Form 10KSB for EASTBRIDGE INVESTMENT GROUP CORP
14-Mar-2008
Annual Report
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Management's discussion and analysis contains statements that are forward-looking and involve risks and uncertainties. Several factors could cause actual results to differ materially from those described in such forward-looking statements. This includes the Company's ability to manage growth, involvement in litigation, competition in the health electronic transaction processing, ongoing contractual relationships, dependence upon key personnel, changes in customer demand for product and services, and the adoption of new, or changes in, accounting policies, practices and estimates and the application of such policies, practices, and estimates, and federal and state governmental regulation, specifically in the areas of electronic transaction processing in the health care industries.
The following financial data should be read in conjunction with the consolidated financial statements of EastBridge and related notes and other financial information appearing elsewhere in this report.
Recent Developments and Current Projects
EastBridge currently has nine (9) clients that it is assisting with the process to register them with the Security Exchange Commission as a public company in the United States and help them to begin trading their stock on a United States stock exchange. Several of these clients will go public in the United States and begin trading its stock in 2008. EastBridge currently has formed five (5) subsidiaries. Two of our clients (Arem Wines and Rhino Sports Drink Company) have already merged with these subsidiaries as noted below. We expect Amonics to merge with Fiber One in the near future. After the mergers are completed, then EastBridge will begin the process to take these companies public and to begin trading their stock in 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 and our subsidiaries. EastBridge's financials should also improve significantly in 2008 once EastBridge completes the SEC registration process of some of its clients. Once a client is registered as a public company and its stock begins trading in a U.S. stock market, then EastBridge will record the value of its stake in that client as revenue for that quarter and also record the value as an asset on its balance sheet. EastBridge typically receives a 10 to 20% stake in a client as consideration for its listing service.
Amonics
On November 23, 2006, we entered into a listing agreement with Amonics Limited ("Amonics"), a company registered in Hong Kong. Under the agreement, EastBridge agrees to assist Amonics to become listed as a reporting company in the United States within eighteen months from the execution date of the contract. The Company agrees to pay for certain legal, auditing, IR/PR, and advisory costs in conjunction with the listing process. Amonics issued 15% of its outstanding common stock to the Company as consideration for its services on the execution date of the contract. The shares are restricted stock and bound by the auspices of Rule 144. If we fail to list the client as a reporting company within the contract term, then the Company agrees to sell all the shares back to the client for a nominal cost, unless the parties mutually agree to an extension.
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, EastBridge agrees to assist Tianjin to become listed as a reporting company in the United States within eighteen months from the execution date of the contract. The Company agrees 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 the Company as consideration for its services on the date of execution of the contract. The shares are restricted stock and bound by the auspices of Rule 144. If we fail to list the client as a reporting company within the contract term, then the Company agrees to sell all the shares to the client for a nominal cost, unless the parties mutually agree to an extension.
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, EastBridge agrees to assist Ning Guo to become listed as a reporting company in the United States. The Company agrees 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 and bound by the auspices of Rule 144. If EastBridge fails to list the client as a reporting company within the contract term, then the Company agrees 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, EastBridge agrees to assist GinKo to become listed as a reporting company in the United States. The Company agrees 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 the Company as consideration for its services on the date of execution of the contract. The shares are restricted stock and bound by the auspices of Rule 144. If EastBridge fails to list the client as a reporting company within the contract term, then the Company agrees to sell all the shares to the client for a nominal cost, unless the parties mutually agree to an extension.
AREM Wines
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, EastBridge 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 EastBridge common shares, in exchange for the 15% stake in AREM. In subsequent events, the Company 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 EastBridge and Arem. In addition to the restricted stock agreement, EastBridge and Arem signed a second agreement. EastBridge will assist Arem to become listed on a U.S. stock exchange. EastBridge 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 SEC and the remaining $200,000 on actual listing and AREM's stock begins trading. Arem will also issue 5% of its stock to EastBridge stockholders.
Rino Two Horns
EastBridge signed an agreement to acquire a 15% stake in Rhino Two Horns (Malaysia) Sdn. Bhd., ("Rino") an energy sports drink company.
Under the terms of the original agreement, EastBridge will issue 5,000,000 restricted EBIG common shares in exchange for a 15% stake in Rhino Two Horns depending on the bilateral valuations of the shares exchanged. In January, 2008 the agreement was changed. Rhino will pay $200,000 to EastBridge in cash to have EastBridge help them go public in the United States. EastBridge will still receive 15% stake in Rhino but EastBridge will not issue any shares to Rhino. Rhino will also issue 5% of its shares to EastBridge stockholders. Rhino Two Horns (Malaysia) Sdn. Bhd., based in Malaysia, markets popular energy sports drinks containing a unique formulation to re-hydrate and refresh the body and to recover from intense sporting activities. The company primarily exports its Energy 250 and Ultra Sports 500 beverages from Malaysia to Australia, New Zealand, and Brunei. New products featuring the Acai berry, called Energy Acai Boost and Twohorns REHYDRA8 are being prepared for launch. The company is currently negotiating to market its products to China and India. More information is available at www.rhinotwohorns.com Rhino Two Horns' website in Malaysia. EastBridge modified their agreement based upon on the accomplishments Rhino Two Horns Sdn. Bhd, Malaysia has achieved recently with its success in selling to 856 7-Eleven stores in Malaysia. Rhino has also begun to distribute its drinks in India, Australia and New Zealand.
Fiber One Ltd
During July 2007, EastBridge organized Fiber One, Ltd. a Hong Kong based subsidiary of EastBridge. Fiber One is wholly owned by EastBridge. Fiber One provides services to the fiber optics industry in China and other Far East countries. Fiber One is currently providing calibration service to Amonics of Hong Kong. Fiber One is an active subsidiary of EastBridge and receiving revenue from Amonics.
Nanotec, Inc.
During July 2007, we organized Nanotec, Inc., ("Nanotec") a wholly owned subsidiary of EastBridge, 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.
General Farms Corporation
On November 27, 2007, we organized General Farms Corporation ("General Farms") a wholly owned subsidiary of EastBridge. A stock dividend of 5% of General Farm's common stock, or 10,000,000 shares, will be distributed to EastBridge's shareholders of record as of Nov 16, 2007. Under the terms of the share exchange agreement, the new stock ownership structure is: 15% owned by EastBridge and 5% owned by EastBridge's shareholders of record as of Nov 16, 2007. As of December 5, 2007, Rhino Two Horns merged with General Farms Corporation. Under the terms of the merger, the new stock ownership structure is: 15% owned by EastBridge, 5% owned by EastBridge shareholders and 80% owned by Rhino's beneficiaries.
Energy Corporation
On November 27, 2007, we organized Energy Corporation ("Energy") a wholly owned subsidiary of EastBridge. 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 EastBridge's shareholders of record on December 28, 2007. The Company has not distributed the stock dividend as of December 31, 2007. Energy Corporation, a wholly owned subsidiary of EastBridge, focuses on energy equipment manufacturers and the energy distribution business in Asia. The eligible shareholders will automatically receive the stock certificates or electronic deposits into their accounts when the Energy Corporation's stock is listed and begins trading. Energy Corporation is presently an inactive subsidiary.
China Properties Corporation
On November 27, 2007 we organized China Properties Corporation ("China Properties") a wholly owned subsidiary of EastBridge. 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 EastBridge, 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
EastBridge will 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. EastBridge will receive restricted stock of ZZH as consideration for its services.
Wenda Professional College
EastBridge will provide listing services to Wenda, a major regional professional college located just west of Shanghai, China. It 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. EastBridge will receive restricted stock in Wenda as consideration for its services.
Huang Wei Pharmaceutical Company
EastBridge will provide listing services to Huang Wei, a well know Chinese pharmaceutical company located approximately two hours from Beijing, China. EastBridge intends to list Huang Wei in a United States stock market within the next 12 to 18 months. Huang Wei has recently added over thirty drug approvals from the Chinese FDA. Its products range from the special anti-flammatory to blood pressure-lowering drugs. EastBridge will receive restricted stock of Huang Wei as consideration for its services.
Critical Accounting Policies
Stock Based Compensation
In December 2004, the FASB issued a revision of SFAS No. 123 ("SFAS No. 123(R)") that requires compensation costs related to share-based payment transactions to be recognized in the statement of operations. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be re-measured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS No. 123(R) replaces SFAS No. 123 and is effective as of the beginning of January 1, 2006. Based on the number of shares and awards outstanding as of December 31, 2005 (and without giving effect to any awards which may be granted in 2006), we do not expect our adoption of SFAS No. 123(R) in January 2006 to have a material impact on the financial statements.
FSP FAS 123(R)-5 was issued on October 10, 2006. The FSP provides that instruments that were originally issued as employee compensation and then modified, and that modification is made to the terms of the instrument solely to reflect an equity restructuring that occurs when the holders are no longer employees, then no change in the recognition or the measurement (due to a change in classification) of those instruments will result if both of the following conditions are met: (a). There is no increase in fair value of the award (or the ratio of intrinsic value to the exercise price of the award is preserved, that is, the holder is made whole), or the antidilution provision is not added to the terms of the award in contemplation of an equity restructuring; and (b). All holders of the same class of equity instruments (for example, stock options) are treated in the same manner. The provisions in this FSP shall be applied in the first reporting period beginning after the date the FSP is posted to the FASB website. The Company has adopted SP FAS 123(R)-5 but it did not have a material impact on its consolidated results of operations and financial condition.
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.
Statement of Operations Data
Years Ended December 31 Years Ended December 31
2007 2006
Revenues $ 441,937 $ -
Operating and Other Expenses 981,697 -
Net Loss $ (539,760 ) $ -
Balance Sheet Data:
Years Ended December 31 Years Ended December 31
2007 2006
Current Assets $ 354,543 $ 47,367
Total Assets 503,343 47,367
Current Liabilities 575,625 387,040
Non Current Liabilities 1,491 -
Total Liabilities 577,116 387,040
Working Capital (Deficit) (221,082 ) (339,673 )
Shareholders'Equity (Deficit) $ (73,773 ) $ (339,673 )
The Company has declared no common stock cash dividends since its inception.
RESULTS OF OPERATIONS
Fiscal Year End December 31, 2007, Compared to Fiscal Year End December 31, 2006
Revenues for Fiscal 2007 increased to $441,937 from $0 during Fiscal 2006 as 100% increase. This increase in revenue is directly the result of implementing the Company's strategic direction in core operations. This included discontinuing declining or unprofitable and business sectors and implementing the Company's business plan.
Selling expenses for the fiscal 2007 increased to $288,936 as compared to fiscal 2006 of $0 a 100% increase. This increase is primarily the result of marketing efforts and includes traveling and various meetings in China, India and other Far East countries to implement the Company's business plan.
General and administrative expenses for the fiscal 2007 increased to $710,172 as compared to fiscal 2006 of $0 a 100% increase. This increase is attributed to the Company's increase use of SEC attorneys, SEC auditors, Investment Relations contractors and Public Relations contractors and increase due to expenses of public company requirements.
The loss for fiscal 2007 increased to ($539,760) as compared to fiscal 2006 of ($376.414). The increase is due to the implementation of the Company's business plan and expense related to that plan.
No tax benefit was recorded on the expected operating loss for fiscal 2007 and 2006 as required by Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. For the quarter ended we do not expect to realize a deferred tax asset and it is uncertain, therefore we have provided a 100% valuation of the tax benefit and assets until we are certain to experience net profits in the future to fully realize the tax benefit and tax assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating requirements have been funded primarily from some of our clients that have paid us in cash for the Company to provide financing and consulting services. The Company believes that the cash flows from its financing services are inadequate to repay the capital obligations and has relied upon loans from its officers to sustain its operations.
Cash (used) provided by operating activities for the fiscal year 2007 was ($16,595) compared to $43,736 for fiscal year 2006. The Company's focus on core operations results in an increase in implementing its clients financing and consulting services. The company has grown its operations to begin to reduce the deficit cash flow positions. However the company is still operating in a deficit. The company issued common stock valued at for fiscal 2007 of $665,660 for debt and services rendered. The company issued 2,000,000 of common stock to Arem Wines in exchange for 15% of the company for $140,000.
Cash (used) by financing activities was ($30,218) for fiscal 2007 as compared to $0 for fiscal 2006. Financing activities primarily consisted of proceeds from affiliates and loans and repayment of debt.
The Company has used funds advanced from its officers. As of fiscal 2007 the Company maintained a note payable from its officer of $25,000 and a note receivable of $8,800 as compared to fiscal 2006 of $0 there is not accrued interest on these notes.
Other Considerations
There are numerous factors that affect the business and the results of its operations. Sources of these factors include general economic and business conditions, federal and state regulation of business activities, the level of demand for product services, the level and intensity of competition in the financing industry, and the ability to develop new services based on new or evolving technology and the market's acceptance of those new services, the Company's ability to timely and effectively manage periodic product transitions, the services, customer and geographic sales mix of any particular period, and our ability to continue to improve our infrastructure including personnel and systems to keep pace with the Company's anticipated rapid growth.
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