UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2004
OR
[ ] 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 000-33119
YI WAN GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 33-0960062
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 E. 52 Street, 9th Floor, New York, New York 10022
(Address of principal executive offices) (Zip Code)
(212) 752-9700
(Registrant's telephone number, including area code)
2 East Camino Real, Suite 202, Boca Raton, Florida 33432
(Former Address)
All Correspondence to:
Kevin K. Leung, Esq.
Richardson & Patel, LLP
10900 Wilshire Blvd. Suite 500
Los Angeles, CA 90024
(310) 208-1182
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [X]
The number of shares outstanding of the issuer's common stock as of November 11,
2004 was 16,831,250.
YI WAN GROUP, INC.
TABLE OF CONTENTS
Page
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures about Market Risks 21
Item 4. Controls and Procedures 22
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 2. Changes in Securities, Use of Proceeds
and Issuer Purchases of Equity Securities 23
Item 3. Defaults upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 25
2
PART I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
YI WAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
ASSETS
September 30, December 31,
2004 2003
------------- ------------
(Unaudited) (Audited)
------------- ------------
CURRENT ASSETS:
Cash $ 4,768,241 $ 3,365,842
Accounts receivable, net of
allowance for doubtful accounts
of $6,455 at September 30, 2004
and December 31, 2003 1,405,008 1,612,710
Due from related parties 3,387,613 3,599,133
Inventories 436,675 513,432
Prepaid expenses 337,112 55,308
------------- ------------
Total current assets 10,334,649 9,146,425
------------- ------------
BUILDINGS, EQUIPMENT AND AUTOMOBILES, net 17,232,317 18,002,661
------------- ------------
OTHER ASSETS:
Intangible asset, net 1,553,153 1,590,561
Equipment held for sale 520,482 529,750
Deferred tax asset 31,718 31,718
Other non-current assets 879,255 369,075
------------- ------------
Total other assets 2,984,608 2,521,104
------------- ------------
Total assets $ 30,551,574 $ 29,670,190
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 271,074 $ 327,862
Accounts payable - related party -- 56,540
Accrued liabilities 1,033,967 733,261
Wages and benefits payable 169,909 301,815
Sales tax payable 898,019 873,208
Income taxes payable 654,901 1,049,331
Due to shareholder -- 89,044
Due to prior owners of joint ventures 4,932,273 4,932,273
Other payable - related party 53,757 64,809
------------- ------------
Total current liabilities 8,013,900 8,428,143
------------- ------------
MINORITY INTEREST 1,997,554 1,843,198
------------- ------------
SHAREHOLDERS' EQUITY:
Common stock, no par value, authorized
50,000,000 shares, 16,831,250 and
16,506,250 shares issued and
outstanding, respectively 432,578 10,078
Paid-in-capital 5,131,495 5,115,222
Statutory reserves 10,655,821 10,655,821
Retained earnings 4,184,098 3,480,712
Accumulated other comprehensive income 136,128 137,016
------------- ------------
Total shareholders' equity 20,540,120 19,398,849
------------- ------------
Total liabilities and shareholders'
equity $ 30,551,574 $ 29,670,190
============= ============
The accompanying notes are an integral part of these financial statements.
3
YI WAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
Three months ended Nine months ended
September 30, September 30,
--------------------------- ---------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------ ------------ ------------
NET SALES $ 2,951,623 $ 3,502,345 $ 8,751,829 $ 9,628,827
COST OF SALES 1,210,871 1,334,116 3,419,070 3,639,830
------------ ------------ ------------ ------------
GROSS PROFIT 1,740,752 2,168,229 5,332,759 5,988,997
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,242,386 1,147,900 3,494,190 3,344,277
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 498,366 1,020,329 1,838,569 2,644,720
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE), NET 7,628 (4,259) 14,669 15,463
------------ ------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES AND MINORITY INTEREST 505,994 1,016,070 1,853,238 2,660,183
PROVISION FOR INCOME TAXES 210,820 333,049 713,828 858,844
------------ ------------ ------------ ------------
INCOME BEFORE MINORITY INTEREST 295,174 683,021 1,139,410 1,801,339
MINORITY INTEREST (49,646) (58,660) (154,356) (145,912)
------------ ------------ ------------ ------------
NET INCOME 245,528 624,361 985,054 1,655,427
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment (19,363) 16,663 (888) 14,461
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME $ 226,165 $ 641,024 $ 984,166 $ 1,669,888
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES 16,831,250 16,506,250 16,615,774 16,506,250
============ ============ ============ ============
Comprehensive Earnings per share,
basic and diluted $ 0.01 $ 0.04 $ 0.06 $ 0.10
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
4
YI WAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
Accumulated
other com-
Number Common Paid-in Statutory Retained prehensive
of shares stock capital reserves earnings income Totals
------------ ------------ ------------ ----------- ------------ ----------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------ ------------ ----------- ------------ ----------- ------------
BALANCE, January 1, 2003, audited 16,506,250 $ 10,078 $ 5,109,656 $ 9,630,799 $ 2,909,810 $ 70,595 $ 17,730,938
Net income 1,655,427 1,655,427
Additions to paid in capital
(land use right) 4,167 4,167
Adjustment to statutory reserves 1,201,932 (1,201,932) --
Foreign currency translation
adjustments 14,461 14,461
------------ ------------ ------------ ----------- ------------ ----------- ------------
BALANCE, September 30, 2003 16,506,250 $ 10,078 $ 5,113,823 $10,832,731 $ 3,363,305 $ 85,056 $ 19,404,993
Net income (59,503) (59,503)
Additions to paid in capital
(land use right) 1,399 1,399
Distribution of statutory
reserves (176,910) 176,910 --
Foreign currency translation
adjustments 51,960 51,960
------------ ------------ ------------ ----------- ------------ ----------- ------------
BALANCE, January 1, 2004, audited 16,506,250 $ 10,078 $ 5,115,222 $10,655,821 $ 3,480,712 $ 137,016 $ 19,398,849
Net income 985,054 985,054
Additions to paid in capital
(land use right) 4,173 -- 4,173
Registered capital of Yi Wan
Beijing 12,100
Stock issued for future services 325,000 422,500 422,500
Deferred charge for future
services (281,668) (281,668)
Foreign currency translation
adjustments (888) (888)
------------ ------------ ------------ ----------- ------------ ----------- ------------
BALANCE, September 30, 2004 16,831,250 $ 432,578 $ 5,131,495 $10,655,821 $ 4,184,098 $ 136,128 $ 20,528,020
============ ============ ============ =========== ============ =========== ============
The accompanying notes are an integral part of these financial statements.
5
YI WAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
Nine months ended
September 30,
---------------------------
2004 2003
------------ ------------
(Unaudited) (Unaudited)
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 985,054 $ 1,655,427
Adjustment to reconcile net income to cash
Provided by (used in) operating activities:
Minority interest 154,356 145,912
Depreciation 1,035,052 1,100,781
Amortization 37,408 37,287
Amortization of consulting services 140,832 --
Land use cost 4,173 4,167
Deferred tax asset -- (56,367)
Foreign currency translation adjustment (888) 14,461
(Increase) decrease in assets:
Accounts receivable 207,702 (434,724)
Related party receivables 211,520 (1,217,601)
Inventories 76,757 (92,131)
Prepaid expenses (281,804) (26,788)
Other non-current assets (510,180) (113,926)
Increase (decrease) in liabilities;
Accounts payable (56,788) (4,385)
Accounts payable - related party (56,540) (79,942)
Accrued liabilities 300,706 (93,791)
Wages and benefits payable (131,906) 7,001
Sales tax payable 24,811 (2,497)
Income taxes payable (394,430) (325,288)
Due to shareholder (89,044) --
------------ ------------
Net cash provided by operating activities 1,656,791 517,596
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of improvements and equipment (255,440) (107,962)
------------ ------------
Net cash used in investing activities (255,440) (107,962)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Collections on note receivable-related party -- 696,437
Increase to paid in capital (Yi Wan Beijing) 12,100 --
Repayments on notes payable (11,052) (1,205)
------------ ------------
Net cash provided by financing activities 1,048 695,232
------------ ------------
INCREASE IN CASH 1,402,399 1,104,866
CASH, beginning of period 3,365,842 2,135,154
------------ ------------
CASH, end of period $ 4,768,241 $ 3,240,020
============ ============
The accompanying notes are an integral part of these financial statements.
6
YI WAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Yi Wan Group, Inc. was incorporated under the laws of the State of Florida in
the United States in May 1999. Yi Wan Group, Inc. is authorized to issue
50,000,000 shares of no par value common stock and 20,000,000 shares of no par
value preferred stock. The Company's TELECOMMUNICATIONS, HOTEL and QINYANG
subsidiaries are incorporated under the laws of the People's Republic of China
(PRC).
The Company's subsidiaries are classified as Foreign Invested Enterprises (FIE)
in the PRC and are subject to the FIE laws of the PRC. The HOTEL and QINYANG are
Foreign Invested Enterprise Joint Ventures, known as FIEJV or Sino-foreign joint
venture, and TELECOMMUNICATIONS is a Wholly Foreign Owned Enterprise company or
WFOE. All three of these companies are Chinese registered limited liability
companies, with legal structures similar to regular corporations and limited
liability companies organized under state laws in the United States. The
respective Articles of Association for these FIE subsidiaries provide a 30-year
term for the HOTEL and QINYANG companies and 15 years for the
TELECOMMUNICATIONS.
The People's Republic of China (PRC) regulations prohibit direct foreign
ownership of business entities providing food and restaurant services in the PRC
in which certain licenses are required for the provision of such services. The
Company and its subsidiaries are foreign or foreign invested enterprises under
PRC law and accordingly are ineligible for a license to operate restaurants and
food services. In order to expand the Company restaurant and food services and
still be in compliance with these regulations, in July 2004, the Company
established YI WAN BEIJING Hotel Management Co., Ltd. (YI WAN BEIJING), a
variable interest entity, through two designated shareholders who are PRC
citizens and legally owned YI WAN BEIJING. Yi Wan Group, Inc is the primary
beneficiary of YI WAN BEIJING business operations and qualifies to be
consolidated under FIN 46(R).
NOTE 2 - BASIS OF PRESENTATION
THE REPORTING ENTITY
The consolidated financial statements of Yi Wan Group, Inc. and subsidiaries
(referred to as the Company or YWG in the accompanying consolidated financial
statements) include the activities and financial transactions of its
subsidiaries and variable interest entity, which are as follows:
Shun De Yi Wan Communication Equipment
Plant Co., Ltd. (TELECOMMUNICATIONS) 100%
Jiao Zuo Yi Wan Hotel Co., Ltd. (HOTEL) 90
Qinyang Yi Wan Hotel Co., Ltd. (QINYANG) 80
Variable interest entity
- ----------------------------------------
Yi Wan Beijing Hotel Management Co., Ltd. (YI WAN BEIJING)
7
YI WAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - BASIS OF PRESENTATION (continued)
BASIS OF PRESENTATION
The consolidated financial statements represent the activities of Yi Wan Group,
Inc. and its subsidiaries and variable interest entity. The consolidated
financial statements of YWG include its subsidiaries HOTEL, TELECOMMUNICATIONS
and QINYANG and its variable interest entity YI WAN BEIJING. All significant
inter-company accounts and transactions have been eliminated in the
consolidation.
RECLASSIFICATIONS
Certain comparative amounts have been reclassified to conform with the current
year's presentation.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles of the United States of America requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Management believes
that the estimates utilized in preparing its consolidated financial statements
are reasonable and prudent. Actual results could differ from these estimates.
FOREIGN CURRENCY TRANSLATION
The reporting currency of YWG is the U.S. dollar. The Company's foreign
subsidiaries use their local currency, Renminbi, as their functional currency.
Results of operations and cash flow are translated at average exchange rates
during the period, and assets and liabilities are translated at the end of
period exchange rates. Translation adjustments resulting from this process are
included in accumulated other comprehensive income in the statement of
shareholders' equity. Transaction gains and losses that arise from exchange rate
fluctuations on transactions denominated in a currency other than the functional
currency are included in the results of operations of the subsidiaries as
incurred. These amounts are not material to the financial statements.
NOTE 4- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND FOOTNOTES
The interim consolidated financial statements presented herein have been
prepared by the Company and include the unaudited accounts of YWG and its
subsidiaries TELECOMMUNICATIONS, HOTEL, and QINYANG and its variable interest
entity YI WAN BEIJING. All significant inter-company accounts and transactions
have been eliminated in the consolidation.
These condensed financial statements have been prepared in accordance with
generally accepted accounting principles of the United States of American for
interim financial information and the instructions to Form 10-Q and Article 10
of Regulation S-X. Certain information and footnote disclosures normally
included in financial statements presented in accordance with generally accepted
8
YI WAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND FOOTNOTES (continued)
accounting principles have been condensed or omitted. YWG believes the
disclosures made are adequate to ensure the information presented is not
misleading. The condensed consolidated financial statements should be read in
conjunction with the YWG's consolidated financial statements for the year ended
December 31, 2003 and notes thereto included in YWG's Form 10-K which was filed
with the Securities and Exchange Commission on March 30, 2004.
In the opinion of management, the unaudited condensed consolidated financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position of the Company
as of September 30, 2004 and the results of operations for the three months and
nine months ended September 30, 2004 and 2003, respectively. Interim results are
not necessarily indicative of an entire year of performance because of the
impact of seasonal and short-term variations.
NOTE 5 - INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out basis and consists of the following:
September 30, December 31,
2004 2003
--------------- ----------------
(Unaudited) (Audited)
--------------- ----------------
Hotel inventory $ 196,339 $ 210,728
YI WAN BEIJING inventory 7,360 --
TELECOMMUNICATION inventory 232,976 302,704
--------------- ----------------
Total inventories $ 436,675 $ 513,432
=============== ================
The HOTEL and Beijing inventory consists of food products, alcohol, beverages
and supplies.
At September 30, 2004, TELECOMMUNICATION's inventory consisted of raw materials,
work in process, and finished goods, which amounted to $92,368, $39,736, and
$100,872, respectively.
NOTE 6 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid amounted to $1,263,573 and $1,240,028 for the nine months
ended September 30, 2004 and 2003, respectively. No interest expense was paid
for the nine months ended September 30, 2004 and 2003.
NON CASH TRANSACTION
The Company issued 325,000 shares of common stock valued at $422,500 for
consulting services as further described in Note 9.
9
YI WAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS 128). SFAS 128 requires the presentation of earnings
per share (EPS) as Basic EPS and Diluted EPS. There are no differences between
Basic and Diluted EPS for the nine months ended September 30, 2004 and 2003. The
weighted average number of shares used to calculate EPS for the nine months
ended September 30, 2004 (16,615,774) and 2003 (16,506,250) reflect only the
shares outstanding for those periods.
Weighted average number of shares outstanding as of September 30, 2004 is
computed as follows:
Dates Shares Weighted -
Outstanding Outstanding Days Average Shares
- ------------------------- ------------- ---------- ------------------
Year - 2004
- -------------------------
January 1 - September 30 16,506,250 273 4,506,206,250
June 30 - September 30 325,000 92 29,900,000
---------- ------------------
Totals 273 4,536,106,250
========== ==================
Weighted-average shares - 9 months 16,615,774
==================
June 1 - September 30 16,506,250 92 1,518,575,000
June 30 - September 30 325,000 92 29,900,000
---------- ------------------
Totals 92 1,548,475,000
========== ==================
Weighted-average shares - 3 months 16,831,250
==================
NOTE 8 - MINORITY INTEREST
Minority interest represents the outside shareholders' 10% ownership of the
common stock of Jiao Zuo Yi Wan Hotel Co., Ltd and 20% of the common stock of
Qinyang Yi Wan Hotel Co., Ltd.
NOTE 9 - HOTEL BOWLING OPERATIONS CEASED
The HOTEL ceased its bowling operation at the end of September 2003. The
Management of Hotel is in the process of finding potential buyers and
formalizing a plan to sell the equipment. As of September 30, 2004, the fair
market value of the bowling equipment has not been determined and no impairment
of the asset value has been calculated. As of September 30, 2004, the related
equipment with a net book value of $520,482 has been recorded as equipment held
for sale; no gain or loss has been recognized in the current period.
10
YI WAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - YI WAN BEIJING OPERATIONS
The People's Republic of China ("PRC") regulations prohibit direct foreign
ownership of business entities providing food and restaurant services in the PRC
in which certain licenses are required for the provision of such services. The
Company and its subsidiaries are foreign or foreign invested enterprises under
PRC law and accordingly are ineligible for a license to operate restaurants and
food services. In order to expand our restaurant and food services and still be
in compliance with these regulations, in July 2004, the Company established YI
WAN BEIJING Hotel Management Ltd. ("YI WAN BEIJING"), a variable interest entity
through two persons who are PRC citizens and who each legally owned 50% of YI
WAN BEIJING ("YI WAN BEIJING Interest Holders") to operate our restaurant
business. Pursuant to an Equity Trust Agreement, we transferred RMB$100,000 to
the YI WAN BEIJING Interest Holders which was used to form and capitalize YI WAN
BEIJING. The Equity Trust Agreement provides that the Trustees are to hold the
equity interest in YI WAN BEIJING (the "Equity Interests") in trust for the
benefit of Yi Wan Group, Inc. The YI WAN BEIJING Interest Holders have agreed to
not sell, pledge, hypothecate, encumber or otherwise dispose of the Equity
Interests. Any such transfer will result in a breach of the Equity Trust
Agreement and the YI WAN BEIJING Interest Holders will be required to transfer
the Equity Interest to the Company. Further the YI WAN BEIJING Interest Holders
have agreed to promptly distribute any and all dividends, distributions or other
payments received from YI WAN BEIJING with respect to the Equity Interest to the
Company. Finally, the YI WAN BEIJING Interest Holders granted irrevocable
proxies to two directors of the Company to exercise all voting rights such YI
WAN BEIJING Interest Holders have with respect to their ownership interest in YI
WAN BEIJING. The irrevocable proxies further provides that if such two directors
cease to be an employee of the Company, the YI WAN BEIJING Interest Holders
agree to immediately terminate the proxy and to grant a proxy to another person
designated by the Company.
NOTE 11 - STOCK ISSUANCE
The Company has entered into two consulting agreements with individuals to
provide business and financial consulting services. These agreements expire May
31, 2005 and June 15, 2005, respectively. The Company has agreed to issue a
total of 325,000 shares of no par value common stock pursuant to a Form S-8 in
exchange for their services. The 325,000 shares of common stock have been
recorded at $1.30 per share or $422,500 based upon the trading price of the
shares at June 30, 2004. The Company has recorded a deferred charge to
shareholders' equity which represents the future consulting services to be
rendered. The Company is amortizing the consulting services over one year using
the straight line method which amounted to $140,836 for the period ending
September 30, 2004. The 325,000 shares of common stock were issued to the
consultants in July 2004.
11
YI WAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - SEGMENT INFORMATION
YWG includes four major operating segments: restaurant, lodging, entertainment
and telecommunication equipment. YWG evaluates the performance of its segments
based primarily on operating profit before corporate expenses and depreciation
and amortization. The following table presents revenues and other financial
information by business segment for the periods presented:
Telecom- Inter-
munication YI WAN segment
Hotel equipment BEIJING elimination Totals
------------- ------------- ------------- ------------- -------------
TOTAL ASSETS:
September 30, 2004 $ 26,248,346 $ 6,553,889 $ 246,921 $ (2,497,582) $ 30,551,574
============= ============= ============= ============= =============
December 31, 2003 $ 24,667,327 $ 6,837,457 $ $ (1,834,594) $ 29,670,190
============= ============= ============= ============= =============
12
YI WAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - SEGMENT INFORMATION, (CONTINUED)
HOTEL
---------------------------------------------------------
Telecom-
munication YI WAN
Restaurant Lodging Entertainment Subtotals equipment BEIJING Totals
------------ ------------ ------------- -------------- ------------ ----------- -------------
THREE MONTHS ENDED
SEPTEMBER 30, 2004
- ---------------------------
Net sales $ 1,528,709 $ 627,075 $ 456,241 $ 2,612,025 $ 269,203 $ 70,395 $ 2,951,623
Cost of sales 755,551 39,180 94,001 888,732 237,021 85,118 1,210,871
------------ ------------ ------------- -------------- ------------ ----------- -------------
Gross profit 773,158 587,895 362,240 1,723,293 32,182 (14,723) 1,740,752
Operating expenses 185,824 89,097 168,406 443,327 70,429 6,908 520,664
Depreciation and
amortization 319,500 319,500
Unallocated expenses 286,842 296,842
------------ ------------ ------------- -------------- ------------ ----------- -------------
Income from operations $ 587,334 $ 498,798 $ 193,834 663,624 (38,247) (21,631) 603,746
============ ============ =============
Interest income 6,119 4,485 11 10,615
Other income (expense) (2,697) (2,697)
Provision for income tax (210,675) (146) (210,821)
Corporate expenses (105,669)
-------------- ------------ ----------- -------------
Income before minority
interest $ 456,371 $ (33,908) $ (21,620) $ 295,174
============== ============ =========== =============
THREE MONTHS ENDED
SEPTEMBER 30, 2003
- ---------------------------
Net sales $ 1,407,107 $ 627,814 $ 514,090 $ 2,549,011 $ 953,334 $ $ 3,502,345
Cost of sales 692,731 43,198 74,797 810,726 523,390 1,334,116
------------ ------------ ------------- -------------- ------------ ----------- -------------
Gross profit 714,376 584,616 439,293 1,738,285 429,944 2,168,229
Operating expenses 165,027 80,525 114,278 359,830 184,772 544,602
Depreciation and
amortization 327,096 5,616 332,712
Unallocated expenses 270,586 270,586
------------ ------------ ------------- -------------- ------------ ----------- -------------
Income from operations $ 549,349 $ 504,091 $ 325,015 780,773 239,556 1,020,329
============ ============ =============
Interest income 4,239 2,916 7,155
Other income (expense) (11,393) (21) (11,414)
Provision for income tax (255,071) (77,978) (333,049)
-------------- ------------ ----------- -------------
Income before minority
interest $ 518,548 $ 164,473 $ $ 683,021
============== ============ =========== =============
13
YI WAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - SEGMENT INFORMATION, (CONTINUED)
HOTEL
---------------------------------------------------------
Telecom-
munication YI WAN
Restaurant Lodging Entertainment Subtotals equipment BEIJING Totals
------------ ------------ ------------- -------------- ------------ ----------- -------------
NINE MONTHS ENDED
SEPTEMBER 30, 2004
- -------------------------
Net sales $ 4,106,582 $ 1,804,100 $ 1,479,131 $ 7,389,813 $ 1,291,621 $ 70,395 $ 8,751,829
Cost of sales 2,080,352 134,657 248,165 2,463,174 870,778 85,118 3,419,070
------------ ------------ ------------- -------------- ------------ ----------- -------------
Gross profit 2,026,230 1,669,443 1,230,966 4,926,639 420,843 (14,723) 5,332,759
Operating expenses 509,302 257,286 416,846 1,183,434 308,413 6,908 1,498,755
Depreciation and
amortization 966,571 997 967,568
Unallocated expenses 738,318 738,318
------------ ------------ ------------- -------------- ------------ ----------- -------------
Income from operations $ 1,516,928 $ 1,412,157 $ 814,120 2,038,316 111,433 (21,631) 2,128,118
============ ============ =============
Interest income 16,611 12,423 11 29,045
Other income (expense) (14,086) (14,086)
Provision for income tax (660,752) (53,076) (713,828)
Corporate expenses (289,549)
-------------- ------------ ----------- -------------
Income before minority
interest $ 1,380,089 $ 70,780 $ (21,620) $ 1,139,700
============== ============ =========== =============
NINE MONTHS ENDED
SEPTEMBER 30, 2003
- -------------------------
Net sales $ 3,679,040 $ 1,778,936 $ 1,401,369 $ 6,859,345 $ 2,769,482 $ $ 9,628,827
Cost of sales 1,834,794 124,769 164,971 2,124,534 1,515,296 3,639,830
------------ ------------ ------------- -------------- ------------ ----------- -------------
Gross profit 1,844,246 1,654,167 1,236,398 4,734,811 1,254,186 5,988,997
Operating expenses 457,254 245,493 282,077 984,824 538,466 1,523,290
Depreciation and
amortization 1,003,229 16,573 1,019,802
Unallocated expenses 801,185 801,185
------------ ------------ ------------- -------------- ------------ ----------- -------------
Income from operations $ 1,386,992 $ 1,408,674 $ 954,321 1,945,573 699,147 2,644,720
============ ============ =============
Interest income 10,491 7,559 18,050
Other income (expense) (2,567) (20) (2,587)
Provision for income tax (625,977) (232,867) (858,844)
-------------- ------------ ----------- -------------
Income before minority
interest $ 1,327,520 $ 473,819 $ $ 1,801,339
============== ============ =========== =============
14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
FORWARD-LOOKING STATEMENTS
The following discussion of our financial condition and results of operations
should be read in conjunction with the consolidated financial statements and
related notes thereto. The following discussion contains forward-looking
statements. Yi Wan Group, Inc. is referred to herein as "we" or "our." The words
or phrases "would be," "will allow," "intends to," "will likely result," "are
expected to," "will continue," "is anticipated," "estimate," "project," or
similar expressions are intended to identify "forward-looking statements." Such
statements include those concerning expected financial performance, corporate
strategy, and operational plans. Actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
risks and uncertainties, including: (a) general economic conditions in China;
(b) regulatory factors in China that may lead to additional costs or otherwise
negatively affect our business; (c) whether we are able to manage our planned
growth efficiently, including whether our management will be able to: (i)
identify, hire, train, retain, motivate and manage required personnel or (ii)
successfully manage and exploit existing and potential market opportunities; (d)
whether we are able to generate sufficient revenues or obtain financing to
sustain and grow our operations; (e) whether we are able to successfully fulfill
our primary cash requirements which are explained below under "Liquidity and
Capital Resources"; (f) whether there will be continuing negative economic
effects upon China and the China hotel and tourist industries due to possible
continuing negative perceptions pertaining to SARS; and (g) whether worldwide
economic conditions will negatively affect the tourist industry in China and our
hotel related revenues. Statements made herein are as of the date of the filing
of this Form 10-Q with the Securities and Exchange Commission and should not be
relied upon as of any subsequent date. Unless otherwise required by applicable
law, we do not undertake, and we specifically disclaim any obligation, to update
any forward-looking statements to reflect occurrences, developments,
unanticipated events or circumstances after the date of such statement. The safe
harbors for forward-looking statements provided by the Private Securities
Litigation Reform Act of 1995 (the "Reform Act") are unavailable to issuers of
penny stock. Our shares may be considered penny stock and as a result of such
safe harbors set forth under the Reform Act are unavailable to us.
GENERAL
Yi Wan Group operates two lines of businesses, a hotel & restaurant business and
a telecommunications business, through ownership of three Chinese business
entities. We own a 90% interest in Jiao Zuo Yi Wan Hotel Company Limited, an 80%
interest in Qinyang Yi Wan Hotel Company Limited and a 100% interest in Shun De
Yi Wan Communications Equipment Plant Co., Ltd.
Our hotel & restaurant business consists of the operation and management of an
upscale hotel conference and entertainment facility in Jiaozuo City, Henan
province and in the City of Qinyang. This business line focuses on providing
lodging, food and beverage, entertainment, and conference and meeting products
and services.
Our telecommunications business focuses on designing and manufacturing telephone
network switching component parts for use in telephone main distribution frames;
and manufacturing and selling assembled telephone main distribution frames. A
15
telephone main distribution frame connects a company's or an individual's
internal telephone system to the telephone company's external lines. Our
telecommunications business' initial design and production efforts focused on
developing analog switching component parts and the manufacture of a series of
analog main distribution frames. Recent design and production efforts have
expanded to include digital switching component parts and the manufacture of
digital telephone main distribution frames.
RESULTS OF OPERATIONS
As of September 30, 2004, we had $4,184,098 of retained earnings. As of
September 30, 2004, we had cash of $4,768,241 and total shareholders' equity of
$20,540,120. For the nine months ended September 30, 2004, we had revenues of
$8,751,829 and general, administrative and sales expenses of $3,494,190
respectively.
CONSOLIDATED RESULTS
(1) SALES. Consolidated sales decreased by $876,998, or approximately 9.11%,
from $9,628,827 for the nine months ended September 30, 2003 to $8,751,829 for
the nine months ended September 30, 2004. The 9.11% decrease was a direct result
of a decrease in sales to our telecommunications business of $1,477,861 which
was offset by an increase in sales in our hotel and restaurant business. The
reasons for the decrease in sales related to our telecommunications business are
(1) our telecommunication business has not yet been unsuccessful in developing
new products to bring to the market, and (2) highly competitive industry. We are
in the process of evaluating our future business plan for our telecommunications
business. In addition, we are currently focusing more of our efforts in
developing and promoting the hotel and restaurant business.
(2) COST OF GOODS SOLD. Consolidated cost of goods sold decreased by $220,760,
from $3,639,830 for the nine months ended September 30, 2003 to $3,419,070 for
the nine months ended September 30, 2004. Cost of goods sold as a percentage of
sales increased by 1.27%, from 37.80% for the nine months ended September 30,
2003 to 39.07% for the nine months ended September 30, 2004. The increase in
cost of sales was due to an increase in our cost of raw materials in our hotel
and restaurant business due to an increase in prices for meat, eggs, vegetables
and rice in comparison to last year's prices. In addition, the incease in cost
of goods sold was because in order to promote the hotel business, we have
offered discount cards which can be used for various discounts in the
restaurants, sauna and night club as well as for room discounts.
(3) GROSS PROFIT. Consolidated gross profit decreased by $656,238, from
$5,988,997 for the nine months ended September 30, 2003 to $5,332,759 for the
nine months ended September 30, 2004. Gross profit as a percentage of sales
decreased by 1.27%, from 62.20% for the nine months ended September 30, 2003 to
60.93% for the nine months ended September 30, 2004. This decrease in gross
profit as a percentage of sales was the result of a decrease in sales and an
increase in the cost of materials and operating expense as discussed above.
(4) SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
increased by $149,913, from $3,344,277 for the nine months ended September 30,
2003 to $3,494,190 for the nine months ended September 30, 2004. The selling and
administrative expenses as a percentage of sales increased by 5.2%, from 34.73%
for the nine months ended September 30, 2003 to 39.93% for the nine months ended
September 30, 2004. The increase in selling and administrative expenses as a
16
percentage of sales is attributed to an increase in corporate expenses such as
water, fuel and electricity and a decrease in sales related to our
telecommunications business.
(5) NET INCOME. Consolidated net income decreased by $670,373, or approximately
40.50%, from $1,655,427 for the nine months ended September 30, 2003 to $985,054
for the nine months ended September 30, 2004. The decrease was mainly due to:
(1) a decrease in sales related to our telecommunications business; and (2) an
increase in cost of raw materials and operating costs in the hotel and
restaurant business.
SEGMENTED RESULTS
(1) SALES. An itemization of each operating unit's data and an explanation of
significant changes are as follows:
Hotel and Restaurant Business: Sales increased by $530,468, or
approximately 7.73%, from $6,859,345 for the nine months ended September 30,
2003 to $7,389,813 for the nine months ended September 30, 2004. The increase
was a result of a new management team and an improvement in marketing
strategies, such as offering discount cards which can be used for various
discounts in the restaurants, sauna and night club as well as for room
discounts.
Telecommunications Business: Sales decreased by $1,477,861, or
approximately 39.20%, from $2,769,482 for the nine months ended September 30,
2003 to $1,291,621 for the nine months ended September 30, 2004. This decrease
was a direct result of (1) our telecommunication operation has been unsuccessful
in developing new products to bring to the market, and (2) highly competitive
industry. We are in the process of evaluating our future plans for this
business.
(2) COST OF GOODS SOLD. An itemization of each operating unit's data and an
explanation of significant changes are as follows:
Hotel and Restaurant Business: Cost of goods sold increased by $338,640,
from $2,124,534 for the nine months ended September 30, 2003 to $2,463,174 for
the nine months ended September 30, 2004. Cost of goods sold as a percentage of
sales increased by 2.36%, from 30.97% for the nine months ended September 30,
2003 to 33.33% for the nine months ended September 30, 2004. The increase is
attributed to an increase in our cost of raw material due to an increase in
prices for meat, eggs, vegetables and rice in comparison to last year's prices.
In addition in the prior year we sold discount cards to customers to be used for
discounts on hotel room rates. Based upon this successful promotion in the
current year we have offered additional discount cards which can be used for
various discounts in the restaurants, sauna and night club as well as for room
discounts.
Telecommunications Business: Cost of goods sold decreased by $644,518, from
$1,515,296 for the nine months ended September 30, 2003 to $870,778 for the nine
17
months ended September 30, 2004. Cost of goods sold as a percentage of sales
increased to 67.42% for the nine months ended September 30, 2004 from 54.71% for
the six months ended September 30, 2003. The increase in cost of goods sold as a
percentage of sales was a result of an increase in cost of raw materials and a
decrease in sales in the telecommunication operation.
(3) GROSS PROFIT. An itemization of each operating unit's data and an
explanation of significant changes are as follows:
Hotel and Restaurant Business: Gross profit increased by $191,828, from
$4,734,811 for the nine months ended September 30, 2003 to $4,926,639 for the
nine months ended September 30, 2004. As a percentage of sales, gross profit
decreased from 69.03% for the nine months ended September 30, 2003 to 66.67% for
the nine months ended September 30, 2004. The decrease in gross profit as a
percentage of sales was due to an increase in the cost of goods sold and
increased promotional discounts as explained above.
Telecommunications Business: Gross profit decreased by $833,343, from
$1,254,186 for the nine months ended September 30, 2003 to $420,843 for the nine
months ended September 30, 2004. As a percentage of sales, gross profit
decreased from 45.29% for the nine months ended September 30, 2003 to 32.58% for
the nine months ended September 30, 2004. The decrease in gross profit as a
percentage of sales was due to an increase in the cost of materials and a
decrease in sales.
(4) SELLING AND ADMINISTRATIVE EXPENSES. An itemization of each operating unit's
data and an explanation of significant changes are as follows:
Hotel and Restaurant Business: Selling and administrative expenses
increased by $99,083, from $2,789,238 for the nine months ended September 30,
2003 to $2,888,321 for the nine months ended September 30, 2004. Selling and
administrative expenses as a percentage of sales decreased to 39.09% for the
nine months ended September 30, 2004 from 40.66% for the nine months ended
September 30, 2003. This decrease was a result of a decrease in our
administrative and selling expenses, such as water, electricity and fuel
materials.
Telecommunications Business: Selling and administrative expenses decreased
by $245,629, from $555,039 for the nine months ended September 30, 2003 to
$309,410 for the nine months ended September 30, 2004. Selling and
administrative expenses as a percentage of sales increased to 23.96% for the
nine months ended September 30, 2004 from 20.04% for the nine months ended
September 30, 2003. The increase in selling and administrative expenses as a
percentage of sales was a result of a decrease in sales.
(5) NET INCOME. An itemization of each operating unit's data and further
explanations of significant changes are as follows:
Hotel and Restaurant Business: Net income increased by $52,279, from
$1,327,520, or 19.35% of sales, for the nine months ended September 30, 2003 to
$1,379,799, or 18.67% of sales, for the nine months ended September 30, 2004.
The increase as a percentage of sales was a result of a new management team and
an improvement in marketing strategies.
18
Telecommunications Business: Net income decreased by $403,039, from
$473,819 or 17.11% of sales, for the nine months ended September 30, 2003 to
$70,780, or 5.47% of sales, for the nine months ended September 30, 2004. The
decrease was a result of a decrease in sales and an increase in cost of raw
materials, as explained in the above paragraphs.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2004, net cash provided by operating activities was
$1,656,791; net cash used in investing activities was $243,340; and net cash
used in financing activities was $11,052.
As of September 30, 2003, net cash used in operating activities was $10,820; net
cash provided by investing activities was $420,454; and net cash provided by
financing activities was $695,232.
Net cash provided by operating activities increased by $1,667,611, from
$(10,820) for the nine months ended September 30, 2003 to $1,656,791 for the
nine months ended September 30, 2004, representing an increase of approximately
100%. The increase in cash flow from operating activities reflects a decrease in
related party receivables and an increase in accounts receivable during the nine
months ended September 30, 2004. Due to the nature of conducting business in
China many financial transaction are completed in cash, instead of by check or
draft. Customarily, officers, managers and employees of companies located in
China, including our personnel, are advanced cash on a daily basis to pay for
normal business operating expenses. These advances are accounted for when the
officer or employee submits the paid invoice to the accounting department to
support the receipt of goods and services.
Net cash used in investing activities increased by $663,794 to $(243,340) for
the nine months ended September 30, 2004, representing a 157.87% increase,
compared with the $420,454 net cash used for the same period ended in 2003. The
increase was due to spending on equipment upgrades.
Net cash used in financing activities increased by $706,284 to $(11,052) for the
nine months ended September 30, 2004, representing a 100% increase, compared to
$695,232 provided by financing activities for the same period of 2003. The
increase was primarily due to full collections on existing notes receivable
prior to December 31, 2003.
Going forward, our primary requirements for cash consist of: (1) the continued
implementation of the Hotel and Restaurant and Telecommunications business'
existing business model in China, and the general overhead and personnel related
expenses in support of this implementation; (2) continued promotional activities
to increase hotel related revenues; (3) the development costs of the hotel
operations in China; (4) the payment of cash contributions to the joint ventures
under the existing agreements; and (5) payments due to some of the subsidiaries'
19
former equity owners. We do not have any material commitments for capital
expenditures as of September 30, 2004. We anticipate that our current operating
activities will enable us to meet the anticipated cash requirements for the 2004
fiscal year.
Historically, our subsidiary companies have financed operations principally
through cash generated from operations. Initial capital for the Hotel and
Restaurant business and our Telecommunications business came from shareholders'
contributions and are as follows: Hotel and Restaurant business: $11,960,000;
and Telecommunications business: $1,580,000. No bank loans were obtained for the
Hotel and Restaurant or Telecommunications businesses. We have to make capital
contributions to our subsidiaries by September 2004 to meet the capital
registration requirements. Other investment requirements include payments due of
$7,371,730 and $4,932,273 to joint venture's former partners. Since the Farm
operation ceased on December 31, 2002, only $500,000 additional capital
investment for the Telecommunications business remains outstanding. The balances
are to be funded from the profits generated from the operations of the
subsidiaries and, if necessary, equity financing. There is no assurance,
however, that equity financing can be obtained for the above purposes. The joint
venture's former partners extended the September 2004 payment date to September
2005 for capital contributions. We intend to fund the hotel and restaurant's
capital improvements from the positive cash flow generated from hotel
operations.
MANAGEMENT ASSUMPTIONS.
Management anticipates, based on internal forecasts and assumptions relating to
our operations, which existing cash and funds generated from operations will be
sufficient to meet working capital and capital expenditure requirements for at
least the next 12 months. In the event that plans change, our assumptions change
or prove inaccurate, or if other capital resources and projected cash flow
otherwise prove to be insufficient to fund operations (due to unanticipated
expense, technical difficulties, or otherwise), we could be required to seek
additional financing. There can be no assurance that we will be able to obtain
additional financing on terms acceptable to us, or at all.
EFFECTS OF INFLATION
We are subject to commodity price risks arising from price fluctuations in the
market prices of the various raw materials that comprise our products. Price
risks are managed by each business unit through productivity improvements and
cost-containment measures. Management does not believe that inflation risk is
material to our business or our consolidated financial position, results of
operations or cash flows.
EFFECT OF FLUCTUATION IN FOREIGN EXCHANGE RATES
Our operating subsidiaries are located in China. These companies buy and sell
products in China using Chinese Renminbi as the functional currency. Based on
China government regulation, all foreign currencies under the category of
current accounts are allowed to be freely exchanged with hard currencies. During
the past two years of operation, there were no significant changes in exchange
rates; however, unforeseen developments may cause a significant change in
exchange rates.
20
OFF-BALANCE SHEET ARRANGEMENTS
None.
REORGANIZATION OF OPERATION OF RESTAURANT BUSINESS
In order to expand our restaurant and food services and still be in compliance
with the regulations of the People's Republic of China ("PRC") with respect to
restaurant services, in July 2004, we established Yi Wan Beijing Hotel
Management Co. Ltd. ("Yi Wan Beijing"), a variable interest entity through two
persons who are PRC citizens and who each legally owned 50% of Yi Wan Beijing
("Yi Wan Beijing Interest Holders") to operate our restaurant business. Pursuant
to an Equity Trust Agreement, we transferred RMB$100,000 to the Yi Wan Beijing
Interest Holders which was used to form and capitalize Yi Wan Beijing. The
Equity Trust Agreement provides that the Trustees are to hold the equity
interest in Yi Wan Beijing (the "Equity Interests") in trust for the benefit of
Yi Wan Group, Inc. The Yi Wan Beijing Interest Holders have agreed to not sell,
pledge, hypothecate, encumber or otherwise dispose of the Equity Interests. Any
such transfer will result in a breach of the Equity Trust Agreement and the Yi
Wan Beijing Interest Holders will be required to transfer the Equity Interest to
the Company. Further the Yi Wan Beijing Interest Holders have agreed to promptly
distribute any and all dividends, distributions or other payments received from
Yi Wan Beijing with respect to the Equity Interest to the Company. Finally, the
Yi Wan Beijing Interest Holders granted irrevocable proxies to two directors of
the Company to exercise all voting rights such Yi Wan Beijing Interest Holders
have with respect to their ownership interest in Yi Wan Beijing. The irrevocable
proxies further provides that if such two directors cease to be an employee of
the Company, the Yi Wan Beijing Interest Holders agree to immediately terminate
the proxy and to grant a proxy to another person designated by the Company.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
While our reporting currency is the U.S. dollar, to date virtually all of our
revenues and costs are denominated in Renminbi and a significant portion of our
assets and liabilities are denominated in Renminbi. As a result, we are exposed
to foreign exchange risk as our revenues and results of operations may be
impacted by fluctuations in the exchange rate between U.S. Dollars and Renminbi.
If the Renminbi depreciates against the U.S. Dollar, the value of our Renminbi
revenues and assets as expressed in our U.S. Dollar financial statements will
decline. We do not hold any derivative or other financial instruments that
expose us to substantial market risk.
The Renminbi is currently freely convertible under the "current account", which
includes dividends, trade and service-related foreign exchange transactions, but
not under the "capital account", which includes foreign direct investment. To
date, we have not entered into any hedging transactions in an effort to reduce
our exposure to foreign currency exchange risk. While we may decide to enter
into hedging transactions in the future, the effectiveness of these hedges may
be limited and we may not be able to successfully hedge our exposure at all.
Accordingly, we may incur economic losses in the future due to foreign exchange
rate fluctuations, which could have a negative impact on our financial condition
and results of operations.
21
Item 4. CONTROLS AND PROCEDURES
With the participation of management, our Chief Executive Officer and Chief
Financial Officer evaluated our disclosure controls and procedures within the 90
days preceding the filing date of this quarterly report. Based upon this
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective in ensuring that
material information required to be disclosed is included in the reports that we
file with the Securities and Exchange Commission.
There were no significant changes in our internal control over financial
reporting to the knowledge of our management, or in other factors that have
materially affected or are reasonably likely to materially affect these internal
controls over financial reporting subsequent to the evaluation date.
22
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Not applicable.
Item 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
There were no changes to the procedures by which security holders may recommend
nominees to our board of directors.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(i) Articles of Incorporation of the Registrant*
3(ii) Bylaws of the Registrant*
3.1 Jiaozuo Yi Wan Hotel Co., Ltd. Articles of Association*
3.2 Shunde Yi Wan Communication Equipment Plant Co., Ltd. Articles of
Association*
4 Form of Common Stock Certificate of the Registrant*
10.1 Form of Employment Agreement Jiaozuo Yi Wan Hotel Co., Ltd.*
10.2 Form of Employment Agreement Shunde Yi Wan Communication Equipment
Plant Co., Ltd.*
10.3 Land Use Permits of Shunde Yi Wan Communication Equipment Plant Co.,
Ltd.*
10.4 Land Use Permits of Jiaozuo Yi Wan Hotel Co., Ltd.*
10.5 Joint Venture Contract Jiaozuo Yi Wan Hotel Co., Ltd.*
10.6 Agreement of Shunde Yi Wan Communication Equipment Plant Co., Ltd.*
10.7 Agreement of Jiaozuo Yi Wan Maple Leaf High Technology Agriculture
Development Ltd., Co. on the Transfer of Equity Shares**
10.8 Agreement of Jiaozuo Yi Wan Hotel Co., Ltd. on the Transfer of
Equity Shares**
23
10.9 Transfer of Stock Rights and Property Rights Agreement of Jiaozuo Yi
Wan Maple Leaf High Technology Agriculture Development Co., Ltd.***
10.10 Qinyang Yi Wan Hotel Co., Ltd. Joint Venture Contract***
10.11 Joint Venture Contract with Qinyang Hotel***
10.12 Jiaozuo Foreign Trade and Economy Cooperation Bureau Reply about
Building Qinyang Yi Wan Hotel Co., Ltd.***
10.13 Agreement with Jiaozuo Yi Wan Maple Leaf High Technology
Agricultural Development Co., Ltd.***
10.14 Reply To The Transfer Of The Transfer Of The Stock Rights Of Jiaozuo
Yi Wan Maple Leaf High Technology Agricultural Development Co.,
Ltd.***
10.15 Consulting Agreement, dated as of April 15, 2004, between Yi Wan
Group, Inc. and Stanley Wunderlich, an individual*****
10.16 Consulting Agreement, dated as of June 15, 2004, between Yi Wan
Group, Inc. and Yale Yu, an individual*****
10.17 Equity Trust Agreement, dated July 30, 2004, Cheng Wan Qing, Cheng
Wan Ming and Yi Wan Group.
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
32.1 Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
- ----------------
* Denotes previously filed exhibit, filed with Form 10-12G/A on 11/07/01, SEC
File No. 000-33119, hereby incorporated by reference.
** Denotes previously filed exhibit, filed with Form 10-12G/A on 5/21/02, SEC
File No. 000-33119, hereby incorporated by reference
*** Denotes previously filed exhibit, filed with Form 10-K on 4/16/03, SEC File
No. 000-33119, hereby incorporated by reference
**** Denotes previously filed exhibit, filed with Form 10-K on 3/30/04, SEC File
No. 000-33119, hereby incorporated by reference
***** Denotes previously filed exhibit, filed with Form S-8 on 6/30/04, hereby
incorporated by reference
(b) Reports on Form 8-K
None.
24
SIGNATURES
Pursuant to the requirements 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.
Date: November 14, 2004 YI WAN GROUP, INC.
(Registrant)
/s/ CHENG WAN MING
---------------------------------------------
Name: Cheng Wan Ming
Title: President and Chief Executive Officer
/s/ WU ZEMING
---------------------------------------------
Name: Wu Zeming
Title: Chief Financial Officer
(principal financial officer)
25