Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is entered
into this 29th day of July, 2005, to be deemed effective on the Closing Date as
defined below by and among Andean Development Corporation, a corporation
organized under the laws of the State of Florida (the "Andean"); Perfect Dream
Limited, a corporation organized under the laws of British Virgin Islands (the
"Perfect Dream"); and seven individuals who are the stockholders of Perfect
Dream (the "Perfect Dream Stockholders"), a list of whom is attached hereto as
Exhibit "A").
WITNESSETH:
RECITALS
WHEREAS, the respective Boards of Directors of Andean and Perfect Dream
have adopted resolutions pursuant to which Andean shall acquire and the Perfect
Dream Stockholders shall exchange for shares of the common capital stock of
Andean 100% of the outstanding common stock of Perfect Dream ("Perfect Dream
Shares"); and
WHEREAS, the sole consideration for the exchange of the Perfect Dream
Shares shall be the receipt by the Perfect Dream Stockholders of shares of the
common capital stock of Andean, $.0001 par value per share, as more particularly
set forth in Exhibit "B" hereto. The shares of Andean's common stock shall be
deemed "restricted securities" as defined in Rule 144 of the Securities Act of
1933, as amended (the "Act"); and
WHEREAS, the Perfect Dream Stockholders shall acquire in exchange such
"restricted securities" of Andean in a reorganization within the meaning of
Section 368(a) (1) (B) of the Internal Revenue Code of 1986, as amended, and/or
any other "tax free" exemptions thereunder that may be available for this
exchange, if and only to the extent that the Internal Revenue Code applies to
this Agreement and the transactions contemplated thereby;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, it is agreed:
Section 1
Exchange of Stock
1.1 Transfer and Number of Shares. The Perfect Dream Stockholders agree
to transfer to Andean at the closing (the "Closing") the Perfect Dream Shares,
in exchange for newly issued and restricted shares of common stock of Andean as
outlined in Exhibit "C". In connection with the acquisition of the Perfect Dream
Shares, Andean shall issue to the Perfect Dream Stockholders an aggregate of
shares of Andean common stock, and such shares at the Closing shall equal to
7,673,325 of the issued and outstanding shares of Andean, and shall be issued
and/or transferred as set forth on Exhibit C attached hereto. After the Closing,
there will be 10,511,388 outstanding shares of common stock of the reorganized
Andean.
1.2 Exchange of Certificates by Perfect Dream Stockholders. The
transfer of the Perfect Dream Shares shall be effected by the delivery to Andean
at the Closing of stock certificates duly endorsed in blank or accompanied by
stock powers executed in blank with all signatures witnessed or guaranteed to
the satisfaction of Andean and with all necessary transfer taxes and other
revenue stamps affixed and acquired at the Perfect Dream Stockholders' expense.
1.3 Convertible Loan. The $57,000 convertible promissory notes of
Andean (as attached as Exhibit D) shall be converted into 2,500,000 shares of
Andean upon Closing. Such convertible promissory notes are convertible upon any
"change of control" into a number of shares of common stock equal to $57,000
divided by the book value of the Company immediately prior to the change of
control, but in any event not less than $.0001 per share.
1.4 Further Assurances. At the Closing and from time to time
thereafter, the Perfect Dream Stockholders shall execute such additional
instruments and take such other action as Andean may request in order to
exchange and transfer clear title and ownership in the Perfect Dream Shares to
Andean.
1.5 Filings. A Certificate of Amendment to the Certificate of
Incorporation of the Company with the Florida Secretary of State changing the
name of the Company to "Perfect Dream" or a similar name as may be determined by
the Board of Directors, and increasing authorized capital stock to 1,000,000,000
shares of common stock and 5,000,000 shares of Preferred Stock, following any
required notifications to shareholders.
1.6 Stock Split. The Company shall effect a one for thirty reverse
stock split prior or after to Closing without shareholder approval pursuant to
Florida Business Corporation Act Section 607.10025, with fractional shares being
rounded to the nearest whole share and a record date as may be determined by the
officers of the Corporation.
1.7 Closing. The Closing shall be deemed to have occurred on the
Effective Date (as hereinafter defined). As used in this Agreement, the term
Closing Date shall be defined to be the same as the Effective Date.
1.8 Effective Date. The transactions contemplated by this Agreement
shall be deemed consummated at such time as Andean shall have filed with the US
Securities and Exchange Commission ("SEC") a Current Report on Form 8-K which
reports the change in control transaction effected by this Agreement and
includes therein, all required audited financial information of Perfect Dream
and its controlled subsidiary (the "Current Report"). If the Current Report is
not filed on or before August 5, 2005, Andean shall have the right, in its sole
discretion, to either deem this Agreement terminated or provide Perfect Dream
with an extension for filing the Current Report. The effective date (the
"Effective Date") of this Agreement shall thus be the date Andean files the
Current Report with the SEC. In addition, for the Closing to be deemed to have
occurred as of the Effective Date, all of the other conditions precedent to the
obligations of each of the parties hereto as hereinafter set forth shall have
been satisfied or shall have been waived.
1.9 Resignations of Present Executive Officers and Designation of New
Directors and Executive Officers. On the Closing Date, the present directors and
executive officers of Andean shall designate the directors and executive
officers nominated by the Perfect Dream Stockholders to serve in their place and
stead, until the next respective annual meeting of the stockholders and the
Board of Directors of the reorganized Andean, and until their respective
successors shall be elected and qualified or until their respective prior
resignations or terminations. The following shall be appointed directors and
officers of Andean upon the closing of the transactions contemplated herein: Xx.
Xxxx Xx Xxx as Director/President/Chief Executive Officer/Secretary, Xxx. Xxx
Xxx as Chief Financial Officer, Mr. Sun Jia Jun (Xxxxxxx) as Chief Operating
Officer, Xx.Xxx Xxxx Xxxx as Director and Xx. Xxx Ru Qin as Director. The
current directors and executive officers shall resign, in seriatim, on the
Closing Date.
Section 2
Closing
The Closing shall be effected by telephone and facsimile on the Closing Date, at
the office of King & Wood, unless another place or time is agreed upon in
writing by the parties. The Closing may also be accomplished by wire, express
mail or other courier service, conference telephone communications or as
otherwise agreed by the respective parties or their duly authorized
representatives.
Section 3
Representations and Warranties of Andean
Except as set forth in Andean's disclosure schedule, Andean represents
and warrants to, and covenants with, the Perfect Dream Stockholders and Perfect
Dream as follows:
3.1 Corporate Status; Compliance with Securities Laws. Andean is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida and is licensed or qualified as a foreign corporation in
all jurisdictions in which the nature of its business or the character or
ownership of its properties makes such licensing or qualification necessary.
Andean is a publicly-held company with a trade symbol "ADCC" on the OTCBB, and
Andean is not in violation of any applicable federal or state securities laws,
rules or regulations. Except as set forth above, there is at present no
established trading market for Andean's securities.
3.2 Capitalization. The authorized capital stock of Andean at Closing
will consist of 5,000,000 shares of preferred stock, of which none has been
issued and outstanding; and 100,000,000 shares of common voting stock, of which
3,835,100 shares are issued and outstanding, all fully paid and non-assessable.
There are no subscriptions, warrants, rights or calls or other commitments or
agreements to which Andean is a party or by which it is bound, pursuant to which
Andean is or may be required to issue or deliver securities of any class. Other
than as set forth in Andean's disclosure schedule, there are no outstanding
securities convertible or exchangeable, actually or contingently, into common
stock or any other securities of Andean. After the Closing, there will be
10,511,388 outstanding shares of common stock, on a fully diluted basis, of
Andean.
3.3 Cancellation of Warrant and Option. The Redeemable Common Stock
Purchase Warrants extended on August 31, 2001 has been cancelled. In addition,
Andean's Stock Option Plan and Directors Stock Option Plan have been cancelled
as well. As a result, Andean has no outstanding warrants and options as of the
Closing.
3.4 Financial Statements. The financial statements of Andean furnished
to the Perfect Dream Stockholders and Perfect Dream, consisting of audited
financial statements for the years ended December 31, 2003, 2004, and audited
interim financial statements for the six months ending June 30, 2005, as filed
with the SEC and incorporated herein by reference, are correct and fairly
present the financial condition of Andean at such dates and for the periods
involved; such statements were prepared in accordance with generally accepted
accounting principles consistently applied, and no material change has occurred
in the matters disclosed therein. Such financial statements do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading.
3.5 Undisclosed Liabilities. Andean has no liabilities of any nature
except to the extent reflected or reserved against in its balance sheets,
whether accrued, absolute, contingent or otherwise, including, without
limitation, tax liabilities and interest due or to become due.
3.6 Interim Changes. Since June 30, 2005, there have been no (i)
changes in financial condition, assets, liabilities or business of Andean which,
in the aggregate, have been materially adverse; (ii) damages, destruction or
losses of or to property of Andean, payments of any dividend or other
distribution in respect of any class of stock of Andean, or any direct or
indirect redemption, purchase or other acquisition of any class of any such
stock; or (iii) increases paid or agreed to in the compensation, retirement
benefits or other commitments to its employees.
3.7 Title to Property. Andean has good and marketable title to all
properties and assets, real and personal, reflected in its balance sheets, and
the properties and assets of Andean are not subject to any mortgage, pledge,
lien or encumbrance, with respect to which no default exists.
3.8 Litigation. There is no litigation or proceeding pending, or to the
knowledge of Andean, threatened, against or relating to Andean, its properties
or business. Further, no officer, director or person who may be deemed to be an
"affiliate" of Andean is party to any material legal proceeding which could have
an adverse effect on Andean (financial or otherwise), and none is party to any
action or proceeding wherein any has an interest adverse to Andean.
3.9 Books and Records. Andean has delivered to legal counsel for the
Perfect Dream Stockholders and Perfect Dream all of Andean's books, records,
contracts and other corporate documents which are true and correct in all
material respects.
3.10 Tax Returns. Andean has duly filed all tax returns required to be
filed by it other than tax returns (individually and in the aggregate) where the
failure to file would have no material adverse effect on the business or
prospects of Andean. All such tax returns were, when filed, and to the knowledge
of Andean are, accurate and complete in all material respects and were prepared
in conformity with applicable laws and regulations. Andean has paid or will pay
in full or has adequately reserved against all taxes otherwise assessed against
it through the Closing Date. Andean is not a party to any pending action or
proceeding by any governmental authority for the assessment of any tax, and, to
the knowledge of Andean, no claim for assessment or collection of any tax
related to Andean has been asserted against Andean that has not been paid. There
are no tax liens upon the assets of Andean. There is no valid basis, to Andean's
knowledge, for any assessment, deficiency, notice, 30-day letter or similar
intention to assess any tax to be issued to Andean by any governmental
authority.
3.11 Confidentiality. Andean's current directors and officers and their
representatives will keep confidential any information which they obtain from
the Perfect Dream Stockholders or from Perfect Dream concerning the properties,
assets and business of Perfect Dream.
3.12 Corporate Authority. Andean has full corporate power and authority
to enter into this Agreement and to carry out its obligations hereunder and will
deliver to the Perfect Dream Stockholders and Perfect Dream or their respective
representatives at the Closing a certified copy of resolutions of its Board of
Directors authorizing execution of this Agreement by Andean's officers and
performance thereunder, and that the directors adopting and delivering such
resolutions are the duly elected and incumbent directors of Andean.
3.13 Due Authorization. At closing, the execution of this Agreement and
performance by Andean hereunder will have been duly authorized by all requisite
corporate action on the part of Andean, and this Agreement will constitute a
valid and binding obligation of Andean and performance hereunder will not
violate any provision of the Articles of Incorporation or other documents,
Bylaws, agreements, mortgages or other commitments of Andean, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application now or
hereafter in effect relating to or affecting the enforcement of creditors' right
generally and the application of general equitable principles in any action,
legal or equitable.
3.14 Environmental Matters. Andean has no knowledge of any assertion by
any governmental agency or other regulatory authority of any environmental lien,
action or proceeding, or of any cause for any such lien, action or proceeding
related to the business operations of Andean. There are no substances or
conditions which may support a claim or cause of action against Andean or any of
Andean's current or former officers, directors, agents or employees, whether by
a governmental agency or body, private party or individual, under any Hazardous
Materials Regulations. "Hazardous Materials" means any oil or petrochemical
products, PCB's, asbestos, urea formaldehyde, flammable explosives, radioactive
materials, solid or hazardous wastes, chemicals, toxic substances or related
materials, including, without limitation, any substances defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials" or "toxic substances" under any applicable federal or state laws or
regulations. "Hazardous Materials Regulations" means any regulations governing
the use, generation, handling, storage, treatment, disposal or release of
hazardous materials, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act and the Federal Water Pollution Control Act.
3.15 Access to Information Regarding Perfect Dream. Andean acknowledges
that it has been delivered copies of documentation containing all material
information respecting Perfect Dream (including its 100% owned subsidiary,
Goldenway Nanjing Garments Co, Ltd (the "Goldenway China"), and Perfect Dream'
present and contemplated business operations, potential acquisitions, and
management; that it has had a reasonable opportunity to review such
documentation and discuss it, to the extent desired, with its legal counsel,
directors and executive officers; that it has had, to the extent desired, the
opportunity to ask questions of and receive responses from the directors and
executive officers of Perfect Dream, and with the legal and accounting firms of
Perfect Dream, with respect to such documentation; and that to the extent
requested, all questions raised have been answered to Andean's complete
satisfaction.
3.16 Assets and Liabilities of Andean at Closing. Andean shall have no
assets and no liabilities on the Closing Date. Andean has good and marketable
title to all of the assets and properties as reflected on its most recent
balance sheet.
3.17 Rule 144. To the best knowledge of Andean, the shares of Andean
issued in exchange for the Perfect Dream Shares to the Perfect Dream
Stockholders shall be eligible for resale pursuant to Rule 144, without
registration under the Act, after satisfaction by the Perfect Dream Stockholders
and Andean of the provisions established by Rule 144, generally, and the
Securities Exchange Act of 1934.
3.18 Contracts and Other Commitments. Except as set forth in Andean's
public filings, Andean is not a party to any contracts or agreements.
3.19 Compliance with Laws and Regulations. Andean has complied and is
presently complying, in all material respects, with all laws, rules,
regulations, orders and requirements (federal, state and local and foreign)
applicable to it in all jurisdictions where the business of Andean is conducted
or to which Andean is subject.
3.20 No Omissions or Untrue Statements. To the best of Andean's
knowledge no representation or warranty made by Andean in this Agreement, the
Andean disclosure schedule or in any certificate of Andean officer required to
be delivered pursuant to the terms of this Agreement, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading as of the date hereof and as of the Closing Date.
Section 4
Representations, Warranties and Covenants of Perfect Dream
and the Perfect Dream Stockholders
Except as set forth in Perfect Dream and Perfect Dream Stockholders
disclosure schedule, Perfect Dream and the Perfect Dream Stockholders represent
and warrant to, and covenant with, Andean as follows:
4.1 Ownership of Perfect Dream. The Perfect Dream Stockholders own the
Perfect Dream Shares free and clear of any liens or encumbrances of any type or
nature whatsoever, and have full right, power and authority to convey the
Perfect Dream Shares that are owned by them without qualification.
4.2 Ownership of Goldenway China. Perfect Dream owns 100% of Goldenway
China, free and clear of any liens or encumbrances of any type or nature
whatsoever, and has full right, power and authority to convey the Goldenway
China ownership that it owns without qualification.
4.3 Corporate Status of Perfect Dream. Perfect Dream is a corporation
duly organized, validly existing and in good standing under the laws of British
Virgin Islands, and is licensed or qualified as a foreign corporation in all
jurisdictions or foreign countries and provinces in which the nature of Perfect
Dream' business or the character or ownership of Perfect Dream' properties makes
such licensing or qualification necessary.
4.4 Corporate Status of Goldenway China. Goldenway China is an wholly
foreign owned enterprise duly organized, validly existing and in good standing
under the laws of the People's Republic of China, and is licensed or qualified
as a foreign corporation in all states of the United States or foreign countries
and provinces in which the nature of its business or the character or ownership
of its properties makes such licensing or qualification necessary.
4.5 Capitalization of Perfect Dream. The authorized capital stock of
Perfect Dream consists of 50,000 shares of common stock, $1.00 par value per
share, of which 50,000 shares are issued and outstanding, and which are fully
paid and non-assessable. There are no outstanding options, warrants or calls
pursuant to which any person has the right to purchase any authorized and
unissued common or other securities of Perfect Dream.
4.6 Capitalization of Goldenway China. The paid-in capital of Goldenway
China is approximately USD 2,512,105.78, all fully paid and non-assessable.
There are no outstanding options, warrants or calls pursuant to which any person
has the right to purchase any authorized and unissued common or other equities
of Goldenway China.
4.7 Financial Statements. The financial statements of Perfect Dream,
which includes the financial statements of Goldenway China, furnished to Andean,
consisting of an audited compiled balance sheet and income statement for the
year ended December 31, 2003 and 2004, attached hereto as Exhibit "F" and "F-1",
respectfully, and incorporated herein by reference, are correct and fairly
present the combined financial condition of Perfect Dream and Goldenway China as
of these dates and for the periods involved; such statements were prepared in
accordance with US generally accepted accounting principles consistently
applied, and no material change has occurred in the matters disclosed therein.
These financial statements do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading.
4.8 Undisclosed Liabilities of Perfect Dream. Perfect Dream has no
material liabilities of any nature except to the extent reflected or reserved
against in its balance sheet, whether accrued, absolute, contingent or
otherwise, including, without limitation, tax liabilities and interest due or to
become due.
4.9 Undisclosed Liabilities of Goldenway China. Goldenway China has no
material liabilities of any nature except to the extent reflected or reserved
against in its balance sheet, whether accrued, absolute, contingent or
otherwise, including, without limitation, tax liabilities and interest due or to
become due.
4.10 Interim Changes of Perfect Dream. Since March 31, 2005, there have
been no (i) changes in the financial condition, assets, liabilities or business
of Perfect Dream, which in the aggregate, have been materially adverse; (ii)
damages, destruction or loss of or to the property of Perfect Dream, payment of
any dividend or other distribution in respect of the capital stock of Perfect
Dream, or any direct or indirect redemption, purchase or other acquisition of
any such stock; or (iii) increases paid or agreed to in the compensation,
retirement benefits or other commitments to their employees.
4.11 Title to Property of Perfect Dream. Perfect Dream has good and
marketable title to all properties and assets, real and personal, proprietary or
otherwise, reflected in the Perfect Dream balance sheet.
4.12 Title to Property of Goldenway China. Goldenway China has good and
marketable title to all properties and assets, real and personal, proprietary or
otherwise, reflected in its balance sheet.
4.13 Litigation of Perfect Dream. There is no litigation or proceeding
pending, or to the knowledge of Perfect Dream, threatened, against or relating
to Perfect Dream or its properties or business. Further, no officer, director or
person who may be deemed to be an affiliate of Perfect Dream is party to any
material legal proceeding which could have an adverse effect on Perfect Dream
(financial or otherwise), and none is party to any action or proceeding wherein
any has an interest adverse to Perfect Dream.
4.14 Litigation of Goldenway China. There is no litigation or
proceeding pending, or to the knowledge of Goldenway China threatened, against
or relating to Goldenway China or its properties or business. Further, no
officer, director or person who may be deemed to be an affiliate of Goldenway
China is party to any material legal proceeding which could have an adverse
effect on Goldenway China (financial or otherwise), and none is party to any
action or proceeding wherein any has an interest adverse to Goldenway China.
4.15 Books and Records of Perfect Dream. The Perfect Dream has (i)
given to Andean and its representatives full access to all of its offices,
books, records, contracts and other corporate documents and properties so that
Andean could inspect and audit them; and (ii) furnished such information
concerning the properties and affairs of Perfect Dream as Andean has requested.
4.16 Books and Records of Goldenway China. Goldenway China has (i)
given to Andean and its representatives full access to all of its offices,
books, records, contracts and other corporate documents and properties so that
Andean could inspect and audit them; and (ii) furnished such information
concerning the properties and affairs of Goldenway China as Andean requested.
4.17 Tax Returns of Perfect Dream. Perfect Dream has filed all income
tax or other tax returns required to be filed in British Virgin Islands or has
received currently effective extensions of the required filing dates.
4.18 Tax Returns of Goldenway China. Goldenway China has filed all
income or other tax returns required to be filed in China or has received
currently effective extensions of the required filing dates.
4.19 Investment Intent. The Perfect Dream Stockholders are acquiring
the securities to be exchanged and delivered to them under this Agreement for
investment and not with a view to the sale or distribution thereof, and they
have no commitment or present intention to sell or distribute the Andean
securities to be received hereunder.
4.20 Corporate Authority of Perfect Dream. Perfect Dream and the
Perfect Dream Stockholders have full corporate power and authority to enter into
this Agreement and to carry out their obligations hereunder and will deliver to
Andean or its representative at the Closing certified copies of resolutions of
Perfect Dream' Board of Directors authorizing execution of this Agreement by its
officers and performance thereunder.
4.21 Due Authorization. Execution of this Agreement and performance by
Perfect Dream and the Perfect Dream Stockholders hereunder have been duly
authorized by all requisite corporate action on the part of Perfect Dream and
the Perfect Dream Stockholders, and this Agreement constitutes a valid and
binding obligation of Perfect Dream and the Perfect Dream Stockholders and
performance hereunder will not violate any provision of the Articles of
Association or other Charter documents, Bylaws, agreements, mortgages or other
commitments of Perfect Dream or the Perfect Dream Stockholders, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application now or
hereafter in effect relating to or affecting the enforcement of creditors'
rights generally and the application of general equitable principles in any
action, legal or equitable.
4.22 Environmental Matters. Perfect Dream and Goldenway China have no
knowledge of any assertion by any governmental agency or other regulatory
authority of any environmental lien, action or proceeding, or of any cause for
any such lien, action or proceeding related to the business operations of
Perfect Dream or its predecessors. In addition, to the best knowledge of Perfect
Dream and Goldenway China, there are no substances or conditions which may
support a claim or cause of action against Perfect Dream and Goldenway China or
any of its current or former officers, directors, agents, employees or
predecessors, whether by a governmental agency or body, private party or
individual, under the current Chinese laws.
4.23 Access to Information Regarding Andean. Perfect Dream and the
Perfect Dream Stockholders acknowledge that they have been delivered copies of
what has been represented to be documentation containing all material
information respecting Andean and its present and contemplated business
operations, potential acquisitions, management and other factors, by delivery to
them and/or by access to such information in the XXXXX Archives of the
Securities and Exchange Commission at xxx.xxx.xxx; that they have had a
reasonable opportunity to review such documentation and to discuss it, to the
extent desired, with their legal counsel, directors and executive officers; that
they have had, to the extent desired, the opportunity to ask questions of and
receive responses from the directors and executive officers of Andean, and with
the legal and accounting firms of Andean, with respect to such documentation;
and that to the extent requested, all questions raised have been answered to
their complete satisfaction.
4.24 Residency of Perfect Dream Stockholders. Each of the Perfect Dream
Stockholders is a non-resident of the United States.
Section 5
Conditions Precedent to Obligations of Perfect Dream
and the Perfect Dream Stockholders
All obligations of Perfect Dream and the Perfect Dream Stockholders
under this Agreement are subject, at their option, to the fulfillment, before or
at the Closing, of each of the following conditions:
5.1 Representations and Warranties True at Closing. The representations
and warranties of Andean contained in this Agreement shall be deemed to have
been made again at and as of the Closing and shall then be true in all material
respects and shall survive the Closing.
5.2 Due Performance. Andean shall have performed and complied with all
of the terms and conditions required by this Agreement to be performed or
complied with by it before the Closing.
5.3 Officers' Certificate. Perfect Dream shall have been furnished with
a certificate signed by the President of Andean, in such capacity, attached
hereto as Exhibit G and incorporated herein by reference, dated as of the date
hereof, and updated as necessary as of the Closing, certifying (i) that all
representations and warranties of Andean contained herein are true and correct;
and (ii) that since the date of the financial statements as described in Section
3.4, 3.5, 3.7, and 3.8 of this Agreement, there has been no material adverse
change in the financial condition, business or properties of Andean, taken as a
whole
5.4 Assets and Liabilities of Andean. Andean shall have no assets and
no liabilities at Closing, and all costs, expenses and fees incident to the
Agreement shall have been paid.
5.5 Documents. All documents and instruments required hereunder to be
delivered by Andean at the Closing shall be delivered in form and substance
reasonably satisfactory to Perfect Dream and Perfect Dream Stockholders and
their counsel. Such documents shall include but not limited to
(1) an executed Board Resolution ratifying all of the past corporate
activities as Exhibit H;
(2) an official shareholders' list issued by Transfer Agent verifying
the total outstanding shares is 3,835,100 shares;
(3) Documents filed with SEC, in correcting the number of the
authorized shares to 100,000,000 as stated in the Amended Articles of
Incorporation of March 29, 2004 and the number of shares issued in the
transaction of May 5, 2003 to 1,425,000 shares;
(4) Board Resolution and legal documents of abolishment of 14C filed on
September 8, 2003, which has been filed with SEC;
(5) a legal opinion issued by a licensed securities lawyer practicing
in the United States, regarding any and all possible liabilities that the new
directors and officers designated by Perfect Dream to Andean may assume about
the past delinquent filings with SEC by Andean.
5.6 Litigation. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or threatened.
5.7 Material Adverse Change. Except for operations in the ordinary
course of business, no material adverse change shall have occurred subsequent to
March 31, 2005 in the financial position, results of operations, assets, or
liabilities of Andean, nor shall any event or circumstance have occurred which
would result in a material adverse change in the financial position, results of
operations, assets, or liabilities of Andean.
5.8 Approval Board of Directors. The board of directors of Andean shall
have approved this Agreement and the transactions contemplated hereby.
5.9 Satisfaction with Due Diligence. Perfect Dream shall have been
satisfied with its due diligence review of Andean its subsidiaries and their
operations.
5.10 Resignations of Present Executive Officers and Designation of New
Directors and Executive Officers. On the Closing Date, the present director and
executive officers of Andean shall resign and the following individuals shall be
appointed the director and executive officers of Andean: Xx. Xxxx Xx Xxx as
Director/President/Chief Executive Officer/Secretary, Xxx. Xxx Xxx as Chief
Financial Officer, Mr. Sun Jia Jun (Xxxxxxx) as Chief Operating Officer, Xx.Xxx
Xxxx Xxxx as Director and Xx. Xxx Ru Qin as Director.
5.11 Regulatory Compliance. Andean shall have received any and all
regulatory approvals and consents required to complete the transactions
contemplated hereby.
Section 6
Conditions Precedent to Obligations of Andean
In addition to the filing of the Current Report, all obligations of
Andean under this Agreement are subject, at Andean's option, to the fulfillment,
before or at the Closing, of each of the following conditions:
6.1 Representations and Warranties True at Closing. The representations
and warranties of Perfect Dream, the Perfect Dream Stockholders and Goldenway
China contained in this Agreement shall be deemed to have been made again at and
as of the Closing and shall then be true in all material respects and shall
survive the Closing.
6.2 Due Performance. Perfect Dream and the Perfect Dream Stockholders
shall have performed and complied with all of the terms and conditions required
by this Agreement to be performed or complied with by them before the Closing.
6.3 Officers' Certificate. Andean shall have been furnished with a
certificate signed by the President of Perfect Dream, in such capacity, attached
hereto as Exhibit "I" and incorporated herein by reference, dated as of the date
hereof, and updated as necessary as of the Closing, certifying (i) that all
representations and warranties of Perfect Dream and the Perfect Dream
Stockholders contained herein are true and correct; and (ii) that since the date
of the financial statements (Exhibit F & F-1), there has been no material
adverse change in the financial condition, business or properties of Perfect
Dream, taken as a whole.
Section 7
Mutual Indemnification
7.1 Mutual Indemnification. The Parties hereto and their agents or
assigns hereby agree to indemnify and hold each other harmless from and against
all losses, claims, damages, liabilities, costs or expenses (including
reasonable attorney's fees, collectively the "Liabilities"), joint and several,
arising from the performance of this Agreement, whether or not either Party is
party to such dispute. This indemnity shall not apply, however, and the
indemnifying Party shall indemnify and hold the other Party, its affiliates,
control persons, officers, employees and agents harmless from and against all
liabilities, where a court of competent jurisdiction has made a final
determination that the indemnifying Party has engaged in gross recklessness and
willful misconduct in the representations and performance of its obligations
hereunder, which have given rise to the loss, claim, damage, liability, cost or
expense sought to be recovered thereunder.
Section 8
General Provisions
8.1 Further Assurances. At any time, and from time to time, after the
Closing, the parties will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the intent
and purposes of this Agreement.
8.2 Waiver. Any failure on the part of any party hereto to comply with
any its or their obligations, agreements or conditions hereunder may only be
waived in writing by the party to whom such compliance is owed.
8.3 Brokers. Each party represents to the other parties hereunder that
there are two brokers or finders retained in connection with this Agreement, the
brokers or finders will be compensated with 210,226 shares at closing (63,068
and 147,158 Shares for King Ocean Overseas Holdings Limited and Sino-Forpros
International, Inc., respectively); each party agrees to indemnify and hold
harmless the other parties against any fee, loss or expense arising out of
claims by brokers or finders employed or alleged to have been employed by
he/she/it.
8.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid first-class registered or certified mail, return receipt requested, as
follows:
If to Andean's Management Prior to Closing:
Xx. Xxxx Xxxxxxxx
Karlsson Law Corporation
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX, XXXXXX
If to Perfect Dream:
Xxxxxxx Law
King and Wood LLP
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000 , USA
Tel: (000) 0000000
Fax: (0000) 0000000
If to the Perfect Dream Stockholders:
Xxxxxxx Law
King and Wood LLP
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000 , USA
Tel: (000) 0000000
Fax: (000) 000 0000
8.5 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any other agreement,
representation or communication, whether oral or written, between the parties
hereto relating to the transactions contemplated herein or the subject matter
hereof.
8.6 Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.7 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Florida. Any actions
permitted hereunder shall be brought in the State of Florida.
8.8 Assignment. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns.
8.9 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.10 Default. In the event of any default hereunder, the prevailing
party in any action to enforce the terms and provisions hereof shall be entitled
to recover reasonable attorney's fees and related costs.
8.11 Expenses. Each party shall each pay its own expenses incident to
the negotiation, preparation, and carrying out of this Agreement, including
legal and accounting and audit fees. Andean's expenses shall be paid prior to
the Closing.
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Reorganization effective the latest date hereof.
ANDEAN DEVELOPMENT CORPORATION
-------------------------
By/s/
Date:
PERFECT DREAM LIMITED
-------------------------
By/s/
Date:
STOCKHOLDERS OF PERFECT DREAM LIMITED
----------------------------
XXXX Xx hua
-----------------------------
XXXX Xxxx Dong
-----------------------------
LI Ning
-----------------------------
SUN Jia Jun
-----------------------------
XXX Xxx Xing
-----------------------------
WEI Ru Qin
-----------------------------
Xxxxx Xxxxxxx HEVICON
EXHIBIT A
THE PERFECT DREAM STOCKHOLDERS
---------- ---------------------------------
1 XXXX Xx Hua
---------- ---------------------------------
2 XXX Xxxx Dong
---------- ---------------------------------
3 LI Ning
---------- ---------------------------------
4 SUN Jia Jun
---------- ---------------------------------
5 XXX Xxx Xing
---------- ---------------------------------
6 WEI Ru Qin
---------- ---------------------------------
7 Xxxxx Xxxxxxx HEVICON
---------- ---------------------------------
EXHIBIT B
--------------------------------------------------------------------------------
Name of Shareholders Newly Issued Shares of Andean
----------------------------------- ----------------------------------------
XXXX Xx Hua 6,238,413
----------------------------------- ----------------------------------------
XXX Xxxx Dong 498,766
----------------------------------- ----------------------------------------
LI Ning 383,666
----------------------------------- ----------------------------------------
SUN Jia Jun 230,200
----------------------------------- ----------------------------------------
XXX Xxx Xing 115,100
----------------------------------- ----------------------------------------
WEI Ru Qin 115,100
----------------------------------- ----------------------------------------
Xxxxx Xxxxxxx HEVICON 92,080
----------------------------------- ----------------------------------------
Total 7,673,325
--------------------------------------------------------------------------------
EXHIBIT C
--------------------------------------------------------------------------------
Name of Shareholders Perfect Dream Shares Held
----------------------------------- ----------------------------------------
XXXX Xx Hua 40,650
----------------------------------- ----------------------------------------
XXX Xxxx Dong 3,250
----------------------------------- ----------------------------------------
LI Ning 2,500
----------------------------------- ----------------------------------------
SUN Jia Jun 1,500
----------------------------------- ----------------------------------------
XXX Xxx Xing 750
----------------------------------- ----------------------------------------
WEI Ru Qin 750
----------------------------------- ----------------------------------------
Xxxxx Xxxxxxx HEVICON 600
----------------------------------- ----------------------------------------
Total 50,000
--------------------------------------------------------------------------------
Exhibit D
Name of note holders Amount owed Shares converted
Worldwide Capital Asia Corp. $11,800 517,544
Carlington Enterprises Corp. $11,800 517,544
Worldwide Associates Inc. 5,000 219,298
Affiliated Holdings Asia Pcific 5,000 219,298
Oriental Blossom Limited 5,160 226,316
National Group of Companies MFG 11,400 500,000
SMC 6,840 300,000
Total $57,000 2,500,000
Exhibit F
PERFECT DREAM LIMITED
AND SUBSIDIARY
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
PERFECT DREAM LIMITED AND SUBSIDIARY
CONTENTS
Pages
--------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm 1
--------------------------------------------------------------------------------
Balance Sheets as of December 31, 2004 (Consolidated) and 2003 2
--------------------------------------------------------------------------------
Statements of Operations and Comprehensive income for the years ended
December 31, 2004 (Consolidated) and 2003 3
--------------------------------------------------------------------------------
Statements of Stockholders' Equity for the years ended December 31, 2004
(Consolidated) and 2003 4
--------------------------------------------------------------------------------
Statements of Cash Flows for the years ended December 31, 2004
(Consolidated) and 2003 5
--------------------------------------------------------------------------------
Notes to Financial Statements 6 - 10
--------------------------------------------------------------------------------
Xxxxx X.X. Xxxxxx & Co
Certified Public Accountants
(A member of Kreston International)
[OBJECT OMITTED]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of:
Perfect Dream Limited and subsidiary
We have audited the accompanying balance sheets of Perfect Dream Limited and
subsidiary, as of December 31, 2004 (consolidated) and 2003, and the related
statements of operations and comprehensive income, changes in stockholders'
equity and cash flows for the years ended December 31, 2004 (Consolidated) and
2003. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits of the financial
statements provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Perfect Dream Limited and
subsidiary, as of December 31, 2004 (Consolidated) and 2003, and the results of
its operations and its cash flows for the years ended December 31, 2004
(Consolidated) and 2003, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Xxxxx Xxxxxx
XXXXX X.X. XXXXXX & CO
Certified Public Accountants
Hong Kong
Date: April 22, 2005
304 Xxxxxxxx Xxxxxx, 00 Xxxxx'x Xxxx Xxxx, Xxxxxxx, Xxxx Xxxx
Tel: (000) 00000000 Fax: (000) 00000000 Email: xxxx@xxxxxxxxxxxxxxxxxxxx.xxx.xx
Website: xxxx://xxx.xxxxxxxxxxxxx.xxx
1
PERFECT DREAM LIMITED AND SUBSIDIARY
BALANCE SHEETS
AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
-----------------------------------------------
ASSETS
------
2004
Note (Consolidated) 2003
---- -------------- --------------
CURRENT ASSETS
Cash and cash equivalents $ 160,612 $ 22,225
Accounts receivable, net of allowances 2 180,613 94,152
Due from related companies 8 2,666,284 4,415,610
Inventories 3 794,412 138,014
Other receivables and prepaid expenses 143,415 8,156
-------------- --------------
Total Current Assets 3,945,336 4,678,157
PROPERTY AND EQUIPMENT, NET 4 3,500,629 1,310,258
-------------- --------------
TOTAL ASSETS $ 7,445,965 $ 5,988,415
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 322,325 $ 264,949
Other payables and accrued expenses 5 733,601 856,405
Capital lease payable -- 1,734
Value added tax payable 66,517 14,392
Income tax and other tax payable 84,820 103,453
Due to related companies 8 1,580,865 1,322,500
-------------- --------------
Total Current Liabilities 2,788,128 2,563,433
-------------- --------------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
$1.00 par value, 50,000 shares authorized, issued
and outstanding 50,000 50,000
Additional paid-in capital 1,173,706 1,173,706
Retained earnings
Unappropriated 1,599,034 579,335
Appropriated 1,807,290 1,594,134
Accumulated other comprehensive income 27,807 27,807
-------------- --------------
Total Stockholders' Equity 4,657,837 3,424,982
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,445,965 $ 5,988,415
============== ==============
The accompanying notes are an integral part of these financial statements
2
PERFECT DREAM LIMITED AND SUBSIDIARY
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
-------------------------------------------------------------
2004
(Consolidated) 2003
-------------- --------------
NET SALES
To related parties $ 367,726 $ 939,362
Other 7,599,875 5,876,382
-------------- --------------
Total net sales 7,967,601 6,815,744
COST OF SALES (6,092,868) (5,624,402)
-------------- --------------
GROSS PROFIT 1,874,733 1,191,342
-------------- --------------
OPERATING EXPENSES
Selling expenses 31,826 113,520
General and administrative expenses 418,060 495,109
Depreciation and amortization 24,656 30,221
-------------- --------------
Total Operating Expenses 474,542 638,850
-------------- --------------
INCOME FROM OPERATIONS 1,400,191 552,492
OTHER INCOME (EXPENSES)
Loss on disposal (13,084) (65)
Interest income -- 277
Interest expenses (2,454) --
Other expenses (6,214) (1,748)
-------------- --------------
Total Other Income (21,752) (1,536)
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES 1,378,439 550,956
INCOME TAX EXPENSE (145,584) (82,729)
-------------- --------------
NET INCOME $ 1,232,855 $ 468,227
============== ==============
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain -- 27,807
-------------- --------------
COMPREHENSIVE INCOME $ 1,232,855 $ 496,034
============== ==============
Net income share-basic and diluted $ 24.66 $ 9.92
============== ==============
Weighted average number of shares outstanding during
the year basis and diluted 50,000 50,000
============== ==============
The accompanying notes are an integral part of these financial statements
3
PERFECT DREAM LIMITED AND SUBSIDIARY
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
-------------------------------------------------------------
Additional
Common Stock Paid in Members'
Share Amount capital equity
-------------- -------------- -------------- --------------
Balance brought forward from 2002 -- $ -- $ -- $ 2,512,106
Net income for the year -- -- -- --
Other comprehensive income -- -- -- --
Transfer from retained earnings to
statutory and staff welfare
reserves -- -- -- --
-------------- -------------- -------------- --------------
Balance at December 31, 2003 -- -- -- 2,512,106
Issuance of stock and capital
contribution from shareholders 50,000 50,000 1,173,706 (2,512,106)
Net income for the year -- -- -- --
Transfer from retained earnings to
statutory and staff welfare
reserves -- -- -- --
-------------- -------------- -------------- --------------
Balance at December 31, 2004
(consolidated) $ 50,000 $ 50,000 $ 1,173,706 $ --
============== ============== ============== ==============
Unappropriated Appropriated Other
retained retained Comprehensive
earnings earnings Income Total
-------------- -------------- -------------- --------------
Balance brought forward from 2002 $ 304,530 $ 1,400,712 $ -- $ 4,217,348
Net income for the year 468,227 -- -- 468,227
Other comprehensive income -- -- 27,807 27,807
Transfer from retained earnings to
statutory and staff welfare
reserves (193,422) 193,422 -- --
-------------- -------------- -------------- --------------
Balance at December 31, 2003 579,335 1,594,134 27,807 4,713,382
Issuance of stock and capital
contribution from shareholders -- -- -- (1,288,400)
Net income for the year 1,232,855 -- -- 1,232,855
Transfer from retained earnings to
statutory and staff welfare
reserves (213,156) 213,156 -- --
-------------- -------------- -------------- --------------
Balance at December 31, 2004
(consolidated) $ 1,599,034 $ 1,807,290 $ 27,807 $ 4,657,837
============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements
4
PERFECT DREAM LIMITED AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
-------------------------------------------------------------
2004
(Consolidated) 2003
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,232,855 $ 468,227
Adjusted to reconcile net income to cash provided
by operating activities:
Depreciation and amortization - cost of sales 139,281 124,870
Depreciation and amortization 21,028 26,593
Loss on disposal on fixed assets 13,084 65
Changes in operating assets and liabilities
(increase)decrease in:
Accounts receivable (86,461) (39,404)
Other receivable and prepaid expenses (135,259) 7,773
Value add tax receivables -- 33,949
Inventories (656,398) 1,471,618
Increase (decrease) in:
Accounts payable 57,376 (444,151)
Other payables and accrued expenses (124,538) (159,830)
Value add tax payables 52,125 --
Income tax and other tax payables (18,633) 117,845
-------------- --------------
Net cash provided by operating activities 494,460 1,607,555
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (2,363,764) (180,249)
-------------- --------------
Net cash used in financing activities (2,363,764) (180,249)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Due from related companies 1,749,326 (1,413,561)
Due to related companies 258,365 --
-------------- --------------
Net cash used in financial activities 2,007,691 (1,413,561)
-------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 138,387 13,745
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 22,225 8,480
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 160,612 $ 22,225
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
------------------------------------------------
Cash paid during the year for:
Interest expenses $ 2,454 $ --
============== ==============
Cash paid during the year for:
Income taxes $ 143,494 $ 27,272
============== ==============
The accompanying notes are an integral part of these financial statements
5
PERFECT DREAM LIMITED AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
-----------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A) Organization
Perfect Dream Limited ("Perfect Dream") was incorporated in the
British Virgin Islands on July 1, 2004. Goldenway Nanjing Garments
Company Limited ("Goldenway"), a People's Republic of China ("PRC")
limited liability company was incorporated on December 31, 1993 with
its principal place of business in Nanjing, PRC. Goldenway is
principally engaged in the manufacturing and sale of garments.
During 2004, Perfect Dream entered into two purchase agreements with
two shareholders of Goldenway to acquire a 100% of the registered
capital of Goldenway for $1,288,400 and the issue of 50,000 common
shares of Perfect Dream. The transactions have been accounted for as a
reorganization of entities under common control as the companies were
beneficially owned by principally identical shareholders and share
common management. The financial statements have been prepared as if
the reorganization had occurred retroactively. Perfect Dream and
Goldenway are hereafter referred to as (the "Company").
The accompanying 2004 consolidated financial statements include the
accounts of Perfect Dream and its 100% owned subsidiary Goldenway. All
significant inter-company balances and transactions have been
eliminated in consolidation.
The accompanying 2003 consolidated financial statements include the
accounts of Goldenway.
(B) Use of estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount 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. Actual results
could differ from those estimates.
(C) Cash and cash equivalents
For purpose of the statements of cash flows, cash and cash equivalents
include cash on hand and demand deposits with a bank with maturities
of less than three months.
(D) Accounts receivable
The Company extends unsecured credit to its customers in the ordinary
course of business but mitigates the associated risks by performing
credit checks and actively pursuing past due accounts. An allowance
for doubtful accounts is established and recorded based on
managements' assessment of the credit history with the customer and
current relationships with them. As of December 31, 2004 and 2003, the
Company considers all its accounts receivable to be collectable and no
provision for doubtful accounts has been made in the financial
statements.
(E) Inventories
Inventories are stated at lower of cost or market value, cost being
determined on a first-in, first-out method. The Company provided
inventory allowances based on excess and obsolete inventories
determined principally by customer demand.
(F) Fair value of financial instruments
Statement of Financial Accounting Standards No. 107, "Disclosure About
Fair Value of Financial Instruments," requires certain disclosures
regarding the fair value of financial instruments. Trade accounts
receivable, accounts payable, and accrued liabilities are reflected in
the financial statements at fair value because of the short-term
maturity of the instruments.
6
PERFECT DREAM LIMITED AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
-----------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
(G) Revenue recognition
The Company recognizes revenue upon delivery or shipment of the
products, at which time title passes to the customer provided that:
there are no uncertainties regarding customer acceptance; persuasive
evidence of an arrangement exists; the sales price is fixed and
determinable; and collectability is deemed probable.
(H) Income taxes
The Company is organized in the British Virgin Islands and the
People's Republic of China and no tax benefit is expected from the tax
credits in the future.
PRC income tax is computed according to the relevant laws and
regulations in the PRC. The Company is entitled to full exemption from
income tax for two years beginning from the first year the Company
becomes profitable and a 50% income tax reduction for the subsequent
three years. Income tax expense has been recorded for 2004 and 2003 as
the Company is entitled 50% income tax.
(I) Foreign currency translation
The functional currency of the Company is the Chinese Renminbi
("RMB"). Transactions denominated in currencies other than RMB are
translated into United States dollars using period end exchange rates
as to assets and liabilities and average exchange rates as to revenues
and expenses. Capital accounts are translated at their historical
exchange rates when the capital transaction occurred. Net gains and
losses resulting from foreign exchange translations are included in
the statements of operations and stockholder's equity as other
comprehensive income (loss).
(J) Comprehensive income (loss)
The foreign currency translation gain or loss resulting from
translation of the financial statements expressed in RMB to United
States Dollar is reported as other comprehensive income (loss) in the
statements of operations and stockholders' equity.
(K) Segments
The Company operates in only one segment, thereafter segment
disclosure is not presented.
2. ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 2004 and 2003 consisted of the
following:
2004 2003
----------- -----------
Accounts receivable $ 180,613 $ 94,152
Less: allowance for doubtful accounts -- --
----------- -----------
Accounts receivable, net $ 180,613 $ 94,152
=========== ===========
As of December 31, 2004 and 2003, the Company considered all accounts
receivable collectable and has not recorded a provision for doubtful
accounts.
7
PERFECT DREAM LIMITED AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
-----------------------------------------------
3. INVENTORIES
Inventories at December 31, 2004 and 2003 consisted of the following:
2004 2003
---------- ----------
Raw materials $ 115,495 $ 35,718
Work-in-progress 359,719 100,420
Finished goods 319,198 1,876
---------- ----------
794,412 138,014
Less: provision of obsolescence -- --
---------- ----------
$ 794,412 $ 138,014
========== ==========
For the years ended December 31, 2004 and 2003, no provision for obsolete
inventories was recorded by the Company.
4. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at December 31:
2004 2003
---------- ----------
Factory buildings $ 637,689 $ 637,689
Plant and machinery 1,187,606 1,077,024
Office equipment 98,769 98,769
Motor vehicles 41,311 41,311
Furniture and fixtures 4,615 4,615
Leasehold improvements 101,238 101,238
Construction in progress 2,222,535 --
---------- ----------
4,293,763 1,960,646
Less: accumulated depreciation 793,134 650,388
---------- ----------
Property and equipment, net $3,500,629 $1,310,258
========== ==========
Depreciation expense for the years ended December 31, 2004 and 2003 was
$160,309 and $151,463, respectively. During 2004 and 2003 the company
recognized a loss on disposal of property and equipment of $13,084 and $65,
respectively.
5. OTHER PAYABLES AND ACCRUED LIABILITIES
Other payables and accrued liabilities at December 31, 2004 and 2003
consist of the following:
2004 2003
---------- ----------
Other payables $ 110,411 $ 103,301
Accrued expenses 623,190 753,104
---------- ----------
$ 733,601 $ 856,405
========== ==========
8
PERFECT DREAM LIMITED AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
-----------------------------------------------
6. COMMITMENTS AND CONTINGENCIES - Employee Benefits
The full time employees of the Company are entitled to employee benefits
including medical care, welfare subsidies, unemployment insurance and
pension benefits through a Chinese government mandated multi-employer
defined contribution plan. The Company is required to accrue for those
benefits based on certain percentages of the employees' salaries. The total
provision for such employee benefits was $623,190 and $685,631 for the
years ended December 31, 2004 and 2003, respectively. The Company is
required to make contributions to the plans out of the amounts accrued for
medical and pension benefits. The contributions for the year ended December
31, 2004 and 2003 amounted to $62,441 and $48,524 respectively. The Chinese
government is responsible for the medical benefits and the pension
liability to be paid to these employees.
7. SHAREHOLDERS' EQUITY
(A) Stock Issuances
During 2004, the Company issued 50,000 shares of common stock to
founders for cash of $50,000.
(B) Appropriated retained earnings
The Company is required to make appropriations to reserves funds,
comprising the statutory surplus reserve, statutory public welfare
fund and discretionary surplus reserve, based on after-tax net income
determined in accordance with generally accepted accounting principles
of the People's Republic of China (the "PRC GAAP"). Appropriation to
the statutory surplus reserve should be at least 10% of the after tax
net income determined in accordance with the PRC GAAP until the
reserve is equal to 50% of the entities' registered capital.
Appropriations to the statutory public welfare fund are at 12% of the
after tax net income determined in accordance with the PRC GAAP. The
statutory public welfare fund is established for the purpose of
providing employee facilities and other collective benefits to the
employees and is non-distributable other than in liquidation.
Appropriations to the discretionary surplus reserve are made at the
discretion of the Board of Directors.
During 2004 and 2003, the Company appropriated $213,156 and $193,422,
respectively to the reserves funds based on its net income under PRC
GAAP.
8. RELATED PARTY TRANSACTIONS
During 2004 and 2003, the Company sub-contracted certain manufacturing work
valued at $1,579,536 and $408,585 respectively to certain of its related
companies. The Company provided raw materials to the sub-contractor who
charges the Company a fixed labor charge for the sub-contracting work.
During 2004 and 2003, the Company had related party sales of $367,726 and
$939,362, respectively.
The Company is owed $2,666,284 and $4,415,610 from related companies as of
December 31, 2004 and 2003 respectively for products sold and advances
made. The amounts due from related companies are interest free and
repayable on demand.
The Company owed related companies $1,580,865 and $1,322,500 as of December
31, 2004 and 2003 respectively for sub-contracting work and advances made.
9. CONCENTRATIONS AND RISKS
During 2004 and 2003, 100% of the Company's assets were located in China.
During 2004 and 2003, 95% and 86% of the Company's revenue respectively
were derived from companies located outside of China.
In 2004, the Company derived 51.9% of its revenue from one customer. In
2003, the Company derived 52.2% of its sales from two customers.
In 2004, the Company relied on one supplier for 17% of its purchases.
9
PERFECT DREAM LIMITED AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
-----------------------------------------------
10. SUBSEQUENT EVENT
On February 2, 2005, the company's 100% subsidiary, Goldenway Nanjing
Garments Company Limited, increased its registered capital from $2,512,106
to $20,000,000. According to the Articles of Association of Goldenway,
Perfect Dream has to fulfill registered capital contribution of $2,623,184
by July 24, 2005 and the remaining balance of $14,864,710 is payable by
February 1, 2008.
10
Exhibit G
OFFICER'S CERTIFICATE
I, Xxxxx Xxxxxx, being the President of Andean Development Corporation, a
Florida corporation (the "Company"), pursuant to Section 5.3 of that certain
Agreement and Plan of Reorganization (the "Agreement"), dated July 29, 2005, by
and between the Company, Perfect Dream Limited and the shareholders of Perfect
Dream Limited, do hereby certify on behalf of the Company (i) that all
representations and warranties of Andean contained therein are true and correct;
and (ii) that since the date of the financial statements as described in Section
3.4, 3.5, 3.7, and 3.8 of the Agreement, there has been no material adverse
change in the financial condition, business or properties of Andean, taken as a
whole.
IN WITNESS WHEREOF, I have executed this Officer's Certificate on behalf of
the Company this _____ day of July, 2005.
ANDEAN DEVELOPMENT CORPORATION
By:___________________________
Xxxxx Xxxxxx, President
Exhibit H
WRITTEN CONSENT OF SOLE DIRECTOR
OF
ANDEAN DEVELOPMENT CORPORATION
May 31, 2005
The undersigned, being the sole Director of Andean Development Corporation, a
Florida corporation (the "Company"), does hereby adopt the resolutions set forth
below.
1. APPROVAL OF MAY 5, 2003 AGREEMENT AND THE TRANSACTION
WHEREAS, on May 5, 2003, the Company entered into a stock purchase agreement
("the Agreement"), whereby the Company would permit the transfer of 1,450,000
common shares from the former Chief Executive Officer Xx. Xxxxx Xxxxx Err Zuriz
for a purchase price of $75,000. However, such transfer actually occurred for
the total shares of 1,425,000, and among them, 900,000 shares were issued to
Xxxxx Xxxxxx and 525,000 shares were issued to Sandringham Investment Limited.
WHEREAS, after the transaction, all the subsequent filings by the Company with
Securities & Exchange Commission ("SEC") of the United States were not correctly
reflecting the numbers of the shares transferred;
NOW, THEREFORE BE IT RESOLVED, that the transaction associated therewith and the
correct number of the shares transferred (1,425,000) in accordance with the
terms and conditions set forth in the Agreement be, and the same are hereby,
approved, ratified and confirmed by the sole Director of the Company, and an
amended 10Q shall be filed by the Company with SEC within 10 days from this
Resolution;
2. APPROVAL OF DECEMBER 1, 2004 TRANSACTION
WHEREAS, on December 1, 2004, the Company issued 1,000,000 common shares to
Service Merchant Corp. for consulting services provided. However, such
transaction had not been entered into a written contract.
RESOLVED FURTHER, that the transaction be, and is hereby, approved, ratified and
confirmed by the sole Director of the Company.
3. APPROVAL OF JANUARY 31, 2005 TRANSACTION
WHEREAS, on January 31, 2005, the Company signed three convertible notes (as
attached hereto as Exhibit A) with Carlington Enterprises Corp., Oriental
Blossom Limited, Worldwide Capital Asia Corp. and National MFG for the
assignment of the then existing debt of $57,000 as stated in the 10Q filed with
SEC on May 16, 2005.
RESOLVED FURTHER, that the transaction be, and is hereby, approved, ratified and
confirmed by the sole Director of the Company.
4. APPROVAL OF ABOLISHMENT OF THE ACTION TO BE TAKEN BY THE DIRECTOR ACCORDING
TO 14C INFORMATION STATEMENT FILED WITH SEC ON SEPTEMBER 9, 2003
WHEREAS, on September 8, 2003, the Company filed a Definitive Information
Statement on form 14C with the SEC (as attached hereto as Exhibit B). The
Company considers it is for the best interest of the Company not to carry out
the transactions set forth in such Information Statement.
RESOLVED FURTHER, that the Company shall abandon the transactions set forth in
the Information Statement.
5. APPROVAL OF APPOINTMENT OF PRESIDENT/CEO/CFO/SECRETARY/DIRECTOR
WHEREAS, Xxxxx Xxxxxx was appointed as the President, CEO, CFO, Secretary and
the sole Director of the Company since March 2004.
RESOLVED FURTHER, that the appointment be, and is hereby, approved, ratified and
confirmed by the sole Director of the Company.
6. CERTAIN FILINGS MADE WITH THE SEC
WHEREAS, in certain filings made by the Company with the Securities and Exchange
Commission, the number of authorized common shares was erroneously reported to
be 20,000,000 and not 100,000,000 shares.
RESOLVED FURTHER, that the number of authorized shares on such filngs be amended
to the correct amount.
EXECUTED as of the date set forth above.
Xxxxx Xxxxxx, Sole Director
Exhibit I
Officer's Certificate (Perfect Dream)
OFFICER'S CERTIFICATE
OF
PERFECT DREAM LIMITED
The undersigned hereby certifies that he is the duly elected, qualified and
acting President of Perfect Dream Limited, a British Virgin Islands corporation
(the "Company"), and that he is authorized to execute this Certificate on behalf
of the Company in connection with Section 6.3 of certain Agreement and Plan of
Reorganization (the "Agreement") dated July 29, 2005, among the Company, Andean
Development Corporation and the shareholders of the Company. The undersigned
hereby further certifies on behalf of the Company that (i) all representations
and warranties of the Company contained in the Agreement are true and correct;
and (ii) that since the date of the financial statements as described in
Sections 3.4, 3.5, 3.7 and 3.8 of the Agreement, there has been no material
adverse change in the financial condition, business or properties of the
Company, taken as a whole. EXECUTED as of August 22, 2005.
PERFECT DREAM LIMITED
By:_________________________
Xxxx Xxxxx, its President
FIRST AMENDMENT AND SUPPLEMENT TO AGREEMENT AND PLAN
OF REORGANIZATION
THIS FIRST AMENDMENT AND SUPPLEMENT TO AGREEMENT AND PLAN OF
REORGANIZATION (the "First Amendment") dated as of August 22, 2005, amends that
certain AGREEMENT AND PLAN OF REORGANIZATION dated as of July 29, 2005 (the
"Reorganization Agreement") by and among Andean Development Corporation, a
corporation organized under the laws of the State of Florida ("Andean"); Perfect
Dream Limited, a corporation organized under the laws of British Virgin Islands
("Perfect Dream"); and seven individuals who are the stockholders of Perfect
Dream (the "Perfect Dream Stockholders"), a list of whom is attached hereto as
Exhibit A).
RECITALS
WHEREAS, the parties wish to amend the Reorganization Agreement with
respect to Section 2 and Section 5.5 thereof as provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Section 2.
Section 2 of the Reorganization Agreement is hereby amended and restated in its
entirety to read as follows:
Section 2
Closing
The Closing shall be effected by telephone and facsimile on the Closing Date, at
the office of Hand & Hand, 00000 Xxxxx Xxxx, Xxxx Xxxxx, Xxxxxxxxxx, 00000,
unless another place or time is agreed upon in writing by the parties. The
Closing may also be accomplished by wire, express mail or other courier service,
conference telephone communications or as otherwise agreed by the respective
parties or their duly authorized representatives.
SECTION 2. Section 5.5.
Section 5.5(4) and Section 5.5(5) of the Reorganization Agreement are hereby
amended and restated in their entirety to read as follows:
Section 5.5 Documents.
(4) Board Resolution and legal documents of abolishment of 14C shall be
filed with SEC after the Closing and Form 8K has been filed with the
SEC.
(5) A legal opinion issued by a licensed securities lawyer practicing in
the United States attached hereto Exhibit 1.
SECTION 3. Defined Terms.
Capitalized terms used but not defined herein shall have the meanings assigned
to such terms in the Reorganization Agreement.
SECTION 4. Governing Law.
This First Amendment shall be governed by and construed and enforced in
accordance with the laws of the State of Florida. Any actions permitted
hereunder shall be brought in the State of Florida.
SECTION 5. Counterparts.
------------
This First Amendment may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this First Amendment
effective as of the date first above written.
ANDEAN DEVELOPMENT CORPORATION
/s/
-------------------------
By
Date:
PERFECT DREAM LIMITED
/s/
-------------------------
By
Date:
STOCKHOLDERS OF PERFECT DREAM LIMITED
----------------------------
XXXX Xx hua
-----------------------------
XXXX Xxxx Dong
-----------------------------
LI Ning
-----------------------------
SUN Jia Jun
-----------------------------
XXX Xxx Xing
-----------------------------
WEI Ru Qin
-----------------------------
Xxxxx Xxxxxxx HEVICON
EXHIBIT A
THE PERFECT DREAM STOCKHOLDERS
--------- -----------------------------
1 XXXX Xx Hua
--------- -----------------------------
2 XXX Xxxx Dong
--------- -----------------------------
3 LI Ning
--------- -----------------------------
4 SUN Jia Jun
--------- -----------------------------
5 XXX Xxx Xing
--------- -----------------------------
6 WEI Ru Qin
--------- -----------------------------
7 Xxxxx Xxxxxxx HEVICON
--------- -----------------------------
EXHIBIT 1
LEGAL OPINION
August 4, 2005
Ever-Glory or
Perfect Dream Limited
Ever-Glory Commercial Centre
00 Xxxxx Xxxxxx,
Xxxxxxx, Xxxxxxx
Xxxxx
Re: Andean Development Corporation 14C and prior filings
Dear Xx. Xxxx,
You have requested our conclusions as to the preliminary information statement
on Form 14C which was filed on August 28, 2003 and which was refiled as a
definitive information statement on September 8, 2003. Apparently the
transactions described in the 14C were never effected and Andean Development
Corporation did not respond to any comments it received from the SEC.
Our experience in over 20 years practice before the SEC is that the staff
attorney who issued comments has placed the comment letter has placed the 14C in
inactive status. You should not expect any future comments on this 14C and
Andean Development Corporation will be under no penalty or Commission
enforcement for not answering the comments at this stage.
In addition you have asked for our conclusions regarding the liability of new
officers and directors for fillings made prior to their election to the Board of
Directors or appointment as officers. The general rule is that officers and
directors only have liability with respect to filings made under the Securities
Exchange Act of 1934 during their tenure. The exception to the general rule is
that to the extent that officers and directors know, or should have known upon
the exercise of due diligence, that prior reports contained misstatements of
material facts, that they have an obligation to correct the misstatements to the
extent they are now material. In the case of Andean Development Corporation, the
prior business has ceased and your new business is being infused into the
company. The only prior information which is material for the future is the
total number of common shares outstanding immediately prior to the reverse
takeover. The prior operating history of Andean is no longer material to future
investors and our conclusion is that the new officers and directors have no
responsibility to review prior Exchange Act filings for accuracy.
Very truly yours,
HAND & HAND
