10QSB 1 form10qsb.htm QUARTERLY REPORT FOR THE PERIOD ENDED OCTOBER 31, 2005 Filed by Automated Filing Services Inc. (604) 609-0244 - Cathay Merchant Group, Inc. - Form 10QSB

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2005

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _________ to _________

COMMISSION FILE NUMBER 000-16283

CATHAY MERCHANT GROUP, INC.
(Name of Small Business Issuer in Its Charter)

DELAWARE 04-2608713
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

3604 Tower 1,  
Kerry Everbright City,  
218 Tian Mu Road West,  
Shanghai, P.R. China 200070
(Address of principal executive offices) (Zip Code)

Issuer's telephone number, including area code: (86) 21-6353-0012

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x YES ¨ NO

Indicate by check mark whether the registrant is a shell company (as defined in Role 12b-2 of the Exchange Act).
¨ YES xNO

The number of shares outstanding of the issuer's common stock as at December 9, 2005 was 18,796,829.

Transitional Small Business Disclosure Format (check one): ¨ YES x NO


CATHAY MERCHANT GROUP, INC. AND SUBSIDIARIES
QUARTERLY REPORT - FORM 10-QSB
THREE MONTHS ENDED OCTOBER 31, 2005
 
TABLE OF CONTENTS

Forward Looking Statements

          Certain statements contained in this quarterly report and other written material and oral statements made from time to time by us do not relate strictly to historical or current facts. As such, they are considered "forward-looking statements" that provide current expectations or forecasts of future events. Such statements are typically characterized by terminology such as "believe," "anticipate," "should," "intend," "plan," "will," "expect," "estimate," "project," "strategy" and similar expressions. Our forward-looking statements generally relate to the prospects for our ability to identify new business opportunities, develop new business strategies and execute such business strategies. These statements are based upon assumptions and assessments made by our management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors our management believes to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including the following: our ability to identify and evaluate business opportunities that will achieve profitable operations while maintaining sufficient cash to operate our business and meet our liquidity requirements: our ability to obtain financing, if required, on terms acceptable to us, if at all; our ability to successfully attract strategic partners and to market both new and existing products and services domestically and internationally; exposure to lawsuits and regulatory proceedings; governmental laws and regulations affecting domestic and foreign operations; our ability to identify and complete diversification opportunities; and the impact of acquisitions, divestitures, restructurings, product withdrawals and other unusual items. Except as required by applicable law, our company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CATHAY MERCHANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

    OCTOBER 31,     JULY 31,  
    2005     2005  
    (UNAUDITED)        
ASSETS            
Current Assets:            
 Cash and cash equivalents $  4,501   $  3,865  
 Restricted cash   65     66  
 Receivables   1,334     1,181  
 Due from affiliates   1,061     1,464  
 Inventories   8,546     8,621  
 Prepaid expenses and other   176     184  
 Deferred tax benefits   565     571  
     Total current assets   16,248     15,952  
Non-current Assets:            
 Deferred credit facility costs   278     298  
 Property, plant and equipment   1,094     991  
 Purchase option agreements   14,728     14,894  
 Goodwill   5,259     5,274  
 Deferred tax benefits   59     59  
       Total non-current assets   21,418     21,516  
       Total assets $  37,666   $  37,468  
             
LIABILITIES & STOCKHOLDERS' EQUITY            
Current Liabilities:            
 Accounts payable and accrued expenses $  14,126   $  14,161  
 Due to affiliates   2,163     1,302  
     Total current liabilities   16,289     15,463  
Long-term Liabilities:            
 Debt   10,387     10,503  
 Other liabilities   40     22  
       Total long-term liabilities   10,427     10,525  
Total liabilities   26,716     25,988  
Stockholders' Equity:            
 Common stock   2,029     2,029  
 Additional paid-in capital   28,008     28,008  
 Accumulated deficit   (13,656 )   (13,280 )
 Treasury stock, at cost   (5,313 )   (5,313 )
 Cumulative translation adjustment   (118 )   36  
     Total stockholders' equity   10,950     11,480  
       Total liabilities and stockholders' equity $  37,666   $  37,468  

See accompanying notes.

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CATHAY MERCHANT GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

    THREE MONTHS ENDED  
    OCTOBER 31,  
    2005     2004  
Product sales, net $  19,127   $  -  
Cost of goods sold   18,302     -  
    825     -  
General and administrative expenses   748     389  
Operating profit (loss)   77     (389 )
Other income (expense):            
   Interest and financing charges, net   (489 )   147  
   Miscellaneous   40     -  
    (449 )   147  
Loss before income tax   (372 )   (242 )
Income tax   4     -  
Net loss $  (376 ) $  (242 )
Net loss per common share, basic and diluted $  (0.02 ) $  (0.01 )

See accompanying notes.

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CATHAY MERCHANT GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(DOLLARS IN THOUSANDS)

    THREE MONTHS ENDED  
          OCTOBER 31,  
    2005     2004  
Net loss $  (376 ) $  (242 )
Other comprehensive loss, foreign currency translation adjustment   (154 )   -  
Comprehensive loss $  (530 ) $  (242 )

See accompanying notes

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CATHAY MERCHANT GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

    THREE MONTHS ENDED  
    OCTOBER 31,  
    2005     2004  
OPERATING ACTIVITIES:            
             
Net loss $  (376 ) $  (242 )
Adjustments to reconcile net loss to net cash            
   provided by operating activities:            
   Depreciation and amortization   73     20  
   Accrued interest on promissory note   94     -  
   Foreign exchange   (98 )   -  
   Changes in operating assets and liabilities:            
     Receivables   (169 )   -  
     Due from affiliates   393     -  
     Refundable income taxes   -     3,465  
     Inventories   (21 )   -  
     Prepaid expenses and other current assets   10     6  
     Accounts payable and other current liabilities   87     (25 )
     Due to affiliates   827     209  
       Net cash provided by operating activities   820     3,433  
             
INVESTING ACTIVITIES:            
Purchase of fixed assets   (167 )   (46 )
      Net cash used in investing activities   (167 )   (46 )
             
FINANCING ACTIVITIES:            
   Proceeds from exercise of stock options   -     6  
   Borrowing from a credit facility   -     1,575  
       Net cash provided by financing activities   -     1,581  
             
Effects of foreign exchange on cash and cash equivalents   (17 )   -  
Increase in cash and cash equivalents   636     4,968  
Cash and cash equivalents, beginning of period   3,865     9,897  
Cash and cash equivalents, end of period $  4,501   $  14,847  
             
SUPPLEMENTAL CASH FLOW INFORMATION:            
Income taxes paid $  4   $  --  
Interest expenses paid $  --   $  --  

See accompanying notes.

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CATHAY MERCHANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          The notes to these consolidated financial statements are presented in United States dollars, unless otherwise indicated. With the exception of per share amounts, amounts are presented in thousands.

Description of Business

          Cathay Merchant Group, Inc. is primarily an aluminium manufacturing and trading company.

          On June 30, 2005, the Company, acting through its wholly-owned subsidiary, Cathay Merchant Group Limited ("CMG") (a Samoan Corporation), acquired all of the shares of AWP Aluminium Walzprodukte GmbH ("AWP") and AFM Aluminiumfolie Merseburg GmbH ("AFM") for an aggregate purchase price of $18,500 (Euro 15,300). AWP and AFM are incorporated under the laws of Germany. The Company expects that AWP and AFM will serve as a trading platform for Chinese companies involved in the export of aluminium products.

          In addition, the Company, through its wholly-owned subsidiaries, CMG and Cathay Merchant Group (Shanghai) Wind Energy Co. Ltd., has investments in the development of two wind energy projects in the Hebei Province in China, the Twin Dragons Wind Farm and the Kanglong Wind Farm, neither of which has generated any revenues.

Basis of Presentation

          The unaudited interim period consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such SEC rules and regulations. The interim period consolidated financial statements should be read together with the audited consolidated financial statements and accompanying notes included in the Company's latest annual report on Form 10-KSB for the fiscal year ended July 31, 2005. In the opinion of the Company, the unaudited consolidated financial statements contained herein contain all adjustments (all adjustments are those of a normal, recurring nature) to present a fair statement of the results of the interim periods presented. The results for the periods presented herein may not be indicative of the results for any subsequent period or the entire year.

2. LOSS PER SHARE

          Basic loss per share is based upon the weighted average number of common shares outstanding during the period. Diluted loss per share reflects the effect of dilutive securities, if any, principally stock options and warrants. Dilutive securities were not included in the calculation of diluted weighted average shares for the three months ended October 31, 2005 and 2004, due to their anti-dilutive effect.

          The following table sets forth the computation of basic and diluted loss per share:

    THREE MONTHS ENDED  
    OCTOBER 31,  
    (Unaudited)  
    2005     2004  
Net loss $  (376 ) $  (242 )
Weighted-average shares   18,797     18,001  
Net loss per share, basic and diluted $  (0.02 ) $  (0.01 )

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3. BUSINESS SEGMENT INFORMATION

          During the three months ended October 31, 2005, the Company operated in one reportable business segment: manufacturing and trading of aluminium products, and all revenues were derived from Europe.

          The following tables disclose the Company's sales by product types for the three months ended October 31, 2005:

By product types   Amount  
       
Sheets $  1,900  
Strips   4,105  
Blanks   3,123  
Foils   9,911  
Other   88  
  $  19,127  

          As of October 31, 2005, there was no material change in total assets from July 31, 2005.

4. RELATED PARTIES TRANSACTIONS

          During the three months ended October 31, 2005, the Company had the following transactions with KHD Humboldt Wedag International Ltd. (collectively with its subsidiaries, "KHD"), which currently owns a 27.8% equity interest in the Company:

a) Deposited its cash and cash equivalents with a banking subsidiary of KHD. Interest income on the deposit was $2. Such deposit amounted to $3,000 as at October 31, 2005.

b) Paid an unused Credit Facility fee of $35.

c) Paid a management fee of $225.

d) Sold $14,814 of product and paid a net financing charge of $303.

5. SUBSEQUENT EVENT

          The Company’s board of directors approved a change in the Company’s fiscal year end from July 31 to December 31.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Overview

          Our primary business involves the manufacturing and trading of aluminium products.

          On June 30, 2005, we acquired all of the shares of AWP Aluminium Walzprodukte GmbH and AFM Aluminiumfolie Merseburg GmbH, for consideration of $18.5 million (Euro 15.3 million).

          We acquired all of the outstanding shares of AWP Aluminium Walzprodukte from a wholly-owned subsidiary of KHD Humboldt Wedag International Ltd. pursuant to a share purchase agreement dated June 30, 2005, for consideration of $10.0 million (Euro 8.3 million). AWP Aluminium Walzprodukte is based in Hettstedt, Germany, and operates an aluminium rolling mill through its wholly-owned subsidiary MAW Mansfelder Aluminiumwerke. Its products include aluminium sheets, foils, strips and blanks for use by industrial and commercial fabricators of aluminium products, principally for the European market.

          We acquired all of the outstanding shares of AFM Aluminiumfolie Merseburg, pursuant to a share purchase agreement dated June 30, 2005, for consideration of $8.5 million (Euro 7.0 million). AFM Aluminiumfolie Merseburg is based in Merseburg, Germany, and also operates an aluminium rolling mill. It produces aluminium foil for flexible (food and beverage) packaging, pharmaceutical packaging and technical applications. AFM Aluminiumfolie Merseburg's principal market is also Europe.

          Our other two investments involve the development of wind farms in the Hebei Province of the People's Republic of China.

          All of our revenues to date have been generated by our two aluminium rolling mills, which were acquired on June 30, 2005.

          The following discussion and analysis of the results of operations and financial condition of our company for the three months ended October 31, 2005 should be read in conjunction with the consolidated financial statements and related notes included in this quarterly report, as well as our company's most recent annual report on Form 10-KSB for the fiscal year ended July 31, 2005 filed with the United States Securities and Exchange Commission.

Results of Operations - Three Months Ended October 31, 2005

          Net product sales were $19.1 million for the three months ended October 31, 2005, compared to $nil in the same period in 2004. The product sales were from our two new subsidiaries which operate the aluminium mills.

          Cost of sales was $18.3 million for the three months ended October 31, 2005, compared to $nil in the same period in 2004. The increase was in line with the increase in sales.

          General and administrative expenses for the three months ended October 31, 2005 were $0.7 million, compared to $0.4 million for the same period in 2004. We paid $0.2 million for reimbursement of expenses and administrative and management fees to KHD Humboldt Wedag International and its subsidiaries for the three months ended October 31, 2005.

          We reported a net loss of $0.4 million, or $0.02 per common share for the three months ended October 31, 2005, compared to $0.2 million, or $0.01 per common share, in the same period in 2004.

Liquidity and Capital Resources

          At October 31, 2005, we had a working capital deficency of $41,000, compared to working capital of $0.5 million at July 31, 2005.

          We entered into a five-year $20 million revolving credit facility dated April 26, 2004 with MFC Merchant Bank S.A., a wholly-owned subsidiary of KHD Humboldt Wedag International, which is to mature in March 2009. In August 2004, MFC Merchant Bank converted $1,575,000 of the principal that we have drawn under the credit

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facility into 3,150,000 shares of our common stock at the exercise price of $0.50 per share. As of October 31, 2005, we have an unused portion of a credit facility of $18,425,000. We are required to pay interest on any outstanding principal amount that we have drawn down under the credit facility on the first banking day of each calendar month, at an annual rate of Libor (being the one month London Inter-Bank Offered Rate fixed daily by the British Bankers Association) plus 3.5%, based on a 360 day year. The credit facility is secured by a first fixed and specific charge and security interest on all of our property, assets and undertakings imposed under our promissory note in the aggregate principal amount of $20,000,000, and a floating charge on all of our company's other property, assets and undertakings not specifically mortgaged and charged under the promissory note, including after-acquired assets or the proceeds of any and all assets. Our obligations under the credit facility are also secured by a pledge agreement in the aggregate principal amount of $20,000,000, pursuant to which we have pledged to MFC Merchant Bank all or our existing and future pecuniary claims against third parties.

          As a result of our revenues from our aluminium rolling mills combined with the funds available for use under the MFC Merchant Bank credit facility, we believe that we have sufficient working capital to meet operating expenses during the next twelve months. Currently, we are also seeking investments in or acquisitions of companies, technologies or products. We may need additional capital if we pursue other opportunities that we may identify through such activities. Should the need arise, we will consider financing alternatives in addition to the possibility of further draws under our credit facility with MFC Merchant Bank, including the possibility of effecting private placements of our securities.

          There is no assurance that management will find suitable opportunities or effect the necessary financial arrangements for such investments or provide the working capital needed for the acquired activities.

Operating Activities

          Operating activities provided cash of $0.8 million for the three months ended October 31, 2005, compared to $3.4 million in the same period in 2004, primarily as a result of collection of refundable income taxes in 2004.

Investing Activities

          Investing activities used cash of $0.2 million for the the three months ended October 31, 2005, compared to $46,000 in the same period in 2004, primarily due to the purchase of fixed assets in 2005.

Financing Activities

          Financing activities provided cash of $nil for the three months ended October 31, 2005, compared to $1.6 million in the same period in 2004, primarily due to borrowing from a credit facility in 2004.

Off-Balance Sheet Arrangements

          The following table sets forth our best estimates for material long-term obligations as at July 31, 2005. Operating leases include commitments for office space, computers and office equipment. As of July 31, 2005, our principal business office is located in Shanghai, People's Republic of China. We occupy approximately 113-square-meters of leased office space, under an informal, month-to-month lease arrangement and payment under this arrangement is not included in the following table. We paid $19,000 during the fiscal year ended July 31, 2005, under this arrangement. The table excludes commitments such as open purchase orders under long-term agreements with customers and suppliers. We have no minimum purchase or supply arrangements in place. Our contractual obligations as of July 31, 2005 were:

    Payments Due by Period        
    (in $000's )            
Contractual         Less Than           4-5     After  
Obligations(1)   Total     One Year     2-3 Years     Years     5 Years  
Capital Lease Obligations $  91   $  64   $  22   $  5   $  -  
Operating Leases   3,266     550     1,123     1,078     515  
Purchase Obligations   67     67     -     -     -  
Total Contractual Obligations $  3,424   $  681   $  1,145   $  1,083   $  515  

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(1) There have been no material changes to the contractual obligations (summarized in the above table of contractual obligations at July 31, 2005) during the three months ended October 31, 2005 that are outside the ordinary course of our business.

ITEM 3. CONTROLS AND PROCEDURES.

          We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions' rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (who is also our Chief Financial Officer) to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

          As of October 31, 2005, the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (who is also our Chief Financial Officer) of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer (who is also our Chief Financial Officer) concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

          There have been no significant changes in our internal controls over financial reporting that occurred during our most recent quarter ended October 31, 2005 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

          As of December 5, 2005, we were not party to any pending legal proceedings and none of our directors, officers, affiliates or significant shareholders were party to any material legal proceedings which were adverse to us. In the ordinary course of conducting our business, we may become subject to litigation and claims regarding various matters.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

          None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

          None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

          None.

ITEM 5. OTHER INFORMATION.

          None.

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ITEM 6. EXHIBITS.

          The following documents are either incorporated by reference or filed herewith in accordance with Item 601 of Regulation SB.

Exhibit   Filed    
Number Exhibit Title Herewith Form Filing Date
         
(3)(i) Articles of Incorporation      
         
3.1.1     Certificate of Incorporation of Cathay Merchant Group, Inc., a Delaware corporation       S-1 April 13, 1981
         
3.1.2       Certificate of Amendment to Certificate of Incorporation of Cathay Merchant Group, Inc., a Delaware corporation         10-Q January 31, 1987
         
3.1.3       Certificate of Amendment to Certificate of Incorporation of Cathay Merchant Group, Inc., a Delaware corporation         10-K July 28, 1990
         
3.1.4       Certificate of Amendment to Certificate of Incorporation of Cathay Merchant Group, Inc., a Delaware corporation         10-KSB July 31, 1997
         
3.1.5       Certificate of Amendment to Certificate of Incorporation of Cathay Merchant Group, Inc., a Delaware corporation         8-K June 5, 1998
         
3.1.6         Certificate of Designations of Series A Convertible Preferred Stock of Cathay Merchant Group, Inc., a Delaware Corporation           8-K June 5, 1998
         
3.1.7         Certificate of Designations of Series B 5% Convertible Preferred Stock of Cathay Merchant Group, Inc., a Delaware Corporation           8-K February 9, 1999
         
3.1.8       Certificate of Amendment to Certificate of Incorporation of Cathay Merchant Group, Inc., a Delaware corporation         8-K January 10, 2000
         
3.1.9       Certificate of Amendment to Certificate of Incorporation of Cathay Merchant Group, Inc., a Delaware corporation         8-K October 7, 2004

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Exhibit   Filed    
Number Exhibit Title Herewith Form Filing Date
         
3(ii) By-laws      
         
3.2.1     Amended Bylaws of Cathay Merchant Group, Inc., a Delaware corporation       8-K May 17, 2000
         
(10) Material contracts      
         
10.1       Asset Purchase Agreement dated December 8, 2003, between Equidyne Systems, Inc. and HNS International Inc.         8-K December 19, 2003
         
10.2       Amendment Agreement dated December 12, 2003, between Equidyne Systems, Inc. and HNS International Inc.         8-K December 19, 2003
         
10.3       Patent Purchase Agreement dated December 8, 2003, between Equidyne Systems, Inc. and HNS International Inc.         8-K December 19, 2003
         
10.4       Stock Purchase Agreement dated April 26, 2004, between Cathay Merchant Group, Inc. and Raj Kumar.         8-K April 30, 2004
         
10.5         Credit Facility Agreement dated as of April 26, 2004, between Cathay Merchant Group, Inc. and MFC Merchant Bank S.A.           8-K April 30, 2004
         
10.6       Financial Advisory Agreement dated January 1, 2004, between Cathay Merchant Group, Inc. and MFC Merchant Bank S.A.         10-KSB October 29, 2004
         
10.7                 Memorandum of Understanding dated September 16, 2004, among MFC Bancorp Ltd., Weichang Manchu Mongolia Autonomous County Government of Hebei Province, Yudaokou County Government and Laowopu County Government.                   10-QSB December 15, 2004

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Exhibit   Filed    
Number Exhibit Title Herewith Form Filing Date
         
10.8                 Addendum of Memorandum of Understanding dated September 26, 2004, among MFC Bancorp Ltd., Weichang Manchu Mongolia Autonomous County Government of Hebei Province, Yudaokou County Government and Laowopu County Government.                   10-QSB December 15, 2004
         
10.11                 Memorandum of Understanding dated January 28, 2005, between Cathay Merchant Group (Shanghai) Wind Energy Co., Ltd. and Kangbao County Government of Hebei Province and Chuzhangdi Town Government.                   10-KSB October 31, 2005
         
10.12             Wind Park Project Land Use Rights Agreement dated February 23, 2005, between Cathay Merchant Group (Shanghai) Wind Energy Co., Ltd. and Kangbao County Government.               10-KSB October 31, 2005
         
10.13         Share Purchase Agreement dated June 30, 2005, between Cathay Merchant Group Limited and Blake International Limited.           8-K June 30, 2005
         
10.14       Promissory Note dated June 30, 2005, between Cathay Merchant Group Limited and Cathay Merchant Group, Inc.         8-K June 30, 2005
         
10.15         Share Purchase Agreement dated June 30, 2005, between Cathay Merchant Group Limited and Universal Metals Limited.           8-K June 30, 2005
         
10.16       Promissory Note dated June 30, 2005, between Cathay Merchant Group Limited and Cathay Merchant Group, Inc.         8-K June 30, 2005
         
(31) Section 302 Certification      
         
31.1   Chief Executive Officer and Chief Financial Officer X        
         
(32) Section 906 Certifications      

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Exhibit   Filed    
Number Exhibit Title Herewith Form Filing Date
         
32.1   Chief Executive Officer and Chief Financial Officer X          

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: December 15, 2005 CATHAY MERCHANT GROUP, INC.
     
     
    By: /s/ Michael J. Smith                                       
           Michael J. Smith
           Chairman of the Board of Directors,
           President, Chief Executive Officer,
           Chief Financial Officer and Secretary

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