-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PKJy2jcJef1TKTy5mBDJxFIioWYC/qmm4XO0Ch68GmwC4/YHXFIgi3rl7MT0peFV AYRYod6z/dAfUDJ+kNDZHg== 0000949353-05-000365.txt : 20050914 0000949353-05-000365.hdr.sgml : 20050914 20050914110506 ACCESSION NUMBER: 0000949353-05-000365 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20050914 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Titanium Group LTD CENTRAL INDEX KEY: 0001338520 IRS NUMBER: 000000000 STATE OF INCORPORATION: D8 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-128302 FILM NUMBER: 051083694 BUSINESS ADDRESS: STREET 1: 4/F, BOCG INSURANCE TOWER STREET 2: 134-136 DES VOEUX CENTRAL CITY: HONG KONG STATE: K3 ZIP: NONE BUSINESS PHONE: 852-3427-3177 MAIL ADDRESS: STREET 1: 4/F, BOCG INSURANCE TOWER STREET 2: 134-136 DES VOEUX CENTRAL CITY: HONG KONG STATE: K3 ZIP: NONE S-1 1 s-1_titanium.txt S-1 TITANIUM As filed September 14, 2005 File No. 333-_________ - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 TITANIUM GROUP LIMITED (Name of registrant as specified in its charter)
BRITISH VIRGIN ISLANDS 7373 NOT APPLICABLE (State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.) incorporation or organization Classification Code Number)
4/F, BOCG INSURANCE TOWER 134-136 DES VOEUX ROAD CENTRAL, HONG KONG (852) 3427 3177 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) JASON MA, CHIEF EXECUTIVE OFFICER 4/F, BOCG INSURANCE TOWER 134-136 DES VOEUX ROAD CENTRAL, HONG KONG (852) 3427 3177 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies of all communications to: FAY M. MATSUKAGE, ESQ. DILL DILL CARR STONBRAKER & HUTCHINGS, P.C. 455 SHERMAN STREET, SUITE 300 DENVER, COLORADO 80203 (303) 777-3737; (303) 777-3823 FAX Approximate date of proposed sale to the public: As soon as practicable after the effective date of the Registration Statement. If any of the securities registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]____________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]_____________ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]_____________ If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ] CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED UNIT PRICE REGISTRATION FEE - -------------------------------------------------------------------------------------------------------------------- Common stock, $0.01 par 9,956,000 shares $0.20 $1,991,200 $234.36 value per share - --------------------------------------------------------------------------------------------------------------------
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ii Subject to Completion, Dated September 14, 2005 TITANIUM GROUP LIMITED UP TO 9,956,000 SHARES OF COMMON STOCK Unless the context otherwise requires, the terms "we", "our" and "us" refers to Titanium Group Limited The selling shareholders named in this prospectus are offering 9,956,000 shares of common stock of Titanium Group Limited. We will not receive any of the proceeds from the sale of these shares. The shares were acquired by the selling shareholders directly from us in a private offering of our common stock that was exempt from registration under the securities laws. The selling shareholders have set an offering price of $0.20 until our shares are quoted on the OTC Bulletin Board and thereafter at prevailing market prices or privately negotiated prices. See "Selling Stockholders" on page 28 for more information about the selling shareholders. Our common stock is presently not traded on any market or securities exchange. The offering price may not reflect the market price of our shares after the offering. INVESTING IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. A DETAILED EXPLANATION OF THESE RISKS IS INCLUDED IN THE SECTION ENTITLED "RISK FACTORS" OF THIS PROSPECTUS, BEGINNING ON PAGE 4. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. ____________, 2005 TABLE OF CONTENTS PAGE PROSPECTUS SUMMARY.............................................................3 RISK FACTORS...................................................................4 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS..............................7 DILUTION.......................................................................7 DIVIDEND POLICY................................................................7 USE OF PROCEEDS................................................................8 SELECTED FINANCIAL DATA........................................................8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL..............................8 CONDITION AND RESULTS OF OPERATIONS............................................8 BUSINESS......................................................................11 MANAGEMENT....................................................................19 EXECUTIVE COMPENSATION........................................................21 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................22 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................24 TAXATION......................................................................24 DESCRIPTION OF SECURITIES.....................................................26 SELLING STOCKHOLDERS..........................................................28 PLAN OF DISTRIBUTION..........................................................31 LEGAL MATTERS.................................................................32 EXPERTS.......................................................................32 ADDITIONAL INFORMATION........................................................32 REPORTS TO STOCKHOLDERS.......................................................33 INDEX TO FINANCIAL STATEMENTS.................................................33 2 PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. You should carefully read this entire prospectus and the financial statements contained in this prospectus before purchasing our securities. TITANIUM GROUP LIMITED Through our wholly-owned subsidiary, Titanium Technology Limited ("Titanium Technology"), we develop and market biometrics technologies. Based in Hong Kong, with a research and development center in ShenZhen, China, and a sales representative office in the United States, we have built a strong network of expertise, comprising over 30 IT practitioners and researchers, enabling us to provide what we believe are top-quality biometrics products and professional services. In order to ensure the sustainability of cutting edge technologies, we have joined forces with Tsinghua University and the Chinese Academy of Science, Institute of Automation in the development of foundation technology and new products. Our offices are located at 4/F, BOCG Insurance Tower, 134-136 Des Voeux Road Central, Hong Kong. Our website is located at WWW.TITANIUM-TECH.COM. Information contained in our website is not part of this prospectus. THE OFFERING Securities offered..................9,956,000 shares of common stock. Use of proceeds.....................We will not receive any of the proceeds from the selling stockholders of shares of our common stock. Securities outstanding..............50,000,000 shares of common stock. Plan of distribution................The offering is made by the selling stockholders named in this prospectus, to the extent they sell shares. Sales may be made in the open market or in private negotiated transactions, at fixed or negotiated prices. See "Plan of Distribution." RISK FACTORS Investing in our securities involves a high degree of risk. You should consider carefully the information under the caption "Risk Factors" in deciding whether to purchase the Units. SUMMARY FINANCIAL INFORMATION The following summary financial data (expressed in United States Dollars) is derived from the unaudited financial statements for the six-month period ended June 30, 2005 and the fiscal years ended December 31, 2004, 2003 and 2002 for Titanium Technology, included elsewhere in this offering memorandum. In June 2005, we acquired 100% ownership of Titanium Technology, but did not have any operations prior to the acquisition. Accordingly, for accounting purposes, the historical financial statements of Titanium Technology will be the historical financial statements of the company. We have prepared the financial statements in accordance with generally accepted accounting principles. Our results of operations for any interim period do not necessarily indicate our results of operations for the full year. You should read this summary financial data in conjunction with "Management's Discussion and Analysis or Plan of Operation," "Business," and our financial statements. 3
INCOME STATEMENT DATA: SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, ----------------------------------------------------- 2005 2004 2003 2002 ---------------------------------------------------------------------- Revenues $ 841,860 $ 814,006 $ 558,679 $ 547,095 Net income $ 141,119 $ 258,204 $ 10,373 $ 66,801 Net income per common share (proforma)(1) $ .00 $ .01 $ .00 $ .00
BALANCE SHEET DATA: JUNE 30, 2005 DECEMBER 31, ----------------------------------------------------- 2004 2003 2002 ---------------------------------------------------------------------- Working capital $ 188,116 $ 236,560 $ 112,106 $ 104,727 Total assets $ 1,106,979 $ 738,252 $ 503,562 $ 331,051 Long-term debt $ - $ 182,051 $ 120,086 $ - Stockholders' equity $ 579,812 $ 388,948 $ 131,055 $ 120,809
- ----------------------- (1) Based on 47,000,000 shares outstanding as a result of the recapitalization with Titanium Group Limited for the years ended December 31, 2004, 2003, and 2002. RISK FACTORS Before deciding to invest in us or to maintain or increase your investment, you should carefully consider the risk factors described below, together with all other information in this prospectus and in our other filings with the SEC, before making an investment decision. If any of the following risks actually occurs, our business, financial conditions or operating results could be materially adversely affected. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. WE HAVE ONLY A LIMITED OPERATING HISTORY, WHICH MAKES IT DIFFICULT TO EVALUATE YOUR INVESTMENT IN OUR STOCK. Your evaluation of our business will be difficult because we have a limited operating history. Titanium Technology has been in business since February 2001. We face a number of risks encountered by early-stage companies, including our need to develop infrastructure to support growth and expansion; our need to obtain long-term sources of financing; our need to establish our marketing, sales and support organizations, as well as our distribution channels; our need to manage expanding operations; and our dependence on technology which could become incompatible or out of date. Our business strategy may not be successful, and we may not successfully address these risks. OUR SUCCESS AND ABILITY TO COMPETE DEPENDS UPON OUR ABILITY TO SECURE AND PROTECT OUR PROPRIETARY TECHNOLOGY. Our success depends on our ability to protect our proprietary technology. In the event that a third party misappropriates or infringes on our intellectual property, our business would be seriously harmed. Third parties may independently discover or invent competing technologies or reverse engineer our technology. We expect that if we should successfully licenses to use our technology, competitors may attempt to duplicate our technology. Even if we were to obtain copyright protection on the software, we would still have to enforce our rights against those who might attempt to infringe on our intellectual property. Such enforcement efforts are likely to be expensive and time-consuming. THE LOSS OF OUR OFFICERS AND DIRECTORS OR OUR FAILURE TO ATTRACT AND RETAIN ADDITIONAL PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS. Our success depends largely upon the efforts, abilities, and decision-making of our executive officers and directors. Although we believe that we maintain a core group sufficient for us to effectively conduct our operations, the loss of any of our key personnel could, to varying degrees, have an adverse effect on our operations and system development. We do not currently maintain "key-man" life insurance on any of our executives or directors, but we intend to have such policies in place in the near future. On the other hand, all of the key officers have employment contracts in place and we strongly believe that the stability of the core team will be maintained for a long period of 4 time. Nevertheless, the loss of any one of them would have a material adverse affect on us and technically, there can be no assurance that the services of any member of our management will remain available to us for any period of time. The knowledge and expertise of our officers and directors are critical to our operations. There is no guarantee that we will be able to retain our current officers and directors, or be able to hire suitable replacements in the event that some or all of our current management leave our company. In the event that we should lose key members of our staff, or if we are unable to find suitable replacements, we may not be able to maintain our business and might have to cease operations, in which case you might lose all of your investment. WE DERIVE A SIGNIFICANT PORTION OF OUR REVENUES FROM A FEW CUSTOMERS, THE LOSS OF WHICH COULD HAVE AN ADVERSE EFFECT ON OUR REVENUES. For the year ended December 31, 2004, 8 customers accounted for approximately 75% of our revenue. Since a small number of customers account for a substantial portion of our revenues, the loss of any of our significant customers would cause revenue to decline and could have a material adverse effect on our business. WE FACE COMPETITION FROM EXISTING AND POTENTIAL COMPETITORS. The current global political climate has heightened interest in the use of security solutions, and we expect competition in this field, which is already substantial, to intensify. Competitors in biometrics are developing and bringing to market products that use face recognition as well as eye, fingerprint, and other forms of biometric verification. Our products also will compete with other non-biometric technologies, such as certificate authorities and traditional keys, cards, surveillance systems, and passwords. Widespread adoption of one or more of these technologies or approaches in the markets we intend to target could significantly reduce the potential market for our systems and products. Due to our small size, it can be assumed that most if not all of our competitors have significantly greater financial, technical, marketing and other competitive resources. Many of our competitors and potential competitors have greater name recognition and more extensive customer bases that could be leveraged, for example, to position themselves as being more experienced, having better products, and being more knowledgeable than us. To compete, we may be forced to offer lower prices and narrow our marketing focus, resulting in reduced revenues. UNLESS WE KEEP PACE WITH CHANGING TECHNOLOGIES, WE COULD LOSE CUSTOMERS AND FAIL TO WIN NEW CUSTOMERS. Our future success will depend upon our ability to develop and introduce a variety of new products and services and enhancements to these new products and services in order to address the changing needs of the marketplace. We may not be able to accurately predict which technologies customers will support. If we do not introduce new products, services and enhancements in a timely manner, if we fail to choose correctly among technical alternatives, or if we fail to offer innovative products and services at competitive prices, customers may forego purchases of our products and services and purchase those of our competitors. SECURITY BREACHES IN SYSTEMS THAT WE SELL OR MAINTAIN COULD RESULT IN THE DISCLOSURE OF SENSITIVE GOVERNMENT INFORMATION OR PRIVATE PERSONAL INFORMATION THAT COULD RESULT IN THE LOSS OF CLIENTS AND NEGATIVE PUBLICITY. Many of the systems we sell manage private personal information and protect information involved in sensitive government functions. A security breach in one of these systems could cause serious harm to our business as a result of negative publicity and could prevent us from having further access to such systems or other similarly sensitive areas for other governmental clients. Our systems may also be affected by outages, delays and other difficulties. We do not have insurance coverage that would cover losses and liabilities that may result from such events. THE MARKET FOR OUR SOLUTIONS IS STILL DEVELOPING AND IF THE INDUSTRY ADOPTS STANDARDS OR A PLATFORM DIFFERENT FROM OUR PLATFORM, THEN OUR COMPETITIVE POSITION WOULD BE NEGATIVELY AFFECTED. The market for identity solutions is still emerging. The evolution of this market is in a constant state of flux that may result in the development of different technologies and industry standards that are not compatible with 5 our current products or technologies. In particular, the face recognition market lacks widely recognized industry standards for commercial use. A LIMITED NUMBER OF STOCKHOLDERS WILL COLLECTIVELY CONTINUE TO OWN A MAJORITY OF OUR COMMON STOCK AFTER THIS OFFERING AND MAY ACT, OR PREVENT CERTAIN TYPES OF CORPORATE ACTIONS, TO THE DETRIMENT OF OTHER STOCKHOLDERS. Immediately after this offering, our directors and officers will continue to own more than 75% of our outstanding common stock. Accordingly, these stockholders may, if they act together, exercise significant influence over all matters requiring stockholder approval, including the election of a majority of the directors and the determination of significant corporate actions after this offering. This concentration could also have the effect of delaying or preventing a change in control that could otherwise be beneficial to our stockholders. THERE IS A LACK OF A PUBLIC MARKET FOR OUR COMMON SHARES, WHICH LIMITS OUR SHAREHOLDERS ABILITY TO RESELL THEIR SHARES OR PLEDGE THEM AS COLLATERAL. There is currently no public market for our shares, and we cannot assure you that a market for our stock will develop. Consequently, investors may not be able to use their shares for collateral or loans and may not be able to liquidate at a suitable price in the event of an emergency. In addition, investors may not be able to resell their shares at or above the price they paid for them or may not be able to sell their shares at all. REGULATIONS RELATING TO "PENNY STOCKS" MAY LIMIT THE ABILITY OF OUR SHAREHOLDERS TO SELL THEIR SHARES AND, AS A RESULT, OUR SHAREHOLDERS MAY HAVE TO HOLD THEIR SHARES INDEFINITELY. If a market develops for our common stock, our common stock would, most likely, be subject to rules promulgated by the SEC relating to "penny stocks," which apply to non-NASDAQ companies whose stock trades at less than $5.00 per share or whose tangible net worth is less than $2,000,000. These rules require brokers who sell "penny stocks" to persons other than established customers and "accredited investors" to complete certain documentation, make suitability inquiries of investors, and provide investors with certain information concerning the risks of trading in the security. These rules may discourage or restrict the ability of brokers to sell our common stock and may affect the secondary market for the common stock. SINCE NEITHER NONE OF OUR OFFICERS AND DIRECTORS IS A UNITED STATES RESIDENT, IT MAY BE DIFFICULT TO ENFORCE ANY LIABILITIES AGAINST THEM. All of our officers and directors reside in Hong Kong. Accordingly, if events should occur that give rise to any liability on the part of these persons, shareholders would likely have difficulty in enforcing such liabilities. If a shareholder desired to sue these persons, the shareholder would have to serve such persons with legal process. Even if personal service is accomplished and a judgment is entered against that person, the shareholder would then have to locate assets of that person, and register the judgment in the foreign jurisdiction where assets are located. OUTSTANDING COMMON STOCK PURCHASE WARRANTS MAY NEGATIVELY IMPACT OUR ABILITY TO OBTAIN FUTURE FINANCING. As of the date of this prospectus, there are outstanding 3,000,000 common stock purchase warrants, each of which entitles the holder to purchase one share of common stock at an exercise price of $0.50 per share through June 30, 2008. The warrants are redeemable at $0.001 per warrant if the common stock is then listed on a recognized stock exchange or trading at $1.00 per share for 20 consecutive trading days. As long as the warrants remain unexercised and outstanding, the terms under which we may be able to obtain additional capital financing may be adversely affected. POTENTIAL FUTURE SALES UNDER RULE 144 MAY DEPRESS THE MARKET PRICE FOR THE COMMON STOCK. In general, under Rule 144, a person who has satisfied a one-year holding period may sell within any three-month period a number of shares which does not exceed the greater of one percent of the then outstanding shares of common stock. Rule 144 also permits the sale of shares without any quantity limitation by a person who is not an affiliate of us and who has beneficially owned the shares for a minimum period of two years. Therefore, the 6 possible sale of our shares may, in the future, have a depressive effect on the price of our common stock in the market, should one develop. WE ARE A BRITISH VIRGIN ISLANDS COMPANY AND, BECAUSE THE RIGHTS OF SHAREHOLDERS UNDER BRITISH VIRGIN ISLANDS LAW DIFFER FROM THOSE UNDER U.S. LAW, YOU MAY HAVE DIFFICULTY PROTECTING YOUR SHAREHOLDER RIGHTS. Our corporate affairs are governed by our memorandum and articles of association, the International Business Companies Act of the British Virgin Islands and the common law of the British Virgin Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under British Virgin Islands law are to a large extent governed by the common law of the British Virgin Islands. The common law of the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the British Virgin Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under British Virgin Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the British Virgin Islands has a less developed body of securities laws as compared to the United States, and some states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law. In addition, British Virgin Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. The British Virgin Islands courts are also unlikely to recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws; and to impose liabilities against us, in original actions brought in the British Virgin Islands, based on certain civil liability provisions of U.S. securities laws that are penal in nature. There is no statutory recognition in the British Virgin Islands of judgments obtained in the United States, although the courts of the British Virgin Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would if we were incorporated in the United States. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus includes "forward-looking statements." All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "project," "estimate," "anticipate," "believe," or "continue" or the negative thereof or variations thereon or similar terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurance that such expectations will prove to have been correct. DILUTION The common stock to be sold by the selling shareholders is common stock that is currently issued and outstanding. Accordingly, there will be no dilution to our existing shareholders. DIVIDEND POLICY To date, we have not declared or paid any dividends on our common stock. We do not intend to declare or pay any dividends on our common stock in the foreseeable future, but rather to retain any earnings to finance the 7 growth of our business. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual and legal restrictions and other factors the board of directors deems relevant. USE OF PROCEEDS We will not receive any of the proceeds from the selling stockholders of shares of our common stock. However, we may receive the sale price of any common stock we sell to the selling stockholders upon exercise of the warrants. We expect to use the proceeds received from the exercise of warrants, if any, for general working capital purposes. SELECTED FINANCIAL DATA The following summary financial data (expressed in United States Dollars) is derived from the unaudited financial statements for the six-month period ended June 30, 2005 and the fiscal years ended December 31, 2004, 2003 and 2002 for Titanium Technology, included elsewhere in this offering memorandum. In June 2005, we acquired 100% ownership of Titanium Technology, but did not have any operations prior to the acquisition. Accordingly, for accounting purposes, the historical financial statements of Titanium Technology will be the historical financial statements of the company. We have prepared the financial statements in accordance with generally accepted accounting principles. Our results of operations for any interim period do not necessarily indicate our results of operations for the full year. You should read this summary financial data in conjunction with "Management's Discussion and Analysis or Plan of Operation," "Business," and our financial statements.
INCOME STATEMENT DATA: SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, ----------------------------------------------------- 2005 2004 2003 2002 ---------------------------------------------------------------------- Revenues $ 841,860 $ 814,006 $ 558,679 $ 547,095 Net income $ 141,119 $ 258,204 $ 10,373 $ 66,801 Net income per common share (proforma)(1) $ .00 $ .01 $ .00 $ .00
BALANCE SHEET DATA: JUNE 30, 2005 DECEMBER 31, ----------------------------------------------------- 2004 2003 2002 ---------------------------------------------------------------------- Working capital $ 188,116 $ 236,560 $ 112,106 $ 104,727 Total assets $ 1,106,979 $ 738,252 $ 503,562 $ 331,051 Long-term debt $ - $ 182,051 $ 120,086 $ - Stockholders' equity $ 579,812 $ 388,948 $ 131,055 $ 120,809
- ------------------------ (1) Based on 47,000,000 shares outstanding as a result of the recapitalization with Titanium Group Limited for the years ended December 31, 2004, 2003, and 2002. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In June 2005, we acquired 100% ownership of Titanium Technology, but did not have any operations prior to the acquisition. Accordingly, for accounting purposes, the historical financial statements of Titanium Technology will be the historical financial statements of the company. As Titanium Technology is a software development company, it earns revenues through license sales of its products, all of which utilize the proprietary technology it develops. Development of the technology requires a significant outlay of cash before a viable product is developed that utilizes the technology. After development of a product, even more cash is required to market the product before any revenues are realized. Accordingly, the challenge that faces many software development companies is being able to obtain enough cash to fund research and 8 development and marketing expenses and sustain the company until revenues are generated. Such funds are needed fairly quickly after products are developed, as the environment in which the products are used is constantly changing. Companies face the risk of discovering that their products do not meet the needs of the potential customers or are technologically outdated after a marketing campaign is launched. We believe that Titanium Technology has fared better than other technology companies, as it has been able to generate revenues rather early in the company's development, which have funded research and development expenses, as well as selling, general and administrative expenses. In the past few years, Titanium Technology has been able to develop proprietary products mainly based on proceeds from projects revenues. Some of the examples are ProAccess FaceOK, which the company launched in the fall of 2003 and was then quickly awarded the "Best of Comdex 2003 Finalist" in November the same year. The same product FaceOK was thereafter further awarded several local (the IT Excellence Award in Hong Kong) and regional (the Asia Pacific ICT award) recognitions. The company then launched ProFacer iDVR in the summer of 2004 and was then quickly granted an official endorsement from the People's Bank of China, which secured a unique advantage for the company to market its technology and products in the banking and finance section in the People's Republic of China. The above illustrates management's ability to internally fund the growth of the company with limited resources. Nevertheless, we believe that external funding from investors can stimulate and accelerate product development for a number of reasons. First, the company has now achieved a certain amount of recognition in the industry, especially in its region. It has also established several important marketing channels, most notably a sole distributor in Japan who brought along opportunities and major customers such as the NTT Group. Second, there is a clear sign of increased awareness in the personal security area in which biometric technologies are some of the most commonly used applications. The current global market size is approximately $1 billion, but is expected to grow to around $7 billion by year 2008(1). Third, the company has achieved a major breakthrough in its technology recently. In April 2005, we developed the newest facial recognition engine that achieves a false acceptance rate of less than 0.001% and a verification rate of over 99.9%. The most notable strength of this technology is perhaps its ability to be utilized in a one-to-many application as well as its ability to be deployed in all indoor lighting conditions. Based on these breakthrough abilities, management believes that the company is now a leader in this technology, worldwide. RESULTS OF OPERATIONS FISCAL YEAR ENDED DECEMBER 31, 2003 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2002. Sales revenues slightly increased by $11,584 to $558,679 in 2003 from $547,095 in 2002. We launched new products in 2003. Because we devoted a substantial amount of our resources to the development of new products and fulfilling our operational needs, our marketing efforts suffered. As a result, sales did not increase significantly in spite of the product launch. The profit margins decreased from 54.0% in 2002 to 43.7% in 2003. Selling, general and administrative expenses increased from $143,299 in 2002 to $299,002 in 2003, due to a substantial increase in the number of employees and operating expenses at the early development stage. Also in 2003, we established our research center in Shenzhen, China. Research and development costs increased from $84,936 in 2002 to $89,092 in 2003. Accordingly, our net income decreased from $66,801 in 2002 to $10,373 in 2003. FISCAL YEAR ENDED DECEMBER 31, 2004 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2003. Sales revenues increased by $255,327 (45.7%) comparing the 2004 fiscal year to the 2003 fiscal year, due to the beginning of significant sales of some of the products we had developed, such as ProAccess FaceOK. This marked the point where the company no longer relied solely upon project-based or consultancy income. The gross margin also improved as a percentage of sales, from 43.7% to 53.9%, and in terms of dollars, from $244,035 to $438,431. Selling, general and administrative expenses increased from $299,002 in 2003 to $323,899 in 2004 due to an increase in the number of employees and operating costs. However, in 2003, Titanium Technology incurred $89,092 of research and development costs, primarily for the research expenses on the ProFacer project, as compared to $nil in 2004. As both projects, ProAccess and ProFacer, reached the stage of development where they were available for general release to the public, expenses incurred for product development were capitalized, and therefore, no research and development expenses were incurred for 2004. Accordingly, Titanium Technology generated net income of $258,204 for 2004, as compared to net income of $10,373 for 2003. - ----------------------- (1) Alster, "A Touchy Subject," CFO MAGAZINE - IT SPECIAL EDITION, p. 29 (Spring 2005, Vol. 21 No. 5). 9 SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO SIX MONTHS ENDED JUNE 30, 2004. Sales revenues increased by $502,581 (148%) comparing the 2005 period to the 2004 period, due to sales of ProAccess FaceGuard and the commencement of a few large projects outside of Hong Kong. Selling, general and administrative expenses increased from $146,737 in 2004 to $259,081 in 2005, but decreased as a percentage of revenues from 43.2% in 2004 to 30.8% in 2005. The gross margin as a percentage of sales increased in 2005 to 47.1% from 25.4% in 2004, and also increased in terms of dollars due to the increase in sales revenues. As a result, we generated net income of $141,119 for the six months ended June 30, 2005, as compared to net income of $40,328 for the comparable 2004 period. LIQUIDITY AND CAPITAL RESOURCES AS OF DECEMBER 31, 2003 AND 2004. At December 31, 2004, we had working capital of 236,560, as compared to $112,106 at December 31, 2003. The increase was due primarily to the increase in net income for the 2004 fiscal year. For the 2004 fiscal year, operating activities provided cash of $280,834, while investing activities and financing activities used cash of $283,428 and $25,641, respectively. Of the$283,428 used for investing activities, $267,804 was used for product development costs. In comparison, 2003 operating activities and financing activities provided cash of $168,132 and $27,778, respectively, while investing activities, primarily product development costs, used cash of $164,327. Product development costs are required to be capitalized when a product's technological feasibility has been established by completion of a working model of the product and ending when a product is available for general release to customers. We capitalized $152,010 and $259,279 of product development costs associated with ProAccess and ProFacer as intangible assets for the 2003 and 2004 fiscal years, respectively. AS OF JUNE 30, 2005. Titanium Technology had working capital of $188,116 at June 30, 2005, as compared to $236,560 at December 31, 2004. While our increased sales for the six months ended June 30, 2005 resulted in a $486,327 increase in accounts receivable, accounts payable also increased by $312,236. We expect that the majority of accounts receivable will be collected in the third quarter of 2005 and do not anticipate any harmful effect on our liquidity in the long-run. For the six months ended June 30, 2005, operating activities provided $184,411, but $100,410 and $134,529 were used in investing and financing activities, respectively. We used $81,487 to renovate our newly leased offices and $18,923 for product development costs. We also used $182,051 to repay shareholders' loans. In comparison, for the six months ended June 30, 2004, $140,431 was provided by operating activities, but $172,380 was used for investing activities, of which $162,438 was used for product development costs. At June 30, 2005, we had contractual obligations as set forth below:
- ---------------------------------------------------------------------------------------------------------------------- CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIOD ------------------------------------------------------------------ LESS THAN MORE THAN 5 TOTAL 1 YEAR 1-3 YEARS 3-5 YEARS YEARS - ---------------------------------------------------------------------------------------------------------------------- Long-Term Debt Obligations Nil Nil Nil Nil Nil - ---------------------------------------------------------------------------------------------------------------------- Capital (Finance) Lease Obligations Nil Nil Nil Nil Nil - ---------------------------------------------------------------------------------------------------------------------- Operating Lease Obligations $104,805 $31,670 $91,135 Nil Nil - ---------------------------------------------------------------------------------------------------------------------- Purchase Obligations Nil Nil Nil Nil Nil - ---------------------------------------------------------------------------------------------------------------------- Other Long-Term Liabilities Reflected on the Nil Nil Nil Nil Nil Company's Balance Sheet - ---------------------------------------------------------------------------------------------------------------------- Total $104,805 $31,670 $91,135 Nil Nil - ----------------------------------------------------------------------------------------------------------------------
We anticipate that we will spend approximately $250,000 before the end of the current fiscal year as a result of a collaboration agreement with the Chinese Academy of Science, Institute of Automation, in Beijing, 10 China, in which we have agreed to jointly develop biometrics products. We believe we will be able to fund this expenditure with our existing cash flow, based upon the signed contracts for orders that we have. Subsequent to June 30, 2005, we completed a private placement of our securities, through which we obtained net proceeds of approximately $535,000. Proceeds will be used to provide the funds necessary to implement the next step in our business plan, which is becoming a publicly-held company in the United States. Funds will be used for legal, accounting, and corporate consulting services and working capital. We believe that by becoming a publicly-held company, we will enhance the visibility of our products and services and our ability to obtain additional financing in the future. BUSINESS BUSINESS DEVELOPMENT We were incorporated on May 17, 2004 as an international business company pursuant to the International Business Companies Act of the British Virgin Islands ("BVI"). On June 22, 2005, we acquired all of the entire issued share capital of Titanium Technology Limited, a company incorporated in Hong Kong on February 14, 2001 with limited liability. Titanium Technology specializes in the development of face recognition technology. On September 20, 2002, Titanium Technology and EAE Productions (HK) Limited, a company incorporated in Hong Kong on October 8, 1997, established Titanium Technology (Shenzhen) Co., Ltd., a wholly foreign owned enterprise in China. Titanium Technology is engaged in developing products utilizing biometrics technologies, licensing of technologies, professional services, and project contracting. Based in Hong Kong with a research and development center in ShenZhen, China, and a sales representative office in the United States, Titanium Technology has built a strong network of expertise, comprising over 30 IT practitioners and researchers, enabling us to provide what we believe are top-quality biometrics products and professional services. In particular, we believe we are a leading provider of Automatic Face Recognition Systems, or AFRS, and other biometric and security solutions to governments, law enforcement agencies, gaming companies, and other organizations worldwide. Our AFRS products enable customers to capture human face images electronically, encode facial image into searchable files (faceprint), and precisely compare a set of faces to a database containing potentially thousands of faces in seconds. For over five years, we have researched, developed, and marketed face biometrics technologies that incorporate advanced concepts in neural networks, artificial intelligence, image processing, pattern recognition, data mining, and massively parallel computing. Our researchers are keen to work on innovative recognition algorithms and, using advanced methods of software engineering, turn core mathematical modules into practical applications. Our proprietary mathematical algorithms, together with optimized hardware peripherals, enable our customers to cost-effectively achieve what we believe to be industry-leading accuracy rates and performance. Titanium Technology supports the latest standards in face biometrics and we are focused on enabling our customers to expand the capabilities of their systems as their biometric needs evolve. In the beginning of 2002, the award-winning core component for face recognition, called "Ti-Face", was successfully developed. To date, Ti-Face Software Development Kit ("SDK") is widely adopted as the development platform for governments, universities, and institutions. In 2003, we successfully registered a patent about "Apparatus and Method for Recognizing Images" in Hong Kong Special Administrative Region ("HKSAR"). Also in 2003, our face recognition product, ProAccess FaceOK(TM), computer logical access control software, was launched. This product was then awarded the "Best of Comdex Finalist 2003" in Las Vegas in the same year. In 2004, our intelligent surveillance product, ProFacer, was launched and promoted into casino and financial institution markets. We also set up distribution networks in mainland China, Australia, and Japan. Titanium Technology has proven capabilities in delivering biometrics security products, consulting, and systems integration serving the government, major financial institutions, universities, telecommunication companies, and prestigious international corporations. 11 TI-FACE Ti-Face is the core face recognition engine developed and implemented by Titanium Technology. A proprietary algorithm, named Dynamic Local Feature Analysis (DLFA), was invented to utilize the specific features for identification instead of the entire representation of the face. This technology is capable of selecting intelligently specific areas of the face, such as the eyes or mouth, which in turn are used as distinguishable features for recognition. Embedded with the Ti-Face module, a system can dynamically select sets of blocks, or features, in each face that differ from other faces in the data repository with an outstanding processing speed. Based on this innovative face recognition technology, our research and development group successfully modularized and realized this concept into the Ti-Face Software Development Kit (SDK) in 2002. This SDK is not only our core technology but serves as the blueprint for further extending our security access control applications for all walks of life. TI-FACE SDK 3.0 FOR WINDOWS. Features included in Ti-Face SDK 3.0 are face detection, high speed face tracking, matching and authentication, detecting motion or changes in a scene, extracting imagery from a video or live-stream, comparing and matching non-facial images, performing both "one-to-one" verification and "one-to-many" identification. Independent developers can use Ti-Face SDK as a tool to easily build custom applications based on our proprietary face detection and recognition technology. Furthermore, by integrating our face recognition engine into third-party solutions and applications, end users can obtain a solution that is customized to fulfill their specific requirements. At present, we are eager to develop additional modules on face recognition, such as lip movement identifier. By combining several modules, greater security and more accurate identification methods can be obtained. Furthermore, a multimodal biometric system can be easily integrated into an application to greatly enhance security, privacy and user convenience. PRODUCTS Powered by our innovative face recognition technology, our core products can be grouped into two categories: PROACCESS and PROFACER. The ProAccess series fulfills the fundamental security and trust needs of the information world by logical and physical access control. The ProFacer series provides an ultimate solution for intelligent surveillance. Both of them have won both local and international prizes, which have shown that these are highly competitive face recognition products in the worldwide market. Moreover, Titanium Technology has proven its potential among its competitors and was selected by the HKSAR Government as one of suppliers PC/LAN Bulk Tender in Category C. PROACCESS. Applying our Ti-Face technology, the first series of products, called ProAccess, were launched in the middle of 2003. The ProAccess suite is a high-performance, secure, user-friendly solution to enhance the authentication method of physical door, personal computer, and mobile phones by advanced face recognition technology. PROACCESS FACEOK (PROFESSIONAL & ENTERPRISE). Powered by cutting-edge Face Recognition Technologies, ProAccess FaceOK fulfils the fundamental security and trust needs of the information world. Users can sign-on to their computers through face recognition, which ensures the highest degree of security against unauthorized access, especially when compared to authentication methods such as unsecured simple text input and unreliable memories. In addition, ProAccess FaceOK offers features such as audit trail, face learning, active user monitoring, and web-based single sign-on services and integrated with directory services. Audit Trail is enabled to capture all unauthorized login attempts (with images of trespassers and hackers) and store that information in a log file. The Face Learning function allows the user to learn the latest face whenever a login occurs. Natural facial progression does not compromise system accuracy. Active Monitoring monitors the environment actively to ensure continuous access control. The system proactively locks itself out when the authorized user is not detected. Hidden Encryption encrypts a file and masks it with an image file type so that only authorized users can retrieve its true content, while it appears as a normal file to others. Furthermore, users can logon to different Directory Services with the use of FaceOK. Those directories can be Novell eDirectory, Microsoft Active Directory, NT Domain, NDS, iPlanet and other LDAP compliant directories. Additionally, our 12 new module focusing on web Single-sign on technology is integrated in FaceOK, which in turn, enforces our competitive competency in the market. Considering our variety of clients, our FaceOK is released into two editions, Professional edition and Enterprise edition. Enterprise edition is suited for the corporate buyers (such as MTRC, Mass Transit Railway Corp) and government agencies (Department of Health), whereas Professional edition is designed for SOHO or SME. Titanium Technology cooperates with distributors in Australia and Japan to market globally. Currently, we are dealing with potential distributors to enlarge our markets in different countries including United States, Europe and China. PROACCESS FACEGUARD. Conventional access control systems relying on cards, keys or codes are vulnerable to those wishing to gain unauthorized entry to a facility. The card, key or code may be lost, stolen or illegally copied. Once an intruder has gained access to a building using a stolen entry device, there is often little evidence to help in apprehending or prosecuting the culprit. Personal property, office equipment and intellectual property are all at risk. "FaceGuard" offers users a radically different approach to facilities security that not only provides secure access to buildings, but also detects and identifies anyone attempting to gain access without authorization. ProAccess FaceGuard is a biometric physical access control system, which identifies an individual's identity from their facial characteristics by comparison with recorded data, and enables keyless entry based not on what the entrant has or knows, but based on the identity of the entrant. In contrast to conventional automatic systems, which only check for possession of a valid card, pass or PIN number, this digital image analysis system recognizes individual people and turns away those who try to enter using borrowed or stolen IDs. Its clever software is not fooled by life-size photos, and will only admit living, breathing humans with faces it "recognizes". Therefore, the technology allows access that is convenient, personal, private, and extremely secure. ProAccess FaceGuard is empowered by Ti-Face. It can be operated in both online and offline mode. The templates of the authorized user list can be stored in a server or in the internal memory of the device. Features such as all-in-one device and best technology are used to protect and secure physical assets. All-In-One Device - Although ProAccess FaceGuard may be networked in an enterprise environment, it is a stand-alone device that can be operated independently. The installation is simple and, except for the electric lock, there is no hidden cost in the installation. Best Technology - Although different biometrics, e.g. finger scan, may be widely employed in similar application, face recognition is the best among the existing alternatives. First, according to our internal research, the false acceptance rate is less than 0.001% regardless of the lighting condition, which is 50 times better than traditional fingerprint authentication. Second, there is no direct contact between the device and users, and hence the problems of cleanliness and wear on the equipment are greatly reduced. Third, the core component is a CCD/CMOS camera, which is relatively low in production cost. Last but not least, users have less concern on privacy issues with regard to facial pictures and the market acceptance is much higher. PROACCESS FACEATTEND. ProAccess FaceAttend is a feature-rich, stand-alone, robust, cost effective, face recognition based time attendance recorder. It is suitable for medium and large offices, branches, factories, or other sites. ProAccess FaceAttend provides the most accurate data collection solution available by ensuring that employees must be present in order to record a punch. It brings the flexibility of a full-function time and attendance terminal together with the sophistication of the most accurate identification technology available. Using field-proven face biometric technology, FaceAttend terminals scan employees' faces to identify their identities from a huge database each time they punch. No fingerprints or palm prints are utilized. ProAccess FaceAttend can be installed at convenient locations throughout a facility to make it easy for employees to clock in. Punching is performed using biometric face scans, and the resulting transactions are periodically uploaded to a host PC running the automated timekeeping system. It greatly improves payroll accuracy by eliminating "buddy-punching," the practice of employees punching in or out for other employees who are not present at work. Not only does this reduce labor costs and the time required to prepare payroll, but it also gives 13 supervisors more time to focus on their jobs instead of watching clocks, thereby increasing efficiency and profitability. From coast-to-coast and around the world, ProAccess FaceAttend is easing concerns and boosting security by ensuring that the people on-site actually belong there. Attendance of each employee is printed on the attendance report. The attendance report is particularly useful for payroll purposes. Wages and salaries can be paid according to the employee's worked hours, overtime etc. Given the continual growth of China as a worldwide manufacturing base, the Southern part of China has become arguably the largest network of factories. This region is also where we clearly have a distinct advantage of physical and cultural proximity. PROACCESS FACEMOBILE. ProAccess FaceMobile is the security solution using biometric technology for the mobile computing market. As the mobile ownership becomes more universal and third generation mobiles become more popular, we are keen to introduce advanced biometric security solution to this market. This technology uses the camera equipped in the mobile phone to perform the logon process. As a result, no additional hardware cost is incurred on the capturing device. Utilizing our face recognition technology, mobile users do not require special knowledge to use it. Users simply look at the camera embedded in their phone, automatically triggering and processing authentication for the logon process. The FaceMobile supports two different system architectures. The difference between the two architectures (user authenticated on the device and on the operator) is the location where authentication is processed. USER AUTHENTICATED ON THE DEVICE. In this architecture, the device captures and authenticates the user by the same device. This architecture is optimal for the following situations: o The device may be operated offline; o The device stores sensitive information locally; or o The device has high processing power. In general, this architecture is applicable in the PDA market. USER AUTHENTICATED ON THE OPERATOR. This architecture supports the user picture being captured by the device, and then the servers in the operator site authenticate the user. This approach is designed for the following cases: o Authentication is required only when the user access service from operator; or o The device need not have very powerful processing power. This approach can be a turn-key solution for current generation mobile phones. In summary, features found in FaceMobile are described below: o ENHANCED ACCESS CONTROL - As cameras are standard components in third generation mobile phones, this application of face recognition helps to greatly improve the access control of the phone with limited increased in production cost. The improved access control prevents unauthorized persons from making calls, receiving calls and reading stored data within the phone. o M-COMMERCE SUPPORT - The continual improvement of computing power of mobile devices, communication bandwidth, market acceptance, etc., will allow the real-life application of M-commerce in the near future. We believe that the use of FaceMobile could provide the foundation for secure transaction in the virtual credit card payment platform for major carriers such as NTT Docomo and Credit Card companies. PROFACER. ProFacer is a biometrically integrated surveillance system. Titanium Technology employs a full range of technology to enhance and automate existing surveillance techniques. In order to make the digital video recording technology more secure and smart, we provide the most advance biometrics systems that enable automated real time face recognition. The technology rapidly and accurately detects and recognizes faces. Characteristic processes enabling ProFacer to function effectively are detection, alignment, normalization, representation and matching: 14 o DETECTION - When the system is attached to a video surveillance system, ProFacer recognition software searches the field of view of a video camera for human faces. If there is a face in the view, it is detected within a second. o ALIGNMENT - Once a face is detected, the system determines the head's position, size and pose. A face needs to be turned to an appropriate angle toward the camera for the system to register it. o NORMALIZATION - The image of the head is scaled and rotated so that it can be registered and mapped into an appropriate size and pose. Normalization is performed regardless of the head's location and distance from the camera. Light does not impact the normalization process. o REPRESENTATION - The system translates the facial data into a binary string - "Faceprint". This coding process allows for easier comparison of the newly acquired facial data to stored facial data. o MATCHING - The newly acquired facial data is compared to the stored data and linked to at least one stored facial representation. As comparisons are made, the system assigns a value to the comparison. If a score is above a predetermined threshold, a match is declared. The operator then views the two photos that have been declared a match to be certain that the computer is accurate. PROFACER IDVR. Currently, Digital Video Recorders (DVRs) are popular in public areas, offices and homes, with the belief that the cameras deter criminal activity. However, with the public need for security rising, the sheer numbers of DVRs pose problems. On top of traditional DVR systems, Titanium Technology offers a proprietary real-time algorithm of face image detection and capture, named PROFACER IDVR. It does not require special cameras or a specific environment. Multiple faces in a stream of people may be detected, captured, recorded and delivered with further analysis, reporting and notification capabilities. The Face Capture is an application software for video surveillance, monitoring, law enforcement and other applications. Individual facial patterns are recorded and stored in a digital photo database that can be viewed and used for different applications on-site or remotely. Titanium Technology developed several algorithms, supporting the real time processing of video data and image localization, determination of position of head and motion tracing for subsequent recognition. PROFACER IDVR can be used at airports, banks, casinos, public buildings, subways, factories, schools or in any other location where it makes sense to record the faces of visitors, with facilities for integration into existing DVR systems. The PROFACER IDVR GUI is very simple such that any operator can use all of its functions with just a minimal amount of training. The system is highly flexible, allowing images to be digitalized and recorded in either color or monochrome with a storage capacity typically exceeding 36 months of facial data recording. PROFACER IDVR screen simultaneously shows the live camera shot and the latest sequence of captured images. A pilot project has been launched in GuangXi Peoples' Bank of China. PROFACER IWATCHGUARD. PROFACER IWATCHGUARD adds automatic full time face recognition, matching and active warning alerts to any new or existing surveillance system. It allows each camera to serve as a diligent observation point even when the video is not observed. Face recognition surveillance incorporates computer intelligence to monitor faces and match those faces against a "watch list" face database. As a modern new tool to identify potential threats to public safety, PROFACER IWATCHGUARD can scan facial images of individuals and match them with a database of images containing known suspects. In seconds, a scanned face can be searched against thousands, or even millions of database images to determine if the scanned image matches a previously stored suspect image. This creative concept has been applied to protect high security areas such as casinos, banks, computer centers, research institutes and prison and jails, for fully automatic operation 24 hours a day. For example, a casino group in Macau has started a pilot project using PROFACER IWATCHGUARD to identify unwanted guests or VIPs. Using a list of unwanted guests stored in the database, casino staff can focus on trailing specific individuals from thousands of guests everyday. With the installation of PROFACER IWATCHGUARD, closed circuit televisions are connected and in real time send the scenes to a detection manager. Inside the detection engine, a number of clear and distinct faces will be identified. Each face will attempt to match the existing black-listed faces. As soon as a face known to the database appears in the scene, the system triggers a configurable alarm. Security guards can locate the unwanted 15 person easily and take them away. As a result, staffs are no longer burdened by monotonous work, but can be employed more flexibly and effectively while still increasing security. PROFACER IMUGSHOT. PROFACER IMUGSHOT is another product derived from ProFacer surveillance solution. In law enforcement units such as police and immigration departments, this system can greatly help reducing fraud and crime. Through identifying duplicate images in large databases, such as licensed drivers and missing children and immigration, suspicious targets can be provided as a list. As a result, the scope in finding the target subjects can be greatly narrowed which, in turn, provides a cost effective, reliable and time saving surveillance application. Existing clients, like the Government Laboratory of HKSAR, are satisfied with this highly accurate, promptly response, time cost effective surveillance system. It is believed that police forces will be interested in this advanced application. PROFACER IDCONTROL. PROFACER IDCONTROL utilizes face recognition technology in the airline and national security. Every traveler, who is ready to make boarding registration, will be captured an image. Our PROFACER IDCONTROL can start scanning if the given facial image has a high similarity scale with the suspects contained in a database storing images of terrorists' faces provided by government agencies. Once a list of suspects is generated, airline staff can refine the verification process by one-to-one scanning. For further enhancement, facial images can be saved in the travel document during the check-in process. When travelers are ready to board the airline, our system can achieve a high degree of security by further matching live face with the face ID marked in the travel document. We believe these two levels of security measures are practical, helpful, safe and convenient in the airport. PROFACER IDCONTROL can be used for banking application. Face identity can be embedded in the credit card, every time holders withdraw money from ATM machines. For greater security, faces can be verified in addition to inputting passwords, to confirm ownership of credit or debit cards. Using these two levels of security control, personal property is strongly protected. CONSULTING Our consulting team works with the client from the earliest stages of the project and takes accountability for the success of the project. We provide services in the areas of security service and system integration/development projects. SECURITY SERVICES. We believe we are one of the leading digital security services providers, offering strategic solutions for technology-enabled enterprises. As a security advisor, we help clients to meet their requirements for continuous IT innovation and development while controlling the risks inherent in today's complex networked environments. Our security specialists help customers identify system/network security weaknesses and provide professional advice on how to best protect vital information and assets both virtually on the Internet and physically without compromising productivity or endangering the bottom line. Our services include security consulting, risk assessment and penetration testing. Security training is also provided for the staffs to increase the security awareness and knowledge. Our clients include the Labour Department of Hong Kong SAR, Tokyo Bank of Mitsubishi, Citic Ka Wah Bank, Hong Kong Productivity Council, Mandatory Provident Fund Schemes Authority, and Mass Transit Railway Corp (MTRC). We are also a close partner with IBM offering the aforementioned service to its customers. SYSTEM DEVELOPMENT/INTEGRATION. Our solution team utilizes its technical expertise to implement complex business systems, thereby reducing time and risk for our customers' mission critical projects. We are responsible for business systems critical to the running of some of the world's leading commercial and public sector organizations, as well as large-scale technical systems designed to operate to the highest levels of reliability in demanding conditions. To keep pace with the competitive IT world, our staff have been equipped with newly and advanced knowledge, such as Microsoft .net and J2EE, on system implementation work. 16 DISTRIBUTION AND MARKETS We select distributors based on the potential impact of the distribution relationship. We seek to cooperate with business partners that will bring synergies, making it quicker to penetrate the target market and localization. Distributors in the United States include Elite Technology Solutions and eInfoDev Inc. Distributors in Asia include Smart Wireless (Japan), Elixir Group (Macau), Maxfair Technology Limited (Hong Kong), and Regal Cyber Group (Hong Kong and People's Republic of China). However, for major accounts that are readily accessible, we tend to handle such accounts ourselves since these corporate clients expect expert knowledge and demand flexibility. We organize exhibitions and seminars periodically to create awareness of the importance of biometrics applications. We participated in four exhibitions and one seminar in Japan in 2004 and 2005. The main purpose of these exhibitions and seminars is to introduce our products to the Japanese market, especially in the retail sector. We also prepares marketing materials such as brochures, product white papers and pricing references for the distributors and provide complete sales support and technical consulting services to them. Our markets include the following: o Hong Kong, including the Hong Kong government and commercial sectors; o China, mainly the government; o Macau, mainly casinos; and o For Japan and the US markets, we form a distribution partnership with the local agents to sell our products. Clients in Japan came from both retail and commercial sectors. Through these marketing activities, we have been able to acquire an increasing number of customers and distributors. As of the date of this Memorandum, we have 12 major customers, which represents a 50% increase over the end of our last fiscal year (December 31, 2004). Further, we project that by the end of this year, the number of major customers will grow to close to 20 from a variety of industries. This will ensure us a more balanced customer portfolio. Titanium Technology not only focuses on two core activities, biometrics-based technology development and professional services, but also operates a distribution business. In March 2003, it was awarded a bulk tender to supply PC/LAN software to all departments in HKSAR government for three years. This guarantees that Titanium Technology is one of the few vendors from whom the Hong Kong government purchases software. To strengthen our distributor network, we believe we have built a good relationship with many large vendors such as Microsoft, Novell, SiS International Ltd, JOS, and others. In addition, with our expertise in security technologies, eEye Digital Security has appointed Titanium Technology to be a regional distributor for eEye products. CUSTOMERS Titanium Technology's major customers include: o In Hong Kong: the Hong Kong government o In China: People's Bank of China o In Macau: Elixir Group, a supplier to an entertainment corporation - Sociedade de Jogos de Macau o In Japan: NTT Group During the fiscal year ended December 31, 2004, 8 customers accounted for approximately 75% of revenues. Sales to Beacon Base Software Ltd. and Information Security One (Hong Kong) Ltd. were 13.32% and 21.02% of revenues, respectively. INTELLECTUAL PROPERTY PATENTS. Titanium Technology was issued patent number HK1053239 for "Apparatus and Method for Recognizing Images" in September 2002. The patent expires September 10, 2010. 17 TRADEMARK AND TRADE NAME. Titanium Technology has the following registered trademarks for "ProAccess FaceOK": o United States - Serial No. 78/414377 o Hong Kong - Trade Mark No. 300053478 o China - Serial No. ZC3732931SL COMPETITION The biometrics industry is fragmented and undeveloped, with a plethora of methods for gathering biometric information, processing the data, and interconnecting with applications. All the major prevailing biometrics systems have limitations. As a general rule, systems with a high degree of accuracy have typically been expensive to install and maintain. Systems that are inexpensive have performed poorly relative to accuracy. This compromise between accuracy and cost has led to many buyers deploying "layered" systems that combine two or more biometric methods, or require supplemental passwords and/or smart cards. Many potential buyers have been put off by the compromises and workarounds demanded by what is available in the market, and they are waiting for a better alternative to arrive. The biometric industry is global in scope, with many competitors and customers located in US and Europe. While Asia has some companies in the biometrics arena, many of the biggest projects have been in nations installing national identification systems. Strategic focus is quite diverse, as well, with some firms specializing in the proprietary technology associated with capturing biometric information, others in providing enterprise-level integration services, and still others in offering managed or hosted services for outsourced systems. Large players in intermediate or end-use markets for biometrics (e.g. banking/financial services, security, PCs/peripherals, software/enterprise systems, and wireless equipment and services) have been active in investing in or sponsoring biometric technologies. We intend to compete by utilizing the following strategies: o put more funding into research and development to strengthen the quality of our products; o gain more share in the Asian market before the big competitors step in; o seek potential partnerships and strategic alliances; and o organize more exhibitions of our products. We believe that we have two major competitors: Identix Incorporated and Viisage Technology, Inc., from the United States. Identix is a multi-biometrics security technology company in both fingerprint identification and facial recognition solutions has set to the growing demand for biometrics products and solutions access multiple security markets. Viisage delivers advance technology identity solutions for governments, law enforcement agencies and business concerned with enhancing security, reducing identity theft, and protecting personal privacy. It has been renowned for its facial recognition technologies. RESEARCH AND DEVELOPMENT During the fiscal years ended December 31, 2004, 2003 and 2002, we spent $nil, $89,092 and $84,936, respectively, on research and development activities. EMPLOYEES As of August 31, 2005, we employed a total of 33 persons, of which 28 were full-time. None of our employees is covered by a collective bargaining agreement. 18 FACILITIES Our principal offices are located at 4/F, BOCG Insurance Tower, 134-136 Des Voeux Road, Central, Hong Kong. We have entered into a lease contract with this new property that runs through June 2008, with an option to renew for an additional term of two years. The lease requires monthly rent of HK$23,695 (approximately $3,050) and a monthly management fee and air conditioning charge of HK$12,863 (approximately $1,656). Our research and development center is located at 15/F, Wen Jin Plaza 23, Tian Bei Road 1, Luo Hu Qu, Shenzhen, China, while the sales representative office in the United States is located at 3723 Haven Avenue, Menlo Park, California. LEGAL PROCEEDINGS There are no legal proceedings pending and, to the best of our knowledge, there are no legal proceedings contemplated or threatened. MANAGEMENT OFFICERS, DIRECTORS AND KEY EMPLOYEES Our executive officers, directors, and key employees are: NAME AGE POSITION Dr. Johnny Ng 30 Chairman of the Board of Directors Jason Ma 33 Chief Executive Officer Prof. Stan Li 47 Chief Scientific Advisor Humphrey Cheung 34 Chief Technology Officer and Director Billy Tang 32 Chief Operation Officer and Director Our shareholders elect our directors annually and our board of directors appoints our officers annually. Vacancies in our board are filled by the board itself. Set forth below are brief descriptions of the recent employment and business experience of our executive officers and directors. DR. JOHNNY NG, CHAIRMAN. Dr. Ng is one of the reputable young entrepreneurs in China. Being a post-doctor in Tsinghua University, he received his BEng and Ph.D. in Industrial & Systems Engineering from The Hong Kong Polytechnic University. Dr. Ng first organized his own technology start-up, 303 Co. Ltd in 1998, which was sold to a listed company in 2001. Shortly after this transaction, he started Titanium Technology in September 2001 with research and development as its primary activity, and gradually expanded his business venture beyond Hong Kong. Dr. Ng has received a great deal of recognition for his extraordinary achievements. In particular, he was awarded the "Ten Outstanding Young Digi Persons 2000," "Innovative Entrepreneur of Year 2003," and "Top 100 Cosmopolitan Chinese Confucian Businessman in 2004". Dr. Ng is the youngest recipient in this event. He is a highly sought after speaker at high level industry conferences and a frequent commentator in the media. Currently, Dr. Ng's duties include his functioning as our principal financial and accounting officer. MR. JASON MA, CHIEF EXECUTIVE OFFICER. Mr. Ma became the Chief Executive Officer of Titanium Technology in May 2005 and is responsible for formulating business strategies, overseeing the entire business operation, and establishing and executing global alliances and mergers and acquisitions for the company. Mr. Ma was born and raised in Hong Kong and went to the United States for his university education, where he received a BSc degree in Engineering and computer science from the University of California at Berkeley, and an MBA degree from the University of Southern California's Marshall School of Business. During his stays in the United States he 19 had worked for different companies in the fields of computer science and marketing. Mr. Ma returned Hong Kong in 1998 and has since been involved in various IT related endeavors. Before joining Titanium Technology in April 2004, he has worked as a consultant for the implementation of an ERP system for a multi-national manufacturing firm, and an analyst for a local venture capitalist on evaluation of IT-related investment opportunities. PROF. STAN LI, CHIEF SCIENTIFIC ADVISOR. Prof. Li has been a Researcher at National Lab of Pattern Recognition (NLPR), Institute of Automation, Chinese Academy of Sciences (CASIA), and the Director of the Center for Biometrics Research and Testing (CBRT) since August 2004. He worked at Microsoft Research Asia (MSRA) as a Researcher from May 2000 to Aug 2004. Prior to that, he was an Associate Professor of Nanyang Technological University, Singapore. His current research interest is in face recognition technologies, biometrics, intelligent surveillance, pattern recognition, and machine learning. Prof. Li has been the Chief Scientific Advisor to Titanium Technology since June 2005. He has published several books, including "Handbook of Face Recognition" (Springer-Verlag, 2004) and "Markov Random Field Modeling in Image Analysis" (Springer-Verlag, 2nd edition in 2001), and over 180 reference papers and book chapters in these areas. He obtained a B.Eng from Hunan University, an M.Eng from National University of Defense Technology, and a PhD. from Surrey University where he also worked as a research fellow. All the degrees are in Electrical and Electronic Engineering. He is a senior member of IEEE and currently serves as editorial board of Pattern Recognition, and program committees of various international conferences. MR. HUMPHREY CHEUNG, CHIEF TECHNOLOGY OFFICER AND DIRECTOR. Mr. Cheung has been the Chief Technology Officer of Titanium Technology since July 2001. He has BEng in Electronic Engineering from The Chinese University of Hong Kong and M.Phil in Manufacturing Engineering from The Hong Kong Polytechnic University. Mr. Cheung is responsible for overseeing the technical development of all product lines as well as the integration of the technologies into product, systems and platforms into deliverables that will best serve market demands. Prior to founding Titanium Technology, Mr. Cheung worked at the Computer Graphics Laboratory for the Hong Kong Polytechnic University as a research assistant. He was also a co-founder of 303 Company Limited with Dr. Johnny Ng and Mr. Billy Tang. He has published several papers in the fields of computer graphics, solid modeling, biometrics, and pattern recognition. MR. BILLY TANG, CHIEF OPERATION OFFICER AND DIRECTOR. Mr. Tang has been the Chief Operation Officer of Titanium Technology since July 2001 and is responsible for its management and overall operation. He holds Bachelor's degree in Mathematics from the Hong Kong University of Science and Technology. Under his leadership, Titanium Technology has experienced tremendous growth and has increased its employee base to over 30 employees worldwide in just over a year. Prior to co-founding Titanium Technology, he was also a co-founder of 303 Company Limited with Dr. Johnny Ng and Mr. Humphrey Cheung. Mr. Tang previously was an instrumental member of the research team in the department of Industrial and Systems Engineering of the Hong Kong Polytechnic University, where he focused on the research of virtual reality technology. He also held senior position in one of the largest Internet Service Provider in Hong Kong. CONFLICTS OF INTEREST Members of our management are associated with other firms involved in a range of business activities. Consequently, there are potential inherent conflicts of interest in their acting as officers and directors of our company. While the officers and directors are engaged in other business activities, we anticipate that such activities will not interfere in any significant fashion with the affairs of our business. Our officers and directors are now and may in the future become shareholders, officers or directors of other companies, which may be formed for the purpose of engaging in business activities similar to us. Accordingly, additional direct conflicts of interest may arise in the future with respect to such individuals acting on behalf of us or other entities. Moreover, additional conflicts of interest may arise with respect to opportunities which come to the attention of such individuals in the performance of their duties or otherwise. Currently, we do not have a right of first refusal pertaining to opportunities that come to their attention and may relate to our business operations. Our officers and directors are, so long as they are our officers or directors, subject to the restriction that all opportunities contemplated by our plan of operation which come to their attention, either in the performance of their duties or in any other manner, will be considered opportunities of, and be made available to us and the companies 20 that they are affiliated with on an equal basis. A breach of this requirement will be a breach of the fiduciary duties of the officer or director. If we or the companies with which the officers and directors are affiliated both desire to take advantage of an opportunity, then said officers and directors would abstain from negotiating and voting upon the opportunity. However, all directors may still individually take advantage of opportunities if we should decline to do so. Except as set forth above, we have not adopted any other conflict of interest policy with respect to such transactions. EXECUTIVE COMPENSATION The following table sets forth information about the remuneration of our chief executive officers for the last three completed fiscal years. SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------------------------------- LONG TERM COMPENSATION ANNUAL COMPENSATION -------------------------------------- AWARDS PAYOUTS ---------------------------------------------------------------------------------------------------- OTHER RESTRICTED SECURITIES NAME AND ANNUAL STOCK UNDERLYING LTIP ALL OTHER PRINCIPAL COMPENSA- AWARD(S) OPTIONS/ PAYOUTS COMPENSA- POSITION YEAR SALARY ($) BONUS ($) TION($) ($) SARS (#) ($) TION ($) - ----------------------------------------------------------------------------------------------------------------------- Johnny Ng (1) 2002 $17,820 $-0- $-0- $-0- -0- $-0- $-0- 2003 $41,538 $-0- $-0- $-0- -0- $-0- $-0- 2004 $30,512 $-0- $-0- $-0- -0- $-0- $-0- - ----------------------------------------------------------------------------------------------------------------------- - -------------------------- (1) Mr. Johnny Ng functioned as the Chief Executive Officer from September 2001 to April 2004.
During the last fiscal year, there were no grants of stock options, stock appreciation rights, benefits under long-term incentive plans or other forms of compensation involving our officers. We reimburse our officers and directors for reasonable expenses incurred during the course of their performance. EMPLOYMENT CONTRACTS We entered into agreements with our executive officers, Jason Ma, Humphrey Cheung, and Billy Tang as of January 1, 2005. While each of the agreements provides for permanent employment, each agreement may be terminated by either party at any time without cause upon two weeks' notice. In the event of termination, the employee is subject to a 12-month non-competition provision during which he cannot engage in any business that competes with us or deal with any of our existing customers. The agreements provide for monthly salaries of $2,564 for Mr. Ma, $3,846 for Mr. Cheung, and $3,846 for Mr. Tang, with annual salary reviews on January 1 of each year. During 2005, there were unpaid salaries to Jason Ma, Humphrey Cheung, and Billy Tang in the amount of $7,692 to each person. On June 30, 2005, these three officers agreed to forgive the unpaid salaries due from us through that date in the total amount of $23,076. STOCK OPTION PLAN We propose to adopt a stock option plan under which options to purchase up to 5,000,000 shares of common stock may be granted. We anticipate that the plan will provide for the granting of incentive stock options to our employees and non-statutory options to our employees, advisors and consultants. The board of directors or the compensation committee of the board would determine the exercise price for each option at the time the option is granted. The exercise price for shares under an incentive stock option would not be less than 100% of the fair market value of the common stock on the date such option is granted. The fair market value price is the closing price per share on the date the option is granted. The committee would also determine when options become exercisable. The term of an option would not be no more than ten (10) years from the date of grant. No option would be exercised after the expiration of its term. Unless otherwise expressly provided in any option agreement, the unexercised portion of any option granted to an optionee would automatically terminate one year after the date on which the optionee's employment or 21 service is terminated for any reason, other than by reason of cause, voluntary termination of employment or service by the optionee, or the optionee's death. Options would terminate immediately upon the termination of an optionee's employment for cause or 30 days after the voluntary termination of employment or service by the optionee. If an optionee's employment or consulting relationship terminates as a result of his or her death, then all options he or she could have exercised at the date of death, or would have been able to exercise within the following year if the employment or consulting relationship had continued, would be exercisable within the one year period following the optionee's death by his or her estate or by the person who acquired the exercise right by bequest or inheritance. Options granted under the plan would not transferable other than by will or the laws of descent and distribution and may be exercised during the optionee's lifetime only by the optionee, except that a non-statutory stock option would be transferable to a family member or trust for the benefit of a family member if the committee's prior written consent is obtained. We anticipate that we will have the right to redeem any shares issued to any optionee upon exercise of the option granted under the plan immediately upon the termination of optionee's employment or service arising from disability, the death of the optionee, the voluntary termination of employment or services of the optionee, or the termination of employment or services of the optionee for cause. The redemption price would be the fair market value of the shares on the date of the event of redemption. In the event that our stock changes by reason of any stock split, dividend, combination, reclassification or other similar change in our capital structure effected without the receipt of consideration, appropriate adjustments shall be made in the number and class of shares of stock subject to the plan, the number and class of shares of stock subject to any option outstanding under the plan, and the exercise price for shares subject to any such outstanding option. In the event of a merger in which our shareholders immediately before the merger own 50% or more of the issued and outstanding shares of stock of the resulting entity after the merger, then existing options shall automatically convert into options to receive stock of the resulting entity. Unless otherwise expressly provided in any option, the committee in its sole discretion may cancel, effective upon the date of the consummation of any change of control, any option that remains unexercised on such date. We anticipate that the plan will authorize the board to amend, alter, suspend, or terminate the plan, or any part thereof, at any time and for any reason. However, the plan would require shareholder approval for any amendment to the plan to the extent necessary and desirable to comply with applicable laws. No such action by the board or shareholders would alter or impair any option previously granted under the plan without the written consent of the optionee. The plan would remain in effect until terminated by action of the board or operation of law. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table provides certain information as to the officers and directors individually and as a group, and the holders of more than 5% of the our common stock, as of the date of this prospectus:
NAME AND ADDRESS OF BENEFICIAL OWNER (1) NUMBER OF SHARES OWNED PERCENT OF CLASS - ----------------------------------------------------------------------------------------------------------------------- Johnny Ng 37,835,000 (3) 75.7% 4/F BOCG Insurance Tower 134-136 Des Voeux Road Central Hong Kong Golden Mass Technologies Ltd. 37,835,000 (4) 75.7% 4/F BOCG Insurance Tower 134-136 Des Voeux Road Central Hong Kong 22 NAME AND ADDRESS OF BENEFICIAL OWNER (1) NUMBER OF SHARES OWNED PERCENT OF CLASS - ----------------------------------------------------------------------------------------------------------------------- Humphrey Cheung 7,188,650 (5) 14.4% 4/F BOCG Insurance Tower 134-136 Des Voeux Road Central Hong Kong Billy Tang 7,188,650 (6) 14.4% 4/F BOCG Insurance Tower 134-136 Des Voeux Road Central Hong Kong Hong Tai Holdings, Co. Ltd. 5,005,500 (7) 10.0% A2, 2/F, Tonic Industrial Centre No. 26, Kai Cheung Road Kowloon Bay, Hong Kong Eric Wong 5,005,500 (7) 10.0% A2, 2/F, Tonic Industrial Centre No. 26, Kai Cheung Road Kowloon Bay, Hong Kong Christine Lau 3,783,500 (8) 7.6% 2/F, Blk 10, Rosary Villas Lok Lam Road, Shatin, Hong Kong All Directors and Executive Officers As a Group (3 37,835,000 (9) 75.7% persons) - ------------------- (1) To our knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws, each person named in the table has sole voting and investment power with respect to the shares set forth opposite such person's name. (2) Does not give effect to the possible exercise of the Warrants or warrants that may be issued as selling compensation. (3) Includes 37,835,000 shares owned by Golden Mass Technologies Ltd., a British Virgin Islands company ("Golden Mass"). Golden Mass is 51% owned by Golden Emperor Investments Ltd., a BVI company ("Golden Emperor"). Golden Emperor is 80% owned by Goldford Business Inc., a BVI company ("Goldford") and 20% owned by Ms. Christine Lau. Goldford is 100% owned by Mr. Ng. (4) Golden Mass is beneficially owned by Mr. Johnny Ng (41%); Ms. Christine Lau (10%); Mr. Humphrey Cheung (19%); Mr. Billy Tang (19%); Mr. Eric Wong and his wife (through Hong Tai Holdings Co. Ltd., a Hong Kong company) (10%); and Mr. Patrick Lo (1%) (5) Mr. Cheung is the beneficial owner of 19% of the shares owned by Golden Mass. (6) Mr. Tang is the beneficial owner of 19% of the shares owned by Golden Mass. (7) Hong Tai Holdings, Co. Ltd. beneficially owns 3,783,500 shares through its 10% ownership of Golden Mass and 1,222,000 shares through its 2.6% direct ownership in the Company. Hong Tai Holdings is 100% owned by Eric Wong and his wife. (8) Ms. Christine Lau is the mother of Mr. Jason Ma. (9) Includes all shares of common stock described in notes (3) through (5) above.
23 CHANGES IN CONTROL There are no agreements known to management that may result in a change of control of our company. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Other than as disclosed below, none of our present directors, officers or principal shareholders, nor any family member of the foregoing, nor, to the best of our information and belief, any of our former directors, senior officers or principal shareholders, nor any family member of such former directors, officers or principal shareholders, has or had any material interest, direct or indirect, in any transaction, or in any proposed transaction which has materially affected or will materially affect us. During the years ended December 31, 2004, 2003 and 2002, we had sold goods to Ericorps Creation (HK) Limited in the amounts of $34,204, $105,874, and $64,102, respectively. Ericorps Creation (HK) Limited is owned by Eric Wong and his wife, who own beneficially 10.0% of the our outstanding shares. We paid for the non-business related expenses of Golden Mass Technologies Limited ("Golden Mass"), a shareholder that is beneficially owned by, among others, Johnny Ng, Humphrey Cheung, and Billy Tang, who are our officers and directors, since 2002. In addition, we have paid Humphrey Cheung, a director, who then transferred the cash to our subsidiary in the PRC. Both transactions have been reflected on our balance sheets as amounts due from related parties. At December 31, 2002, $49,427 was owed to us by Golden Mass and Mr. Cheung. We received payments of $6,210 and advanced $60,415 during 2003, resulting in $103,632 being owed at December 31, 2003. We received payments of $56,329 and advanced $87,144 during 2004, resulting in $180,601 being owed at December 31, 2004. All these balances were settled on June 30, 2005 by offsetting the outstanding balances against the loans from directors. Since 2001, Billy Tang, Humphrey Cheung and Johnny Ng, officers and directors, have loaned funds to us on an interest-free, unsecured basis. During 2001 and 2002, the three directors loaned us $52,964 and we repaid $28,058, leaving a balance owed of $24,906. During 2003, the three directors and Goldford Consultancy Limited ("Goldford"), a shareholder that is beneficially owned primarily by Johnny Ng, loaned us $81,149 and we repaid $68,865 to Humphrey Cheung and Johnny Ng, leaving a balance owed to the three directors and Goldford of $37,190 at December 31, 2003. During 2004, Billy Tang and Johnny Ng loaned us $56,604 and we repaid $66,769 to Humphrey Cheung, Johnny Ng, and Goldford, leaving a balance owed to Humphrey Cheung and Johnny Ng of $27,025 at December 31, 2004. During 2005, Billy Tang and Johnny Ng loaned $65,767 and we repaid $4,679 to both directors. On June 30, 2005, Billy Tang and Johnny Ng agreed to forgive loans made to us through that date in the amount of $88,113. In 2003 and 2004, Johnny Ng, Billy Tang, and Humphrey Cheung, through Golden Mass, loaned us $117,949 and $64,102, respectively. These loans are unsecured, interest-free, and not repayable within the next twelve months. Billy Tang, Johnny Ng, and Humphrey Cheung personally guaranteed our installment loan from a financial institution in the amount of $38,462. This loan was repaid in 18 monthly installments of $2,313 in 2005. TAXATION The following is a summary of anticipated material U.S. federal income and British Virgin Islands tax consequences of an investment in our common shares. The summary does not deal with all possible tax consequences relating to an investment in our common shares and does not purport to deal with the tax consequences applicable to all categories of investors, some of which, such as dealers in securities, insurance companies and tax-exempt entities, may be subject to special rules. In particular, the discussion does not address the tax consequences under state, local and other non-U.S. and non-British Virgin Islands tax laws. Accordingly, each prospective investor should consult its own tax advisor regarding the particular tax consequences to it of an investment in the common shares. The discussion below is based upon laws and relevant interpretations in effect as of the date of this prospectus, all of which are subject to change. 24 UNITED STATES FEDERAL INCOME TAXATION The following discussion addresses only the material U.S. federal income tax consequences to a U.S. person, defined as a U.S. citizen or resident, a U.S. corporation, or an estate or trust subject to U.S. federal income tax on all of its income regardless of source, making an investment in the common shares. In addition, the following discussion does not address the tax consequences to a person who holds or will hold, directly or indirectly, 10% or more of our common shares, which we refer to as a "10% Shareholder". Non-U.S. persons and 10% Shareholders are advised to consult their own tax advisors regarding the tax considerations incident to an investment in our common shares. A U.S. investor receiving a distribution of our common shares will be required to include such distribution in gross income as a taxable dividend, to the extent of our current or accumulated earnings and profits as determined under U.S. federal income tax law. Any distributions in excess of our earnings and profits will first be treated, for U.S. federal income tax purposes, as a nontaxable return of capital, to the extent of the U.S. investor's adjusted tax basis in our common shares, and then as gain from the sale or exchange of a capital asset, provided that our common shares constitutes a capital asset in the hands of the U.S. investor. U.S. corporate shareholders will not be entitled to any deduction for distributions received as dividends on our common shares. Gain or loss on the sale or exchange of our common shares will be treated as capital gain or loss if our common shares are held as a capital asset by the U.S. investor. Such capital gain or loss will be long-term capital gain or loss if the U.S. investor has held our common shares for more than one year at the time of the sale or exchange. A holder of common shares may be subject to "backup withholding" at the rate of 28% with respect to dividends paid on our common shares if the dividends are paid by a paying agent, broker or other intermediary in the United States or by a U.S. broker or certain United States-related brokers to the holder outside the United States. In addition, the proceeds of the sale, exchange or redemption of common shares may be subject to backup withholding, if such proceeds are paid by a paying agent, broker or other intermediary in the United States. Backup withholding may be avoided by the holder of Common Shares if such holder: o is a corporation or comes within other exempt categories; or o provides a correct taxpayer identification number, certifies that such holder is not subject to backup withholding and otherwise complies with the backup withholding rules. In addition, holders of common shares who are not U.S. persons are generally exempt from backup withholding, although they may be required to comply with certification and identification procedures in order to prove their exemption. Any amounts withheld under the backup withholding rules from a payment to a holder will be refunded or credited against the holder's U.S. federal income tax liability, if any, provided that amount withheld is claimed as federal taxes withheld on the holder's U.S. federal income tax return relating to the year in which the backup withholding occurred. A holder who is not otherwise required to file a U.S. income tax return must generally file a claim for refund or, in the case of non-U.S. holders, an income tax return in order to claim refunds of withheld amounts. BRITISH VIRGIN ISLANDS TAXATION Under the International Business Companies Act of the British Virgin Islands as currently in effect, a holder of common shares who is not a resident of British Virgin Islands is exempt from British Virgin Islands income tax on dividends paid with respect to the common shares and holders of common shares are not liable for British Virgin Islands income tax on gains realized during that year on any sale or disposal of the shares. The British Virgin Islands does not currently impose a withholding tax on dividends paid by a company incorporated under the International Business Companies Act. 25 There are no capital gains, gift or inheritance taxes levied by the British Virgin Islands on companies incorporated under the International Business Companies Act. In addition, the common shares are not subject to transfer taxes, stamp duties or similar charges. There is no income tax treaty or convention currently in effect between the United States and the British Virgin Islands. DESCRIPTION OF SECURITIES We were registered in the British Virgin Islands on May 17, 2004 as a British Virgin Islands International Business Company, number 597079. Our charter documents consist of our Memorandum of Association and our Articles of Association. The Memorandum of Association loosely resembles the Articles of Incorporation of a United States corporation and the Articles of Association loosely resembles the bylaws of a United States corporation. A brief description of our Memorandum of Association and Articles of Association follows, including a summary of material differences between the corporate laws of the United States and those of the British Virgin Islands. This description and summary does not purport to be complete and does not address all differences between United States and British Virgin Islands corporate laws. Copies of our Memorandum of Association and Articles of Association have been filed as exhibits to our registration statement on Form S-1 and readers are urged to review these exhibits in their entirety for a complete understanding of the provisions of our charter documents. Our Memorandum of Association provides that we any engage in any act or activity which is not prohibited by any laws of the British Virgin Islands. We are authorized to issue 100,000,000 shares of common stock, with a par value of $0.01 per share. As of the date of this prospectus, we had 50,000,000 outstanding shares of common stock. All of our outstanding shares are fully paid and non-assessable. All shareholders have the same voting rights. Holders of common stock are each entitled to cast one vote for each share held of record on all matters presented to shareholders. Our shareholders are entitled to vote together as a single class on all matters submitted to a vote of the shareholders. Cumulative voting is not allowed; hence, the holders of a majority of the outstanding common stock can elect all directors. Holders of common stock are entitled to receive such dividends as may be declared by the Board of Directors out of funds legally available for dividends. All outstanding common shares have the same rights with regard to dividends and distributions upon our liquidation, which is to share pro rata in any distribution of our assets after payment of liabilities. Our Board of Directors is not obligated to declare a dividend and it is not anticipated that dividends will ever be paid. All dividends unclaimed for three years after having been declared may be forfeited by resolution of the directors for our benefit. Although there are no conversion, redemption, sinking fund or similar provisions applicable to our outstanding shares of common stock, we may redeem any of our own shares for fair value. However, no purchase, redemption or other acquisition of shares can be made unless out of surplus (as defined by the International Business Companies Act) and unless the directors determine that immediately after the purchase, redemption or other acquisition we will be able to satisfy our liabilities as they become due in the ordinary course of business, and the realizable value of our assets will not be less than the sum of our total liabilities and capital. In the absence of fraud, the decision of the directors as to the realizable value of our assets is conclusive, unless a question of law is involved. If our shares are divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of the shares of that class) may be changed only with the consent in writing of the holders of not less than 75% of the issued shares of that class and the holders of not less than 75% of the issued shares of any other class of shares which may be affected by such variation. 26 There are no limitations on the right of any person to own or vote our securities. However, holders of common stock do not have preemptive rights to subscribe to any additional shares we may issue. Our Memorandum and Articles of Association do not contain any provision discriminating against any existing or prospective holder of our common stock as a result of ownership of any particular number of shares. Our Memorandum and Articles of Association do not contain any provisions relating to changes in our capital which are more stringent than those required by law. Our Articles of Association provide that our board of directors will consist of not less than one nor more than 20 directors. Each director holds office until his successor has been elected or the director is removed or resigned. The directors may by resolution fix the compensation of directors for services provided in any capacity to us. There is no age requirement or limit for a director and a director is not required to own any shares of our capital stock. Directors may be natural persons or companies, in which event the company may designate a person as its representative as a director. Directors or shareholders may remove a director for any reason. A director may appoint an alternate to attend meetings and vote in the place of the director. No agreement or transaction between us and one or more of our directors or any person in which any of our directors has a financial interest is void or voidable by reason of the presence, vote or consent by the interested director at the meeting at which the agreement or transaction is approved if the material facts of the interest of each director are disclosed in good faith or known to the other directors. The directors may convene meetings of our shareholders at such times and in such manner and places as the directors consider necessary or desirable. The directors are required to convene such a meeting upon the written request of shareholders holding 50% or more of our outstanding voting shares. At least seven days' notice of the meeting must be given to the shareholders whose names appear on the share register. One-third of our outstanding shares entitled to vote must be present at a meeting of shareholders in order to constitute a quorum and the affirmative vote of a majority of those present and entitled to vote is required in order to approve action by shareholders. Our Memorandum and Articles of Association do not contain any conditions relating to admission to any meeting of our shareholders. Our directors have the power to take certain actions without shareholder approval, including an amendment of our Memorandum of Association or Articles of Association or an increase or reduction in our authorized capital, which would require shareholder approval under the laws of most US jurisdictions. In addition, the directors of a British Virgin Islands company, subject in certain cases to court approval but without shareholder approval, may, among other things, implement a reorganization, certain mergers or consolidations with a subsidiary, the sale, transfer, exchange or disposition of any assets, property, part of the business, or securities of the company, or any combination (provided the assets do not represent more than 50% of the total assets of the company and the sale is not outside of the usual or ordinary course of the company's business), if they determine it is in the best interests of the company. The directors may, by a resolution of directors, exercise all powers we may have to borrow money. The directors' ability to amend our Memorandum of Association and Articles of Association without shareholder approval could have the effect of delaying, deterring or preventing a change in our control without any further action by the shareholders, including a tender offer to purchase our common shares at a premium over then current market prices. Our directors may also, by resolution: o change the shares of all or part of a class into a different number of shares of the same class. o sub-divide all or any of our outstanding shares into a smaller number of shares, and determine that, as between the holders of the shares resulting from the sub-division, one or more of the shares may have special rights, or may have qualified or deferred rights over other outstanding shares or be subject to any restrictions imposed by the directors. 27 British Virgin Islands law protecting the interests of minority shareholders may not be as protective in all circumstances as the law protecting minority shareholders in US jurisdictions. While British Virgin Islands law does permit a shareholder of a British Virgin Islands company to sue its directors derivatively, that is, in the name of, and for the benefit of, our company and to sue a company and its directors for his benefit and for the benefit of others similarly situated, the circumstances in which any such action may be brought, and the procedures and defenses that may be available in respect of any such action, may result in the rights of shareholders of a British Virgin Islands company being more limited than those of shareholders of a company organized in the US. As in most US jurisdictions, the board of directors of a British Virgin Islands company is charged with the management of the affairs of the company. In most US jurisdictions, directors owe a fiduciary duty to the corporation and its shareholders, including a duty of care, under which directors must properly apprise themselves of all reasonably available information, and a duty of loyalty, under which they must protect the interests of the corporation and refrain from conduct that injures the corporation or its shareholders or that deprives the corporation or its shareholders of any profit or advantage. Many US jurisdictions have enacted various statutory provisions which permit the monetary liability of directors to be eliminated or limited. Under British Virgin Islands law, liability of a corporate director to the corporation is primarily limited to cases of willful malfeasance in the performance of his duties or to cases where the director has not acted honestly and in good faith and with a view to the best interests of the company. However, under our Memorandum of Association, we are authorized to indemnify any director or officer who is made or threatened to be made a party to a legal or administrative proceeding by virtue of being one of our directors or officers, provided such person acted honestly and in good faith. Our Memorandum of Association also enables us to indemnify any director or officer who was successful in such a proceeding against expense and judgments, fines and amounts paid in settlement and reasonably incurred in connection with the proceeding. WARRANTS In connection with our private placement of Units, we issued common stock purchase warrants. The warrants give the holders the right to purchase from us, until June 30, 2008, an aggregate of 3,000,000 shares of our common stock for $0.50 per share. Both the number of warrants and the exercise price of the warrants are subject to anti-dilution adjustments in the event of stock dividends, stock splits, stock combinations and any other similar transactions. The warrants also give the holders the right to any additional rights, including those obtained through the consolidation, merger or sale of assets of the company or a similar transaction, that are granted, issued or sold to our shareholders as if the holders had held the number of shares of common stock acquirable upon the complete exercise of the warrants at the time such rights become available to the shareholders. Each warrant is redeemable at $0.001 per warrant if the common stock is then listed on a recognized stock exchange or trading at $1.00 per share for 20 consecutive trading days. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for our common stock is Computershare Trust Company, Inc. Its address is 350 Indiana Street, Suite 800, Golden, Colorado 80401, and its telephone number is (303) 262-0600. SELLING STOCKHOLDERS This prospectus relates to the resale of 9,956,000 shares of common stock held by existing shareholders. We are registering the shares in order to permit the selling shareholders to offer the shares of common stock for resale from time to time. The selling shareholders have not had any material relationship with us within the past three years. 28 The table below lists the selling shareholders and other information regarding the beneficial ownership of the common stock by the selling shareholders. The second column lists the number of shares of common stock held. The third column lists the shares of common stock being offered by this prospectus by the selling shareholders.
OWNERSHIP AFTER OFFERING -------------------------- NUMBER OF SHARES SHARES BENEFICIALLY REGISTERED FOR NUMBER OF NAME OF SELLING SHAREHOLDER OWNED (1) FOR RESALE (3) SHARES (2) PERCENT - --------------------------- --------- -------------- ---------- ------- George Lucas Adamson 50,000 (2) 25,000 25,000 (4) Lori Kay Allred 20,000 (2) 10,000 10,000 (4) William Ambrose 150,000 (2) 75,000 75,000 (4) Lloyd Banks and Vera Banks 100,000(2) 50,000 50,000 (4) Richard Bush-Luna and Cyndi Bush-Luna 25,000 (2) 12,500 12,500 (4) Howard S. Carney 100,000 (2) 50,000 50,000 (4) Chan Ho Wah Terence 100,000 (2) 50,000 50,000 (4) Linda A Chandler and Bradley Scott Chandler 10,000 (2) 5,000 5,000 (4) Cheng Chui Yee Bonnie 20,000 (2) 10,000 10,000 (4) Chin Cheung 100,000 (2) 50,000 50,000 (4) Devries Properties 30,000 (2) 15,000 15,000 (4) Laura Dichter 25,000 (2) 12,500 12,500 (4) John Diepersloot Trust 37,000 (2) 18,500 18,500 (4) Heather Evans 108,000 (2) 54,000 54,000 (4) Brent Alan Fedrizzi 10,000 (2) 5,000 5,000 (4) Jeffrey W. Felton 100,000 (2) 50,000 50,000 (4) Lilian Fong 300,000 (2) 150,000 150,000 (4) Michael D. Forti and Thomas A. Forti 50,000 (2) 25,000 25,000 (4) Thomas A. Forti 200,000 (2) 100,000 100,000 (4) Dirk Blair Freeman II 50,000 (2) 25,000 25,000 (4) Clifford E. Godfrey 20,000 (2) 10,000 10,000 (4) Goh Choo Hwee 10,000 (2) 5,000 5,000 (4) Arnold Goldblatt 20,000 (2) 10,000 10,000 (4) Martin Gross 10,000 (2) 5,000 5,000 (4) Jacquie Hallenbeck 100,000 (2) 50,000 50,000 (4) Sarah S. Haney 50,000 (2) 25,000 25,000 (4) Robert Hardaway 10,000 (2) 5,000 5,000 (4) Randy and Carol Heller 30,000 (2) 15,000 15,000 (4) Ryan B. Heller and Marlana Heller 15,000 (2) 7,500 7,500 (4) Adrian Hernandez and Tracy Hernandez 250,000 (2) 125,000 125,000 (4) Annie S. Hinson and Bob Hinson 250,000 (2) 125,000 125,000 (4) Paul E. Hinson 50,000 (2) 25,000 25,000 (4) Robert S. and Michele B. Hinson 50,000 (2) 25,000 25,000 (4) J Paul Consulting 500,000 (2) 250,000 250,000 (4) Mike G. Jackson 250,000 (2) 125,000 125,000 (4) Kevin Jenkins 130,000 (2) 65,000 65,000 (4) Richard H. Kelly 50,000 (2) 25,000 25,000 (4) John D. Kucera 50,000 (2) 25,000 25,000 (4) Lai To Yue Linden 50,000 (2) 25,000 25,000 (4) Lam Kwan 10,000 (2) 5,000 5,000 (4) Lam Sheung Ching Larry 20,000 (2) 10,000 10,000 (4) 29 OWNERSHIP AFTER OFFERING -------------------------- NUMBER OF SHARES SHARES BENEFICIALLY REGISTERED FOR NUMBER OF NAME OF SELLING SHAREHOLDER OWNED (1) FOR RESALE (3) SHARES (2) PERCENT - --------------------------- --------- -------------- ---------- ------- Lee Wing Hong Bruce 200,000 (2) 100,000 100,000 (4) Lee Yau Chuen Jacko 200,000 (2) 100,000 100,000 (4) Myron Leon Trust 125,000 (2) 62,500 62,500 (4) Catherine Leung 100,000 (2) 50,000 50,000 (4) Stella S.F. Liu Trust 125,000 (2) 62,500 62,500 (4) Jay Lutsky 10,000 (2) 5,000 5,000 (4) Thomas E. Manoogian 50,000 (2) 25,000 25,000 (4) Chris J. Martinez 20,000 (2) 10,000 10,000 (4) Deborah A. Melnick 50,000 (2) 25,000 25,000 (4) Jeffrey C. Melnick 50,000 (2) 25,000 25,000 (4) Robert A. Melnick 50,000 (2) 25,000 25,000 (4) John J. Murphy and Paula B. Murphy 10,000 (2) 5,000 5,000 (4) Steven F. Neira 10,000 (2) 5,000 5,000 (4) Robert M. Nieder 200,000 (2) 100,000 100,000 (4) Ponderosa Investment Partners Inc. 50,000 (2) 25,000 25,000 (4) Edward H. Price, Inc. PS Plan 100,000 (2) 50,000 50,000 (4) Seth D. Rankin 30,000 (2) 15,000 15,000 (4) David J. Schanin 50,000 (2) 25,000 25,000 (4) Mike M. Schizas and Linda K. Schizas 20,000 (2) 10,000 10,000 (4) Andrew J. Schlauch and Kimberly L. Schlauch 20,000 (2) 10,000 10,000 (4) John Schoenauer 50,000 (2) 25,000 25,000 (4) William Secor 100,000 (2) 50,000 50,000 (4) The Irrevocable Seven Oaks Trust 150,000 (2) 75,000 75,000 (4) H. Howland Silleck 50,000 (2) 25,000 25,000 (4) Silleck Investments, LLC 100,000 (2) 50,000 50,000 (4) David Simas and Jeanne Simas 100,000 (2) 50,000 50,000 (4) David Simas FBO Kasey Simas 20,000 (2) 10,000 10,000 (4) Kyle P. Simas and David L. Simas 20,000 (2) 10,000 10,000 (4) Donald Strasburg 10,000 (2) 5,000 5,000 (4) Scott R Takeda 20,000 (2) 10,000 10,000 (4) Billy B Kay Tam 20,000 (2) 10,000 10,000 (4) Roger Wasserman 100,000 (2) 50,000 50,000 (4) Jeremy Watada 10,000 (2) 5,000 5,000 (4) Charles Wong 70,000 (2) 35,000 35,000 (4) Yau Kam Wing Anthony 200,000 (2) 100,000 100,000 (4) DeCh'in Strategic Consulting LLC 1,457,000 1,457,000 -0- -- Li Kai Chi 1,833,000 1,833,000 -0- -- Ma Kit Ying, Ada 1,833,000 1,833,000 -0- -- Lam Wai Keung 1,833,000 1,833,000 -0- -- - ------------------------ (1) To our knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws, each person named in the table has sole voting and investment power with respect to the shares set forth opposite such person's name. (2) Includes shares underlying warrants which entitle the holder to purchase common shares through June 30, 2008. 30 (3) Does not include shares underlying warrants. (4) Less than 1%.
PLAN OF DISTRIBUTION The selling shareholders may sell some or all of their shares of common stock in one or more transactions, including block transactions: o on such public markets or exchanges as the common stock may from time to time be trading; o in privately negotiated transactions; o through the writing of options on the common stock; o in short sales; or o in any combination of these methods of distribution. The selling shareholders have set an offering price of $0.20 until our shares are quoted on the OTC Bulletin Board and thereafter at prevailing market prices or privately negotiated prices. The shares may also be sold in compliance with the Securities and Exchange Commission's Rule 144. In the event of the transfer by the selling shareholders of their shares to any pledgee, donee, or other transferee, we will amend this prospectus and the registration statement of which this prospectus forms a part by the filing of a post-effective registration statement in order to name the pledgee, donee, or other transferee in place of the selling shareholder who has transferred his shares. The selling shareholders may also sell their shares directly to market makers acting as principals or brokers or dealers, who may act as agent or acquire the common stock as a principal. Any broker or dealer participating in such transactions as agent may receive a commission from the selling shareholder or, if they act as agent for the purchaser of such common stock, from such purchaser. The selling shareholder will likely pay the usual and customary brokerage fees for such services. Brokers or dealers may agree with the selling shareholder to sell a specified number of shares at a stipulated price per share and, to the extent such broker or dealer is unable to do so acting as agent for the selling shareholder, to purchase, as principal, any unsold shares at the price required to fulfill the respective broker's or dealer's commitment to the selling shareholder. Brokers or dealers who acquire shares as principals may thereafter resell such shares from time to time in transactions in a market or on an exchange, in negotiated transactions or otherwise, at market prices prevailing at the time of sale or at negotiated prices, and in connection with such resales may pay or receive commissions to or from the purchasers of such shares. These transactions may involve cross and block transactions that may involve sales to and through other brokers or dealers. We can provide no assurance that all or any of the common stock offered will be sold by the selling shareholders. If, after the date of this prospectus, a selling shareholder enters into an agreement to sell his shares to a broker-dealer as principal and the broker-dealer is acting as an underwriter, we will need to file a post-effective amendment to the registration statement of which this prospectus is a part. We will need to identify the broker-dealer, provide required information on the plan of distribution, and revise the disclosures in that amendment, and file the agreement as an exhibit to the registration statement. Also, the broker-dealer would have to seek and obtain clearance of the underwriting compensation and arrangements from the NASD Corporate Finance Department. We are bearing all costs relating to the registration of the common stock, which are estimated at $25,000. The selling shareholders, however, will pay any commissions or other fees payable to brokers or dealers in connection with any sale of the common stock. We are paying the expenses of the offering because we seek to: (i) become a reporting company with the Commission under the Securities Exchange Act of 1934 (the "1934 Act"); and (ii) enable our common stock to be traded on the NASD OTC Bulletin Board. We believe that the registration of the resale of shares on behalf of existing shareholders may facilitate the development of a public market in our common stock if our common stock is approved for trading on the NASD OTC Bulletin Board. 31 We consider that the development of a public market for our common stock will make an investment in our common stock more attractive to future investors. In order for us to continue with our business plan, we will at some point in the near future need to raise additional capital through private placement offerings. We believe that obtaining reporting company status under the 1934 Act and trading on the OTC Bulletin Board should increase our ability to raise these additional funds from investors. The selling shareholders must comply with the requirements of the Securities Act and the Securities Exchange Act in the offer and sale of the common stock. In particular, during such times as the selling shareholders may be deemed to be engaged in a distribution of the common stock, and therefore be considered to be underwriters, they must comply with applicable law and may, among other things: o Not engage in any stabilization activities in connection with our common stock; o Furnish each broker or dealer through which common stock may be offered, such copies of this prospectus, as amended from time to time, as may be required by such broker or dealer; and o Not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities other than as permitted under the Securities Exchange Act. LEGAL MATTERS Stevenson, Wong & Co., has given an opinion on the validity of the securities. EXPERTS We have included the financial statements of the company as of December 31, 2004 and 2003, and for the years ended December 31, 2004, 2003 and 2002, in reliance upon the report of Zhong Yi (Hong Kong) C.P.A. Company Limited, an independent registered public accounting firm, to the extent and for the periods indicated in their report also incorporated by reference, and are included in reliance upon such report and upon the authority of such firm as experts in accounting and auditing. ADDITIONAL INFORMATION We have not previously been subject to the reporting requirements of the Securities and Exchange Commission. We have filed with the Commission a registration statement on Form S-1 under the Securities Act with respect to the shares offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to our securities and us you should review the registration statement and the exhibits and schedules thereto. Statements made in this prospectus regarding the contents of any contract or document filed as an exhibit to the registration statement are not necessarily complete. You should review the copy of such contract or document so filed. You can inspect the registration statement and the exhibits and the schedules thereto filed with the commission, without charge, at the office of the Commission at 100 F Street, NE, Washington, D.C. 20549. You can also obtain copies of these materials from the public reference section of the commission at 100 F Street, NE, Washington, D.C. 20549, at prescribed rates. You can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Commission maintains a web site on the Internet that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at HTTP://WWW.SEC.GOV. 32 REPORTS TO STOCKHOLDERS As a result of filing the registration statement, we are subject to the reporting requirements of the federal securities laws, and are required to file periodic reports and other information with the SEC. We will furnish our shareholders with annual reports containing audited financial statements certified by independent public accountants following the end of each fiscal year and quarterly reports containing unaudited financial information for the first three quarters of each fiscal year following the end of such fiscal quarter. INDEX TO FINANCIAL STATEMENTS Unaudited Interim Consolidated Financial Statements - Six Months Ended June 20, 2005 and 2004 Consolidated Balance Sheet June 30, 2005 (Unaudited).............................................F-1 Consolidated Statements of Income (Unaudited) Six Months Ended June 30, 2005 and 2004...............................F-2 Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2005 and 2004...............................F-3 Notes to Consolidated Financial Statements (Unaudited)..................F-4 Financial Statements - Years Ended December 31, 2004, 2003 and 2002 Report of Independent Registered Public Accounting Firm ................FF-1 Consolidated Balance Sheets December 31, 2004, 2003 and 2002......................................FF-2 Consolidated Statement of Income Years Ended December 31, 2004, 2003 and 2002..........................FF-4 Consolidated Statement of Stockholders' Equity Years Ended December 31, 2004, 2003 and 2002..........................FF-5 Consolidated Statements of Cash Flows Years Ended December 31, 2004, 2003 and 2002..........................FF-6 Notes to Consolidated Financial Statements..............................FF-8 33 Titanium Group Limited and its Subsidiaries Consolidated Balance Sheets As of June 30, 2005 (Original currency expressed in Hong Kong Dollars ("HK$")) (Unaudited)
2005 2005 -------------- -------------- US$ HK$ ASSETS Current assets: Cash and cash equivalents $ 16,592 $ 129,417 Accounts receivable, trade 670,673 5,231,246 Amount due from related parties - - Inventories 3,141 24,497 Deposits 28,890 225,342 -------------- -------------- Total current assets 719,296 5,610,502 -------------- -------------- Property and equipment, at cost, net of accumulated depreciation Cost 122,161 952,852 Accumulated depreciation (22,912) (178,710) -------------- -------------- 99,249 774,142 -------------- -------------- Other assets 288,434 2,249,788 -------------- -------------- Total assets $ 1,106,979 $ 8,634,432 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank overdraft $ 51,843 $ 404,375 Current portion of long term debt Accounts payable, trade 423,865 3,306,147 Taxes payable 55,472 432,683 Amount due to related parties - - -------------- -------------- Total current liabilities 531,180 4,143,205 -------------- -------------- Long-term debt Shareholders' loans - - -------------- -------------- - - -------------- -------------- Minority interest (4,013) (31,304) -------------- -------------- Stockholders' equity: Common stock, US$0.01 (HK$0.078) par value, 100,000,000 shares authorized, 47,000,000 shares issued and outstanding 99,659 777,338 Retained earnings 480,153 3,745,193 -------------- -------------- 579,812 4,522,531 -------------- -------------- $ 1,106,979 $ 8,634,432 ============== ==============
See accompanying notes to unaudited consolidated financial statements. F-1 Titanium Group Limited and its Subsidiaries Consolidated Statements of Income Six Months Ended June 30, 2005 and 2004 (Original currency expressed in Hong Kong Dollars ("HK$")) (Unaudited)
2005 2005 2004 --------------- ---------------- ---------------- US$ HK$ HK$ Revenue $ 841,860 $ 6,566,505 $ 2,646,377 Cost of sales 444,984 3,470,875 1,974,936 ---------------- ---------------- ---------------- Gross profit 396,876 3,095,630 671,441 ---------------- ---------------- ---------------- Selling, general and administrative expenses 259,081 2,020,831 1,144,551 ---------------- ---------------- ---------------- 259,081 2,020,831 1,144,551 --------------- ---------------- ---------------- Income (loss) from operations 137,795 1,074,799 (473,110) ---------------- ---------------- ---------------- Other income (expense): Other income 37,042 288,924 781,609 Interest expense (191) (1,486) (8,054) ---------------- ---------------- ---------------- 36,851 287,438 773,555 ---------------- ---------------- ---------------- Income before provision for income taxes and minority interest 174,646 1,362,237 300,445 Income tax 38,462 300,000 - ---------------- --------------- ---------------- Income before minority interest 136,184 1,062,237 300,445 Minority interest (4,935) (38,493) (14,115) ---------------- ---------------- ---------------- Net income $ 141,119 $ 1,100,730 $ 314,560 ================ ================ ================ Per share information: Basic and diluted income (loss) per common share $ - $ 0.02 $ 0.01 ================ ================ ================ Weighted average shares outstanding basic and fully diluted 47,000,000 47,000,000 47,000,000 ================ =============== ================ Net income $ 141,119 $ 1,100,730 $ 314,560 Other comprehensive income (loss) Effect of foreign currency transactions 86 671 (3,009) ---------------- ---------------- ---------------- Comprehensive income $ 141,205 $ 1,101,401 $ 311,551 ================ ================ ================
See accompanying notes to unaudited consolidated financial statements. F-2 Titanium Group Limited and its Subsidiaries Consolidated Statement of Cash Flows Six Months Ended June 30, 2005 and 2004 (Original currency expressed in Hong Kong Dollars ("HK$")) (Unaudited)
2005 2004 ---------------- --------------- HK$ HK$ Net cash provided by operating activities $ 1,438,403 $ 1,095,363 Cash flows from investing activities: Acquisition of intangible assets (147,600) (1,267,019) Acquisition of plant and equipment (635,600) (77,545) ---------------- ---------------- Net cash used in investing activities (783,200) (1,344,564) ---------------- ---------------- Cash flows from financing activities: Repayment of long term bank loan (16,667) (100,000) Repayment of shareholders' loan (1,420,000) - Proceeds from additional paid in capital 387,338 - ---------------- --------------- Net cash used in financing activities (1,049,329) (100,000) ---------------- --------------- Increase (decrease) in cash (394,126) (349,201) Cash and cash equivalents, beginning of period 523,543 746,205 ---------------- --------------- Cash and cash equivalents, end of period $ 129,417 $ 397,004 ================ ===============
See accompanying notes to unaudited consolidated financial statements. F-3 Titanium Group Limited and its Subsidiaries. Notes to Consolidated Financial Statements (Unaudited) NOTE 1 - GENERAL The Company is incorporated in the British Virgin Islands as a private limited company using the name Titanium Group Limited. The Company is incorporated on May 17, 2004 and has been dormant since incorporation. The Company's functional currency is the Hong Kong dollar. On June 22 2005, the Company acquired the entire share capital of Titanium Technology Limited from Golden Mass Technologies Limited. Titanium Technology Limited is a company incorporated in Hong Kong and is engaged in developing products utilizing biometrics technologies, licensing of technologies, professional services and project contracting. Through the acquisition of Titanium Technology Limited, the Company had also acquired Titanium Technology (Shenzhen) Company Limited., a subsidiary of Titanium Technology Limited. The accompanying financial statements present the financial position and results of operations of the Company and its subsidiary companies, Titanium Technology Limited and Titanium Technology (Shenzhen) Company Limited (collectively known as "the Group"). The Group's functional currency is the Hong Kong dollar. NOTE 2 - BASIS OF PRESENTATION OF INTERIM PERIOD The accompanying unaudited consolidated financial statements as of June 30, 2005 and 2004 and for the six-month period then ended have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the requirements of Regulation S-X. They do not include all of the information and footnotes for complete consolidated financial statements as required by GAAP. In management's opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the period ended June 30, 2005 and 2004 presented are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the annual fiancial statements presented elsewhere in this registration statement. Note 3 - AMOUNT DUE FROM RELATED PARTIES The outstanding amounts represent cash advanced to a director and shareholder of the Group. The cash advanced to a shareholder was for the payment of the shareholder's non-business related expenses over the years. The cash advanced to a director relates to the temporary cash payment to the directors who will then transfer the cash to the Group's subsidiary in PRC. It form part of the remittance procedures from the Group's subsidiary in Hong Kong to its subsidiary in PRC. These amounts due from related parties are unsecured, interest free and are repayable on demand. F-4 Set out below is the movement of the amount due from related companies during each of the six months ended June 30, 2005 and 2004: 2005 2004 HK$ HK$ Balance brought forward 1,048,685 808,330 Advances during the year 623,673 235,384 Repayment during the year - - Amount capitalized (1,672,358) - -------------- -------------- Balance carried forward - 1,043,714 ============== ============== Maximum balance during the year 1,672,358 1,043,714 ============== ============== NOTE 4 - OPERATING LEASE During the period ended June 30, 2005, the Group subsidiary signed a new operating lease effective from July 1, 2005. The future minimum lease payments for the next three years under the lease are HK$106,627 for 2005, HK$284,340 for 2006, HK$284,340 for 2007 and HK$142,170 for 2008. NOTE 5 - STOCKHOLDERS' EQUITY On June 30, 2005, certain shareholders agreed to forgive loans made to the Group though that date. The amount of the forgiveness (net of loans made to the shareholders) was contributed to the capital of the Company and aggregated approximately HK$387,000. F-5 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders Titanium Group Limited and its subsidiaries We have audited the accompanying consolidated balance sheets of Titanium Group Limited and its subsidiaries as of December 31, 2002, 2003 and 2004, and the related consolidated statements of income, stockholders' equity and comprehensive income, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Titanium Group Limited and its subsidiaries as of December 31, 2002, 2003 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, 2003 and 2004 in conformity with accounting principles generally accepted in the United States of America. /s/ Zhong Yi (Hong Kong) C.P.A. Company Limited Zhong Yi (Hong Kong) C.P.A. Company Limited. Certified Public Accountants Hong Kong, China August 31, 2005 9TH FLOOR, CHINACHEM HOLLYWOOD CENTRE, 1-13 HOLLYWOOD ROAD, CENTRAL, HONG KONG TEL. : (852) 2573 2296 FAX.: (852) 2384 2022 FF-1 FF-4 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2004, 2003 AND 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$"))
2004 2004 2003 2002 ---- ----- ---- ---- US$ HK$ HK$ HK$ ASSETS Current assets: Cash and cash equivalents $ 67,121 $ 523,543 $ 746,205 $ 500,852 Accounts receivable, trade 184,346 1,437,898 1,203,161 1,552,623 Amount due from related parties 134,447 1,048,685 808,330 385,534 Inventories 2,686 20,953 - - Deposits 14,291 111,469 47,860 20,210 -------------- ------------- ------------- ------------- Total current assets 402,891 3,142,548 2,805,556 2,459,219 -------------- ------------- ------------- ------------- Plant and equipment Computer system 28,012 218,495 133,720 73,232 Decoration 4,671 36,430 - - Furniture and fixtures 2,521 19,660 19,000 19,000 Office equipment 5,470 42,667 42,667 23,012 -------------- ------------- ------------- ------------- 40,674 317,252 195,387 115,244 Less: accumulated depreciation (18,238) (142,253) (72,836) (30,262) -------------- ------------- ------------- ------------- Plant and equipment, net 22,436 174,999 122,551 84,982 -------------- ------------- ------------- ------------- Intangible assets 312,925 2,440,815 999,677 38,000 -------------- ------------- ------------- ------------- Total assets $ 738,252 $ 5,758,362 $ 3,927,784 $ 2,582,201 ============== ============= ============= =============
See accompanying notes to consolidated financial statements. FF-2 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) AS OF DECEMBER 31, 2004, 2003 AND 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$"))
2004 2004 2003 2002 ---- ---- ---- ---- US$ HK$ HK$ HK$ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank overdraft $ 8,058 $ 62,850 $ 211,264 $ 1,215 Current portion of bank borrowings 2,137 16,667 200,000 - Amount due to related parties 27,025 210,797 290,085 194,265 Accounts payable 111,629 870,706 1,215,076 1,350,983 Taxes payable 17,482 136,360 14,706 95,884 ------------- ------------- ------------- ------------- Total current liabilities 166,331 1,297,380 1,931,131 1,642,347 ------------- ------------- ------------- ------------- Long-term debt Long term portion of bank Borrowings - - 16,667 - Shareholders' loans 182,051 1,420,000 920,000 - ------------- ------------- ------------- ------------- 182,051 1,420,000 936,667 - ------------- ------------- ------------- ------------- Minority interest 922 7,190 37,760 (2,455) ------------- ------------- ------------- ------------- Stockholders' equity: Common stock, US$0.01 (HK$0.078) par value, Authorized - 100,000,000 shares, issued and outstanding - 47,000,000 shares 50,000 390,000 390,000 390,000 Retained earnings 339,374 2,647,120 633,127 552,219 Accumulated other comprehensive Income (426) (3,328) (901) 90 388,948 3,033,792 1,022,226 942,309 ------------- ------------- ------------- ------------- Total liabilities and stockholders' equity $ 738,252 $ 5,758,362 $ 3,927,784 $ 2,582,201 ============= ============= ============= =============
See accompanying notes to consolidated financial statements. FF-3 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$"))
2004 2004 2003 2002 ---- ---- ---- ---- US$ HK$ HK$ HK$ Revenue $ 814,006 $ 6,349,252 $ 4,357,694 $ 4,267,341 Cost of sales (375,575) (2,929,488) (2,454,220) (1,964,860) ------------- -------------- -------------- --------------- Gross profit 438,431 3,419,764 1,903,474 2,302,481 ------------- -------------- -------------- --------------- Expenses Selling, general and administrative expenses (323,899) (2,526,414) (2,332,213) (1,117,729) Research and development costs - - (694,918) (662,500) ------------- -------------- -------------- --------------- (323,899) (2,526,414) (3,027,131) (1,780,229) ------------- -------------- -------------- --------------- Income (loss) from operations 114,532 893,350 (1,123,657) 522,252 ------------- -------------- -------------- --------------- Other income (expenses) Interest expenses (2,119) (16,532) (6,877) - Grant and subsidy income 157,634 1,229,545 1,182,435 90,159 Other income 3,134 24,449 1,153 2,064 ------------- -------------- -------------- --------------- Total other income 158,649 1,237,462 1,176,711 92,223 ------------- -------------- -------------- --------------- Income before provision for income taxes and minority interest 273,181 2,130,812 53,054 614,475 Income tax (18,896) (147,389) (11,931) (95,884) ------------- -------------- -------------- --------------- Income before minority interest 254,285 1,983,423 41,123 518,591 Minority interest 3,919 30,570 39,785 2,455 ------------- -------------- -------------- --------------- Net income $ 258,204 $ 2,013,993 $ 80,908 $ 521,046 ============= ============== ============== =============== Net income per share $ 0.01 $ 0.04 $ 0.00 $ 0.01 ============= ============== ============== =============== Weighted average shares Outstanding Basic 47,000,000 47,000,000 47,000,000 47,000,000 ============= ============== ============== =============== Diluted 47,000,000 47,000,000 47,000,000 47,000,000 ============= ============== ============== =============== Net income $ 258,204 $ 2,013,993 $ 80,908 $ 521,046 Other comprehensive income (loss) Effect of foreign transactions (311) (2,427) (991) 90 ------------- -------------- -------------- --------------- Comprehensive income $ 257,893 $ 2,011,566 $ 79,917 $ 521,136 ============= ============== ============== ===============
See accompanying notes to consolidated financial statements. FF-4 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$"))
Common stock Accumulated comprehensive Retained SHARES AMOUNT INCOME PROFITS TOTAL At January 1, 2002 47,000,000 $ 390,000 $ - $ 31,173 $ 421,173 Cumulative foreign currency translation - - 90 - 90 Profit for the year - - - 521,046 521,046 ------------- ------------- -------------- ------------- ------------- At December 31, 2002 47,000,000 390,000 90 552,219 942,309 Cumulative foreign - - (991) - (991) currency translation Profit for the year - - - 80,908 80,908 ------------- ------------- -------------- ------------- ------------- At December 31, 2003 47,000,000 390,000 (901) 633,127 1,022,226 Cumulative foreign currency translation - - (2,427) - (2,427) Profit for the year - - - 2,013,993 2,013,993 ------------- ------------- -------------- ------------- ------------- At December 31, 2004 47,000,000 $ 390,000 $ (3,328) $ 2,647,120 $ 3,033,792 ============= ============= ============== ============= =============
See accompanying notes to consolidated financial statements. FF-5 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$"))
2004 2004 2003 2002 ---- ---- ---- ---- US$ HK$ HK$ HK$ Cash flow from operating activities: Net income $ 258,204 $ 2,013,993 $ 80,908 $ 521,046 Adjustments: Depreciation and amortization 91,942 717,148 282,505 20,520 Minority interest in earnings of subsidiaries (3,919) (30,570) 40,215 (2,455) Loss on disposals of long term assets - - - 18,868 Decrease/ (increase) in: Inventories (2,686) (20,953) - - Trade and other receivables (30,094) (234,737) 349,462 (1,470,128) Deposits (8,155) (63,609) (27,650) 12,270 Amount due from related parties (30,815) (240,355) (422,796) (385,534) Increase/ (decrease) in: Trade and other payables (63,177) (492,784) 74,142 1,327,900 Amount due to related parties (10,166) (79,288) 95,820 107,053 Tax payable 15,597 121,654 (81,178) 95,884 Shareholders loan 64,103 500,000 920,000 - --------------- -------------- -------------- ------------- Net cash provided by operating activities 280,834 2,190,499 1,311,428 245,424 --------------- -------------- -------------- ------------- Cash flows from investing activities: Purchases of investment securities - - - (187,727) Disposal of investment securities - - - 170,381 Investment in subsidiary - - - (30,000) Purchases of fixed assets (15,624) (121,865) (80,143) (56,534) Increase of intangible assets (267,804) (2,088,869) (1,201,608) (40,000) --------------- -------------- -------------- ------------- Net cash used in investing activities (283,428) (2,210,734) (1,281,751) (143,880) --------------- -------------- -------------- ------------- Cash flows from financing activities : Increase in share capital - - - 390,000 Proceeds from long term debt - - 300,000 - Repayments of long term debt (25,641) (200,000) (83,333) - --------------- -------------- -------------- ------------- Net cash provided by (used in) financing activities (25,641) (200,000) 216,667 390,000 --------------- -------------- -------------- ------------- Effect of exchange gain / (loss) on cash and cash equivalents (311) (2,427) (991) 90 --------------- -------------- -------------- ------------- Net increase/(decrease) in cash and cash equivalents (28,546) (222,662) 245,353 491,634 Cash and cash equivalents at the beginning of the year 95,667 746,205 500,852 9,218 --------------- -------------- -------------- ------------- Cash and cash equivalents at the end of the year $ 67,121 $ 523,543 $ 746,205 $ 500,852 =============== ============== ============== =============
See accompanying notes to consolidated financial statements. FF-6 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) YEARS ENDED DECEMBER 31 2004, 2003 AND 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$"))
2004 2004 2003 2002 ---- ---- ---- ---- US$ HK$ HK$ HK$ Other information Interest paid on bank overdraft and bank borrowing $ 2,119 $ 16,532 $ 6,877 $ - ============== ============ ============ ============ Income tax paid $ 423 $ 25,735 $ 93,109 $ - ============== ============ ============ ============ Non-cash disclosure Comprehensive income / (loss) $ (311) $ (2,427) $ (991) $ 90 ============== ============ ============ ============
See accompanying notes to consolidated financial statements. FF-7 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 & 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$")) 1. ORGANIZATION AND BASIS OF PRESENTATION Titanium Group Limited ("the Company") was incorporated as an International Business Company with limited liability in the British Virgin Island under the International Business Companies Act, Cap 291 of the British Virgin Islands on May17, 2004. The Company was established to be the holding company for Titanium Technology Limited ("TTL") and Titanium Technology (Shenzhen) Co., Ltd., a subsidiary in which TTL has a 92% equity interest, (collectively known as "the Operating Enterprises"). The Operating Enterprises are distinct legal entities with limited liability. The following are the particulars of the Operating Enterprises included in the consolidated financial statements: Titanium Technology Limited ("TTL") TTL was incorporated in Hong Kong on February 14, 2001 by certain individuals. The issued ordinary share capital of TTL was HK$30,000. TTL is engaged in developing products utilizing biometrics technology, licensing of technologies, professional services and project contracting. Listed below are the technology and products which TTL has developed and sold during the year ended December 31, 2004: Technology Ti-Face Ti-Face is the core face recognition engine developed and implemented by TTL. The technology is capable of selecting intelligently specific areas of the face, such as the eyes or mouth, which in turn are used as distinguishable features for recognition. Products ProAccess Applying TTL's Ti-Face technology, the ProAccess suite is a high-performance, secure, user-friendly solution to enhance the authentication method of physical door, personal computer, and mobile phones by advance recognition technology. FF-8 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 & 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$")) ProFacer ProFacer is a biometrically integrated surveillance system. TTL employs a full range of technology to enhance and automate existing surveillance techniques. The characteristic processes enabling ProFacer to function effectively are detection, alignment, normalization, representation and matching. Besides, TTL also provides consulting services to its customers. TTL's consulting team works with the client from the earliest stages of the project and takes accountability for the success of the project. In generally, TTL provides consulting services in the areas of security service and system integration/development projects. TTL's principal markets/customer base as well as the geographic area served can be summarized as below: - Hong Kong, including Hong Kong government and commercial sectors; - China, mainly the government; - Macau, mainly casinos; and - For Japan and the US markets, TTL has formed distribution partnership with the local agents to sell its products. Customers in Japan came from both retail and commercial sectors. Titanium Technology (Shenzhen) Limited ("TTLSZ") TTLSZ was registered in Shenzhen, the People's Republic of China ("PRC") on September, 20 2002. The registered and contributed capital of TTLSZ was HK$1,000,000. TTLSZ was established by TTL and EAE Production HK Limited ("EAE"). TTL owns 92% of the registered capital of TTLSZ while EAE owns the remaining 8%. TTLSZ is responsible for the product development activities for TTL. The Company believes that it operates in a single business segment. The accompanying consolidated financial statements present the consolidated assets, liabilities, results of operations and cash flows of the Company and its subsidiaries (collectively known as "the Group") as if the Company had been in existence throughout the three years ended December 31, 2004. The interest of the Company in the Operating Enterprises was acquired in exchange for shares in the Company subsequent to December 31, 2004. These transactions are considered to be transfers between entities under common control, within the meaning of generally accepted accounting principles in the United States of America ("US GAAP"). Accordingly, the assets and liabilities transferred have been accounted for at historical cost or at their "fair value" at the date of their original acquisition and have been included in the foregoing financial statements as of the beginning of the periods presented. FF-9 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 & 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$")) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of consolidation The consolidated financial statements include the financial statements of Titanium Group Limited and its subsidiaries and have been prepared in accordance in accordance with US GAAP. All significant inter-company balances and transactions have been eliminated on consolidation. Inventories Inventories are stated at the lower of cost or market value. Cost is determined using the weighted average method for all inventories. Inventories consist of computer accessories purchased from various suppliers. Accounts receivable Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Group's best estimate of the amount of probable credit losses in the Group's existing accounts receivable. The Group determines the allowance based on historical write-off experience of the Group. The Group reviews its allowance for doubtful accounts on a regular basis. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. All other balances are reviewed on a pooled basis by industry. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Group does not have any off-balance-sheet credit exposure related to its customers. No general provision of bad and doubtful debts has been made in these consolidated financial statements. The management considers that the accounts receivables are from reputable customers and expects to collect their outstanding balances in full. Cash and cash equivalents For purposes of reporting cash flows, cash includes amounts on hand and amounts on deposits at financial institutions. Plant and equipment Plant and equipment are stated at cost less accumulated depreciation. Depreciation on plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets. The estimated useful life of machinery and equipment is 5 years. Total depreciation for each of the three years ended December 31, 2002, 2003 and 2004 was HK$18,520, HK$42,574 and HK$69,417 respectively. Intangible assets Costs incurred in connection with the registration of patent rights have been capitalized and are being amortized using the straight-line method over a period of 20 years. FF-10 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 & 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$")) Revenue recognition The principal activities of the Group are software development and software sales. It generates revenues through license sales of its products, all of which utilize the proprietary technology that it has developed as well as consulting services that the Group provides to its customers in connection with its products. Revenue from software license sales is recognized as revenue when the Group has fulfilled all conditions and obligation under the agreements. Revenue from the provision services is recognized at the time when the consulting services have been rendered to the customers. Interest income is recognized on a time apportionment basis, taking into account the principal amounts outstanding and the interest rates applicable. Research and development costs Research costs are expensed as incurred. Product development expenses, consist primarily of labor cost. The products are developed by in-house technicians who perform research and development, enhance and maintain existing products and provide quality assurance. Product development costs are required to be capitalized when a product's technological feasibility has been established by completion of a working model of the product and ending when a product is available for general release to customers. To date, management considers that the products, "ProAccess" and "ProFacer" have reached this stage of development, therefore, they have capitalized HK$1,185,678 and HK$2,022,379 of product development costs associated with ProAccess ProFacer as intangible assets for the years ended December 2003 and 2004 respectively. These intangible assets are being amortized using the straight-line method over a period of 5 years. Amortization amounted to HK$237,135 and HK$641,610 and was charged to operations for the years ended December 31, 2003 and 2004 respectively. Grant and subsidy income Grant and subsidy income represents subsidy from the Government of Hong Kong Special Administrative Region ("HKSAR") for assisting the Group in development of products of innovative nature. The products developed under this subsidy plan include ProAccess and ProFacer. Pursuant to the agreements made between the Group and the Government of Hong Kong Special Administrative Region ("HKSAR"), the Government of HKSAR will provide funding to the Group for product development. The funding will be made available to the specific project in accordance with the milestones as established by the Group and is subject to a ceiling of HK$2,000,000. The Group is not required to repay the Government grant. However, the Group is required to contribute approximately 50% of the overall project cost in accordance with the grant agreement. The Group has contributed HK$2,309,313 for the ProAccess and ProFacer projects. Upon completion of the project, the Group will have to tender to the Government its pro rata share of the residual funds remaining in the project account. Beside that, the Group will have to pay the Government a royalty fee of 5% on the gross revenue earned from any activities in connection with FF-11 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 & 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$")) the project. The royalty fee paid by the Group for each of the years ended December 31, 2003 and 2004 amounted to HK$32,647 and HK$34,532 respectively. The Group is entitled to retain ownership of the intellectual property resulting from the project. Advertising costs The Group expenses advertising costs as incurred in accordance with the American Institute of Certified Public Accountants ("AICPA") Statement of Position 93-7, "Reporting for Advertising Costs". Advertising expenses amounted to HK$129,573, HK$80,303 and HK$45,643 for the year ended December 31, 2002, 2003 and 2004 respectively. Income taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Comprehensive income Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated comprehensive income, as presented in the accompanying consolidated statement of stockholder's equity consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit. Foreign currency translation methodology The Group's functional currency is the Hong Kong dollar because the majority of the Group's revenues, capital expenditure and operating and borrowing costs are either denominated in Hong Kong dollars or linked to the Hong Kong dollar exchange rate. Accordingly, transactions and balances not already measured in Hong Kong dollars (primarily transactions involving the United States dollar and the PRC Yuan) have been re-measured into Honk Kong dollars in accordance with the relevant provisions of Statement of Financial Accounting Standards (`SFAS") No. 52, "Foreign Currency Translation". The objective of this re-measurement process is to produce largely the same results that would have been reported if the accounting records had been kept in Hong Kong dollars. The exchange rate adopted throughout the consolidated financial statement where US dollars are presented was US$1 / HK$7.8. Cash, receivables, payables, and loans are considered monetary assets and liabilities and have been translated using the exchange rate as of the balance sheet dates. Non-monetary assets and liabilities, including non-current assets and shareholders' equity, are stated at their actual dollars costs or are restated from their historic cost, by applying the historical exchange rate as monthly average exchange rates to underlying transactions. FF-12 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 & 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$")) Equity-based compensation The Company adopted Statement of Financial Accounting Standard ("FAS") No. 123 ("FAS 123"), Accounting for Stock-Based Compensation beginning at its inception. Upon adoption of FAS 123, the Company continued to measure compensation expense for its stock-based employee compensation plans using the intrinsic value method prescribed by Accounting Principals Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). The Company did not pay any stock based compensation during any period presented. Use of estimates The preparation of the consolidated financial statements requires management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include the carrying amount of property, plant and equipment, intangibles and goodwill; valuation allowances for receivables, inventories and deferred income tax assets; environmental liabilities; valuation of derivative instruments; and assets and obligations related to employee benefits. Actual results could differ from those estimates. Paid vacation leave and long service leave obligation No accrual for paid vacation leave and long service leave obligation has been provided in the financial statements of the Group. Pursuant to Hong Kong law, Hong Kong employees are generally only entitled to severance pay upon their retirement or upon the termination of their employment without cause provided that they have been employed by the Group for a period of more than five years. As the Group had been in existence for less than five years, the management believes that the provision for long service leave obligation is not required. For paid leave obligation, the Group has adopted a policy that employees would be entitled to take paid holiday leave in each year in accordance with their employment contracts. Any unused vacation leave is forfeited at the end of each calendar year. With the approval from the management, an employee of the PRC subsidiary is entitled to carry forward the unused annual vacation leave to the subsequent year once. Furthermore, it is also obligated to pay long service leave to employee upon termination of employment. In accordance with the PRC's rules and regulations on employment, the subsidiary is required to pay the employee a payment equals to a month salary for every full year of employment. However, the payment should not be more than twelve month of salary normally earned by that employee. Since all the employee have taken their entitlement of paid vacation leave and the management considers that the provision for long service leave obligation would be insignificant, therefore, no provision for unused annual paid vacation leave and long service leave obligation has been provided in the financial statements for the year ended December 31, 2004. FF-13 Provision for products warranties The Group's standard warranty for its software products generally covers a twelve-month period and warrants against substantial non-conformance to the published documentation at time of delivery. The Group has not experienced any material returns where it was under obligation to honor this standard warranty provision. Warranty claims on hardware deficiencies are covered by the particular hardware suppliers. As such, no warranty provision has been provided in the accompanying consolidated balance sheet or reflected in the result of operations for the three years ended December 31, 2004. Impairment of long-lived assets In accordance with Statement 144, long-lived assets, such as plant, and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet. Intangible assets are tested annually for impairment and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset's fair value. This determination is made at the reporting unit. Recently issued accounting standards In December 2004, the FASB issued FASB Statement No. 123 (revised 2004), SHARE-BASED PAYMENT, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. This Statement is a revision to Statement 123 and supersedes APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and its related implementation guidance. For nonpublic companies, this Statement will require measurement of the cost of employee services received in exchange for stock compensation based on the grant-date fair value of the employee stock options. Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. This Statement will be effective for the Company as of January 1, 2006. In December 2004, the FASB issued FASB Statement No.151, INVENTORY COSTS, which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Under this Statement, such items will be recognized as current-period charges. In addition, the Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This Statement will be effective for the Company for inventory costs incurred on or after January 1, 2006. FF-14 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 & 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$")) In December 2004, the FASB issued FASB Statement No. 153, EXCHANGES OF NON-MONETARY ASSETS, which eliminates an exception in APB 29 for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. This Statement will be effective for the Company for non-monetary asset exchanges occurring on or after January 1, 2006. 3. AMOUNT DUE FROM RELATED PARTIES The outstanding amounts represent cash advanced to a director and shareholder of the Group. The cash advanced to a shareholder was for the payment of the shareholder's non-business related expenses over the years. The cash advanced to a director relates to the temporary cash payment to the directors who will then transfer the cash to the Group's subsidiary in PRC. It form part of the remittance procedures from the Group's subsidiary in Hong Kong to its subsidiary in PRC. These amounts due from related parties are unsecured, interest free and are repayable on demand. Set out below are the movement of the amount due from related companies during each of the three years ended December 31, 2002, 2003 and 2004:
2004 2003 2002 ---- ---- ---- HK$ HK$ HK$ Balance brought forward $ 808,330 $ 385,534 $ - Advances during the year 679,725 471,237 385,534 Repayment during the year (439,370) (48,441) - -------------- -------------- ------------- Balance carried forward $ 1,048,685 $ 808,330 $ 385,534 ============== ============== ============= Maximum balance during the year $ 1,408,685 $ 808,330 $ 385,534 ============== ============== =============
4. INTANGIBLE ASSETS
AS OF DECEMBER 31, 2004 -------------------------------------------------------- WEIGHTED GROSS AVERAGE CARRYING AMORTIZATION ACCUMULATED AMOUNT PERIOD AMORTIZATION ------ ------ ------------ HK$ HK$ Intangible assets: Products development costs $ 3,208,057 5 years $ 878,745 Patent and license right registration fee 122,420 20 years 10,917 --------------- ------------- $ 3,330,477 $ 889,662 =============== =============
Aggregate amortization expense for intangible assets was HK$2,000, HK$239,931 and HK$647,731 for the years ended December 31, 2002, 2003 and 2004 respectively. FF-15 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 & 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$")) 5. FAIR VALUE OF INANCIAL INSTRUMENTS The fair value of financial instruments is the amount at which the instrument could be exchanged in a current transaction between willing parties. The board of directors considers that the estimated fair value of the Group's financial instruments at December 31, 2002, 2003 and 2004 are their respective carrying amount. The following methods and assumptions were used to estimate the fair value of each class of financial instruments: Cash and cash equivalents, trade accounts receivable, amounts due from related parties, bank borrowings, trade accounts payable and shareholders' loan. The carrying amount approximates fair value because of short maturity of these instruments. 6. LONG TERM BORROWINGS
2004 2003 2002 ---- ---- ---- HK$ HK$ HK$ Bank borrowings $ - $ 216,667 $ - Current portion of bank borrowings - (200,000) - -------------- --------------- ------------- Long term portion of bank borrowings - 16,667 - -------------- --------------- ------------- Loan from shareholders 1,420,000 920,000 - -------------- --------------- ------------- $ 1,420,000 $936,667 $ - ============== =============== =============
In 2003, TTL entered into a financing agreement with a financial institution in which the financial institution would lend the Group HK$300,000 (US$38,462). The bank borrowings were unsecured and bearing interest at 5.5% per annum. The loan was to be repaid by 18 monthly installments of HK$18,042 (US$2,313). The financing agreement was secured by personal guarantees given by TTL's directors. The loans from shareholders are unsecured, interest free and are not repayable within the next twelve months. FF-16 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 & 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$")) 7. COMMON STOCK The description of the Company's shares is as follows: Each outstanding share of common stock is entitled to one vote. The common stockholders do not have cumulative voting rights in the election of directors, and accordingly, holders of a majority of shares voting are able to elect all of the directors. Holders of common stock are entitled to receive ratably such dividends as may be declared by the board of directors out of funds legally available therefore as well as distributions to the stockholders. At the time of incorporation, the Company's authorized capital was 1,000,000 shares of common stock, par value US$0.05. On June 20, 2005, the authorized capital was changed to 100,000,000 shares of common stock, par value US$0.01. Pursuant to a share an exchange agreement dated June 22, 2005, the Company issued 47,000,000 shares in exchange for the then outstanding shares of TTL and TTL then became a wholly owned subsidiary of the Company. Subsequent to the balance sheet date, the Company sold 3,000,000 shares of common stock through a private placement and received aggregate gross proceeds of HK$4,680,000 (US$600,000). Expenses of the offering were approximately HK$507,000 (US$65,000). In addition, the Company issued 3,000,000 common stock purchase warrants to the investors. Each common stock purchase warrant entitles the investor to purchase one share of common stock at an exercise price of US$0.50 per share through June 30, 2008. 8. INCOME TAXES Income tax consists of:
2004 2003 2002 ---- ---- ---- HK$ HK$ HK$ Hong Kong Profit Tax: - current year $ 147,389 $ 11,931 $ 95,884 ============== =============== =============
Income tax is calculated at 17.5% based on the estimated assessable profit for each year. No income tax has been provided for the Group's subsidiary registered in the PRC as the subsidiary has no profit earned which is subject to tax in accordance with the relevant law and regulation in the PRC. As the tax effect of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31, 2004, 2003 and 2002 is immaterial to the Group; therefore, no provision for deferred tax has been made in these consolidated financial statements. FF-17 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 & 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$")) 9. OPERATING LEASE COMMITMENTS At December 31, 2004 the Group had total future minimum lease payments under non-cancelable operating leases falling due as follows: Due in 2005 $ 235,656 Thereafter $ 589,140 The Group expenses rental payments as incurred and is included in administrative expenses in the consolidated statement of income. Rental payments amounted to HK$45,587, HK$99,052 and HK$207,088 for the years ended December 31, 2002, 2003 and 2004 respectively. 10. RELATED PARTY TRANSACTIONS For each of the years in the three-year period ended December 31, 2002, 2003 and 2004, TTL had sold goods to Ericorps Creation (HK) Limited amounting to HK$500,000, HK$825,820 and HK$266,791 respectively. Ericorps Creation (HK) Limited is owned by certain beneficial shareholders of the Group who control an aggregate of 10% of the outstanding shares. 11. OPERATING RISK Concentration of credit risk The carrying amount of cash and cash equivalents, trade receivables and due from related parties represented the Group's maximum exposure to credit risk in relation to financial assets. The majority of the Group's trade receivables relate to sales of goods/provision of services to third party customers. The Group does not have fixed credit period for its trade receivables. The Group performs ongoing credit evaluations of its customer's financial condition and generally does not require collateral on trade receivables. No other financial assets carry a significant exposure to credit risk. Exchange risk The Group cannot guarantee that the current exchange rate will remain steady, therefore there is a possibility that the Group could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HK$ converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notices. FF-18 TITANIUM GROUP LIMITED AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 & 2002 (ORIGINAL CURRENCY EXPRESSED IN HONG KONG DOLLARS ("HK$")) 12. SUBSEQUENT EVENTS On May 13, 2005, the Group subsidiary signed a new operating lease effective from July 1, 2005. The future minimum lease payments for the next three years under the lease are HK$106,627 for 2005, HK$284,340 for 2006, HK$284,340 for 2007 and HK$142,170 for 2008. On June 30, 2005, certain shareholders agreed to forgive loans made to the Group though that date. The amount of the forgiveness (net of loans made to the shareholders) was contributed to the capital of the Company and aggregated approximately HK$387,000. FF-19 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The expenses to be paid by the registrant in connection with the securities being registered are as follows: Securities and Exchange Commission filing fee........$ 234.36 Accounting fees and expenses......................... 70,000.00 Blue sky fees and expenses........................... 1,000.00 Legal fees and expenses.............................. 25,000.00 Transfer agent fees and expenses..................... 5,550.00 Printing expenses.................................... 2,000.00 Miscellaneous expenses............................... 1,215.64 -------------- Total................................................$ 105,000.00 ============== All amounts are estimates except the SEC filing fee. The Selling Stockholders will be bearing the cost of its own brokerage fees and commissions and its own legal and accounting fees. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Under the International Business Companies Act of the British Virgin Islands, the registrant has broad powers to indemnify its directors and officers against liabilities they may incur in such capacities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). Section 74 of the registrant's Articles of Association (Exhibit 3.2 hereto) states that every officer and director shall be entitled to be indemnified out of the assets of the registrant against all losses or liabilities which he may sustain or incur in or about the execution of the duties of his office or otherwise in relation thereto, and no director or other officer shall be liable for any loss, damage, or misfortune which may happen to, or be incurred by the registrant in the execution of the duties of his office, or in relation thereto. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. Within the past three years, the registrant has issued and sold the unregistered securities set forth in the tables below.
- ---------------------------------------------------------------------------------------------------------------------- PERSONS OR CLASS OF DATE PERSONS SECURITIES CONSIDERATION EXEMPTION CLAIMED - ---------------------------------------------------------------------------------------------------------------------- May 2004 5 persons 5,000,000 shares of common $50,000 Section 4(2) stock - ---------------------------------------------------------------------------------------------------------------------- June 2005 Golden Mass 42,000,000 shares of common Shares of capital stock of Section 4(2) Technolo-gies stock Titanium Technology Limited Ltd. - ---------------------------------------------------------------------------------------------------------------------- July 2005 - 64 2,460,000 Units, each Unit $492,000 aggregate offering Rule 506 August 2005 accredited consisting of one share of price; selling commissions of investors common stock and one common $49,200 stock purchase warrant - ---------------------------------------------------------------------------------------------------------------------- II-1 - ---------------------------------------------------------------------------------------------------------------------- PERSONS OR CLASS OF DATE PERSONS SECURITIES CONSIDERATION EXEMPTION CLAIMED - ---------------------------------------------------------------------------------------------------------------------- July 2005 - 13 non-U.S. 540,000 Units, each Unit $108,000 aggregate offering Regulation S August 2005 Persons consisting of one share of price; selling commissions of common stock and one common $10,800 stock purchase warrant - ----------------------------------------------------------------------------------------------------------------------
No underwriters were used in the recapitalization and reorganization of the registrant. Underwriters were used in connection with the sale of the Units made from July 2005 to August 2005. The registrant relied upon the exemption from registration contained in Section 4(2) as to all of the transactions except for the sales of Units to accredited investors. The registrant relied upon Rule 506 and Regulation S for the sales of Units from July 2005 to August 2005, as all of the purchasers were either accredited investors or non-US persons. With regard to the transactions made in reliance on the exemption contained in Section 4(2), the purchasers were deemed to be sophisticated with respect to the investment in the securities due to their financial condition and involvement in the registrant's business. Restrictive legends were placed on the stock certificates evidencing the securities issued in all of the above transactions. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES - -------------------------------------------------------------------------------- REGULATION S-K NUMBER EXHIBIT - -------------------------------------------------------------------------------- 3.1 Memorandum of Association, as amended - -------------------------------------------------------------------------------- 3.2 Articles of Association, as amended - -------------------------------------------------------------------------------- 5.1 Opinion of Stevenson, Wong & Co. - -------------------------------------------------------------------------------- 10.1 Employment agreement with Jason Ma dated January 1, 2005 - -------------------------------------------------------------------------------- 10.2 Employment agreement with Humphrey Cheung dated January 1, 2005 - -------------------------------------------------------------------------------- 10.3 Employment agreement with Billy Tang dated January 1, 2005 - -------------------------------------------------------------------------------- 10.4 Office lease dated June 22, 2005 - -------------------------------------------------------------------------------- 21 Subsidiaries of the registrant - -------------------------------------------------------------------------------- 23.1 Consent of Stevenson, Wong & Co. - -------------------------------------------------------------------------------- 23.2 Consent of Zhong Yi (Hong Kong) C.P.A. Company Limited - -------------------------------------------------------------------------------- II-2 ITEM 28. UNDERTAKINGS Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act") may be permitted to directors, officers and controlling persons of the issuer pursuant to the foregoing provisions, or otherwise, the issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The Registrant hereby undertakes to: (1) File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (i) Include any prospectus required by section 10(a)(3) of the Securities Act; (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) Include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hong Kong, on September 12, 2005. TITANIUM GROUP LIMITED By: /s/ JASON MA ----------------------------------- Jason Ma, Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE Chief Executive Officer (Principal /s/ JASON MA Executive Officer) September 12, 2005 - -------------------------------------------- Jason Ma Chairman of the Board of Directors (Principal Financial and Accounting Officer) /s/ DR. JOHNNY NG September 12, 2005 - -------------------------------------------- Dr. Johnny Ng /s/ HUMPHREY CHEUNG Director September 12, 2005 - -------------------------------------------- Humphrey Cheung /s/ BILLY TANG Director September 12, 2005 - -------------------------------------------- Billy Tang
II-4 EX-3 2 exh3-1.txt EXH 3-1 MEM OF ASSOC EXHIBIT 3.1 MEMORANDUM OF ASSOCIATION, AS AMENDED BRITISH VIRGIN ISLANDS THE INTERNATIONAL BUSINESS COMPANIES ACT (C.A.P. 291) -------- MEMORANDUM OF ASSOCIATION OF TITANIUM GROUP LIMITED [name in Chinese] (the "Company") 1. The Name of the Company is Titanium Group Limited 2. The Registered Office of the Company is Akara Bldg., 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands or such other place within the British Virgin Islands as the directors may from time to time determine. 3. The Registered Agent of the Company is Mossack Fonseca & Co. (B.V.I.) Ltd., P.O. Box 3136, Road Town, Tortola, British Virgin Islands or such other person or company being a person or company entitled to act as a Registered Agent as the directors may from time to time determine. 4. The objects for which the Company is established are: (a) To carry on the business of an investment company and for that purpose to acquire and hold either in the name of the Company or in that of any nominee share stocks, debentures, debenture stocks, bonds, notes, obligations or securities. (b) To acquire any such share stocks, debentures, debenture stocks, bonds, notes, obligations or securities by original subscription, contract, tender, purchase, exchange underwriting or otherwise and to subscribe for the same subject to such terms and conditions (if any) as may be thought fit. (c) To exercise and enforce all rights and powers conferred by or incident to the ownership of any such share stock obligations or other securities including without prejudice to the generality of the foregoing all such powers of veto or control as may be conferred by virtue of the holding by the Company of some special proportion of the issued or nominal amount thereof and to provide managerial and other executive supervisory and consultancy services for or in relation to any company in which the Company is interested upon such terms as may be thought fit. (d) To buy, own, hold, subdivide, lease, sell, rent, prepare building sites, construct, reconstruct, alter, improve, decorate, furnish, operate, maintain, reclaim or otherwise deal with and/or develop land and buildings and otherwise deal in real estate in all its branches, to make advances upon the security of land or houses or other property or any interest therein, and whether erected or in course of erection and whether on first mortgage or charge or subject to a prior mortgage or mortgages or charge or charges, and to develop land and buildings as may seem expedient but without prejudice to the generality of the foregoing. (e) To carry on the business of traders and merchants of any kind, nature or description, and the sale or rendering of related products and services, and the employment of the necessary personnel therefor. (f) Without prejudice to the generality of the foregoing paragraphs: to carry on the business of franchising to purchase, sell, exchange, lease, manage, hold, trade, invest in all kinds of movable or immovable property, merchandise, commodities, effects, products, services of any kind, nature or description, to carry on any type of commercial or financial operation to receive and/or pay royalties, commissions and other income or outgoings of any kind, to purchase, construct, charter, own, operate, manage, administer transport vessels of any kind and the appurtenances and related services and agencies, to sell or render related services and employ the necessary personnel therefor. 2 (g) To buy, sell, underwrite, invest in, exchange or otherwise acquire, and to hold, manage, develop, deal with and turn to account any bonds, debentures, shares (whether fully paid or not), stock options, commodities, futures, forward contracts, notes or securities of governments, states, municipalities, public authorities or public or private limited or unlimited companies in any part of the world, precious metals, gems, works of art and other articles of value, and whether on a cash or margin basis and including short sales, and to lend money against the security of any of the aforementioned property. (h) To borrow or raise money from, but not restricted to, banks by the issue of debentures, debenture stock (perpetual or terminable), bonds, mortgages, or any other securities founded or based upon all or any of the assets or property of the Company or without any such security and upon such terms as to priority or otherwise as the Company shall think fit. (i) To engage in any other business or businesses whatsoever, or in any act or activity, which are not prohibited under any law for the time being in force in the British Virgin Islands. (j) To do all such other things as are incidental to, or the Company may think conducive to, the attainment of all or any of the above objects. And it is hereby declared that the intention is that each of the objects specified in each paragraph of this clause shall, except where otherwise expressed in such paragraph, be an independent main object and be in nowise limited or restricted by reference to or inference from the terms of any other paragraph or the name of the Company. 5. The Company has no power to: (a) carry on business with persons resident in the British Virgin Islands; (b) own an interest in real property situate in the British Virgin Islands, other than a lease referred to in paragraph (e) of subsection (2); (c) carry on banking or trust business, unless it is licensed under the Banks and Trust Companies Act, 1990; (d) carry on business as an insurance or reinsurance company, insurance agent or insurance broker, unless it is licensed under an enactment authorising it to carry on that business; (e) carry on the business of company management unless it is licensed under the Company Management Act, 1990, or (f) carry on the business of providing the Registered Office or the Registered Agent for companies incorporated in the British Virgin Islands. Paragraph (e) of subsection (2) set out in paragraph 5(b) above refers to section 5 of the International Business Companies Act (CAP.291). According to paragraph (e) of subsection (2), an International Business Company shall not be treated as carrying on business with persons resident in the British Virgin Islands by reason that it holds a lease of property for use as an office from which to communicate with members or where books and records of the Company are prepared or maintained.. The Company Management Act, 1990 referred to in paragraph 5(e) above governs company management activities carried out in or from within the British Virgin Islands only. 6. The shares in the Company shall be issued in the currency of the United States of America. 7. The authorised capital of the Company is US$1,000,000.00 divided into 100,000,000 shares with a par value of US$0.01 each. The directors are duly empowered to issue shares as registered shares only. 8. The shares shall be divided into such number of classes and series as the directors shall by resolution from time to time determine and until so divided shall comprise one class and series. 3 9. The directors shall by resolution have the power to issue any class or series of shares that the Company is authorised to issue in its capital, original or increased, with or subject to any designations, powers, preferences, rights, qualifications, limitations and restrictions. 10. The liability of members of the Company is limited. 11. The Company may by resolution of its members or of its directors, amend or modify any of the conditions contained in this Memorandum of Association and increase or reduce the authorised capital of the Company in any way which may be permitted by law. We, MOSSACK, FONSECA & CO. (B.V.I.) LTD., of P. O. Box 3136, Road Town, Tortola, British Virgin Islands for the purpose of Incorporating an International Business Company under the laws of the British Virgin Islands hereby subscribe our name to this Memorandum of Association. - ------------------------------------------------------------------------------- NAME, ADDRESS AND DESCRIPTION OF SUBSCRIBER - ------------------------------------------------------------------------------- MOSSACK FONSECA & CO. (B.V.I.) LTD. Akara Bldg. 24 De Castro Street Wickhams Cay 1 Road Town, Tortola British Virgin Islands SGD. DESIREE CHALWELL ----------------------------------------- Trust Company Assistant Secretary - ------------------------------------------------------------------------------- DATED this 17th day of May, 2004. WITNESS to the above signatue: SGD. SHARMINE PICKERING ---------------------------------------- Sharmine Pickering Wickhams Cay 1 Road Town, Tortola British Virgin Islands Secretary EX-3 3 exh3-2.txt EXH 3-2 ARTICLES OF ASSOC EXHIBIT 3.2 ARTICLES OF ASSOCIATION, AS AMENDED BRITISH VIRGIN ISLANDS THE INTERNATIONAL BUSINESS COMPANIES ACT (CAP. 291) ARTICLES OF ASSOCIATION OF TITANIUM GROUP LIMITED [name in Chinese] ("the Company") 1. References in these Regulations to the Act shall mean The International Business Companies Act (Cap. 291). The following Regulations shall constitute the Regulations of the Company. In these Articles, words and expressions defined in the Act shall have the same meaning and, unless otherwise required by the context, the singular shall include the plural and vice versa, the masculine shall include the feminine and neuter, and references to persons shall include corporations and all legal entities capable of having a legal existence. SHARES 2. The authorised capital of the Company is US$1,000,000.00 divided into 100,000,000 shares with a par value of US$0.01 each. The directors are duly empowered to issue shares as registered shares only. 3. Every person whose name is entered as a member in the share register being the holder of registered shares, shall be entitled to a certificate signed by the director(s) or officer(s) so authorised and under the common seal of the Company, specifying the share or shares held and the par value thereof, provided that in respect of shares, held jointly by several persons, the Company shall not be bound to issue more than one certificate, and delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all. 4. If a certificate is worn out or lost, it may be renewed on production of the worn-out certificate, or on satisfactory proof of its loss together with such indemnity as the directors may reasonably require. Any member receiving a share certificate shall indemnify and hold the Company and its officers harmless from any loss or liability which it or they may incur by reason of wrongful or fraudulent use or representation made by any person by virtue of the possession of such certificate. SHARE CAPITAL AND VARIATION OF RIGHTS 5. Subject to the provisions of these Articles, the unissued shares of the Company (whether forming part of the original or any increased capital) shall be at the disposal of the directors who may offer, allot, grant options over or otherwise dispose of them to such persons at such time and for such consideration, being not less than the par value of the shares being disposed of, and upon such terms and conditions as the directors may determine. 6. Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, any share in the Company may be issued with such preferred, deferred or other special rights, or such restrictions, whether in regard to dividend, voting, return of capital or otherwise, as the directors may from time to time determine. 7. Subject to the provisions of the Act in this regard, shares may be issued on the terms that they are redeemable, or, at the option of the Company, liable to be redeemed on such terms and in such manner as the directors before or at the time of the issue of the shares may determine. 8. The directors may redeem any such share at a premium. 9. If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the Company is being wound up, be varied with the consent in writing of the holders of not less than fifty-one percent of the issued shares 2 of that class and of the holders of not less than fifty-one percent of the issued shares of any other class of shares which may be affected by such variation. 10. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking PARI PASSU therewith. 11. Except as required by law, no person shall be recognised by the Company as holding any share upon any trust, and the Company shall not be bound by or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or (except only as by these Regulations or by law otherwise provided) any other rights in respect of any share except an absolute right to the entirety thereof by the registered holder. TRANSFER OF SHARES 12. Shares in the Company may be transferred by a written instrument signed by the transferor and containing the name and address of the transferee or in such other manner or form and subject to such evidence as the directors shall consider appropriate. 13. Upon receipt of notification of any change of name and address of any agent or attorney given to the Company for the purpose of service of any notice, information or written statement required to be given to members, the directors shall forthwith amend the register maintained for this purpose. TRANSMISSION OF SHARES 14. The personal representative, guardian or trustee as the case may be of a deceased, incompetent or bankrupt sole holder of a registered share shall be the only person recognised by the Company as having any title to the share. In the case of a share registered in the names of two or more holders, the survivor or survivors, and the personal representative, guardian or trustee as the case may be of the deceased, incompetent or bankrupt, shall be the only person(s) recognised by the Company as having any title to the share, but they shall not be entitled to exercise any rights as a member of the Company until they have proceeded as set forth in the following two Regulations. 15. Any person becoming entitled by operation of law or otherwise to a share or shares in consequence of the death, incompetence or bankruptcy of any member may be registered as a member upon such evidence being produced as may reasonably be required by the directors. An application by any such person to be registered as a member for all purposes shall be deemed to be a transfer of shares of the deceased, incompetent or bankrupt member and the directors shall treat it as such. 16. Any person who has become entitled to a share or shares in consequence of the death, incompetence or bankruptcy of any member may, instead of being registered himself, request in writing that some person to be named by him be registered as a transferee of such share or shares and such request shall likewise be treated as if it were a transfer. ACQUISITION OF OWN SHARES 17. Subject to the provisions of the Act in this regard, the directors may, on behalf of the Company, purchase, redeem or otherwise acquire any of the Company's own shares but only out of surplus or in exchange for newly issued shares of equal value, or for such consideration as they consider fit, and either cancel or hold such shares as treasury shares. The directors may dispose of any shares held as treasury shares on such terms and conditions as they may from time to time determine. Shares may be purchased or otherwise acquired in exchange for newly issued shares in the Company. ALTERATION IN CAPITAL 18. Subject to the terms of any resolution passed by the directors for the purpose of increasing the authorised capital of the Company, such increased capital may be divided into shares of such respective amounts, and with such rights or privileges (if any) as the directors think expedient. 3 19. Any capital raised by the creation of new shares shall be considered as part of the original capital, and shall be subject to the same provisions as if it had been part of the original capital. 20. The directors may by resolution: (a) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (b) cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its authorised share capital by the amount of the shares so cancelled; (c) sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association and so that subject to the provisions of Regulation 10 the resolution whereby any share is sub-divided may determine that as between the holders of the shares resulting from such sub-division one or more of the shares may have such preferred or other special rights over or may have such qualified or deferred rights or be subject to any such restrictions as compared with the other or others as the Company has power to attach to unissued or new shares; (d) subject to any confirmation or consent required by law, reduce its authorised and issued share capital or any capital redemption reserve fund or any share premium account in any manner. 21. Where any difficulty arises in regard to any consolidation and division under this Regulation, the directors may settle the same as they think expedient. MEETINGS OF MEMBERS 22. The directors may convene meetings of the members of the Company at such times and in such manner and places as the directors consider necessary or desirable, and they shall convene such a meeting upon the written request of members holding more than 50 percent of the votes of the outstanding voting shares in the Company. 23. Seven days' notice at the least specifying the place, the day and the hour of the meeting and the nature of the business to be conducted shall be given in the manner hereinafter mentioned to such persons whose names on the date the notice is given appear as members in the share register of the Company. 24. A meeting of the members shall be deemed to have been validly held, notwithstanding that it is held in contravention of the requirement to give notice in Regulation 23, if notice of the meeting is waived by ninety percent of the votes of all shares having a right to attend and vote at the meeting. 25. The inadvertent failure of the directors to give notice of a meeting to a member or to the agent or attorney as the case may be, or the fact that a member or such agent or attorney has not received the notice, does not invalidate the meeting. PROCEEDINGS AT MEETINGS OF MEMBERS 26. No business shall be transacted at any meeting unless a quorum of members is present at the time when the meeting proceeds to business. A quorum shall consist of the holder or holders present in person or by proxy of not less than one third of the shares of each class or series of shares entitled to vote as a class or series thereon and the same proportion of the votes of the remaining shares entitled to vote thereon. 27. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting shall be dissolved. 28. At every meeting the members present shall choose someone of their number to be the Chairman. If the members are unable to choose a Chairman for any reason, then the person representing the greatest number of voting shares present at the meeting shall preside as Chairman, failing which the oldest individual person shall take the chair. 4 29. The Chairman may, with the consent of the meeting, adjourn any meeting from time to time, and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. 30. At any meeting a resolution put to the vote of the meeting shall be decided on a show of hands by simple majority unless a poll is (before or on the declaration of the result of the show of hands) demanded: (a) by the Chairman; or (b) by any member or members present in person or by proxy and representing not less than one tenth of the total voting rights of all the members having the right to vote at the meeting. 31. Unless a poll be so demanded, a declaration by the Chairman that a resolution has, on a show of hands, been carried, and an entry to that effect in the book containing the minutes of the proceedings of the Company, shall be sufficient evidence of the fact, without proof of the number or proportion of the votes recorded in favour of or against such resolution. 32. If a poll is duly demanded, it shall be taken in such a manner as the Chairman directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. The demand for a poll may be withdrawn. 33. In the case of an equality of votes, whether on a show of hands, or on a poll, the Chairman of the meeting at which the show of hands takes place, or at which the poll is demanded, shall be entitled to a second or casting vote. VOTES OF MEMBERS 34. At any meeting of members, whether on a show of hands or on a poll, every holder of a voting share present in person or by proxy shall have one vote for every voting share of which he is the holder. 35. A resolution which has been notified to all members for the time being entitled to vote and which has been approved by a majority of the votes of those members in the form of one or more documents in writing or by telex, telegram, cable or other written electronic communication shall forthwith, without the need for any notice, become effectual as a resolution of the members. 36. If a committee be appointed for any member who is of unsound mind, he may vote by his committee. 37. If two or more persons are jointly entitled to a registered share or shares and if more than one of such persons shall vote in person or by proxy at any meeting of members or in accordance with the terms of Regulation 34, the vote of that person whose name appears first among such voting joint holders in the share register shall alone be counted. 38. Votes may be given either personally or by proxy. 39. The instrument appointing a proxy shall be produced at the place appointed for the meeting before the time for holding the meeting at which the person named in such instrument proposes to vote. 40. An instrument appointing a proxy shall be in such form as the Chairman of the meeting shall accept as properly evidencing the wishes of the member appointing the proxy. 41. The instrument appointing a proxy shall be in writing under the hand of the appointer, unless the appointer is a corporation or other form of legal entity other than one or more individuals holding as joint owners, in which case the instrument appointing a proxy shall be in writing under the hand of an individual duly authorised by such corporation or legal entity to execute the same. The Chairman of any meeting at which a vote is cast by proxy so authorised may call for a notarilly certified copy of such authority which shall be produced within 7 days of being so requested or the vote or votes cast by such proxy shall be disregarded. CORPORATIONS ACTING BY REPRESENTATIVES AT MEETINGS 42. Any corporation or other form of corporate legal entity which is a member of the Company may be resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any meeting of 5 the members or of any class of members of the Company, and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual member of the Company. DIRECTORS 43. Subject to any subsequent amendment to change the number of directors, the minimum number of directors of the Company shall be one and the maximum number shall be twenty. 44. The first director or directors shall be elected by the subscribers to the Memorandum. Thereafter, the director(s) shall be elected by the members or the director (if there is only one) or directors for such term as the members or the director (if there is only one) or directors may determine. 45. The director(s) shall hold office until his (their) successor(s) shall take office or until his (their) earlier death, resignation or removal. 46. Every vacancy in the board of directors may be filled by a resolution of the members or of the director (if there is only one) or of a majority of the remaining directors if applicable. 47. A director shall not require a share qualification, but nevertheless shall be entitled to attend and speak at any meeting of the members and at any separate meeting of the holders of any class of shares in the Company. 48. A director by writing under his hand deposited at the Registered Office of the Company may from time to time appoint another director or any other person to be his alternate. Every such alternate shall be entitled to be given notice of meetings of the directors and to attend and vote as a director at any such meeting at which the director appointing him is not personally present and generally at such meeting to have and exercise all the powers, rights, duties and authorities of the director appointing him. Every such alternate shall be deemed to be an officer of the Company and shall not be deemed to be an agent of the director appointing him. If undue delay or difficulty would be occassioned by giving notice to a director of a resolution of which is approval is sought in accordance with Regulation 73, his alternate (if any) shall be entitled to signify approval of the same on behalf of that director. The remuneration of an alternate shall be payable out of the remuneration payable to the director appointing him, and shall consist of such portion of the last mentioned remuneration as shall be agreed between such alternate and the director appointing him. A director by writing under hand deposited at the Registered Office of the Company may at any time revoke the appointment of an alternate appointed by him. If a director shall die or cease to hold the office of director, the appointment of his alternate shall thereupon cease and terminate. 49. The directors may, by resolution, fix the emoluments of directors in respect of services rendered or to be rendered in any capacity to the Company. The directors may also be paid such travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the directors, or any committee of the directors or meetings of the members, or in connection with the business of the Company as shall be approved by resolution of the directors. 50. Any director who, by request, goes or resides abroad for any purposes of the Company or who performs services which in the opinion of the directors go beyond the ordinary duties of a director, may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) as shall be approved by resolution of the directors. 51. The Company may pay to a director who at the request of the Company holds any office (including a directorship) in, or renders services to any company in which the Company may be interested, such remuneration (whether by way of salary, commission, participation in profits or otherwise) in respect of such office or services as shall be approved by resolution of the directors. 52. The office of director shall be vacated if the director: (a) is removed from office by a resolution of members or by a resolution of directors, or (b) becomes bankrupt or makes any arrangement or composition with his creditors generally, or (c) becomes of unsound mind, or of such infirm health as to be incapable of managing his affairs, or 6 (d) resigns his office by notice in writing to the Company. 53. (a) A director may hold any other office or position under the Company (except that of auditor) in conjunction with his office of director, and may act in a professional capacity to the Company on such terms as to remuneration and otherwise as the directors shall arrange. (b) A director may be or become a director or other officer of, or otherwise interested in any company promoted by the Company, or in which the Company may be interested, as a member or otherwise, and no such director shall be accountable for any remuneration or other benefits received by him as director or officer or from his interest in such other company. The directors may also exercise the voting powers conferred by the shares in any other company held or owned by the Company in such manner in all respects as they think fit, including the exercise thereof in favour of any resolutions appointing them, or any of their number, directors or officers of such other company, or voting or providing for the payment of remuneration to the directors or officers of such other company. A director may vote in favour of the exercise of such voting rights in the manner aforesaid, notwithstanding that he may be, or be about to become, a director or officer of such other company, and as such in any other manner is, or may be, interested in the exercise of such voting rights in the manner aforesaid. (c) No director shall be disqualified by his office from contracting with the Company, either as a vendor, purchaser or otherwise, nor shall any such contract or arrangement entered into by or on behalf of the Company in which any director shall be in any way interested be voided, nor shall any director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement, by reason of such director holding that office or of the fiduciary relationship thereby established. The nature of a director's interest must be declared by him at the meeting of the directors at which the question of entering into the contract or arrangement is first taken into consideration, and if the director was not at the date of that meeting interested in the proposed contract or arrangement, or shall become interested in a contract or arrangement after it is made, he shall forthwith after becoming so interested advise the Company in writing of the fact and nature of his interest. A general notice to the directors by a director that he is a member of a specified firm or company, and is to be regarded as interested in any contract or transaction which may, after the date of notice, be made with such firm or company shall (if such director shall give the same at a meeting of the directors, or shall take reasonable steps to secure that the same is brought up and read at the next meeting of directors after it is given) be a sufficient declaration of interest in relation to such contract or transaction with such firm or company. A director may be counted as one of a quorum upon a motion in respect of any contract or arrangement which he shall make with the Company, or in which he is so interested as aforesaid, and may vote upon such motion. OFFICERS 54. The directors of the Company may, by a resolution of directors, appoint officers of the Company at such times as shall be considered necessary or expedient, and such officers may consist of a President, one or more Vice-Presidents, a Secretary and a Treasurer and such other officers as may from time to time be deemed desirable. The officers shall perform such duties as shall be prescribed at the time of their appointment subject to any modification in such duties as may be prescribed by the directors thereafter, but in the absence of any specific allocation of duties it shall be the responsibility of the President to manage the day to day affairs of the Company, the Vice-President to act in order of seniority in the absence of the President but otherwise to perform such duties as may be delegated to them by the President, the Secretary to maintain the registers, minute books and records (other than financial records) of the Company and to ensure compliance with all procedural requirements imposed on the Company by applicable law, and the Treasurer to be responsible for the financial affairs of the Company. 55. Any person may hold more than one office and no officer need be a director or member of the Company. The officers shall remain in office until removed from office by the directors whether or not a successor is appointed. 56. Any officer who is a body corporate may appoint any person its duly authorised representative for the purpose of representing it and of transacting any of the business of the officers. 7 POWERS OF DIRECTORS 57. The business of the Company shall be managed by the directors who may pay all expenses incurred preliminary to and in connection with the formation and registration of the Company, and may exercise all such powers of the Company as are not by the Act or by these Regulations required to be exercised by the members subject to any delegation of such powers as may be authorised by these Regulations and to such requirements as may be prescribed by resolution of the members; but no requirement made by resolution of the members shall prevail if it be inconsistent with these Regulations nor shall such requirement invalidate any prior act of the directors which would have been valid if such requirement had not been made. 58. The directors may entrust to and confer upon any director or officer any of the powers exercisable by them upon such terms and conditions and with such restrictions as they think fit, and either collaterally with, or to the exclusion of, their own powers, and may from time to time revoke, withdraw, alter or vary all or any of such powers. The directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the directors. 59. The directors may from time to time and at any time by power of attorney appoint any company, firm or person or body of persons, whether nominated directly or indirectly by the directors, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the directors under these Regulations) and for such period and subject to such conditions as they may think fit, and any such powers of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the directors may think fit and may also authorise any such attorney to delegate all or any of the powers, authorities and discretions vested in him. 60. Any director who is a body corporate may appoint any person its duly authorised representative for the purpose of representing it at Directors Meetings and of transacting any of the business of the directors. 61. The Directors are authorised to open and operate bank accounts with banks, brokerage houses, savings and/or loan associations, credit institutes or any similar institutions of their choice anywhere in the world. All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments and all receipts for monies paid to the Company, shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as the directors shall from time to time by resolution determine. 62. The directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertakings, property and uncalled capital or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or of any third party. 63. The continuing directors may act notwithstanding any vacancy in their body, save that if the number of directors shall have been fixed at two or more persons and by reason of vacancies having occurred among the directors there shall be only one continuing director, he shall be authorised to act alone only for the purpose of appointing another director. PROCEEDINGS OF DIRECTORS 64. The meetings of the directors and any committee thereof shall be held at such place or places as the directors shall decide. 65. The directors may elect a chairman of their meetings and determine the period for which he is to hold office; but if no such chairman is elected, or if at any meeting the chairman is not present at the time appointed for holding the same, the directors present may choose one of their number to be Chairman of the meeting. 66. The directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings as they think fit. Questions arising at any meeting shall be decided by a majority of votes; in case of an equality of votes the chairman shall have a second or casting vote. A director may at any time summon a meeting of the directors. If the Company shall have only one director, the provisions hereinafter contained for meetings of the directors shall not 8 apply but such sole director shall have full power to represent and act for the Company in all matters and in lieu of minutes of a meeting shall record in writing and sign a note or memorandum of all matters requiring a resolution of the directors. Such note or memorandum shall constitute sufficient evidence of such resolution for all purposes. 67. A director shall be given not less than seven days notice of a meeting of the directors. 68. Notwithstanding Regulation 67 above, a meeting of directors held in contravention of that regulation shall be valid if a majority of the directors entitled to vote at the meeting have waived the notice of the meeting. 69. The inadvertent failure to give notice of a meeting to a director, or the fact that a director has not received the notice, does not invalidate the meeting. 70. A meeting of directors is duly constituted for all purposes if at the commencement of the meeting there are present in person or by alternate not less than one third of the total number of directors with a minimum of two. 71. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting shall be dissolved. 72. Any one or more of the directors or any committee thereof may participate in a meeting of directors or of a committee of directors by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. 73. A resolution approved by a majority of the directors for the time being entitled to receive notice of a meeting of the directors or of a committee of the directors and taking the form of one or more documents in writing or by telex, telegram, cable or other written electronic communication shall be as valid and effectual as if it had been passed at a meeting of the directors or of such committee duly convened and held, without the need for any notice. INDEMNITY 74. Subject to the provisions of the Act and of any other statute for the time being in force, every director or other officer of the Company shall be entitled to be indemnified out of the assets of the Company against all losses or liabilities which he may sustain or incur in or about the execution of the duties of his office or otherwise in relation thereto, and no director or other officer shall be liable for any loss, damage or misfortune which may happen to, or be incurred by the Company in the execution of the duties of his office, or in relation thereto. SEAL 75. The directors shall provide for the safe custody of the common seal of the Company. The common seal when affixed to any instrument, shall be witnessed by a director or any other person so authorised from time to time by the directors. The directors may provide for a facsimile of the common seal and approve the signature of any director or authorised person which may be reproduced by printing or other means on any instrument and it shall have the same force and validity as if the seal had been affixed to such instrument and the same had been signed as hereinbefore described. DIVIDENDS AND RESERVES 76. The directors may, by resolution, declare a dividend, but no dividend shall be declared and paid except out of surplus and unless the directors determine that immediately after the payment of the dividend (a) the Company will be able to satisfy its liabilities as they become due in the ordinary course of its business; and (b) the realisable value of the assets of the Company will not be less than the sum of its total liabilities, other than deferred taxes, as shown in the books of account, and its capital. 77. Dividends may be declared and paid in money, shares or other property. 78. In computing the surplus for the purpose of resolving to declare and pay a dividend, the directors may include in their computation the net unrealised appreciation of the assets of the Company. 9 79. The directors may from time to time pay to the members such interim dividends as appear to the directors to be justified by the surplus of the Company. 80. Subject to the rights of the holders of share entitled to special rights as to dividends, all dividends shall be declared and paid according to the par value of the shares in issue, excluding those shares which are held by the Company as treasury shares at the date of declaration of the dividend. 81. The directors may, before recommending any dividend, set aside out of the profits of the Company such sums as they think proper as a reserve or reserves which shall, at the discretion of the directors, be applicable for meeting contingencies, or for any other purpose to which the profits of the Company may be properly applied, and pending such application may, at the like discretion, either be employed in the business of the Company or be invested in such investments as the directors may from time to time think fit. 82. If several persons are registered as joint holders of any share, any of them may give effectual receipt for any dividend or other monies payable on or in respect of the share. 83. Notice of any dividend that may have been declared shall be given to each member in manner hereinafter mentioned and all dividends unclaimed for three years after having been declared may be forfeited by the directors for the benefit of the Company. 84. No dividend shall bear interest against the Company. BOOKS AND RECORDS 85. The Company shall keep such accounts and records as the directors consider necessary or desirable in order to reflect the financial position of the Company. 86. The Company shall keep minutes of all meetings of directors, members, committees of directors, committees of officers and committees of members, and copies of all resolutions consented to by directors, members, committees of directors, committees of officers and committees of members. 87. The books, records and minutes required by Regulation 85 and 86 shall be kept at the Registered Office of the Company or at such other place as the directors may determine, and shall be open to the inspection of the directors at all times. 88. The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the books, records and minutes of the Company or any of them shall be open to the inspection of members not being directors, and no member (not being a director) shall have any right of inspecting any book, record, minute or document of the Company except as conferred by Law or authorised by resolution of the directors. AUDIT 89. The directors may by resolution call for the accounts of the Company to be examined by an auditor or auditors to be appointed by them at such remuneration as may from time to time be agreed. 90. The auditor may be a member of the Company, but no director or officer shall be eligible during his continuance in office. 91. Every auditor of the Company shall have a right of access at all times to the books of accounts and vouchers of the Company, and shall be entitled to require from the officers of the Company such information and explanations as he thinks necessary for the performance of his duties. 92. The report of the auditor shall be annexed to the accounts upon which he reports, and the auditor shall be entitled to receive notice of, and to attend, any meeting at which the Company's audited Profit and Loss Account and Balance Sheet is to be presented. 10 NOTICES 93. Any notice, information or written statement required to be given to members shall be served, by mail (air mail service if available) addressed to each member at the address shown in the share register. 94. All notices directed to be given to the members shall, with respect to any registered share to which persons are jointly entitled, be given to whichever of such persons is named first in the share register, and notice so given shall be sufficient notice to all the holders of such share. 95. Any notice, if served by post, shall be deemed to have been served within ten days of posting, and in proving such service it shall be sufficient to prove that the letter containing the notice was properly addressed and put into the Post Office. PENSIONS AND SUPERANNUATION FUNDS 96. The directors may establish and maintain or procure the establishment and maintenance of any non-contributory pension or superannuation funds for the benefit of, and give or procure the giving of donations, gratuities, pensions, allowances or emoluments to any persons who are or were at any time in the employment or service of the Company or any company which is a subsidiary of the Company or is allied to or associated with the Company or with any such subsidiary, or who are or were at any time directors or officers of the Company or of any such other company as aforesaid or who hold or held any salaried employment or office in the Company or such other company, or any persons in whose welfare the Company or any such other company as aforesaid is or has been at any time interested, and to the wives, widows, families and dependents of any such person, and may make payments for or towards the insurance of any such persons as aforesaid, and may do any of the matters aforesaid either alone or in conjunction with nay such other company as aforesaid. A director holding any such employment or office shall be entitled to participate in and retain for his own benefit any such donation, gratuity, pension, allowance or emolument. WINDING UP 97. If the Company shall be wound up, the Liquidator may, in accordance with a resolution of members, divide among the members in specie or in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may for such purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members. The Liquidator may vest the whole or any part of such assets in trustees upon such trusts for the benefit of the contributories as the Liquidator shall think fit, but so that no member shall be compelled to accept any shares or other securities whereon there is any liability. ARBITRATION 98. Whenever any difference arises between the Company on the one hand and any of the members, their executors, administrators or assigns on the other hand touching the true intent and construction or the incidence or consequences of these presents or of the Act touching anything done or executed omitted or suffered in pursuance of the Act or touching any breach or alleged breach or otherwise relating to the premises or to these presents or to any ordinance affecting the Company or to any of the affairs of the Company, such difference shall, unless the parties agree to refer the same to a single arbitrator, be referred to two arbitrators one to be chosen by each of the parties to the difference and the arbitrators shall before entering in the reference appoint an umpire. 99. If either party to the reference makes default in appointing an arbitrator either originally or by way of substitution (in the event that an appointed arbitrator shall die, be incapable of acting or refuse to act) for ten days after the other party has given him notice to appoint the same, such other party may appoint an arbitrator to act in the place of the arbitrator of the defaulting party. AMENDMENT TO ARTICLES 100. The Company may alter or modify the conditions contained in these Regulations, as originally drafted or as amended from time to time, by a resolution of either the Company member(s) or the director(s). 11 We, MOSSACK FONSECA & CO. (B.V.I.) LTD., of P. O. Box 3136, Road Town, Tortola, British Virgin Islands for the purpose of incorporating an International Business Company under the laws of the British Virgin Islands hereby subscribe our name to these Articles of Association. - ------------------------------------------------------------------------------ NAME, ADDRESS AND DESCRIPTION OF SUBSCRIBER - ------------------------------------------------------------------------------ MOSSACK FONSECA & CO. (B.V.I.) LTD. Akara Bldg. 24 De Castro Street Wickhams Cay 1 Road Town, Tortola British Virgin Islands Trust Company SGD. DESIREE CHALWELL -------------------------------------------- Assistant Secretary - ------------------------------------------------------------------------------ DATED this 17th day of May, 2004. WITNESS to the above signature: SGD. SHARMINE PICKERING -------------------------------------- Sharmaine Pickering Wickhams Cay 1 Road Town, Tortola British Virgin Islands Secretary EX-5 4 exh5-1.txt EXH 5-1 OPINION EXHIBIT 5.1 OPINION OF STEVENSON, WONG & GO. [LETTERHEAD OF STEVENSON, WONG & CO.] OUR REF: YOUR REF: DATE: CWC/HLO(P)/63052/05Cor.Fin. 13 September 2005 REPLY FAX: BY HAND The Directors Titanium Group Limited 4th Floor, BOCG Insurance Tower 134 - 136 Des Voeux Road Central Hong Kong Dear Sirs LEGAL OPINION This letter will constitute an opinion upon the legality of the sale by certain selling shareholders of Titanium Group Ltd., a British Virgin Islands corporation (the "Company"), of up to 9,956,000 shares of common stock, all as referred to in the Registration Statement on Form S-1 filed by the Company with the Securities and Exchange Commission. The Memorandum of Association, the Articles of Association and the minutes of the Board of Directors of the Company and the applicable laws of the British Virgin Islands have been reviewed. Based on our consultation with the Counsel qualified to advise on the laws of the British Virgin Islands, the Company has duly authorized the issuance of the shares of stock mentioned above and such shares of common stock are legally issued, fully paid and not subject to stamp duty. The above opinion is based upon the laws of the British Virgin Islands. Yours faithfully, /s/ STEVENSON, WONG & CO. STEVENSON, WONG & CO. EX-10 5 exh10-1.txt EXH 10-1 EMPLOYMENT AGMT EXHIBIT 10.1 EMPLOYMENT AGREEMENT WITH JASON MA DATED JANUARY 1, 2005 PRIVATE & CONFIDENTIAL Mr. Ma Ka Wai [HKID: K 036 896 (2)] Date: 1 January 2005 Dear Mr. Ma, LETTER OF APPOINTMENT We are pleased to confirm your employment with Titanium Technology Limited on the terms and conditions under listed: - - --------------------------------------------------------------- Position Chief Executive Officer - --------------------------------------------------------------- Monthly Salary HK$20,000 - --------------------------------------------------------------- Mode Permanent - --------------------------------------------------------------- Working Hours 9:00 to 18:00 (5 1/2 days) - --------------------------------------------------------------- Commencement 1 Jan 2005 - --------------------------------------------------------------- TERMINATION: Your appointment may be terminated by either party at any time without cause assigned by giving to the other party two weeks' written notice, or on payment of two weeks' salary. ANNUAL LEAVE: In addition to the gazette general holidays, you will be eligible for paid leave at the rate of one day's leave for every completed month of service subject to your completion of at least 3 months' service from the date of assumption of duty. Such leave shall be taken during the above appointment period but shall not be included as part of the period of notice of termination of service. Any untaken leave shall lapse automatically upon expiry of the above appointment period and cannot be encashed. SICK LEAVE (APPLY TO PERMANENT STAFF ONLY): Employees who apply for sick leave must produce a medical certificate issued by a registered medical practitioner, certificates issued by Chinese Herbalists or Bonesetters will not be accepted. PERSONAL LEAVE: Employees who apply for personal leave should submit their application at least two days in advance; salary will be deducted for personal leave. SALARY REVIEW (APPLY TO PERMANENT STAFF ONLY): Your salary will be reviewed once a year on 1st January. No salary increment will be granted or back paid upon submission of resignation. TRANSFER: The employee agreed and accepted to be transferred to other departments/companies for work or at the position of the Company in such other capacity as the Company shall reasonably consider to be within the scope of the employee's capabilities. 1 OVERTIME: The employee may be required to work overtime to cover peaks of workload or ad-hoc basis. The employee is willing to accept such arrangement and you will have no payment of allowance or leave in lieu in respect of overtime work. NON-COMPETITIVE Without the prior written consent of Titanium Technology Limited, for a period of twelve (12) months from the date of their leaving the employment of Titanium Technology Limited or any of its subsidiaries: a) Be engaged or interested in any capacity in any business whose activities are substantially similar to or compete with any of the business activities of Titanium Technology Limited or any of its subsidiaries; or b) Be involved in any projects or products handled or produced by Titanium Technology Limited or its subsidiaries; or c) Deal with any existing customer of Titanium Technology Limited or any of its subsidiaries. OTHERS: You will not be eligible for any other benefits except those mentioned above and those in accordance with the Employment Ordinance. Any and all industrial property rights including patent to which you are or may be entitled or which are created as a result of your services under this agreement shall belong to and be the exclusive property of Titanium Technology Limited. - -------------------------------------------------------------------------------- We should now be grateful if you would, as soon as possible, indicate your acceptance of this offer of appointing by signing and returning Yours sincerely, Joanne Wong Human Resources Manager BT/JN - -------------------------------------------------------------------------------- To: Human Resources Manager, Titanium Technology Limited I accept this offer of appointment as embodied in the terms set out above. Yours faithfully, Signature : Name : Date : EX-10 6 exh10-2.txt EXH 10-2 EMPLOYMENT AGMT EXHIBIT 10.2 EMPLOYMENT AGREEMENT WITH HUMBPHREY CHEUNG DATED JANUARY 1, 2005 PRIVATE & CONFIDENTIAL Mr. Cheung Kin Kwong[HKID: G 903 617 (1)] Date: 1 January 2005 Dear Mr. Cheung, LETTER OF APPOINTMENT We are pleased to confirm your employment with Titanium Technology Limited on the terms and conditions under listed: - - ------------------------------------------------------- Position Chief Technology Officer - ------------------------------------------------------- Monthly Salary HK$30,000 - ------------------------------------------------------- Mode Permanent - ------------------------------------------------------- Working Hours 9:00 to 18:00 (5 1/2 days) - ------------------------------------------------------- Commencement 1 Jan, 2005 - ------------------------------------------------------- TERMINATION: Your appointment may be terminated by either party at any time without cause assigned by giving to the other party two weeks' written notice, or on payment of two weeks' salary. ANNUAL LEAVE: In addition to the gazette general holidays, you will be eligible for paid leave at the rate of one day's leave for every completed month of service subject to your completion of at least 3 months' service from the date of assumption of duty. Such leave shall be taken during the above appointment period but shall not be included as part of the period of notice of termination of service. Any untaken leave shall lapse automatically upon expiry of the above appointment period and cannot be encashed. SICK LEAVE (APPLY TO PERMANENT STAFF ONLY): Employees who apply for sick leave must produce a medical certificate issued by a registered medical practitioner, certificates issued by Chinese Herbalists or Bonesetters will not be accepted. PERSONAL LEAVE: Employees who apply for personal leave should submit their application at least two days in advance; salary will be deducted for personal leave. SALARY REVIEW (APPLY TO PERMANENT STAFF ONLY): Your salary will be reviewed once a year on 1st January. No salary increment will be granted or back paid upon submission of resignation. TRANSFER: The employee agreed and accepted to be transferred to other departments/companies for work or at the position of the Company in such other capacity as the Company shall reasonably consider to be within the scope of the employee's capabilities. ================================================================================ PAGE 1 OF 2 OVERTIME: The employee may be required to work overtime to cover peaks of workload or ad-hoc basis. The employee is willing to accept such arrangement and you will have no payment of allowance or leave in lieu in respect of overtime work. NON-COMPETITIVE Without the prior written consent of Titanium Technology Limited, for a period of twelve (12) months from the date of their leaving the employment of Titanium Technology Limited or any of its subsidiaries: a) Be engaged or interested in any capacity in any business whose activities are substantially similar to or compete with any of the business activities of Titanium Technology Limited or any of its subsidiaries; or b) Be involved in any projects or products handled or produced by Titanium Technology Limited or its subsidiaries; or c) Deal with any existing customer of Titanium Technology Limited or any of its subsidiaries. OTHERS: You will not be eligible for any other benefits except those mentioned above and those in accordance with the Employment Ordinance. Any and all industrial property rights including patent to which you are or may be entitled or which are created as a result of your services under this agreement shall belong to and be the exclusive property of Titanium Technology Limited. - -------------------------------------------------------------------------------- We should now be grateful if you would, as soon as possible, indicate your acceptance of this offer of appointing by signing and returning Yours sincerely, Joanne Wong Human Resources Manager BT/JN - -------------------------------------------------------------------------------- To: Human Resources Manager, Titanium Technology Limited I accept this offer of appointment as embodied in the terms set out above. Yours faithfully, Signature : Name : Date : ================================================================================ PAGE 2 OF 2 EX-10 7 exh10-3.txt EXH 10-3 EMPLOYMENT AGMT EXHIBIT 10.3 EMPLOYMENT AGREEMENT WITH BILLY TANG DATED JANUARY 1, 2005 PRIVATE & CONFIDENTIAL Mr. Tang Wai Hung [HKID: K 127 604 (2)] Date: 1 January 2005 Dear Mr. Tang, LETTER OF APPOINTMENT We are pleased to confirm your employment with Titanium Technology Limited on the terms and conditions under listed: - - ------------------------------------------------------- Position Chief Operation Officer - ------------------------------------------------------- Monthly Salary HK$30,000 - ------------------------------------------------------- Mode Permanent - ------------------------------------------------------- Working Hours 9:00 to 18:00 (5 1/2 days) - ------------------------------------------------------- Commencement 1 Jan, 2005 - ------------------------------------------------------- TERMINATION: Your appointment may be terminated by either party at any time without cause assigned by giving to the other party two weeks' written notice, or on payment of two weeks' salary. ANNUAL LEAVE: In addition to the gazette general holidays, you will be eligible for paid leave at the rate of one day's leave for every completed month of service subject to your completion of at least 3 months' service from the date of assumption of duty. Such leave shall be taken during the above appointment period but shall not be included as part of the period of notice of termination of service. Any untaken leave shall lapse automatically upon expiry of the above appointment period and cannot be encashed. SICK LEAVE (APPLY TO PERMANENT STAFF ONLY): Employees who apply for sick leave must produce a medical certificate issued by a registered medical practitioner, certificates issued by Chinese Herbalists or Bonesetters will not be accepted. PERSONAL LEAVE: Employees who apply for personal leave should submit their application at least two days in advance; salary will be deducted for personal leave. SALARY REVIEW (APPLY TO PERMANENT STAFF ONLY): Your salary will be reviewed once a year on 1st January. No salary increment will be granted or back paid upon submission of resignation. TRANSFER: The employee agreed and accepted to be transferred to other departments/companies for work or at the position of the Company in such other capacity as the Company shall reasonably consider to be within the scope of the employee's capabilities. ================================================================================ PAGE 1 OF 2 OVERTIME: The employee may be required to work overtime to cover peaks of workload or ad-hoc basis. The employee is willing to accept such arrangement and you will have no payment of allowance or leave in lieu in respect of overtime work. NON-COMPETITIVE Without the prior written consent of Titanium Technology Limited, for a period of twelve (12) months from the date of their leaving the employment of Titanium Technology Limited or any of its subsidiaries: a) Be engaged or interested in any capacity in any business whose activities are substantially similar to or compete with any of the business activities of Titanium Technology Limited or any of its subsidiaries; or b) Be involved in any projects or products handled or produced by Titanium Technology Limited or its subsidiaries; or c) Deal with any existing customer of Titanium Technology Limited or any of its subsidiaries. OTHERS: You will not be eligible for any other benefits except those mentioned above and those in accordance with the Employment Ordinance. Any and all industrial property rights including patent to which you are or may be entitled or which are created as a result of your services under this agreement shall belong to and be the exclusive property of Titanium Technology Limited. - -------------------------------------------------------------------------------- We should now be grateful if you would, as soon as possible, indicate your acceptance of this offer of appointing by signing and returning Yours sincerely, Joanne Wong Human Resources Manager BT/JN - -------------------------------------------------------------------------------- To: Human Resources Manager, Titanium Technology Limited I accept this offer of appointment as embodied in the terms set out above. Yours faithfully, Signature : Name : Date : ================================================================================ PAGE 2 OF 2 EX-10 8 lease.txt EXH 10-4 LEASE EXHIBIT 10.4 OFFICE LEASE DATED JUNE 22, 2005 THIS AGREEMENT is made the 22nd day of June 2005 BETWEEN the Landlord whose name address or registered office and description are set out in Part I of the First Schedule hereto (hereinafter called "the Landlord" which expression shall include its successors and assigns) of the one part and the Tenant whose name address or registered office and description are set out in Part II of the First Schedule hereto (hereinafter called "the Tenant") of the other part WHEREBY IT IS HEREBY MUTUALLY AGREED by and between the said parties hereto as follows: SECTION (I) THE PREMISES AND THE TERM The Landlord shall let and the Tenant shall take ALL THAT the premises as more particularly described and set out in the Second Schedule hereto (hereinafter called "the said premises"). Together with all the Landlord's fixtures and fittings And together with] the use in common with the Landlord and all others having the like right of the entrances, staircases, landings, passages and lavatories in the building of which the said premises form part (hereinafter called "the Building") in so far as the same are necessary for the proper use and enjoyment of the said premises And except in so far as the Landlord may from time to time restrict such use And together also with (if and whenever the same shall be available and operating) the use in common as aforesaid of the lifts, escalators, central air-conditioning services and the loading and unloading bays in the Building for a term set out in Part III of the First Schedule hereto YIELDING and PAYING therefor the rent and other charges and in such manner as described and set out in Part IV of the First Schedule hereto. SECTION (II) RENT AND OTHER CHARGES The Tenant hereby agrees with the Landlord as follows: (1) To pay and discharge punctually the said rent (the "Rent"), rates and all other charges as mentioned in Part IV of the First Schedule (the "Services Charges") on the days and in the manner hereinbefore provided for payment thereof. (2) To pay and discharge punctually all rates (the "Rates"), government rent (the "Government Rent") taxes, assessments, maintenance, duties, charges, impositions and outgoings whatsoever now or hereafter to be assessed, imposed or charged by the Government (as defined hereinafter) or other lawful authority upon the said premises or upon the owner or the occupier thereof (Property Tax only excepted). -1- (3) To pay and discharge punctually all charges (including deposits) for service maintenance, telephone, gas, water and electricity in respect of the said premises (including but without limitation charges for any air-conditioning fan-coil units installed therein, if any) whether as shown by the separate meter installed upon the said premises or by accounts rendered to the Tenant. Nothing contained herein shall confer on the Tenant, by implication or inference, right to install separate meter for the utilities aforesaid unless the Landlord shall have so previously approved in writing and the plans for such installation shall have been previously approved by the Landlord or its management agent, the Manager of the Building, the relevant public utility company and statutory or public or competent authorities in writing. SECTION (III) TENANTS OTHER OBLIGATIONS The Tenant hereby further agrees with the Landlord as follows: (1) To obey and comply with and to fully indemnify the Landlord against the breach of all Ordinances, regulations, by-laws, orders, rules and requirements of the Government, public utility companies, statutory or public or competent authorities, the provisions of the Deed of Mutual Covenant, the Sub-Deed of Mutual Covenant (if any) and the Management Agreement in respect of the said premises relating to the use and occupation of the said premises, and the conduct and carrying out of the Tenant's business on the said premises or to any other act, deed, mater or thing done, permitted, suffered or omitted therein or thereon by the Tenant or any licensee (as defined hereinafter) of the Tenant and to notify the Landlord forthwith in writing of any notice received from the Government or any public utility company or any statutory or public or competent authority concerning or in respect of the said premises or any services supplied thereto. (2) (a) To maintain the expense of the Tenant the said premises throughout the term of this Agreement in good, clean and tenantable condition and repair to the satisfaction of the Landlord (fair tear and wear excepted). (b) To keep all the interior of the said premises (including but not limited to (the flooring and interior plastering or other finishes or rendering to or on walls, floors and ceilings) and the Landlord's furniture fixtures and fittings therein and all additions thereto (including but not limited to the carpet, door frames, air-conditioners, fan coil unit, air compressor, window frames, ventilators, doors, windows, fire services equipment and apparatus, electrical installations and wiring, burglar alarm systems, sanitary system apparatus and the main switch box) in good, clean and tenantable repair and condition and properly preserved and painted to the satisfaction of the Landlord and so maintain the same at the expense of the Tenant and to deliver up the same to the Landlord at the expiration or sooner determination of the term of this Agreement in like condition. -2- (c) (i) To fit out the said premises in accordance with such Ordinances and other orders, rules and regulations of the Government, public utility companies and competent authorities as shall from time to time be in force during the term of this Agreement and to maintain, add to, modify or alter the same in accordance with such Ordinance, orders, rules and regulations as are in force from time to time. The Tenant shall in carrying out the works hereunder use only such contractor(s) as shall be approved by the Landlord in writing (which approval not to be unreasonably withheld). (ii) To fit out the said premises in accordance with such directions and conditions as may be given by the Landlord and its management agent and the Manager of the Building, and such drawings, layout details and plans, designs and specifications of the works (together the "Fitting-out Plans") (including but not limited to the electrical wiring diagram and installations, air-conditioning and mechanical ventilation plans) as may be desired by the Tenant or required by the Government, public utility companies or any public or statutory or competent authorities and shall first be submitted by the Tenant to and approved in writing by, the Landlord and so to maintain the same throughout the term of this Agreement in good, clean and tenantable condition and repair to the satisfaction of the Landlord. The Landlord shall be entitled to accept or reject such Fitting-Out Plans, in whole or in part as it shall think fit. The Landlord shall further have the right to vary or specify, the choice of finishes and materials to be used for the fitting out works, and the Tenant in carrying out such works shall obey and comply with and ensure its licensees shall comply with, the requirements and provisions in this Agreement and the instructions and directions of and the Landlord and its authorized representatives, contractors and management agents, and the Manage of the Building from time to time. In order to enable the building services of the Building to be effectively co-ordinated and controlled, the Landlord shall have the right to require the Tenant that all alterations and additions to the building services in or for the said premises shall be carried out only by the Landlord's contractor at the Tenant's expense. For the purpose of this Clause, subject to alterations and additions from time to time and to such extent as the Landlord shall in its discretion deem appropriate or necessary, the expression "building services" shall mean all mechanical and electrical engineering works and arrangement related to the said premises (including but not confined to electrical air-conditioning, plumbing and fire fighting installation). Prior to the commencement of any works, the Tenant shall furnish the Landlord with the following information and items: (aa) the name(s) and address(es) of the appointed designer(s)/agent(s) for the said premises; (bb) the name(s) and address(es) of the general contractor(s) that the Tenant intends to engage in the Tenant's works; (cc) the name(s) and address(es) of the Tenant's authorized agent(s)/representative(s), if any; and (dd) the actual commencement date of interior decoration and the estimated date of completion of decoration works, fitting-out works, and the date of projected opening. -3- (d) To pay to the Landlord on demand all fees incurred by the Landlord in connection with its consideration and approval of the Fitting-out Plans as well as all modifications and amendments thereof, and to be responsible for obtaining all necessary permits licences and approvals pertaining to the proposed decoration partitioning alternations additions installations and fitting out works. Any approval or direction given by the Landlord under or pursuant to or in connection with this Agreement shall not relieve the responsibility of the Tenant to comply with and observe the Deed of Mutual Covenant, the Sub-Deed of Mutual Covenant (if any) and the Management Agreement. The Tenant shall submit all applications required and the Fitting-out Plans and shall comply with all Ordinances, rules and regulations and by-laws of the Government, public utility companies and public or statutory or competent authorities having jurisdiction over the said works. Without such necessary permits licences and approvals, the Tenant shall not commence any such decoration partitioning alterations additions installation and fitting out works. The Tenant shall be solely responsible for the consequences of the breach aforesaid (including but not limited to the costs of demolition, addition and alteration required to comply with the requirements of the Government or any public or statutory of competent authority) and shall indemnify and keep the Landlord indemnified in full against all losses claims costs actions and proceedings arising from the Tenant's breach of this Clause. (e) To make good at its own costs any default in complying with this Clause notwithstanding that its fitting out alteration addition installation partitioning and decoration proposals may have been submitted by the Landlord or the Landlord's agent to the Government or public utility companies or public or statutory or competent authorities on behalf of the Tenant and the Tenant shall solely bear the consequences of any rejections or any amendments required by the Government, or public utility companies or statutory or competent authorities of the Tenant's proposals and of any delay or losses resulting from such rejections or amendments. As security for the due observance and compliance by the Tenant and its licensees of the rules and regulations stipulated by the Landlord and its management agent and the Manager of the Building from time to time in carrying out any Tenant's works hereunder, the Tenant shall pace a fitting-out deposit with the Landlord, its managing agents and the Manager of the Building (as the case may be) in the amount stipulated by the Landlord or its managing agents and the Manager of the Building (as the case may be) before commencing such works. The fitting-out deposit shall be returned without interest to the Tenant after the said premises shall have been fitted -out in accordance with the approved plans but subject to any deduction therefrom necessary to make good any damages or losses caused to the Building or the said premises or any part thereof or suffered by the Landlord, its managing agents and the Manager of the Building (as the case may be) and damages or losses or injuries to any person as a result of any breach by the Tenant of this Clause. (3) To pay and reimburse to the Landlord forthwith upon demand the cost of replacing and repairing all broken and damaged window frames and glass panels within and/or encompassing the said premises whether or not the same be broken or damaged by the negligence of the Tenant or its licensee or owing to the circumstances beyond the control of the Tenant (including but not limited to typhoons and rainstorm). -4- (4) To pay and reimburse to the Landlord forthwith upon demand the cost of repairing and replacing work done pursuant to this Agreement (including but not limited to the [shop front plate glass or open shutter or any] air-conditioning fancoil unit and all other parts of the air- conditioning system or installation which is damaged or rendered defective) whether or not the same be due to the negligence or circumstances beyond the control of the Tenant or its licensee, and of making good all damages and defects caused to the said premises or any part(s) of the Building. (5) To repair or replace any electrical mechanical gas or piping fittings installation wiring apparatus and meter located in the said premises (or elsewhere, if use exclusively by the Tenant or its licensees) forthwith if the same becomes dangerous unsafe or hazardous or if so required by the Landlord or by the Government or any public utility company or statutory or public or competent authority, and in so doing the Tenant shall use only such contractor designated by the Landlord or by the Government or any public utility company or statutory or public or competent authority in writing for this purpose. The Tenant shall permit the Landlord's agents and/or contractors to test the Tenant's electrical mechanical gas or piping fittings installation apparatus wiring and meter in the said premises at any time upon request being made. The Tenant shall indemnify the Landlord and all persons and hold them harmless against any cost claims losses damages injuries actions or proceedings resulting from or attributable to any malfunction or disrepair of the electrical mechanical gas or piping fittings installation wiring apparatus or meter in the said premises. (6) To keep the lavatories sanitary plumbing and water apparatus (including but not limited to drainage taps wash basins and sinks as are located in the said premises (or elsewhere if used exclusively by the Tenant or its licensees) in good, clean and tenantable repair and condition to the satisfaction of the Landlord and in accordance with the Ordinances and the orders, regulations and by-laws of the Government and public utility companies and the statutory or public or competent authorities concerned. In the event of any damage being incurred, the Tenant shall forthwith repair the damage and restore the said premises and those lavatories, sanitary, plumbing and water apparatus in the said premises (or elsewhere) if used exclusively by the Tenant or its licensees) to their proper state and condition in accordance with the covenant for repair contained in the foregoing provisions. (7) To pay and reimburse to the Landlord forthwith on demand all costs in full incurred by the Landlord in cleansing, clearing, repairing or replacing any of the drains, pipes or sanitary or plumbing or water apparatus choked or stopped up owing to the careless or improper use or neglect by the Tenant or its licensees. (8) To be wholly responsible for and to indemnify the Landlord in full against any proceedings actions claims or demands whatsoever by any person for losses and damages occasioned to the said premises or any part of the Building or any adjacent or neighbouring premises thereto or for any injury as a result of, directly or indirectly, the want of repair or maintenance to the said premises or the spread of fire or smoke or the overflow or leakage of -5- water or the escape of any substance or anything from the said premises due to the breach of duty or default or negligence of the Tenant or its licensees and to make good the same and, if required by the Landlord, to effect and maintain a policy or policies of insurance against any loss or damage to property or against any injury to person or economic loss or any perils or risks of fire, water, gas, fittings, stocks, equipment or any risks or liabilities disclaimed or excluded by the Landlord under this Agreement with such reputable insurance company on such term and in such values as the Landlord may approve from time to time and shall be endorsed therein to show the Landlord as owner of the said premises and shall contain a clause to the effect that the insurance cover thereby and the terms and conditions thereby shall not be cancelled, modified or restricted without the prior written consent of the Landlord. The Tenant hereby undertakes to produce to the Landlord on request the policy or policies and the receipt for the last payment of premium and a certificate form the insurance company that the policy or policies are in all respects valid and subsisting provided always that if the Tenant shall at any time fail to effect such insurance policy or policies within reasonable time acceptable to the Landlord or keep such insurance policy or policies in full force and effect or cause such policy or policies to be void or voidable, the Landlord may do all things as may be appropriate or necessary to effect and maintain such an adequate insurance cover and any monies expended by the Landlord for that purpose shall be recoverable without deduction from the Tenant on demand. (9) To take all precautions to protect the interior of the said premises against damage by any rainstorm or typhoon or the like. (10) To carry out any works of the Tenant to the said premises pursuant to this Agreement subject to the prior written approval of the Landlord and the inspection of the Landlord, the Landlord's architect and general contractor from time to time. (11) No approval by the Landlord is valid unless in writing, signed by the Landlord or the Landlord's authorised representatives. (12) To permit the Landlord and its contractors and all persons authorised by the Landlord with or without appliances at all reasonable times and upon prior notice to enter upon view and inspect the state of repair, defects and damages of the said premises, to take inventories of the fittings and fixtures therein and to carry out any work, repairs or maintenance which are required to be done hereunder provided that in the event of an emergency the Landlord, its servants or workmen or contractors or agents or the Manager of the Building may enter the said premises without notice and forcible if needed be. (13) On receipt of any notice from the Landlord or its authorised representatives or agents or the Manager of the Building or the Government or any public utility company or public or statutory or competent authority, specifying any works or repairs which are required to be done and the time in which they are to be done and which are the responsibility of the Tenant hereunder, forthwith to, put in hand and execute the same with all possible despatch and if the Tenant shall fail to comply with such notice in any respect it shall be lawful for the Landlord (but without -6- prejudice to its any other rights contained herein or at law) and its agents, servants contractors and workmen and the Manager of the Building to enter upon the said premises and to carry out all or any of the works referred to in such notice and the costs of so doing and all expenses incurred thereby shall be recoverable as rent in arrears and be paid by the Tenant to the Landlord forthwith on demand. (14) To give immediate notice to the Landlord of any damage that may be caused or suffered to the said premises and of any accident to or defects in the sewers, water pipes, gas pipes, electrical wiring or utility lines, fittings, fixtures installation or other services or facilities placed or installed in the said premises or provided by the Landlord upon the Tenant becoming aware of such occurrence of damage, accident or defect and to indemnify the Landlord against any claim or action made against the Landlord by any third party and any loss suffered by the Landlord either directly or indirectly as a result of any breach by the Tenant of this provision. (15) To allow at all reasonable times within three calendar months immediately preceding the expiration of the terms of this Agreement, the Landlord and/or its estate agents and/or employees and/or the prospective tenants and/or buyers to enter, view and inspect the said premises and the Landlord shall be entitled during the said three calendar months to exhibit (without interruption) a notice in or outside the said premises as the Landlord shall think fit indicating that the said premises are to be let or sold with or without vacant possession and such other information in connection therewith as the Landlord shall desire. (16) To obey and comply with such regulations as may from time to time be adopted by the Landlord and its management agent in accordance with Section (IX) hereof. (17) To be wholly responsible for the acts, neglects, omissions and defaults of or breaches by all licensees of the Tenant as if they were the acts, neglects, omissions and defaults of the Tenant himself and to indemnify the Landlord in full against all costs claims demands actions costs proceedings expenses or liabilities to any person in connection therewith. For the purpose of this Agreement, any acts defaults neglects defaults or omissions of or breaches by the licensees of the Tenant shall be deemed to be the acts defaults neglects defaults or omissions of or breaches by the Tenant. (18) To keep in operation batter operated emergency lighting and exit signs in locations within the said premises as required by the Fire Services Ordinances and all orders, directions, codes and regulations made by the Government, competent authorities, the Landlord or it management agent and the Manager of the Building. (19) To provide at its own costs earthing within the said premises to meet the requirements of the Government, the competent authorities, the Landlord or its management agent, and the Manager of the Building. (20) To permit pipes, conduits, cables, wiring and utility lines to be erected in and passed through the said premises in order to service other premises and areas in the Building. For -7- this purpose, the Landlord and its agents workmen and contractors and the Manager of the Buidling shall have the right to enter the said premises to examine the same. (21) To permit the Landlord's servants or security guards to enter the said premises at all reasonable times for security purposes, to connect and keep at its own costs the said premises connected to any communal alarm or security system and, if required by the Landlord, to be linked up to the security system for the Building provided and operated by the Landlord. (22) To comply with orders, codes and regulations stipulated by the Government and all statutory or public or competent authorities for any additional fire services and fire fighting system and apparatus apart from those provided by the Landlord, whether induced by the business of the Tenant or otherwise, and the costs so incurred shall be solely borne by the Tenant. (23) To quietly yield up the said premises together with all the Landlord's fixtures, fittings and additions therein and thereto (including but not limited to air-conditioning ducts, if any) at the expiration or sooner determination of this Agreement in good, clean and tenantable repair and condition to the satisfaction of the Landlord notwithstanding any rule of law or equity to the contrary and, provided that where the Tenant has made any alterations or additions or installed any fixtures or fittings whether of a structural or non-structural nature, to the said premises with or without the Landlord's written consent, the Landlord may at its discretion require the Tenant at the expense of the Tenant to remove and/or do away with such alterations fixtures or fittings or additions or any part(s) or portion(s) thereof, to reinstate the said premises and to make good and repair in a proper and workmanlike manner any damage to the said premises and to the Landlord's fixtures and fittings therein as a result thereof, and remove at the expense of the Tenant all lettering and characters from all the doors, walls and windows of the said premises and surrender to the Landlord all keys giving access to all parts of the said premises before delivering up the said premises to the Landlord at the expiration or sooner determination of the term of this Agreement. (24) To install at the Tenant's own expenses empty conduits for telephone service to the said premises. Telephone service to the said premises shall only be installed by such public utility company as previously approved by the Landlord in writing and the Tenant shall make its own arrangement with regard to the installation of telephones in the said premises and leave pull wire in all conduits. Installation of all telephone lines outside the said premises must be made in accordance with the Landlord's directions in writing and the Tenant shall forthwith pay and reimburse to the Landlord expenses incurred in the installation of any telephone jacks or conduits to the said premises. (25) To keep all windows and doors of the said premises closed at all times unless otherwise previously approved by the Landlord in writing and to permit the Landlord and its servants, management agents and contractors and the Manager of the Building from time to time during the term of this Agreement to enter upon the said premises for the purpose of closing any doors or windows. -8- (26) To permit the Landlord and its agents, contractors, workmen and servants to perform on behalf of and for the account of the Tenant any of the Tenant's work which the Landlord determines shall be so performed. Such work shall include work which the Landlord deems necessary to be done on an emergency basis, work caused by the Tenant's fault, and work which pertains to structural components and the general utility systems for the Building and the erection of temporary safety barricades hoarding and, if necessary, temporary signs during construction. All expenses incurred thereby shall be paid by the Tenant to the Landlord forthwith upon demand and shall be recoverable as rent in arrears. (27) To permit the Landlord and its agents workmen servants and contractors and the Manager of the Building at all reasonable times (except in case of emergency) during the term of this Agreement to enter into and upon the said premises and to execute any works of renewal cleansing alteration or repair the said premises or to any adjacent or neighbouring premises or to the Building. (28) To remove at its own costs refuse and garbage from the said premises to such location and to use only such type of refuse container as shall be specified by the Landlord from time to tome. In the event of the Landlord providing a collection service for refuse and garbage the same shall be used by the Tenant and all damages incurred therefor shall be solely borne by the Tenant who shall punctually pay and reimburse such charges to the Landlord in accordance with the direction of the Landlord from time to time. (29) To load and unload goods, equipment and apparatus only at such times and through such entrances and by such service lifts (if any) as shall be designated by the Landlord for this purpose from time to time. (30) To pay and reimburse to the Landlord forthwith upon demand the cost in making good any damage caused to any part of the common areas of the Building occasioned by the Tenant or its licensees or any other person claiming through or under the Tenant. (31) To pay and reimburse to the Landlord forthwith upon demand the cost of affixing repairing or replacing as necessary the Tenant's name in lettering to the directory boards at the Building. (32) If any excavation or other building work or renovation works or repairs shall be made or authorised in the vicinity of the Building, the Tenant shall upon prior notice by the Landlord permit the Landlord and its servants, contractors, workmen, management agents and the Manager of the Building to enter the said premises to do such works and repairs as may be deemed necessary to preserve the exterior walls of the Building from injury to person or damage to property and to maintain the Building without any claim for losses or damages or indemnity against the Landlord. -9- (33) To give copies to the Landlord of any notices orders directions or other things by the Manager of the Building or any statutory or public or competent authority affecting or likely to affect the said premises served onto the Tenant. (34) To apply for and obtain all necessary approvals permits and licenses required by the Government or any statutory or public or competent authority in connection with the Tenant's use and occupation of the said premises and the operation of the Tenant's business in the said premises prior to the commencement of the Tenant's business and to maintain the same in full force during the currency of this Agreement and to indemnify the Landlord in full against any claims losses damages expenses demands and liabilities which the Landlord may incur as owner of the said premises as a result of the failure to obtain and maintain the necessary approvals, permits and licenses. (35) To deliver up vacant possession of the said premises to the Landlord at the expiration or sooner determination of this Agreement notwithstanding any rules of law or equity to the contrary. (36) In addition and without prejudice to the Landlord's right hereunder, to permit, and the Tenant hereby specifically authorizes, the Landlord to cut off the supply of electricity and air- conditioning chilled water to the said premises and to dispose of all objects including goods merchandise equipment furniture chattels and fixtures in or at the said premises in such manner as the Landlord shall deem fit, and any expenses in connection therewith shall be paid by the Tenant and shall be recoverable from it as a debt. The Landlord shall in no way be responsible to the Tenant or the Tenant's licensees for any loss or damage or injury or accident caused to property or to any person as a result of the cut off of utilities and disposal of objects. (37) To keep the said premises well and sufficiently lighted throughout the business hours of the Tenant. (38) To ensure that the Tenant itself and the Tenant's licensees shall not obstruct or park or use those areas of the Building allocated to temporary vehicle parking or designated as loading/unloading areas otherwise then in accordance with the regulations from time to time made by the Landlord and its management agents, servants and contractors and Manager of the Building and shall at all times comply with the directions of the Landlord and its management agents servants and contractors and the Manager of the Building. (39) To conduct the business of the Tenant so as not to prejudice the goodwill and reputation of the Building as a first class office building. (40) To pay and reimburse to the Landlord or (as the case may be) its management agents, or the Manager of the Building forthwith on demand charges for air-conditioning outside the normal business of the Building hours, which charges shall be at such rate as the Landlord or its management agent or the Manager of the Building may from time to time determine according to the cost of providing the same. -10- (41) To comply with any Ordinance, orders, rules and regulations and orders by the Government and all statutory or public or competent authorities for the time being in force and all future enactments in substitution therefor or amendment thereto should such enactments or amendments apply to the said premises, and be answerable and responsible for the consequences of any breach of Ordinances, orders and rules and regulations by the Tenant and its licensees. SECTION (IV) LANDLORD'S OBLIGATIONS The Landlord hereby agrees with the Tenant as follows: (1) To permit the Tenant (who duly paying the Rent, the Rates, the Government Rent and the Service Charges on the days and in the manner herein provided and observing and performing the agreements, covenants, stipulations and conditions herein contained and on the Tenant's part) to have quiet possession and enjoyment of the said premises during the term of this Agreement without any interruption by the Landlord or any person lawfully claiming under or in trust for the Landlord. (2) To pay the Property Tax payable in respect of the said premises. SECTION (V) RESTRICTIONS AND PROHIBITIONS The Tenant hereby agrees with the Landlord as follows: (1) (a) Not without the previous written consent of the Landlord to install or permit or suffer to be installed any equipment, apparatus or machinery or article which imposes a weight on ay part of the flooring in excess of that for which it is designed or which requires any additional electrical main wiring or which consumes electricity not metered through the Tenant's separate meter. (b) The Landlord shall be entitled to prescribe the maximum weight and permitted location of safes and other heavy equipment or article and to require that the same shall stand on supports of such dimensions and materials to distribute the weight as the Landlord may deem necessary. (2) Not without the previous written consent of the Landlord to erect, install, remove or alter any fixtures fittings partitioning or structure or other erection or installation in or outside the said premises or the Building or any part thereof nor without the like consent make or permit or suffer to be made any structural or non-structural alterations in or additions to the said premises or the Landlord's fixtures and fittings or any electrical wiring and installations or any pipes drains or sewers. -11 (3) Not without the previous written consent of the Landlord to cut, maim, injure, drill into, mark or deface or permit or suffer to be cut, maimed, injured, drilled into, marked or defaced any doors, windows, walls, beams, air-conditioner ducts (if any), structural members or any part of the fabric of the said premises nor any of the electrical mechanical gas plumbing or sanitary apparatus or installation included therein. (4) Not without the previous written consent of the Landlord to alter the existing locks, bolts and fittings on the entrance doors to the said premises, nor to install any additional locks, bolts or fittings thereon. (5) Not to do or permit or suffer to be done in or upon the said premises or in the common passages stairways lifts escalators lobby toilets or roof of the Building any act or thing which may be or become a nuisance or annoyance or cause damage or injury to the Landlord or its employees licensees agents or contractors or to the tenants or occupiers of other premises in the Building or in any adjoining or neighbouring building. (6) Not to produce or do or permit or suffer to be done at any time in the said premises any act or thing or any music or noise (including but not limited to sound produced by broadcasting from television, radio or any other service or by any equipment apparatus or instrument capable of producing or reproducing receiving or recording music or sound) so as to constitute, in the opinion of the Landlord (which opinion shall be final and conclusive) a nuisance or disturbance or annoyance to or to give cause for reasonable complaint from, the occupants of any other premises in the Building or persons using or visiting the same. (7) Not without the previous written consent of the Landlord affix or exhibit or display or paint or make any alteration or addition whatsoever or permit or suffer to be affixed or exhibited or displayed or painted outside the said premises or in at or above any common area (including but not limited to stairways, lifts, escalators, lobby, landing or corridor of the Building) any signboard, decoration flag, sign, decoration, advertising matter or other device whether illuminated or not other than in a location designated and in form previously approved by the Landlord in writing. (8) Not to use or permit or suffer to be used the said premises or any part thereof for any purpose other than for the Tenant's business the nature of which business is set out in Part V of the First Schedule hereto and the Tenant shall not be entitled to change the nature of its business carried out at the said premises without the Landlord's prior written consent. (9) Not to use or permit or suffer to be used the said premises or any part thereof for any illegal or immoral or improper purpose. (10) Not to use or permit or suffer to be used in or upon the said premise or any part thereof as sleeping quarters or as domestic premises withing the meaning of any Landlord and Tenant (Consolidation) Ordinance or similar legislation for the time being in force, nor to allow any person to remain in the said premises overnight. -12- (11) Not to use or permit or suffer to be used in or upon the said premises for the purpose of the manufacture of goods and merchandise or as a workshop or for the storage of goods and merchandise other than stock reasonably required in connection with the Tenant's business carried on therein. (12) Not to keep or store or permit or suffer to be kept or stored in the said premises or any part thereof any illegal drugs, pirated goods or merchandise, arms, ammunition, gun-powder, saltpetre, kerosene or other explosive or combustible or dangerous or hazardous substance or goods or articles or such other substance or goods prohibited under the Dangerous Drugs Ordinance or the Dangerous Goods Ordinance. (13) Not to encumber or obstruct or permit or suffer to be encumbered or obstructed with any boxes, merchandize, goods, chattels, rubbish, packaging or other objects or articles or obstruction of any kind or nature at any of the entrances, staircases, landings, passages, escalators, lifts, lobbies or other parts of the Building in common use and not to leave place or expose or permitted to be placed left or exposed goods or merchandise or rubbish or any other object or article or thing in any part of the Building not in the exclusive occupation of the Tenant. In addition to any other rights and remedies which the Landlord may have hereunder, the Landlord and its servants workmen contractors and management agents may without any prior notice to the Tenant remove any such obstruction and dispose of the same as the Landlord shall think fit from time to time without incurring any liability whatsoever therefor and the Tenant shall on demand pay and reimburse to the Landlord forthwith all costs and expenses incurred in such removal. (14) Not to lay, install, affix or attach any wiring, cables or other articles or things in or upon any of the entrances, staircases, landing, passages, lobbies, transformer rooms, switch rooms or other parts of the Building in common use to the said premises. (15) Not to prepare or cook or permit or suffer to be prepared or cooked any food in the said premises or in any party of the Building (except by means of the service lifts or the preparation or consumption of food on the said premises other than the preparation and consumption of light meals or refreshments for consumption by the Tenant's employees or guests provided that such light meals or refreshments shall not be consumed within any retail areas of the said premises or within sight of customers and/or the public. No hot food shall be cooked or re-heated other than by an approved microwave oven. The Tenant shall ensure that all wet garbage and refuse will be disposed of by arrangement with and in containers specified by the management of the Building) or to cause or permit any offensive or unusual odours to be produced upon, permeate through or emanate from the said premises. (16) Not to keep or permit or suffer to be kept any animals or pets inside the said premises, and to take all such steps and precautions to the satisfaction of the Landlord in order to prevent the said premises or any part thereof from becoming infested by termites, rats, mice, roaches or any other pests or vermin and for the better observance hereof the Landlord may require the Tenant to employ at the Tenant's cost such pest extermination contractors as the -13- Landlord may nominate or approve in writing from time to time and at such intervals as the Landlord may direct. In the event of the said premises becoming so infested, the Tenant shall pay and reimburse to the Landlord forthwith the cost of extermination as arranged or approved by the Landlord and the selected extermination contractors shall be given full access to the said premises for such purpose. (17) Not without the previous written consent of the Landlord to transfer assign underlet or otherwise part with the possession of the said premises or any part thereof or interest therein in any way whether by way of subletting lending sharing or other means whereby any organization company firm or person not a party to this Agreement obtains the use or possession of the said premises or any part thereof or interest therein irrespective of whether any rental or other consideration is given for such use or possession and in the event of any such transfer sub-letting sharing assignment or parting with the possession of the said premises (whether for monetary consideration or not) this Agreement shall at the option of the Landlord absolutely determine and the Tenant shall forthwith vacate the said premises upon notice to that effect from the Landlord. This Agreement shall be personal to the Tenant and, without in any way limiting the generality of the foregoing, the occurrence of any of the following acts and events shall, unless previously approved in writing by the Landlord, be deemed to be a breach of this Clause: (a) In the case of a tenant which is a partnership, the taking in of one or more new partners whether on the death or liquidation or retirement of an existing partner or otherwise. (b) In the case of a tenant who is an individual (including a sole surviving partner of a partnership tenant), the death insanity or disability of that individual to the intent that no right to use possess occupy or enjoy the said premises or any part thereof shall vest in the executors administrators personal representatives next-of-kin trustee or committee of any such individual. (c) In the case of a tenant which is a corporation, any take-over reconstruction amalgamation merger voluntary liquidation or presentation of petition for the winding up of the corporation or entry into any composition or arrangement between the corporation and its creditors or change in the person or persons who own a majority of the voting rights or who otherwise has or have effective control of such corporation. (d) The giving by the Tenant of a power of attorney or similar authority whereby the donee of the power of attorney obtains the right to use possess occupy or enjoy the said premises or any part thereof or interest therein or does in fact use possess occupy or enjoy the same. (e) The change of the Tenant's business name as stated in Part V of the First Schedule without the previous written consent of the Landlord. (18) Not to do or omit to do or permit or cause or suffer to be done any act, deed, matter or thing whatsoever which amounts to a breach of or default in any of the terms and conditions under which the Building is held from the Government and the Deed of Mutual Covenant, the Management -14- Agreement and, if any, the Sub-Deed of Mutual Covenant, and to indemnify the Landlord in full against any such breach or default. (19) Not to do or omit to do or permit or cause or suffer to be done any act, deed, matter or thing whatsoever whereby the policy or policies of insurance on the Building or the said premises against loss or damage by fire or other insurable perils or claims by third parties or exclusion or disclaimer of the Landlord's liabilities hereunder for the time being in force may be vitiated or rendered void or voidable or whereby the rate of premium thereon may be increased, and in the event of such occurrence, the Tenant shall indemnify and keep indemnified the Landlord and all third parties in full (without prejudice to any other rights or remedies available to the Landlord) against their loss and damage at all times including but not limited to the costs of renewal by the Landlord of insurance policy or policies and increase in insurance premium. (20) Not to erect any aerial on the roof or walls of the Building or on the ceiling or walls of the said premises without the prior written consent of the Landlord. (21) Not to install air-conditioning facilities and/or heating facilities without the prior written consent of the Landlord. (22) Not to suspend or permit or suffer to be suspended any excessive weight from the main structure of the said premises. (23) Not to permit or suffer to be held upon the said premises any sale by auction, fire, bankruptcy, closing-down or sales of similar nature or any discount-type of retail business or any form of unethical business operation provided that this Clause shall not preclude genuine promotional, clearance or quarterly or semi-annual or annual seasonal sales. (24) Not to hang any laundry, clothing or other articles or things outside the said premises or the Building. (25) Not without the previous written consent of the Landlord to change or in any way alter the standard entrance doors provided by the Landlord for access to and egress from the said premises. (26) Not to do or permit any act or thing to be done which is likely to cause any fire risk or other hazard in the said premises or the Building. (27) Not to take delivery of furniture equipment fittings or bulky items in and out of the Building except during the normal business hours and only in the lift designated by the Landlord or its management agent or the Manager of the Building. (28) Not to permit or allow any food or food containers to be brought onto or removed from the said premises. (29) Not to permit gambling of any description whatsoever upon the said premises. -15- (30) Not to form or organize or attempt or make any effort to form or organize any tenant's association or union jointly with any tenants of the Building for whatever objects or purposes during the continuance of this Agreement. (31) Not to sell or supply any beer wine spirits liquor or alcohol in the said premises (except in small quantity for private consumption) or any part of the Building. (32) Not without the previous written consent of the Landlord to block up darken or obstruct or obscure the windows or lights belonging to the said premises. (33) Not to permit any touting or soliciting for business or the distributing of any pamphlets notice or advertising matter by the Tenant or its licensees outside the said premises or anywhere within the Building. (34) Not to park in obstruct or otherwise use or permit to be parked in obstructed or otherwise used those areas (if any) of the Building allocated to parking the movement of or access for vehicles or designated as loading/unloading areas except in accordance with the regulations made from time to time by the Landlord or its management agent and the Manager of the Building. (35) Not to carry on business under a name other than as specified in Part V of the First Schedule. If the Tenant is desirous of changing the business name, it must first seek written approval from the Landlord of the proposed new name. The Landlord may give or withhold its approval at its discretion. Without prejudice to the foregoing, the Landlord may, in connection with any application for approval under this provision, require the Tenant to produce such evidence as it may think fit to show that no breach of the agreements and stipulations herein contained prohibiting the assignment, underletting, parting with possession of or transfer of the said premises or any part thereof or any interest therein has taken place or is about to take place in Clause 17 of this Section (V). SECTION (VI) EXCLUSIONS The Landlord shall not in any circumstances be liable to the Tenant or any other person whomsoever: (1) In respect of any loss or damages or other liability (whether direct or consequential) to person or property sustained by the Tenant or any such other person caused by or through or in any way owing to any defect in or breakdown of the lifts or escalators or the air-conditioning system (if any) of the Building or any cracking of the glass panels of the Building or any interruption of the facilities or services in the Building by reason of necessary repair or maintenance of any installations or apparatus thereto or any destruction thereof by fire smoke water Act of God or other cause beyond the Landlord's control or by reason of mechanical electrical or other defect or other inclement conditions or any unavoidable shortage of fuel -16- materials water or labour or any cause whatsoever beyond the Landlord's control or any act omission neglect or default of the tenants or occupiers of any other parts of the Building or any of their employees workmen customers agents licensees contractors or invitees or any defect in or any surge reduction variation fluctuation interruption or termination in the supply of electrical power or any typhoon landslide subsidence of the ground escape of fire or smoke or any leakage of water or electric current from electric wiring cables or ducts situate in upon or in any way connected with the Building or any part thereof or any dropping or falling of any article object or material whatsoever (including but not limited to cigarette ends, glass or tiles) or any vibrations from any floor office or premises forming part of the Building or in the neighbourhood or any defective or damaged condition of the said premises or the Landlord's fixtures therein or any part thereof; or (2) In respect of any loss or damage or other liability (whether direct or consequential) to person or property sustained by the Tenant or any such other person caused by or through or it any way owing to any failure malfunction explosion or suspension of the electricity, water, gas or other utility supply to the Building or the said premises; or (3) For the security of safekeeping the said premises or any contents therein, and in particular but without prejudice to the generality of the foregoing, the provision (if any) by the Landlord of watchmen and caretakers or any mechanical or electrical security system or alarm system or equipment shall not create any obligation on the part of the Landlord as to the security of the said premises or any contents thereof which shall at all times rest with the Tenant nor shall the Rent, the Rates and other Service Charges or any part thereof abate or cease to be payable on account thereof except pursuant to the provisions under Section (VII). (4) This Agreement and the obligations on the Tenant to pay Rent and other sums due hereunder and to perform and observe it other obligations hereunder shall in no way be affected impaired or excused because the Landlord is unable due to any circumstances to fulfill any of its obligations under this Agreement or to supply or is delayed in supplying any services expressly or impliedly to be supplied hereunder or to make or is delayed in making any repair additions alterations or decoration or is unable to supply or is delayed in supplying any equipment or fixtures by reason of strike labour troubles shortage of materials or any other cause whatsoever beyond its control or by reason of any Ordinances or any order or rule or regulation of the Government or any public utility company or any statutory or public or competent authority. (5) The Landlord does not represent or warrant that the said premises are suitable for the use or purposes specified in Part V of the First Schedule or for any purposes whatsoever, and the Landlord hereby declares to which the Tenant hereby acknowledges that (a) any approval or direction or instruction given by the Landlord or on its behalf may not represent in any way consistency or compliance with the terms and conditions of the Deed of Mutual Covenant or the Management Agreement, or (if any) the Sub-Deed of Covenant; and (b) the Tenant shall satisfy itself or shall be deemed to have satisfied itself that the said premises are suitable for the purpose for which they are to be used and that all requirements and restrictions to which the said premises -17- and the Building are subject are fully observed and complied with under the said terms and conditions and Deed of Mutual Covenant, if any, the Sub-Deed of Covenant and the Management Agreement. SECTION (VII) ABATEMENT OF RENT (1) In the event that the said premises or any part thereof shall be destroyed or damaged or shall be rendered inaccessible or unfit for use and occupation by fire, typhoon, Act of God, or other calamity beyond the control of the Landlord or the said premises or the Building shall be condemned as a dangerous structure or a demolition order or closing order shall become operative in respect of the said premises or the Building; and (2) not in any way attributable, directly or indirectly, to any act or default or neglect or omission of the Tenant or its licensee; and (3) the insurance policy effected by the Landlord shall not have been vitiated or not have been rendered void or payment of premium not have been refused in whole or in part in consequence of any act or default or omission or neglect of the Tenant or its licensee; (4) then the Rent or a part thereof proportionate according to the nature and extent of the damage sustained to the Tenant shall abate and cease to be payable until the said premises shall have been restored or reinstated or rendered accessible or fit for use and occupation or the demolition order or the closing order shall have been uplifted provided always that: (a) the date of expiration of the term hereby created shall not be postponed; and (b) the Landlord may but not obliged to repair or reinstate the said premises if in its sole opinion, it is not economical or practicable or reasonable to do so; and (c) if the whole or substantially the whole of the said premises or the Building shall have been destroyed or if rendered unfit for use and occupation and not repaired and reinstated or the demolition order or the closing order on the said premises or the Building shall remain continue and not uplifted, within 3 months of occurrence of such damage or destruction or demolition or closing order (as the case may be); either party hereto shall be entitled to terminate this Agreement by notice in writing to the other whereupon the same and everything herein contained shall cease and be void as from the date of the occurrence of the damage or destruction or the demolition or closing order (without prejudice to the rights and remedies of either party hereto against the other) except in respect of any antecedent claim or breach of the stipulations terms and conditions herein contained or in respect -18- of the Rent, Rates, Government Rent and Services Charges payable hereunder prior to the coming into effect of the cessation to pay Rent. SECTION (VIII) DEFAULT It is hereby further expressly agreed and declared as follows: (1) If any Rent, Rates, Government Rent or Service Charges or any part thereof shall be unpaid for 15 days after the same shall become payable (whether legally or formally demanded or not) or if the Tenant shall fail or neglect to observe or perform or default in or omit to do any of the agreements, stipulations or conditions herein contained and on the Tenant's part or if the Tenant shall become bankrupt or being a corporation shall go into liquidation or if any petition shall be filed for the winding up of the Tenant or if the Tenant shall otherwise become insolvent or shall make or attempt to make any composition or arrangement with creditors or shall suffer any judicial execution to be levied on the said premises or otherwise on the Tenant's goods, then and in any such case it shall be lawful for the Landlord at any time thereafter (a) to determine this Agreement and to re-enter on the said premises or any part thereof in the name of the whole but without prejudice to any rights of action by or remedies available to the Landlord in respect of any outstanding breach or non-observance or non-performance of any of the agreements, stipulations and conditions herein contained and on the Tenant's part (including but not limited to the Landlord's right to recover the arrears as debt from the Tenant and/or to deduct all losses and damages thereby incurred from the deposit paid by the Tenant in accordance with Section (X) hereof); and (b) to claim interest upon the Rent, Rates, Government Rent and Service Charges in arrears (as the case may be) at the prescribed rate from the due date until the date of payment as liquidated damages and not as penalty. The term "prescribed rate" means 3% over the best lending rate quoted by The Hongkong and Shanghai Banking Corporation Limited on Hong Kong dollars deposits at the date upon which the Rent, the Rates, Government Rent and the Service Charges (as the case may be) became due. Interest payable to the Tenant upon arrears of Rent, the Rates, Government Rent and the Service Charges (as the case may be) shall not itself be deemed to be rent. (2) The Tenant hereby irrevocably authorizes the Landlord to, if the Landlord so desires, open any locks and doors to the said premises in the event of any such default as aforesaid in order to effectuate the Landlord's right of re-entry. A written notice served by the Landlord on the Tenant in manner hereinafter mentioned to the effect that the Landlord thereby exercises the power of re-entry herein contained shall be full and sufficient exercise of such power without physical entry on the part of the Landlord. (3) Acceptance of Rent by the Landlord shall not be deemed to operate as a waiver by the Landlord of any right to proceed against the Tenant in respect of any breach, non-observance or non-performance by the Tenant of any of the agreements, stipulations and conditions herein contained and on the Tenant's part. Any acceptance after the Landlord's right to proceed against -19- the Tenant as aforesaid shall be deemed to be on account of mesne profits unless the Landlord shall expressly waive the said right. (4) For the purpose of these presents any act, default, neglect or omission of any licensee of the Tenant shall be deemed to be the act, default, neglect or omission of the Tenant. (5) For the purpose of distress for rent in terms of Part III of the Landlord and Tenant (Consolidation) Ordinance (Chapter 7) and of these presents, the Rent, the Rates, the Government Rent and the Service Charges payable shall be and be deemed to be in arrears if not paid in advance at the times and in manner hereinbefore provided for payment thereof. SECTION (IX) REGULATIONS (1) The Landlord reserves the right from time to time and by notice in writing to the Tenant to make and introduce, and subsequently amend, adopt or abolish if necessary, such regulations as it may consider necessary for the proper operation and maintenance of the Building or any part thereof. (2) Such regulations shall be supplementary to the terms and conditions of this Agreement and shall not in any way derogate from such terms and conditions and shall bind the Tenant and any breach of or default in such regulations shall be deemed to be a breach of this Agreement for which the Landlord may exercise all or any of its rights or remedies hereunder. (3) In the event of conflict between such regulations and such terms and conditions of this Agreement, other terms and conditions of this Agreement shall prevail. (4) The Landlord shall not be liable to the Tenant or its licensee for any loss or damage however caused to any person arising from any failure or delay in the enforcement of the regulations or non-observance thereof. SECTION (X) DEPOSIT (1) The Tenant shall on or before the signing of this Agreement pay to the Landlord a deposit as set out in Part VI of the First Schedule hereto to secure the due observance and performance by the Tenant of the agreements, stipulations and conditions herein contained and on the Tenant's part (including the due payment of the Rent, the Rates, the Government Rent and Service Charges). In the event of any breach or non-observance or non- performance by the tenant of any of the said agreements, stipulations or conditions which are irremediable or, if -20- remediable by the Tenant but the Tenant shall fail to remedy and rectify before the expiration of the period as shall be specified in the written notice given by the Landlord to the Tenant, then the Landlord shall have the right to, from time to time and at its absolute discretion and without notice to the Tenant, (i) forfeit the said deposit (including any further deposit(s) paid by the Tenant pursuant to Clause 3 of this Section ("further deposits")) absolutely as and for liquidated damages; and/or (ii) deduct from the said deposit and further deposits such amount of Rent in arrears as debt and/or all monetary losses and damages incurred by the Landlord in consequence of the said breach, non-observance or non- performance by the Tenant. In any event the exercise of the aforesaid right of forfeiture and deduction by the Landlord shall be without prejudice to its right to claim damages over and above the said deposit or further deposits or further damages sustained by the Landlord and to all other rights and remedies available to the Landlord hereunder or at law. The Landlord's right to forfeit the said deposit and further deposits or to make deductions from the said deposit and further deposits once exercised shall be final and binding on the Tenant conclusively. In the event that the Landlord exercising its right of forfeiture or deduction during the currency of this Agreement in accordance with this provision, the Tenant shall forthwith upon demand by the Landlord pay to the Landlord a further deposit or deposits equal to the amount(s) so forfeited or deducted and, if the Tenant shall fail so to do, the Landlord shall be entitled to re-enter on the said premises and to determine this Agreement in which event all deposits and further deposits paid by the Tenant pursuant hereto may be forfeited to the Landlord as hereinbefore provided. For the avoidance of doubt, there shall be no limit on the number of times which the Landlord may exercise its right of forfeiture or deduction in respect of the said deposit and further deposits under this provision. (2) Subject as aforesaid and the foregoing provisions and without prejudice to the Landlord's rights and remedies available to the Landlord at law or hereunder, a sum equivalent to the said deposit and further deposits shall be returned to the Tenant by the Landlord without interest within one month after the expiration or the sooner determination of this Agreement and the delivery of vacant possession of the said premises to the Landlord, or (without being construed as a waiver of the Landlord's rights under this Agreement) within one month after the settlement of the last outstanding claim which the Landlord may have against the Tenant in respect of any breach, non-observance or non-performance of or default in any of the agreements, stipulations or conditions herein contained and on the part of the Tenant, whichever shall be the later. (3) If at any time during the term of the tenancy hereby created, the Landlord shall sell or otherwise assign or transfer the said premises, the Landlord may at any time transfer to its purchaser or assignee ("the New Owner") the said deposit in (1) above and (if any) further deposits (subject to the Landlord's prior right of forfeiture and deduction) or the balance thereof (if any) in the event of the Landlord being entitled to exercise its right of deduction as aforesaid. Upon such transfer, the Landlord (which in this context shall exclude its assigns) shall be released from any liability or obligation under this Agreement to return the said sum equivalent to the said deposit in (1) above and (if any) further deposits or any balance thereof to the Tenant. The Tenant shall thereafter be entitled only to claim for the return of the said sum equivalent to the said deposit in (1) above and (if any) further deposits or the balance thereof from the New Owner. -21- SECTION (XI) INTERPRETATION AND MISCELLANEOUS (1) No condoning, excusing or overlooking or acceptance of the Rent, the Rates or the Service Charges by the Landlord of any default, breach or non-observance or non-performance by the Tenant at any time of any of the Tenant's obligations herein contained shall operate or be deemed to operate as a waiver of the Landlord's rights hereunder or shall defeat or affect in any way the rights and remedies of the Landlord hereunder in respect of any continuing or subsequent default, breach or non-observance or non-performance of the Tenant's obligations and covenants hereunder and no waiver by the Landlord shall be inferred from or implied by anything done or permitted or suffered to be done by the Landlord unless otherwise specifically agreed in writing and signed by the Landlord. Any consent given by the Landlord shall operate as a consent only for the particular matter to which it relates and in no way shall be considered as a waiver or release of any of the provisions hereof nor shall it be construed as dispensing with the necessity of obtaining the specific written consent of the Landlord in the future unless expressly so provided. (2) Any notice required to be served hereunder shall, if to be served on the Tenant, be sufficiently served if addressed to the Tenant and sent by prepaid post to or left at the Tenant's registered office in Hong Kong or the said premises and if to be served on the Landlord, be sufficiently served if addressed to the Landlord and sent by registered post to or left at its registered office in Hong Kong or the address given above or any other address which the Landlord may notify in writing to the Tenant from time to time. A notice sent by post shall be deemed to have been received at the time when in due course of post it would be delivered at the address to which it is sent. (3) The Tenant acknowledges that no fine, premium, key money or other consideration of similar nature has been paid by the Tenant to the Landlord for the grant of this tenancy hereby created. (4) This Agreement sets out the full agreement reached between the parties and no other representations or warranties have been made or given relating to the Landlord or the Tenant or the Building or the said premises and if any such representation or warranty whether oral or written has been made given or implied the same is hereby waived and superceded by this Agreement entirely. (5) The Tenant shall, in addition to paying the legal costs of his own solicitors (if any), also pay to the Landlord upon the signing hereof a sum equal to half of the Landlord's solicitors' costs plus half share of stamp duty and (if any) registration fee and any disbursements on this Agreement. In this matter Messrs. Tsang, Chan & Wong, Solicitors are acting only for the Landlord although Messrs. Tsang, Chan & Wong, Solicitors may witness the execution of this Agreement by the Tenant and collect from the Tenant the aforesaid sum on behalf of the Landlord. -22- (6) The parties hereto further agree that they shall respectively be bound by and entitled to the benefit of the Special Conditions (if any) set out in the Third Schedule. (7) The Landlord reserves the right (subject to any relevant provisions of the Deed of Mutual Covenant and/or the Sub-Deed of Mutual Covenant or Management Agreement in respect of the Building) to name the Building with any such name or style as it in its sole discretion may determine and at any time and from time to time to change, alter, substitute or abandon any such name without the same constituting an actual or constructive eviction of the Tenant and without incurring any liability to the Tenant therefor provided always the Tenant shall be entitled to not less than one month's prior notice of the intention of the Landlord to change name of the Building. (8) Notwithstanding anything herein contained, the Landlord shall have the right to remove, cancel, relocate or otherwise change the common areas (including but not limited to entrances, passages, corridors and staircases) and common facilities (including but not limited to lifts, escalators and toilets) of the Building or to agree with others the same to occur from time to time and in such manner as the Landlord may in its absolute discretion deem fit without the same constituting an actual or constructive eviction of the Tenant and without incurring any liability to the Tenant therefor. (9) Notwithstanding anything herein contained or implied to the contrary the Landlord may subject to any relevant provisions of the Deed of Mutual Covenant, the Sub-Deed of Mutual Covenant (if any) and the Management Agreement in respect of the Building provide and install a public address system throughout the common areas and may play relay or broadcast or permit any other person to play relay or broadcast recorded music or public announcement therein. (10) (a) Notwithstanding anything to the contrary hereinbefore contained, if at any time during the tenancy hereby created, it is decided or resolved that the Building or any part thereof (which intention to redevelop shall be notified by the Landlord in writing to the Tenant) is to be redeveloped whether wholly by demolition and rebuilding or otherwise, or partially by renovation, re-furbishment or otherwise, then in such event the Landlord shall be entitled to give three clear calendar months; notice in writing expiring at the end of any calendar month during the tenancy hereby created terminating this Agreement and immediately upon the expiration of such notice this Agreement and everything herein contained shall cease and be void but without prejudice to the rights and remedies of either party against the other in respect of any antecedent claim or breach of any of the covenants or stipulations herein set out. (b) The Tenant hereby expressly covenants to deprive himself of all rights (if any) to protection against eviction or ejectment provided by any existing or future legislation from time to time in force and applicable to the said premises or to this Agreement and the Tenant covenants to deliver up vacant possession of the said premises to the Landlord on the expiration or sooner termination of the tenancy hereby created notwithstanding any rule of law or equity to the contrary. (11) In this Agreement: -23- (a) (unless the context permits or requires) words importing the singular number shall include the plural and vice versa and words importing the masculine feminine or neuter gender shall include the others of them; (b) the Headings and Index (if any) are intended for guidance only and do not form a part of this Agreement nor shall any of the provisions of this Agreement be construed or interpreted by reference thereto or in any way affected or limited thereby; (c) the "Government" shall (unless the context requires otherwise) mean the Government of Hong Kong Special Administrative Region; the "licensee" shall (unless the context requires otherwise) include employee, servant, workman, customer, agent and contractor of the Tenant and any person present in, using or visiting the said premises with the consent of the Tenant, express or implied; the "Tenant" shall (where the context permits) mean and include the party or parties specifically named and shall not include the executors and administrators of any such party or where such party is a corporate, any liquidator thereof. Where the Tenant comprises more than one individual all covenants undertakings and agreements made by the Tenant herein shall be deemed to be made jointly and severally by all the persons comprising the Tenant; (d) reference to person includes any public body and anybody of persons, corporate or unincorporate; (e) reference to Ordinance, orders, statutes, legislation or enactments shall be construed as a reference to such Ordinance, orders, statutes, legislation or enactments as may be amended or re-enacted from time to time and for the time being in force; (12) The Tenant hereby declares that it has inspected and is fully satisfied with and accepts in all respects the existing state, condition, fixtures, decoration and finishes of the said premises and agrees to take up the said premises in "as is" basis provided that the Tenant shall be obliged to deliver up vacant possession of the said premises and reinstate the same in its original physical state to the Landlord according to the provisions hereinbefore mentioned upon expiry or sooner determination of this tenancy hereby created (fair wear and tear excepted). -24- THE FIRST SCHEDULE ABOVE REFERRED TO PART I LANDLORD : BOC GROUP LIFE ASSURANCE COMPANY LIMITED Address : 13th-21st Floors of BOCG Insurance Tower, Nos. 134-136 Des Voeux Road Central, Hong Kong PART II TENANT : TITANIUM TECHNOLOGY LIMITED Registered office : 10th Floor, Tianjin Building, No. 167 Connaught Road West, Hong Kong PART III TERM: : THREE YEARS from the 1st day of July 2005 to the 30th day of June 2008 (both dates inclusive) with an option to renew for a further term of two years PART IV RENT : PERIOD RENT PER CALENDAR MONTH ------ ----------------------- the whole term HONG KONG DOLLARS TWENTY THREE THOUSAND SIX HUNDRED AND NINETY FIVE ONLY (HK$23,695.00) per month -25- Rent (exclusive of Rates, Government Rent, Service Charges and other outgoings and expenses payable in respect of the said premises or the Building) shall be payable in advance without any deduction whatsoever on the 1st day of each and every calendar month. SERVICE CHARGES : MANAGEMENT FEES Management Fees and AND AIR-CONDITIONING air-conditioning charges CHARGES PERIOD PER CALENDAR MONTH: ------ ------------------- the whole term HONG KONG DOLLARS TWELVE THOUSAND EIGHT HUNDRED AND SIXTY THREE ONLY (HK$12,863.00) per month subject to increase from time to time as may be notified by the Landlord or its management agent(s) or the Manager of the Building in writing. Rates and Government Rent : for such period and in such amount to be assessed by the Government from time to time All Service Charges (including management fees and air-conditioning charges, Rates and Government Rent) shall be payable in advance without deduction on the 1st day of each and every calendar month to the Landlord direct. The first of the Rent, Rates, Government Rent and all Service Charges shall be apportioned according to the number of days in the month included in the term and paid on the signing of this Agreement. The Landlord is entitled to demand payment of amounts payable hereunder by the Tenant at the own costs of the Tenant in cash or any other methods of payment or in any banknotes, and whether payment is made by cheque or cash or autopay or otherwise, such payment must reach the offices of or the account designated by the Landlord before 3:00 o'clock in the afternoon on the due date if such payment is made on any weekday except Saturday, and before 11:00 a.m. on the due date if such payment is made on a Saturday. If the day on which the Rent, Rates, Government Rent or any of the Service Charges falls due under this Agreement is a Sunday or a public holiday, the relevant payment shall be due and payable on the preceding business day. Otherwise, the payment shall be deemed to have been paid by the Tenant on the following -26- business day and the Tenant shall be deemed to have defaulted in making due payment and shall solely bear the consequences of such default on terms hereinbefore appearing. PART V USER : The nature of the Tenant's business shall be: office for commercial use trading under the existing style and business name of the Tenant and for no other purpose PART VI DEPOSIT : HONG KONG DOLLARS ONE HUNDRED AND NINE THOUSAND SIX HUNDRED AND SEVENTY FOUR ONLY (HK$109,674.00) (equivalent to 3 months' rental and 3 months' management fee and air-conditioning charge deposits) THE SECOND SCHEDULE ABOVE REFERRED TO THE SAID PREMISES ALL THAT the FOURTH FLOOR of BOCG INSURANCE TOWER, Nos. 134-136 Des Voeux Road Central and Nos. 35-43 Gilman's Bazaar, Central, Hong Kong erected on ALL THOSE pieces or parcels of ground registered in the Land Registry as Inland Lot No. 4793, Inland Lot No. 4794, Inland Lot No. 4795, Inland Lot No. 4796, Inland Lot No. 4797, Inland Lot No. 4798 and Inland Lot No. 4799. -27- THE THIRD SCHEDULE ABOVE REFERRED TO SPECIAL CONDITIONS (1) Rent free period Notwithstanding anything to the contrary contained in this Agreement, the Tenant shall be entitled to occupy the said premises for a period of 45 days from the 1st day of July 2005 to the 15th day of August 2005 (both dates inclusive) hereunder free of rent provided that during the said rent free period the Tenant shall pay all Service Charges (including but not limited to Rates, Government Rent, management fees and air-conditioning charges and other outgoings payable in respect of the said premises). (2) Option to Renew (a) The Landlord shall, on the written request of the Tenant made not later than 6 months before the date of expiration of the term of this tenancy and provided that there shall at that time be no outstanding or existing breach of any of the agreements, stipulations or conditions herein contained and on the part of the Tenant to be observed and performed, grant to the Tenant a renewal of this Agreement for a further term of two years from the expiry date at the new rent (the "New Rent") to be determined as provided hereinbelow but otherwise subject to the same terms and conditions as are herein contained with the exception of the Special Conditions (1) and (2) in this Schedule hereto. The written request of renewal of tenancy, once given by the Tenant, shall be irrevocable. The Tenant shall upon the expiry of the term hereof pay to the Landlord such sum (if any) as shall make up the deposit paid by the Tenant under Clause (1) of Section (X) hereto to the aggregate if 3 months' revised rent and management fees and air-conditioning charges then payable in respect of the said premises. (b) The New Rent payable to this tenancy shall be reviewed by reference to the then fair market rent. The New Rent shall be assessed and notified by the Landlord to the Tenant and shall be agreed by the Landlord and the Tenant at least 3 months before the New Rent shall become payable. Failure on the part of the Tenant for whatever reason to respond to the Landlord's notice of assessment of the Ne Rent within 14 days of the Landlord's notice shall be deemed absolute acceptance on the part of the Tenant of the Landlord's assessment. (c) In default of agreement of the New Rent before expiration of said 3 months' period, either party shall refer the disagreement to an independent professional valuer or firm of professional valuers to be appointed jointly by the parties hereto in writing -28- or in default of such agreement, the President for the time being of the Hong Kong Institute of Surveyors to appoint such professional valuer who shall act as an expert and not as an arbitrator and whose decision shall be final and binding on the parties hereto and shall take into account the fair market rent for prime office accommodation in the Central District of Hong Kong obtainable at the time of such determination on the following assumptions at that date: (i) that the said premises are fit for immediate occupation and use and that no work has been carried out thereon during the term by the Tenant or its successors in title which has diminished the rental value of the said premises and in the case where the said premises have been destroyed or damaged that they have been fully restored; (ii) that the said premises or for similar premises in the Building in a similar development having similar characteristics and attributes are available to let by a willing landlord to a willing tenant without a premium but with vacant possession and subject to the provisions of this Agreement for a term equal to the original term of this Agreement; and (iii) that the covenants herein contained on the part of the Tenant have been fully performed and observed but disregarding: (aa) any goodwill attributable to the Tenant's business; (bb) the value of any fixture and fitting or any other improvement to the said premises made by the Tenant; (cc) the fact that the Tenant or its predecessors in title have been in occupation of the said premises; and (dd) the fact that the said premises are large in size or may be considered to be larger in size than is usual for such a office tenancy. (d) Until such New Rent for the said premises shall have been determined in accordance with the foregoing paragraphs (b) and (c) above, the Tenant shall pay the New Rent assessed and notified by the Landlord under (b) above and within 14 days of such determination the Tenant shall pay to the Landlord such additional sum as may be necessary to equate the deposit paid to the Landlord under Section (X) hereof to an amount equal to 3 months' rent and 3 months' management fee and air-conditioning charge as agreed or determined hereunder, such deposit to be held on the same terms and conditions (mutatis mutandis) as are contained in the said Section (X). -29 (e) The right of the Landlord to review the rent and the entitlement of the Landlord to the New Rent as stipulated hereunder shall be absolute and shall not be deemed to have lapsed under any circumstances including but not limited to where the Landlord fails for whatever reason to notify the Tenant of the rent review within the time frame stipulated in paragraph (b) above. For the avoidance of doubt, if for whatever reason the New Rent once assessed or agreed with effect from the commencement of the two-year period of the term to which the rent review applies, and the Tenant shall forthwith pay the Landlord the total difference between the New Rent payable and the actual rent paid. (f) All costs involved in the determination of the fair market rent shall be borne by the parties hereto in equal shares. -30- AS WITNESS the hands of the parties hereto the day and year first above written. SIGNED by Chan Fu Kan, its ) FOR AND ON BEHALF OF ) BOC GROUP LIFE ASSURANCE Director ----------------- ) COMPANY LIMITED ) for an on behalf of the Landlord whose ) /s/ (unknown signature) ) ------------------------------- ) Authorized Signature(s) signature(s) is/are verified by: ) /s/ Mak Tsz May Solicitor, Hong Kong SAR Messrs. Tsang, Chan & Wong SIGNED by Tang Wai Hung ) FOR AND ON BEHALF OF ) TITANIUM TECHNOLOGY LIMITED Director ----------------------- ) ) /s/ (unknown signature) for an on behalf of the Tenant in the ) ------------------------------- ) Authorized Signature(s) presence of: ) /s/ Alice M.C. Cheung ALICE M. C. CHEUNG Clerk to Messrs. Tsang, Chan & Wong, Solicitors & Notaries, Hong Kong SAR -31- RECEIVED the day and year first above ) ) written of an from the Tenant the sum of ) ) HONG KONG DOLLARS ONE ) ) HUNDRED AND NINE THOUSAND SIX ) ) HK$109,674.00 HUNDRED AND SEVENTY FOUR ) ) ONLY being the deposit above expressed ) ) to be paid by the Tenant to the Landlord ) Signature(s) is/are verified by: -32- EX-21 9 exh-21.txt EXH 21 SUBSIDIARIES EXHIBIT 21 LIST OF SUBSIDIARIES The subsidiaries of Titanium Group Limited are as follows: o Titanium Technology Limited, a Hong Kong corporation, which does not do business under any other name; and o Titanium Technology Shenzhen Co., Ltd., a company incorporated in the People's Republic of China, which does not do business under any other name. EX-23 10 exh23-1.txt EXH 23-1 CONSENT EXHIBIT 23.1 CONSENT OF STEVENSON, WONG & CO. [LETTERHEAD OF STEVENSON, WONG & CO.] OUR REF: YOUR REF: DATE: CWC/HLO(P)/63052/05Cor.Fin. 13 September 2005 REPLY FAX: BY HAND The Directors Titanium Group Limited 4th Floor, BOCG Insurance Tower 134 - 136 Des Voeux Road Central Hong Kong Dear Sirs CONSENT OF ATTORNEYS Reference is made to the Registration Statement of Titanium Group Limited (the "Company") on Form S-1 whereby certain shareholders of the Company propose to sell up to 9,956,000 shares of the Company's common stock. Reference is also made to Exhibit 5 included in the Registration Statement relating to the validity of the securities proposed to be sold. We hereby consent to the use of our opinion concerning the validity of the securities to be sold. Yours faithfully, /s/ STEVENSON, WONG & CO. STEVENSON, WONG & CO. EX-23 11 exh23-2.txt EXH 23-2 CONSENT EXHIBIT 23.2 CONSENT OF ZHONG YI (HONG KONG) C.P.A. COMPANY LIMITED ZHONG YI (HONG KONG) C.P.A. COMPANY LIMITED CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors Titanium Group Limited: We consent to the reference to our firm under the caption "Experts" and to the use of our reports on the consolidated financial statements of Titanium Group Limited dated August 31, 2005, in the Registration Statement on Form S-1 and related Prospectus of Titanium Group Limited for the registration of shares of its common stock. /s/ ZHONG YI (HONG KONG) C.P.A. COMPANY LIMITED ZHONG YI (HONG KONG) C.P.A. COMPANY LIMITED September 12, 2005 Hong Kong, China 9th Fl., Chinachem Hollywood Centre, 1-13 Hollywood Rd., Central, Hong Kong Tel: 2573 2296 Fax: 2384 2022 -----END PRIVACY-ENHANCED MESSAGE-----