies Co., Ltd., are not related party to the Company. The
Company has also made significant purchases from one vendor representing
70.58% of total purchases for three months ended March 31, 2004. This
significant vendor, Shanghai Chang Lu Trade Co, is not related party to the
Company.
INVENTORIES
Inventories consist of the following:
March 31, 2004
--------------
Raw materials $ 150,659
Work in process 14,531
Finished goods 39,577
--------
Total $ 204,767
========
RELATED PARTY TRANSACTIONS
Loans to officers are unsecured, non-interest bearing and due upon demand. Loan
to employees also are unsecured, non-interest bearing and due upon demand.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at cost, less accumulated depreciation, consists
of the following:
March 31, 2004
--------------
Buildings and improvement $ 2,080,929
Machinery and equipment 557,679
Vehicle 46,892
---------
Subtotal 2,685,500
Less accumulated depreciation 158,018
---------
Total $ 2,527,482
=========
Depreciation expense charged to operations was $39,059 for three months ended
March 31, 2004.
Cashtech Investment Limited and Subsidiary
Notes to the Consolidated Financial Statements
RIGHTS TO USE LAND AND POWER
The Company's office and manufacturing site is located in Shuangcheng
Heilongjiang. The Company leases land per real estate contract from the
People's Republic of China Government, for a period from August 2003 to
September 2043. Per the People's Republic of China's governmental
regulations, the Government owns all land. The Government allows maximum
50 year leases for commercial building owners.
The Company also leases power from the local government in Shuangcheng
Heilongjiang, for a period July 2003 to July 2013.
The rights to use land and power at cost, less accumulated amortization,
consists of the following:
March 31, 2004
--------------
Right to use land $ 420,745
Right to use power 42,286
---------
Subtotal 463,031
Less accumulated amortization 24,128
---------
Total $ 438,903
=========
Amortization expense charged to operations was $3,622 for three months ended
March 31, 2004.
PATENTS
The patents at cost, less accumulated amortization, consists of following:
March 31, 2004
--------------
Patents $ 103,773
Less accumulated amortization 2,069
---------
Total $ 101,704
========
Amortization expense charged to operations was $648 for three months ended
March 31, 2004.
LOAN RECEIVABLE, OTHERS
Loan receivable, others represents the unsecured loan to non-related third
parties, non-interest bearing and due upon demand.
NOTE PAYABLE
The note payable represents an unsecured demand loan from Shuangcheng National
Owned Assets Operation Ltd. with expiration date on June 1, 2004 and monthly
interest rate 5.7525%.
Cashtech Investment Limited and Subsidiary
Notes to the Consolidated Financial Statements
LOAN PAYABLE, OTHERS
Loan payable, others represents the unsecured loan from non-related third
parties, non-interest bearing and due upon demand.
TAXES PAYABLE
Taxes payable was $31,394 as of March 31, 2004, consist of the following:
March 31, 2004
--------------
Value-added tax $ 27,636
Property tax 1,935
Payroll tax 718
Other tax payable 1,105
--------
Total $ 31,394
========
LONG-TERM DEBT
Long-term debt represents $21,748 car loan from China Bank with 24 months
term and monthly interest rate 4.575%. The loan started on December 10, 2003
and is secured by the car.
The following is a schedule of future minimum payments of long-term debt:
Three Months Ended March 31,
2004 $ 8,155
2005 10,873
--------
Total minimum payments required $ 19,028
========
EMPLOYEE WELFARE PLAN
The Company has established its own employee welfare plan in accordance with
Chinese law and regulations. The Company makes annual pre-tax contributions
of 14% of all employees' salaries.
The total expense for the above plan amounted to $10,244 for three months
ended March 31, 2004.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs is $23,833 for three months ended March 31,
2004. Shuangcheng Science and Technology Bureau has committed to grant the
Company $604,105 (RMB5,000,000), if the Company's research and development
products pass the international or local bureau's standards by December 31,
2004.
WARRANTIES
The Company warrants that all equipment manufactured by it will be free from
defects in material and workmanship under normal use for a period of one
year from the date of shipment. The Company's experience for costs and
expenses in connection with such warranties has been minimal and through
March 31, 2004, no amounts have been considered necessary to reserve for
warranty costs at this time.
Cashtech Investment Limited and Subsidiary
Notes to the Consolidated Financial Statements
FAIR VALUE OF FINANCIAL INSTRUMENTS
The current carrying amounts of the Company's cash, accounts
receivable, accounts payable and accrued expenses, and note
payable approximate their fair values on March 31, 2004 due to the
short term maturities of these financial instruments.
The carrying amounts of the Company's long-term debt approximate
its fair value on March 31, 2004 based on current rates at which
the Company could borrow funds with similar maturities.
Independent Auditors' Report
To the Board of Directors and Stockholders of
Heilongjiang ZhongQiang Power-Tech Co., Ltd.
We have audited the accompanying balance sheets of Heilongjiang
ZhongQiang Power-Tech Co., Ltd. (A Development Stage Company) as of
December 31, 2003 and 2002 and the related statements of operations,
changes in stockholders' equity and cash flows for the year ended
December 31, 2003, the period from August 20, 2002 (date of
inception) to December 31, 2002, and the period from August 20, 2002
(date of inception) to December 31, 2003. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Heilongjiang ZhongQiang Power-Tech Co., Ltd. (A Development Stage
Company) as of December 31, 2003 and 2002 and the results of their
operations and cash flows for the year ended December 31, 2003, the
period from August 20, 2002 (date of inception) to December 31 2002,
and the period from August 20, 2002 (date of inception) to December
31, 2003 in conformity with accounting principles generally accepted
in the United States of America.
Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
January 10, 2004
Heilongjiang ZhongQiang Power-Tech Co., Ltd.
(A Development Stage Company)
Balance Sheets
December 31,
2003 2002
Assets -------------------------
Current Assets
Cash $ 8,063 $ 2,441
Accounts receivable 61 -
Inventories 102,775 -
Loan to officers 99,420 -
Prepaid expenses 331,438 -
Taxes receivable 28,495 -
Loan receivable, others 95,024 -
--------- ---------
Total Current Assets 665,276 2,441
Property, plant and equipment, net 2,506,535 1,953,160
Construction in process 2,820,630 -
Rights to use land and power, net 442,541 454,589
Patents, net 95,996 -
--------- ---------
Total Assets 6,530,978 2,410,190
========= =========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses 49,458 -
Notes payable 362,463 -
Current maturities of long term debt 10,626 -
Customer deposits 69 -
Loan from officers - 2,826
Loan from employees 53,101 -
Welfare payable 20,546 -
Loan payable, others 185,234 -
--------- ---------
Total Current Liabilities 681,497 2,826
Long-term debt, excluding current maturities 11,122 -
--------- ---------
Total Liabilities 692,619 2,826
--------- ---------
Stockholders' Equity
Common stock, $0.12 par value, 50,000,000
and 20,000,000 shares authorized,
issued and outstanding, respectively 6,000,000 2,400,000
Additional paid in capital 428,894 14,461
Deficit accumulated during development stage (631,267) (22,554)
Exchange reserve 40,732 15,457
--------- ---------
Total Stockholders' Equity 5,838,359 2,407,364
--------- ---------
Total Liabilities and Stockholders' Equity $6,530,978 $2,410,190
========= =========
See notes to the financial statements.
Heilongjiang ZhongQiang Power-Tech Co., Ltd.
(A Development Stage Company)
Statements of Operations
Period from Period from
August 20, 2002 August 20, 2002
(Date of (Date of
Year Ended Inception) to Inception) to
December 31, December 31, December 31,
2003 2002 2003
----------------------------------------------
Net Sales $ 11,292 $ - $ 11,292
Cost of goods sold 9,388 - 9,388
----------------------------------------
Gross Profit 1,904 - 1,904
----------------------------------------
Selling expenses 2,790 - 2,790
General and administrative expenses 109,913 22,554 132,467
Research and development costs 493,114 - 493,114
----------------------------------------
Total Operating Expenses 605,817 22,554 628,371
----------------------------------------
Loss from Operations (603,913) (22,554) (626,467)
----------------------------------------
Other Income (Expense)
Miscellaneous income 103 - 103
Interest income 124 - 124
Interest expense (5,027) - (5,027)
----------------------------------------
Total Other Expense (4,800) - (4,800)
----------------------------------------
Net Loss $ (608,713) $ (22,554) $ (631,267)
==========================================
Loss Per Share
Loss Per Common Share, basic
and diluted $ (0.03) $ - $ (0.03)
========================================
Weighted Average Number of Common
Shares Outstanding, basic and
diluted 21,150,685 20,000,000 20,841,683
=========================================
See notes to the financial statements.
Heilongjiang ZhongQiang Power-Tech Co., Ltd.
(A Development Stage Company)
Statements of Changes in Stockholders' Equity
For the Period From Inception (August 20, 2002)
To December 31, 2002 and For the Year Ended December 31, 2003
Common Stock
----------------------- Additional Total
Stated Paid-in Accumulated Exchange Stockholders'
Shares Value Capital Deficit Reserve Equity
-----------------------------------------------------------------------------------------------------
BALANCE, AUGUST 20, 2002
(date of inception) 20,000,000 $ 2,400,000 $ 14,461 $ - $ 15,457 $ 2,429,918
Net loss - - - (22,554) - (22,554)
------------------------------------------------------------------------
BALANCE, DECEMBER 31,
2002 20,000,000 2,400,000 14,461 (22,554) 15,457 2,407,364
Issuance additional paid
in capital to exchange
equipments - - 414,433 - 963 415,396
Issuance of common stock,
in private placement,
net of offering costs $0 30,000,000 3,600,000 - - 24,312 3,624,312
Net loss - - - (608,713) - (608,713)
------------------------------------------------------------------------
BALANCE, DECEMBER 31,
2003 50,000,000 $ 6,000,000 $ 428,894 $(631,267) $ 40,732 $ 5,838,359
========================================================================
See notes to the financial statements.
Heilongjiang ZhongQiang Power-Tech Co., Ltd.
(A Development Stage Company)
Statements of Cash Flows
Period from Period from
August 20, 2002 August 20, 2002
(Date of (Date of
Year Ended Inception) to Inception) to
December 31, December 31, December 31,
2003 2002 2003
----------------------------------------------
Cash Flows From Operating
Activities
Net Loss $ (608,713) $ (22,554) $ (631,267)
Adjustments to reconcile net
income to net cash
Currency deficiency (320) (2) (322)
Depreciation and amortization 118,715 22,171 140,886
Decrease (increase) in assets
Accounts receivable (61) - (61)
Inventories (102,775) - (102,775)
Prepaid expenses (331,438) - (331,438)
Taxes receivable (28,495) - (28,495)
Increase (decrease) in liabilities
Accounts payable and accrued
expenses 49,458 - 49,458
Customer deposits 69 - 69
Welfare payable 20,546 - 20,546
----------------------------------------
Net Cash Used by Operating
Activities (883,014) (385) (883,399)
----------------------------------------
Cash Flow From Investing Activities
Cash paid for property, plant and
equipment (240,780) - (240,780)
Cash paid for construction in
process (2,820,630) - (2,820,630)
Cash paid for rights to use land
and power (2,446) - (2,446)
Cash paid for patents (97,417) - (97,417)
---------------------------------------
Net Cash Used by Investing
Activities (3,161,273) - (3,161,273)
---------------------------------------
Cash Flow From Financing Activities
Proceeds from issuance of common
stock 3,624,633 - 3,624,633
Proceeds from notes payable 362,463 - 362,463
Payments on loans, others (95,024) - (95,024)
Proceeds from loans, others 185,234 - 185,234
(Payments on) proceeds from
officers loans (102,246) 2,826 (99,420)
Proceeds from employees loans 53,101 - 53,101
Proceeds from long-term debt 21,748 - 21,748
---------------------------------------
Net Cash Provided by Financing
Activities 4,049,909 2,826 4,052,735
---------------------------------------
Net Increase in Cash 5,622 2,441 8,063
Cash at Beginning of Period 2,441 - -
---------------------------------------
Cash at End of Period $ 8,063 $ 2,441 $ 8,063
=======================================
Period from Period from
August 20, 2002 August 20, 2002
(Date of (Date of
Year Ended Inception) to Inception) to
December 31, December 31, December 31,
2003 2002 2003
----------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during the year for:
Interest $ 5,027 $ - $ 5,027
=======================================
Income taxes $ - $ - $ -
=======================================
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Capital increase in exchange of
property, plant and equipment $ 415,396 $1,969,319 $2,384,715
=======================================
Capital increase in exchange of
rights to use land and power $ - $ 460,601 $ 460,601
======================================
Heilongjiang ZhongQiang Power-Tech Co., Ltd.
(A Development Stage Company)
Notes to the Financial Statements
ORGANIZATION AND NATURE OF BUSINESS
Heilongjiang ZhongQiang Power-Tech Co., Ltd. (the Company) was founded in the
People's Republic of China on August 20, 2002. The Company, located in NO1
Weiyou Road Shuangcheng Heilongjiang Province 150100 P.R.China, is primarily
engaged in manufacturing mine-used polymer lithium-ion batteries, electrical
motorcycle-used polymer lithium-ion batteries, and electrical autocar-used
polymer lithium-ion batteries in China.
The Company is in the development stages and its present activities are focused
on developing and testing the electrical mine-used, motorcycle-used, and
autocar-used polymer lithium-ion batteries. Since the Company is in the
development stage, the accompanying financial statements should not be regarded
as typical for normal operating periods.
LOSSES DURING THE DEVELOPMENT STAGE AND MANAGEMENT'S PLANS
Through December 31, 2003, the Company had incurred accumulated development
stage losses totaling $631,267, and on December 31, 2003 had a working capital
deficit of $16,221. On December 31, 2003, the Company had $8,063 and $61 of
cash and trade receivable, respectively, to fund short-term working capital
requirements.
The Company's ability to continue as a going concern and its future success is
dependent upon its ability to raise capital in the near term to : (1) satisfy
its current obligations, (2) continue its research and development efforts, and
(3) the successful wide scale development, marketing, and sales of its
products.
The Company believes that it will be able to complete the necessary steps in
order to meet its cash flow requirements throughout fiscal 2004 and continue
its development and commercialisation efforts. Management's plans in this
regard include, but are not limited to, the following:
During year 2004, the Company will be able to raise more capital from the
shareholders, and borrow line of credit loan from the bank in pledge of the
Company's property, plant and equipment.
Shuangcheng Science and Technology Bureau has committed to grant the Company
$604,105 (RMB5,000,000), if the Company's research and development products
pass the international or local bureau's standards by December 31, 2004.
Subsequent to December 31, 2003, the Company has received $4,567,038
(RMB37,800,000) in orders for their product.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts equal to the estimated
losses that will be incurred in the collection of all receivables. The
estimated losses are based on a review of the current status of the existing
receivables. The Company expects all receivables to be collected; Therefore, no
allowance is provided.
Heilongjiang ZhongQiang Power-Tech Co., Ltd.
(A Development Stage Company)
Notes to the Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Inventories
Inventories are valued at the lower of cost (determined on a first-in,
first-out basis) or market.
Depreciation and Amortization
The cost of property, plant and equipment is depreciated for financial
reporting purposes on a straight-line basis over the estimated useful lives of
the assets: 39 years for buildings and improvements, 5-10 years for machinery
and equipment, and vehicle. Rights to use land and power are amortized over the
shorter of the estimated useful lives or the underlying lease term. Patents are
amortized over 40 years. Repairs and maintenance expenditures which do not
extend the useful lives of the related assets are expensed as incurred.
Construction in Process
Construction in process is charged as incurred and was $2,820,630 and $0 in
2003 and 2002, respectively.
Patents
Patents are capitalized when the Company determines there will be a future
benefit derived from such assets, and are stated at cost. Amortization is
computed the straight-line method over the estimated useful life of the asset,
generally forty years.
Revenue Recognition
Sales revenue is recognized at the date of shipment to customers, at which
time, no other significant obligations of the Company exist, other than normal
warranty support.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expenses was $16,967
and $0 for the years ended December 31, 2003 and the period from August 20,
2002 (date of inception) to December 31, 2002, respectively.
Shipping and Handling Costs
Shipping and handling costs for the products transportation operations are
charged to costs of goods sold as incurred
Research and Development Costs
Research and development is charged to operations as incurred.
Basic Loss Per Common Share
Net loss per common share is calculated utilizing the weighted average number
of common shares outstanding during the period. The number of shares used in
the computations were 21,150,685, 20,000,000 and 20,841,683 for the year ended
December 31, 2003, the period from August 20, 2002 (date of inception) to
December 31, 2002, and the period from August 20, 2002 (date of inception) to
December 31, 2003, respectively.
Heilongjiang ZhongQiang Power-Tech Co., Ltd.
(A Development Stage Company)
Notes to the Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Translation of Foreign Currencies
The financial statements of the Company are measured in Chinese Yuan
and then translated to U.S. dollars. All balance sheet accounts have been
translated using the current rate of exchange at the balance sheet date.
Results of operations have been translated using the average rates
prevailing throughout the year. Translation gains or losses resulting from
the changes in the exchange rates from year-to-year are accumulated in a
separate component of members' equity, and be called exchange reserve.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the bases of (list the
balance sheet elements with different bases for financial and tax purposes)
for financial and income tax reporting. The deferred tax assets and
liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes also are recognized for
operating losses that are available to offset future income taxes. There
were no income taxes provided for on December 31, 2003 and 2002.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONCENTRATIONS OF BUSINESS AND CREDIT RISK
The Company provides credit in the normal course of business. The Company
performs ongoing credit evaluations of its customers and maintains allowances
for doubtful accounts based on factors surrounding the credit risk of specific
customers, historical trends, and other information.
Since inception, the Company had no sales and purchases in 2002. The Company
had significant sales to one customer representing 91.9 % of total revenues in
2003. This significant customer, Shanghai Yikeli Co., is not related party to
the Company. The Company has also made significant purchases from one vendor
representing 42.2% of total purchases in 2003. This significant vendor,
Shanghai Chang Lu Trade Co, is not related party to the Company.
INVENTORIES
Inventories consist of the following:
December 31,
2003 2002
-------------------------
Raw materials $ 59,219 $ -
Work in process 15,058 -
Finished goods 28,498 -
-------- --------
Total $ 102,775 $ -
======== ========
Heilongjiang ZhongQiang Power-Tech Co., Ltd.
(A Development Stage Company)
Notes to the Financial Statements
RELATED PARTY TRANSACTIONS
Loans to and from officers are unsecured, non-interest bearing and due upon
demand. Loan from employees also are unsecured, non-interest bearing and due
upon demand.
PREPAID EXPENSES
Prepaid expenses for the year ended December 31, 2003 includes the payment of
$149,879 for services incidental to the Company's intention on becoming
publicly traded in United States of America.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at cost, less accumulated depreciation, consists
of the following:
December 31,
2003 2002
--------------------------
Buildings and improvement $ 2,080,999 $ 1,969,319
Machinery and equipment 497,602 -
Vehicle 46,893 -
--------- ---------
Subtotal 2,625,494 1,969,319
Less accumulated depreciation 118,959 16,159
--------- ---------
Total $ 2,506,535 $ 1,953,160
========= =========
Depreciation expense charged to operations was $102,800 and $16,159 in 2003
and 2002, respectively.
RIGHTS TO USE LAND AND POWER
The Company's office and manufacturing site is located in Shuangcheng
Heilongjiang. The Company leases land per real estate contract from the
People's Republic of China Government, for a period from August 2003 to
September 2043. Per the People's Republic of China's governmental regulations,
the Government owns all land. The Government allows maximum 50 year leases
for commercial building owners.
The Company also leases power from the local government in Shuangcheng
Heilongjiang, for a period July 2003 to July 2013.
The rights to use land and power at cost, less accumulated amortization,
consists of the following:
December 31,
2003 2002
--------------------------
Right to use land $ 420,760 $ 418,331
Right to use power 42,287 42,270
--------- ---------
Subtotal 463,047 460,601
Less accumulated amortization 20,506 6,012
--------- ---------
Total $ 442,541 $ 454,589
========= =========
Amortization expense charged to operations was $14,494 and $6,012 in 2003 and
2002, respectively.
Heilongjiang ZhongQiang Power-Tech Co., Ltd.
(A Development Stage Company)
Notes to the Financial Statements
PATENTS
The patents at cost, less accumulated amortization, consists of following:
December 31,
2003 2002
--------------------------
Patents $ 97,417 $ -
Less accumulated amortization 1,421 -
-------- --------
Total $ 95,996 $ -
======== ========
Amortization expense charged to operations was $1,421 and $0 in 2003 and 2002,
respectively.
LOAN RECEIVABLE, OTHERS
Loan receivable, others represents the unsecured loan to non-related third
parties, non-interest bearing and due upon demand.
NOTE PAYABLE
The note payable represents an unsecured demand loan from Shuangcheng National
Owned Assets Operation Ltd. with expiration date on June 1, 2004 and monthly
interest rate 5.7525%.
LOAN PAYABLE, OTHERS
Loan payable, others represents the unsecured loan from non-related third
parties, non-interest bearing and due upon demand.
TAXES RECEIVABLE
Taxes receivable was $28,495 and $0 as of December 31, 2003 and 2002,
respectively and consist of the following:
December 31,
2003 2002
-----------------------
Value-added tax $ 28,541 $ -
Payroll tax 46 -
-------- --------
Total Taxes receivable $ 28,495 $ -
======== ========
Heilongjiang ZhongQiang Power-Tech Co., Ltd.
(A Development Stage Company)
Notes to the Financial Statements
LONG-TERM DEBT
Long-term debt represents $21,748 car loan from China Bank with 24 months term
and monthly interest rate 4.575%. The loan started on December 10, 2003 and is
secured by the car.
The following is a schedule of future minimum payments of long-term debt:
Year Ending December 31,
2004 $ 10,626
2005 11,122
--------
Total minimum payments required $ 21,748
========
EMPLOYEE WELFARE PLAN
The Company has established its own employee welfare plan in accordance with
Chinese law and regulations. The Company makes annual pre-tax contributions
of 14% of all employees' salaries.
The total expense for the above plan amounted to $24,546 and $0 for the years
ended December 31, 2003 and 2002, respectively.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs is $493,114 and $0 in 2003 and 2002,
respectively. Shuangcheng Science and Technology Bureau has committed to grant
the Company $604,105 (RMB5,000,000), if the Company's research and development
products pass the international or local bureau's standards by December 31,
2004.
WARRANTIES
The Company warrants that all equipment manufactured by it will be free from
defects in material and workmanship under normal use for a period of one year
from the date of shipment. The Company's experience for costs and expenses in
connection with such warranties has been minimal and through December 31, 2003,
no amounts have been considered necessary to reserve for warranty costs at this
time.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The current carrying amounts of the Company's cash, accounts receivable,
accounts payable and accrued expenses, and note payable approximate their fair
values on December 31, 2003 and 2002 due to the short term maturities of these
financial instruments.
The carrying amounts of the Company's long-term debt approximate its fair value
on December 31, 2003, and 2002 based on current rates at which the Company
could borrow funds with similar maturities.
Heilongjiang ZhongQiang Power-Tech Co., Ltd.
(A Development Stage Company)
Notes to the Financial Statements
NEW ACCOUNTING PRONOUNCEMENTS
In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This
statement addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. SFAS No. 144 supercedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets to be Disposed of, and
provides guidance on classification and accounting for such assets when held
for sale or abandonment. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001. The adoption of SFAS No. 144 did not have a
significant impact on the Company's results of operations or financial
position.
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
This statement rescinds SFAS No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that statement, SFAS No. 44,
Accounting for Intangible Assets of Motor Carriers, and SFAS No. 64,
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This
statement amends SFAS No. 13, Accounting for Leases, to eliminate
inconsistencies between the required accounting for sales-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sales-leaseback transactions. Also,
this statement amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings, or describe their
applicability under changed conditions. Provisions of SFAS No. 145 related to
the rescissions of SFAS No. 4 were effective for the Company on November 1,
2002 and provisions affecting SFAS No. 13 were effective for transactions
occurring after May 15, 2002. The adoption of SFAS No. 145 did not have a
significant impact on the Company's results of operations or financial
position.
In June 2003, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This statement covers restructuring type
activities beginning with plans initiated after December 31, 2002. Activities
covered by this standard that are entered into after that date will be recorded
in accordance with provisions of SFAS No. 146. The adoption of SFAS No. 146
did not have a significant impact on the Company's results of operations or
financial position.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure, which provides alternative methods of
transition for a voluntary change to fair value based method of accounting for
stock-based employee compensation as prescribed in SFAS 123, Accounting for
Stock-Based Compensation. Additionally, SFAS No. 148 required more prominent
and more frequent disclosures in financial statements about the effects of
stock-based compensation. The provisions of this Statement are effective for
fiscal years ending after December 15, 2002. The adoption of this statement is
not expected to have a significant impact on the Company's results of
operations of financial position.
Heilongjiang ZhongQiang Power-Tech Co., Ltd.
(A Development Stage Company)
Notes to the Financial Statements
NEW ACCOUNTING PRONOUNCEMENTS (Continued)
In April 2003, the FASB issued SFAS Statement No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities", which amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities. This Statement is effective for contracts entered into or modified
after June 30, 2003, except for certain hedging relationships designated after
June 30, 2003. Most provisions of this Statement should be applied
prospectively. The adoption of this statement is not expected to have a
significant impact on the Company's results of operations or financial
position.
In May 2003, the FASB issued SFAS Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity".
This Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). This
statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatorily redeemable
financial instruments of nonpublic entities, if applicable. It is to be
implemented by reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance date of the
Statement and still existing at the beginning of the interim period of
adoption. The adoption of this statement is not expected to have a significant
impact on the Company's results of operations or financial position.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. FIN 45 requires a company, at the time
it issues a guarantee, to recognize an initial liability for the fair value of
obligations assumed under the guarantees and elaborates on existing disclosure
requirements related to guarantees and warranties. The initial recognition
requirements are effective for the Company during the third quarter ending
March 31, 2003. The adoption of FIN 45 did not have a significant impact on
the Company's results of operations or financial position.
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is effective for all new variable interest
entities created or acquired after January 31, 2003. For variable interest
entities created or acquired prior to February 1, 2003, the provisions of FIN
46 must be applied for the first interim or annual period beginning after June
15, 2003. The adoption of FIN 46 did not have a significant impact on the
Company' results of operations or financial position.
* * * * *
Exhibit 10
SHARE EXCHANGE AGREEMENT
AGREEMENT dated April 13, 2004 by and between BUY IT
CHEAP.COM, INC., a Delaware corporation (hereinafter referred to
as "BYCC") and the individual signatories to this agreement,
being all of the shareholders of CASHTECH INVESTMENT LIMITED, a
British Virgin Islands corporation (hereinafter referred to as
the "BVICORP SHAREHOLDERS").
WHEREAS, CASHTECH INVESTMENT LIMITED ("BVICORP") is a
British Virgin Islands corporation which owns seventy percent
(70%) of the issued and outstanding capital stock of Harbin
Zhongqiang Power-Tech Co., Ltd., a corporation organized under
the laws of the People's Republic of China ("ZQ POWER-TECH"); and
WHEREAS, the BVICORP SHAREHOLDERS own all of the issued and
outstanding capital stock of BVICORP; and
WHEREAS, the BVICORP SHAREHOLDERS desire to transfer to BYCC
and BYCC desires to acquire one hundred (100%) percent of such
shares.
NOW, THEREFORE, it is agreed:
1. Definitions. As used herein, the following terms shall
have the meanings set forth below:
a. "Applicable Law" means any domestic or foreign law,
statute, regulation, rule, policy, guideline or ordinance
applicable to the businesses or corporate existence of BYCC,
BVICORP or ZQ POWER-TECH.
b. "GAAP" means generally accepted accounting principles
in the United States of America as promulgated by the American
Institute of Certified Public Accountants and the Financial
Accounting Standards Board or any successor institutes concerning
the treatment of any accounting matter.
c. "Lien" means, with respect to any property or asset,
any mortgage, lien, pledge, charge, security interest, claim,
encumbrance, royalty interest, any other adverse claim of any
kind in respect of such property or asset, or any other
restrictions or limitations of any nature whatsoever.
d. "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means:
(i) any income, alternative or add-on minimum tax,
gross receipts tax, sales tax, use tax, ad valorem tax, transfer
tax, franchise tax, profits tax, license tax, withholding tax,
payroll tax, employment tax, excise tax, severance tax, stamp
tax, occupation tax, property tax, environmental or windfall
profit tax, custom, duty or other tax, impost, levy, governmental
fee or other like assessment or charge of any kind whatsoever
together with any interest or any penalty, addition to tax or
additional amount imposed with respect thereto by any
governmental or Tax authority responsible for the imposition of
any such tax (domestic or foreign), and
(ii) any liability for the payment of any amounts of
the type described in clause (i) above as a result of being a
member of an affiliated, consolidated, combined or unitary group
for any Taxable period, and
(iii) any liability for the payment of any amounts of
the type described in clauses (i) or (ii) above as a result of
any express or implied obligation to indemnify any other person.
e. "Tax Return" means any return, declaration, form, claim
for refund or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
2. Share Exchange.
a. On the Closing Date (defined herein), the BVICORP
SHAREHOLDERS shall transfer and assign to BYCC all of the issued
and outstanding capital stock of BVICORP. The BVICORP
SHAREHOLDERS represent and warrant that upon delivery to BYCC of
certificates for said shares, all of the right, title and
interest in said shares will be transferred to BYCC free of
Liens, claims and encumbrances.
b. On the Closing Date, BYCC shall issue to the BVICORP
SHAREHOLDERS a total of nine million seven hundred twenty
thousand (9,720,000) shares of common stock and seven hundred
twenty-five thousand four hundred ninety-four (725,494) shares
of Series D Preferred Stock. The shares shall be issued in
proportion to the relative interests of the BVICORP SHAREHOLDERS
in BVICORP, as set forth on Schedule 2a hereto. No fractional
shares will be issued; in lieu thereof, the number of shares to
each STOCKHOLDER will be rounded up to the next whole share.
BYCC warrants that the common stock and the preferred stock, when
so issued, will be duly authorized, fully paid and non-
assessable.
c. On the Closing Date, BYCC shall enter into a
Registration Rights Agreement in the form annexed hereto as
Exhibit A with those of the BVICORP SHAREHOLDERS listed as
signatories in said Exhibit A.
d. The parties intend that the exchange of shares described
above shall qualify as a tax-free exchange under Section 351 of
the United States Internal Revenue Code. The parties further
intend that the issuance of the common stock and the preferred
stock by BYCC to the BVICORP SHAREHOLDERS shall be exempt from
the provisions of Section 5 of the Securities Act of 1933
pursuant to Section 4(2) of said Act.
3. Closing. The Closing of the transactions contemplated
by this Agreement ("Closing") shall take place at the offices of
BYCC at 11:00 A.M. on the first business day after the latter of
(a) 10 days after notice pursuant to Rule 14f-1 has been filed
with the Securities and Exchange Commission ("SEC") and mailed to
the shareholders of BYCC, or (b) such other date as the parties
hereto shall agree upon. As used herein, "Closing Date" means
the date on which the Closing occurs.
4. Warranties and Representations of BVICORP SHAREHOLDERS
In order to induce BYCC to enter into this Agreement and to
complete the transaction contemplated hereby, the BVICORP
SHAREHOLDERS warrant and represent to BYCC that:
a. Organization and Standing - BVICORP. BVICORP is a
corporation duly organized, validly existing and in good standing
under The International Business Companies Act of the British
Virgin Islands. BVICORP is qualified to do business as a foreign
corporation in every state or jurisdiction in which it operates
to the extent required by the laws of such states and
jurisdictions, and has full power and authority to carry on its
business as now conducted and to own and operate its assets,
properties and business. The copy of the Memorandum of
Association of BVICORP previously delivered to BYCC is true and
complete as of the date hereof.
b. Capitalization - BVICORP. BVICORP's entire authorized
capital consists of $50,000 US, which has been divided into
50,000,000 shares of Common Stock, all of which shares are issued
and outstanding. There are no other voting or equity securities
authorized or issued, nor any authorized or issued securities
convertible into equity securities, and no outstanding
subscriptions, warrants, calls, options, rights, commitments or
agreements by which BVICORP or the BVICORP SHAREHOLDERS are
bound, calling for the issuance of any additional equity
securities of BVICORP. All of the outstanding BVICORP Common
Shares have been duly authorized and validly issued and are fully
paid and non-assessable and were not issued in violation of any
preemptive rights or any applicable securities laws.
c. Ownership of BVICORP Shares. The BVICORP SHAREHOLDERS
are the sole owners of the outstanding shares of BVICORP Common
Stock, free and clear of all liens, encumbrances, and
restrictions whatsoever. By the transfer of the BVICORP Common
Stock to BYCC pursuant to this Agreement, BYCC will thereby
acquire good and marketable title to 100% of the capital stock of
BVICORP, free and clear of all Liens, encumbrances and
restrictions of any nature whatsoever, except by reason of the
fact that the BVICORP Common Shares will not have been registered
under the Securities Act of 1933, or any applicable State
Securities laws.
d. Business Operations and Liabilities - BVICORP. BVICORP
has conducted no business operations other than the acquisition
of ownership of the capital stock of ZQ POWER-TECH. The only
liability of BVICORP is a liability for a consulting fee owed to
Warner Technology and Investment Corp., which will be fully
satisfied by the issuance of shares at closing contemplated by
Section 8c of this Agreement.
e. Organization and Standing - ZQ POWER-TECH. ZQ POWER-
TECH is a corporation duly organized, validly existing and in
good standing under the laws of the People's Republic of China.
Until a name change was effected in 2004, the corporate name of
ZQ POWER-TECH was "Heilongjiang ZhongQiang Power-Tech Co., Ltd.
ZQ POWER-TECH is qualified to do business as a foreign
corporation in every state or jurisdiction in which it operates
to the extent required by the laws of such states and
jurisdictions, and has full power and authority to carry on its
business as now conducted and to own and operate its assets,
properties and business. The copies of the Certificate of
Incorporation and Bylaws of ZQ POWER-TECH previously delivered to
BYCC are true and complete as of the date hereof.
f. Capitalization - ZQ POWER-TECH. ZQ POWER-TECH's entire
authorized capital stock consists of 50,000,000 shares of Common
Stock $.12 par value, all of which are shares of Common Stock
that are issued and outstanding. There are no other voting or
equity securities authorized or issued, nor any authorized or
issued securities convertible into equity securities, and no
outstanding subscriptions, warrants, calls, options, rights,
commitments or agreements by which ZQ POWER-TECH or BVICORP are
bound, calling for the issuance of any additional equity
securities of ZQ POWER-TECH. All of the outstanding ZQ POWER-
TECH Common Shares have been duly authorized and validly issued
and are fully paid and non-assessable and were not issued in
violation of any preemptive rights or any applicable securities
laws.
g. Ownership of ZQ POWER-TECH Shares. BVICORP is the
owner of seventy percent (70%) the outstanding shares of ZQ POWER-
TECH Common Stock, free and clear of all Liens, encumbrances, and
restrictions whatsoever.
h. Corporate Records. All of the books and records of
each of BVICORP and ZQ POWER-TECH including, without limitation,
its books of account, corporate records, minute book, stock
certificate books and other records are up-to-date, complete and
reflect accurately and fairly the conduct of its business in all
material respects since its date of incorporation. All reports,
returns and statements currently required to be filed by either
BVICORP or ZQ POWER-TECH with any government agency with respect
to the business and operations of BVICORP or ZQ POWER-TECH have
been filed or valid extensions have been obtained in accordance
with normal procedures and all governmental reporting
requirements have been complied with.
i. Governmental Consent. No consent, waiver, approval,
order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other non-
U.S., U.S., state, county, local or other foreign governmental
authority, instrumentality, agency or commission is required by
or with respect to BVICORP or ZQ POWER-TECH in connection with
the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
j. Taxes. Each of BVICORP and ZQ POWER-TECH has filed all
Tax Returns that it is required to file with all governmental
agencies, wherever situate, and has paid or accrued for payment
all Taxes as shown on such returns except for Taxes being
contested in good faith. There is no material claim for Taxes
that is a Lien against the property of BVICORP or ZQ POWER-TECH
other than Liens for Taxes not yet due and payable.
k. Pending Actions. There are no material legal actions,
lawsuits, proceedings or investigations, either administrative or
judicial, pending or threatened, against or affecting BVICORP, ZQ
POWER-TECH, or against ZQ POWER-TECH's Officers or Directors or
the BVICORP SHAREHOLDERS that arose out of their operation of ZQ
POWER-TECH. Neither BVICORP, ZQ POWER-TECH nor any of the
BVICORP SHAREHOLDERS are subject to any order, writ, judgment,
injunction, decree, determination or award of any court,
arbitrator or administrative, governmental or regulatory
authority or body which would be likely to have a material
adverse effect on the business of ZQ POWER-TECH or BVICORP.
l. ZQ POWER-TECH Financial Statements. The BVICORP
SHAREHOLDERS have delivered to BYCC the financial statements of
ZQ POWER-TECH for the years ended December 31, 2003 and 2002 with
an audit report signed by Rosenberg Rich Baker Berman & Company
(the "ZQ Financial Statements"). The ZQ Financial Statements
have been prepared by independent auditors in accordance with
GAAP and present fairly in all material respects the financial
condition of TLI as of the dates thereof.
m. Absence Of Certain Changes Or Events. Except as set
forth on Schedule 4m, to the knowledge of any of the BVICORP
SHAREHOLDERS, since December 31, 2003:
(A) there has not been (i) any material adverse change in
the business, operations, properties, assets, or condition of ZQ
POWER-TECH or (ii) any damage, destruction, or loss to ZQ POWER-
TECH (whether or not covered by insurance) materially and
adversely affecting the business, operations, properties, assets,
or condition of ZQ POWER-TECH;
(B) ZQ POWER-TECH has not (i) amended its Certificate of
Incorporation or Bylaws; (ii) declared or made, or agreed to
declare or make, any payment of dividends or distributions of any
assets of any kind whatsoever to stockholders or purchased or
redeemed, or agreed to purchase or redeem, any outstanding
capital stock; (iii) waived any rights of value which in the
aggregate are extraordinary or material considering the business
of ZQ POWER-TECH; (iv) made any material change in its method of
management, operation, or accounting; (v) other than in the
ordinary course of business, entered into any other material
transaction; (vi) other than pursuant to any existing employment
agreement, made any accrual or arrangement for payment of bonuses
or special compensation of any kind or any severance or
termination pay to any present or former officer or employee;
(vii) other than pursuant to any existing employment agreement,
increased the rate of compensation payable or to become payable
by it to any of its officers or any of its employees whose
monthly compensation exceeds $5,000; or (viii) other than
pursuant to any existing employment agreement, made any increase
in any profit sharing, bonus, deferred compensation, insurance,
pension, retirement, or other employee benefit plan, payment, or
arrangement made to, for, or with its officers, directors, or
employees;
(C) ZQ POWER-TECH has not (i) materially borrowed or agreed
to borrow any funds, or incurred, or become subject to, any
material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (ii)
paid any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown
on the ZQ Financial Statements and current liabilities incurred
since that date in the ordinary course of business; (iii) sold or
transferred, or agreed to sell or transfer, any of its assets,
properties, or rights (except non-material assets, properties, or
rights not used or useful in its business which, in the aggregate
have a value of less than $50,000), or canceled, or agreed to
cancel, any debts or claims (except non-material debts or claims
which in the aggregate are of a value of less than $50,000); (iv)
made or permitted any amendment or termination of any contract,
agreement, or license to which it is a party if such amendment or
termination is material, considering the business of ZQ POWER-
TECH; or (v) issued, delivered, or agreed to issue or deliver any
stock, bonds or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock); and
(D) to the knowledge of any of the BVICORP SHAREHOLDERS, ZQ
POWER-TECH has not become subject to any law or regulation which
materially and adversely affects, or in the future is substantially
likely to have a material adverse effect on ZQ POWER-TECH.
n. Ownership of Assets. Except as specifically identified
in the ZQ Financial Statements, ZQ POWER-TECH has good, marketable
title, without any Liens or encumbrances of any nature whatever,
to all of the following, if any: its assets, properties and rights
of every type and description, including, without limitation, all
cash on hand and in banks, certificates of deposit, stocks, bonds,
and other securities, good will, customer lists, its corporate name
and all variants thereof, trademarks and trade names, copyrights
and interests thereunder, licenses and registrations, pending
licenses and permits and applications therefor, inventions, processes,
know-how, trade secrets, real estate and interests therein and
improvements thereto, machinery, equipment, vehicles, notes and accounts
receivable, fixtures, rights under agreements and leases, franchises,
all rights and claims under insurance policies and other contracts
of whatever nature, rights in funds of whatever nature, books and
records and all other property and rights of every kind and nature
owned or held by ZQ POWER-TECH as of this date. Except in the
ordinary course of its business, ZQ POWER-TECH has not disposed
of any such asset since December 31, 2003.
o. No Interest in Suppliers, Customers, Creditors or
Competitors. Except as specifically identified in the ZQ
Financial Statements, neither the BVICORP SHAREHOLDERS nor any
member of their families have any interest of any nature whatever
in any supplier, customer, creditor or competitor of ZQ POWER-
TECH.
p. No Debt Owed to BVICORP SHAREHOLDERS. Except as
specifically identified in the ZQ Financial Statements, neither
BVICORP nor ZQ POWER-TECH owes any money, securities, or property
to any of the BVICORP SHAREHOLDERS or any member of their
families or to any company controlled by or under common control
with such a person, directly or indirectly.
q. Intellectual Property And Intangible Assets. To
the knowledge of any of the BVICORP SHAREHOLDERS, ZQ POWER-TECH
has full legal right, title and interest in and to all of the
intellectual property utilized in the operation of its business.
ZQ POWER-TECH has not received any written notice that the rights
of any other person are violated by the use by ZQ POWER-TECH of
the intellectual property. None of the intellectual property has
ever been declared invalid or unenforceable, or is the subject of
any pending or, to the knowledge of any of the BVICORP
SHAREHOLDERS, threatened action for opposition, cancellation,
declaration, infringement, or invalidity, unenforceability or
misappropriation or like claim, action or proceeding.
r. Validity of the Agreement. This Agreement has been
duly executed by the BVICORP SHAREHOLDERS and constitutes the
valid and binding obligation of each of them, except to the
extent limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws relating to or effecting
generally the enforcement of creditors rights. The execution and
delivery of this Agreement and the carrying out of its purposes
will not result in the breach of any of the terms or conditions
of, or constitute a default under or violate, the Certificate of
Incorporation or Bylaws of either BVICORP or ZQ POWER-TECH, or
any material agreement, lease, mortgage, bond, indenture, license
or other material document or undertaking, oral or written, to
which BVICORP or ZQ POWER-TECH or the BVICORP SHAREHOLDERS is a
party or is bound or may be affected, nor will such execution,
delivery and carrying out violate any order, writ, injunction,
decree, law, rule or regulation of any court, regulatory agency
or other governmental body; and the business now conducted by ZQ
POWER-TECH can continue to be so conducted after completion of
the transaction contemplated hereby.
s. Compliance with Laws. ZQ POWER-TECH's operations have
been conducted in all material respects in accordance with all
applicable statutes, laws, rules and regulations. ZQ POWER-TECH
is not in violation of any law, ordinance or regulation of the
People's Republic of China or of any other jurisdiction. ZQ
POWER-TECH holds all the environmental, health and safety and
other permits, licenses, authorizations, certificates and
approvals of governmental authorities (collectively, "Permits")
necessary or proper for the current use, occupancy or operation
of its business, and all of the Permits are now in full force and
effect.
5. Warranties and Representations of BYCC. In order to
induce the BVICORP SHAREHOLDERS to enter into this Agreement and
to complete the transaction contemplated hereby, BYCC warrants
and represents to the BVICORP SHAREHOLDERS that:
a. Organization and Standing. BYCC is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware. BYCC is qualified to do business as a
foreign corporation in every other state in which it operates to
the extent required by the laws of such states, and has full
power and authority to carry on its business as now conducted and
to own and operate its assets, properties and business. The
copies of the Certificate of Incorporation and Bylaws of BYCC
previously delivered to the BVICORP SHAREHOLDERS are true and
complete as of the date hereof. BYCC has conducted no material
business operations within the past three years.
b. Capitalization. BYCC's entire authorized capital stock
consists of 20,000,000 shares of common stock, $.001 par value,
and 2,000,000 shares of preferred stock, $.001 par value. There
are 9,190,802 shares of BYCC Common Stock issued, 9,040,582
shares of BYCC Common Stock outstanding and 10,000 shares of
Series C Preferred Stock outstanding. The relative rights and
preferences of BYCC's equity securities are set forth on the
Certificate of Incorporation, as amended and BYCC's Bylaws.
There are no other voting or equity securities outstanding, and
no outstanding subscriptions, warrants, calls, options, rights,
commitments or agreements by which BYCC is bound, calling for the
issuance of any additional shares of common stock or preferred
stock or any other voting or equity security.
c. Corporate Records. All of BYCC's books and records,
including, without limitation, its books of account, corporate
records, minute book, stock certificate books and other records
are up-to-date, complete and reflect accurately and fairly the
conduct of its business in all material respects since its date
of incorporation; all of said books and records will be delivered
to BYCC's new management at the Closing.
d. BYCC Financial Condition. Except as set forth on
Schedule 5d, BYCC has no assets of liabilities of any kind or
nature, undisclosed fixed or contingent.
e. Significant Agreements. BYCC is not bound by any
contract, agreement, lease, commitment, guarantee or arrangement
of any kind.
f. Taxes. BYCC has filed all Tax Returns that it is
required to file with all governmental agencies, wherever
situate, and has paid or accrued for payment all Taxes as shown
on such returns except for Taxes being contested in good faith.
There is no material claim for Taxes that is a Lien against the
property of BYCC other than Liens for Taxes not yet due and
payable.
g. Pending Actions. There are no legal actions, lawsuits,
proceedings or investigations, either administrative or judicial,
pending or threatened, against or affecting BYCC or against
BYCC's Officers or Directors that arose out of their operation
of BYCC. Except as set forth on Schedule 5g, BYCC is not subject
to any order, writ, judgment, injunction, decree, determination
or award of any court, arbitrator or administrative, governmental
or regulatory authority or body.
h. Validity of the Agreement. All corporate and other
proceedings required to be taken by BYCC in order to enter into
and to carry out this Agreement have been duly and properly
taken. This Agreement has been duly executed by BYCC, and
constitutes a valid and binding obligation of BYCC except to the
extent limited by applicable bankruptcy reorganization,
insolvency, moratorium or other laws relating to or effecting
generally the enforcement of creditors rights. The execution and
delivery of this Agreement and the carrying out of its purposes
will not result in the breach of any of the terms or conditions
of, or constitute a default under or violate, BYCC's Certificate
of Incorporation or Bylaws, or any agreement, lease, mortgage,
bond, indenture, license or other document or undertaking, oral
or written, to which BYCC is a party or is bound or may be
affected, nor will such execution, delivery and carrying out
violate any order, writ, injunction, decree, law, rule or
regulation of any court, regulatory agency or other governmental
body.
i. Trading Status. BYCC's common stock is listed on the
OTC Bulletin Board, with the symbol "BYCC." To the knowledge of
BYCC, BYCC has not been threatened with or is subject to removal
of its common stock from the OTC Bulletin Board.
j. SEC Status. The common stock of BYCC is registered
pursuant to Section 12(g) of the Securities and Exchange Act of
1934. BYCC has filed all reports required by the applicable
regulations of the SEC. All of the filings by BYCC under the
Exchange Act within the past three years were true, correct and
complete in all material respects when filed, were not misleading
and did not omit to state any material fact which was necessary
to make the statements contained in such public filings not
misleading in any material respect.
k. Compliance with laws. BYCC's operations have been
conducted in all material respects in accordance with all
applicable statutes, laws, rules and regulations. BYCC is not in
violation of any applicable law, ordinance or regulation.
6. Pre-Closing Covenants.
a. Tax-Free Exchange. The Parties intend that the
transactions contemplated by this Agreement qualify as a tax-free
exchange under Section 351 of the United States Internal Revenue
Code. The Parties will take the position for all purposes that
the said transactions qualify under said Section 351.
b. Announcement. Prior to the Closing, no Party hereto
nor BVICORP or ZQ POWER-TECH shall issue any press release or
otherwise make any public statement with respect to this
Agreement or the transactions contemplated hereby without the
prior consent of the other Party (which consent shall not be
unreasonably withheld), except as may be required by applicable
law or securities regulation. The Parties will, to the extent
practicable, consult with each other before issuing, and provide
each other the opportunity to review and comment upon, any such
press release or other public statements with respect to this
Agreement and the transactions contemplated hereby whether or not
required by Applicable Law. Upon execution of this Agreement,
BYCC shall issue a press release, which shall be approved by
BVICORP.
c. Access to Information
(A) Inspection by ZQ POWER-TECH. BYCC will make
available for inspection by ZQ POWER-TECH, during normal business
hours, all of BYCC's records (including tax records), books of
account, premises, contracts and all other documents in BYCC's
possession or control that are reasonably requested by ZQ POWER-
TECH to inspect and examine the business and affairs of BYCC.
BYCC will cause its managerial employees and regular independent
accountants to be available upon reasonable advance notice to
answer questions of ZQ POWER-TECH concerning the business and
affairs of BYCC. ZQ POWER-TECH will treat and hold as
confidential any information they receive from BYCC in the course
of the reviews contemplated by this Section 6c(A). No
examination by ZQ POWER-TECH will, however, constitute a waiver
or relinquishment by ZQ POWER-TECH of its rights to rely on
BYCC's covenants, representations and warranties made herein or
pursuant hereto.
(B) Inspection by BYCC. The BVICORP SHAREHOLDERS will
cause ZQ POWER-TECH to make available for inspection by BYCC,
during normal business hours and in a manner so as not to
interfere with normal business operations, all of ZQ POWER-TECH's
records (including tax records), books of account, premises,
contracts and all other documents in ZQ POWER-TECH's possession
or control that are reasonably requested by BYCC to inspect and
examine the business and affairs of ZQ POWER-TECH. The BVICORP
SHAREHOLDERS will cause the managerial employees of ZQ POWER-TECH
and its regular independent accountants to be available upon
reasonable advance notice to answer questions of BYCC concerning
the business and affairs of ZQ POWER-TECH. BYCC will treat and
hold as confidential any information it receives from ZQ POWER-
TECH in the course of the reviews contemplated by this Section
6c(B). No examination by BYCC will, however, constitute a waiver
or relinquishment by BYCC of its rights to rely on the BVICORP
SHAREHOLDERS' covenants, representations and warranties made
herein or pursuant hereto.
7. Conditions Precedent to Closing.
a. Conditions Precedent to Obligations of BVICORP
SHAREHOLDERS. The obligations of the BVICORP SHAREHOLDERS under
this Agreement shall be and are subject to fulfillment, prior to
or at the Closing, of each of the following conditions:
(A) BYCC's representations and warranties contained
herein shall be true and correct on the Closing Date, as if such
representations and warranties had been made on and as of the
Closing Date, and the President and the Chief Financial Officer
of BYCC shall each have delivered to the BVICORP SHAREHOLDERS a
certification to such effect.
(B) BYCC shall have performed or complied with all
agreements, terms and conditions required by this Agreement to be
performed or complied with by it prior to or at the time of the
Closing.
(C) BYCC shall have filed with the Secretary of State
of the State of Delaware a Certificate of Designation of the
Series D Convertible Preferred Stock in the form annexed hereto
as Exhibit B.
(D) BYCC shall have filed a Rule 14f-1 notice with the
SEC and mailed such notice to its shareholders at least ten days
before the Closing Date, and shall not have received any comments
thereon from the SEC.
(E) BYCC's common stock will continue to be listed for
trading on the OTC Bulletin Board.
(F) The BVICORP SHAREHOLDERS shall have completed to
their own satisfaction due diligence with respect to BYCC.
(G) Since the date of this Agreement, BYCC shall have
not suffered any material adverse event.
(H) All documents and instruments to be delivered
pursuant to this Agreement shall be reasonably satisfactory in
substance and form to the BVICORP SHAREHOLDERS and their counsel,
and the BVICORP SHAREHOLDERS and their counsel shall have
received all such counterpart originals (or certified or other
copies) of such documents as they may reasonably request.
b. Conditions Precedent to Obligations of BYCC. The
obligations of the BYCC under this Agreement shall be and are
subject to fulfillment, prior to or at the Closing, of each of
the following conditions:
(A) The representations and warranties of the BVICORP
SHAREHOLDERS contained herein shall be true and correct on the
Closing Date, as if such representations and warranties had been
made on and as of the Closing Date, and the President and the
Chief Financial Officer of ZQ POWER-TECH shall each have
delivered to BYCC a certification to such effect.
(B) The BVICORP SHAREHOLDERS shall have performed or
complied with all agreements, terms and conditions required by
this Agreement to be performed or complied with by them prior to
or at the time of the Closing.
(C) BYCC shall have completed to its own satisfaction
due diligence with respect to BVICORP and ZQ POWER-TECH.
(D) Since the date of this Agreement, neither BVICORP
nor ZQ POWER-TECH shall have not suffered any material adverse
event.
(E) All documents and instruments to be delivered
pursuant to this Agreement shall be reasonably satisfactory in
substance and form to BYCC and its counsel, and BYCC and its
counsel shall have received all such counterpart originals (or
certified or other copies) of such documents as they may
reasonably request.
8. Deliveries at Closing
a. At the Closing the BVICORP SHAREHOLDERS shall deliver to
BYCC the following:
A. Certificates for the outstanding shares of BVICORP
duly endorsed for transfer to BYCC.
B. The Certification of the President and Chief
Financial Officer of ZQ POWER-TECH described in Section 7b(A)
hereof.
C. A certificate of good standing issued by the British
Virgin Islands with respect to BVICORP within seven days prior to
the closing date.
D. A bank check or wire transfer payable to counsel
for BYCC in the aggregate amount of BYCC liabilities identified
on Schedule 5d as "liabilities to be paid at closing." Counsel
shall hold the funds in escrow and apply them to payment of the
said liabilities.
b. At the Closing, BYCC shall deliver to the BVICORP
SHAREHOLDERS the following:
A. Certificates for nine million seven hundred twenty
thousand (9,720,000) shares of BYCC common stock and seven
hundred twenty-five thousand, four hundred and ninety-four
(725,494) shares of Series D Preferred Stock in the names and
individual quantities specified on Schedule 2a hereto.
B. The Certification of the President and Chief
Financial Officer of BYCC described in Section 7a(A) hereof.
C. A written representation executed by Robert Brantl,
Esq. to the effect that he represented BYCC in connection with
the within transaction, that he has reviewed this agreement with
the duly authorized representatives of BYCC, and that he is not
aware of any fact that would make any or the representations of
BYCC in this agreement not true and complete as of the Closing
Date.
D. A certificate of good standing issued by the
Delaware Secretary of State with respect to BYCC within seven
days prior to the Closing Date.
E. A certification signed by the Secretary of BYCC
attesting to the adoption and continuing effectiveness of
resolutions of the BYCC Board of Directors (i) ratifying and
approving this Agreement, and (ii) electing Zhiguo Fu and John
Leo to serve as the member of the BYCC Board of Directors
effective on the completion of the Closing.
F. The resignations of all of the officers and
directors of BYCC effective on the completion of the Closing.
G. All books and records of BYCC.
H. A Share Lock-Up Agreement in the form annexed
hereto as Exhibit C, executed by each of Robert Edwards
(400,000), Anthony Consi (350,000), Stephen Roman (308,153),
Verchi Holdings (550,000), Fowler Holdings (450,000), Lyncroft
Corp. (100,000), Majestic International (633,400), Jonathan Wu
(321,405), and Frank Lin (83,400) with respect to the number of
shares recited in this section, accompanied by the certificates
for the shares subject to the Lock-Up Agreement to be delivered
to the escrow agent pursuant to the Share Lock-Up Agreement.
c. The BVICORP SHAREHOLDERS have represented to BYCC that
they are parties to a consulting agreement with Warner Technology
& Investment Corp. ("Warner"), which will require the issuance to
Warner at Closing of one million eighty thousand (1,080,000)
shares of BYCC Common Stock and eighty thousand six hundred ten
(80,610) shares of Series D Preferred Stock. Accordingly, BYCC
will deliver to the BVICORP SHAREHOLDERS at Closing certificates
for the shares to be issued to Warner.
9. Termination. This Agreement may be terminated at any
time before or at Closing, by:
a. The mutual agreement of the parties;
b. Any party if:
(i) Any provision of this Agreement
applicable to a party shall be materially untrue
or fail to be accomplished.
(ii) Any legal proceeding shall have been
instituted or shall be imminently threatening to
delay, restrain or prevent the consummation of
this Agreement or any material component thereof.
c. BYCC, if the BVICORP SHAREHOLDERS shall have breached
in any material respect any of their representations, warranties,
covenants or other agreements contained in this Agreement, and
the breach cannot be or has not been cured within thirty (30)
calendar days after the giving of written notice by BYCC to the
BVICORP SHAREHOLDERS;
d. the BVICORP SHAREHOLDERS, if BYCC shall have breached
in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, and
the breach cannot be or has not been cured within thirty (30)
calendar days after the giving of written notice by the BVICORP
SHAREHOLDERS to BYCC; or
e. Without any action on the part of the Parties if
required by Applicable Law or if the Closing shall not have
occurred on or prior to May 15, 2004.
Upon termination of this Agreement for any reason, in
accordance with the terms and conditions set forth in this
paragraph, each said party shall bear all costs and expenses as
each party has incurred and no party shall be liable to the other
for such costs and expenses.
10. Restriction on Resale. The BYCC Common Shares and
the Series D Preferred Stock to be issued by BYCC to the BVICORP
SHAREHOLDERS hereunder and to Warner at the Closing will not be
registered under the Securities Act of 1933, or the securities
laws of any state, and cannot be transferred, hypothecated, sold
or otherwise disposed of within the United States of America
until: (i) a registration statement with respect to such
securities is declared effective under the Securities Act of
1933, or (ii) BYCC receives an opinion of counsel for the
stockholders, reasonably satisfactory to counsel for BYCC, that
an exemption from the registration requirements of the Securities
Act of 1933 is available.
The certificates representing the shares which are being
issued to the BVICORP SHAREHOLDERS pursuant to this Agreement and
to Warner shall contain a legend substantially as follows:
"THE SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED
OR OTHERWISE DISPOSED OF UNTIL A REGISTRATION STATEMENT
WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER SUCH ACT,
OR BUY IT CHEAP.COM, INC. RECEIVES AN OPINION OF COUNSEL FOR
THE HOLDER REASONABLY SATISFACTORY TO COUNSEL FOR BUY IT
CHEAP.COM, INC. THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT IS AVAILABLE."
11. Confidentiality. BYCC, on the one hand, and each of
the BVICORP SHAREHOLDERS, on the other hand, will keep
confidential all information and documents obtained from the
other, including but not limited to any information or documents
provided pursuant to Section 6c hereof (except for any
information disclosed to the public pursuant to a press release
authorized by the Parties) and in the event the Closing does not
occur or this Agreement is terminated for any reason, will
promptly return such documents and all copies of such documents
and all notes and other evidence thereof, including material
stored on a computer, and will not use such information for its
own advantage, except to the extent that (i) the information must
be disclosed by law, (ii) the information becomes publicly
available by reason other than disclosure by the Party subject to
the confidentiality obligation, (iii) the information is
independently developed without use of or reference to the other
Party's confidential information, (iv) the information is
obtained from another source not obligated to keep such
information confidential, (v) the information is already publicly
known or known to the receiving Party when disclosed as
demonstrated by written documentation in the possession of such
Party at such time, or (vi) in connection with any arbitration
proceeding hereunder pursuant to Section 13.
12. Applicable Law; Arbitration.
a. Governing Law. This Agreement shall be governed by
the laws of the State of New Jersey, without giving effect to the
principles of conflicts of laws thereof, as applied to agreements
entered into and to be performed in such state.
b. Arbitration. Any controversy or claim among the
Parties arising out of or relation to this Agreement or arising
in connection with any breach hereof, shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. Any award rendered in
any arbitration hereunder or in connection herewith shall be
final and binding on the Parties and judgment upon such award
shall be rendered in any court of competent jurisdiction. Any
arbitration shall be held in the State of New Jersey. A single
arbitrator shall conduct all arbitrations.
13. Notices. All notices and other communications under
this Agreement shall be in writing and shall be deemed to have
been given or made as follows:
(a) If sent by an overnight air courier with a national
reputation, 2 business days after being sent;
(b) If sent by facsimile transmission, with a copy mailed
on the same day in the manner provided in clause (a) above, when
transmitted and receipt is confirmed by the fax machine; or
(c) If otherwise actually personally delivered, when delivered.
All notices and other communications under this Agreement
shall be sent or delivered as follows:
If to the BVICORP SHAREHOLDERS, to:
David Zhou
Warner Technology & Investment Corp.
15 Warren Street, Suite 313
Jersey City, NJ 07302
Telephone: (201) 200-9394
Facsimile: (201) 200-1782
with a copy to (which shall not constitute notice):
Darren L. Ofsink, Esq.
Guzov Ofsink, LLC
600 Madison Avenue, 22nd Floor
New York, NY 10022
Telephone: (212) 371-8008
Facsimile: (212) 688-7273
If to BYCC, to:
Buy It Cheap.com, Inc.
c/o Autobar
1800 Bloomsbury Avenue
Ocean, New Jersey 07712
Attention: Steve Roman
Telephone: (732) 922-3609
Facsimile: (732) 922-2221
with a copy to (which shall not constitute notice):
Robert Brantl, Esq.
322 4th Street
Brooklyn, NY 11215
Telephone: 718-768-6045
Facsimile: 718-965-4042
Each Party may change its address by written notice in accordance
with this Section.
14. Covenant of Cooperation. Each party shall do and perform,
or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
In particular, but not by way of limitation, the BVICORP SHAREHOLDERS
agree that they will cause BYCC to execute such documents and provide
such acknowledgements as may be required after the Closing in order to
complete the assignment of the BYCC domain name which was initiated
prior to the Closing.
15. Assignment; Binding Effect. This Agreement, including
both its obligations and benefits, shall inure to the benefit of,
and be binding on the respective permitted assigns, transferees
and successors of the parties. This Agreement may not be
assigned or transferred in whole or in part by any party without
the prior written consent of the other parties, which consent
shall not be unreasonably withheld or delayed.
16. Rules of Construction. The Parties agree that each of
them has been represented by counsel during the negotiation and
execution of this Agreement and, therefore, each of them waives
the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement
or document.
17. Counterparts; Translations. This Agreement may be
executed in multiple facsimile counterparts, which may be in
either the English language or the Chinese language provided that
the translation has been certified accurate by an independent
third party. Each of the counterparts shall be deemed an
original, and together they shall constitute one and the same
binding Agreement, with one counterpart being delivered to each
party hereto.
IN WITNESS WHEREOF, the parties hereto have set their hands
as of the date and year written on the first page.
BUY IT CHEAP.COM, INC.
By: -------------------------- ----------------------------
Anthony J. Consi Zhiguo Fu
President
------------------------------ ----------------------------
Xiuhua Tang Guifen Zuo
------------------------------ ----------------------------
Dongmei Chen Huaqin Zhou
------------------------------ ----------------------------
Huanyu Wang Yin Wang
------------------------------ ----------------------------
Yaozhen Li Yaman Tao
------------------------------ ----------------------------
Guohua Wan Lijian Gao
------------------------------ ----------------------------
Guopeng Gao Hongjun Si
------------------------------ ----------------------------
Jianjun Chen Ping Dong
------------------------------ ----------------------------
Min Wang Chunli Tian
------------------------------ ----------------------------
Danyuan Liu Shuqin Ai
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is
made and entered into as of April __, 2004, by and among BUY IT
CHEAP.COM, INC., a Delaware corporation (hereinafter referred to
as the "Company") and the individual signatories to this agreement.
WHEREAS, the Company and the shareholders of Cashtech
Investment Limited ("Cashtech") are parties to a Share Exchange
Agreement dated April 13, 2004 (the "Exchange Agreement"); and
WHEREAS, The Exchange Agreement provides that certain
parties shall be granted registration rights as more fully set
forth herein.
NOW THEREFORE, in consideration of the foregoing recitals
and the mutual promises hereinafter set forth, the parties hereto
agree as follows:
1. Definitions. For purposes of this Agreement:
1.1 Form S-3. The term "Form S-3" mean such forms
under the Securities Act as are in effect on the date hereof,
such other forms available to a registrant similar to the Company
or any successor registration forms under the Securities Act
subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
1.2 Holder. The term "Holder" means the individual
signatories to this Agreement, or any assignee of record of such
Registrable Securities and the rights hereunder.
1.3 Ordinary Shares. The term "Ordinary Shares"
means shares of the $.001 par value per share common stock of the
Company.
1.4 Registration Expenses. The term "Registration
Expenses" means all expenses incurred by the Company in complying
with this Agreement, including, without limitation, all
registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and
expenses, the expense of any special audits incident to or
required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any
event by the Company) and the expenses of Underwriters
customarily paid by similarly situated companies in connection
with underwritten offerings of equity securities to the public,
excluding any such fees, commissions and underwriting discounts
based on the proceeds of sales of Registrable Securities by
selling Holders. With respect to expenses incurred in
connection with this Agreement, "Registration Expenses" shall
include reasonable fees and disbursements of a single special
counsel for the Holders.
1.5 Registrable Securities. The term "Registrable
Securities" means (1) all Ordinary Shares of the Company issued
pursuant to the Exchange Agreement to any of the Holders or their
assignees or (2) a dividend or other distribution with respect
to, or in exchange for or in replacement of, all such Ordinary
Shares described in clause (1) of this subsection; excluding in
all cases, however, any Registrable Securities sold by a person
in a transaction in which rights under this Agreement are not
assigned in accordance with this Agreement or any Registrable
Securities sold to the public or sold pursuant to Rule 144
promulgated under the Securities Act.
1.5.1 Registrable Securities Then Outstanding. The
number of shares of "Registrable Securities then outstanding"
shall mean the number of Ordinary Shares which are Registrable
Securities and are then issued and outstanding.
1.5.1.1 Registration. The terms "register,"
"registration" and "registered" refer to a registration effected
by preparing and filing a registration statement in compliance
with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement.
1.5.1.2 Registration Statement. The term
"Registration Statement" means any registration statement under
the Securities Act for purposes of effecting a public offering of
securities of the Company
1.6 SEC. The term "SEC" shall mean the Securities and
Exchange Commission.
1.7 Securities Act. The term "Securities Act" means the
Securities Act of 1933, as amended as of the date of this
Agreement.
1.8 Underwriter. The term "Underwriter" shall mean
a dealer, as defined under the Securities Act, which has agreed
to offer the Company's securities to the public.
1.8.1 Managing Underwriter. The term "Managing
Underwriter" shall mean the Underwriter or Underwriters in an
Underwriting which have primary responsibility for the
Underwriting.
1.9 Underwriting. The term "Underwriting" shall mean a
registration in which the Company's securities are either sold to
an Underwriter for reoffering to the public or sold to the public
by an Underwriter.
2. Demand Registration.
2.1 Request by Holders. If the Company shall
receive, at any time after the date of this Agreement, a written
request from any of the Holders of the Registrable Securities
then outstanding that the Company file a Registration Statement,
covering the registration of Registrable Securities, then the
Company shall, within twenty (20) days after the receipt of such
written request, give written notice of such request
("Request Notice") to all Holders, and effect, as soon as
practicable, the registration under the Securities Act of all
Registrable Securities which Holders request to be registered and
included in such registration by written notice given by such
Holders to the Company within twenty (20) days after receipt of
the Request Notice, subject only to the limitations of this
Agreement.
2.2 Underwriting. If the Holders initiating the
registration request under this Section 2 (the "Initiating Holders")
intend to distribute the Registrable Securities covered by their
request by means of an underwriting, then they shall so advise
the Company as a part of their request made pursuant to this
Section 2 and the Company shall include such information in the
written notice referred to in subsection 2.1. In such event,
the right of any Holder to include its Registrable Securities
in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall enter into an Underwriting agreement in customary
form with the Managing Underwriter or Underwriters selected for
such underwriting by the Holders holding more than fifty percent
(50%) of the Registrable Securities to be underwritten; provided
that any such Underwriting agreement shall not impair the indemnification
rights of the Holders granted under this Agreement; and provided
further, that the representations and warranties given by, and
the other agreement on the part of, the Company to and for the
benefit of the Underwriter(s) shall also be made to and for the
benefit of the Holders; and provided further, that the Company
shall ensure that no Underwriter(s) requires any Holder to make
any representations or warranties to, or agreements with, any
Underwriter(s) in a Registration other than customary
representations, warranties and agreements relating to such
Holders free and unencumbered title to the Registrable Securities
and authority to enter into the underwriting agreement.
Notwithstanding any other provision of this Section 2, if the
Underwriter(s) advise(s) the Company in writing that marketing
factors require a limitation of the number of securities to be
underwritten then the Company shall so advise all Holders of
Registrable Securities that would otherwise be registered and
underwritten pursuant hereto, and the number of Registrable
Securities that may be included in the underwriting shall be
reduced as required by the Underwriter(s) and the Company will
include in such registration (i) first, the maximum number of
Registrable Securities requested to be included therein, pro rata
among the respective Holders thereof on the basis of the amount
of Registrable Securities requested to be included in such
registration by each such Holder, and (ii) second, the maximum
amount of other securities requested to be included therein
(including any by the Company), pro rata among the holders of
such other securities on the basis of the number of shares
requested to be included in such registration by each such
holder. Any Registrable Securities excluded and withdrawn from
such underwriting shall be withdrawn from the registration. For
any Holder that is a partnership or corporation, the partners,
retired partners and shareholders of such Holder, or the estates
and family members of any such partners and retired partners and
any trusts for the benefit of any of the foregoing persons shall
be deemed to be a single "Holder," and any pro rata reduction
with respect to such "Holder" shall be based upon the aggregate
amount of shares carrying registration rights owned by all
entities and individuals included in such "Holder," as defined in
this sentence.
2.3 Deferral. Notwithstanding the foregoing, if
the Company shall furnish to the Holders requesting the filing of
a Registration Statement pursuant to this Section 2, a
certificate signed by the President or Chief Executive Officer of
the Company stating that in the good faith judgment of the board
of directors of the Company, it would be seriously detrimental to
the Company and its shareholders for such Registration Statement
to be filed and it is therefore essential to defer the filing of
such Registration Statement, then the Company shall have the
right to defer such filing for a period of not more than sixty
(60) days after receipt of the request of the Initiating Holders;
provided, however, that the Company may not utilize this right
more than once in any twelve (12) month period; and provided
further, that during such sixty (60) day period the Company shall
not file a registration statement with respect to the public
offering of securities of the Company or any other selling
shareholder.
2.4 Expenses. All Registration Expenses incurred in
connection with a registration pursuant to this Agreement, shall
be borne by the Company. Each Holder participating in a
registration pursuant to this Agreement shall bear such Holder's
proportionate share (based on the total number of shares sold in
such registration other than for the account of the Company) of
all discounts, commissions or other amounts payable to
Underwriters in connection with such offering.
3. Piggyback Registrations.
3.1 Notice by Company. The Company shall notify all
Holders of Registrable Securities in writing at least thirty (30)
days prior to filing any Registration Statement (including, but
not limited to, Registration Statements relating to secondary
offerings of securities of the Company, but excluding
Registration Statements relating to any employee benefit plan or
a corporate reorganization) and will afford each such Holder an
opportunity to include in such Registration Statement all or any
part of the Registrable Securities then held by such Holder.
Each Holder desiring to include in any such Registration
Statement all or any part of the Registrable Securities held by
such Holder shall, within twenty (20) days after receipt of the
above-described notice from the Company, so notify the Company in
writing, and in such notice shall inform the Company of the
number of Registrable Securities such Holder wishes to include in
such Registration Statement. The Company thereupon will use its
best efforts as a part of its filing of such Registration
Statement to effect the registration under the Securities Act of
all Registrable Securities which the Company has been so
requested to register by the Holder, to the extent required to
permit the disposition of the Registrable Securities so to be
registered. If a Holder decides not to include all of its
Registrable Securities in any Registration Statement thereafter
filed by the Company, such Holder shall nevertheless continue to
have the right to include any Registrable Securities in any
subsequent Registration Statement or Registration Statements as
may be filed by the Company with respect to offerings of its
securities, all upon the terms and conditions set forth herein.
3.2 Underwriting. If a Registration Statement under
which the Company gives notice under this Section 3 is for an
underwritten offering, then the Company shall so advise the
Holders of Registrable Securities. In such event, the right of
any such Holders Registrable Securities to be included in a
registration pursuant to this Section 3 shall be conditioned upon
such Holders participation in such underwriting and the inclusion
of such Holders Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall
enter into an underwriting agreement in customary form with the
Managing Underwriter or Underwriter(s) selected for such
underwriting; provided that any such underwriting agreement shall
not impair the indemnification rights of the Holders granted
under this Agreement; and provided further, that the
representations and warranties given by, and the other agreements
on the part of, the Company to and for the benefit of the
Underwriter(s) shall also be made to and for the benefit of the
Investor; and provided further, that the Company shall ensure
that no Underwriter(s) requires any Holder to make any
representations or warranties to, or agreements with, any
Underwriter(s) in a Registration other than customary
representations, warranties and agreements relating to such
Holders title to the Registrable Securities and authority to
enter into the underwriting agreement. Notwithstanding any other
provision of this Agreement, if the Managing Underwriter
determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the
Managing Underwriter(s) may exclude shares (including Registrable
Securities) from the registration and the underwriting, and the
number of shares that may be included in the registration and the
underwriting shall be allocated, first, to the Company, and
second, to each of the Holders requesting inclusion of their
Registrable Securities in such Registration Statement on a pro
rata basis based on the total number of Registrable Securities
then held by each such Holder. If any Holder disapproves of the
terms of any such underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company and the Underwriter,
delivered at least twenty (20) days prior to the effective date
of the Registration Statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded
and withdrawn from the registration. For any Holder that is a
partnership or corporation, the partners, retired partners and
shareholders of such Holder, or the estates and family members of
any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a
single "Holder," and any pro rata reduction with respect to such
"Holder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and
individuals included in such "Holder," as defined in this
sentence.
3.3 Expenses. All Registration Expenses incurred in
connection with a registration pursuant to this Section 3 shall
be borne by the Company.
4. Registration on Form S-3. With respect to all Registration
Statements filed pursuant to this Agreement, the Company shall
use its best efforts to qualify for registration on Form S-3 any
comparable or successor form or forms.
5. Obligations of the Company. Whenever required to effect the
Registration of any Registrable Securities under this Agreement,
the Company shall, as expeditiously as reasonably possible:
5.1 Prepare and file with the SEC a Registration
Statement with respect to such Registrable Securities and use
reasonable, diligent efforts to cause such Registration Statement
to become effective unless and until all Holders have sold their
Registrable Securities or such securities are eligible to be sold
under Rule 144 under the Securities Act..
5.2 Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus
used in connection with such Registration Statement as may be
necessary to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
Registration Statement.
5.3 Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act and such other
documents as they may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by them that
are included in such registration.
5.4 Otherwise use its best efforts to comply with the
Securities Act, the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and any other applicable rules and
regulations of the SEC, and make available to the securities
holders; as soon as reasonably practicable, an earning statement
covering the period of at least twelve (12) months after the
effective date of such Registration Statement, which earning
statement shall satisfy Section 10(a) of the Securities Act.
5.5 Use reasonable, diligent efforts to register and
qualify the securities covered by such Registration Statement
under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders.
5.6 In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the Managing
Underwriter(s) of such offering.
5.7 Notify each Holder of Registrable Securities
covered by such Registration Statement at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which
the prospectus included in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances then existing, and at the request of
each Holder prepare and furnish to such Holder a reasonable
number of copies of a supplement to or amendment of such
prospectus as may be necessary so that, as thereafter delivered
to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light
of the circumstances then existing.
5.8 Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such
Registrable Securities are delivered to the Underwriters for
sale, if such securities are being sold through Underwriters, or,
if such securities are not being sold through Underwriters, on
the date that the Registration Statement with respect to such
securities becomes effective, (1) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given
to Underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders requesting
registration, addressed to the Underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (2)
a "comfort" letter dated as of such date, from the independent
certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants to Underwriters in an underwritten public offering
and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the Underwriters,
if any, and to the Holders requesting registration of Registrable
Securities.
5.9 Use its best efforts to list such Registrable
Securities on each securities exchange on which any equity
security of the Company is then listed, if such securities are
already so listed, or, if the Company does not have a class of
equity securities listed on a United States securities exchange,
apply for qualification and use its best efforts to qualify
Registrable Securities being registered for inclusion on the
National Market System/NASD or the American Stock Exchange.
6. Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to
this Agreement that the selling Holders shall furnish to the
Company such information regarding themselves, the Registrable
Securities held by them, and the intended method of disposition
of such securities as shall be reasonably required by the Company
to timely effect the registration of their Registrable
Securities.
7. Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying
any such registration as the result of any controversy that might
arise with respect to the interpretation or implementation of
this Agreement.
8. Indemnification. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
8.1 By the Company. To the extent permitted by law,
the Company will indemnify and hold harmless each Holder, the
partners, officers, directors and control persons of each Holder,
any Underwriter (as defined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or
Underwriter within the meaning of the Securities Act or the
Exchange Act against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the
Securities Act, the Exchange Act or any other securities or other
law of any jurisdiction, common law or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively, "Violations"
and, individually, a "Violation"):
8.1.1 any untrue statement or alleged untrue
statement of a material fact contained in or incorporated by
reference in any Registration Statement, including any
preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto or any document
incorporated by reference therein;
8.1.2 the omission or alleged omission to state
therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or
8.1.3 any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, or any other
securities or other law of any jurisdiction, common law or
otherwise, or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any such other laws, in
connection with the offering covered by such Registration
Statement; and the Company will reimburse each such Holder,
partner, officer or director, Underwriter or controlling person
for any legal or other expenses reasonably incurred by them, as
incurred, in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that
the indemnity agreement contained in this Section 8 shall not
apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by such Holder, partner, officer, director,
Underwriter or controlling person of such Holder.
Notwithstanding the foregoing, the Company shall not be required
to indemnify or hold harmless any Holder insofar as any Violation
arises out of or is based on information furnished in writing to
the Company by or on behalf of that Holder
8.2 By Selling Holders. To the extent permitted by
law, each selling Holder, severally and not jointly, will
indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement,
each person, if any, who controls the Company within the meaning
of the Securities Act, any Underwriter and any other Holder
selling securities under such Registration Statement or any of
such other Holders partners, directors or officers or any person
who controls such Holder within the meaning of the Securities Act
or the Exchange Act, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such
director, officer, controlling person, Underwriter or other such
Holder, partner or director, officer or controlling person of
such other Holder may become subject under the Securities Act,
the Exchange Act or any other securities or other law of any
jurisdiction, common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with
such registration; and each such Holder will reimburse any legal
or other expenses reasonably incurred by the Company or any such
director, officer, controlling person, Underwriter or other
Holder, partner, officer, director or controlling person of such
other Holder in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this Section 8.2 shall
not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be
unreasonably withheld.
8.3 Promptly after receipt by an indemnified party under
this Section 8 of notice of the commencement of any action
(including any governmental action), such indemnified party will,
if a claim in respect thereof is to be made against any
indemnifying party under this Section 8, deliver to the
indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have
the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential conflict
of interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall
relieve such indemnifying party of its liability to the
indemnified party under this Section 8 only if and to the extent
it is prejudicial to its ability to defend such action, and the
omission to so deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 8. In no
event shall any indemnity under this Section 8 exceed the net
proceeds received by such Holder in the registered offering out
of which such violation arises.
8.4 Defect Eliminated in Final Prospectus. The
foregoing indemnity agreements of the Company and the Holders are
subject to the condition that, insofar as they relate to any
Violation made in a preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the SEC at the
time the Registration Statement in question becomes effective or
the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "Final Prospectus"), such indemnity agreement shall
not inure to the benefit of any person if a copy of the Final
Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the
Securities Act.
8.5. Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities
Act, in any case in which either (1) any Holder exercising rights
under this Agreement, or any controlling person of any such
Holder, makes a claim for indemnification pursuant to Section 8
but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case
notwithstanding the fact that Section 8 provides for
indemnification in such case, or (2) contribution under the
Securities Act may be required on the part of any such selling
Holder or any such controlling person in circumstances for which
indemnification is provided under Section 8; then, and in each
such case, the Company and such Holder will contribute to the
aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such
proportion so that such Holder is responsible for the portion
represented by the percentage that the public offering price of
its Registrable Securities offered by and sold under the
Registration Statement bears to the public offering price of all
securities offered by and sold under such Registration Statement,
and the Company and other selling Holders are responsible for the
remaining portion; provided, however, that, in any such case, (A)
no such Holder will be required to contribute any amount in
excess of the public offering price of all such Registrable
Securities offered and sold by such Holder pursuant to such
Registration Statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent
misrepresentation.
8.6 Survival; Release. The obligations of the Company
and Holders under this Section 8 shall survive the completion of
any offering of Registrable Securities in a Registration
Statement, and otherwise. No indemnifying party, in the defense
of any such claim or litigation, shall, except with the consent
of each indemnified party, consent to entry of any judgment or
enter into any settlement which admits fault on behalf of the
indemnified party or which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to
such claim or litigation.
9. Termination of the Companys Obligations. The Company
shall have no obligations pursuant to this Agreement with respect
to (a) any request or requests for registration made by any
Holder pursuant to Section 2 or 3 of this Agreement on a date
more than ten (10) years after the date of this Agreement or (b)
any Registrable Securities proposed to be sold by a Holder in a
registration pursuant to this Agreement if, in the opinion of
counsel to the Company, all such Registrable Securities proposed
to be sold by a Holder may be sold without registration under the
Securities Act pursuant to Rule 144(k) under the Securities Act.
10. Rule 144 Reporting. With a view to making available to
the Holders the benefits of certain rules and regulations of the
SEC which may permit the sale of the Registrable Securities to
the public without registration, the Company agrees to use its
best efforts to:
10.1 commencing on the date of this Agreement, make and
keep public information available, as those terms are understood
and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the
effective date of the first registration filed by the Company for
an offering of its securities to the general public;
10.2. File with the SEC, in a timely manner, all
reports and other documents required of the Company under the
Exchange Act;
10.3 So long as a Holder owns any Registrable
Securities, furnish to such Holder forthwith upon request: a
written statement by the Company as to its compliance with the
reporting requirements of said Rule 144 of the Securities Act,
and of the Exchange Act (at any time after it has become subject
to such reporting requirements); a copy of the most recent annual
or quarterly report of the Company; and such other reports and
documents as a Holder may reasonably request in availing itself
of any rule or regulation of the SEC allowing it to sell any such
securities without registration.
11. General Provisions
11.1 Notices. Any and all notices required or permitted
to be given to a party pursuant to the provisions of this
Agreement will be in writing and will be effective and deemed to
provide such party sufficient notice under this Agreement on the
earliest of the following: (i) at the time of personal delivery,
if delivery is in person; (ii) at the time of transmission by
facsimile, addressed to the other party at its facsimile number
specified herein (or hereafter modified by subsequent notice to
the parties hereto), with confirmation of receipt made by both
telephone and printed confirmation sheet verifying successful
transmission of the facsimile; (iii) one (1) business day after
deposit with an express overnight courier for deliveries within a
country, or three (3) business days after such deposit for
international deliveries or (iv) three (3) business days after
deposit in mail by certified mail (return receipt requested) or
equivalent for deliveries within a country.
All notices for international delivery will be sent by
facsimile or by express courier. All notices not delivered
personally or by facsimile will be sent with postage and/or other
charges prepaid and properly addressed to the party to be
notified at the address or facsimile number indicated for such
party:
in the case of the Company, at
Buy It Cheap.com, Inc.
c/o Autobar
1800 Bloomsbury Avenue
Ocean, New Jersey 07712
Attention: Steve Roman
Telephone: (732) 922-3609
Facsimile: (732) 922-2221
with a copy to (which shall not constitute notice):
Robert Brantl, Esq.
322 4th Street
Brooklyn, NY 11215
Telephone: 718-768-6045
Facsimile: 718-965-4042
If to the signatories below, at the following address:
David Zhou
Warner Technology
15 Warren Street, Suite 313
Jersey City, NJ 07302
Telephone: (201) 200-9394
Facsimile: (201) 200-1782
or at such other address or facsimile number as such other party
may designate by giving ten (10) days advance written notice by
one of the indicated means of notice herein to the other party
hereto. Notices by facsimile shall be machine verified as
received.
Any party hereto (and such partys permitted assigns) may by
notice so given change its address for future notices hereunder.
Notice shall conclusively be deemed to have been given in the
manner set forth above.
11.2 Entire Agreement. This Agreement constitutes and
contains the entire agreement and understanding of the parties
with respect to the subject matter hereof and supersedes any and
all prior negotiations, correspondence, agreements,
understandings, duties or obligations between the parties
respecting the subject matter hereof.
11.3 Governing Law; Jurisdiction. This Agreement shall
be governed by and construed exclusively in accordance with the
internal laws of the State of New York, without giving effect to
any choice of law rule that would cause the application of the
laws of any jurisdiction other than the internal laws of the
State of New York to the rights and duties of the parties. The
parties hereto consent to the non-exclusive jurisdiction of any
New York State or Federal court sitting in the City of New York
and any appellate court from any thereof in any action or
proceeding arising out of or relating to this Agreement.
11.4 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, then
such provision(s) shall be excluded from this Agreement and the
balance of this Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in
accordance with its terms.
11.5 Delays or Omissions. It is agreed that no delay
or omission to exercise any right, power, or remedy accruing to
any Holder, upon any breach, default or noncompliance of the
Company under this Agreement shall impair any such right, power,
or remedy, nor shall it be construed to be a waiver of any such
breach, default or noncompliance, or any acquiescence therein, or
of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit,
consent, or approval of any kind or character on any Holders part
of any breach, default or noncompliance under the Agreement or
any waiver on such Holders part of any provisions or conditions
of this Agreement must be in writing and shall be effective only
to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law, or otherwise
afforded to Holders, shall be cumulative and not alternative.
11.6 Parties. Nothing in this Agreement, express or
implied, is intended to confer upon any person, other than the
parties hereto and their successors and assigns, any rights or
remedies under or by reason of this Agreement.
11.7 Successors And Assigns. The provisions of this
Agreement shall inure to the benefit of, and shall be binding
upon, the successors and permitted assigns of the parties hereto,
except that the Company may not assign or transfer any of its
rights or obligations under this Agreement.
11.8 Captions. The captions to sections of this
Agreement have been inserted for identification and reference
purposes only and shall not be used to construe or interpret this
Agreement.
11.9 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
11.10 Costs And Attorneys Fees. In the event that any
action, suit or other proceeding is instituted by any party
hereto against any other party hereto concerning or arising out
of this Agreement or any transaction contemplated hereunder, the
prevailing party shall recover all of such partys costs and
attorneys fees incurred in each such action, suit or other
proceeding, including any and all appeals or petitions therefrom.
11.11 Adjustments for Share Splits, Etc. Wherever in
this Agreement there is a reference to a specific number of
Ordinary Shares or preferred shares of the Company of any class
or series, then, upon the occurrence of any subdivision,
combination or share dividend of such class or series of shares,
the specific number of shares so referenced in this Agreement
shall automatically be proportionally adjusted to reflect the
affect on the outstanding shares of such class or series of
shares by such subdivision, combination or share dividend.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date and year first written above.
BUY IT CHEAP.COM, INC.
By:______________________
INDIVIDUAL SIGNATORIES
----------------------------- ----------------------------
Xiuhua Tang Guifen Zuo
----------------------------- -----------------------------
Dongmei Chen Huaqin Zhou
----------------------------- -----------------------------
Huanyu Wang Yin Wang
----------------------------- -----------------------------
Yaozhen Li Yaman Tao
----------------------------- -----------------------------
Guohua Wan Lijian Gao
----------------------------- -----------------------------
Guopeng Gao Hongjun Si
----------------------------- -----------------------------
Jianjun Chen Ping Dong
----------------------------- -----------------------------
Min Wang Chunli Tian
----------------------------- -----------------------------
Danyuan Liu Shuqin Ai
WARNER TECHNOLOGY & INVESTMENT CORP.
By:_______________________________
Huakang Zhou, President
EXHIBIT B
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF
SERIES D CONVERTIBLE PREFERRED STOCK OF
BUY IT CHEAP.COM, INC.
PURSUANT TO SECTION 151 OF THE DELAWARE
GENERAL CORPORATION LAW
Buy It Cheap.com, Inc., a corporation organized and existing
under and by virtue of the laws of the State of Delaware
(hereinafter the "Corporation"), DOES HEREBY CERTIFY:
Pursuant to authority expressly granted and vested in the
Board of Directors of the Corporation by the provisions of the
Corporation's Certificate of Incorporation, the Board of
Directors adopted the following resolution on April __, 2004
(i) authorizing a series of the Corporation's previously
authorized preferred stock, par value $.001 per share, and
(ii) providing for the designations, preferences and relative,
participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, of Eight Hundred and Six
Thousand One Hundred and Thirteen (806,113) shares of Series D
Convertible Preferred Stock of the Corporation, as follows:
RESOLVED: That pursuant to the authority vested in the
Board of Directors of the Corporation by the Corporation's
Certificate of Incorporation (the "Certificate of Incorporation"),
a series of Preferred Stock of the Corporation be, and it hereby
is, created out of the authorized but unissued shares of the
capital stock of the Corporation, such series to be designated
Series D Convertible Preferred Stock (the "Series D Convertible
Preferred Stock"), to consist of Eight Hundred and Six Thousand
One Hundred and Thirteen (806,113) shares, par value $.001 per
share, which shall have the following preferences, powers,
designations and other special rights;
1. Voting. Each holder of a share of Series D Convertible
Preferred Stock of record shall have the right to cast that same
number of votes, whether at a meeting of the shareholders or by
consent given in lieu of a meeting of the shareholders, as would
the holder of record of one hundred shares of common stock.
2. Dividends. The Series D Convertible Preferred Stock
shall not bear any dividends.
3. Liquidation. Upon the liquidation, dissolution and
winding up of the Corporation, the holders of the Series D
Convertible Preferred Stock shall be entitled to receive in cash
out of the assets of the Corporation, whether from capital or
from earnings available for distribution to its stockholders,
before any amount shall be paid to the holders of common stock,
the sum of one cent ($.01) per share.
4. Conversion. The holders of shares of Series D
Convertible Preferred Stock shall have the following conversion
rights:
(a) Right to Convert. The holder of a share of Series D
Convertible Preferred Stock shall have the right to convert each
whole share of Series D Convertible Preferred Stock into one
hundred (100) shares of common stock, $.001 par value. Said
conversion rate shall be subject to equitable adjustment at the
reasonable discretion of the Board of Directors of the
Corporation in the event of the occurrence of the following
events: a dividend or distribution payable in shares of common
stock, subdivisions, combinations or reclassifications of the
common stock, the distribution to the holders of common stock of
evidences of indebtedness or assets (excluding cash dividends or
distributions made out of current or retained earnings), a merger
or consolidation, share exchange, reorganization, or sale of the
assets of the Corporation.
(b) Conversion Notice. A holder of Series D Convertible
Preferred Stock may exercise his conversion right by giving a
written notice of conversion (the "Conversion Notice") to the
Corporation (x) by facsimile confirmed by a telephone call or (y)
by registered mail or overnight delivery service. If such
conversion will result in the conversion of all of such holder's
shares of Series D Convertible Preferred Stock, such holder shall
also surrender the certificate or certificates representing the
shares so to be converted (the "Preferred Stock Certificates") to
the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by
notice in writing to the holders of the Series D Convertible
Preferred Stock) at any time during its usual business hours on
the date set forth in the Conversion Notice.
(c) Issuance of Certificates; Time Conversion Effected.
Promptly, but in no event more than five (5) trading days, after
the receipt of the Conversion Notice referred to in Section 4(b)
and surrender of the preferred stock certificates (if required),
the Corporation shall issue and deliver, or cause to be issued
and delivered, to the holder, registered in such name or names as
such holder may direct, a certificate or certificates for the
number of whole shares of common stock into which such shares of
Series D Convertible Preferred Stock have been converted. In the
alternative, if the Corporation's transfer agent is a participant
in the electronic book transfer program, the transfer agent shall
credit such aggregate number of shares of Common Stock to which
the holder shall be entitled to the holder's or its designee's
balance account with The Depository Trust Company. Such
conversion shall be deemed to have been effected, and the
Conversion Date shall be deemed to have occurred, on the date on
which such Conversion Notice shall have been received by the
Corporation and at the time specified stated in such Conversion
Notice, which must be during the calendar day of such notice.
5. Redemption of Series D Convertible Preferred Stock. At
any time after June 30, 2005, the Corporation shall be entitled
to redeem the shares of Series D Convertible Preferred Stock by
giving written notice to the registered holders thereof not less
than 15 nor more than 60 days prior to the redemption date. Each
such notice shall state (1) the redemption date, (2) the number
of share to be redeemed from each holder, and (3) the place where
certificates for the Series D Convertible Preferred Stock are to
be surrendered. Upon surrender in accordance with said notice of
certificates for the shares to be redeemed, such shares shall be
redeemed at a price of $.01 per share. Notice having been given,
upon the redemption date (unless the Corporation shall default in
paying the redemption price), said shares shall no longer be
deemed to be outstanding.
6. Vote to Change the Terms of or Issue Series D
Convertible Preferred Stock. The affirmative vote at a meeting
duly called for such purpose, or the written consent without a
meeting, of the holders of not less than sixty-six and two-thirds
percent (66?%) of the then outstanding shares of Series D
Convertible Preferred Stock shall be required for (i) any change
to the Corporation's Articles of Incorporation that would amend,
alter, change or repeal any of the preferences, limitations or
relative rights of the Series D Convertible Preferred Stock, or
(ii) any issuance of additional shares of Series D Convertible
Preferred Stock.
IN WITNESS WHEREOF, Anthony J. Consi, Chief Executive
Officer of the Corporation, under penalties of perjury, does
hereby declare and certify that this is the act and deed of the
Corporation and the facts stated herein are true and accordingly
has signed this Certificate of Designations as of this ____ day
of April, 2004.
BUY IT CHEAP.COM, INC.
By:____________________________
Anthony J. Consi
Chief Executive Officer
EXHIBIT C
SHARE LOCK-UP AGREEMENT
Dated: April ___, 2004
Buy It Cheap.com, Inc.
c/o Autobar
1800 Bloomsbury Avenue
Ocean, NJ 07712
Re: Share Lock-Up Agreement
Dear Sirs:
The undersigned holder of _________ shares (the "Shares") of
$.001 par value per share common stock of Buy It Cheap.com, Inc.,
a Delaware Corporation (the "Company"), for good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, covenants and agrees as follows:
1. For 90 days from the date hereof, I will not
a. pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant for the sale of, or otherwise
dispose of the Shares, or any securities convertible into or
exchangeable or exercisable for Common Stock, whether now owned
or hereafter acquired by me or with respect to which the
undersigned has or hereafter acquires the power of disposition,
or
b. enter into any swap or any other agreement or any
transaction that transfers the Shares, in whole or in part,
directly or indirectly, the economic consequence of ownership of
the Shares, whether any such swap or transaction is to be settled
by delivery of the Shares or other securities, in cash or
otherwise.
2. In order to secure the undertakings made herein, I am
delivering the certificate for the Shares to Robert Brantl, Esq.,
counsel for the Company, to hold for the duration of this
agreement. At the conclusion of the 90 days, Mr. Brantl is to
return the certificate to me. My instructions to Mr. Brantl
herein are irrevocable, being made for the benefit of the
Company.
Sign:___________________________
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