SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K/A
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): April 6,
2009
China Shoe Holdings,
Inc.
|
(Exact
name of registrant as specified in its
charter)
|
Nevada
|
|
333-
139910
|
|
20-2234410
|
(State
or Other Jurisdiction of Incorporation)
|
|
(Commission
File Number)
|
|
(IRS
Employer Identification
Number)
|
488 Wai
Qingsong Road,
Waigang,
Jiading District, Shanghai
People's
Republic of China 201800
(Address
of principal executive offices) (Zip code)
011-86-21-59587756
(Registrant's
telephone number, including area code)
Copies
to:
Richard
A. Friedman, Esq.
Jonathan
R. Shechter, Esq.
Sichenzia
Ross Friedman Ference LLP
61
Broadway, 32
nd
Floor
New York,
New York 10006
Phone:
(212) 930-9700
Fax:
(212) 930-9725
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Item
1.01 Entry into a Material Definitive Agreement.
On March
31, 2009 (the “Closing Date”), China Shoe Holdings, Inc. (“
CHSH
” or the “Company”) entered
into a Share Exchange Agreement (the “Exchange Agreement”) by and among (1)
Extra Ease Limited (“Extra Ease”), (2) Eatware Intellectual Properties Limited
(“EWIP”), (3) China Shoe Holdings, Inc., a Nevada corporation (the “Company”),
and (4) the Shareholders of Extra Ease and EWIP (collectively “the
Shareholders”).
Pursuant
to the Exchange Agreement, the Company agreed to acquire (the “Acquisition”),
subject to the satisfaction of the conditions to closing as outlined in the
Agreement, all of the issued and outstanding shares of common stock of Extra
Ease and EWIP. As consideration, the Company shall issue a total of
1,871,313,946 shares of its common stock, of which (i) 121,313,946 shares shall
be issued to the shareholder of Extra Ease or its designee/designees (the “Extra
Ease Exchange Shares”) in exchange for 10,000 shares of Extra Ease, representing
100% of the issued and outstanding common stock of Extra Ease, and (ii)
1,750,000,000 shares shall be issued to the shareholders of EWIP or their
designee/designees (the “EWIP Exchange shares”) in exchange for 50,000 shares of
EWIP, representing 100% of the issued and outstanding common stock of
EWIP. Immediately following completion of the share exchange
transaction, the Company shall have a total of 1,990,759,517 shares of its
common stock issued and outstanding.
As a
result, the Company has acquired the business and operations of Extra Ease and
EWIP, and the Company’s principal business activities, moving forward, shall
continue to be conducted through these two companies and their subsidiaries, as
further described below.
Item
2.01 Completion of Acquisition or Disposition of Assets.
Corporate
History of China Shoe Holdings, Inc.
CHSH was incorporated in the State of
Nevada on January 24, 2005 as Indigo Technologies, Inc. On June 6, 2007,
the Company
changed its name to China Shoe Holdings,
Inc.
Prior to the transaction under the Exchange Agreement,
CHSH was engaged,
through its subsidiaries, in the
manufacturing of ladies fashion footwear for shoe retailers in Japan and China.
T
he Company also produce
d
various types of shoe soles for the
domestic market in the PRC.
The Company’s manufacturing plant was located
in Jiading Township, a suburb of Shanghai in the People's Republic of China.
However, the Company faced a worsening operating environment during the third
quarter of 2008 as the global financial crisis cut demand and a rising currency
eroded profits. As a result, in connection with the Exchange Agreement, the
Company sold off the existing business operations of CHSH by way of a Subsidiary
Stock Purchase Agreement dated March 31, 2009, thereby selling the business and
assets of its subsidiaries to a third party. Moving forward, the Company shall
engage in the business as described in the “Business” section
below.
Corporate
History of Eatware Intellectual Properties Limited
EWIP was
incorporated as a British Virgin Island corporation on December 15, 2006.
The Company’s management
had performed extensive research and development on pulp technology since the
1990s. After years of research, it’s the Company’s management has successfully
invented four main apparatus for producing a bio-based product that has all of
the favorable properties as described in the “Product” session. They
are: (1) an apparatus and a method of producing pulp-moulded products
(Compression Chamber Forming); (2) a method to reduce water content during cold
press; (3) A kind of Food Container Box Hasp Structure; (4) A mould cavity
device to reduce residual moisture of pulp-moulded products during
compression. The first patent application was filed on July 15, 2004
in UK following other countries including China, Korea, Malaysia, Singapore and
Taiwan. The first patent was issued in Taiwan on August 21, 2006
followed by China on September 27, 2006. As part of the corporate restructuring,
all the patents and trademarks held by the Company’s management and subsidiaries
were all transferred to EWIP.
Corporate
History of Extra Ease Limited
Extra
Ease was incorporated as a British Virgin Island corporation on January 2, 2008.
Extra Ease’s wholly-owned subsidiary, Eatware Global Corporation (“EGC”) was
founded in 2006 to market and sell bio-based food packaging products. Extra Ease
has a licensing agreement with EWIP which grants Extra Ease the right to utilize
EWIP patented technologies to develop related products and launch to market
(Heretoforth known as “Eatware products”). Up to date, Eatware products have
obtained numerous awards and recognitions, such as the compliance to FDA food
packaging standard 176.170 and 178.3800.
To expand
the market segment among different regions, the first distributorship agreement
was signed on November 18, 2006 with one of the UK's leading suppliers of
upscale packaging and tabletop products, Remmerco Ltd. A year later, EGC has
also established distributor and strategic partnership with Solo Cups in the
United States. Since 2008, EGC has been approached - directly or indirectly -
for launch of retail pack sales and customized designs’ solutions by
representatives of Wal-Mart, Mark & Spencer, Havi in connection with their
corporate goal to find a replacement to the traditional disposables they
currently use and which they know is having a negative impact on the
environment. EGC has been expanding rapidly its clientele base internationally
during the past few years - and continue to do so - to cope with the increasing
demand of the bio-based products.
Overview
of Extra Ease and EWIP
Moving forward, we will
conduct our operations
through our wholly owned
subsidiar
ies
,
EWIP
and
Extra Ease
and its subsidiaries
–
EGC
, Eatware A
sset Management Ltd.
, Eatware F
ar East Ltd.
,
Eatware International
Ltd.,
and Ron
gbao
(Nantong) Envir
onmental Co.
Ltd.
(collectively referred to as
“
EGC
”
)
.
Extra Ease, EGC and EWIP are
collectively referred to as
“
Eatware
”
or
the
“
Group
”
.
We
will
primarily
engage in the business of
licensing our technology
, intellectual properties
and
trademarks, marketing and trading of
environmentally safe food
packaging
products
and additives
,
as well as l
easing of machineries
to licensees
. Our objective is to establish
ourselves as a leading
brand
of
high quality
bio-based
food packaging
products.
Our
Corporate Structure
Our
Intellectual Properties
Prior to
Eatware products launching to the market, we have performed extensive research
on pulp technology. Throughout the process, EWIP has involved experts both from
the industry and the universities. Management believes that Eatware’s
technological application in this area is far advanced of its competitors. Our
research and development strategy is to create innovative, value-added products
and market opportunities and thus enhance Eatware’s market
position.
The
patented technology combined with the unique additive serve as a high barrier to
entry for the Company’s competitors.
Invention
|
An
Apparatus And A Method Of Producing Pulp-Moulded Products
(Compression
Chamber Forming)
|
A
Method To Reduce Water Content During Cold Press
|
A
Kind Of Food Container Box Hasp Structure
|
A
Mould Cavity Device To Reduce Residual Moisture Of Pulp-Moulded Products
During Compression
|
China
|
-
|
Patent
No.: ZL 200520040420.9
(Issued
on
27
Sept 06
)
|
App
No. 200520047096.3
(filed
on
1
Dec 05
)
(Process
time : 48 months)
|
App
No. 200610140169.2
(filed on
10
Oct 06)
(Process
time : 48 months)
|
Korea
|
-
|
Patent
No.: 10-0877008
(Issued
on
24
Dec 08
)
|
-
|
-
|
Malaysia
|
App
No. PI20056021
(filed
on 20 Dec 05)
(Process
time : 48 months)
|
App
No. PI20060276
(filed on
23
Jan 06)
(Process
time : 48 months)
|
-
|
-
|
Singapore
|
App
No. 200508402-5
(filed
on 27 Dec 05)
(Process
time : 48 months)
|
App
No. 200602007-7
(filed
on
27
Mar 06
)
(Process
time : 48 months)
|
-
|
-
|
Taiwan
|
-
|
Patent
No. : M296135
(Issued
on
21
Aug 06
)
|
|
-
|
UK
|
App
No. GB0415853.1
(filed
on 15 July 04)
|
-
|
-
|
-
|
EWIP has
been working extensively with copyrights and trademarks to protect against
infringement of its properties. The below table outlines Eatware’s
copyrights and trademarks:
|
TRADEMARK/COPYRIGHT
|
|
|
|
|
|
COUNTRY
|
Canada
|
File
no.: 1255299
(class
16 & 21)
Filed
on 26 Apr 05
|
-
|
-
|
|
File
no.:1255302
(class
1)
Filed
on 26 Apr 05
|
China
|
®
4601212 (class 16)
Reg.
date : 21 August 08
®
4601214 (class 21)
Reg.
date : 21 August 08
|
-
|
File
no.: ZC5014116SL
(class
35)
Filed
on 1 March 06
|
-
|
®
4601213 (class 1)
Reg.
date :
21
August 08
|
European
Union
|
®
005050976
(class
16,21,35)
Reg.
date : 20 July 07
|
-
|
-
|
-
|
-
|
Hong
Kong
|
®
300305225
(class
16 & 21)
Reg.
date : 21 Oct 04
|
-
|
®
300569160
(class
16 & 21 & 35)
EATWARE/Eatware/
eatware
Reg.
date : 21 Jan 06
|
®
300569142
(class
16 & 21 & 35)
Reg.
date : 21 Jan 06
|
®
300305216 (class 1)
Reg.
date 21 Oct 04
|
Japan
|
®
4968375 (class 16 & 21)
Reg.
date : 7 Jul 06
|
-
|
-
|
-
|
-
|
Malaysia
|
®
06000078 (class 16)
Reg.
date : 4 Jan 06
®
06000079 (class 21)
Reg.
date : 4 Jan 06
|
-
|
File
no: 6008434 (class 35)
Filed
on 19 May 06
|
®
06008435
(class 35)
Reg.
date : 21 Nov 05
|
-
|
Singapore
|
®
T06/00623D
(class 16)
®
T06/00624B (class 21)
Reg.
date: 9 Jan 06
|
-
|
®
T06/09579B (class 35)
Reg.
date: 19 May 06
|
-
|
-
|
Taiwan
|
®
01198302 (class 16)
Reg.
date: 1 Mar 06
®
01204663 (class 21)
Reg.
date: 16 Apr 06
|
-
|
®
01249531 (class 35)
Reg.
date: 1 Feb 07
|
®
01249530 (class 35)
Reg.
date: 1 Feb 07
|
®
01203450 (class 1)
Reg.
date: 16 Apr 06
|
UK
|
®
2395326 (class 16 & 21)
Reg.
date: 7 May 05
|
-
|
-
|
-
|
®2397473
(class 1)
Reg.
date: 7 May 05
|
US
|
®
3308510 (class 16)
Reg.
date : 9 Oct 07
|
®
3364588
Reg.
date : 8 Jan 08 (class 16, 21)
|
®3364587
Reg.
date : 8 Jan 08
(class
16, 21)
|
-
|
®3481399
Reg.
date : 5 Aug 08
(class
16,
21)
|
EWIP
relies on a combination of trade secrets, confidentiality agreements, patent,
trademark, copyright, licenses, unfair competition and other intellectual
property laws to protect its intellectual property and other proprietary
rights.
E
WIP has
engaged with B.I. Appraisals Limited
(“
B.I.
Appraisals
”
)
for an
opinion of valuation of its Intellectual Property in the technology to produce
environmentally preferable food
packaging
products.
B.I.
Appraisals
and the
management
ha
ve
been
conducting asset valuations and consultancy works in the Greater China and the
Asia Pacific regions for various purposes for
over
25
years.
In their
report dated December 23
,
2008,
B.I. Appraisals has estimated that
the
market value of EWIP Intangible Asset as at November 30, 2008, was reasonably
represented by the amount of US$127,000,000.00 (US Dollars One Hundred and
Twenty-seven Million only).
A
copy
of the
valuation report is attached as an exhibit.
Our
Products
Eatware
products are 100% organic, chemical-free biodegradable foodservice packaging
product in the industry. Features of the products include being oil,
water, heat resistant, microwave and oven safe. EWIP also invented what
management believes to be the world’s first 100% organic additive - Eatplus
®
,
comprised of a modified starch. While other food packaging competitive products
can take over 200 years to decompose and have contributed to massive landfills
across the globe, Eatware products are designed to decompose in the soil within
180 days and can disperse in water within two weeks. Eatplus
®
enhances
the products making them sturdy, yet 100% biodegradable.
In
contrast, traditional foodservice disposables, wraps, and paperboard are
currently manufactured from a variety of materials, including paper and plastic.
Management believes that none of these materials fully addresses three of the
principal challenges facing the foodservice industry; namely performance, price,
and environmental impact. Management believes that Eatware products address the
combination of these challenges better than traditional alternatives and
therefore will be able to achieve a significant share of the foodservice
disposable packaging market.
Eatware
products can be categorized into five types: (1) plates; (2) bowls; (3) trays;
(4) lunch boxes; and (5) mini containers. To date, EWIP’s technology has been
used to produce limited commercial quantities of plates, bowls, and hinged-lid
containers intended for use by all segments of the foodservice disposable
packaging market, including quick-service restaurants, food and facilities
management companies, Governments, universities/colleges, and retail operations.
These products were developed using detailed environmental assessments and
carefully selected raw materials and processes to minimize the harmful impact on
the environment without sacrificing competitive price or
performance.
The
Company markets and sells bio-based tableware for the food service packaging
industry that is:
|
·
|
100%
decomposable, biodegradable and
compostable;
|
|
·
|
100%
oil-resistant to over 400ºF;
|
|
·
|
100%
heat-resistant to over 400ºF;
|
|
·
|
100%
microwave-safe to over 400ºF;
|
|
·
|
100%
made of natural materials – absolutely no chemicals/petroleum are
added;
|
|
·
|
Made
from bamboo, sugarcane, rice or
cornstarches;
|
|
·
|
Decomposable
in a landfill within 90 days;
|
|
·
|
Decomposable
in a compost pile within 2 days;
|
Industry
Based on
industry studies, management believes that the annual spending on foodservice
disposable packaging is approximately $12 billion in the U.S. and will reach
14.4 billion in year 2009. (
source:
http://www.allbusines
s.com/specialty-businesses/860475-1.html
)
The Company believes that of the foodservice disposables purchased in the U.S.
by quick-service restaurants and other institutions, approximately 45% are made
of coated or plastic laminated paper and 55% are made of non-paper materials
such as plastic, polystyrene or foil.
In
addition to the U.S., management believes the market opportunity for Eatware
products are particularly strong in Europe and parts of Asia due to heightened
environmental concerns and government regulations.
According
to the U.S. Environmental Protection Agency (“EPA”), approximately 60 billion
disposable cups, 20 billion disposable eating utensils and 25 billion disposable
plates are used and sent to landfills and incinerators each year in the United
States. Single-use disposable "Expanded Polystyrene" (“EPS”) food and
drink containers (lunch boxes, cups and bowls) are discarded by consumers around
the world by the hundreds of millions each and every single day. This is
extremely detrimental to the environment. EPS products are being viewed by
cities and countries around the world as the main culprit for causing so called
"White Pollution" since EPS is totally non-biodegradable and non-recyclable,
according to the California Integrated Waste management Board,
Statewide Waste Characterization
Study: Results and Final Report
, pub. #340-00-009, Sacramento, Calif.,
December 1999, prepared by Cascadia Consulting Group. It takes over 200 years
before EPS begins to only partly degrade in water or in the earth. Not
only that, but EPS also releases significant toxic by-products.
Most
widely-used food serviceware is made from crude oil (Styrofoam, etc.) and, like
all conventional plastics, polystyrene foam is non-renewable, non-biodegradable
and virtually non-recyclable. Polystyrene foam food serviceware ends up in
landfills, waterways or the ocean. It breaks down into smaller and smaller
pieces which are often mistaken for food and ingested by marine animals, birds
and fish. Medical evidence also suggests that chemicals in polystyrene foam are
carcinogenic and may leach into food or drink. Polystyrene is produced from
styrene, which is also a known human neurotoxin and a known animal
carcinogen.
As a
result, many municipalities have enacted efforts, regulations and laws to curb
or ban the use of EPS products, such as polystyrene. In fact, over 100 cities in
the US have banned polystyrene in some empirical form (
source:
http://earth911.com/blog/2008/06/23/stroyfoam-bans-here-to-stay/
). In
Oakland, CA, for instance, recently banned the use of polystyrene foam (such as
Styrofoam) disposable food service ware for all food vendors (
source: Ordiance No.
07-004
http://www.ci.emeryville.ca.us/community/environment/pdf/foodware_ordinance.pdf
)
In our
disposable society, though, it is difficult to ban disposable products
altogether. Fast food restaurants, households with young children,
hospitals, school cafeterias and other facilities concerned with the spread of
food-borne disease attest to the need for disposable food containers.
Add to this the additional energy, water and detergents needed to
wash permanent-ware and it becomes clear that a disposable eco-friendly
alternative is needed around the world. The dilemma, of course, is in
choosing a disposable container that is effective, cost efficient, and minimizes
damage to the environment. Management believes that Eatware products fulfill
this need.
The
Company believes that no other competitive product currently exists in the
market that can equal its environmentally friendly product line’s full list of
benefits. A strong opportunity exists, then, for segment dominance by
Eatware products since the market is just beginning to adopt eco-friendly
foodware. The Company forecasts multiple niche markets that could readily
transition to using the Company’s products, including: catering, government,
academic, hospitality, airline, military and restaurants. Major
opportunities also exist to capture significant portions of the fresh and frozen
food packaging industries.
Environmental
Compliance
Eatware
products have received numerous awards and certifications throughout the
years:
|
Eatware
Management System Certifications
|
|
|
|
|
1
|
Quality
Management System ISO9001:2000
|
|
|
|
|
2
|
Environmental
Management System ISO14001:2004
|
|
|
|
|
3
|
Food
Safety Management System HACCP
|
|
|
|
|
Eatware
Product Awards
|
|
|
|
|
1
|
***US
Green Seal***
|
|
|
|
|
2
|
***China
Environmental Label***
|
|
|
|
|
3
|
Hong
Kong Eco-Products Award
|
|
|
|
|
4
|
Hong
Kong Q-Mark Product
|
|
|
|
|
5
|
Hong
Kong Green Label
|
|
|
|
|
6
|
China
Quality Safety Mark
|
|
|
|
|
7
|
US
People’s Choice Award – Best New Technology
|
|
|
|
|
Eatware
Product Compliance Testing
|
|
|
|
|
1
|
HKEPD
Testing Guideline on the Degradability and Food Safety of Container and
Bags
HS
1004 Pesticides Residues Test
HS
1005 Coliform Bacteria Test
HS
1006 Moulds and Yeasts Test
HS
2001 Biodegradability Test
HS
3001 Static Loading Test
HS
3003 Low Temperature Resistance Test
HS
3004 Water and Oil Proof Tests at Raised Temperature
HS
3006 Acid Resistance Test
|
|
2
|
US
FDA 21 CFR 176.170
Components
of Paper and Paperboard in Contact with Aqueous and Fatty
Foods
|
|
|
|
|
3
|
US
FDA 21 CFR 178.3800
Preservatives
for Fiber
|
|
|
|
|
4
|
US
FDA Bacteriological Analytical Manual Chapter 18
Yeasts,
Molds and Mycotoxins
|
|
|
|
|
5
|
French
Law 94-647
Packaging
Materials Pollutants Analysis
|
|
|
|
|
6
|
EU
Council Directive 94/62/EC; French Law 98-638
Recyclability,
Composting and Biodegradability
|
|
|
|
|
7
|
The
European Standard EN13432
Requirements
for Resins Recoverable through Composting and
Biodegradation
|
|
|
|
|
8
|
ASTM
D6866-08
Biobased
content
|
|
|
|
|
9
|
Canada
Consumer Packaging and Labelling Act (R.S., 1985, c.C-38)
Packaging,
Labelling, Sale, Importation and
Advertising
|
In
addition to international certifications, Eatware products have also been
awarded Eco Products Award by the Centre of Environmental Technology Ltd, the
Chinese and Hong Kong General Chamber of Commerce in 1999, the Best New
Technology Award by Los Angeles Western Foodservice & Hospitality Expo 2006
and recently the Hong Kong Q-Mark Product Scheme in May 2008 for its remarkable
biodegradable nature and quality. Governmental authorities worldwide recognize
Eatware® as a strong advocator of environmental preservation providing the most
bio-based foodware solutions.
Customers
The
Company’s current customer base is comprised of professional medium size
corporations, with years of experiences in their market segments and with
established network within the food and packaging industries, for faster
penetration. The Company continues to search internationally for more industry
players, to expand its network, as it increases its licensed manufacturing base
for production capacity.
Suppliers
Our
principal suppliers include:
|
|
AMOUNT
(HK$)
|
|
|
AMOUNT
(HK$)
|
|
Tian
Yao Puikei (Haimen) Environmental Product Co. Ltd.
|
|
|
4,147,608.14
|
|
|
|
8,524,140.49
|
|
|
|
|
|
|
|
|
|
|
Tian
Yao (Nantong) Environment Protection
|
|
|
3,432,151.22
|
|
|
|
4,787,552.78
|
|
|
|
|
|
|
|
|
|
|
Glory
Team Industrial Ltd, Shanghai
|
|
|
0.0
|
|
|
|
76,287.90
|
|
Distributors
Our
principal distributors include:
|
|
|
|
Natures
Fresh, LLC
|
United
States
|
08/06/07
– 08/05/09
|
USD
250,000
|
|
|
|
|
Excellent
Packaging & Supply
|
United
States
|
01/30/07
– 01/30/08
(pending
renewal)
|
USD
600,000
|
|
|
|
|
BSS
(HK) Corporation Ltd.
|
Hong
Kong & Singapore
|
01/01/07
– 12/31/08
(pending
renewal)
|
USD
300,000
|
|
|
|
|
Biopak
Pty Ltd.
|
Australia
& New Zealand
|
06/01/07
– 05/31/09
|
USD
950,000
|
|
|
|
|
DBM
Holdings Ltd.
|
United
Kingdom
|
06/23/08
– 06/22/10
|
USD
600,000
|
|
|
|
|
DEREC
Sarl
|
France
|
01/11/07
– 01/10/10
|
USD
1,800,000
|
|
|
|
|
Especia,
S.A. De C.V.
|
Mexico
|
01/10/07
– 01/09/09
|
USD
1,200,000
|
|
|
|
|
Global
Foods Trade, LLC
|
United
States
|
01/10/07
– 01/09/08
|
USD
1,200,000
|
|
|
|
|
Green
Energy Holding Corp.
|
West
Coast of United States, incl. CA, NV, AZ, OR, WA and the western provinces
of Canada
|
05/15/08
– 05/14/09
|
USD
600,000
|
|
|
|
|
Import
Food Network, LLC
|
United
States
|
02/09/07
– 02/08/08
(pending
renewal)
|
USD
600,000
|
|
|
|
|
Rimpac
Emballage AB
|
Sweden
|
07/30/07
– 07/29/0
|
USD
1,200,000
|
|
|
|
|
Total
Package Solutions, LLC
|
United
States
|
06/01/08
– 05/31/09
|
USD
475,000
|
|
|
|
|
Vertex
Industrial Sales, Inc.
|
Canada
|
02/15/08
– 02/14/09
|
USD
525,000
|
|
|
|
|
Be_Natural
N.V
|
Benelux
|
02/28/09
– 02/27/10
|
USD
50,000
|
|
|
|
|
MEITAV
CHEF
|
Israel
|
11/25/08
– 11/24/09
|
USD
300,000
|
|
|
|
|
Enrus
Corp
|
Korea
|
11/22/06
– 11/21/11
|
USD
1,200,000
|
|
|
|
|
P
& M(Int’l) Industrial Co.
|
United
States
|
12/30/08
– 12/29/09
|
Sales
Representative
|
|
|
|
|
The
Green One, Inc.
|
North
America
|
06/05/08
– 06/05/09
|
Sales
Representative
|
|
|
|
|
CIZETA
S.a.s.
|
Italy
|
02/25/08
– 02/27/09
|
Sales
Representative
|
Competition
Competition among food and beverage
container manufacturers in the foodservice industry is
intense
and many of
these competitors
have greater financial and marketing
resources at their disposal than
the Company
does
, and many have established supply,
production and distribution relationships and channels.
A number of
the competitors
have intr
oduced or are attempting to develop
biodegradable starch-based materials, plastics, or other materials that may be
positioned as potential environmentally su
perior packaging alternatives.
It is expected that many
existing packaging manufacturers may active
ly seek to develop competitive
alternatives to
the
Company
’
s
patented
manufacturing process and
products.
There are
at least five companies involved in the production of water- and oil-stopping
additives that compete against us, namely: 3M, Dupont, Proman, Michelin and
Aquashield.
To the best of our knowledge, our
principal competitors within the PRC are the following
companies:
|
·
|
Shandong
Teanhe Green PAK Science and
Technology
|
|
·
|
China
National Aero-Technology
|
|
·
|
Zuangzhou
Xin Yan Environmental Protection
Products
|
For
countries outside PRC, there are also competing products from companies such as:
Earthcycle, Biosphere, Cereplast, Earthshell, Novamont, Enviropak, Biobag,
International Paper, NatureWorks, Eatitworlda and Earthsmart. Management
believes that its low-cost manufacturing and technological advantage of EWIP’s
patented additive, EATplus (as described in the section titled “Our Business”),
gives the Company a strong competitive advantage over competitors. The main
advantage, though, is that Eatware product line is a proven technology that has
been manufactured, distributed and marketed for years in Asia.
Some of
our competitive strengths include:
|
·
|
Premium Quality:
We are committed
to ensure the quality of our products. Every single piece of product is
carefully examined before delivering to our
customers.
|
|
·
|
Highest Hygienic
Standard:
Our productions
from licensees are designed to meet the highest food safety requirements
to ensure Eatware products arefree of chemicals, microbiologicals and
allergens.
|
|
·
|
Extensive Product
Range:
Our licensees are
capable of full customized solutions, developments and production. We can
tailor our products to meet client needs in terms of thickness, shape or
size.
|
The
Company believes that its patents and proprietary manufacturing process give it
a competitive advantage in its area of specialization.
Our
Distribution Method
Sales and Marketing.
Our internal sales and
marketing team is responsible for monitoring international sales, which includes
coordinating and distributing orders from distributors.
Distribution Network.
We have established a
wide distribution network which allows us to maintain our competitiveness in the
industry. Eatware products are exported to various countries, including Canada,
the USA, Hong Kong, Singapore, New Zealand, Australia, France, Italy, Sweden,
Israel and Mexico.
As of
March 31st, 2009 we had 17 distributors and 3 sales representatives in various
countries throughout the world as follows:
|
|
|
|
Australia
& New Zealand
|
|
|
1
|
|
|
|
|
|
|
Canada
|
|
|
2
|
|
|
|
|
|
|
France
|
|
|
1
|
|
|
|
|
|
|
Benelux
|
|
|
1
|
|
|
|
|
|
|
Hong
Kong & Singapore
|
|
|
1
|
|
|
|
|
|
|
Korea
|
|
|
1
|
|
|
|
|
|
|
Mexico
|
|
|
1
|
|
|
|
|
|
|
Sweden
|
|
|
1
|
|
|
|
|
|
|
United
Kingdom
|
|
|
1
|
|
|
|
|
|
|
United
States
|
|
|
6
|
|
|
|
|
|
|
Israel
|
|
|
1
|
|
|
|
|
|
|
Sales
Representative (Italy)
|
|
|
1
|
|
|
|
|
|
|
Sales
Representatives (US)
|
|
|
2
|
|
|
|
|
|
|
Total
|
|
|
20
|
|
The
Company primarily serves three customer groups: (1) foodservice (2) consumer and
(3) produce (growers/packers). The Company has maintained strong relationships
with leading foodservice customers and emphasis on innovation and customer
service.
The
Company mainly markets and sells its product line to foodservice customers
through its in-house direct sales force. Foodservice distributors
sell the products they purchase to various operators including catering
services, the government, academic institutions, hospitality companies,
airlines, the military and restaurants. The company’s sales team works closely
with these customers to develop unique product offerings and promotional
programs.
Compared
to polystyrene products, Eatware products are equally leak-proof, versatile,
sturdy and convenient. However, the biodegradability of Eatware’s starch-based
products could lessen the burden of disposable serviceware on the environment.
Although consumers are generally more environmentally conscious, pricing is
still the key factors for commercial customers and distributors. In the last few
years, the general manufacturing costs for “green” biodegradable products have
become much more competitive compared to traditional methods. Besides promoting
the biodegradability of Eatware products, the Company emphasizes on building
cost advantage by developing economies of scale. The Company expects the costs
of Eatware products would be very competitive to traditional polystyrene
products when more licensed manufacturers are in full operation. It is the
Company’s strategic plan to aggressively expand in order to meet the targeted
price points.
RISK
FACTORS
You
should carefully consider the risks described below as well as other information
provided to you in this document, including information in the section of this
document entitled “Information Regarding Forward Looking Statements.” The risks
and uncertainties described below are not the only ones facing us. Additional
risks and uncertainties not presently known to us or that we currently believes
are immaterial may also impair our business operations. If any of the following
risks actually occur, the Company’s businesses, financial condition or results
of operations could be materially adversely affected, the value of the common
stock could decline, and you may lose all or part of your
investment.
RISKS
RELATED TO OUR BUSINESS
We are dependent on our Executive
Directors and Executive Officers. Any loss in their services without
suitable replacement may adversely affect our operations.
Our success to date
has been largely due to the
co
ntribution of
our
Chief Executive Officer
and Chief Financial Officer
,
Jonathan W. L.
So
.
Mr. So is the founder of our Company,
and has spearheaded our expansion and growth. He is responsible for
our operations, marketing, p
ublic relations, strategic planning and
development of new products and markets. Our continued success is
dependent, to a large extent, on our ability to retain his services.
The continued success of our business is
also dependent on our key management an
d operational personnel such as Mr.
Wu, Man-Shing
, our
Chairman and Mr. Megret, Laurent, our
Chief Operating Officer
. We rely on their experience
in the food packaging industry, product development, sales and marketing and on
their relationships with our
customers and
suppliers.
The loss of the services of any of our
executive directors or executive officers without suitable replacement or the
inability to attract and retain qualified personnel will adversely affect our
operations and hence, our revenue
and profits.
We
have not yet fully evaluated all of the Eatware products and it is possible that
some of the products may not perform as well as conventional
products.
Although
we believe that our licensed Eatware manufacturer can engineer and manufacture
Eatware product to meet many of the critical performance requirements for
specific applications, individual products may not perform as well as
conventional foodservice disposables; for example, some consumers may prefer
clear cups and clear lids on take-home containers which are not available with
our technology. We are still developing many of our Eatware product
and we have not yet evaluated the performance of all of them. If we
fail to develop Eatware product that perform comparably to conventional
foodservice disposables, this could cause consumers to prefer our competitors'
products.
Established
manufacturers in the foodservice disposables industry could improve their
ability to recycle their existing products or develop new environmentally
preferable disposable foodservice containers, which could render our technology
obsolete and could negatively impact our ability to compete.
Competition
among existing food and beverage container manufacturers in the foodservice
industry is intense. Virtually all of the key participants in the
industry have substantially greater financial and marketing resources at their
disposal than we do, and many have well-established supply, production and
distribution relationships and channels. Companies producing competitive
products utilizing competitive materials may reduce their
prices or engage in advertising or
marketing campaigns designed to protect their respective
market shares
and impede market acceptance of our
Eatware product line. In addition, several paper and
plastic disposable packaging manufacturers and
converters and others have made efforts
to increase the recycling of these
products. Increased recycling of paper and plastic products could
lessen their harmful environmental impact, one major basis upon which the
Company intends to compete. A number of companies have introduced or
are attempting to develop biodegradable starch-based materials, plastics, or
other materials that may be positioned as potential environmentally superior
packaging alternatives. We expect that many existing packaging manufacturers may
actively seek competitive alternatives to our products and processes. The
development of competitive, environmentally attractive, disposable foodservice
packaging, whether or not based on our products and technology, could render our
technology obsolete and could impair our ability to compete, which would have an
adverse effect on our business, financial condition and results of
operations.
Our
anticipated international revenues are subject to risks inherent in
international business activities.
We expect
sales of our products and services in foreign countries to account for a
material portion of our revenues. These sales are subject to risks inherent in
international business activities, including:
|
·
|
Any
adverse change in the political or
economic environments in these
countries;
|
|
·
|
Any
adverse change in tax, tariff and trade or other
regulations;
|
|
·
|
The
absence or significant lack of legal protection for intellectual property
rights;
|
|
·
|
Exposure
to exchange rate risk for revenues which are denominated in currencies
other than U.S. dollars; and
|
|
·
|
Difficulties
in managing joint venture businesses spread over various
jurisdictions.
|
Our revenues could
be substantially less than we expect if these risks affect
our ability to successfully sell
our products in the international
market.
Our
products may be perceived poorly by customers and/or environmental groups, which
could have an adverse affect on our business.
Our
success depends substantially on our ability to design and develop foodservice
disposables that are not as harmful to the environment as conventional
disposable foodservice containers made from paper, plastic and polystyrene.
Extra Ease uses a cradle to grave approach in its environmental assessment of
Eatware products and in the development of associated environmental claims. We
have received support for the Eatware concept from a number of environmental
groups. Although we believe that Eatware products offer several environmental
advantages over conventional packaging products, our products may also possess
characteristics that consumers or some environmental groups could perceive as
negative for the environment. Whether, on balance, Eatware products are better
for the environment than conventional packaging products is a somewhat
subjective judgment. Environmental groups, regulators, customers or
consumers may not agree that present and future Eatware products have an
environmental advantage over conventional packaging.
Third parties
may infringe upon our patents, new products that we
develop may not be covered by our
patents and we could suffer an adverse determination in a
patent infringement proceeding, which could allow our competitors to duplicate
our products without having incurred the research and
development costs we
have incurred and therefore allow
them to produce and market those products more
profitably
Our ability
to compete effectively with conventional packaging will
depend, in part, on
our ability to protect our proprietary rights
to our technology. Although the
Company endeavors to protect
our licensed technology through, among
other things, U.S. and foreign patents, the duration of
these patents is limited and the patents and
patent applications licensed to us may not
be sufficient to protect our technology. We
also rely on trade secrets and proprietary know-how that we try to protect in
part by confidentiality agreements with employees and consultants. These
agreements have limited terms and these agreements may be breached, we may not
have adequate remedies for any breach and our competitors may learn our trade
secrets or independently develop them. It is necessary for us to
litigate from time to time to enforce patents issued or licensed to us, to
protect our trade secrets or know-how and to determine the enforceability, scope
and validity of the proprietary rights of others.
We
believe that we own or have the rights to use all of the technology that we
expect to incorporate into Eatware products, but an adverse determination in
litigation or infringement proceedings to which we are or may become a party
could subject us to significant liabilities and costs to third parties or
require us to seek licenses from third parties. Although patent and
intellectual property disputes are often settled through licensing or similar
arrangements, costs associated with those arrangements could be substantial and
could include ongoing royalties. Furthermore, we may not obtain the
necessary licenses on satisfactory terms or at all. We
could incur substantial costs attempting to
enforce our licensed patents against third party infringement, or
the unauthorized use of
our trade secrets and proprietary know-how or
in defending ourselves against claims of infringement by others. Accordingly, if
we suffered an adverse determination in a judicial or administrative proceeding
or failed to obtain necessary licenses, it would prevent us from manufacturing
or licensing others to manufacture some of our products.
Our
Failure to produce products profitably on a commercial scale would adversely
affect our ability to compete with conventional disposable foodservice
packagers.
Production
volumes of Eatware products to date have been low relative to the intended
capacity of the various manufacturing lines, and, until production volumes
approach design capacity levels, actual costs and profitability will not be
certain. Since the actual cost of manufacturing Eatware products on a commercial
scale has not been fully demonstrated, they may not be manufactured at a
competitive cost. As we begin to commercially produce Eatware products, we may
encounter unexpected difficulties that cause production costs to exceed current
estimates. The failure to manufacture Eatware products at commercially
competitive costs would make it difficult to compete with other foodservice
disposable manufacturers.
Unavailability of
raw materials used to manufacture our products, increases in the
price of the raw materials, or the necessity of
finding alternative raw materials to use in
our products could delay the introduction and market
acceptance of our products.
Although
we believe that sufficient quantities of all raw materials used in Eatware
products are generally available, if any raw materials become unavailable, it
could delay the commercial introduction and hinder market acceptance of Eatware
products. In addition, we may
become significant consumers of certain key raw
materials such as starch, and if such consumption is substantial in
relation to the available resources, raw
material prices may increase which in turn may increase
the cost of Eatware products and impair our profitability. In
addition, we may need to seek alternative sources of raw materials or modify our
product formulations if the cost or availability of the raw materials that we
currently use become prohibitive.
Our
operations are subject to regulation by the U.S. Food and Drug
Administration.
The
manufacture, sale and use of Eatware products are subject to regulation by the
U.S. Food and Drug Administration (the "FDA"). The FDA's regulations
are concerned with substances used in food packaging materials, not with
specific finished food packaging
products. Thus, food and beverage
containers are in compliance with FDA regulations if the components
used in the food and beverage containers: (i)
are approved by the FDA as indirect food
additives for their intended uses and comply with
the applicable FDA indirect food
additive regulations; or (ii) are
generally recognized as safe for their intended uses and are of
suitable purity for those intended uses. the
Company believes that Eatware plates, bowls and
hinged-lid containers and all other current and prototype Eatware
products are in compliance with all requirements of the FDA and do not require
additional FDA approval. However, the FDA may not agree with these
conclusions, which could have a material adverse affect on our business
operations.
RISKS
RELATED TO DOING BUSINESS IN CHINA
Our
operations in the PRC are subject to the laws and regulations of the
PRC.
As the
manufacturing of our products by licensees is mainly carried out in the PRC, we
are subject to and have to operate within the framework of the PRC legal system.
Any changes in the laws or policies of the PRC or the implementation thereof,
for example in areas such as foreign exchange controls, tariffs, trade barriers,
taxes, export licence requirements and environmental protection, may have a
material impact on our operations and financial performance.
The
corporate affairs of our subsidiary in the PRC are governed by its articles of
association and the corporate and foreign investment laws and regulations of the
PRC. The principles of the PRC laws relating to matters such as the fiduciary
duties of directors and other corporate governance matters and foreign
investment laws in the PRC are relatively new. Hence, the enforcement of
investors or shareholders' rights under the articles of association of a PRC
company and the interpretation of the relevant laws relating to corporate
governance matters remain largely untested in the PRC.
Introduction
of new laws or changes to existing laws by the PRC government may adversely
affect our business.
The laws
of the PRC govern our businesses and operations that are located in the PRC. The
PRC legal system is a codified system of written laws, regulations, circulars,
administrative directives and internal guidelines. The PRC government is still
in the process of developing its legal system to encourage foreign investment
and to align itself with global practices and standards. As the PRC economy is
undergoing development at a faster rate than the changes to its legal system,
some degree of uncertainty exists in connection with whether and how existing
laws and regulations apply to certain events and circumstances. Some of the laws
and regulations and the interpretation, implementation and enforcement of such
laws and regulations are also at an experimental stage and are subject to policy
changes. Hence, precedents on the interpretation, implementation and enforcement
of certain PRC laws are limited and court decisions in the PRC do not have
binding effect on lower courts. Accordingly, the outcome of dispute resolutions
and litigation may not be as consistent or predictable as in other more
developed jurisdictions and it may be difficult to obtain swift and equitable
enforcement of the laws in the PRC, or to obtain enforcement of a judgment by a
court or another jurisdiction.
In
particular, on 8 August 2006, six PRC regulatory bodies (including MOFCOM and
the China Security and Regulatory Commission (“CSRC”)) jointly promulgated the
new “Regulations on Foreign Investors Merging with or Acquiring Domestic
Enterprises”, which took effect on 8 September 2006 (“2006 M&A Rules”). The
2006 M&A Rules regulate,
inter alia
, the acquisition
of PRC domestic companies by foreign investors.
On 21
September 2006, the CSRC promulgated the “Guidelines on Domestic Enterprises
Indirectly Issuing or Listing and Trading their Stocks on Overseas Stock
Exchanges” (the “CSRC Guidelines”).
Under the
2006 M&A Rules and the CSRC Guidelines, the listing of overseas special
purpose vehicles (“SPV”) which are controlled by PRC entities or individuals are
subject to the prior approval of the CSRC.
The 2006
M&A Rules and the CSRC Guidelines do not provide any express requirement for
an SPV to retroactively obtain CSRC approval where the restructuring steps had
been completed prior to 8 September 2006.
John Y.
Lo, 9/F, Hutchison House, Central, Hong Kong, telephone number (852) 2848-4848,
the Legal Adviser to our Company on PRC Law, is of the opinion that our Group
has obtained all the necessary governmental approvals from PRC authorities for
the Restructuring Exercise prior to 8 September 2006, the requirement to obtain
CSRC approval is not applicable to our Company and it is not necessary for the
Company to comply retroactively with the requirement of obtaining the prior
approval of the CSRC for a listing on OTC-BB.
There is
no assurance that these PRC authorities will not issue further directives,
regulations, clarifications or implementation rules requiring us to obtain
further approvals in relation to our proposed listing on the
OTC-BB.
PRC
foreign exchange control may limit our ability to utilise our cash effectively
and affect our ability to receive dividends and other payments from our PRC
subsidiaries.
Our PRC
subsidiary, which is a foreign investment entity (“FIEs”), is subject to the PRC
rules and regulations on currency conversion. In the PRC, the State
Administration of Foreign Exchange (“SAFE”) regulates the conversion of the RMB
into foreign currencies. Currently, foreign investment enterprises (including
wholly foreign-owned enterprises) are required to apply to the SAFE for “Foreign
Exchange Registration Certificates for FIEs”. With such registration
certification (which have to be renewed annually), FIEs are allowed to open
foreign currency accounts including the “current account” and “capital account”.
Currently, transactions within the scope of the "current account" (for example,
remittance of foreign currencies for payment of dividends) can be effected
without requiring the approval of the SAFE. However, conversion of currency in
the “capital account” (for example, for capital items such as direct
investments, loans and securities) still requires the approval of the SAFE. Our
PRC operating subsidiary Rixiang has obtained the "Foreign Exchange Registration
Certificates for FIEs", which is subject to annual review.
Our
subsidiaries, operations and significant assets are located outside the
U.S. Shareholders may not be accorded the same rights and protection
that would be accorded under the Securities Act. In addition, it could be
difficult to enforce a U.S judgment against our Directors and
officers.
Our
subsidiaries, operations and assets are located in the PRC, British Virgin
Islands and Hong Kong. Our subsidiaries are therefore subject to the relevant
laws in the PRC, British Virgin Islands and Hong Kong. The Companies Act may
provide shareholders with certain rights and protection which may not have
corresponding or similar provisions under the laws of the PRC, British Virgin
Islands and Hong Kong. As such, investors in our Shares may or may not be
accorded the same level of shareholder rights and protection that would be
accorded under the Securities Act. In addition, some of our Executive Directors,
as at the Latest Practicable Date, are non-residents of the U.S. and the assets
of these persons are mainly located outside the U.S. As such, there may be
difficulty for Shareholders to effect service of process in the U.S., or to
enforce a judgment obtained in PRC, British Virgin Islands and Hong Kong against
any of these persons.
We
are subject to the PRC's environmental laws and regulations.
Our
production facilities in the PRC will be subject to environmental laws and
regulations imposed by the PRC authorities,
inter alia
, in respect of air
protection, waste management and water protection. In the event stricter rules
are imposed on air protection, waste management and water protection by the PRC
authorities, we may have to incur higher costs to comply with such rules.
Accordingly, our financial performance may be adversely affected. In addition,
we require licence for the discharge of pollutants for our operations, which is
subject to annual review and renewal. In the event that we fail to renew our
licence with the relevant authority, our operations and financial performance
will be adversely affected.
Changes in
China’s political or economic situation could harm us and our operating
results
.
Economic
reforms adopted by the Chinese government have had a positive effect on the
economic development of the country, but the government could change these
economic reforms or any of the legal systems at any time. This could
either benefit or damage our operations and profitability. Some of
the things that could have this effect are:
|
|
Level
of government involvement in the
economy;
|
|
|
Control
of foreign exchange;
|
|
|
Methods
of allocating resources;
|
|
|
Balance
of payments position;
|
|
|
International
trade restrictions; and
|
The
Chinese economy differs from the economies of most countries belonging to the
Organization for Economic Cooperation and Development, or OECD, in many
ways. As a result of these differences, we may not develop in the
same way or at the same rate as might be expected if the Chinese economy were
similar to those of the OECD member countries.
Our business is
largely subject to the uncertain legal environment in China and your legal
protection could be limited
.
The
Chinese legal system is a civil law system based on written
statutes. Unlike common law systems, it is a system in which
precedents set in earlier legal cases are not generally used. The
overall effect of legislation enacted over the past 20 years has been to enhance
the protections afforded to foreign invested enterprises in
China. However, these laws, regulations and legal requirements are
relatively recent and are evolving rapidly, and their interpretation and
enforcement involve uncertainties. These uncertainties could limit
the legal protections available to foreign investors, such as the right of
foreign invested enterprises to hold licenses and permits such as requisite
business licenses. In addition, some of our executive officers and
our directors are residents of China and not of the U.S., and substantially all
the assets of these persons are located outside the U.S. As a result,
it could be difficult for investors to effect service of process in the U.S., or
to enforce a judgment obtained in the U.S. against our Chinese operations and
subsidiaries.
The
Chinese government exerts substantial influence over the manner in which we must
conduct our business activities.
China
only recently has permitted provincial and local economic autonomy and private
economic activities. The Chinese government has exercised and continues to
exercise substantial control over virtually every sector of the Chinese economy
through regulation and state ownership. Our ability to operate in China may be
harmed by changes in its laws and regulations, including those relating to
taxation, import and export tariffs, environmental regulations, land use rights,
property and other matters. We believe that our operations in China are in
material compliance with all applicable legal and regulatory requirements.
However, the central or local governments of the jurisdictions in which we
operate may impose new, stricter regulations or interpretations of existing
regulations that would require additional expenditures and efforts on our part
to ensure our compliance with such regulations or interpretations.
Accordingly,
government actions in the future including any decision not to continue to
support recent economic reforms and to return to a more centrally planned
economy or regional or local variations in the implementation of economic
policies, could have a significant effect on economic conditions in China or
particular regions thereof, and could require us to divest ourselves of any
interest we then hold in Chinese properties or joint ventures.
The
PRC's legal and judicial system may not adequately protect our business and
operations and the rights of foreign investors.
The PRC
legal and judicial system may negatively impact foreign investors. In 1982, the
National People's Congress amended the Constitution of China to authorize
foreign investment and guarantee the "lawful rights and interests" of foreign
investors in the PRC. However, the PRC's system of laws is not yet
comprehensive. The legal and judicial systems in the PRC are still rudimentary,
and enforcement of existing laws is inconsistent. Many judges in the PRC lack
the depth of legal training and experience that would be expected of a judge in
a more developed country. Because the PRC judiciary is relatively inexperienced
in enforcing the laws that do exist, anticipation of judicial decision-making is
more uncertain than would be expected in a more developed country. It may be
impossible to obtain swift and equitable enforcement of laws that do exist, or
to obtain enforcement of the judgment of one court by a court of another
jurisdiction. The PRC's legal system is based on the civil law regime, that is,
it is based on written statutes; a decision by one judge does not set a legal
precedent that is required to be followed by judges in other cases. In addition,
the interpretation of Chinese laws may be varied to reflect domestic political
changes.
The
promulgation of new laws, changes to existing laws and the pre-emption of local
regulations by national laws may adversely affect foreign investors. However,
the trend of legislation over the last 20 years has significantly enhanced the
protection of foreign investment and allowed for more control by foreign parties
of their investments in Chinese enterprises. There can be no assurance that a
change in leadership, social or political disruption, or unforeseen
circumstances affecting the PRC's political, economic or social life, will not
affect the PRC government's ability to continue to support and pursue these
reforms. Such a shift could have a material adverse effect on our business
and prospects.
The
practical effect of the PRC legal system on our business operations in the PRC
can be viewed from two separate but intertwined considerations. First, as a
matter of substantive law, the Foreign Invested Enterprise laws provide
significant protection from government interference. In addition, these laws
guarantee the full enjoyment of the benefits of corporate Articles and contracts
to Foreign Invested Enterprise participants. These laws, however, do impose
standards concerning corporate formation and governance, which are qualitatively
different from the general corporation laws of the United States. Similarly, the
PRC accounting laws mandate accounting practices, which are not consistent with
U.S. generally accepted accounting principles. PRC's accounting laws require
that an annual "statutory audit" be performed in accordance with PRC accounting
standards and that the books of account of Foreign Invested Enterprises are
maintained in accordance with Chinese accounting laws. Article 14 of the
People's Republic of China Wholly Foreign-Owned Enterprise Law requires a wholly
foreign-owned enterprise to submit certain periodic fiscal reports and
statements to designated financial and tax authorities, at the risk of business
license revocation. While the enforcement of substantive rights may appear less
clear than United States procedures, the Foreign Invested Enterprises and Wholly
Foreign-Owned Enterprises are Chinese registered companies, which enjoy the same
status as other Chinese registered companies in business-to-business dispute
resolution. Any award rendered by an arbitration tribunal is enforceable in
accordance with the United Nations Convention on the Recognition and Enforcement
of Foreign Arbitral Awards (1958). Therefore, as a practical matter, although no
assurances can be given, the Chinese legal infrastructure, while different in
operation from its United States counterpart, should not present any significant
impediment to the operation of Foreign Invested Enterprises
Capital outflow policies in the PRC
may hamper our ability to remit income to the United States.
The PRC
has adopted currency and capital transfer regulations. These regulations may
require that we comply with complex regulations for the movement of capital and
as a result we may not be able to remit all income earned and proceeds received
in connection with our operations or from the sale of our operating subsidiary
to the U.S. or to our stockholders.
Future
inflation in China may inhibit our ability to conduct business in
China.
In recent
years, the Chinese economy has experienced periods of rapid expansion and highly
fluctuating rates of inflation. During the past ten years, the rate of inflation
in China has been as high as 20.7% and lows as -2.2%. These factors have led to
the adoption by the Chinese government, from time to time, of various corrective
measures designed to restrict the availability of credit or regulate growth and
contain inflation. High inflation may in the future cause the Chinese government
to impose controls on credit and/or prices, or to take other action, which could
inhibit economic activity in China, and thereby harm the market for our
products.
Any
recurrence of severe acute respiratory syndrome, or SARS, or another widespread
public health problem, could harm our operations.
A renewed
outbreak of SARS or another widespread public health problem in China, where our
operations are conducted, could have a negative effect on our
operations.
Our
operations may be impacted by a number of health-related factors, including the
following:
|
·
|
Quarantines
or closures of some of our offices which would severely disrupt our
operations,
|
|
·
|
The
sickness or death of our key officers and employees,
and
|
|
·
|
A
general slowdown in the Chinese
economy.
|
Any of
the foregoing events or other unforeseen consequences of public health problems
could damage our operations.
Restrictions
on currency exchange may limit our ability to receive and use our revenues
effectively.
The
majority of our revenues will be settled in Renminbi and U.S. dollars, and any
future restrictions on currency exchanged may limit our ability to use revenue
generated in Renminbi to fund any future business activities outside China or to
make dividend or other payments in the U.S. dollars. Although the Chinese
government introduced regulations in 1996 to allow greater convertibility of the
Renminbi for current account transactions, significant restrictions still
remain, including primarily the restriction that foreign-invested enterprises
may only buy, sell or remit foreign currencies after providing valid commercial
documents, at those banks in China authorized to conduct foreign exchange
business. In addition, conversion of Renminbi for capital account items,
including direct investment and loans, is subject to governmental approval in
China, and companies are required to open and maintain separate foreign exchange
accounts for capital account items. We cannot be certain that the Chinese
regulatory authorities will not impose more stringent restrictions on the
convertibility of the Renminbi.
The
value of our securities will be affected by the foreign exchange rate between
U.S. dollars and Renminbi.
The value
of our common stock will be affected by the foreign exchange rate between U.S.
dollars and Renminbi, and between those currencies and other currencies in which
our sales may be denominated. For example, to the extent that we need to convert
U.S. dollars into Renminbi for our operational needs and should the Renminbi
appreciate against the U.S. dollar at that time, our financial position, the
business of the company, and the price of our common stock may be harmed.
Conversely, if we decide to convert our Renminbi into U.S. dollars for the
purpose of declaring dividends on our common stock or for other business
purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar
equivalent of our earnings from our subsidiaries in China would be
reduced.
Because our funds are held in banks
which do not provide insurance, the failure of any bank in which we deposit our
funds could affect our ability to continue in
business.
Banks and
other financial institutions in the PRC do not provide insurance for funds held
on deposit. As a result, in the event of a bank failure, we may not have access
to funds on deposit. Depending upon the amount of money we maintain in a bank
that fails, our inability to have access to our cash could impair our
operations, and, if we are not able to access funds to pay our suppliers,
employees and other creditors, we may be unable to continue in
business.
We may
experience barriers to conducting business and trade in our targeted emerging
markets in the form of delayed customs clearances, customs duties and tariffs.
In addition, we may be subject to repatriation taxes levied upon the exchange of
income from local currency into foreign currency, substantial taxes of profits,
revenues, assets and payroll, as well as value-added tax. The markets in
which we plan to operate may impose onerous and unpredictable duties, tariffs
and taxes on our business and products, and there can be no assurance that this
will not reduce the level of sales that we achieve in such markets, which would
reduce our revenues and profits.
Failure
to comply with the United States Foreign Corrupt Practices Act could subject us
to penalties and other adverse consequences.
We are
subject to the United States Foreign Corrupt Practices Act, which generally
prohibits United States companies from engaging in bribery or other prohibited
payments to foreign officials for the purpose of obtaining or retaining
business. Foreign companies, including some that may compete with us, are not
subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft
and other fraudulent practices occur from time-to-time in the PRC. We can make
no assurance, however, that our employees or other agents will not engage in
such conduct for which we might be held responsible. If our employees or other
agents are found to have engaged in such practices, we could suffer severe
penalties and other consequences that may have a material adverse effect on our
business, financial condition and results of operations.
We
currently have a US$3 million product liability. However, we cannot
guarantee that this amount would cover the liability in the event of the failure
of any of our products. This is particularly true given our plan to
significantly expand our sales into international markets, like the United
States, where product liability claims are more prevalent.
Except
for the product liability insurance, we do not have other insurance such as
business liability or disruption insurance coverage for our operations in the
PRC.
We do not
maintain a reserve fund for warranty or defective products claims. Our costs
could substantially increase if we experience a significant number of warranty
claims. We have not established any reserve funds for potential warranty claims
since historically we have experienced few warranty claims for our products so
that the costs associated with our warranty claims have been low. If we
experience an increase in warranty claims or if our repair and replacement costs
associated with warranty claims increase significantly, it would have a material
adverse effect on our financial condition and results of
operations.
RISKS
RELATED TO THE MARKET FOR OUR STOCK
Our
common stock is quoted on the OTC Bulletin Board which may have an unfavorable
impact on our stock price and liquidity.
Our
common stock is quoted on the OTC Bulletin Board. The OTC Bulletin Board is a
significantly more limited market than the New York Stock Exchange or NASDAQ
system. The quotation of our shares on the OTC Bulletin Board may result in a
less liquid market available for existing and potential stockholders to trade
shares of our common stock, could depress the trading price of our common stock
and could have a long-term adverse impact on our ability to raise capital in the
future.
The
market price of our common stock may be volatile.
The
market price of our common stock has been subject to wide fluctuations. The
market price of our common stock in the future is likely to continue to be
subject to wide fluctuations in response to various factors, including, but not
limited to, the following:
|
variations
in our operating results and financial conditions;
|
|
actual
or anticipated announcements of technical innovations, new product
developments, or design wins by us or our
competitors;
|
|
general
conditions in the foodware industries; and
|
|
worldwide
economic and financial conditions.
|
In
addition, the public stock markets have recently experienced extreme price and
volume fluctuations that have particularly affected the market price for many
technology companies and that have often been unrelated to the operating
performance of these companies. The broad market fluctuations and other factors
may continue to adversely affect the market price of our common
stock.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
Forward Looking
Statements
Some of
the statements contained in this Form 8-K that are not historical facts are
“forward-looking statements” which can be identified by the use of terminology
such as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,”
“intends,” or the negative or other variations, or by discussions of strategy
that involve risks and uncertainties. We urge you to be cautious of the
forward-looking statements, that such statements, which are contained in this
Form 8-K, reflect our current beliefs with respect to future events and involve
known and unknown risks, uncertainties and other factors affecting our
operations, market growth, services, products and licenses. No assurances can be
given regarding the achievement of future results, as actual results may differ
materially as a result of the risks we face, and actual events may differ from
the assumptions underlying the statements that have been made regarding
anticipated events. Factors that may cause actual results, our performance or
achievements, or industry results, to differ materially from those contemplated
by such forward-looking statements include without limitation:
|
|
|
Our ability to attract and retain
management, and to integra
te and maintain technical
information and management information systems;
|
|
|
|
|
|
|
|
Our ability to raise capital when
needed and on acceptable terms and conditions;
|
|
|
|
|
|
|
|
The intensity of competition;
and
|
|
|
|
|
|
|
|
General economic
conditions.
|
All written and oral forward-looking
statements made in connection with this Form 8-K that are attributable to us or
persons acting on our behalf are expressly qualified in their entirety by these
cautionary statements. Given the uncertainties that surround such statements,
you are cautioned not to place undue reliance on such forward-looking
statements
.
Overview
The
Company is a leading global technology-driven company focused on the marketing
and selling of high-quality, single-use bio-based tableware for the foodservice
packaging industry currently available worldwide. Product features
include being oil, water, heat resistant, microwave and oven safe, and made with
all natural, abundant, and renewable materials that are 100% decomposable,
biodegradable and recyclable. The Company’s product line includes
food containers, plates, trays, bowls, lids and other disposable packaging
containers in the industry.
EWIP owns
various names, trademarks, patents, equipment and procedures for the
manufacture, distribution and sales of organically sensitive, bio-based
tableware, packaging and other cellulose-based products (“the
Products”). Additionally, EWIP owns certain product formulations,
production equipment, productions methods and procedures (“Trade Secrets”) which
may be used to produce the Products.
Extra
Ease, through its subsidiaries, markets and sells bio-based food packaging
products. Extra Ease has a licensing agreement with EWIP which grants Extra Ease
the right to utilize EWIP patented technologies to develop related products and
launch to market. Eatware products are marketed primarily under the Eatware
brand, as well as a line of products to select customers under private label
brands. Extra Ease is recognized for its customer service and its
products are known for their quality, reliability and consistency.
Plan
of Operations of the Company
In 2009
the Company plans to continue expanding its distributor partnerships
worldwide. At the same time, we will further enhance our brand
development and increase brand and environmental awareness to the
public.
Moreover,
the Company will seek to further expand its manufacturing base by establishing
partnership with qualified licensed factories, allowing them to utilize the
Company’s patented manufacturing process and thereby generating royalty income.
The selling of proprietary additive to these licensed factories will also
contribute to the Company’s revenue.
Results
of Operations of Extra Ease Limited
The
following table summarizes the results of our operations during the nine-months
period ended December 31 2008 and 2007, and provides information regarding the
dollar and percentage increase or (decrease) from the nine-months period ended
December 31, 2007 to the nine months period ended December 31,
2008.
All
amount, other than percentages, in millions of U.S dollars.
|
|
9
Months ended December 31,
|
|
|
|
|
|
|
|
Item
|
|
2008
|
|
|
2007
|
|
|
Increase
(Decrease)
|
|
|
%
Increase
(%
Decrease)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
2.08
|
|
|
$
|
0.65
|
|
|
$
|
1.44
|
|
|
|
222.5
|
%
|
Cost
of
Goods Sold
|
|
|
1.62
|
|
|
|
0.58
|
|
|
|
1.04
|
|
|
|
179.3
|
%
|
Gross
profit
|
|
|
0.46
|
|
|
|
0.07
|
|
|
|
0.40
|
|
|
|
607.7
|
%
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
|
1.19
|
|
|
|
1.33
|
|
|
|
(0.14
|
)
|
|
|
-10.2
|
%
|
EBITDA
|
|
|
(0.73
|
)
|
|
|
(1.26
|
)
|
|
|
0.53
|
|
|
|
42.1
|
%
|
Depreciation
and amortization
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
N/A
|
|
EBIT
|
|
|
(0.73
|
)
|
|
|
(1.26
|
)
|
|
|
0.53
|
|
|
|
42.1
|
%
|
Other
Income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(0.01
|
)
|
|
|
0.00
|
|
|
|
(0.01
|
)
|
|
|
N/A
|
|
Interest
income
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
(0.00
|
)
|
|
|
N/A
|
|
Net
interest expense
|
|
|
(0.01
|
)
|
|
|
0.00
|
|
|
|
(0.01
|
)
|
|
|
N/A
|
|
Pretax
income
|
|
|
(0.74
|
)
|
|
|
(1.26
|
)
|
|
|
0.52
|
|
|
|
41.6
|
%
|
Income
tax expense
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(0.74
|
)
|
|
$
|
(1.26
|
)
|
|
|
0.52
|
|
|
|
41.6
|
%
|
Nine
Months Ended December 31, 2008 Compared to Nine Months Ended December 31,
2007
Net sales
. Net sales
increased $1.44 million, or 222.5%, for the nine months ended December 31, 2008
compared to the prior year period. The increase in sales primarily
resulting from distributors’ orders income generated from the third quarter of
2007 and the continued expansion of our sales force through distributor
partnerships around the world.
Gross Profits
. For the nine
months ended December 31, 2008, gross profit increased by $0.4 million over the
prior year period. Due to possible volatility in raw materials and
energy pricing, we will further enhance our efficiency and lowering costs for
freight and distribution as well as increasing in average sales price to
partially offset the increasing costs to generate the best gross profit
margin.
Selling, General and Administrative
Expenses
. Selling, general and administrative expenses decreased $0.14
million for the nine months ended December 31, 2008 compared to the nine months
ended December 31, 2007. As a percentage of net sales, selling,
general and administrative expenses were 57% in 2008 versus 205% in 2007 in the
comparable period. The high selling, general and administrative
expenses is due to more resources were put into product research and development
as well as advertising of the product. We expect the selling, general
and administrative expenses will become stable or further reduced as sales
increases.
Results
of Operations of Eatware Intellectual Properties Limited
The
following table summarizes the results of our operations during the nine-months
period ended December 31 2008 and 2007, and provides information regarding the
dollar and percentage increase or (decrease) from the nine-months period ended
December 31, 2007 to the nine months period ended December 31,
2008.
All
amount, other than percentages, are in U.S dollars
|
|
9
Months ended December 31,
|
|
|
|
|
|
|
|
Item
|
|
2008
|
|
|
2007
|
|
|
Increase
(Decrease)
|
|
|
%
Increase
(%
Decrease)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
N/A
|
%
|
Cost
of
Goods Sold
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
N/A
|
%
|
Gross
profit
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
N/A
|
%
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
|
6,196.00
|
|
|
|
610.00
|
|
|
|
5,586.00
|
|
|
|
915.7
|
%
|
EBITDA
|
|
|
(6,196.00
|
)
|
|
|
(610.00
|
)
|
|
|
(5,586.00
|
)
|
|
|
915.7
|
%
|
Depreciation
and amortization
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
N/A
|
|
EBIT
|
|
|
(6,196.00
|
)
|
|
|
(610.00
|
)
|
|
|
(5,586.00
|
)
|
|
|
915.7
|
%
|
Other
Income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
N/A
|
|
Interest
income
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
(0.00
|
)
|
|
|
N/A
|
|
Net
interest expense
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
(0.00
|
)
|
|
|
N/A
|
|
Pretax
income
|
|
|
(6,196.00
|
)
|
|
|
(610.00
|
)
|
|
|
(5,586.00
|
)
|
|
|
915.7
|
%
|
Income
tax expense
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(6,196.00
|
)
|
|
$
|
(610.00
|
)
|
|
|
(5,586.00
|
)
|
|
|
915.7
|
%
|
Nine
Months Ended December 31, 2008 Compared to Nine Months Ended December 31,
2007
Net sales
. Net sales were $0
for the nine months ended December 31, 2008 and nine months ended December 31,
2007.
Gross Profits
. Gross profits
were $0 for the nine months ended December 31, 2008 and nine months ended
December 31, 2007.
Selling, General and Administrative
Expenses
. Selling, general and administrative expenses increased $5,586
dollars for the nine months ended December 31, 2008 compared to the nine months
ended December 31, 2007. The selling, general and administrative
expenses increased due to registration of trademarks and patents in different
countries.
Liquidity
and Capital Resources
The Company continued to
stre
ngthen its balance
sheet in 200
8
and the first quarter
of 200
9
. Total assets and s
tockholders
’
equity have both increased.
The Company utilizes short term bank
financing to provide for its liquidity needs as the Company is typically paid
for its products adequate to allow the Company to operate at present levels and
to sustain moderate
growth,
the Company has received large, potentially profitable orders which it has been
compelled to refuse due to lack of plant capacity.
Management believes that the
Company
’
s reputation for quality production will
result in more large orders that will
be difficult to fill without
significant plant expansion and the required financing. Management will seek
additional equity or debt financing for the Company to permit plant expansion
and to explore the feasibility of
forming strategic partnerships with
d
istributors and
licensees
. However, the Company does not have any
commitments for additional financing and no assurance is given that any
additional financing will be available or that, if available, it will be on
terms that are favorable to our shareholde
rs.
Management
Resigning
Officers and Directors
The below
officers and directors resigned as of March 31, 2009:
Name
|
|
Age
|
|
Position(s)
|
|
|
|
|
|
Gu
Xianzhong
|
|
52
|
|
President,
CEO and a Director
|
|
|
|
|
|
Gu
Changhong
|
|
57
|
|
COO
and VP Manufacturing
|
|
|
|
|
|
Chaojun
Huang
|
|
33
|
|
Secretary
|
Gu Xianzhong
was a founder of
SKYEDC in where he has worked since 1997 and has over 20 years of experience in
managing shoe operations in the PRC. Gu Xianzhong has been a director and our
CEO since June 2007.
Gu Changhong
was appointed COO
and VP Manufacturing and Production in July 2007. Gu Changhong is a co-founder
if SKYEDC where he has worked since 1997. He has over 20 years of managerial
experience in the wholesale footwear industry including experience in shoe
design and export.
Chaojun Huang
has been was
appointed Secretary in July 2007. He has been CFO of SKYEDC since 2005. Prior
thereto, from 1999 to 2005, he was the financial director of Shanghai Taihe
Metallic Material Co., Ltd. He is a 1998 graduate of Hunan Financial and
Economical College and a registered accountant.
Newly
Elected and Appointed Officers and Directors
The
following sets forth the name and position of each of our newly elected and
appointed current executive officers and directors.
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Mr.
Wu, Man-Shing
|
|
39
|
|
Chairman
|
|
|
|
|
|
Mr.
So, Jonathan W.L.
|
|
43
|
|
C.E.O.,
C.F.O. and Director
|
|
|
|
|
|
Mr.
Megret, Laurent
|
|
42
|
|
C.O.O.
and
Director
|
Mr.
Wu, Man-Shing, Chairman
Mr. Wu,
Man-Shing (“Mr. Wu”), Chairman of the Company. Mr. Wu has over 10
years of experiences in administration management, policy establishment and
business development over an extensive of businesses covering toys, gifts,
garment manufacturing, retailing, global sourcing as well as decomposable food
container made from natural materials.
Mr.
So, Jonathan W.L., C.E.O., C.F.O. and Director
Mr. So,
Jonathan W.L. (“Mr. So”), C.E.O., C.F.O. and a director of the Company. With his
wealth of international business experience, Mr. So leads the finance, business
management, sales & marketing and strategic planning divisions of the
Company. Mr. So continues to devote significant resources in
developing the Company and keeping the Company on track for steady sales
growth.
Mr. So
had been nurtured to do business since childhood. Mr. So’s family started a
manufacturing business in 1970. When the China’s economic reform
started in 1979, Mr. So’s family was one of the first investors to establish a
factory in Jiangsu Province, China. In 1988, Mr. So’s family further
expanded their factories to Shenzhen and Shanghai and employed over 5000
workers. Sales orders have been obtained from Europe and the United
States.
Besides
toys, gifts and garment manufacturing businesses, Mr. So further enhances the
business in retailing, global sourcing, franchising, internet, animation, comic
publishing, media as well as a self-invented single-use 100% decomposable food
container made from natural materials.
Mr.
Megret, Laurent, C.O.O. and Director
Mr.
Megret, Laurent (“Mr. Megret”), C.O.O. and a Director of the
Company. With over 18 years of experiences in sales and marketing,
Mr. Megret primarily engaged in clientele sales strategy and communications
along side operational management for development opportunities. From
Reinsurance Captives to EATware, he has looked after very specific niche markets
and put tremendous efforts to manage international clientele requirements and
convert them in better partnership and increased returns. Laurent enjoy working
in very dynamic international and multi-cultural structures.
Significant
Employees
Other
than the officers described above, we do not expect any other individuals to
make a significant contribution to our business.
Family
Relationships
There are
no family relationships among our officers, directors, or persons nominated for
such positions.
Involvement
in Certain Legal Proceedings
None of
our directors, executive officers, promoters or control persons has been
involved in any of the following events during the past five years:
|
|
Any
bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of
bankruptcy or within two years prior to that
time;
|
|
|
Any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor
offenses);
|
|
|
Being
subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities;
or
|
|
|
Being
found by a court of competent jurisdiction (in a civil violation), the SEC
or the Commodity Future Trading Commission to have violated a federal or
state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
|
From time
to time we may be a defendant and plaintiff in various legal proceedings arising
in the normal course of our business. We are currently not a party to any
material pending legal proceedings or government actions, including any
bankruptcy, receivership, or similar proceedings. In addition, management is not
aware of any known litigation or liabilities involving the operators of our
properties that could affect our operations. Should any liabilities incurred in
the future, they will be accrued based on management’s best estimate of the
potential loss. As such, there is no adverse effect on our consolidated
financial position, results of operations or cash flow at this time.
Furthermore, Management of the Company does not believe that there are any
proceedings to which any director, officer, or affiliate of the Company, any
owner of record of the beneficially or more than five percent of the common
stock of the Company, or any associate of any such director, officer, affiliate
of the Company, or security holder is a party adverse to the Company or has a
material interest adverse to the Company.
Audit
Committee
The
functions of the Audit Committee are currently carried out by our Board of
Directors. Our Board of Directors has determined that we do not have an audit
committee financial expert on our Board of Directors carrying out of the duties
of the Audit Committee. Our Board of Directors has determined that
the cost of hiring a financial expert to act as a director of us and to be a
member of the Audit Committee or otherwise perform Audit Committee functions
outweighs the benefits of having a financial expert on the Audit
Committee.
Executive
Compensation
The
following table sets forth information concerning the total compensation that
the Company has paid or that has accrued on behalf of Company’s chief executive
officer and other executive officers with annual compensation exceeding $100,000
in the last fiscal year.
Name
& Principal Position
|
|
|
Inception
to
3/31/08
|
|
|
Salary
(HK$)
|
|
|
Bonus
(HK$)
|
|
Stock
Awards ($)
|
|
Option
Awards (1)
|
|
Non-Equity
Incentive Plan Compensation ($)
|
|
Change
in Pension Value
and
Non-Qualified
Deferred Compensation Earnings ($)
|
|
All
Other Compensation ($)
|
|
|
Total
($)
|
|
Mr.
Megret, Laurent,
COO,
Director
|
|
|
2008
2007
2006
|
|
$
$
$
|
398,970
122,031
0
|
|
$
$
$
|
33,000
0
0
|
|
|
|
|
|
|
|
|
|
|
|
$
|
431,970
122,031
0
|
|
Option
grants in the last fiscal year
We did
not grant any options or stock appreciation rights to our named executive
officers or directors in the fiscal year of and. As of March 31,
2009, none of our executive officers or directors owned any of our derivative
securities.
Management
agreements
We have
no existing or proposed management agreements.
Compensation
of Directors
We do not
compensate our directors for their time spent on our behalf, but they are
entitled to receive reimbursement for all out of pocket expenses incurred for
attendance at our Board of Directors meetings.
Pension and Retirement
Plans
Currently,
we do not offer any annuity, pension or retirement benefits to be paid to any of
our officers, directors or employees. There are also no compensatory plans or
arrangements with respect to any individual named above which results or will
result from the resignation, retirement or any other termination of employment
with our company, or from a change in our control.
Employment
Agreements
On
November 10, 2008, a subsidiary of the Company entered into a permanent and
full-time employment agreement with Laurent Megret, covering the terms and
conditions of Mr. Megret’s employment as a sales and marketing
manager. The agreement provides a base salary of HK$407,880
(US$52,427) per year.
Compensation
Committee
Currently,
the Board of Directors does not have a Compensation Committee. The
Board of Directors as a whole determines executive compensation.
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The
following table sets forth certain information, as of March 31, 2009, with
respect to any person (including any “group”, as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) who is known to us to be the beneficial owner of more than five
percent (5%) of any class of our voting securities, and as to those shares of
our equity securities beneficially owned by each of our directors and executive
officers and all of our directors and executive officers as a group. Unless
otherwise specified in the table below, such information, other than information
with respect to our directors and executive officers, is based on a review of
statements filed with the Securities and Exchange commission (the “Commission”)
pursuant to Sections 13 (d), 13 (f), and 13 (g) of the Exchange Act
with respect to our common stock. As of March 31, 2009, there were 119,445,571
shares of our common stock outstanding. Following completion of the Share
Exchange Transaction, there were 1,990,759,517 shares issued and
outstanding.
The
number of shares of common stock beneficially owned by each person is determined
under the rules of the Commission and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which such person has sole or
shared voting power or investment power and also any shares which the individual
has the right to acquire within sixty (60) days after the date hereof,
through the exercise of any stock option, warrant or other right. Unless
otherwise indicated, each person has sole investment and voting power (or shares
such power with his or her spouse) with respect to the shares set forth in the
following table. The inclusion herein of any shares deemed beneficially owned
does not constitute an admission of beneficial ownership of those
shares.
The table
also shows the number of shares beneficially owned as of April 6, 2009 by each
of our individual directors and executive officers, by our nominee directors and
executive officers and by all our current directors and executive officers as a
group.
|
|
Name
and Address of Beneficial Owner
|
|
|
|
|
Common
|
|
Gu
Xianzhong [former Director, President and C.E.O.]
488
Wai Qing Song Road, Waigang Town, Jiading District, Shanghai, PR
China
|
|
11,500,000
|
|
*
|
Common
|
|
Gu
Changhong [former C.O.O.]
488
Wai Qing Song Road, Waigang Town, Jiading District, Shanghai, PR
China
|
|
3,395,000
|
|
*
|
Common
|
|
Chaojun
Huang [former Secretary]
488
Wai Qing Song Road, Waigang Town, Jiading District, Shanghai, PR
China
|
|
1,000,000
|
|
*
|
Common
|
|
Wu,
Man-Shing [Chairman]
23/F,
Westin Center, 26 Hung To Road, Kwun Tong, Kowloon, Hong
Kong
|
|
1,521,313,946
(2)
|
|
76.42%
|
Common
|
|
Grasswind
Investments Limited
23/F,
Westin Center, 26 Hung To Road, Kwun Tong, Kowloon, Hong
Kong
|
|
1,400,000,000
(2)
|
|
70.32%
|
Common
|
|
Courdrey
Trading Limited
23/F,
Westin Center, 26 Hung To Road, Kwun Tong, Kowloon, Hong
Kong
|
|
121,313,946
(2)
|
|
6.09%
|
Common
|
|
So,
Jonathan W.L. [C.E.O., C.F.O. and Director]
23/F,
Westin Center, 26 Hung To Road, Kwun Tong, Kowloon, Hong
Kong
|
|
0
|
|
*
|
Common
|
|
Megret,
Laurent [C.O.O. and Director]
23/F,
Westin Center, 26 Hung To Road, Kwun Tong, Kowloon, Hong
Kong
|
|
0
|
|
*
|
All
executive officers and directors as a group (3
individuals)
|
|
1,521,313,946
|
|
76.42%
|
*
|
|
Represents
less than 1% beneficial ownership.
|
(1)
|
|
Percent
of Ownership is calculated in accordance with the Securities and Exchange
Commission’s Rule 13(d) — 13(d)(1). Beneficial ownership is
determined based on 1,990,759,517 shares issued and outstanding as of
April 5, 2009.
|
(2)
|
|
The
shares of common stock owned by Grasswind Investments Limited and Courdrey
Trading Limited are beneficially owned by Mr. Wu, Man-Shing, who exercises
the sole voting power over such
shares.
|
Description
of Securities
Our
authorized capital consists of 2,000,000,000 shares of common stock with a par
value of $0.001, and 10,000,000 shares of preferred stock with a par value of
$0.001. At the close of business on March 31, 2009, the Company had 119,445,571
shares of Common Stock issued and outstanding. Following completion of the Share
Exchange Transaction, there were 1,990,759,517 shares issued and
outstanding.
Holders
of the Company’s common stock are entitled to one vote for each share on all
matters submitted to a stockholder vote. Holders of common stock do not have
cumulative voting rights. Therefore, holders of a majority of the shares of
common stock voting for the election of directors can elect all of the
directors. Holders of the Company’s common stock representing a majority of the
voting power of the Company’s capital stock issued, outstanding and entitled to
vote, represented in person or by proxy, are necessary to constitute a quorum at
any meeting of stockholders. A vote by the holders of a majority of the
Company’s outstanding shares is required to effectuate certain fundamental
corporate changes such as liquidation, merger or an amendment to the Company’s
articles of incorporation.
Holders
of the Company’s common stock are entitled to share in all dividends that the
board of directors, in its discretion, declares from legally available funds. In
the event of a liquidation, dissolution or winding up, each outstanding share
entitles its holder to participate pro rata in all assets that remain after
payment of liabilities and after providing for each class of stock, if any,
having preference over the common stock. The Company’s common stock has no
pre-emptive rights, no conversion rights and there are no redemption provisions
applicable to the Company’s common stock.
Market
for Common Equity and Related Stockholders Matters
Our
shares of common stock, par value $0.001 per share, are quoted on the
Over-the-Counter Bulletin Board (“OTC.BB”) under the symbol “CHSH.OB”. We
initially traded under the symbol “INGY” commencing on April 13, 2007 and our
symbol was changed to “CHSH” on June 21, 2007 in connection with the change of
our name from Indigo Technologies, Inc. to China Shoe Holdings, Inc. and our
seven and six tenths for one stock split. As of March 31, 2009, there were 387
holders of record of our common stock. The number of holders does not include
the shareholders for whom shares are held in a "nominee" or "street" name. We
have not paid any cash dividends and do not anticipate doing so in the
foreseeable future. Future dividends, if any, will depend upon our results of
operations, financial condition, capital needs and such other factors as the
Board of Directors deems relevant.
The
following table sets forth the high and low closing prices for our common stock
for the quarters ending on the dates indicated since we were first granted a
symbol:.
|
|
MARKET
PRICE
$
|
|
|
|
HIGH
|
|
|
LOW
|
|
FISCAL
YEAR ENDED DECEMBER 31, 2007:
|
|
|
|
|
|
|
December
31
|
|
$
|
0.25
|
|
|
$
|
0.09
|
|
September
30
|
|
$
|
0.87
|
|
|
$
|
0.25
|
|
June
30 (commencing on July 13)
|
|
|
-
|
|
|
|
-
|
|
FISCAL
YEAR ENDED DECEMBER 31, 2008:
|
|
|
|
|
|
|
|
|
September
30
|
|
$
|
0.05
|
|
|
$
|
0.04
|
|
June
30
|
|
$
|
0.16
|
|
|
$
|
0.14
|
|
March
31
|
|
$
|
0.10
|
|
|
$
|
0.09
|
|
December
31
|
|
$
|
0.0075
|
|
|
$
|
0.01
|
|
The
closing sale prices in the table above reflect inter-dealer prices, without
retail mark-up or commissions and may not represent actual
transactions.
The shares quoted are subject to the
provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act
of 1934, as amended (the Exchange Act”), commonly referred to as the “penny
stock” rule. Section 15(g) sets forth certain requirements for transactions in
penny stocks and Rule 15g9(d)(1) incorporates the definition of penny stock
as that used in Rule 3a51-1 of the Exchange Act.
The
Commission generally defines penny stock to be any equity security that has a
market price less than $5.00 per share, subject to certain exceptions.
Rule 3a51-1 provides that any equity security is considered to be a penny
stock unless that security is: registered and traded on a national securities
exchange meeting specified criteria set by the Commission; authorized for
quotation on The NASDAQ Stock Market; issued by a registered investment company;
excluded from the definition on the basis of price (at least $5.00 per share) or
the registrant’s net tangible assets; or exempted from the definition by the
Commission. Trading in the shares is subject to additional sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors, generally persons with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse.
For
transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must have
received the purchaser’s written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
the monthly statements must be sent disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker dealers to
trade and/or maintain a market in the Company’s common stock and may affect the
ability of shareholders to sell their shares.
Legal
Proceedings
We are
not a party to any legal proceedings, nor are we aware of any contemplated or
pending legal proceedings against us
Recent
Sales of Unregistered Securities
The
following is a history of CHSH’s sales of unregistered securities since its
incorporation on January 24, 2005.
As
disclosed above, on March 31, 2009, the Company entered into a Share Exchange
Agreement pursuant to which the Company agreed to acquire all of the issued and
outstanding shares of common stock of Extra Ease and EWIP. As
consideration, the Company shall issue a total of 1,871,313,946 shares of its
common stock.
On March
31, 2009, the Company entered into an Agreement for Sale of Stock to which Feng
Guang Yuan agreed to purchase all of the issued and outstanding stock, i.e.
945,000 shares of Wholly Success, a British Virgin Islands corporation (“WS”)
for a total consideration of $100.
On March
24, 2008, the Company entered into an Equity Line Agreement (the “ELA”) and a
Registration Rights Agreement (“RRA”) with Magellan Global Fund, L.P., a
Delaware limited partnership with offices in San Diego, California (“Magellan”).
The ELA provides that he Company will receive up to $2,000,000 from Magellan in
connection with the issuance to Magellan of Common Stock. Magellan was issued
571,429 shares of the Company’s common stock upon execution of the ELA and will
be issued additional shares of the Company’s common stock (having a market value
of $40,000 based on the closing bid price on the effective date of the
registration statement on such effective date.
On
January 30, 2008, the Company entered into a Regulation S Subscription Agreement
with Yu Guorui a resident and national of the Peoples Republic of China pursuant
to which it sold 4,230,769 shares (approximately 4.1% of the 104,230,769
outstanding shares) to such investor for US$550,000.00.
On July
3, 2007, a closing was held pursuant to an Agreement and Plan of Reorganization,
dated as of June 29, 2007, (the “Agreement”) by and among the Company, Wholly
Success Technology Group Limited, a British Virgin Islands Corporation, (WSTG)
and WSTG’s shareholders. Pursuant to the Agreement, each Shareholder of WSTG
exchanged all of his shares in WSTG for shares in the Company with an aggregate
of 69,615,000 shares in the Company being issued in exchange for the shares in
WSTG. In addition, the Agreement provided that China Venture Partners, Inc.
(“CVP”), a Delaware corporation, would be issued 15,185,000 shares in the
Company at their par value of $.001 per share for services pursuant to a
consulting agreement which the Company and CVP have agreed to value at
$15,185.
On April
16, 2006, a total of 4,125,000 shares of Common Stock were issued to our
director in exchange for cash in the amount of $4,125 U.S., or $.001 per share.
On April 20, 2006, a total of 1,000,000 shares of Common Stock were issued to 4
unrelated shareholders in exchange for cash in the amount of $10,000 U.S., or
$.01 per share. These securities were issued in reliance upon the exemption
contained in Section 4(2) of Securities Act of 1933
All of
the above noted securities were sold in reliance on Regulation D,
Section 504 of the Securities Act of 1933. All shareholders are subject to
Rule 144 of the Securities Act of 1933 with respect to resale. We relied on
this exemption from registration due to the fact that at the time of these sales
we were not subject to the reporting requirements of Section 13 or 15(d) of
the Securities Act of 1933, not an investment company, we had a specific
business plan at the time we sold the securities, we are not a blank check
company, as that term is defined in Rule 419(a)(2) of Regulation C or
Rule 504 (a)(3) of Regulation D of the Securities Act of 1933, and the
aggregate offering price was less that $1,000,000. All of the subscribers are
directors and/or officers of us.
No
underwriters were used, and no commissions or other remuneration was paid except
to the company for any of the above noted.
Indemnification
of Directors and Officers
The
Company’s directors and executive officers are indemnified as provided by the
Nevada General Corporation law and its Bylaws. These provisions state that the
Company’s directors may cause the Company to indemnify a director or former
director against all costs, charges and expenses, including an amount paid to
settle an action or satisfy a judgment, actually and reasonably incurred by him
as a result of him acting as a director. The indemnification of costs can
include an amount paid to settle an action or satisfy a judgment. Such
indemnification is at the discretion of the Company’s board of directors and is
subject to the Securities and Exchange Commission’s policy regarding
indemnification.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, or otherwise, the Company 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.
Item 3.02 Unregistered Sales of
Equity Securities.
See
Item 2.01.
Item 4.01 Changes in
Registrant’s Certifying Accountant.
See
Item 2.01.
Item 5.01 Changes in Control of
Registrant.
See
Item 2.01.
Item 5.02 Departure of Directors
or Principal Officers; Election of Directors; Appointment of Principal
Officers.
See
Item 2.01.
In
connection with the acquisition of Extra Ease Limited and Eatware Intellectual
Properties Limited, the Company is changing its name to EATware Inc. with a
trading symbol of EATW. The Company is also changing its fiscal
year-end from December 31 to March 31.
Item 5.06 Change in Shell
Company Status.
See
Item 2.01
Item 9.01 Financial Statements
and Exhibits.
|
Financial
statements of business
acquired.
|
Exhibit
99.1 - Audited consolidated financial statements of Extra Ease Limited for the
years ended March 31, 2008 and 2007.
Exhibit
99.2 - Audited financial statements of EATware Intellectual Properties Limited
for the year ended March 31, 2008 and the period from inception (December 16,
2006) to March 31, 2007.
Exhibit
99.3 - Unaudited consolidated financial statements of Extra Ease Limited
for the nine months ended December 31, 2008 and 2007.
Exhibit
99.4 - Unaudited financial statements of EATware Intellectual Properties
Limited for the nine months ended December 31, 2008 and 2007.
|
Pro
Forma Financial
Information.
|
Exhibit
99.5 - Pro forma consolidated financial statements of the Registrant, Extra Ease
Limited and EATware Intellectual Properties Limited, as of and for the nine
months ended December 31, 2008.
Exhibit
Number
|
Description
|
10.1
|
Agreement
for Share Exchange, dated as of March 31, 2009, by and among Extra Ease
Limited, Eatware Intellectual Properties Limited, the Company, and the
shareholders of Extra Ease and EWIP (incorporated by reference to Form 8-K
filed with the Securities and Exchange Commission on March 31,
2009)
|
10.2
|
Agreement
for Sale of Stock by and between the Company and FENG Guang Yuan dated
March 31, 2009 (incorporated by reference to Form 8-K filed with the
Securities and Exchange Commission on April 7,
2009)
|
10.3
|
Employment
Agreement by and between the Company and Mr. Megret,
Laurent
|
10.4
|
Letter
of indemnification with Appendix (incorporated by reference to Form 8-K
filed with the Securities and Exchange Commission on April 7,
2009)
|
10.5
|
Valuation
report of the Intellectual Property in the technology to produce
environmentally preferable food packaging products held by EATware
Intellectual Properties Limited dated December 23, 2008 by B.I. Appraisals
Limited (incorporated by reference to Form 8-K filed with the Securities
and Exchange Commission on April 7, 2009)
|
99.1
|
Audited
consolidated financial statements of Extra Ease Limited for the years
ended March 31, 2008 and 2007
|
99.2
|
Audited
financial statements of EATware Intellectual Properties Limited for the
year ended March 31, 2008 and the period from inception (December 16,
2006) to March 31, 2007
|
99.3
|
Unaudited
consolidated financial statements of Extra Ease Limited for the nine
months ended December 31, 2008 and 2007
|
99.4
|
Unaudited
financial statements of EATware Intellectual Properties Limited for the
nine months ended December 31, 2008 and 2007
|
99.5
|
Pro
forma consolidated financial statements of the Registrant, Extra Ease
Limited and EATware Intellectual Properties Limited, as of and for the
nine months ended December 31, 2008
|
SIGNATURES
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
|
CHINA
SHOE HOLDINGS, INC.
|
|
|
|
|
|
|
|
|
Date:
May
22, 2009
|
By:
|
/s/
Wu,
Man-Shing
|
|
|
|
Name:
|
Wu,
Man-Shing
|
|
|
|
Title:
|
Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
So,
Jonathan W.L.
|
|
|
|
Name:
|
So,
Jonathan W.L.
|
|
|
|
Title:
|
C.E.O.,
C.F.O and Director
|
|
|
|
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By:
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/s/
Megret,
Laurent
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Name:
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Megret,
Laurent
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Title:
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C.O.O.
and Director
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China Shoe (CE) (USOTC:CHSH)
Historical Stock Chart
From Aug 2024 to Sep 2024
China Shoe (CE) (USOTC:CHSH)
Historical Stock Chart
From Sep 2023 to Sep 2024