UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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ü | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE |
| ACT OF 1934 |
For the quarterly period ended: September 30, 2008 | |
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| 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: 0-52282
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EastBridge Investment Group Corporation
(Exact name of registrant as specified in its charter)
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Arizona | 86-1032927 |
(State or other jurisdiction | (I.R.S. Employer |
of incorporation or organization) | Identification No.) |
8040 E. Morgan Trail, Unit 18, Scottsdale, Arizona 85258
(Address of Principal Executive Office) (Zip Code)
(480) 966-2020
(Registrant’s telephone number, including area code)
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Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value per share
(Title of Class)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the | ||||||||
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | ü | Yes |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. | ||||||||
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Large accelerated filer |
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Non-accelerated filer |
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| Smaller reporting company | ü |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | ||||||||
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Transitional Small Business Disclosure Format (check one): | Yes |
| No | ü | ||||
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. | ||||||||
Class |
| Outstanding at November 14, 2008 | ||||||
Common stock, No par value |
| 121,679,839 | ||||||
EastBridge Investment Group Corporation
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION Condensed Consolidated Balance Sheet Condensed Consolidated Statements Of Operations(Unaudited) Condensed Consolidated Statements Of Cash Flows (Unaudited) Notes To Condensed Consolidated Financial Statements Item 2. Management’s Discussion And Analysis Or Plan Of Operations Item 3 .Quantitative And Qualitative Disclosures About Market Risk Item 4. Controls And Procedures PART II - OTHER INFORMATION Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds Securities Item 3. Defaults Upon Senior Securities Item 4. Submission Of Matters To A Vote Of Security Holders CERTIFICATIONS Exhibit 31 – Management certification Exhibit 32 – Sarbanes-Oxley Act |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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2
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EASTBRIDGE INVESTMENT GROUP CORPORATION
(FORMERLY ATC TECHNOLOGY CORPORATION)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 and 2007
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – DESCRIPTION OF BUSINESS
Overview
EastBridge Investment Group Corporation (formally ATC Technology Corporation) (“EastBridge”, “we”, “us”, “our” or the “Company”) was incorporated in the state of Arizona on June 25, 2001. The Company’s principle activity up through June 30, 2005 was to manufacture mobile entertainment products that provide a means to play video game consoles made by Sony, Microsoft and Nintendo, in the car, RV, SUV, van or boat with attachable viewing monitors.
On August 23, 2002, we entered into an agreement with Providential Holding, Inc. (“Providential”) to sell all the issued and outstanding shares of EastBridge. For consideration, Providential agreed to deliver (i) $250,000 in non-interest bearing promissory notes, payable 270 days after closing, (ii) $250,000 in non-interest bearing promissory notes, payable 180 days after closing, (iii) 3,000,000 shares of restricted stock of EastBridge with an option of additional shares to be issued after 270 days if the stock price does not reach $0.30 and (iv) 1,000,000 shares of restricted stock of Providential with an option of additional shares to be issued after one year if the stock price does not reach $0.30. The transaction between the original stockholders and Providential was consummated as of October 17, 2003. On June 30, 2005 the Company and Providential, agreed to a financial and ownership restructuring and executed a formal agreement to return the majority ownership of EastBridge to its original stockholders in exchange for a forgiveness of notes and obligations owed to the Company and its original stockholders. The total amount of the debt forgiven was $1,932,617 and is recorded as paid-in capital by the majority original stockholders in the 2005 financial statement. As a result of the re-structuring, Providential has become a minority stock holder and the original stockholders of the Company have become the majority stockholders as a group.
In 2005, we decided to exit the mobile video game market and dedicate our activities to providing investment related services in Asia, with a strong focus on the high GDP growth countries, such as China and India. EastBridge will initially concentrate on the growing investment opportunities in China (Hong Kong, mainland China, Macao and Taiwan). Its products will be financial services that assist small to medium-size companies obtain capital to grow their business. Our financial services are expected to be in the form of joint ventures, wholly foreign owned enterprises, guaranteed return ventures, investment banking, financial advisory services or any other financial services allowed by the local government and in compliance with the United States Securities Exchange Commission regulations. In addition, EastBridge will also provide marketing, sales and strategic planning services for its clients to assist them to enter the United States market.
EastBridge is one of the very few United States companies solely concentrated in marketing financial services to the small to mid-size, but large number, of Asian companies that require financial services to assist them in expanding in their local markets. Usually, the first step is to help its clients become a public company in the US capital market. EastBridge currently has ten (10) clients that it intends to take public in the United States and list each company in a U.S. stock exchange beginning in 2009. All ten clients are located in Asia. EastBridge has also acquired two (2) Chinese companies via stock exchange agreements. All of these transaction are described in more detail in the Management Discussion and Analysis section.
In January, 2007, we formed Fiber One Limited (“Fiber One”) in Hong Kong as a wholly owned subsidiary of EastBridge to provide calibration and maintenance services to fiber optic companies in Asia, mainly in China and Japan. On June 11, 2007, we distributed 5.0% of Fiber One to our shareholders of record on June 11, 2007. Accordingly, the results of Fiber One have been consolidated with those of EastBridge’s from the date of formation of Fiber One. EastBridge has formed other subsidiaries since the formation of Fiber One – these are noted in the Management Discussion and Analysis section. For most of these subsidiaries, EastBridge intends to distribute part of its ownership to its shareholders in the form of dividend shares.
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NOTE 2. BASIS OF PRESENTATION
Interim Financial Statements
The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months period ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. For further information, refer to the financial statements and footnotes thereto included in our Form 10-KSB Report for the fiscal year ended December 31, 2007.
NOTE 3. GOING CONCERN
As indicated in the accompanying financial statements, the Company has incurred cumulative net operating losses of $3,451,898 since inception until the new acquisition. We place no assurance on the on going operations of our new subsidiaries. So far, most of the working capital has been provided by the Company's management team members. They have done so since EastBridge's inception and have indicated their continued support for EastBridge; however, there is no assurance that additional funds will be advanced. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 4 - CRITICAL ACCOUNTING POLICIES
Accounting Policies and Estimates
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.
As such, in accordance with the use of accounting principles generally accepted in the United States of America, our actual realized results may differ from management’s initial estimates as reported. A summary of significant accounting policies are detailed in notes to the financial statements which are an integral component of this filing.
Revenues
The Company has adopted the Securities and Exchange Commission’s Staff Accounting Bulletin SAB No. 104, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements.
Segment Reporting
Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure About Segments of an Enterprise and Related Information" requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. SFAS No. 131 has no effect on the Company's financial statements as substantially all of the Company's operations are conducted in one industry segment.
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Income Taxes
In assessing the realizability of deferred tax assets, management assesses the likelihood that deferred tax assets will be recovered from future taxable income, and to the extent that recovery is not likely a valuation allowance is established. We adjust the valuation allowance in the period management determines it is more likely than not that deferred tax assets will or will not be realized. To date, we have fully reserved for our deferred tax assets based primarily on our history of recurring losses.
RECENT PRONOUNCEMENTS
Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities
In June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) Issue No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” The FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. The FSP affects entities that accrue dividends on share-based payment awards during the awards’ service period when the dividends do not need to be returned if the employees forfeit the award. This FSP is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the impact of FSP EITF 03-6-1 on its consolidated financial position and results of operations.
Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an entity's Own Stock
In June 2008, the FASB ratified EITF Issue No. 07-5, "Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock" (EITF 07-5). EITF 07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument's contingent exercise and settlement provisions. It also clarifies on the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the impact of EITF 07-5 on its consolidated financial position and results of operations.
Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
In May 2008, the FASB issued FSP Accounting Principles Board (“APB”) Opinion No. 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).” The FSP clarifies the accounting for convertible debt instruments that may be settled in cash (including partial cash settlement) upon conversion. The FSP requires issuers to account separately for the liability and equity components of certain convertible debt instruments in a manner that reflects the issuer's nonconvertible debt (unsecured debt) borrowing rate when interest cost is recognized. The FSP requires bifurcation of a component of the debt, classification of that component in equity and the accretion of the resulting discount on the debt to be recognized as part of interest expense in our consolidated statement of operations. The FSP requires retrospective application to the terms of instruments as they existed for all periods presented. The FSP is effective for us as of January 1, 2009 and early adoption is not permitted. The Company is currently evaluating the potential impact of FSP APB 14-1 upon its consolidated financial statements.
The Hierarchy of Generally Accepted Accounting Principles
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" (FAS No.162). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles". The implementation of this standard will not have a material impact on the Company's consolidated financial position and results of operations.
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Determination of the Useful Life of Intangible Assets
In April 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position on Financial Accounting Standard (“FSP FAS”) No. 142-3, “Determination of the Useful Life of Intangible Assets”, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of intangible assets under SFAS No. 142 “Goodwill and Other Intangible Assets”. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of the expected cash flows used to measure the fair value of the asset under SFAS No. 141 (revised 2007) “Business Combinations” and other U.S. generally accepted accounting principles. The Company is currently evaluating the potential impact of FSP FAS No. 142-3 on its consolidated financial statements.
Disclosure about Derivative Instruments and Hedging Activities
In March 2008, the FASB issued SFAS No. 161, “Disclosure about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133”, (SFAS 161). This statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. The Company is required to adopt SFAS No. 161 on January 1, 2009. The Company is currently evaluating the potential impact of SFAS No. 161 on the Company’s consolidated financial statements.
Delay in Effective Date
In February 2008, the FASB issued FSP FAS No. 157-2, “Effective Date of FASB Statement No. 157”. This FSP delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The impact of adoption was not material to the Company’s consolidated financial condition or results of operations.
Business Combinations
In December 2007, the FASB issued SFAS No. 141(R) “Business Combinations” (SFAS 141(R)). This Statement replaces the original SFAS No. 141. This Statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. The objective of SFAS No. 141(R) is to improve the relevance, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, SFAS No. 141(R) establishes principles and requirements for how the acquirer:
a.
Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree.
b.
Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase.
c.
Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.
This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and may not be applied before that date. The Company is unable at this time to determine the effect that its adoption of SFAS No. 141(R) will have on its consolidated results of operations and financial condition.
Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51
In December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (SFAS No. 160). This Statement amends the original Accounting Review Board (ARB) No. 51 “Consolidated Financial Statements” to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as
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equity in the consolidated financial statements. This Statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008 and may not be applied before that date. The Company is unable at this time to determine the effect that its adoption of SFAS No. 160 will have on its consolidated results of operations and financial condition.
Fair Value Option for Financial Assets and Financial Liabilities
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of SFAS No. 115” (SFAS No. 159), which becomes effective for the Company on February 1, 2008, permits companies to choose to measure many financial instruments and certain other items at fair value and report unrealized gains and losses in earnings. Such accounting is optional and is generally to be applied instrument by instrument. The Company does not anticipate that the election, of this fair-value option will have a material effect on its consolidated financial condition, results of operations, cash flows or disclosures.
Fair Value Measurements
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS No. 157). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. SFAS No. 157 addresses the requests from investors for expanded disclosure about the extent to which companies’ measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and will be adopted by the Company in the first quarter of fiscal year 2008. The Company is unable at this time to determine the effect that its adoption of SFAS No. 157 will have on its consolidated results of operations and financial condition.
Accounting Changes and Error Corrections
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections" (SFAS No. 154), which replaces Accounting Principles Board (APB) Opinion No. 20, "Accounting Changes," and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements - An Amendment of APB Opinion No. 28”. SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections, and it establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company adopted SFAS No. 154 in the first quarter of fiscal year 2007 and does not expect it to have a material impact on its consolidated results of operations and financial condition.
NOTE 5 – RELATED PARTY TRANSACTIONS
Due to officers
We receive advances from officers of the Company amounting to $25,000, as of September 30, 2008. These advances are payable on demand.
Amonics and Man Wai Sing
During February 2007 (as amended August 2007), Fiber One entered into an employment agreement with Man Wai Sing, who is also the President of Amonics Limited (“Amonics”). The employment agreement calls for annual compensation of 38,800 Hong Kong dollars per year, for two years, payable in February of 2009. Revenues recognized in these financial statements reflect calibration services performed for Amonics by Fiber One. Additionally, during the second quarter of 2007, Amonics advanced Fiber One 2,000 Hong Kong dollars that is interest free and payable on demand. As of March 31, 2008 this employment agreement has been terminated.
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NOTE 6 – EQUITY
As of September 30, 2008, EastBridge had 121,679,839 shares of no par common stock issued and outstanding with 300,000,000 shares authorized. During March 31, 2008, 2,378,333 common shares were issued to consultants and officers for services rendered as well as payment of debt. The shares were valued between the values of $.07 - $.09 shares based on the market value of the common shares at the time the services were rendered, which approximates the value of the services rendered. These amounts were expensed. No shares were issued in the three months ended June 30, 2008.
During the three months ended September 30, 2008, EastBridge issued 7,000,000 common shares for payment of services rendered by its officers and issued 2,000,000 common shares as a bonus to its officers and directors valued for the amount of outstanding debt of $545,000 and $100,000 in bonus respectively. EastBridge issued 210,000 common shares to consultants valued at the trading price of our common stock during this quarter.
NOTE 7 – GAIN ON THE SETTLEMENT OF DEBT
During the March 31, 2008, the Company recorded a $20,878 gain on the settlement of debt. The gains are reflected in “other income” on the accompanying Statements of Operations.
NOTE 8 – SEGMENT INFORMATION
We have determined our operating and reporting segments pursuant to the requirements of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”). In making this determination, we considered our organization/reporting structure and the information used by our chief operating decision makers to make decisions about resource allocation and performance assessment. The segments also help focus strategic planning efforts on key objectives and initiatives across our businesses. Due to our integrated business structure, operating costs included in one segment may benefit other segments. Therefore, these segments are not designed to measure operating income or loss that is directly related to the products included in each segment. We operate in four segments – Financial Services, through EastBridge, and Electrical Cable Manufacturing through our 51% owned subsidiary, Aoxing Corporation, Pipe and Valve Supply Business through our 51% owned subsidiary Ji-Bo Pipes and Valves Co. and Calibration Services through our 95% owned subsidiary Fiber One Ltd. which is no longer an operating subsidiary as of March 31, 2008. Presented below are results for the nine months ended September 30, 2008:
Financial Services segment is a strategic business development of our company that has sought out new acquisitions and assists those companies in developing marketing strategies
Nine months Ended September 30 |
| 2008 |
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| 2007 |
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| Net Change |
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Revenue |
| $ | –– |
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| $ | 400,000 |
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| $ | 400,000 |
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Operating Loss |
| $ | (693,709 | ) |
| $ | (283,669 | ) |
| $ | (410,040 | ) |
Electrical Cable Manufacturing segment is a business segment that provides copper alloy electrical cables for domestic and international markets. The manufacturing facility is located in Jiangxi, China.
Nine months Ended September 30 |
| 2008 |
|
| 2007 |
|
| Net Change |
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Revenue |
| $ | 653,243 |
|
| $ | –– |
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| $ | 653,243 |
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Operating Income |
| $ | 116,247 |
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| $ | –– |
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| $ | 116,247 |
|
Pipe and Valve Supply segment is a business segment that provides copper piping to the plumbing business. It’s manufacturing facility is located in Zhejiang, China.
Nine months Ended September 30 |
| 2008 |
|
| 2007 |
|
| Net Change |
| |||
Revenue |
| $ | 258,014 |
|
| $ | –– |
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| $ | 258,014 |
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Operating Income |
| $ | 46,493 |
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| $ | –– |
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| $ | 46,493 |
|
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Calibration Services segment is a business segment that provides internet and fiber services in Hong Kong to a limited customer base.
Nine months Ended September 30 |
| 2008 |
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| 2007 |
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| Net Change |
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Revenue |
| $ | 17,275 |
|
| $ | 26,556 |
|
| $ | (9,281 | ) |
Operating Income |
| $ | 13,202 |
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| $ | 24,465 |
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| $ | (11,263 | ) |
During nine months ended September 30, 2008, we operated only in the financial services segment.
Corporate-Level Expenses
Nine months Ended September | 2008 |
| 2007 |
| Net Change |
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Corporate Level Income |
| $ | 3,627 |
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| $ | 24,323 |
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| $ | (20,696 | ) |
Certain corporate-level expenses are not allocated to our segments. Those expenses primarily include corporate operations related to broad-based sales and marketing, product support services, human resources, legal, finance, information technology, corporate development and procurement activities, research and development and other costs, settlement of debt, and stock and warrants issued for compensation.
NOTE 8 – INCOME TAXES
We recognize a provision for foreign taxes on our income from Fiber One, Ji-Bo Pipes and Valves Co., and Aoxing Corporation, however, due to the lack of taxable income relative to our U.S. operations and history of recurring losses, we have provided a valuation allowance for our net operating loss carry-forwards generated in the U.S.
NOTE 9 – LINE OF CREDIT
The Company executed a note with a Line of Credit with Goldwater Bank in Scottsdale, Arizona. The Line of Credit allows the Company to borrow up to one hundred thousand dollars ($100,000) at a 7% interest rate. The current balance of this Line of Credit is ninety eight thousand, 300 hundred dollars ($98,300).
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ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Management’s Discussion and Analysis contains various “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company’s business, including but not limited to, reliance on key customers and competition in its markets, market demand, product performance, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. The Company adopted at management’s discretion, the most conservative recognition of revenue based on the most astringent guidelines of the SEC in terms of recognition of software licenses and recurring revenue. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.
Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.
In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements.
Overview
We provide financial services including public offering guidance, joint venture, and merchant banking services, to the small to medium-size businesses in China, India and other Asian countries. Normally, our first step is to help our clients become US public companies. Our target clients are mostly in China, Hong Kong, and Australia. We focus on short-term investment opportunities where the expected return is within a one to two year period and the potential gain is substantial for both parties. We generally seek transactions where we can assist in uncovering hidden value after our participation. Keith Wong (President and Chief Executive Officer of EastBridge) and Norman Klein (Chief Financial Officer of EastBridge) each have over twenty years of experience in the industrial, sales and financial industries. Our management can understand our prospective client's business quickly and are able to take fast and decisive actions to achieve business opportunities for our client. We plan China, Australia and Hong Kong to be our immediate focus and become our revenue centers in 2008. We plan to expand to other Asian countries in 2009.
A new strategy has emerged during this past quarter. We plan to acquire several companies and own a minimum 51% stake in each company. Each of these acquisitions will be a subsidiary of our company. We intend to eventually take each of these companies public in the United States. In short term, we are able to provide the necessary capital for these companies to expand their business. We acquired our first two companies in September, 2008 – these are noted below.
Acquisitions – Pipe and Valve Supply Business and Electrical Cable Manufacturing Business:
On September 21, 2008, we entered into a stock purchase agreement and acquired a controlling interest in Ji-Bo Pipes & Valves Company in Zhejiang, China. As a condition to this stock purchase agreement, we have agreed to issue 1,000,000 shares of our Series B-preferred stock in exchange for 51% controlling interest in Ji-Bo. Ji-Bo is a well known supplier of copper parts to the plumbing industry and has been in business for over five years.
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Ji-Bo: manufacturer of fittings, faucets, garden hardware for the plumbing and home garden industries. Its major customers are the local distributors and exporters. Its products are also shipped to the US hardware stores such as Home Depot and Lowe's.
Ji-Bo: 2008 Revenue and Net Income are estimated, but cannot be guaranteed, to be $15,909,915 and $1,351,624 respectively; the 2007 Revenue and Net Income were $6,816,567 and $721,940 respectively.
In addition, we entered into a stock purchase agreement to acquire controlling interest in Aoxing Corporation, a manufacturer of electrical cables in Jiangxi, China. We agreed to issue 1,000,000 shares of our Series A-preferred stock in exchange for 51% controlling interest in Aoxing.
Aoxing makes copper alloy electrical cables for the domestic and international markets and it has been in business for over seven years.
Aoxing: a manufacturer of electrical cables and wires. Their main market is local in China. They make low to medium voltage power cables for the building trade and the power companies. Their cables are most copper and aluminum alloy.
Aoxing: 2008 Revenue and Net Income are estimated, but cannot be guaranteed, to be $37,122,520 and $3,200,712 respectively; the 2007 Revenue and Net Income were $15,905,522 and $1,684,776 respectively.
Financial Services Business:
We currently have ten (10) clients that we are assisting with the process to register them with the Securities and Exchange Commission as public reporting companies in the United States and help them to begin trading their stock on a United States stock exchange. Management anticipates, but can [provide no assurances, that several of these clients will go public in the United States and begin trading their stock in 2009. We have currently has formed several subsidiaries. We expect most of our clients to merge with one of our subsidiaries in the near future. After the mergers are completed, then our management will begin providing the active services to commence the process to take these companies public and to begin trading their stock on a U.S. stock exchange. EastBridge may also choose to take some of the clients’ public directly without merging them with a subsidiary. Below is a summary of our clients. Management expects, but cannot guarantee, that our financials should also improve significantly in 2009 once our clients complete registration process with the Securities and Exchange Commission as public reporting companies. Once a client is registered as a public company and its stock begins trading in a U.S. stock market, then we will record the value of its stock in that client as revenue for that quarter and also record the value as an asset on its balance sheet. We typically receive a 10 to 30% equity position in a client as consideration for our services.
Tianjin Heavy Steel
On December 3, 2006, we entered into a listing agreement with Tianjin Hui Hong Heavy Steel Construction Co., Ltd ("Tianjin"), a company registered in China. Under the agreement, we agreed to assist Tianjin to become listed as a reporting company in the United States within eighteen months from the execution date of the contract. We agreed to pay for certain legal, auditing, IR/PR, and advisory costs in conjunction with the listing process. Tianjin issued 15% of its outstanding common stock to us as consideration for its services on the date of execution of the contract. The shares are restricted stock. If the client does not become a reporting company within the contract term, then we have agreed to sell all the shares to the client for a nominal cost, unless the parties mutually agree to an extension. The listing work has been postponed by Client for their internal re-organization.
Ning Guo
On January 6, 2007, we entered into a listing agreement with Ning Guo Shunchang Machinery Co., Ltd. ("Ning Guo"), a company registered in China. Under the agreement, we agreed to assist Ning Guo to become listed as a reporting company in the United States. We agreed to pay for certain legal, auditing, IR/PR, and advisory costs in conjunction with the listing process. Ning Guo issued 20% of their company’s common stock to the Company as consideration for its services on the date of execution of the contract. The shares are restricted stock. If the client
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does not become a reporting company within the contract term, then we have agreed to sell all the shares to the client for a nominal cost, unless the parties mutually agree to an extension.
GinKo
On July 24, 2007, we entered into a listing agreement with Hefe GinKo Real Estate Company, Ltd. (“GinKo”), a company registered in Anhui, China. Under the agreement, we agreed to assist GinKo to become listed as a reporting company in the United States. We agreed to pay for certain legal, auditing, IR/PR, and advisory costs in conjunction with the listing process. GinKo issued 18% of their company’s common stock to us as consideration for its services on the date of execution of the contract. The shares are restricted stock. If the client does not become a reporting company within the contract term, then we have agreed to sell all the shares to the client for a nominal cost, unless the parties mutually agree to an extension.
AREM Pacific Corporation (Formerly known as Nanotec, Inc. – EastBridge Subsidiary)
During July 2007, we organized Nanotec, Inc., (“Nanotec”) a wholly owned subsidiary of our company, to provide electronic and chemical products and services to companies in Asia, especially those in China and Japan. On July 11, 2007 we distributed 5% of Nanotec to our shareholders of record on that date. As of November 8, 2007, Arem Wines merged with Nanotec, Inc. Under the terms of the merger, the new stock ownership structure is as follows: 15% owned by EastBridge, 5% owned by EastBridge shareholders, and 80% owned by Arem Wines’ beneficiaries. The name of the merged company was Arem Group, Inc.
During September, 2007, we signed a definitive agreement to acquire 15% of AREM Wines Pty, Ltd, (“Arem”) an Australian wine company in Melbourne, Australia. Under the terms of the agreement, we gave Arem Pacific Corporation, the investment company that owns AREM Wines Pty, Ltd., 8,000,000 of our restricted common shares, plus options to purchase our common shares, in exchange for the 15% equity position in AREM. In subsequent events, we issued only 2,000,000 of the restricted shares as part of 8,000,000 shares to be issued in accordance with the agreement. The September, 2007 agreement replaces all other stock exchange agreements between us and Arem. In addition to the restricted stock agreement, our company and Arem signed a second agreement. We will assist Arem to become listed on a U.S. stock exchange. We will be paid $700,000 in cash, of which $400,000 was due at signing and $100,000 will be paid when the proper application is filed with the Securities and Exchange Commission and the remaining $200,000 following the listing and trading of AREM’s stock on a U.S. stock exchange. Arem will also issued 5% of its stock to our stockholders.
As of September, 2008, the Arem Wines Pty, Ltd company is Australia has been dissolved. A new company called, Arem Pacific Corporation was formed with a new set of directors and officers along with a new ownership structure. The U.S. subsidiary’s name was also changed to Arem Pacific Corporation. We continue to own 15% of this subsidiary and our shareholders continue to own 5% of this new entity. We will take Arem Pacific Corporation public in the near future once all cash payments have been received.
General Farms Corporation (EastBridge Subsidiary)
On November 27, 2007, we organized General Farms Corporation (“General Farms”) a wholly owned subsidiary of our company. A stock dividend of 5% of General Farm's common stock, or 10,000,000 shares, will be distributed to our shareholders of record as of Nov 16, 2007. Under the terms of the share exchange agreement, the new stock ownership structure is: 85% owned by our company and 5% owned by our shareholders of record as of Nov 16, 2007. On of December 5, 2007, Rhino Two Horns merged with General Farms Corporation. However, during this quarter, Rhino Two Horns terminated their contract with us which dissolves the merger.
Energy Corporation (EastBridge Subsidiary)
On November 27, 2007, we organized Energy Corporation (“Energy”) a wholly owned subsidiary of our company. A stock dividend of 5% of Energy Corporation’s common stock of 10 million shares, on a pro-rata basis and with no considerations will be distributed to our shareholders of record on December 28, 2007. The Company has not distributed the stock dividend as of September 30, 2008. Energy Corporation, a wholly owned subsidiary of our company, focuses on energy equipment manufacturers and the energy distribution business in Asia. Energy Corporation is presently an inactive subsidiary.
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China Properties Corporation (EastBridge Subsidiary)
On November 27, 2007, we organized China Properties Corporation (“China Properties”) a wholly owned subsidiary of our company. A stock dividend of 5% of China Properties’ common stock of 10,000,000 shares, on a pro-rata basis and without considerations to its shareholders of record on Friday, November 30, 2007. China Properties Corporation, a wholly owned subsidiary of our company, focuses on real estate development and construction business in Asia. The eligible shareholders will automatically receive the stock certificates or electronic deposits into their accounts when the China Properties' stock is listed and begins trading. China Properties is presently an inactive subsidiary.
Beijing Power Plant Equipment Company
We have entered into an agreement to provide listing services to ZZH, a major coal fired ignition equipment manufacturer for electricity power plants. ZZH will be listed on the U.S. stock market as soon as practicable. ZZH sells energy saving ignition equipment to control coal consumption in power plants and has been granted several critical patents for its core technology. ZZH currently provides equipment to save fuel and lower pollution to numerous major Chinese power plants, including the one providing power to Beijing-Da Tang Electricity Company. Coal is the main source of electricity generation in China and a major source in the U.S. We will receive restricted stock of ZZH as consideration for our services.
Wenda Professional College
We have entered into an agreement to provide listing services to Wenda, a major regional professional college located just west of Shanghai, China. Wenda offers professional and vocational educational programs to train post high school students to improve their skills for higher paying jobs. Wenda offers programs mainly in the computer related IT sectors such as network design, hardware technology, computer graphics, CAD, animation, network database and network security. We will receive restricted stock in Wenda as consideration for its services.
We formed a U.S. subsidiary for Wenda. It is called Wonder International Education and Investment Group Corporation. Wenda has merged with this subsidiary as of this filing.
Huang Wei Pharmaceutical Company
We have entered into an agreement to provide listing services to Huang Wei, a well know Chinese pharmaceutical company located approximately two hours from Beijing, China. We intend to assist in the listing process for Huang Wei in a United States stock market. Huang Wei has recently added over thirty drug approvals from the Chinese FDA. Its products range from the special anti-inflammatory to blood pressure-lowering drugs. We will receive restricted stock of Huang Wei as consideration for its services.
We formed a U.S. subsidiary for Huang Wei. It is called Huang Wei Pharmacy Group Holdings Limited. Huang Wei has merged with this subsidiary as of this filing.
YEWO Group Corporation
We have entered into and agreement to provide listing services to YEWO Group Corporation, Zhejiang, China. YEWO Group is a property development and management company that operates shopping centers in China and is expanding their business rapidly. YEWO Group is developing a new mega resort property in Jiangsu province. We will assist YEWO Group in completing the necessary audit and legal requirements. YEWO Group is a stable and profitable company that has been in business for approximately ten years.
We formed a U.S. subsidiary for Yewo. It is called, Sunyi International Group Corporation. Yewo has merged into this subsidiary.
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HaoHai Media Company
We signed a definitive listing agreement with HaoHai Media Company (HH Media), in Hangzhou, China, to take it public in the United States and assist HH Media list on a U.S. stock exchange. HH Media is a well known TV media company selling advertisement time to the pharmaceutical companies in China. Its main clients are the major drug companies in China, and it owns exclusive rights in the major hospitals of China. HH Media broadcasts direct medicinal ads to the hospital's patients while they are attending the hospitals. HH Media also hosts TV medicine info-commercials to market its client's drug products. In China, most people go to the hospitals directly when they are sick versus using private Physicians. HH Media has received a special media license from the government to produce and market TV time for medicinal products in China.
Jinkuizi Science & Technology Company
We entered into a definitive listing agreement with Jinkuizi Science & Technology Co. ("JKZ"), in Foshan, China, to take its main operating subsidiary public in the United States. We will provide listing services to JKZ, a company started more than ten years ago, that is profitable and specializes in developing and selling environmentally safe fertilizers in China and Southeast Asia. Its main clients are the farmers and co-ops in Asia. JKZ owns more than ten patents in agricultural chemical compounds for promoting crop yields and de-composing bio-mass. JKZ is considered one of the leading suppliers of green fertilizers in China.
Calibration Services Business Segment:
Fiber One, Ltd. (An EastBridge Subsidiary)
During July 2007, we organized Fiber One, Ltd. a Hong Kong based subsidiary of our company. Fiber One is wholly owned by our company. Fiber One provides calibration services to the fiber optics industry in China and other Far East countries.
RESULTS OF OPERATIONS
Revenue – Related Party
Related party revenue was $1,030,444 and $408,779 for the three months ended September 30, 2008 and 2007 respectively as compared to $1,047,719 and $426,556 for the nine months ended September 30, 2007. Revenues recognized in the three and nine months ended September 30, 2008 in these financial statements reflect calibration services performed by Fiber One; pipe and valve manufacturing performed by Ji-Bo Pipes and Values Co, and electrical cable manufacturing performed by Aoxing Corporation. The Revenues recognized in the three and nine months ended September 30, 2007 in these financial statements reflect calibration services for Amonics by Fiber One and consulting agreement with Arem Wines
General and Administrative
General and Administrative was $307,029 and $162,628 for the three months ended September 30, 2008 and 2007, respectively as compared to $682,865 and $541,010 for the nine months ended September 30, 2008 and 2007, respectively. The increase in general and administrative expenses for the periods in 2008 compared to 2007 relates to the reduction in consulting and legal services. Many of the expenses in 2007 were related to the required SEC filings. Most of our current expenses focus on finding new clients for our company. We are beginning to incur expenses to take our clients public in the United States and begin trading on a US stock exchange. Both activities will help to improve the financials of the company.
Sales and Marketing Services
Sales and Marketing was $26,060 and $129,956 for the three months ended September 30, 2008 and 2007, respectively as compared to $71,901 and $144,750 for the nine months ended September 30, 2008 and 2007, respectively. The decrease in sales and marketing services for the periods in 2008 compared to 2007 relates to decreased costs marketing our services and also the decrease cost of hiring investor relations firms, marketing firms, and stock related services.
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LIQUIDITY AND CAPITAL RESOURCES
We have cash and cash equivalents of $1,031,716 and $59,162 compared to working capital of $2,508,351 and deficit of $221,082 as of September 30, 2008 and December 31, 2007, respectively.
We have operating activities provided by (used in) $927,973 and ($39,587) for the nine months ended September 30, 2008 and 2007, respectively. The difference is mainly attributable to the increase in revenues in the current year and increase in operating expenses of the Company.
Cash provided by financing activities was $44,581 and $27,059 for the nine months ended September 30, 2008 and 2007, respectively. The increase is due to repayment of advances from officers and cash received from our line of credit.
Our operations are currently financed through various loans from senior management and principal shareholders as it has been the case for the past several years. We also have a line or credit that we can borrow against and are seeking to increase the amount of our line of credit. However, there are no assurances that management will continue to fund the company. Management is in the process of taking action to strengthen our working capital position and generate sufficient cash to meet our operating needs. In addition, we also anticipate generating revenue through our proposed financial services that we provide to our clients and the newly acquired companies which we own at least a 51% stake. No assurances can be made that management will be successful in achieving its plan, or that additional capital will be available on a timely basis or at acceptable terms.
We file reports and other materials with the Securities and Exchange Commission. These documents may be inspected and copied at the Commission’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549. You can obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. You can also get copies of documents that the Company files with the Commission through the Commission’s Internet site at www.sec.gov.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not hold any derivative instruments and do not engage in any hedging activities. Most of our activity is providing listing and financial services to companies in Asia and Taiwan. At present, the Company is providing these services to nine companies.
ITEM 4.
CONTROLS AND PROCEDURES
a) Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Our Chief Executive Officer and Chief Financial Officer is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the Company's operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.
Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company's internal control over financial reporting as of September 30, 2008. In making this assessment, our Chief Executive Officer and Chief Financial Officer used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control -- Integrated Framework. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer, concluded that, as of September 30, 2008, our internal control over financial reporting was effective.
b) Changes in Internal Control over Financial Reporting.
During the Quarter ended September 30, 2008, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
LACK OF INDEPENDENT BOARD OF DIRECTORS AND AUDIT COMMITTEE
Management is aware that an audit committee composed of the requisite number of independent members along with a qualified financial expert has not yet been established. Considering the costs associated with procuring and providing the infrastructure to support an independent audit committee and the limited number of transactions, Management has concluded that the risks associated with the lack of an independent audit committee are not justified. Management will periodically reevaluate this situation.
LACK OF SEGREGATION OF DUTIES
Management is aware that there is a lack of segregation of duties at the Company due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management will periodically reevaluate this situation
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PART II – OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
Our company nor any of its officers or directors is a party to any material legal proceeding or litigation and such persons know of no material legal proceeding or litigation contemplated or threatened. There are no judgments against the Company or its officers or directors. None of the officers or directors has been convicted of a felony or misdemeanor relating to securities or performance in corporate office.
ITEM 1A.
We have updated the risk factors previously disclosed in Part I, Item 1A of our Amended Form 10–SB, which was filed with the Securities and Exchange Commission on February 27, 2007.
You should carefully consider the following risk factors before making an investment decision. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In such cases, the trading price of our common stock could decline and you may lose all or a part of your investment.
I. Risk Factors That May Affect Our Results of Operations and Financial Condition
Our Common Stock Is Subject To Penny Stock Regulation
Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Since our shares are deemed to be "penny stock", trading in the shares will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited investors.
The Liquidity Of Our Common Stock Is Seriously Limited And There Is A Limited Market For Our Common Stock
Our stock is currently being traded on the NASDAQ Over-The-Counter Bulletin Board, and the liquidity of our common stock is limited. The Bulletin Board is a limited market and subject to substantial restrictions and limitations in comparison to the NASDAQ system. Any broker/dealer that makes a market in our stock or other person that buys or sells our stock could have a significant influence over its price at any given time.
II. Risks Associated with Our Current Stage of Business
Management May Not Run the Company in a Profitable Manner and If It Does Not You May Lose Your Entire Investment:
Two members of our executive management team founded the company and it is presently not profitable.
We May Not Have Access to Sufficient Capital to Pursue Further Development of the BioAuthorize Business and Technology and Therefore Would Be Unable to Achieve Our Planned Future Growth:
We intend to pursue a growth strategy that includes development of the EastBridge business. Currently we have limited capital which is insufficient to pursue our plans for development and growth. Our ability to implement our growth plans will depend primarily on our ability to obtain additional private or public equity or debt financing. We are currently seeking additional capital. Such financing may not be available at all, or we may be unable to
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locate and secure additional capital on terms and conditions that are acceptable to us. Our failure to obtain additional capital will have a material adverse effect on our business.
Our Lack of Diversification In Our Business Subjects Investors to a Greater Risk of Losses:
Since the effective stage of EastBridge, all of our efforts are focused on the development and growth of that business in an unproven area. Although the patent litigation is substantial, we can make no assurances that the marketplace will accept the corporate financial services.
III. Risks Associated with the Peoples republic of China (“PRC”)
There could be changes in the policies of the PRC government that may adversely affect our business.
Industry and services in the PRC is subject to policies implemented by the PRC government. The PRC government may, for instance, impose control over aspects of our business such as distribution of raw materials, product pricing, services, education, and sales. On the other hand, the PRC government may also make available subsidies or preferential treatment, which could be in the form of tax benefits or favorable financing arrangements.
Separately, our business and operating results also could be adversely affected by changes in policies of the Chinese government such as: changes in laws, regulations or the interpretation thereof; confiscatory taxation; restrictions on currency conversion, imports on sources of supplies; or the expropriation or nationalization of private enterprises. Although the Chinese government has been pursuing economic reform policies for approximately two decades to liberalize the economy and introduce free market aspects, there is no assurance that the government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting China’s political, economic and social life.
Certain political and economic considerations relating to PRC could adversely affect our company.
The PRC is passing from a planned economy to a market economy. The Chinese government has confirmed that economic development will follow a model of market economy under socialism. While the PRC government has pursued economic reforms since its adoption of the open-door policy in 1978, a large portion of the PRC economy is still operating under five-year plans and annual state plans adopted by the government that set down national economic development goals. Through these plans and other economic measures, such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic market of various industries, the PRC government exerts considerable direct and indirect influence on the economy. Many of the economic reforms are unprecedented or experimental for the PRC government, and are expected to be refined and improved. Other political, economic and social factors can also lead to further readjustment of such reforms. This refining and readjustment process may not necessarily have a positive effect on our operations or future business development. Our operating results may be adversely affected by changes in the PRC’s economic and social conditions as well as by changes in the policies of the PRC government, which we may not be able to foresee, such as changes in laws and regulations (or the official interpretation thereof), measures which may be introduced to control inflation, changes in the rate or method of taxation, and imposition of additional restrictions on currency conversion.
The recent nature and uncertain application of many PRC laws applicable to us create an uncertain environment for business operations and they could have a negative effect on us.
The PRC legal system is a civil law system. Unlike the common law system, such as the legal system used in the United States, the civil law system is based on written statutes in which decided legal cases have little value as precedents. In 1979, the PRC began to promulgate a comprehensive system of laws and has since introduced many laws and regulations to provide general guidance on economic and business practices in the PRC and to regulate foreign investment. Progress has been made in the promulgation of laws and regulations dealing with economic matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. The promulgation of new laws, changes of existing laws and the abrogation of local regulations by national laws could have a negative impact on our business and business prospects. In addition, as these laws, regulations and legal requirements are relatively recent, their interpretation and enforcement involve significant uncertainty.
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If relations between the United States and China worsen, our stock price may decrease and we may have difficulty accessing the U.S. capital markets.
At various times during recent years, the United States and China have had disagreements over political and economic issues. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China could adversely affect the market price of our common stock and our ability to access U.S. capital markets.
Governmental control of currency conversion may affect the value of your investment.
The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of the PRC. Currently, the Renminbi is not a freely convertible currency. Shortages in the availability of foreign currency may restrict our ability to remit sufficient foreign currency to satisfy foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from the transaction, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate governmental authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans and corporate debt obligations denominated in foreign currencies.
The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay certain of our expenses as they come due.
The fluctuation of the Renminbi may materially and adversely affect your investment.
The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of the Renminbi may materially and adversely affect our cash flows, revenues and financial condition.
Since 1994 the PRC has pegged the value of the Renminbi to the U.S. dollar. We do not believe that this policy has had a material effect on our business. There can be no assurance that Renminbi will not be subject to devaluation. We may not be able to hedge effectively against Renminbi devaluation, so there can be no assurance that future movements in the exchange rate of Renminbi and other currencies will not have an adverse effect on our financial condition.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES
There were no changes in securities and small business issuer purchase of equity securities during the period ended March 31, 2008 other than the issuance of 2,378,500 common shares to consultants. We have sold or issued the following securities not registered under the Securities Act by reason of the exemption afforded under Section 4(2) of the Securities Act of 1933, within the last quarter. Except as stated below, no underwriting discounts or commissions were paid with respect to any of the following transactions. The offer and sale of the following securities was exempt from the registration requirements of the Securities Act under Rule 506 insofar as (1) except as stated below, each of the investors was accredited within the meaning of Rule 501(a); (2) the transfer of the securities were restricted by the company in accordance with Rule 502(d); (3) there were no more than 35 non-accredited investors in any transaction within the meaning of Rule 506(b), after taking into consideration all prior investors under Section 4(2) of the Securities Act within the twelve months preceding the transaction; and (4) none of the offers and sales were effected through any general solicitation or general advertising within the meaning of Rule 502(c).
During the three months ended September 30, 2008, EastBridge issued 7,000,000 common shares for payment of deferred salaries and issued 2,000,000 common shares as a bonus to its officer and directors valued for the amount of outstanding debt of 545,000 and 100,000 in bonus respectively. EastBridge issued 210,000 common shares to consultants valued at the trading price of our common stock. We have sold or issued the following securities not registered under the Securities Act by reason of the exemption afforded under Section 4(2) of the
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Securities Act of 1933, within the last quarter. Except as stated below, no underwriting discounts or commissions were paid with respect to any of the following transactions. The offer and sale of the following securities was exempt from the registration requirements of the Securities Act under Rule 506 insofar as (1) except as stated below, each of the investors was accredited within the meaning of Rule 501(a); (2) the transfer of the securities were restricted by the company in accordance with Rule 502(d); (3) there were no more than 35 non-accredited investors in any transaction within the meaning of Rule 506(b), after taking into consideration all prior investors under Section 4(2) of the Securities Act within the twelve months preceding the transaction; and (4) none of the offers and sales were effected through any general solicitation or general advertising within the meaning of Rule 502(c).
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the period ended September 30, 2008.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the vote of securities holders during the period ended September 30, 2008.
ITEM 5.
OTHER INFORMATION
None
ITEM 6.
EXHIBITS
| Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act | |
| Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. | |
| Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| By: | /s/ Keith Wong |
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| Keith Wong Chief Executive Officer |
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| By: | /s/ Norman Klein |
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| Norman Klein Chief Financial Officer |
Date: November 14, 2008
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