10-Q 1 chinaventures10q.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 2001 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number: 000-30802 --------- CHINA VENTURES LIMITED ---------------------------------------------------- (Exact name of registrant as specified in its charter) CAYMAN ISLANDS N/A (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) BRICKELL BAYVIEW CENTER 80 SW 8TH STREET, MIAMI, FLORIDA 33130 -------------------------------------- (Address of Principal Executive Offices) (305) 810-2898 -------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X ] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Ordinary Shares, $0.001 par value; outstanding on May 14, 2001: 247,500 TABLE OF CONTENTS

2 Item 1. Financial Statements. CHINA VENTURES LIMITED (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS

See accompanying notes to financial statements. 3 CHINA VENTURES LIMITED (A DEVELOPMENT STAGE COMPANY) STATEMENT OF OPERATIONS (UNAUDITED)

See accompanying notes to financial statements. 4 CHINA VENTURES LIMITED (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY (UNAUDITED)

5 CHINA VENTURES LIMITED (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS (UNAUDITED)

See accompanying notes to financial statements. 6 CHINA VENTURES LIMITED (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION China Ventures Limited (the Company) was incorporated in the Cayman Islands on December 10, 1999 for the purpose of facilitating a Chinese private company to become a reporting public company whose securities are qualified for trading in the United States secondary market. The Company has the intention of attempting to locate and negotiate with a target business entity, initially from the People's Republic of China (PRC), to effect a merger or some other business combination, in exchange for the opportunity to acquire ownership interest in a publicly registered company without incurring the cost and time required to conduct an initial public offering. If this initial attempt fails, the Company is not expected to restrict its search to any specific business, industry or geographical location. As of March 31, 2001 the Company is in the development stage and has not started operations - accordingly these financial statements are prepared in accordance with SFAS 7, "Accounting and Reporting by Development Stage Enterprises" as issued by the Financial Accounting Standards Board. ACCOUNTING METHOD The Company presents its financial statements under the accrual basis of accounting, under which method revenues are recognized when earned rather than when received, and expenses are recognized when incurred rather than when paid. EARNINGS PER SHARE Primary and fully diluted loss per share is computed based on weighted average of common shares outstanding of 249,604 at March 31, 2001. INCOME TAXES The Company is incorporated in the Cayman Islands and is, therefore, not subject to income taxes. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 7 CHINA VENTURES LIMITED (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NEW ACCOUNTING PRONOUNCEMENT SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES requires companies to recognize all derivatives contracts as either assets or liabilities in the balance sheet and to measure them at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company has not entered into derivatives contracts either to hedge existing risks or for speculative purposes. Accordingly, the Company does not expect adoption of the new standard to have a material effect on its financial statements. NOTE B - GOING CONCERN As shown in the accompanying financial statements, the Company is in the development stage, has yet to generate operating revenues and will require a significant amount of capital to commence its planned principal operations. As reflected in the accompanying financial statements, the Company has incurred accumulated losses since inception of $39,294 and has raised an insignificant amount of capital. As such, there is no assurance that the Company will be successful in its efforts to raise the necessary capital to commence its planned principal operations. The Company has indicated that its principal operation is to engage in a merger or acquisition with an unidentified company or companies and may issue "penny stock" securities as defined in the Securities and Exchange Act of 1934. The Company will require a significant amount of capital to commence its planned principal operations. Accordingly, the Company's ability to continue as a going concern is dependent upon its ability to secure an adequate amount of capital to finance its planned principal operations. The Company's plans include a merger and a subsequent public offering of its common stock; however there is no assurance that they will be successful in their efforts to raise capital or to obtain a business combination. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. NOTE C - RELATED PARTY TRANSACTIONS A stockholder of the Company acted as legal counsel during 1999. Legal fees and incorporation costs for the year ended December 31, 1999 in the amount of $11,678 were payable to a law firm in which this stockholder is a partner. During the year ended December 31, 1999, the Company borrowed $8,000, due on demand, from an entity related through common ownership. This amount is uncollateralized and non-interest bearing. 8 NOTE D - RECENT SALES OF UNREGISTERED SECURITIES In December 1999 China Ventures issued and sold 2,500 ordinary shares to 25 individuals for aggregate consideration of $15,000. China Ventures did not sell these ordinary shares in reliance on any exception from the United States federal securities laws as all purchasers were residents of the Republic of China. On December 16, 1999, in connection with the formulation of China Ventures, Mr. Hong Yang received 123,750 ordinary shares, Mr. James Chow received 121,250 ordinary shares and Mr. Ricardo Bajandas received 5,050 ordinary shares. Each of Mr. Yang, Mr. Chow, and Mr. Bajandas paid par value as consideration for the shares issued in connection with the formulation of China Ventures. Mr. Yang and Chow are residents of China. Mr. Bajandas is a resident of the United States. Accordingly, no exception was required for the issuance of ordinary shares to Mr. Yang or Mr. Chow. Mr. Bajandas purchased his ordinary shares of China Ventures in reliance on Rule 4(2) promulgated under the Securities Act. In May 2000, in connection with the termination of Mr. Bajandas' engagement with China Ventures, Mr. Bajandas agreed to transfer his ordinary shares to China Ventures. NOTE E - TRANSACTIONS WITH STATE-OWNED ENTITIES A significant portion of the Company's transactions might be undertaken, directly or indirectly with State-owned enterprises in the PRC and on such commercial terms as determined between the relevant PRC State-owned enterprises and the Company. NOTE F - FOREIGN CURRENCY EXCHANGE A significant portion of the business of the Company's PRC Subsidiaries may be undertaken in Renmin (RMB), the national currency of the PRC, which is not freely convertible into the US$ or other foreign currencies. NOTE G - CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS If a merger, alliance or some other business combination is successful, the Company's operating assets and primary source of income and cash flow are expected to be its interests in its subsidiaries in the PRC. The value of the Company's interests in these subsidiaries may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for many years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC's political, economic and social conditions. There is also no guarantee that the PRC government's pursuit of economic reforms will be consistent or effective. NOTE H - UNAUDITED FINANCIAL STATEMENTS The unaudited financial statements presented as of March 31, 2001 and for three months ended March 31, 2001 and 2000 contain all adjustments necessary, in management's opinion, for a fair presentation of financial position and results of operations. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Registrant has not, as of the end of the thre month period ended March 31, 2001, commenced active business operations. As of March 31, 2001 the Registrant had no assets or liabilities, and the total Shareholders' Equity was $0. The Registrant has no reasonable basis for comparison with respect to its quarterly financial results in that the Company has not yet commenced its business operations. The recurring professional fees and other costs of complying with filings with the Securities and Exchange Commission, the Internal Revenue Service and others is being funded through contributions to capital by the Company's principal shareholder. 10 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. There is no litigation pending or threatened by or against China Ventures. ITEM 2. CHANGES IN SECURITIES. In December 1999, China Ventures issued and sold 2,500 ordinary shares to 25 individuals for aggregate consideration of $15,000. China Ventures did not sell these ordinary shares in reliance on any exemption from the United States federal securities laws as all purchasers were residents of the Republic of China. On December 16, 1999, in connection with the formation of China Ventures, Mr. Hong Yang received 123,750 ordinary shares, Mr. James Chow received 121,250 ordinary shares and Mr. Ricardo Bajandas received 5,050 ordinary shares. Each of Mr. Yang, Mr. Chow and Mr. Bajandas paid par value as consideration for the shares issued in connection with the formation of China Ventures. Mr. Yang and Mr. Chow are residents of China. Mr. Bajandas is a resident of the United States. Accordingly, no exemption was required for the issuance of ordinary shares to Mr. Yang or Mr. Chow. Mr. Bajandas purchased his ordinary shares of China Ventures in reliance on Rule 4(2) promulgated under the Securities Act. In May 2000, in connection with the termination of Mr. Bajandas' engagement with China Ventures, Mr. Bajandas agreed to transfer his ordinary shares to China Ventures. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable. ITEM 5. OTHER INFORMATION. Not Applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits On February 22, 2001 the Company filed a Form 8-K, which is incorporated herein by reference. The Report principally dealt with a change in the Company's Certified Public Accountants, from Lopez Levi & Associates, LLC to Puritz & Weintraub, LLP and states there were no disagreements with Lopez Levi & Associates, LLC. 11 SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized. CHINA VENTURES LIMITED Date: May 14, 2001 By: /s/ James N.L. Chow ---------------------------------------- James N.L. Chow Secretary & Principal Financial and Accounting Officer 12

CHINA VENTURES LTD 10-Q