Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer — Form SB-2
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SB-2/A Pre-Effective Amendment to Registration of 51 242K
Securities by a Small-Business Issuer
2: EX-5.1 Opinion re: Legality 2± 8K
3: EX-10.2 Material Contract 4± 18K
4: EX-10.3 Material Contract 14± 58K
5: EX-23.1 Consent of Experts or Counsel 1 6K
6: EX-99.1 Miscellaneous Exhibit 2± 9K
SB-2/A — Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer
Document Table of Contents
As filed with the Commission on October ___ 2004 Registration No. 333-111652
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre Effective Amendment No. 2 to
Form SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PORTALTOCHINA.COM, INC.
(Name of small business issuer in its charter)
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Nevada 7373 Applied For
(State of Jurisdiction) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
1802-888 Pacific Street
Vancouver, BC V6Z 2S6
(604) 619-6328
(Address and telephone number of principal executive offices)
Laughlin International
2533 Carson Street
Carson City, Nevada 89706
(775) 883-8484
(Name, address and telephone number of agent for service)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
===============================
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Title of Each
Class of . . . . Proposed Maximum Proposed Maximum Proposed Maximum
Securities to be Number of Shares to Offering Price per Aggregate Offering Amount of
Registered . . . be Registered Share (1) Price Registration Fee (2)
Common Stock . . 2,500,000 $ 0.10 $ 250,000 $ 20.23
Total. . . . . . 2,500,000 $ 0.10 $ 250,000 $ 20.23
<FN>
(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule
457 (o) under the Securities Act.
(2) Fee already paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
PRELIMINARY PROSPECTUS
Subject to Completion
Dated October ___, 2004
PortalToChina.com, Inc.
2,500,000 to 625,000 Shares of Common Stock
$0.10 per Share
This is an initial public offering of shares of common stock of
Portaltochina.com, Inc. We will be selling a minimum of 625,000 and a maximum
of 2,500,000 shares of our common stock in this offering at $0.10 per share.
Until we have sold at least 625,000 shares, we will not disburse the funds.
We will deposit all proceeds of this offering into a non-interest bearing escrow
account held by Transfer Online, in Portland, Oregon. If we are unable to sell
at least 625,000 shares within 180 days, we will return all funds, without
interest or deductions to subscribers within 30 days. The offering will remain
open until all shares offered are sold or nine months after the date of this
prospectus, except that we will have only 180 days to sell at least the first
625,000 shares. We may decide to cease selling efforts prior to such date.
No broker-dealer is participating in this offering and no sales commission will
be paid to any person in connection with this offering. There is no market for
the securities. The common stock is not listed on any national exchange or the
NASDAQ Stock Market. The offering price for our common stock was arbitrarily
determined and may not reflect the market price of our shares after the
offering.
AN INVESTMENT IN OUR STOCK IS EXTREMELY SPECULATIVE AND INVOLVES SEVERAL
SIGNIFICANT RISKS. YOU ARE CAUTIONED NOT TO INVEST UNLESS YOU CAN AFFORD THE
LOSS OF YOUR ENTIRE INVESTMENT. WE URGE YOU TO READ THE "RISK FACTORS" SECTION
OF THIS PROSPECTUS BEGINNING ON PAGE 5 AND THE REST OF THIS PROSPECTUS BEFORE
MAKING AN INVESTMENT DECISION.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of any offer to buy nor shall there by any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
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PRICE TO PUBLIC UNDERWRITING DISCOUNTS PROCEEDS TO THE
PER SHARE AND COMMISSIONS COMPANY (1)
Per Share. . . . . . . . $0.10 $0 $0.10
Maximum 2,500,000 shares $250,000 $0 $250,000
Minimum 625,000 shares . $62,500 $0 $62,500
<FN>
(1) Proceeds to PortalToChina.com, Inc. are shown before deducting offering
expenses payable by us estimated at $20,000, including legal and accounting fees and
printing costs.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is October __, 2004.
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TABLE OF CONTENTS
PAGE
Prospectus Summary............................................................3
Risk Factors..................................................................5
Forward-Looking Statements....................................................8
Use of Proceeds...............................................................9
Determination of Offering Price..............................................10
Dilution.....................................................................10
Market for Common Equity and Related Stockholder Matters.....................11
Description of Business......................................................11
Description of Property......................................................18
Legal Proceedings............................................................18
Plan of Operation............................................................18
Directors, Executive Officers, Promoters and Control Persons.................22
Executive Compensation.......................................................22
Certain Relationships and Related Transactions...............................23
Security Ownership of Certain Beneficial Owners and Management...............23
Plan of Distribution.........................................................24
Description of the Securities................................................25
Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...............................................25
Legal Matters................................................................26
Experts......................................................................26
Available Information........................................................26
Index To Financial Statements...............................................F-1
2
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR IS
URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY AND PARTICULARLY THE INFORMATION
SET FORTH IN "RISK FACTORS" ON PAGE 5.
PORTALTOCHINA.COM, INC.
We were incorporated on March 18, 2003 under the laws of the State of
Nevada. From inception through May 31, 2004, our operations have been primarily
limited to developing our business plan, building our Internet portal and
marketing. Our principal office is located at 1802-888 Pacific Street,
Vancouver, British Columbia, Canada, V6Z 2S6, (604) 619-6328.
We are a start-up company that operates an Internet portal located on the
World Wide Web at www.portaltochina.com. It is our objective to establish our
portal as an information hub for those interested in doing business in China.
We will provide a freely accessible, comprehensive collection of resources that
includes Chinese news and current events, Chinese trade and business
information, a directory of topical Internet hyperlinks, an English text search
engine, email and chat rooms.
If we are able to sell 50% of this offering we will augment our website by
adding a subscription-based B2B Exchange platform that will contain a database
of products and services, an online trading platform for B2B transactions, a
library of practical insights into doing business in China, and a discussion
forum. If we are able to sell 75% of this offering we will also add bilingual
functionality to our portal so that users can read and search content in either
English or simplified Chinese.
We expect to earn revenue through subscription fees charged for access to
our B2B Exchange, service charges from B2B transactions completed through our
Marketplace, and the sale of advertising on our portal.
We are a development stage company with no operating history on which to
base an evaluation of our business and prospects. You must consider our
prospects in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development. To address these
risks, we must establish, maintain and expand our customer base, implement and
successfully execute our business and marketing strategy, provide superior
customer service, anticipate and respond to competitive developments and
attract, retain and motivate qualified personnel. We cannot give any assurance
that we will be successful in addressing these risks, and our failure to do so
could have a negative impact on our business, operating results and financial
condition.
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THE OFFERING
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Securities Offered: Up to 2,500,000 shares of common stock, par value $0.0001
Offering price: $0.10 per share
Offering period: The offering will continue until the earlier of the date all offered
shares are sold or nine months from the date of this prospectus.
Net proceeds to us: Approximately $230,000, after expenses of approximately
20,000 assuming sale of 2,500,000 shares
Use of proceeds: We will use the proceeds to pay for offering expenses, debt
repayment, portal development, sales and technical staff,
equipment, marketing expenses and working capital.
Number of shares outstanding before the offering: 5,500,000
Maximum Number of shares outstanding after the
offering: 8,000,000 assuming sale of all 2,500,000 shares being offered.
SUMMARY OF SELECTED FINANCIAL DATA
We are a development stage company. From the date of our inception on
March 18, 2003, to August 31, 2004, we have not generated any revenue or
earnings from operations. As of August 31, 2004, our financial data is as
follows:
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As at or for the period from March 18, 2004
(inception) to August 31, 2004
OPERATIONS DATA
Revenue $0
Net Loss: $8,729
BALANCE SHEET DATA
Total Assets: $47
Total Liabilities: $8,226
Shareholder Equity: $(8,179)
Negative Net Tangible Book Value: $(8,179)
Negative Net Tangible Book Value Per Share: $0.00
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RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK IS EXTREMELY SPECULATIVE AND INVOLVES
SIGNIFICANT RISKS. YOU ARE CAUTIONED NOT TO PURCHASE OUR STOCK UNLESS YOU CAN
AFFORD TO LOSE YOUR ENTIRE INVESTMENT. YOU SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS BEFORE YOU DECIDE TO BUY OUR COMMON STOCK. YOU SHOULD
ALSO CAREFULLY READ AND CONSIDER ALL THE INFORMATION WE HAVE INCLUDED IN THIS
PROSPECTUS BEFORE YOU DECIDE TO BUY OUR COMMON STOCK.
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH AN EVALUATION OF OUR PROSPECTS
CAN BE MADE.
We were incorporated on March 18, 2003. Our lack of operating history
makes an evaluation of our business and prospects very difficult. Our prospects
must be considered speculative, considering the risks, expenses, and
difficulties frequently encountered in the establishment of a new business. We
cannot be certain that our business will be successful or that we will generate
significant revenues.
IN THEIR REPORT TO OUR FINANCIAL STATEMENTS, OUR AUDITORS HAVE EXPRESSED
SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE OPERATIONS AS A "GOING CONCERN".
INVESTORS MAY LOSE ALL OF THEIR INVESTMENT IF WE ARE UNABLE TO CONTINUE
OPERATIONS.
Since inception, we have suffered recurring losses and net cash outflows
from operations. We expect to continue to incur substantial losses to complete
the development of our business. Since inception, we have funded operations
through common stock issuances and related party loans in order to meet our
strategic objectives. We have not established any other source of equity or
debt financing. There can be no assurance that we will be able to obtain
sufficient funds to continue the development of and, if successful, to commence
the sale of our products and services under development. As a result of the
foregoing, our auditors have expressed substantial doubt about our ability to
continue as a going concern. If we cannot continue as a going concern, then
investors may lose all of their investment.
WITHOUT SUFFICIENT CAPITAL WE MAY NOT BE ABLE TO FULLY IMPLEMENT OUR BUSINESS
OPERATIONS AND DEVELOPMENT PLAN.
We are a development stage company and our business model is unproven. We
are presently earning no revenue. We have incurred significant operating losses
since inception and as of August 31, 2004, we had an accumulated deficit of
$8,729. We expect to continue to incur substantial losses to implement our
business plan.
We are depending on the proceeds of this offering in order to develop and
expand our Internet portal, which will be our sole source of revenue. If we
sell the minimum 25% of this offering, we will have an Internet portal that
features Chinese news and current events, Chinese business information
(including Chinese laws, regulations and practices, plus upcoming events of
interest to the Chinese business community), a directory of Internet hyperlinks
related to Chinese business, Chinese city information, Chinese stock quotes,
email, chat rooms and an English text search engine. If we sell 50% of this
offering, we will expand our portal's functionality by adding our B2B Exchange,
a subscription-based service that includes our Insider's Guide to accessing the
Chinese market, an online trading platform, a business database of products and
services, and a discussion forum. If we sell 75% of this offering, we will add
bilingual functionality to our portal, which will give users the ability to read
and search our content in simplified Chinese. Please refer to the sections in
this prospectus titled, "Description of Business" beginning on page 11, and
"Plan of Operations" beginning on page 18.
We anticipate that the net proceeds of this offering will be sufficient to
meet our anticipated need for working capital for at least the next 12 months.
Notwithstanding, if we do not sell 25% or more of this offering then we may
conduct additional public or private offerings of our stock or make other
funding arrangements such as debt financing or enter into strategic partnerships
in order to complete the expansion of our Internet portal. We have not
identified any specific alternative sources of funding other than this offering.
There can be no assurance that additional capital will be available on terms
favorable to us, or at all.
If adequate capital cannot be obtained or obtained on satisfactory terms,
our results of operations and financial condition could be substantially harmed.
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IF OUR INTERNET PORTAL IS NOT SUCCESSFUL, YOU MAY LOSE ALL OR SUBSTANTIALLY ALL
OF YOUR INVESTMENT.
Our Internet portal is not yet active and we do not presently earn any
revenue from it. There can be no assurance that we will ever earn revenue from
our portal or that any such revenue will be sufficient to pay for operations.
If we do not earn sufficient revenue from our portal to pay for operations, we
will be required to substantially revise our business plan, and you may lose all
or substantially all of your investment.
IF WE RAISE ADDITIONAL CAPITAL THE VALUE OF YOUR INVESTMENT MAY DECREASE.
If we need to raise additional capital to implement or continue operations,
we would likely issue additional equity or convertible debt securities. If we
issue equity or convertible debt securities, the net tangible book value per
share may decrease, the percentage ownership of our current stockholders may be
diluted and such equity securities may have rights, preferences or privileges
senior or more advantageous to our common stockholders.
WE FACE INTENSE COMPETITION; YOU MAY LOSE ALL OF YOUR INVESTMENT IF WE ARE
UNABLE TO SUCCESSFULLY COMPETE.
We plan to receive a majority of our revenue from selling advertising space
on our portal and allowing third parties to provide sponsored services and
placements on our portal under sponsorship agreements with us. There is intense
competition based on price in the sale of advertising on the Internet, which
makes it difficult to project future advertising revenue.
The market for Internet advertising and Internet search and retrieval
services is intensely competitive. We believe that the principal competitive
factors in these markets are name recognition, volume of user traffic, pricing,
performance, ease of use, and functionality. Our primary competitors are
Internet search and retrieval companies such as Infoseek Corporation, Lycos,
Inc., and Yahoo!, Inc. and specific search and retrieval services and products
offered by other companies, including Digital Equipment Corporation's Alta
Vista, HotWired Venture's and Inktomi's HotBot, and OpenText. In the future, we
may encounter competition from internet service providers, Operator Service
Providers (such as AOL, CompuServe, MSN and Prodigy), website operators,
providers of Internet browser software (such as Netscape or Microsoft) and other
Internet services and products that incorporate search and retrieval features
into their offerings, whether through internal development or by acquisition of
one or more of our direct competitors. In addition, we also compete with
internet service providers and operator service providers, Internet browsers and
other Internet content providers for the sale of advertisements. Accordingly,
we may face increased pricing pressure for the sale of advertisements, which
would have a material adverse effect on our business, results of operations and
financial condition. Many of our existing competitors, as well as a number of
potential new competitors, have longer operating histories in the Internet
market, greater name recognition, larger customer bases and databases and
significantly greater financial, technical and marketing resources than we do.
Such competitors may be able to undertake more extensive marketing campaigns,
adopt more aggressive pricing policies and make more attractive offers to
potential employees, distribution partners, advertisers and content providers.
Further, there can be no assurance that our competitors will not develop
Internet search and retrieval services that are equal or superior to ours, or
that achieve greater market acceptance than our offerings in the area of name
recognition, performance, ease of use and functionality. There can also be no
assurance that internet service providers, operator service providers, Internet
browsers and other Internet content providers will not be perceived by
advertisers as having more desirable websites for placement of advertisements.
There can also be no assurance that we will be able to compete successfully
against our current or future competitors or that competition will not have a
material adverse effect on our business, results of operations and financial
condition. The Internet, in general, and our portal, specifically, also must
compete with traditional advertising media such as print, radio and television
for a share of advertisers' total advertising budgets. To the extent that the
Internet is not an effective advertising medium, advertisers may be reluctant to
devote a significant portion of their advertising budget to the Internet.
IF THE INTERNET DOES NOT GROW AND CONTINUE AS A COMMERCIALLY VIABLE MEDIUM, THEN
OUR BUSINESS MAY FAIL AND INVESTORS MAY LOSE THEIR ENTIRE INVESTMENT.
The success of our Internet portal is dependent on, among other things, the
continued expansion of the Internet and its network infrastructure. We cannot
assure you that the infrastructure or complementary products necessary to make
the Internet a viable commercial network will continue to be developed. In
particular, we cannot assure you that the Internet will retain its current
pricing structure with regard to volume, distance (the physical location of any
user) and the lack of varying rates for different times of day. Moreover,
critical issues concerning the commercial use of the Internet (including
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security, reliability, cost, ease of use and access and quality of service)
remain unresolved and may affect the growth of Internet use. We cannot assure
you that the Internet will be able to meet additional demands or its users'
evolving requirements on a timely basis, at a commercially reasonable cost, or
at all. While we anticipate the continued evolution of the Internet and related
infrastructure, any failure to develop accordingly could have a material adverse
impact on our business, financial condition or results of operations.
Our portal will be vulnerable to computer viruses or similar disruptive
problems. Computer viruses or problems caused by third parties could lead to
interruptions, delays or termination of service. Furthermore, inappropriate use
of the Internet by third parties could potentially jeopardize the security of
confidential information, which may deter certain potential customers from using
our portal. Until more comprehensive security technologies are developed, the
security and privacy concerns of existing and potential users may inhibit the
growth of the Internet industry in general and the use of our portal in
particular.
THE COST OF ADAPTING TO TECHNOLOGICAL CHANGE AND DEVELOPING NEW PRODUCTS COULD
PREVENT US FROM BEING PROFITABLE AND RESULT IN THE LOSS OF YOUR INVESTMENT.
To be competitive, we must enhance and improve the functionality, features
and content of our Internet portal. There can be no assurance that we will be
able to successfully develop or implement new features and functions that will
involve the development of increasingly complex technologies. If we are unable
to develop or implement new features or functions, then we may not be
competitive, and our ability to earn revenue could be substantially impaired.
The cost of developing new features and functions for our Internet portal
could be significant. We expect that personalized information services, such as
an Internet-based e-mail service, will require significantly greater expenses
associated with, among other things, increased server capacity and equipment and
requirements for additional customer support personnel and systems. To the
extent such additional expenses are not offset by additional revenue from the
personalized services, our financial results will be adversely affected.
ANY IMPOSITION OF LIABILITY AGAINST US FOR INFORMATION RETRIEVED FROM THE
INTERNET COULD RESULT IN SUBSTANTIAL LOSSES AND SUBSTANTIALLY HARM OUR BUSINESS,
RESULTING IN THE LOSS OF YOUR INVESTMENT.
Because material may be downloaded by the online or Internet services
operated or facilitated by us or any Internet access providers with which we
have relationships, and be subsequently distributed to others, it is possible
that claims will be made against us on the basis of defamation, negligence,
copyright or trademark infringement or other theories based on the nature and
content of such materials. These claims could be based on us providing access
to obscene, lascivious or indecent information. We do not carry general
liability insurance, so any imposition of liability against us could impair our
business or cause us to cease operations, and result in the loss of your
investment.
WE MAY BECOME INVOLVED IN INTELLECTUAL PROPERTY LITIGATION THAT COULD IMPAIR OUR
ABILITY TO CONDUCT OUR BUSINESS AND MAY RESULT IN THE LOSS OF YOUR INVESTMENT.
There has been substantial litigation in the computer industry regarding
intellectual property rights. We may become involved in claims and counterclaims
with third parties regarding infringement with respect to current or future
products or trademarks or other proprietary rights. Any infringement or other
claims or counterclaims could impair our business because they could be
time-consuming; result in costly litigation; divert management's attention;
cause product release delays; and require us to redesign our portal or require
us to enter into royalty or licensing agreements which may not be available on
terms acceptable to us, or at all. A successful claim or counterclaim against
us form infringement of intellectual property rights could impair our business
or cause us to cease operations and result in the loss of your investment.
OUR OFFICERS AND DIRECTORS MAY NOT DEVOTE SUFFICIENT TIME TO OUR AFFAIRS, WHICH
MAY AFFECT OUR ABILITY TO CONDUCT MARKETING ACTIVITIES AND GENERATE REVENUES.
The persons serving as our officers and directors have existing
responsibilities and may have additional responsibilities to provide management
and services to other entities. As a result, conflicts of interest between us
and the other activities of those entities may occur from time to time, in that
our officers and directors shall have conflicts of interest in allocating time,
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services, and functions between the other business ventures in which they may be
or become involved and our affairs. Mr. Fong and Ms. Rechia each presently
devote approximately five hours a week to our business. Once our portal has
been developed, Mr. Fong and Ms. Rechia anticipate respectively devoting 20 and
25 hours per week to our business.
WE ARE DEPENDENT ON KEY PERSONNEL; IF WE DO NOT ATTRACT AND RETAIN QUALIFIED
MANAGEMENT AND EMPLOYEES WE WILL LIKELY NOT EARN SIGNIFICANT REVENUE.
Our future success depends in part on our continuing ability to attract and
retain highly qualified technical and managerial personnel. Competition for
such personnel is intense and there can be no assurance that we will be able to
retain our key managerial and technical employees or that we will be able to
attract and retain additional highly qualified technical and managerial
personnel in the future. The inability to attract and retain the necessary
technical and managerial personnel could have a material and adverse effect upon
our business, operating results and financial condition.
OUR OFFICERS AND DIRECTORS ARE NOT LOCATED IN THE UNITED STATES; IF INVESTORS
WISH TO EFFECT LEGAL SERVICE AGAINST OUR OFFICERS OR DIRECTORS THEY WILL HAVE
DIFFICULTY DOING SO.
We are incorporated in the State of Nevada and have an agent for service in
Carson City, Nevada. Our agent for service will accept on our behalf, the
service of any legal process and any demand or notice authorized by law to be
served upon a corporation. Our agent for service will not, however, accept
service on behalf of any of our officers or directors. Our directors and
officers are residents of Canada and neither of them have an agent for service
in the United States. Therefore, it may be difficult for a resident of a
country other than Canada to serve Mr. Fong and Ms. Rechia with legal process or
a demand or notice.
SUBSEQUENT TO COMPLETION OF THIS OFFERING, CONTROL OF THE COMPANY WILL REMAIN
WITH OUR OFFICERS AND DIRECTORS.
If we sell all 2,500,000 shares of common stock in this offering, our
officers and directors will own at least 5,500,000 shares (69% of our issued
common stock) and will control us. Following completion of this offering, our
officers and directors will be able to elect all of our directors and inhibit
your ability to cause a change in the course of our operations. Furthermore,
our officers and directors could effect a major transaction such as a merger
without further shareholder approval. Our articles of incorporation do not
provide for cumulative voting.
THERE IS NO PUBLIC TRADING MARKET FOR OUR COMMON STOCK, THEREFORE YOU MAY NOT BE
ABLE TO RESELL YOUR STOCK.
Currently, our common stock is not listed or quoted upon any established
trading system. Most of our common stock will be held by a small number of
investors that will further reduce the liquidity of our common stock.
Furthermore, the offering price of our common stock was determined by us, and
was based upon the amount of capital needed to develop and promote our portal,
without considering assets, earnings, book value, net worth or other economic or
recognized criteria or future value of our common stock. Market fluctuations
and volatility, as well as general economic, market and political conditions,
could reduce our market price. As a result, this may make it difficult or
impossible for you to sell our common stock or for you to sell our common stock
for more than the offering price even if our operating results are positive.
FORWARD-LOOKING STATEMENTS
INFORMATION IN THIS PROSPECTUS CONTAINS "FORWARD LOOKING STATEMENTS" WHICH CAN
BE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS SUCH AS "BELIEVES",
"ESTIMATES", "COULD", "POSSIBLY", "PROBABLY", "ANTICIPATES", "ESTIMATES",
"PROJECTS", "EXPECTS", "MAY", OR "SHOULD" OR OTHER VARIATIONS OR SIMILAR WORDS.
NO ASSURANCES CAN BE GIVEN THAT THE FUTURE RESULTS ANTICIPATED BY THE
FORWARD-LOOKING STATEMENTS WILL BE ACHIEVED. THE FOLLOWING MATTERS CONSTITUTE
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS WITH RESPECT TO THOSE
FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THE FUTURE RESULTS ANTICIPATED BY
THOSE FORWARD-LOOKING STATEMENTS. AMONG THE KEY FACTORS THAT HAVE A DIRECT
BEARING ON OUR RESULTS OF OPERATIONS ARE THE EFFECTS OF VARIOUS GOVERNMENTAL
REGULATIONS, THE FLUCTUATION OF OUR DIRECT COSTS AND THE COSTS AND EFFECTIVENESS
OF OUR OPERATING STRATEGY. OTHER FACTORS COULD ALSO CAUSE ACTUAL RESULTS TO VARY
MATERIALLY FROM THE FUTURE RESULTS ANTICIPATED BY THOSE FORWARD-LOOKING
STATEMENTS.
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USE OF PROCEEDS
Our President will be offering the common stock. There is no assurance
that we will raise any proceeds, or if any proceeds are raised, that they will
be sufficient to implement our business plan. The following table sets forth
management's current estimate of the allocation of net proceeds anticipated to
be received from this offering if all or part of this offering is sold, in order
of priority. Actual expenditures may vary from these estimates. Pending such
uses, we will invest the net proceeds in investment-grade, short-term, interest
bearing securities.
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2,500,000 1,875,000 1,250,000 625,000
Shares Sold Shares Sold Shares Sold Shares Sold
----------- ----------- ----------- -----------
Gross Proceeds 250,000 187,500 125,000 62,500
Less offering Expenses 20,000 20,000 20,000 20,000
Net Proceeds 230,000 167,500 105,000 42,500
---------------------- ----------- ----------- ----------- -----------
Use of Proceeds
Portal Development 75,000 75,000 70,000 35,000
Debt Repayment 6,000 6,000 6,000 6,000
Equipment 14,000 10,000 5,000 -
Marketing Expenses 20,000 12,000 10,000 -
Sales Representatives 40,000 20,000 - -
Technical Staff 60,000 30,000 - -
Office Rent 12,000 12,000 12,000 -
Working Capital 3,000 2,500 2,000 1,500
Total Use of Proceeds 230,000 167,500 105,000 42,500
---------------------- ----------- ----------- ----------- -----------
Debt Repayment refers to repayment of a promissory note issued to our
President, Paul Fong, on May 30, 2003. Under the terms of the Note, which is
unsecured, we promised to repay Paul Fong the sum of $6,000 on May 31, 2005,
with interest accruing at an annual interest rate of 3%. Proceeds of the loan
from Paul Fong were used to pay for legal fees, accounting fees, and
miscellaneous expenses.
Portal Development refers to expenditures arising from a contract dated
June 1, 2004, with an independent third party for the development of our
Internet portal, to be delivered by December 15, 2004. The contract commits us
to paying $35,000 on delivery of a portal that will feature news and current
events, Chinese business information, a WebLinks directory, English text search
engine, e-mail and chat rooms. Once our portal has been delivered, we intend to
pay the developer a further $35,000 to expand the portal's functionality by
adding our B2B Exchange, a subscription-based service that will include our
Insider's Guide to accessing the Chinese market, an online trading platform, a
business database of products and services, and a discussion forum. Upon
completing the B2B Exchange, we intend to pay the developer an additional $5,000
to make our portal (and search engine) bilingual (English and simplified
Chinese).
Equipment includes furniture, telecommunications and computers, including
software and peripherals.
Working capital includes office expenses, supplies, and other general expenses.
9
DETERMINATION OF OFFERING PRICE
As no underwriter has been retained to offer our common stock, the offering
price of our common stock was not determined by negotiation with an underwriter
as is customary in underwritten public offerings. Rather, we arbitrarily
selected the offering price. There is no relationship between the offering
price of the shares and our assets, earnings, book value, net worth or other
economic or recognized criteria or future value of our common stock.
DILUTION
At August 31, 2004, we had a negative book value of $(8,179) or $(0.00) per
share. Negative book value per share is determined by dividing our total
shareholders' deficiency at August 31, 2004, by the number of shares of common
stock outstanding. The offering price of $0.10 per share substantially exceeds
the net tangible book value per unit of our outstanding shares. Therefore, all
current shareholders will realize an immediate increase of $0.01 per share in
the net tangible book value of their units held prior to the offering if the
minimum is sold, and an increase of $0.03 per share if the maximum is sold.
Purchasers of the shares in the offering will realize an immediate dilution of
$0.09 per share in the net tangible book value of their shares if the minimum is
sold, and an immediate dilution of $0.07 per share if the maximum is sold.
The following table illustrates the increase to existing shareholders and
the dilution to purchasers in the offering in their net tangible book value per
unit, before deducting estimated offering expenses. This table does not take
into account any other changes in the net tangible book value of our shares
occurring after August 31, 2004.
[Enlarge/Download Table]
Minimum Maximum
Offering price per share $ 0.10 $ 0.10
Net tangible book value per share at August 31, 2004 $ 0.00 $ 0.00
Increase in net tangible book value per unit attributable to the sale of 625,000
(minimum) and 2,500,000 (maximum) shares $ 0.01 $ 0.03
Net tangible book value per share at August 31, 2004, as adjusted for the sale of
shares $ 0.01 $ 0.03
Dilution per share to new investors in the offering $ 0.09 $ 0.07
We may seek additional equity financing in the future, which may cause
additional dilution to investors in the offering, and a reduction in their
equity interest. The holders of the shares purchased in the offering will have
no preemptive rights to purchase any shares we issue in the future in connection
with any additional equity financing.
The table below sets forth as of August 31, 2004, the difference between
the number of units purchased and total consideration paid for those units by
existing shareholders, compared to shares purchased by new investors in the
offering without taking into account any offering expenses.
[Enlarge/Download Table]
TOTAL NUMBER OF UNITS PURCHASED TOTAL CONSIDERATION AND AVERAGE PER UNIT PRICE
MINIMUM MAXIMUM MINIMUM MAXIMUM
PERCENT PERCENT AMOUNT PERCENT AVERAGE AMOUNT PERCENT AVERAGE
NUMBER (%) NUMBER (%) ($) (%) ($) ($) (%) ($)
Existing
shareholders
5,500,000 89.8 5,500,000 76.2 800 1.3 0.0001 800 0.3 0.0001
New shareholders
625,000 10.2 2,500,000 33.8 62,500 98.7 0.10 250,000 99.7 0.10
Total 6,125,000 100.0 8,000,000 100.0 63,300 100.0 0.01 250,800 100.0 0.03
10
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no trading market for our common stock and no assurance can be
given that a trading market will develop in the future, or, if developed, that
it will be sustained. Consequently, a purchaser of our common stock may find it
difficult to resell the securities offered herein should the purchaser desire to
do so when eligible for public resale. Furthermore, the shares are not
marginable and it is not likely that a lending institution would accept our
common stock as collateral for a loan.
Pursuant to this registration statement, we propose to publicly offer a
maximum of 2,500,000 and a minimum of 625,000 shares of common stock on a best
efforts basis. To date, we have no outstanding options, warrants, or
convertible securities. We have no agreements to register shares of common
stock held by existing security holders for resale. Prior to this offering, we
have two shareholders that own in the aggregate of 5,500,000 shares of
restricted common stock.
Our transfer agent and registrar is Transfer Online, Inc., located at 317
SW Alder Street, 2nd Floor, Portland, Oregon 97204, telephone (503)227-2950.
DESCRIPTION OF BUSINESS
GENERAL
We are a development stage operator of a planned Internet portal to be
located on the World Wide Web at www.portaltochina.com. We were incorporated on
March 18, 2003 under the laws of the State of Nevada. From inception through
August 31, 2004, our operations have been primarily limited to developing our
business plan, building our portal, and marketing. Our principal office is
located at 1802-888 Pacific Street, Vancouver, British Columbia, Canada, V6Z
2S6, (604)619-6328. The Information set forth on our portal does not constitute
part of this prospectus.
Internet portals are websites known for cataloging available content from
the Internet and acting as a "hub" from which users can locate and link to
desired content. They commonly offer a broad array of online resources and
services, including search and navigation tools.
We plan to operate within what is commonly referred to as the
"business-to-business" (B2B) segment of the Internet, in which products and
services are offered principally to businesses as compared to the
"business-to-consumer" segment in which products and services are offered
principally to consumers. Our portal will be designed to be a comprehensive
resource that will enable users with Chinese business interests to reference
important Chinese trade and business information, access a database of products
and services, engage in B2B commerce, and interact with others having similar
interests.
INDUSTRY BACKGROUND
The Internet is a global collection of thousands of computer networks
interconnected to enable commercial organizations, educational institutions,
government agencies and individuals to communicate electronically, access and
share information, and conduct business. Much of the growth to-date in the use
of the Internet by businesses and individuals is due to the emergence of the
World Wide Web.
The World Wide Web is a network medium that includes an ever growing wide
range of content and activities. Within the Web there can be found content such
as magazines, news, sports information, radio broadcasts, corporate, product,
educational, research and political information, customer service, shopping,
electronic commerce, hotel and airline reservations, banking, games, and
discussion groups.
In recent years, the Internet has become a place where a wide range of
goods and services can be bought or sold, making cyberspace a global community,
a commercial medium, and a multi-billion-dollar industry. According to the
Canadian Department of Industry, the projected figure for worldwide online trade
in 2006 is $12.8 trillion, up from the $6.8 trillion projected for 2004 by
Forrester Research. Of this global e-commerce number, North America will
account for 58%. The United States will account for 26% of total sales in 2006,
with Canada, Europe and the Asia/Pacific region each accounting for an
additional 20%. The total forecasted B2B online trade figure for 2006 is $12.3
11
billion, up from the $6.0 trillion projected for 2004 by Gartner Group. North
America's share of B2B online trade is expected to be $7.3 billion in 2006. The
Census Bureau of the U.S. Department of Commerce estimates that U.S. retail
e-commerce sales for the second quarter of 2004 was $15.7 billion, an increase
of 23.1% from the second quarter of 2003.
The term, "e-commerce" refers to financial transactions carried out over
the Internet. Revenue from e-commerce is typically derived from transaction fees
or percentage of sales fees directly generated by the placement of links on a
website to an online merchant site or online store. The growth in e-commerce is
being fueled by two interrelated factors. First, users are becoming increasingly
comfortable with the concept of using the Internet for retail shopping, due in
part to growing confidence in credit card transaction security. Second, the
number of Internet users is growing at a dynamic rate. In 1994, there was a
total of 3 million internet users worldwide (most of them located in the U.S.).
According to data compiled by InternetWorldStats.com, the number of internet
users has increased from 361 million in 2000, to 800 million by September 2004.
The Internet enables advertisers to target their messages to audiences
having specific demographic characteristics and to track the effectiveness of
their advertisements based on impressions delivered and click through rates.
Advertising on the Internet is beginning to rival more traditional print and
broadcast media. Worldwide Internet advertising more than quadrupled between
1998 and 2000, only to decline by 16% during 2002-2003. PriceWaterhouseCoopers
estimates in its Entertainment and Media Outlook that worldwide online
advertising and access spending will increase from $55.7 billion in 2002 to
$93.1 billion in 2007. The Asia/Pacific region, led by growth in China, will
average 14.7% compound growth, rising to $25.1 billion in 2007 from $12.6
billion in 2002. The continued growth of Internet advertising demonstrates that
an increasing number of advertisers now consider a strong presence on the
Internet as key to their overall branding strategies, which reinforces the
importance of the medium as an integral component to across-the-board
advertising coverage.
Relative to the United States and Western Europe, the Internet is in its
infancy in China. We believe that the number of Internet subscribers in China
has grown rapidly in recent years and that the rate of growth in use of the
Internet in China will continue to accelerate. At the start of 1999, China had
only 2.1 million Internet users. According to InternetWorldStats.com, by the
beginning of 2004 China had 79.5 million Internet users (6% of China's
population), an increase of 34.5% from 59.1 million users one year earlier. As
of July 2004, there were 87 million Internet users in China. Meanwhile, growth
of the Chinese Internet access market has continued through 2003 into 2004.
According to the China Internet Network Information Center, the number of
broadband users in July 2004 reached 31.10 million, an increase of 13.70 million
over the past 12 months (an increase by 78.7% over a 6 month period). In 2000,
Chinese e-commerce revenue reached $9.32 billion, of which B2B trade accounted
for $9.27 billion, and business to consumer trade accounted for $47.1 million.
By 2005, China's e-commerce revenue is projected to grow to more than $16
billion, according to a report from IT analysts IDC, with a compound annual
growth rate of B2B e-commerce expected to be 81% over the next four years.
OUR BUSINESS
Our Internet portal will be designed to meet the needs of those having an
interest in Chinese business, and in particular, accessing the Chinese B2B
market. The portal will feature free public access to some of the most useful
Chinese business information available. Upon registration, users will also have
access to personal e-mail and chat rooms. Paid subscribers will be able to
access our B2B Exchange, designed to connect businesses interested in Chinese
B2B transactions.
12
We believe that businesses are increasingly recognizing that productivity
and competitiveness depend on access to reliable online information, including
information about customers, competitors, products, industries, business trends,
breaking news and market data. Because of its affordability, convenience and
ease of access, the Internet has emerged as an effective medium for distributing
business information. We believe that as business information requirements are
reaching unprecedented levels, organizations are increasingly turning to the
Internet for information that will give them a competitive edge.
With Chinese economic growth up 9.1% in 2003, and projected to grow a
further 8-9% in 2004, foreign investment is pouring into China at an
ever-increasing rate. According to the Organisation for Economic Co-operation
and Development, China surpassed the U.S. in 2003 as the biggest recipient of
foreign direct investment, attracting $53 billion.
We believe that non-Chinese businesses, particularly those in North
American and Western Europe, are increasingly looking to access the Chinese
market, particularly in the B2B sector. But whereas business information about
these non-Chinese markets is plentiful and available from a variety of online
sources, similar information concerning China is not as readily available. We
believe that this lack of information impedes the efficient operation and growth
of businesses interested in commerce with China, and presents us with an
opportunity to develop and utilize an Internet portal that will become a
reliable and recognized source of Chinese business information, with a virtual
community of users enabled to exchange information and engage in trade. By
providing high-quality information and services, our Internet portal will be
positioned to support B2B trade with China while also providing an attractive
environment for businesses seeking to establish advertising or e-commerce
relationships.
INTERNET PORTAL
Our Internet portal will be located on the World Wide Web at
www.portaltochina.com. It is scheduled to be available to the public on
December 15, 2004. It will be designed to provide users with a clean,
esthetically pleasing, intuitive interface. Emphasis will be placed on
establishing our Internet portal as a comprehensive and reliable source for
quality information and services. Our Internet portal will be updated
regularly, and we expect continual development of our portal throughout our
operating life.
There will be two operating levels to our portal. The first level will
allow free public access to specific content such as current events, an online
document library of Chinese business information, a directory of Internet
hyperlinks to Chinese business information and our search engine. Also
available to the general public will be our branded e-mail service and chat
rooms.
The second level of our portal will be available only on a paid monthly
subscription basis. Subscribers will have access to our B2B Exchange, which
will include our Insider's Guide to doing business in China, a database of
businesses and products, an online trading platform that facilitates B2B
transactions with Chinese businesses, and a discussion forum. We will not be
able to develop our B2B Exchange unless we are able to sell at least 50% of the
offered shares, or we have secured sufficient additional financing. There is no
assurance that we will be able to secure such financing on satisfactory terms,
or at all.
Our Internet portal will be our sole source of revenue. We believe that we
will earn most of our revenue in the form of advertising fees and service
charges arising from our online trading platform. We also intend to earn
revenue from paid subscriptions to the B2B Exchange.
If we are successful in selling at least 75% of this offering, we intend to
make our Internet portal bilingual. Users will have the option of reading our
content in English and simplified Chinese. Our search engine will similarly be
adapted to accommodate bilingual functionality. We will not be able to add the
bilingual functionality unless we are able to sell at least 50% of the offered
shares, or we have secured sufficient additional financing. There is no
assurance that we will be able to secure such financing on satisfactory terms,
or at all.
GENERAL PUBLIC ACCESS
While the focus of our Internet portal is on the Chinese B2B market, we
believe that by providing useful content that is freely accessible by the
public, the portal will have a broader appeal to anyone having interests in
China. The freely accessible content on our portal will include the following:
Current Events. The Current Events section will figure prominently in our
public access section. It will feature news articles that we believe will
appeal to anyone having interests in China, particularly businesspersons seeking
to access the Chinese B2B market. Such articles will include general Chinese
and international news items, financial reports, technology news and sports
results.
Chinese Business Library. The Chinese Business Library will serve as a
repository for information and a collection of online resources for those
interested in doing business in China. It will contain technical information
regarding Chinese trade and business, including laws, regulations and practices.
Upcoming events of interest to the Chinese business community will be
highlighted, such as business opportunities, major trade shows, exhibitions,
special product offerings, conferences and the like.
13
WebLinks. The WebLinks directory will contain a comprehensive selection of
useful Internet hyperlinks relating to business in China, with brief
descriptions of each.
Search Engine. Our Internet portal will feature a powerful navigation tool in
the form of a search feature. Searching will be available throughout the portal
from a permanent position residing on every page. The permanent search will
enable users to search our portal or the Internet at large in English. There
will also be an "advanced search" link that will take users to a dedicated
search page that allows for more advanced search options such as searching a
particular section of the portal.
Chinese Stock Quotes. Free online stock quotes will be available for the
Shanghai, Shenzhen and Honk Kong stock exchanges.
Cities. Our Internet portal will feature real-time displays for current weather
information for various principal Chinese cites, such as Beijing, Canton, Hong
Kong, and Shanghai. By clicking on the respective displays, users will be able
to access basic information for each city.
E-mail. Users will be able to utilize our branded email service, free of
charge. Users must register by supplying a valid email address to take
advantage of this feature.
Chat Rooms. Chat rooms are virtual rooms where users can engage in real-time
communications through the Internet. Once a chat has been initiated, either
user can enter text that simultaneously appears on the other user's video
display. Our Internet Portal will feature chat rooms on a variety of topics
related to Chinese business issues. Users must register by supplying a valid
email address to take advantage of this feature.
B2B EXCHANGE
The B2B Exchange will feature subscription-based information and services.
Subscribers will be required to pay a monthly fee of $10 and complete a short
online form. After the successful completion of a confirmation process,
subscribers will have access to the following services:
Insider's Guide. Expanding upon the technical information contained in the
Business Information Library, our Insider's Guide will be designed as an
"insider's perspective" on doing business in China. It will contain practical
insights such as common stumbling blocks and how to avoid them, reports and tips
from experienced sources. Editorials and guest expert columns will focus on
overcoming cultural and regulatory barriers, whether systemic or practical.
Comments and advice from other subscribers will also be featured.
Marketplace: The marketplace section of our Internet portal will be an online
trading platform that facilitates B2B transactions with Chinese businesses. Our
portal will function to create, maintain, and expand the technological
functionality, safety, ease-of-use, and reliability of our trading platform
while, at the same time, supporting the growth and success of our community of
users. All users will be able to browse the marketplace section, but only
subscribers will be able to complete transactions.
Our marketplace will be a fully automated, searchable, topically arranged,
intuitive and easy-to-use online service that is available 24-hours a day, seven
days a week, enabling sellers to list items for sale in a fixed price format,
buyers to purchase items of interest, and all portal users to browse through
selected items from any place in the world at any time.
Through a third party payments platform, we will enable subscribers with email
to send and receive online payments securely, conveniently and cost-effectively.
All financial transactions will be handled by the third party payments platform,
which will also be responsible for safeguarding the financial information of our
users. We will not receive the financial information of our users.
A service charge for each sale facilitated through our portal will be added to
the selling price of each item and paid by the purchaser at the time of sale.
Service charges will be 1% of the final agreed-upon price.
14
Our feedback forum will encourage users to provide comments on other users with
whom they trade. Every subscriber will have a feedback profile containing
compliments, criticisms and comments by other subscribers. The feedback forum
will require comments to be related to specific transactions and will provide an
easy tool for subscribers to match specific transactions with the user names of
their trading partners. This information will be recorded in a feedback profile
that includes a feedback rating for the subscriber with feedback sorted
according to whether it was given over the past month, six months, or twelve
months. Subscribers who develop positive reputations will have color-coded
symbols displayed next to their user names to indicate the number of positive
feedback ratings they have received. Before bidding on items listed for sale,
subscribers will be encouraged to review a seller's feedback profile to check
the seller's reputation within the portaltochina.com community.
We will not take possession of either the item being sold or the buyer's payment
for the item. Rather, the buyer and seller must independently arrange for
shipment of and payment for the item, with the buyer typically paying for
shipping.
Business Database. We intend to create a database of businesses, both Chinese
and non-Chinese that are interested in B2B commerce. Businesses will be able to
submit product and enterprise information directly to our staff by e-mail or by
fax, free of charge. Our staff will then compile and organize the data and
continuously manage and update the database to ensure the quality and accuracy
of the information.
The database will be organized by products and services, either being sought or
offered for sale. Each entry will contain a brief overview of the business and
its products or services, plus its name, address, telephone and fax numbers,
e-mail address, and website. The database will enable Chinese businesses to
promote themselves and access the global B2B market, while giving non-Chinese
businesses leads and contacts for reaching the burgeoning Chinese market.
All users of our Internet portal will be able to view the categories of products
and services in the Business Database, as well as the number of businesses in
each category interested in buying or selling. Only subscribers will be able to
access contact information for businesses in the database.
The database will be linked to the Marketplace, so that businesses with products
for sale in the Marketplace will be identified as such.
Forum. Our Internet portal will feature a discussion forum for users to
interact and share information. The forum will contain features common to other
Internet forums such as, topics, discussion threads, messages and moderators.
It will be augmented by information from other sections of the portal.
ADVERTISING
We will offer banner and button advertisements, and sponsorships or
co-branded advertising to businesses that want to integrate their advertisements
or products with selected content on our portal. We will also offer combined
arrangements that can integrate components of advertisement, sponsorship and our
Marketplace.
Banner ads are small, usually rectangular graphics that appear on most
websites. Like roadside billboards the messages are usually static and appear at
the top of a web page. Button ads are small, approximately square
advertisements that are usually at the bottom of a web page and contain only a
corporate name or brand. Clicking on the button takes the online viewer directly
to the corporate website which allows advertisers to directly interact with the
online viewer. Sponsorships are strategically placed corporate or brand names
advertisements, possibly including a banner or button, which attempt to
integrate a company's brand or products with the content on targeted websites.
The goal of sponsorships is to cause users to strongly identify the advertiser
with the mission, or content, of the website.
We plan to enter into agreements with advertisers under which
advertisements are placed on our portal and we are paid a fee based on the
number of click through impressions. Our list price for advertising will range
from $10 to $20 for each 1,000 impressions generated. Advertisement rates are
often negotiated on a case-by-case basis and depend upon a variety of factors,
including the duration of the advertising contract, whether the advertisements
are targeted to a particular audience or are "run-of-site" advertisements and
the number of impressions purchased.
15
MARKETING
Our target market is the non-Chinese business community, primarily in North
American and Western Europe, that is interested in accessing the Chinese market
for the purpose of concluding B2B transactions. In order to access this market,
we believe that broader recognition and a favorable perception of our Internet
portal will be essential. By providing both a wealth of information about doing
business in China and access to Chinese markets, we plan to position our
Internet portal as a "one-stop-shop" for B2B transactions.
Successful positioning of our brand will largely depend on the success of
our advertising, marketing and promotion efforts and our ability to continue to
provide high quality information and services.
Our ability to market our portal will be affected by the success of this
offering. If we are only able to sell 25% of the offered shares, we will rely
almost exclusively on the Internet for marketing and promotion of our portal and
services. We will register our trade name, PortalToChina.com, on most popular
search engines, including Google, Yahoo, AltaVista, Netscape, MSN, About.com,
and AOL. In addition, we will submit our portal for inclusion in the Google
"Adwords" program, which will exchange advertising space on our portal for a
higher position on Google search results. We will resubmit our portal
information periodically to the above search engines in order to keep our
listing current.
If we are successful in selling 50% of the offered shares, we will augment
our Internet sales efforts by advertising our portal and services in appropriate
industry publications, including Internet directories, and through other print
media, email, mail, fax and telephone campaigns. Furthermore, we plan to attend
trade shows and events related to International trade shows where we will place
appropriate advertisements concerning our services and where we will have the
opportunity for personal contact with our target market.
Unless we are successful in selling 75% of the offered shares, our officers
will conduct our marketing efforts. If we are able to sell 75% of this
offering, we intend to employ at least one sales representative to market our
portal and services, provide customer relations services, and solicit database
listings and portal subscriptions. If we are able to sell all of this offering,
then we intend to employ two sales representatives. If we are unable to sell
75% of this offering then we will need to secure additional financing before we
can hire any sales staff.
We have not performed any marketing studies to assess whether a potential
market exists for our services or whether such a market would be sustainable
given the potential cost of our services. We do not intend to conduct such
basic marketing studies prior to beginning operations.
COMPETITION
The market for Internet advertising, e-commerce and Internet-based
information services is relatively new, intensely competitive, rapidly evolving
and subject to rapid technological change. We expect competition to persist,
intensify and increase in the future. There are several Internet sites that
promote Chinese trade and products that may compete with us for Internet
advertising and e-commerce customers, including Netease, Sina Corporation,
Tom.com and Yahoo! China. We also compete indirectly for advertisers and
e-commerce customers with a large number of other Internet sites, including
sites that cater to the Chinese market and sites that promote international
trade, and with traditional advertising and media agencies and formats.
There are relatively low barriers to entering the markets in which we
compete. We have no patented technology to preclude competitors from entering
our markets; instead, as an information provider we rely on the skill of our
personnel. We expect that our portal will compare favorably with our
competitors at the outset in terms of portal design and our publicly accessible
information. We believe that the first year of operations, our accumulated
information content and B2B Exchange will also compare favorably with content on
competing portals. Our prices will also be competitive. However, many of our
competitors offer comprehensive Internet technology solutions, including
internet service provider hosting services, and have longer operating histories,
larger installed customer bases; longer relationships with clients, and
significantly greater financial, technical and public relations resources than
we do. There can be no assurance that we will be able to successfully compete
with existing competitors or with new competitors that may enter one or more of
our markets.
16
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We regard copyrights, service marks, trademarks, trade secrets and other
intellectual property as critical to our success. While we do not presently hold
any copyrights, service marks or trademarks, we expect to rely on trademark and
copyright law, trade secret protection and confidentiality and/or license
agreements with employees, customers, partners and others to protect
intellectual property rights. Despite such precautions, it may be possible for
third parties to obtain and use intellectual property without authorization.
Furthermore, the validity, enforceability and scope of protection of
intellectual property in Internet-related industries is uncertain and still
evolving. The laws of some foreign countries do not protect intellectual
property to the same extent as do the laws of the United States.
We intend to pursue the registration of trademarks in the United States and
internationally in China and other Asian countries. We may not, however, be able
to secure adequate protection for such trademarks in the United States and other
countries. Effective trademark protection may not be available in all the
countries in which we conduct business. Policing unauthorized use of marks is
also difficult and expensive. In addition, it is possible that competitors will
adopt product or service names similar to our own, thereby impeding our ability
to build brand identity and possibly leading to customer confusion.
Many businesses are actively developing chat, home page, search and related
Internet technologies. Developers of such technologies can be expected to take
steps to protect these technologies, including seeking patent protection. There
may be patents issued or pending that are held by others and that cover
significant parts of our technology, business methods or services. Disputes over
rights to these technologies may arise in the future. We cannot be certain that
our products and services do not or will not infringe valid patents, copyrights
or other intellectual property rights held by third parties. We may be subject
to legal proceedings and claims from time to time relating to the intellectual
property of others in the ordinary course of our business. In the event that we
determine that licensing this intellectual property is appropriate, we may not
be able to obtain a license on reasonable terms or at all. We may also incur
substantial expenses in defending against third-party infringement claims,
regardless of the merit of these claims. Successful infringement claims against
us may result in substantial monetary liability or may prevent us from
conducting all or a part of our business.
We also intend to license technology from third parties, including
web-server and encryption technology. The market is evolving and we may need to
license additional technologies to remain competitive. We may not be able to
license these technologies on commercially reasonable terms or at all. In
addition, it is possible that licensed technologies may not be successfully
integrated into our services. The inability to obtain any of these licenses
could delay product and service development until alternative technologies can
be identified, licensed and integrated.
EMPLOYEES
We currently have no employees.
If we are able to sell 75% of the offered shares we plan to hire two
employees to function as our technical and sales staff, respectively. The
technical staff will manage and update our Internet portal, including listings
in our Business Database. The sales staff will be responsible for marketing,
customer relations, and the solicitation of database listings and portal
subscriptions. The technical staff and the sales staff will each be expanded to
two employees if we are able to sell all of the offered shares.
Until we are able to sell at least 75% of the offered shares, we will
utilize independent contractors as needed and as our resources permit. We do
not intend to provide any special benefit or incentive program to our employees.
CORPORATE POLICY
Corporate policy does not permit PortaltoChina.com, Inc. to acquire or
merge with any business or company in which our promoters, management or their
affiliates or associates, directly or indirectly, have an ownership interest.
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DESCRIPTION OF PROPERTY
We are presently using 400 square feet of office space supplied at no cost
by our President, Paul Fong, at 1802-888 Pacific Street, Vancouver, British
Columbia. If we sell 50% of this offering we intend to move our offices to
leased premises of approximately 800-1,000 square feet at another location in
Greater Vancouver to provide room for sales and technical staff. The cost of
such premises will be approximately $1,000 per month.
LEGAL PROCEEDINGS
Neither PortalToChina.com, Inc., nor any of its officers or directors is a
party to any material legal proceeding or litigation and such persons know of no
material legal proceeding or contemplated or threatened litigation. There are
no judgments against PortalToChina.com, Inc. or its officers or directors. None
of our officers or directors have been convicted of a felony or misdemeanor
relating to securities or performance in corporate office.
PLAN OF OPERATION
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR PLAN OF OPERATION SHOULD BE READ IN
CONJUNCTION WITH THE FINANCIAL STATEMENTS AND THE RELATED NOTES. THIS DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS BASED UPON CURRENT EXPECTATIONS THAT INVOLVE
RISKS AND UNCERTAINTIES, SUCH AS OUR PLANS, OBJECTIVES, EXPECTATIONS AND
INTENTIONS. OUR ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS,"
"DESCRIPTION OF BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We are a development stage operator of an Internet portal located on the
World Wide Web at www.portaltochina.com. Our portal is designed to be a
comprehensive resource that will enable users with Chinese business interests to
reference important Chinese trade and business information, access a database of
products and services, engage in B2B commerce, and interact with others having
similar interests.
Our plan of operations for the next 12 months is to develop and promote our
Internet portal, employ sales and technical staff, repay debt, purchase
equipment and secure appropriate office space.
LIQUIDITY AND CAPITAL RESOURCES
Our business is in the early stages of development and has had no
significant operations. Since inception on March 18, 2003, we have earned no
revenue. As of August 31, 2004, we had a negative working capital of $8,179 and
no assets. All incurred expenses have been funded thus far by private
placements and by a loan from our President.
We expect to be able to satisfy our cash requirements until our Internet
portal is delivered. On delivery of the portal, we will owe the developer
$35,000. At that time, we will also need to hire up to two sales staff and two
technical staff to assist the officers with the operation and marketing of the
portal. Anticipated annual salary for each member of the sales staff is
$20,000, and for each member of the technical staff is $30,000.
We have a limited operating history on which to base an evaluation of our
business and prospects. You must consider our prospects in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development. To address these risks, we must establish, maintain and
expand our customer base, implement and successfully execute our business and
marketing strategy, provide superior customer service, anticipate and respond to
competitive developments and attract, retain and motivate qualified personnel.
We cannot give any assurance that we will be successful in addressing these
risks, and our failure to do so could have a negative impact on our business,
operating results and financial condition.
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PORTAL DEVELOPMENT
On June 1, 2004, we contracted with an independent third party for the
development of our Internet portal. The contract contemplates the development
of our portal in three phases. Phase I, is to be completed by December 15,
2004. The remaining phases will be completed according to the success of this
offering, or our ability to raise additional financing if the proceeds from this
offering are insufficient to complete their development. This section is to be
read in conjunction with the Description of Business, beginning on page 11 of
this prospectus.
PHASE I.
Phase I of the development of our Internet portal will involve the creation
and delivery of an operating Internet portal by December 15, 2004. Phase I has
been commenced, and will cost us $35,000, payable on delivery of the portal. We
will be using the proceeds from this offering to pay the cost of Phase I. If we
are unable to sell the minimum of 25% of this offering, then our directors and
officers will be required to obtain additional financing to pay for Phase I.
Upon completion of Phase I, the public access section of our portal will be
completed as follows:
Current Events. The Current Events section will be fully functional, and will
feature news articles that we believe will appeal to anyone having interests in
China, particularly businesspersons seeking to access the Chinese B2B market.
Such articles will include general Chinese and international news items,
financial reports, technology news and sports results.
Chinese Business Library. Our library of Chinese business information will be
fully functional and available for searching and viewing. On completion of
Phase I, this section will contain information regarding Chinese trade and
business, including laws, regulations, and practices, plus upcoming events of
interest to the Chinese business community. This section will be regularly
updated by our staff, with old information being deleted and newer information
being added on an ongoing basis.
WebLinks. The WebLinks directory of useful Internet hyperlinks relating to
business in China, along with brief descriptions of each, will be fully
functional upon completion of Phase I. This section will be regularly updated
by our staff, with old information being deleted and newer information being
added on an ongoing basis.
Search Engine. Upon completion of Phase I, our Internet portal will offer users
the ability to search the portal or the Internet through our search engine,
which will have a permanent position residing on every page. There will also be
an "advanced search" link that will take users to a dedicated search page that
allows for more advanced search options such as searching a particular section
of the portal. As of the completion of Phase I, the search capability of our
portal will be limited to English language searches, only.
Chinese Stock Quotes. Our online stock quotation system for the Shanghai,
Shenzhen and Honk Kong stock exchanges will be fully operational.
Chinese City Information. The real-time displays for current weather
information for various principal Chinese cites will be fully functional. Each
display will show the current weather conditions. By clicking on each display,
users will be able to access basic information for the city in question.
E-mail. Upon completion of Phase I, our Internet Portal will offer registered
users the opportunity to use our branded email service. Registration for our
email service will be free of charge.
Chat Rooms. Upon completion of Phase I, our Internet portal will have a single
operating chat room for registered users. Additional chat rooms will be created
as the need arises, or by request of users. Registration for our chat rooms
will be free of charge.
We plan to enter into agreements with advertisers pursuant to which
advertisements are placed on our portal and we are paid a fee based on the
number of click-through impressions. Our list price for advertising will range
from $10 to $20 for each 1,000 impressions generated. Advertisement rates are
often negotiated on a case-by-case basis and depend upon a variety of factors,
including the duration of the advertising contract, whether the advertisements
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are targeted to a particular audience or are "run-of-site" advertisements and
the number of impressions purchased. We will be able to place advertisements on
our Internet portal immediately upon completion of Phase I. The revenue earned
from advertising will depend upon the number of visitors to our portal. We
cannot give any assurance that we will have any significant number of visitors
to our portal or that we will ever earn more than nominal fees from advertising.
PHASE II.
Phase II of the development of our Internet portal will involve adding our
B2B Exchange, composed of the Insider's Guide, the Marketplace, the Business
Database and the Forum.
It will take six months to complete Phase II, at a cost to us of $35,000,
payable upon completion. We intend to use the proceeds of this offering to pay
for the development of Phase II. If we are able to sell 50% of the offered
shares, we will commence development of Phase II upon completion of Phase I. If
we are unable to sell 50% of this offering then we will be required to obtain
additional financing before we can commence Phases II. There is no assurance
that we will be able to secure such additional financing. If we are unable to
secure additional financing we will be unable to develop Phases II and III and
our Internet portal may consequently be unsuccessful.
In order to access the B2B Exchange, users will be required to pay a
monthly subscription fee of $10. Payments will be made through a third party
payments platform. We will not be able to earn revenue from subscriptions
unless we are able to complete Phase II.
Insider's Guide. Upon completion of Phase II, the Insider's Guide, a section
featuring an "insider's perspective" on doing business in China, will be
available. The success of this section will depend upon us obtaining
contributions from persons having experience with doing business in China. Such
contributors will likely include businesspersons, academics and other
subscribers. We will also source information from the Internet, periodicals,
and other publications. We do not intend to source any content for this section
until we have commenced Phase II.
Marketplace: Upon completion of Phase II, the Marketplace section of our
Internet portal will be fully functional as an online trading platform that
facilitates B2B transactions between Chinese and non-Chinese businesses. All
users will be able to browse the Marketplace, but only subscribers will be able
to engage in transactions. Our Feedback Forum will also be fully functional.
We plan to charge a service fee of 1% of the final agreed-upon price of any
transaction completed through the Marketplace. The service charge will be
automatically added to the selling price of each item and paid by the purchaser
at the time of sale. We will not be able to earn revenue from subscriptions
unless we are able to complete Phase II.
The success of the Marketplace will depend upon our ability to solicit postings
from appropriate businesses. Our staff will be responsible for soliciting
postings for the buying and selling of products and services. If we are unable
to generate postings to the Marketplace, then we will be unable to earn revenue
from the Marketplace and our portal may be unsuccessful.
The Marketplace will be unsuccessful if we are unable to secure a suitable third
party payments platform that will handle all financial transactions. We do not
intend to enter into any agreement with a payments platform provider unless and
until we are able to sell 50% of this offering, or we are otherwise able to
obtain sufficient additional financing to complete Phase II. If we are unable
to secure a satisfactory agreement with a third party provider of a payments
platform, then we will be unable to earn revenue from the Marketplace and our
Internet portal may not be successful. The cost of using a payments platform is
generally between 2.9% and 1.9% of a transaction, depending on the size of the
transaction.
Business Database. Upon completion of Phase II, our Business Database will be
constructed and available for the input of product and business information.
The Business Database will be regularly updated by our staff based on
submissions from users. The rate at which our database grows will be largely
dependent upon the response by the B2B business community. We cannot give any
assurance that we will receive any submissions to our Business Database, or that
it will be successful.
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Forum. Upon completion of Phase II, the discussion forum of our Internet portal
will be fully functional. It will contain features common to other Internet
forums such as, topics, discussion threads, messages and moderators. It will be
also be augmented by information from other sections of the portal.
PHASE III.
Phase III of the development of our Internet portal will involve adding
bilingual functionality. Users will have the option of reading our content in
English and simplified Chinese. Our search engine will similarly be adapted to
accommodate bilingual functionality. It will take two months to complete Phase
III, at a cost to us of $5,000, payable upon completion.
We intend to use the proceeds of this offering to pay for the development
of Phase III if we are able to sell 75% of the offered shares. In such a case,
we will commence development of Phase III upon completion of Phase II. If we
are unable to sell 75% of this offering then we will be required to obtain
additional financing before Phase III can be initiated. There is no assurance
that we will be able to secure such additional financing. If we are unable to
secure additional financing we will be unable to develop Phase III and our
Internet portal may consequently be unsuccessful.
[Enlarge/Download Table]
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
Payments Due by Period
Contractual Obligations as of August 30, 2004 Total Less than 1 year 1-3 years 4-5 years After 5 years
Long-Term Debt $6,226 - $6,226(1) - -
Unconditional Purchase Obligations $35,000 $35,000(2) - - -
Total Contractual Cash Obligations $41,226 $35,000 $6,226 - -
<FN>
(1) On May 30, 2003, we issued an unsecured promissory note in the amount of $6,000 bearing interest at three% per annum to
Paul Fong, our President, Chief Financial Officer, and a Director (see "Certain Relationships And Related Transactions").
(2) On June 1, 2004, we entered into a contract for the development of our portal. We are committed to paying the sum of
$35,000 upon delivery of our portal on December 15, 2004.
OFF-BALANCE SHEET ARRANGEMENTS
There is no transaction, agreement or other contractual arrangement to which an
entity unconsolidated with us is a party, under which we have:
(i) any obligation under a guarantee contract;
(ii) a retained or contingent interest in assets transferred to an
unconsolidated entity or similar arrangement that serves as credit, liquidity or
market risk support to such entity for such assets;
(iii) any obligation, including a contingent obligation, under a contract
that would be accounted for as a derivative instrument; or
(iv) any obligation, including a contingent obligation, arising out of a
variable interest in an unconsolidated entity that is held by, and material to
us, where such entity provides us with financing, liquidity, market risk or
credit risk support to, or engages in leasing, hedging or research and
development services.
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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following sets forth our directors, executive officers, promoters and
control persons, their ages, and all offices and positions held. Directors are
elected for a period of one year and thereafter serve until their successor is
duly elected by the shareholders. Officers and other employees serve at the
will of the Board of Directors.
[Download Table]
Term Period Served as
Name Position Age Director/Officer
--------------- -------------------------- --- ---------------------
President, Chief Financial
Paul Fong Officer, Director 53 03/30/03 to present
Caroline Rechia Secretary, Director 34 03/30/03 to present
PAUL FONG
Mr. Fong has served as our President and Chief Financial officer, and as a
director since March 30, 2003 and currently devotes approximately five hours per
week to our operations. Mr. Fong has been the President of Paul Fong Pontiac
Buick GMC Ltd. since 1998 and was the President of Lawson Oates Chrysler Ltd.
from January 1991 to August 2000. Both companies are private car dealerships
located in Vancouver, British Columbia. Mr. Fong completed three years of
business studies at Simon Fraser University in Burnaby, British Columbia.
Mr. Fong was a Director of Shabute Ventures Inc., a public company listed
on the TSX Venture Exchange in Canada, from May 2002 through to April 2003. Mr.
Fong assisted in the restructuring of the company which was involved in the
environmental clean-up industry. Shabute, however, was inactive during Mr.
Fong's involvement with the company. Shabute is now involved in the exploration
of oil and gas in Alberta, Canada and is named Northern Sun Exploration Company
Inc.
On March 8, 2004, Mr. Fong was appointed President, Chief Executive
Officer, Treasurer and director of Furio Resources Inc. Furio is a reporting
issuer under the Securities Exchange Act of 1934 but is not currently traded or
quoted on any exchange. Furio is a junior mineral exploration company with
mineral claims located in southwestern Alaska.
In addition, on September 7, 2004, Mr. Fong became the President and
director of Adriana Ventures Inc., a company publicly listed on the TSX Venture
Exchange's NEX board in Canada. The NEX board provides a trading forum for
listed companies that have fallen below TSX Venture's ongoing listing standards.
CAROLINE RECHIA
Ms. Rechia serves as our Vice President and Secretary. Since 2001, Ms.
Rechia has been employed as a systems analyst by Chalk Media Corp., a privately
held company based in Vancouver, British Columbia. Chalk Media Corp. creates
custom learning and marketing campaigns for corporations through rich media
content, strategic design and targeted delivery. From 2000 to 2001, Ms. Rechia
provided useability testing services to THINQ Learning Solutions, Inc., a
privately held company headquartered in Baltimore, with operations in the United
States, Canada and the U.K. that provides enterprise learning management tools
to corporations and government agencies. From 1997 to 2000, Ms. Rechia was
employed as a communications specialist for Canadian Tire Corporation, Ltd. Ms.
Rechia received a Bachelor of Arts from the University of Toronto in 1994. Ms.
Rechia presently devotes approximately five hours a week to our business. She
anticipates devoting 25 hours a week once our Internet portal has been
developed.
EXECUTIVE COMPENSATION
To date we have no employees. Neither our officers nor directors have been
paid any compensation. We have no employment agreements with any of our
officers. We do not contemplate entering into any employment agreements until
we have either successfully sold at least 75% of this offering or we have been
able to arrange sufficient alternative financing. Neither our officers nor our
directors will be paid any compensation from the proceeds of this offering.
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There are no other stock option plans, retirement, pension, or profit
sharing plans for the benefit of our officers and directors. We do not have any
long-term incentive plans that provide compensation intended to serve as
incentive for performance.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have issued common stock to the following officers, directors, promoters
and beneficial owners of more than 5% of our outstanding securities.
[Enlarge/Download Table]
Position with
Name Company Shares Consideration Date
--------------- ---------------------------------- --------- -------------- --------------
Paul Fong President, Chief Financial Officer 3,000,000 $300 March 10, 2003
Caroline Rechia Vice President, Secretary 2,500,000 $250 March 10, 2003
On May 30, 2003, we issued an unsecured promissory note in the amount of
$6,000 bearing interest at 3% per annum to Paul Fong, our President, Chief
Financial Officer, and a Director. The promissory note is due on May 31, 2005,
but we anticipate repaying it earlier than the due date from the proceeds of
this offering. If we fail to repay the promissory note on the due date, then
the interest rate on the principal and accrued interest will increase as of May
31, 2005 to 5% per annum. Proceeds from this promissory note were used to pay
for development of our business plan, accounting and legal expenses. This
transaction was evaluated as being fair by our directors reviewing the
transaction without third party advice or consultation. No independent third
party has evaluated the fairness of this transaction.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of May 31, 2004, the following table sets forth information known by our
management regarding beneficial ownership of our common stock at the date of
this prospectus by: each person known by us to own, directly or beneficially,
more than 5% of our common stock; each of our executive officers and directors;
and, all of our officers and directors as a group.
Except as otherwise indicated, our management believes that the beneficial
owners of the common stock listed below, based on information furnished by the
owners, own the shares directly and have sole investment and voting power over
the shares.
[Enlarge/Download Table]
Name Number of Shares Beneficially Owned Percentage Beneficially Owned
Before Before
Offering After Offering Offering After Offering
Minimum Maximum Minimum Maximum
Paul Fong 3,000,000 3,000,000 3,000,000 55% 49% 38%
Caroline Rechia 2,500,000 2,500,000 2,500,000 45% 41% 31%
Directors and officers as a
group (two persons) 5,500,000 5,500,000 5,500,000 100% 90% 69%
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The address for all officers and directors is 1802-888 Pacific Street,
Vancouver, British Columbia V6Z 2S6.
Mr. Fong and Ms. Rechia are promoters of PortalToChina.com, Inc.
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PLAN OF DISTRIBUTION
We offer the right to subscribe for up to 2,500,000 shares at the offering
price of $0.10 per share. We are offering the shares directly on a best efforts,
625,000 share minimum basis. No compensation is to be paid to any person for the
offer and sale of the shares.
Our President, Paul Fong, plans to distribute prospectuses related to this
offering. We estimate up to 500 prospectuses will be distributed in such a
manner to acquaintances, friends and business associates. Mr. Fong will not
register as a broker/dealer under Section 15 of the Securities Exchange Act of
1934 (the "Exchange Act") in reliance upon Rule 3a4-1. Rule 3a4-1 sets forth
those conditions under which a person associated with an issuer may participate
in the offering of the issuer's securities and not be deemed to be a
broker-dealer. These conditions are as follows:
1. The person is not subject to a statutory disqualification, as that term
is defined in Section 3(a)(39) of the Exchange Act, at the time of his
participation;
2. The person is not compensated in connection with his participation by the
payment of commissions or other remuneration based either directly or indirectly
on transactions in securities;
3. The person is not, at the time of their participation, an associated
person of a broker-dealer; and
4. The person meets the conditions of paragraph (a)(4)(ii) of Rule 3a4-1 of
the Exchange Act in that she (a) primarily performs, or is intended to primarily
perform at the end of the offering, substantial duties for or on behalf of the
Issuer otherwise than in connection with transactions in securities; and (b) is
not a broker-dealer, or an associated person of a broker-dealer, within the
preceding twelve (12) months; and (c) does not participate in selling and
offering of securities for any Issuer more than once every twelve (12) months
other than in reliance on paragraphs (a)(4)(i) or (a) (4) (iii) of the Exchange
Act.
Mr. Fong is not subject to disqualification, is not being compensated, and
is not associated with a broker-dealer. Mr. Fong is and will continue to be one
of our officers and directors at the end of the offering and, during the last
twelve months, he has not been and is not currently a broker-dealer nor
associated with a broker-dealer. Mr. Fong has not, during the last twelve
months, and will not, during the next twelve months, offer or sell securities
for another corporation other than in reliance on paragraphs (a)(4)(i) or (a)
(4) (iii) of the Exchange Act.
We will be conducting our offering of common stock exclusively to residents of
Canada and Europe.
There is currently no trading market for our common stock, and there can be
no assurance that any trading market will develop in the future. Investors in
this offering must make their own decisions regarding whether to hold or sell
their shares. We will not exercise any influence over your decisions.
TERMS OF SALE OF THE SHARES
We will be selling our shares on a best efforts 625,000 share minimum
2,500,000 share maximum basis. Until we have sold at least 625,000 shares, we
will not accept subscriptions for any shares. All proceeds of this offering
will be deposited in a non-interest bearing escrow account operated by our
escrow agent, Transfer Online, Inc.
If we are unable to sell at least 625,000 shares within 180 days, we will
return all funds, without interest or deductions to subscribers within 30 days.
We have the right to completely or partially accept or reject any subscription
for shares offered in this offering, for any reason or for no reason. The
offering will remain open until all shares offered in this offering are sold or
nine months after the date of this prospectus, except that we will have only 180
days to sell at least 625,000 shares. We may decide to cease selling efforts at
any time prior to such date. If this offering is oversubscribed, we may
consider whether or not you expect to hold the shares purchased in this offering
long term in determining whether and to what extent we will accept your
subscription.
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METHOD OF SUBSCRIBING
Persons may subscribe by filling in and signing the subscription agreement,
and delivering it, prior to the expiration date, to us. The subscription price
of $0.10 per share must be paid in cash or by check, bank draft or postal
express money order payable in United States dollars to our order.
EXPIRATION DATE
The offering will expire on the date that all offered shares are sold or
nine months after the date of this prospectus. We shall terminate the offering
180 days from the date of this prospectus if we are unable to sell 625,000 of
the offered shares during that period.
KEY TERMS OF ESCROW AGREEMENT
We will deposit all proceeds of this offering into a non-interest bearing
escrow account operated by our escrow agent, Transfer Online, Inc., in Portland,
Oregon. If we are unable to sell at least 625,000 shares within 180 days, we
will return all funds, without interest or deductions to subscribers within 30
days. The offering will remain open until all shares offered are sold or nine
months after the date of this prospectus, except that we will have only 180 days
to sell at least the first 625,000 shares. We may decide to cease selling
efforts prior to such date.
Under the terms of our escrow agreement with Transfer Online, Inc.,
proceeds from the sale of shares will be deposited into a non-interest bearing
account until the minimum offering amount is sold. If the proceeds are
insufficient to meet the 625,000 share minimum requirement, proceeds will be
returned directly to investors by the escrow agent, without interest and without
any deduction for expenses including escrow agent fees.
The escrowed proceeds will not be subject to claims by our creditors,
affiliates, associates, or underwriters until the proceeds have been released to
us under the terms of the escrow agreement.
The regulatory administrator of any jurisdiction in which the offering is
registered has the right to inspect and make copies of the records of the escrow
agent relating to the escrowed funds in the manner described in the escrow
agreement.
DESCRIPTION OF THE SECURITIES
We are currently authorized to issue 100,000,000 shares of $0.0001 par
value common stock. All shares are equal to each other with respect to
liquidation and dividend rights. Holders of voting shares are entitled to one
vote for each share that they own at any shareholders' meeting. Holders of our
shares of Common stock do not have cumulative voting rights
Holders of shares of common stock are entitled to receive such dividends as
may be declared by the Board of Directors out of funds legally available. Upon
liquidation, holders of shares of common stock are entitled to participate
pro-rata in a distribution of assets available for such distribution to
shareholders. There are no conversion, pre-emptive or other subscription rights
or privileges with respect to any shares.
Our Articles of Incorporation do not provide for the issuance of any other
securities.
We have not paid dividends on our common stock since our inception.
Dividends on common stock are within the discretion of the Board of Directors
and are payable from profits or capital legally available for that purpose. It
is our current policy to retain any future earnings to finance the operations
and growth of our business. Accordingly, we do not anticipate paying any
dividends on common stock in the foreseeable future.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Article Twelfth of our Articles of Incorporation provides, among other
things, that no director or officer of the Corporation shall be personally
liable to the Corporation or any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or omission of any
such director or officer; provided, however, that the foregoing provision shall
not eliminate or limit the liability of a director or officer (i) for acts or
25
omissions which involve intentional misconduct, fraud or a knowing violation of
law, or (ii) the payment of dividends in violation of Section 78.300 of the
Nevada Revised Statutes.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that any claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
LEGAL MATTERS
The validity of the shares of Common stock offered by us will be passed
upon by the law firm of Mound, Cotton, Wollan & Greengrass, of New York, New
York.
EXPERTS
Our balance sheet as of May 31, 2004, and the related statements of
operations and deficit accumulated during the development stage, cash flows and
stockholders' equity for the period May 31, 2003 to May 31, 2004, have been
included herein in reliance on the report of Moore Stephens Ellis Foster Ltd.,
Chartered Accountants, given on the authority of that firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
We are not required to deliver an annual report to our security holders and
we do not intend to do so. We are required to file annual, quarterly and current
reports, proxy statements and other information with the Securities and Exchange
Commission. Our Securities and Exchange Commission filings are available to the
public over the Internet at the SEC's website at http://www.sec.gov.
You may also read and copy any materials we file with the Securities and
Exchange Commission at the SEC's public reference room at 450 Fifth Street N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms.
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2, under the Securities Act with respect to the securities
offered under this prospectus. This prospectus, which forms a part of that
registration statement, does not contain all information included in the
registration statement. Certain information is omitted and you should refer to
the registration statement and its exhibits. With respect to references made in
this prospectus to any contract or other document of PortalToChina.com, Inc.,
the references are not necessarily complete and you should refer to the exhibits
attached to the registration statement for copies of the actual contract or
document. You may review a copy of the registration statement at the SEC's
public reference room. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our filings and the
registration statement can also be reviewed by accessing the SEC's website at
http://www.sec.gov.
NO FINDER, DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY PORTALTOCHINA.COM, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
26
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANYTIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
27
INDEX TO FINANCIAL STATEMENTS
PORTALTOCHINA.COM, INC.
Pages
-----
FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD ENDED
AUGUST 31, 2004 (UNAUDITED)
Balance Sheets for period ended August 31, 2004 F-2
Statements of Stockholders' Deficiency for period ended August 31, 2004 F-3
Statements of Operations and Deficit for period ended August 31, 2004 F-4
Statements of Cash Flows for period ended August 31, 2004 F-5
Notes to Financial Statements for period ended August 31, 2004 F-6 thru F-10
FINANCIAL STATEMENTS AS OF MAY 31, 2004
Report of Independent Auditors F-11
Balance Sheets for period ended May 31, 2004 F-12
Statements of Stockholders' Deficiency for period ended May 31, 2004 F-13
Statements of Operations and Deficit for period ended May 31, 2004 F-14
Statements of Cash Flows for period ended May 31, 2004 F-15
Notes to Financial Statements for period ended May 31, 2004 F-16 thru F-20
F-1
[Enlarge/Download Table]
PORTALTOCHINA.COM, INC.
(A development stage company)
Balance Sheets
August 31, 2004
(Unaudited - Prepared by Management)
(EXPRESSED IN U.S. DOLLARS)
August 31 May 31
2004 2004
---------------------------------------------------------------------------------------
ASSETS
CURRENT
Cash and cash equivalents $ 47 $ 65
---------------------------------------------------------------------------------------
TOTAL ASSETS $ 47 $ 65
=======================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 2,226 $ 2,180
Promissory note - related party (Note 3) 6,000 6,000
---------------------------------------------------------------------------------------
TOTAL LIABILITIES 8,226 8,180
---------------------------------------------------------------------------------------
STOCKHOLDERS' DEFICIENCY
SHARE CAPITAL
Authorized:
100,000,000 common shares with a par value of $0.0001 per share
Issued and outstanding: 5,500,000 common shares 550 550
(DEFICIT) ACCUMULATED DURING THE DEVELOPMENT STAGE (8,729) (8,665)
---------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY DEFICIENCY (8,179) (8,115)
---------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 47 $ 65
=======================================================================================
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-2
[Enlarge/Download Table]
PORTALTOCHINA.COM, INC.
(A development stage company)
Statements of Stockholders' Deficiency
For the period from March 18, 2003 (inception) to August 31, 2004
(EXPRESSED IN U.S. DOLLARS)
Deficit
accumulated
during Total
Common stock development stockholders'
Shares Amount stage deficiency
----------------------------------------------------------------------------------------------------------------------------
Issuance of common stock for cash
March 18, 2003, $0.0001 per share 5,500,000 $ 550 $ - $ 550
Comprehensive income (loss)
Loss for the period - - (1,743) (1,743)
---------------------------------------------------------------------------------------------------------------------------
BALANCE, May 31, 2003 5,500,000 550 (1,743) (1,193)
---------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss)
Loss for the period - - (6,922) (6,922)
---------------------------------------------------------------------------------------------------------------------------
BALANCE, May 31, 2004 5,500,000 550 (8,665) (8,115)
---------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss)
Loss for the period - - (64) (64)
---------------------------------------------------------------------------------------------------------------------------
BALANCE, August 31, 2004 5,500,000 $ 550 $ (8,729) $ (8,729)
===========================================================================================================================
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
[Enlarge/Download Table]
PORTALTOCHINA.COM, INC.
(A development stage company)
Statements of Operations
(Unaudited - Prepared by Management)
(EXPRESSED IN U.S. DOLLARS)
Cumulative Amounts Since
March 18, 2003 (inception) Three Months Ended Three Months Ended
to August 31, 2004 August 31, 2004 August 31, 2003
-------------------------------------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES
Accounting $ 1,650 $ - $ 1,650
Incorporation 1,728 - -
Interest and Bank Charges 351 64 89
Legal 5,000 - -
-------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 8,729 64 1,739
-------------------------------------------------------------------------------------------------------------
(LOSS) FOR THE PERIOD $ (8,729) $ (64) $ (1,739)
=============================================================================================================
(LOSS) PER SHARE
- basic and diluted $ (0.00) $ (0.00)
=============================================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
- basic and diluted $ 5,500,000 $ 5,500,000
=============================================================================================================
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-4
[Enlarge/Download Table]
PORTALTOCHINA.COM, INC.
(A development stage company)
Statements of Cash Flows
(Unaudited - Prepared by Management)
(EXPRESSED IN U.S. DOLLARS)
Cumulative Amounts
Since March 18,
2003 (inception) to Three Months Ended Three Months Ended
August 31, 2004 August 31, 2004 August 31, 2003
----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
(Loss) for the period $ (8,729) $ (64) $ (1,739)
Changes in assets and liabilities:
- increase (decrease) in accounts payable and accrued liabilities 2,226 46 (1,362)
----------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (6,503) (18) (3,101)
----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Promissory note 6,000 - -
Proceeds from issuance of common stock 550 - -
----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 6,550 - -
----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 47 (18) (3,101)
CASH AND CASH EQUIVALENTS, beginning of period - 65 6,215
----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 47 $ 47 $ 3,114
==================================================================================================================================
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
1. INCORPORATION AND CONTINUANCE OF OPERATIONS
The Company was formed on March 18, 2003 under the laws of the State of Nevada.
The Company is in the business of operating an internet portal featuring Chinese
business. The Company is considered a development stage company as defined in
SFAS No. 7. The Company has an office in Vancouver, Canada.
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and the satisfaction of liabilities and commitments in
the normal course of business. The Company has incurred operating losses and
requires additional funds to maintain its operations. Management's plans in
this regard are to raise equity financing as required.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. These financial statements do not include any adjustments
that might result from this uncertainty.
The Company has not generated any operating revenues to date.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Cash and Cash Equivalents
Cash equivalents comprise certain highly liquid instruments with a maturity of
three months or less when purchased. As at August 31, 2004, there were no cash
equivalents.
(b) Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles of United States of America 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
and assumptions.
(c) Advertising Expenses
The Company expenses advertising costs as incurred. There was no advertising
expenses incurred by the Company for the period ended August 31, 2004.
(d) Loss Per Share
Loss per share is computed using the weighted average number of shares
outstanding during the period. The Company has adopted SFAS No. 128, "Earnings
Per Share". Diluted loss per share is equivalent to basic loss per share.
F-6
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(e) Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit quality
financial institutions. As of August 31, 2004, the Company had no balance in a
bank beyond insured limits.
(f) Foreign Currency Transactions
The Company is located and operating outside of the United States of America.
It maintains its accounting records in U.S. Dollars, as follows:
At the transaction date, each asset, liability, revenue and expense is
translated into U.S. dollars by the use of the exchange rate in effect at that
date. At the period end, monetary assets and liabilities are remeasured by
using the exchange rate in effect at that date. The resulting foreign exchange
gains and losses are included in operations.
(g) Fair Value of Financial Instruments
The respective carrying value of certain on-balance-sheet financial instruments
approximated their fair value. These financial instruments include cash and
cash equivalents, accounts payable and accrued liabilities and promissory note
and accrued interest. Fair values were assumed to approximate carrying values
for these financial instruments, except where noted. Management is of the
opinion that the Company is not exposed to significant interest or credit risks
arising from these financial instruments. The Company is operating outside the
United States of America and has significant exposure to foreign currency risk
due to the fluctuation of currency in which the Company operates and U.S.
dollar.
(h) Income Taxes
The Company has adopted Statement of Financial Accounting Standards No. 109
(SFAS 109), Accounting for Income Taxes, which requires the Company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns using the liability method. Under this method, deferred tax liabilities
and assets are determined based on the temporary differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the differences are expected to reverse.
F-7
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Long-Lived Assets
Long-lived assets and certain identifiable intangibles to be held and used by
the Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company continuously evaluates the recoverability of its
long-lived assets based on estimated future cash flows and the estimated
liquidation value of such long-lived assets, and provides for impairment if such
undiscounted cash flows are insufficient to recover the carrying amount of the
long-lived assets. If impairment exists, an adjustment is made to write the
asset down to its fair value and a loss is recorded as the difference between
the carrying value and fair value. Fair values are determined based on quoted
market value, discounted cash flows, or internal and external appraisals, as
applicable. Assets to be disposed of, when applicable, are carried at the lower
of carrying value or estimated net realizable value. As at August 31, 2004, the
Company has no long-lived assets.
(j) Stock-Based Compensation
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123 (SFAS 123), Accounting for Stock-based
Compensation. SFAS 123 encourages, but does not require, companies to adopt a
fair value based method for determining expense related to stock-based
compensation. The Company accounts for stock-based compensation issued to
employees and directors using the intrinsic value method as prescribed under
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees and related interpretations.
The Company did not grant any stock options during the period.
(k) Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130 (SFAS
130), Reporting Comprehensive Income, which establishes standards for reporting
and display of comprehensive income, its components and accumulated balances.
The Company is disclosing this information on its Statement of Stockholders'
Equity (Deficiency). Comprehensive income comprises equity except those
resulting from investments by owners and distributions to owners. The Company
has no elements of "other comprehensive income" for the period ended August 31,
2004.
(l) New Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has issued the following
pronouncements, none of which are expected to have a significant affect on the
financial statements:
F-8
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(l) New Accounting Pronouncements (continued)
In April 2003, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standard No. 149 (SFAS 149), Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. This Statement 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 SFAS
No. 133, Accounting for Derivative Instruments and hedging Activities. This
Statement is effective for contracts entered into or modified after June 30,
2003. The adoption of SFAS No. 149 does not have an impact on the Company's
financial statements.
In May 2003, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standard No. 150 (SFAS 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 financial instrument that is within
the 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 at the beginning of the first interim period beginning after June
15, 2003. The adoption of SFAS 150 does not have an impact on the Company's
financial statements.
In December 2003, the FASB issued SFAS No. 132(R), a revision to SFAS No. 132,
"Employers' Disclosure about Pensions and Other Post-Retirement Benefits." SFAS
No. 132(R) requires additional disclosures about the assets, obligations, cash
flows and net periodic benefit cost of defined benefit pension plans and other
defined benefit post-retirement plans. SFAS No. 132(R) is effective for
financial statements with fiscal years ending after December 15, 2003, with the
exception of disclosure requirements related to foreign plans and estimated
future benefit payments which are effective for fiscal years ending after June
15, 2004. The adoption of SFAS 132(R) does not have an impact on the Company's
financial position or results of operations.
In December 2003, the American Institute of Certified Public Accountants and
Securities and Exchange Commission ("SEC") expressed the opinion that rate-lock
commitments represent written put options, and therefore be valued as a
liability. The SEC expressed that they expect registrants to disclose the
effect on the financial statement of recognizing the rate-lock commitments as
written put options, for quarters commencing after March 15, 2004.
Additionally, the SEC recently issued Staff Accounting Bulletin (SAB) No 105.
SAB No. 105 clarifies the SEC's position that the inclusion of cash flows from
servicing or ancillary income in the determination of the fair value of interest
rate lock commitments is not appropriate. SAB No 105 is effective for loan
commitments entered into on or after April 1, 2004. The adoption of SAB No. 105
does not have an impact on the Company's financial statements.
3. PROMISSORY NOTE AND RELATED PARTY TRANSACTIONS
A promissory note is payable to a director of the Company. It is unsecured,
bearing interest at 3% per annum, and is due on May 31, 2005. At August 31,
2004, accrued interest payable on the promissory note was $226 (2004 - $180).
F-9
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
PORTALTOCHINA.COM, INC.
(A development stage company)
We have audited the balance sheets of PORTALTOCHINA.COM, INC. (A development
stage company) ("the Company") as at May 31, 2004 and 2003, the related
statements of stockholders' deficiency, operations and cash flows from March
18, 2003 (inception) to May 31, 2004 and the statements of operations and cash
flows for the years ended May 31, 2004 and for the period from March 18, 2003
(inception) to May 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 standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform an audit to obtain reasonable assurance 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 ours audit provide a
reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at May 31, 2004 and 2003 and
the results of its operations and its cash flows for the years ended May 31,
2004, for the period ended March 18, 2003 (inception) to May 31, 2003 and for
the cumulative period from March 18, 2003 (inception) to May 31, 2004 in
conformity with generally accepted accounting principles in the United States of
America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered losses from operations that raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Vancouver, Canada "MOORE STEPHENS ELLIS FOSTER LTD."
October 1, 2004 Chartered Accountants
F-10
[Enlarge/Download Table]
PORTALTOCHINA.COM, INC.
(A development stage company)
Balance Sheets
May 31, 2004
(EXPRESSED IN U.S. DOLLARS)
May 31, 2004 May 31, 2003
-----------------------------------------------------------------------------------------------
ASSETS
CURRENT
Cash and cash equivalents $ 65 $ 6,215
-----------------------------------------------------------------------------------------------
TOTAL ASSETS $ 65 $ 6,215
===============================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 2,180 $ 1,408
Promissory note (Note 3) 6,000 6,000
-----------------------------------------------------------------------------------------------
TOTAL LIABILITIES 8,180 7,408
-----------------------------------------------------------------------------------------------
STOCKHOLDERS' DEFICIENCY
SHARE CAPITAL
Authorized:
100,000,000 common shares with a par value of $0.0001 per share
Issued and outstanding: 5,500,000 common shares 550 550
(DEFICIT) ACCUMULATED DURING THE DEVELOPMENT STAGE (8,665) (1,743)
-----------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY DEFICIENCY (8,115) (1,193)
-----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 65 $ 6,215
===============================================================================================
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-11
[Enlarge/Download Table]
PORTALTOCHINA.COM, INC.
(A development stage company)
Statements of Stockholders' Deficiency
For the period from March 18, 2003 (inception) to May 31, 2004
(EXPRESSED IN U.S. DOLLARS)
Deficit
accumulated
during Total
Common stock development stockholders'
Shares Amount stage deficiency
---------------------------------------------------------------------------------------------------------------------------
Issuance of common stock for cash
March 18, 2003, $0.0001 per share 5,500,000 $ 550 $ - $ 550
Comprehensive income (loss)
Loss for the period - - (1,743) (1,743)
---------------------------------------------------------------------------------------------------------------------------
BALANCE, May 31, 2003 5,500,000 550 (1,743) (1,193)
---------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss)
Loss for the period - - (6,922) (6,922)
---------------------------------------------------------------------------------------------------------------------------
BALANCE, May 31, 2004 5,500,000 $ 550 $ (8,665) $ (8,115)
===========================================================================================================================
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-12
[Enlarge/Download Table]
PORTALTOCHINA.COM, INC.
(A development stage company)
Statements of Operations
(EXPRESSED IN U.S. DOLLARS)
Cumulative
March 18, 2003 March 18, 2003
(inception) to Year Ended (inception) to
May 31, 2004 May 31, 2004 May 31, 2003
------------------------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES
Accounting $ 1,650 $ 1,650 $ -
Incorporation 1,728 - 1,728
Interest and bank charges 287 272 15
Legal 5,000 5,000 -
------------------------------------------------------------------------------------------------
TOTAL EXPENSES 8,665 6,922 1,743
(LOSS) FOR THE PERIOD $ (8,665) (6,922) $ (1,743)
================================================================================================
(LOSS) PER SHARE
- basic and diluted $ (0.00) $ (0.00)
================================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
- basic and diluted 5,500,000 5,500,000
================================================================================================
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-13
[Enlarge/Download Table]
PORTALTOCHINA.COM, INC.
(A development stage company)
Statements of Cash Flows
(EXPRESSED IN U.S. DOLLARS)
Cumulative
March 18, 2003 March 18, 2003
to May 31 Year Ended (inception) to
2004 May 31, 2004 May 31, 2003
------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
(Loss) for the period $ (8,665) $ (6,922) $ (1,743)
Changes in assets and liabilities:
- increase in accounts payable and accrued liabilities 2,180 772 1,408
-----------------------------------------------------------------------------------------------------------
Net cash used in operating activities (6,485) (6,150) (335)
CASH FLOWS FROM FINANCING ACTIVITIES
Promissory note 6,000 - 6,000
Proceeds from issuance of common stock 550 - 550
------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 6,550 - 6,550
------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 65 (6,150) 6,215
CASH AND CASH EQUIVALENTS, beginning of period - 6,215 -
------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 65 $ 65 $ 6,215
============================================================================================================
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-14
1. INCORPORATION AND CONTINUANCE OF OPERATIONS
The Company was formed on March 18, 2003 under the laws of the State of Nevada.
The Company is in the business of operating an internet portal featuring Chinese
business. The Company is considered a development stage company as defined in
SFAS No. 7. The Company has an office in Vancouver, Canada.
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and the satisfaction of liabilities and commitments in
the normal course of business. The Company has incurred operating losses and
requires additional funds to maintain its operations. Management's plans in
this regard are to raise equity financing as required.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. These financial statements do not include any adjustments
that might result from this uncertainty.
The Company has not generated any operating revenues to date.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Cash and Cash Equivalents
Cash equivalents comprise certain highly liquid instruments with a maturity of
three months or less when purchased. As at May 31, 2004, there were no cash
equivalents.
(b) Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles of United States of America 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
and assumptions.
(c) Advertising Expenses
The Company expenses advertising costs as incurred. There was no advertising
expenses incurred by the Company for the year ended May 31, 2004 and the period
from March 18, 2003 (inception) to May 31, 2003.
F-15
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Loss Per Share
Loss per share is computed using the weighted average number of shares
outstanding during the period. The Company has adopted SFAS No. 128, "Earnings
Per Share". Diluted loss per share is equivalent to basic loss per share.
(e) Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit quality
financial institutions. As of May 31, 2004, the Company had no balance in a
bank beyond insured limits.
(f) Foreign Currency Transactions
The Company is located and operating outside of the United States of America.
It maintains its accounting records in U.S. Dollars, as follows:
At the transaction date, each asset, liability, revenue and expense is
translated into U.S. dollars by the use of the exchange rate in effect at that
date. At the period end, monetary assets and liabilities are remeasured by
using the exchange rate in effect at that date. The resulting foreign exchange
gains and losses are included in operations.
(g) Fair Value of Financial Instruments
The respective carrying value of certain on-balance-sheet financial instruments
approximated their fair value. These financial instruments include cash and
cash equivalents, accounts payable and accrued liabilities and promissory note
and accrued interest. Fair values were assumed to approximate carrying values
for these financial instruments, except where noted. Management is of the
opinion that the Company is not exposed to significant interest or credit risks
arising from these financial instruments. The Company is operating outside the
United States of America and has significant exposure to foreign currency risk
due to the fluctuation of currency in which the Company operates and U.S.
dollar.
(h) Income Taxes
The Company has adopted Statement of Financial Accounting Standards No. 109
(SFAS 109), Accounting for Income Taxes, which requires the Company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns using the liability method. Under this method, deferred tax liabilities
and assets are determined based on the temporary differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the differences are expected to reverse.
F-16
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Long-Lived Assets
Long-lived assets and certain identifiable intangibles to be held and used by
the Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company continuously evaluates the recoverability of its
long-lived assets based on estimated future cash flows and the estimated
liquidation value of such long-lived assets, and provides for impairment if such
undiscounted cash flows are insufficient to recover the carrying amount of the
long-lived assets. If impairment exists, an adjustment is made to write the
asset down to its fair value and a loss is recorded as the difference between
the carrying value and fair value. Fair values are determined based on quoted
market value, discounted cash flows, or internal and external appraisals, as
applicable. Assets to be disposed of, when applicable, are carried at the lower
of carrying value or estimated net realizable value. As at August 31, 2004, the
Company has no long-lived assets.
(j) Stock-Based Compensation
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123 (SFAS 123), Accounting for Stock-based
Compensation. SFAS 123 encourages, but does not require, companies to adopt a
fair value based method for determining expense related to stock-based
compensation. The Company accounts for stock-based compensation issued to
employees and directors using the intrinsic value method as prescribed under
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees and related interpretations.
The Company did not grant any stock options during the periods ended May 31,
2004 and 2003.
(k) Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130 (SFAS
130), Reporting Comprehensive Income, which establishes standards for reporting
and display of comprehensive income, its components and accumulated balances.
The Company is disclosing this information on its Statement of Stockholders'
Equity (Deficiency). Comprehensive income comprises equity except those
resulting from investments by owners and distributions to owners. The Company
has no elements of "other comprehensive income" for the year ended May 31, 2004
and the period from March 18, 2003 (inception) to May 31, 2003.
(l) New Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has issued the following
pronouncements, none of which are expected to have a significant affect on the
financial statements:
In April 2003, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standard No. 149 (SFAS 149), Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. This Statement 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 SFAS
No. 133, Accounting for Derivative Instruments and hedging Activities. This
Statement is effective for contracts entered into or modified after June 30,
2003. The adoption of SFAS No. 149 does not have an impact on the Company's
financial statements.
F-17
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(l) New Accounting Pronouncements (continued)
In May 2003, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standard No. 150 (SFAS 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 financial instrument that is within
the 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 at the beginning of the first interim period beginning after June
15, 2003. The adoption of SFAS 150 does not have an impact on the Company's
financial statements.
In December 2003, the FASB issued SFAS No. 132(R), a revision to SFAS No. 132,
"Employers' Disclosure about Pensions and Other Post-Retirement Benefits." SFAS
No. 132(R) requires additional disclosures about the assets, obligations, cash
flows and net periodic benefit cost of defined benefit pension plans and other
defined benefit post-retirement plans. SFAS No. 132(R) is effective for
financial statements with fiscal years ending after December 15, 2003, with the
exception of disclosure requirements related to foreign plans and estimated
future benefit payments which are effective for fiscal years ending after June
15, 2004. The adoption of SFAS 132(R) does not have an impact on the Company's
financial position or results of operations.
In December 2003, the American Institute of Certified Public Accountants and
Securities and Exchange Commission ("SEC") expressed the opinion that rate-lock
commitments represent written put options, and therefore be valued as a
liability. The SEC expressed that they expect registrants to disclose the
effect on the financial statement of recognizing the rate-lock commitments as
written put options, for quarters commencing after March 15, 2004.
Additionally, the SEC recently issued Staff Accounting Bulletin (SAB) No 105.
SAB No. 105 clarifies the SEC's position that the inclusion of cash flows from
servicing or ancillary income in the determination of the fair value of interest
rate lock commitments is not appropriate. SAB No 105 is effective for loan
commitments entered into on or after April 1, 2004. The adoption of SAB No. 105
does not have an impact on the Company's consolidated financial statements.
3. PROMISSORY NOTE AND RELATED PARTY TRANSACTION
A promissory note is payable to a director of the Company. It is unsecured,
bearing interest at 3% per annum, and is due on May 31, 2005. At May 31, 2004,
there was $180 accrued interest payable on the promissory note.
4. INCOME TAXES
As at May 31, 2004, the Company has estimated net operating losses carryforward
for tax purposes of $7,000. This amount may be applied against future federal
taxable income. The Company evaluates its valuation allowance requirements on an
annual basis based on projected future operations. When circumstances change
and this causes a change in management's judgment about the realizability of
deferred tax assets, the impact of the change on the valuation allowance is
generally reflected in current income.
The tax effects of temporary differences that give rise to the Company's
deferred tax asset (liability) are as follows:
Tax loss carry forwards $ 2,450
Valuation allowance (2,450)
$ -
Future income tax benefits which may arise as a result of these losses have not
been recognized in these financial statements as their realization is uncertain.
F-18
2,500,000 SHARES
----------------
PORTALTOCHINA.COM, INC.
COMMON STOCK
----------
PROSPECTUS
----------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or a
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the Issuer
have not changed since the date hereof.
Until _______________, 2005, 90 days after the date of this prospectus, all
dealers that buy, sell or trade in our securities, whether or not participating
in this offering, may be required to deliver a prospectus. This requirement is
in addition to the dealers' obligation to deliver a prospectus when acting as an
underwriter with respect to its unsold allotment or subscription.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 78.7502 of the Nevada Business Corporation Act provides that each
corporation shall have the following powers:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he:
(a) Is not liable pursuant to NRS 78.138; or
(b) Acted in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent, does
not, of itself, create a presumption that the person is liable pursuant to NRS
78.138 or did not act in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation, or that, with
respect to any criminal action or proceeding, he had reasonable cause to believe
that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he:
(a) Is not liable pursuant to NRS 78.138; or
(b) Acted in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which such
a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections 1 and 2, or in defense of any claim, issue
or matter therein, the corporation shall indemnify him against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the defense.
Section 78.751 of the Nevada Revised Statutes ("NRS") states as follows:
1. Any discretionary indemnification pursuant to NRS 78.7502, unless ordered by
a court or advanced pursuant to subsection 2, may be made by the corporation
only as authorized in the specific case upon a determination that
II-1
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not parties
to the action, suit or proceeding so orders, by independent legal counsel in a
written opinion; or
(d) If a quorum consisting of directors who were not parties to the action, suit
or proceeding cannot be obtained, by independent legal counsel in a written
opinion.
2. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
3. The indemnification pursuant to NRS 78.7502 and advancement of expenses
authorized in or ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under the articles of incorporation
or any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, for either an action in his official capacity or an action in another
capacity while holding his office, except that indemnification, unless ordered
by a court pursuant to NRS 78.7502 or for the advancement of expenses made
pursuant to subsection 2, may not be made to or on behalf of any director or
officer if a final adjudication establishes that his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was material
to the cause of action.
(b) Continues for a person who has ceased to be a director, officer, employee or
agent and inures to the benefit of the heirs, executors and administrators of
such a person.
Our Articles of Incorporation limit liability of our Officers and Directors to
the full extent permitted by the Nevada Business Corporation Act.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses we will pay in
connection with the offering described in this registration statement:
Amount (1)
-----------
SEC Registration fee $ 20.23
Filing fees $ 3,500.00
Printing and shipping expenses $ 1,000.00
Accounting fees and expenses $ 3,000.00
Legal fees $ 10,000.00
Transfer and Miscellaneous expenses $ 2,479.77
-----------
Total (1) $20,000.00
(1) All expenses, except SEC registration fees, are estimated.
II-2
Item 26. Recent Sales of Unregistered Securities.
On March 10, 2003, 3,000,000 restricted common shares were issued to our
President, Chief Financial Officer and Director, Paul Fong, in exchange for a
cash payment on behalf of the Company of $300. The shares were issued without
registration under the Securities Act of 1933 in reliance on an exemption from
registration provided by Regulation S of the Securities Act. No general
solicitation was made in connection with the offer or sale of these securities.
On May 10, 2003, 2,500,000 restricted common shares were issued to our Vice
President, Secretary and Director, Caroline Rechia, in exchange for a cash
payment on behalf of the Company of $250. The shares were issued without
registration under the Securities Act of 1933 in reliance on an exemption from
registration provided by Regulation S of the Securities Act. No general
solicitation was made in connection with the offer or sale of these securities.
Item 27. Exhibits
Exhibit No. Document
3.1 Articles of Incorporation (1)
3.2 By-laws (1)
5.1 Legal opinion
10.1 Promissory Note (1)
10.2 Escrow Agreement
10.3 Portal Development Contract
23.1 Consent of Accountant
23.2 Consent of Counsel (contained in Exhibit 5.1)
99.1 Specimen Subscription Agreement
(1) Previously filed with our initial registration statement on Form SB-2,
filed with the SEC on December 31, 2003
Item 28. Undertakings.
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred to that section.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to its Articles of Incorporation or provisions of the Nevada
Business Corporations Act, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question, whether
or not such indemnification by us is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
We hereby undertake to:
(1) File, during any period in which we offer or sell securities, a
post-effective amendment to this registration statement to:
(a) Include any prospectus required by section 10(a)(3) of the Securities
Act;
II-3
(b) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(c) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act treat each
post-effective amendment as a new registration statement of the securities
offered and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 Registration Statement and authorized
this registration to be signed on its behalf by the undersigned, in the City of
Vancouver, Province of British Columbia, Canada, on October 15, 2004 .
PORTALTOCHINA.COM, INC.
/s/ Paul Fong
By: Paul Fong, President and
Chief Financial Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
Date: October 15, 2004 /s/ Paul Fong
By: Paul Fong, President and
Chief Financial Officer, Director
Date: October 15, 2004 /s/ Caroline Rechia
By: Caroline Rechia, Vice-President,
Secretary, Director
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Dates Referenced Herein and Documents Incorporated by Reference
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