**U.S. SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549**

 

**FORM 10-KSB**

 

**ANNUAL REPORT PURSUANT TOSECTION 13 OR 15(D) OFTHE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE FISCALYEAR ENDED DECEMBER 31, 2003**

 

**Kubla Khan,Inc.**

(Exact name of issuer in its charter)

 
| **Utah**                 |   | **87-0650976**              |
|--------------------------|--------|-----------------------------|
| (State of Incorporation) |   | (I.R.S. Employer I.D. No.:) |

 

**57-71# High-Tech Industrial Park NanShan,District ShenZhen, P.R. China 51805011 86 755 26983825**

(Address and telephone number of principalexecutive offices)

 

SECURITIES REGISTERED UNDERSECTION 12(B) OF THE EXCHANGE ACT: **None**

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Title of each class to be so registered:  **Common Stock**

 

Check whether the issuer (1) filed all reports to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or forsuch shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90 days.

Yes ý   Noo

 

Check ifthere is no disclosure of delinquent filers in response to Item 405 ofRegulation S-B is not contained in this form, and no disclosure will becontained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form10-KSB or any amendments to this Form 10-KSB. [ ]

 

The issuer’s revenues for the Fiscal Year ended December 31, 2003were $390. The aggregate market value of the voting common stock held bynon-affiliates of the issuer computed by reference to the last reported bidprice of such common stock (no reported ask price was available) as ofMarch 31, 2004 was $464,457.  As ofApril 1, 2004, there were 5,611,744 shares of the issuer’s common stockoutstanding.

 

The following documents are incorporated by reference:

 

 

Transitional Small Business Disclosure Format (check one)Yes   o   No   ý

 

 

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TABLE OF CONTENTS

 
| PART I     |
|------------|
|       |   |
| Item 1     | Description of Business |
|       |   |
| Item  2    | Description  of Property |
|       |   |
| Item 3     | Legal Proceedings |
|       |   |
| Item 4     | Submission of Matters to a Vote of Security  Holders |
|       |   |
| PART II    |
|       |   |
| Item 5     | Market for Common Equity and Related  Stockholder Matters |
|       |   |
| Item 6     | Management’s Discussion and Analysis or  Plan of Operation |
|       |   |
| Item 7     | Financial Statements |
|       |   |
| Item 8     | Changes in and Disagreements with  Accountants on Accounting and Financial Disclosure |
|       |   |
| Item 8A    | Controls and Procedures |
|       |   |
| PART  III  |
|       |   |
| Item 9     | Directors and Executive Officers of the  Registrant |
|       |   |
| Item 10    | Executive Compensation |
|       |   |
| Item 11    | Security Ownership of Certain Beneficial  Owners and Management and Related |
|       |   |
| Item 12    | Certain Relationships and Related  Transactions |
|       |   |
| Item 13    | Exhibits and Reports on Form 8-K |
|       |   |
| Item14     | Principal Accountant Fees and Services |
|       |   |
| SIGNATURES |

 

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**PARTI**

 

Certain statements in this Annual Report on Form 10-KSB, or the Report,are “forward-looking statements.” These forward-looking statements include, butare not limited to, statements about the plans, objectives, expectations andintentions of Kubla Khan, Inc., a Utah corporation (referred to in this Reportas “we,” “us”, “our” or “registrant”), and other statements contained in thisReport that are not historical facts. Forward-looking statements in this Report or hereafter included in otherpublicly available documents filed with the Securities and Exchange Commission,reports to our stockholders and other publicly available statements issued orreleased by us involve known and unknown risks, uncertainties and other factorswhich could cause our actual results, performance (financial or operating) orachievements to differ from the future results, performance (financial oroperating) or achievements expressed or implied by such forward-lookingstatements. Such future results are based upon management’s best estimatesbased upon current conditions and the most recent results of operations.  When used in this Report, the words“expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” andsimilar expressions are generally intended to identify forward-lookingstatements, because these forward-looking statements involve risks and uncertainties.There are important factors that could cause actual results to differmaterially from those expressed or implied by these forward-looking statements,including our plans, objectives, expectations and intentions and other factorsdiscussed under “Risk Factors.”

 

**ITEM1.****                                                     DESCRIPTIONOF BUSINESS**

### ** **

##### *History*

##### * *

We were incorporated on March 28, 2000, in the state of Utah.   Until March 31, 2004, we operated abusiness consisting of a purchase overrun and distressed merchandise resalenetwork.  On March 31, 2004, wecompleted a private placement of 5,500,000 shares of our Common Stock.  As part of such private placement we issued3,000,000 shares of our common stock to Fang Xuemei and 2,000,000 shares of ourcommon stock to Xu ZhongNan.  Thepurchase price per share of each of such shares was $.10, for an aggregatepurchase price of $500,000.  Suchissuance constituted approximately 98% of our issued and outstandingstock.  As a result of the acquisitionand change in control, we abandoned our business plan of establishing apurchase overrun and distressed merchandise resale network are holdingourselves available for an extraordinary corporate transaction, such as amerger, sale or reorganization.  Currently, we are exploring opportunities to engage in such extraordinarycorporate transactions but are not a party to any agreement to enter into orengage in any such transactions.  Inconnection with Xuemei and ZhongNan’s acquisition of our securities, newdirectors were added to our board of directors and the old directors tenderedtheir resignations.  Our newlyconstituted board of directors also immediately acted to elect new officerspromptly after the change in control.

 

We are currently a “shell” corporation that seeks to identify andcomplete a merger or acquisition with a private entity whose business presentsan opportunity for our shareholders. Our management will review and evaluatebusiness ventures for possible mergers or acquisitions. We have not yet enteredinto any agreement, nor do we have any commitment or understanding to enterinto or become engaged in a transaction, as of the date of this filing.Further, the business objectives discussed herein are extremely general and arenot intended to restrict the discretion of our management.

 

A decision to participate in a specific business opportunity will bemade based upon our analysis of the quality of the prospective businessopportunity’s management and personnel, asset base, the anticipatedacceptability of business’ products or marketing concepts, the merit of abusiness plan, and numerous other factors which are difficult, if notimpossible, to analyze using any objective criteria.

 

##### *Selectionof a Business*

##### * *

Webelieve that potential business opportunities will be referred from varioussources, including our former and current officers and directors, professionaladvisors, securities broker-dealers, venture capitalists, persons involved inthe financial community, and others who may present unsolicited proposals. Wewill not engage in any general solicitation or advertising for a businessopportunity, and will rely on the personal contacts of our management team, aswell as indirect associations with other business and professional people.  Our reliance on “word of mouth” may limitthe number of potential business opportunities identified. While it is notpresently anticipated that we will engage unaffiliated professional firmsspecializing in business acquisitions or reorganizations, such firms may beretained if management deems it in our best interest. Finder’s fees paid toprofessional acquisition firms could involve one-time

 

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cash payments, payments based on a percentage of the businessopportunity’s revenues or product sales volume, payments involving issuance ofsecurities (including those of the Company), or any combination of these orother compensation arrangements. Consequently, we are unable to predict thecost of utilizing such services. As of the filing date there have been no discussions,agreements or understandings with any professional advisors, financialconsultants, broker-dealers or venture capitalists. Our present intention is torely upon the contacts of our former and current officers and directors.

 

We will not restrict our search to any particular business, industry,or geographical location. Management reserves the right to evaluate and enterinto any type of business in any location. In seeking a business venture, thedecision of management will not be controlled by an attempt to take advantageof any anticipated or perceived appeal of a specific industry, managementgroup, product, or industry, but will be based on the business objective ofseeking long-term capital appreciation. We may participate in a newly organizedbusiness venture or in a more established business. Participation in a newbusiness venture entails greater risks since, in many instances, management ofsuch a venture may not have a proven track record; the eventual market for suchventure’s product or services will likely not be established; and theprofitability of the venture will be untested and impossible to accuratelyforecast. Should we participate in a more established venture that isexperiencing financial difficulty, risks may stem from our inability togenerate sufficient funds to manage or reverse the circumstances causing suchfinancial problems.

 

The analysis of new businesses will be undertaken by or under thesupervision of our management team.  Inanalyzing prospective businesses, we will consider, to the extent applicable,the available technical, financial and managerial resources of any givenbusiness venture. Management will also consider the nature of present andexpected competition; potential advances in research and development or exploration;the potential for growth and expansion; the likelihood of sustaining a profitwithin given time frames; the perceived public recognition or acceptance ofproducts, services, trade or service marks; name identification; and otherrelevant factors. We anticipate that the results of operations of a specificbusiness venture may not necessarily be indicative of the potential for futureearnings, which may be impacted by a change in marketing strategies, businessexpansion, modifying product emphasis, changing or substantially augmentingmanagement, and other factors.

 

We will analyze all relevant factors and make a determination based ona composite of available information, without reliance on any single factor.The period within which we will decide to participate in a given businessventure cannot be predicted and will depend on certain factors, including thetime involved in identifying businesses, the time required for us to completeour analysis of such businesses, the time required to prepare appropriatedocumentation to effect a merger or acquisition, and other circumstances.

 

##### *Acquisitionof a Business*

##### * *

The implementation of a structure that will effect any given businesstransaction may cause us to become a party to a merger, consolidation, purchaseand sale of assets, purchase or sale of stock, or other reorganizationinvolving another corporation, joint venture, partnership or licensee.  Currently, we are exploring opportunities toengage in such extraordinary corporate transactions but are not a party to anyagreement to enter into or engage in any such transactions.  The exact structure of the anticipatedbusiness transaction cannot yet be determined. Notwithstanding the above, we do not intend to participate in a businessthrough the purchase of minority stock positions.  Our current focus is to acquire a controlling interest in abusiness. Upon the completion of a transaction, it is possible that our presentmanagement will no longer control Company affairs. Further, a majority or allof our present directors may, as part of the terms of a prospective businesstransaction, resign and be replaced by new directors without a vote of ourshareholders.

 

In connection with the Company’s merger or acquisition of a businessventure, our present shareholders, including Xuemei and ZhongNan, may, as anegotiated part of the transaction, sell a portion or all of our Common Stockheld by them at a significant premium over their original investment in us. Ifour current shareholders sell their stock as part of a merger/acquisition, theymay decide to sell a controlling interest (i.e., over 50%) of the Company tothe other entity (including such other entity’s shareholders and affiliates),which participates in the merger/acquisition. The other entity might only buyshares from Xuemei and ZhongNan, or it might only buy enough shares to obtain acontrolling interest in the Company. However, there is no degree of certaintythat the other entity will buy any of our shares, whether from Xuemei andZhongNan or any other shareholder. Conversely, it is possible the other entitymay offer to buy out all or most of the shareholders’ stock at pricescomparable to those offered to Xuemei and ZhongNan. It is possible that theentity may pay a higher price for shares belonging to insider shareholders thanfor shares belonging

 

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to non-insider shareholders. Management does not intend to actively negotiate for or otherwiserequire the purchase of all or any portion of its stock as a condition to or inconnection with any proposed merger or acquisition. Although our presentshareholders did not acquire their shares of Common Stock with a view towardany subsequent sale, it is not unusual for affiliates of the entity participatingin the reorganization to negotiate to purchase shares held by the presentshareholders. This is done in order to reduce the amount of shares held bypersons no longer affiliated with us and thereby reduce the potential adverseimpact on the public market in our common stock that could result fromsubstantial sales of such shares after the business reorganization. Publicinvestors will not receive any portion of the premium that may be paid in theforegoing circumstances. Furthermore, our shareholders may not be afforded anopportunity to approve or consent to any particular stock buy-out transaction.

 

The issuance of substantial additional securities and their potentialsale into any trading market, which may develop in the Company’s securities,may have a depressive effect on such market.

 

The manner in which the Company participates in a business will dependon the nature of the business, the respective needs and desires of the Companyand other parties, the management of the business, and the relative negotiatingstrength of the Company and such other management.

 

Wewill participate in a business only after the negotiation and execution ofappropriate written agreements. We have entered into no such agreements at thistime. Although the terms of such agreements cannot be determined at this time,generally such agreements will require specific representations and warrantiesby all of the parties thereto, will specify certain events of default, willdetail the terms of closing and the conditions which must be satisfied by eachof the parties prior to such closing, will outline the manner of bearing costsif the transaction is not closed, will set forth remedies on default, and willinclude miscellaneous other terms.

 

##### *Operationof Business After Acquisition*

##### * *

Our operation following its merger or acquisition of a business will bedependent on the nature of the business and the interest acquired. We areunable to determine at this time whether we will be in control of the businessor whether present management will be in control of the Company following theacquisition. It may be expected that the business will present various risks,which cannot be predicted at the present time.

 

##### *GovernmentRegulation*

##### * *

It is impossible to anticipate government regulations, if any, to whichwe may be subject until we have acquired an interest in a business. The use ofassets to conduct a business, which we may acquire, could subject us toenvironmental, public health and safety, land use, trade, or other governmentalregulations and state or local taxation. In selecting a business in which toacquire an interest, management will endeavor to ascertain, to the extent ofthe limited resources of the Company, the effects of such government regulationon our prospective business. In certain circumstances, however, such as theacquisition of an interest in a new or start-up business activity, it may notbe possible to predict with any degree of accuracy the impact of governmentregulation. The inability to ascertain the effect of government regulation on aprospective business activity will make the acquisition of an interest in suchbusiness a higher risk.

 

##### *Competition*

##### * *

We will be involved in intense competition with other businessentities, many of which will have a competitive edge over us by virtue of theirstronger financial resources and prior experience in business. There is noassurance that we will be successful in obtaining suitable businessopportunities.

 

##### *Employees*

##### * *

As of March 31, 2004, we had 7 employees, all of which are fulltime, including 3 executives and 4 administrative personnel.  We expect to use consultants, attorneys, andaccountants as necessary, and does not anticipate a need to engage anyadditional full-time employees so long as it is identifying and evaluating businesses.The need for employees and their availability will be addressed in connectionwith a decision whether or not to acquire or participate in a specific businessventure.

 

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We do not have key-man life insurance for any of our employees.  Our employees are not represented by a laborunion and are not covered by a collective bargaining agreement. We believe thatour employee relations are good.

 

RISK FACTORS

 

THIS REPORT MAY BE DEEMED TO CONTAIN FORWARD-LOOKING STATEMENTS.  FORWARD-LOOKING STATEMENTS IN THIS REPORT ORHEREAFTER INCLUDED IN OTHER PUBLICLY AVAILABLE DOCUMENTS FILED WITH THECOMMISSION, REPORTS TO THE COMPANY’S STOCKHOLDERS AND OTHER PUBLICLY AVAILABLESTATEMENTS ISSUED OR RELEASED BY THE COMPANY INVOLVE KNOWN AND UNKNOWN RISKS,UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE THE COMPANY’S ACTUAL RESULTS,PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS TO DIFFER FROM THE FUTURERESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS EXPRESSED ORIMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FUTURE RESULTS ARE BASED UPONMANAGEMENT’S BEST ESTIMATES BASED UPON CURRENT CONDITIONS AND THE MOST RECENTRESULTS OF OPERATIONS. THESE RISKS INCLUDE, BUT ARE NOT LIMITED TO, RISKS SET FORTHHEREIN, EACH OF WHICH COULD ADVERSELY AFFECT THE COMPANY’S BUSINESS AND THEACCURACY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.

 

THERE IS A LIMITED PUBLIC MARKET FOR THE COMPANY’S COMMON STOCK.  PERSONS WHO MAY OWN OR INTEND TO PURCHASESHARES OF COMMON STOCK IN ANY MARKET WHERE THE COMMON STOCK MAY TRADE SHOULDCONSIDER THE FOLLOWING RISK FACTORS, TOGETHER WITH OTHER INFORMATION CONTAINED ELSEWHERE IN THE COMPANY’SREPORTS, PROXY STATEMENTS AND OTHER AVAILABLE PUBLIC INFORMATION, AS FILED WITHTHE SECURITIES AND EXCHANGE COMMISSION, PRIOR TO PURCHASING SHARES OF THECOMMON STOCK:

 

###### FINANCIAL RISKS

######  

*We Have Recently Adopted A New Business Plan.  There Is No Assurance That We Will Be Successful In Implementing Our Business Plan. *We have abandoned our current business plan and have adopted a new business plan to hold ourselves available for an extraordinary corporate transaction such as a merger or acquisition with an unidentified company or entity.  In connection therewith, we have appointed new directors and officers to further our new business plan.  As a result, our financial statements may materially change in the future as we implement our new plan or strategic focus and historical financial statements will not be accurate indicators of the prospective performance of the Company.  Prior to the new plan, we were engaged in the business of a purchase overrun and distressed merchandise resale network.  We have a limited operating history and are considered a development stage enterprise because we have not generated significant revenues from the sale of our products.   We have nominal assets with which to create operating capital. We have an accumulated deficit of $82,530 at December 31, 2003.  These factors raise substantial doubt about our ability to continue as a going concern if we do not implement our new business plan.  There can be no assurance, however, that we will be successful in implementing our new business plan or that we will able to generate revenues sufficient to continue as a going concern under our new business plan.

 

*We Lack Profitability And Suffer From Cash Flow Difficulties. We*generated a net loss of $26,473 during the fiscal year ended December 31, 2003. Further, as of December 31, 2003, we had an accumulated deficit of approximately $82,530. We experienced loss from operations during the year ended December 31, 2003 of approximately $26,473.  We anticipate generating revenues from the operations of the new business to be acquired.  Prior to such acquisition, we intend to rely on cash on hand and financing from external sources in order to sustain the Company on an on-going basis.  There can be no assurances that we will be able to acquire a profitable business or obtain such an additional financing in the future on terms acceptable to us or at all. Unless we establish or acquire profitable operations, we may need to obtain a working line of credit and/or an external financing to satisfy cash flow needs in the future.  The failure to obtain such a line of credit or such a financing may have an adverse effect on our ability to finance costs of operations and to meet its current obligations.

 

*We Will Need, But May Not Be Able To ObtainAdditional Financing On Reasonable Terms Or At All*. ** **Sinceinception, we have had minimal revenues and minimal profits.  We have financed our operations primarilythrough the

 

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sale of our common stock and with income derived from operations.****We recently raised $550,000 from a privateplacement of 5,500,000 shares of our Common Stock.  We do not intend to devote the proceeds of such offering tofurther our existing business, but intend to apply them to implementing our newbusiness plan.  We believe that theproceeds of such offering, together with other available funds, will besufficient to meet our anticipated needs for the new business plan and forworking capital and capital expenditures for at least the next 13 months.  Thereafter, we will need to raise additionalfunds.  We may need to raise additionalfunds sooner in order to accelerate the implementation of our new businessplan, to develop new or enhanced services or products, to respond tocompetitive pressures or to acquire complementary products, businesses ortechnologies.  We may also need to raisefunds if our available funds decrease. If additional funds are raised through the issuance of equity orconvertible debt securities, the percentage ownership of our stockholders willbe reduced and stockholders may experience additional and substantialdilution.  Moreover, such securities mayhave rights, preferences and privileges senior to those of our CommonStock.  There can be no assurance thatadditional financing will be available on terms favorable to us or at all.  If adequate funds are not available or arenot available on acceptable terms, we may not be able to fund our expansion,take advantage of unanticipated acquisition opportunities, develop or enhanceproducts or respond to competitive pressures. Thus, we may be adversely impacted if the full proceeds are not raisedand investors may lose their entire investment. Such inability could have amaterial adverse effect on our business, results of operations and financialcondition.

 

*There Is No Assurance That We Will Be Able ToConsummate An Extraordinary Corporate Transaction And Achieve Profitability .*  Our former business of purchase overrun anddistressed merchandise resale network was not a significant source ofrevenue.  Our current business plan isto identify businesses to acquire. There can be no assurance that we will beable to acquire a business or that any such business will be profitable afteracquisition.  If we fail to acquire aprofitable business or operate such business in a manner to generatesignificant revenue, our results of operation and financial condition may bematerially and adversely affected.  Wemay be required to rely on outside financing to sustain the on-going operationsof the Company.

 

*We Have Broad Management Discretion Over The Allocation Of Proceeds From The Recent Private Offering.*  We recently consummated an offering of 5,500,000 shares of our Common Stock for gross proceeds of approximately $550,000. Our management retains broad discretion as to the allocation of the proceeds of this offering.  The failure of management to apply such funds effectively could have a material adverse effect on our business, results of operations and financial condition.

 

SECURITIES RISKS

 

*There Is A Limited Public Market For OurCommon Stock.* There is currently an extremely limitedpublic market for the Common Stock. Frequently there are no bid or askingprices available on Over-The-Counter Market on the NASD Electronic BulletinBoard for our Common Stock.  Holders ofthe Company’s Common Stock may, therefore, have difficulty selling their CommonStock, should they decide to do so. In addition, there can be no assurancesthat such markets will continue or that any shares of Common Stock, which maybe purchased may be sold without incurring a loss. Any such market price of theCommon Stock may not necessarily bear any relationship to the Company’s bookvalue, assets, past operating results, financial condition or any otherestablished criteria of value, and may not be indicative of the market pricefor the Common Stock in the future. Further, the market price for the CommonStock may be volatile depending on a number of factors, including businessperformance, industry dynamics, news announcements or changes in generaleconomic conditions.

 

*Disclosure Relating To Low-Priced Stocks*.The Company’s Common Stock is currently listed for trading in theOver-The-Counter Market on the NASD Electronic Bulletin Board or in the “pinksheets” maintained by the National Quotation Bureau, Inc., which are generallyconsidered to be less efficient markets than markets such as NASDAQ or othernational exchanges, and which may cause difficulty in conducting trades anddifficulty in obtaining future financing. Further, the Company’s securities aresubject to the “penny stock rules” adopted pursuant to Section 15 (g) ofthe Securities Exchange Act of 1934, as amended (the “Exchange Act”). The pennystock rules apply to non-NASDAQ companies whose common stock trades at lessthan $5.00 per share or which have tangible net worth of less than $5,000,000($2,000,000 if the company has been operating for three or more years). Suchrules require, among other things, that brokers who trade “penny stock” topersons other than “established customers” complete certain documentation, makesuitability inquiries of investors and provide investors with certaininformation concerning trading in the security, including a risk disclosuredocument and quote information under certain circumstances. Many brokers havedecided not to trade “penny stock” because of the requirements of the pennystock rules and, as a result, the number of broker-dealers willing to act asmarket makers in such securities is limited. In the event that we remain

 

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subject to the “penny stock rules” for any significant period, theremay develop an adverse impact on the market, if any, for the Company’ssecurities. Because the Company’s securities are subject to the “penny stockrules,” investors will find it more difficult to dispose of our securities.Further, for companies whose securities are traded in the Over-The-CounterMarket, it is more difficult: (i) to obtain accurate quotations, (ii) to obtaincoverage for significant news events because major wire services, such as theDow Jones News Service, generally do not publish press releases about suchcompanies, and (iii) to obtain needed capital.

 

*One or Two Shareholders Can Control Us*.  We have two shareholders, Xuemei Fang andZhongNan Xu, who own 3,000,000 and 2,000,000 shares of our common stock,respectively, and jointly own an option to purchase 100,000 shares of ourCommon Stock granted by other shareholders. Ms. Fang, herself, owns and controls a majority of our issued andoutstanding stock and is in a position to exercise significant control withrespect to the affairs of the Company and the election of directors. Mr. Xu, isa Director of the Company and is deemed to beneficially own approximately 37.4%of our Common Stock.  Mr. Xu is also ina position to exercise significant control with respect to the affairs of theCompany and the election of directors. These control shareholders may limit the amount of influence minorityshareholders can have on the Company.

 

*Number Of Authorized Shares Of Common Stock Available ForFuture Issuance; Possible Dilutive Effects.*  We are currently authorized by our Articlesof Incorporation to issue 50,000,000 shares of Common Stock, of which 5,611,744are issued and outstanding.  We mayissue a substantial number of additional securities in connection with futurefinancing or acquisitions.  To theextent that additional shares of Common Stock are issued, dilution of theinterests of all of our shareholders will occur.  We currently are not committed to issue any shares of CommonStock.

 

*We Do Not Intend To Pay Dividends On OurCommon Stock.* We have not paid any dividends on ourCommon Stock to date and there are no plans for paying dividends on the CommonStock in the foreseeable future. We intend to retain earnings, if any, toprovide funds for the implementation of our new business plan.  We do not intend to declare or pay anydividends in the foreseeable future. Therefore, there can be no assurance that holders of Common Stock willreceive any additional cash, stock or other dividends on their shares of CommonStock until we have funds, which the Board of Directors determines, can beallocated to dividends.

 

OTHER RISKS

 

*Utah Law and Our Articles of IncorporationImpose Limitations on the Liability of Our Directors to the Stockholders.*  Our Articles of Incorporation provide, aspermitted by governing Utah law, that our directors shall not be personallyliable to our stockholders for monetary damages for breach of fiduciary duty asa director, with certain exceptions. Our bylaws require us to provide mandatory indemnification of directorsto the fullest extent permitted by Utah law, except for matters arising underthe securities laws of the United States. Further, we may elect to adopt forms of indemnification agreements tocover directors and officers.  Theseprovisions and agreements may discourage stockholders from bringing suitagainst a director for breach of fiduciary duty and may reduce the likelihoodof derivative litigation brought by stockholders on behalf of the Companyagainst a director.

 

**ITEM2.****                                                     DESC****RIPTION OF PROPERTY**

 

During 2003, we leased office space located at 6990 S. Park CentreDrive, Suite 315, Salt Lake City, Utah 84121, from our former President,William Roberts, pursuant to a month-to-month lease, for $500 per month.  Such lease agreement has beenterminated.  The Company has enteredinto a new lease of approximately 2,150 sq. ft. of office space located at57-71 # High-Tech Industrial Park NanShan, District ShenZhen, P.R. China 51805.  The new lease commenced on March 31,2004 at an expense of $725.00 per quarter and has a term of 1 year.

 

**ITEM 3.****                                                     LEGALPROCEEDINGS**

### ** **

We are not currently a party to any pending legal proceeding.

 

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**ITEM4.****                                                     SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

During the quarter ended December 31, 2003, no matters weresubmitted to a vote of our security holders.

 

#### **PART II**

#### ** **

**ITEM5.****                                                     MARKETFOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.**

 

As of March 31, 2004, the authorized capital stock of the Companyconsisted of 50,000,000 shares of common stock, par value $0.001 per share (the“Common Stock”) and we had 5,611,744 shares of common stock issued andoutstanding.  Or transfer agent isColonial Stock Transfer Company, 66 Exchange Place, Salt Lake City, Utah,84111.

 

Our Common Stock is listed for trading in the Over-The-Counter Marketand is quoted on the NASD’s Electronic Bulletin Board or in the “pink sheets”maintained by the National Quotation Bureau, Inc. under the symbol “KUKH.”  Our stock has a very limited tradinghistory.

 

As of March 31, 2004, the last traded price for our Common Stockwas $3.00 per share.  At March 31,2004, the last posted bid price for our Common Stock was $1.13 per share.  There was no posted ask price.  There is no established market for ourCommon Stock.  During 2003 our aggregatepublic share trading volume was 88,900. The traded price of our Common Stock during such period ranged from$1.00 to $4.00.  As of March 31,2004, we had 100 stockholders of record, without giving effect to determiningthe number of stockholders who hold shares in “street name” or other nomineeaccounts.

 

EQUITY COMPENSATION PLAN INFORMATION

 

We do not have any equity compensation plans.

 

DIVIDEND POLICY

 

We have not declared or paid any dividend since inception on our commonstock. We do not anticipate that any dividends will be declared or paid in thefuture on our common stock.

 

RECENT ISSUANCES OF UNREGISTERED SECURITIES

 

*Private Offering of 5,500,000 Shares ofRestricted Common Stock*

 

On March 31, 2004, we completed a private offering of 5,500,000shares of our restricted common stock at a per share purchase price of $0.10 toseven unaffiliated individuals, resulting in gross proceeds of $550,000 in cashto the Company.  We did not pay any commissionor other costs in connection with this offering.  We intend to use the proceeds of this offering to implement ournew business plan.  Based uponstatements certified to us by the investors, we believe that the issuance ofsecurities was made in transactions under Regulations D and S and exempt fromregistration requirements of the Securities Act of 1933, as amended.

 

As a result of the sale, the following individuals became beneficialowners of 5% or more of our issued and outstanding shares of common stock:

 
| **Title of Class** |   | **Name of  Beneficial Owner** |   | **Amount of  beneficial  ownership** |    | **Percent of  class** |   |
|--------------------|--------|-------------------------------|--------|--------------------------------------|---------|-----------------------|--------|
| Common Stock       |   | Xuemei Fang                   |   | 3,100,000                            | *  | 55.2                  | %      |
| Common Stock       |   | ZhongNan Xu                   |   | 2,100,000                            | *  | 37.4                  | %      |
| Common Stock       |   | Mark Peterson Roth IRA        |   | 300,000                              |    | 5.3                   | %      |

 

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* Includes an option to purchase 100,000 shares of Common Stock ownedjointly by Fang and Xu.

 

ZhongNanXu is also a Director of the Company.

 

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**ITEM 6.****                                                     MANAGEMENTDISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS**

### ** **

The following discussion and analysis should be read in conjunctionwith the Consolidated Financial Statements and related notes included elsewherein this Report.

 

##### *Plan ofOperation*

##### * *

Since inception and until the change in control of the Company effectedon March 31, 2004, we operated a business consisting of a purchase overrunand distressed merchandise resale network. On March 31, 2004, we sold 5,000,000 shares of our restrictedCommon Stock to two investors resulting in a change in control of theCompany.  In connection with the changein control, new directors were appointed to our Board of Directors and newofficers were elected.  As a result ofthe acquisition and change in control, we abandoned our former business planand are holding ourselves available for an extraordinary corporate transaction,such as a merger, sale or reorganization. Currently, we are exploring opportunities to engage in suchextraordinary corporate transactions but are not a party to any agreement toenter into or engage in any such transactions. We do not plan to limit ouroptions to any particular industry, but will evaluate each opportunity on itsmerits.  We believe that the proceeds ofour recent offering, together with other available funds, will be sufficient tomeet our anticipated needs for the new business plan and for working capitaland capital expenditures for at least the next 13 months.  Thereafter, we will need to raise additionalfunds.

 

##### *Resultsof Operations*

##### * *

For the Years Ended December 31, 2002 and 2003.

 

Sales

 

Revenues for the year ended December 31, 2003 were $390 versus$1,329 in revenues for the year ended December 31, 2002.  We have discontinued our then existingoperations and do expect to generate any revenue unless or until anextraordinary transaction occurs.

 

Income / Loss

 

Net loss for the year ended December 31, 2003 was $26,473 ascompared to a net loss of $21,189 in the comparable period in 2002. The changein net loss was primarily attributable to an increase in general administrativeand professional fee expenses.

 

As expected, we incurred losses in fiscal 2003 and believe that we willcontinue to incur losses until our we undertake and extraordinary corporatetransaction and, even then, there can be no assurance that we will achieve ormaintain profitability or that any revenue growth will take place in thefuture.

 

Expenses

 

Selling, general and administrative expenses for the year endedDecember 31, 2003 were $18,690 versus $18,132 in the comparable period in2002.

 

Cost of Sales

 

Cost of sales for the period ended December 31, 2003 was $308versus $1,019 in the comparable period in 2002. The decrease in the cost ofsales was attributable to lack of business.

 

Impact of Inflation

 

We believe that inflation has had a negligible effect on operationsduring the period. We believe that inflation will continue to have a negligibleeffect until we consummate an acquisition of a favorable business opportunity.

 

Trends, Events, and Uncertainties

 

8

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Demand for our products or services if and after we acquire a businessopportunity will be dependent on, among other things, market acceptance of theCompany’s concept and general economic conditions, which are cyclical innature. If, after an extraordinary transaction, a major portion of theCompany’s activities is the receipt of revenues from the sales of its products,the Company’s business operations may be adversely affected by the Company’scompetitors and prolonged recessionary periods.

 

##### *Liquidityand Capital Resources*

##### * *

For the Years Ended December 31, 2002 and 2003.

 

Cash flows used in operations were $12,768 for the year endedDecember 31, 2003 versus $20,540 in the comparable period in 2002.Negative cash flows from operating activities were primarily attributable tothe net loss from operations offset by common stock issued for services anddecreases in receivables, inventory and loans from related parties.

 

We may need additional capital to fund operations over the next 13months. A lack of revenues throughout fiscal 2003 have significantly affectedthe cash position of the Company and fiscal 2004 is expected to continue with alack of revenue and the Company will remain in a position where the raising ofadditional funds through equity, debt financing, merger or acquisition will benecessary.

 

On a long-term basis, liquidity is dependent on establishingoperations, receipt of revenues, additional infusions of capital and debtfinancing. If necessary, we may raise capital through a stock offering. Thefunds raised from this offering will be used to develop and execute our newbusiness plan. However, there can be no assurance that we will be able toobtain additional equity or debt financing in the future, if at all. If we areunable to raise additional capital, our growth potential will be adverselyaffected. Additionally, we will have to significantly modify our plans.

 

*CriticalAccounting Policies*

* *

Thediscussion and analysis of our financial condition and results of operations inthis Report are based upon our consolidated financial statements, which havebeen prepared in accordance with generally accepted accounting principles inthe United States. The preparation of financial statements requires managementto make estimates and judgments that affect the reported amounts of assets andliabilities, revenues and expense and disclosures at the date of the financialstatements. On an on-going basis, we evaluate our estimates, including, but notlimited to, those related to revenue recognition, accounts receivables,inventories, impairment of property and equipment and of intangibles. We useauthoritative pronouncements, historical experience and other assumptions asthe basis for making estimates. Actual results could differ from thoseestimates.

 

Management does not believe that there are critical accountingpolicies, which have a material effect on our financial statements.

 

**ITEM7.****                                                     FINANCIALSTATEMENTS**

### ** **

The following discussion and analysis should be read in conjunctionwith the Consolidated Financial Statements and related notes included elsewherein this Report.  Such information isincorporated herein by reference.

 

**ITEM8.****                                                     CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

** **

On March 31, 2004, at the direction of our Board of Directors wedismissed Randy Simpson CPA, PC (“Simpson”) as our principal independent publicaccountants, and engaged Moores Rowland Mazars (“MRM”) as our principalindependent public accountants.

 

Simpson’s reports on our financial statements for the years endedDecember 31, 2002 and 2001 did not contain an adverse opinion ordisclaimer of opinion, nor were they qualified or modified as to uncertainty,audit scope, or accounting principles.

 

9

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During our two most recent fiscal years (2002 and 2001) and through thedate of Simpson’s dismissal, there were no disagreements with Simpson on anymatters of accounting principles or practices, financial statement disclosure,or auditing scope or procedure which, if not resolved to Simpson’ssatisfaction, would have caused Simpson to make reference to the subject matterin connection with its report of the financial statements for such years.

 

We have provided Simpson with a copy of the above disclosures. Attachedas Exhibit 23.2 is a copy of Simpson’s letter, dated April 9, 2004,stating its agreement with the disclosures in this report contained in thisItem 8.

 

**ITEM8A.****                                            CONTROLSAND PROCEDURES**

 

We carried out an evaluation, under the supervision and with theparticipation of our management, including our Chief Executive Officer andChief Financial Officer, of the effectiveness of the design and operation ofour disclosure controls and procedures as of the end of the period covered bythis report. The evaluation was undertaken in consultation with our accountingpersonnel. Based on that evaluation, the Chief Executive Officer and the ChiefFinancial Officer concluded that our disclosure controls and procedures arecurrently effective to ensure that information required to be disclosed by theCompany in the reports that it files or submits under the Securities ExchangeAct of 1934 is recorded, processed, summarized and reported within the timeperiods specified in the Securities and Exchange Commission’s rules and forms.

 

The Company made no significant changes in its internal controls or inother factors that could significantly affect these controls subsequent to thedate of the evaluation of those controls by the Chief Executive and ChiefFinancial officers.  We have alsoundertaken to periodically review our disclosure controls and procedures andinternal controls for adequacy and effectiveness.

 

#### **PART III**

#### ** **

**ITEM 9.****                                                     DIRECTORSAND EXECUTIVE OFFICERS OF THE REGISTRANT**

### ** **

The following table sets forth certain information regarding ourdirectors and executive officers.

 
| **Name**       |   | **Age** |   | **Position**                      |   |
|----------------|--------|---------|--------|-----------------------------------|--------|
| Xiaobin Liu    |   | 35      |   | Chief Financial Officer           |   |
| YaLi Xu        |   | 33      |   | Chief Executive Officer, Director |   |
| Zhongping Wang |   | 36      |   | Secretary, Director               |   |
| ZhongNan Xu    |   | 67      |   | Director                          |   |

 

Xiaobin Liu, 35 years old, graduated from Zhengzhou University of LightIndustry, China in 1990.  Mr. Liu is aChina certified accountant.  Mr. Liu wasa staff accountant with ShaanXi Aircraft Company from 1998 to 1999.  Mr. Liu was an accountant with HaiNanChina-Europe Accounting Firm from 1999 to 2000.   Mr. Liu was the General Manager of Jiong Hai Wan Quan HeIncorporated Company from 2000 to 2001. He was the Securities/Finance Department Manager of ShenZhen CitySaiGeGuoDou Company from 2001 to 2002.  Mr. Liu was the Chief Financial Officer of Da Shen Incorporated, asubsidiary of DaShen Real Estate LLC from 2002 to 2004.

 

YaLi Xu, 33 years old, graduated from Hebei Shigia Zhuang University,China in 1991.  Miss Xu was employed bythe Province PangBu City Post and Tele Bureau of the Province of Anhui from1999 to 2001 as a general manager.  MissXu was a Finance Manager of Shenzhen City Blue Hope Electronics Limited Companyfrom 2001 to 2004.

 

Zhongping Wang, 36 years old, graduated from HuangShi University in1990.  Mr. Wang was a supervisor withHuangShi City Clothing Factory from 1997 to 2000.  He was a sales manager with Wondial Incorporated, a manufacturerand distributor of telephones, from 2000 to 2004, and was involved with theearly development of Wondial.

 

ZhongNan Xu, 67 years old, was employed as a Supervisor by ErZhouYiXiang Chemical Company in the Province of HuBei from 1997 to 2002.  Mr. Xu was the General Manager of ShenzhenCity YiJinLi Technology Developing Limited Company from 2002 to 2004.

 

None of our board members serve as board members of any other publiccompanies.

 

10

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There are no family relationships among the officers and directors.

 

The directors named above will serve until the next annual meeting ofour shareholders and until his successor shall have been elected andqualified.  Officers hold theirpositions at the pleasure of the Board of Directors.

 

During the past five years, no current director or executive officer ofthe Company:

 

(1) was a general partner or executive officer of any business whichfiled any bankruptcy petition or against which any bankruptcy petition wasfiled, either at the time of the bankruptcy or two years prior to that time;

 

(2) was convicted in a criminal proceeding or named subject to apending criminal proceeding (excluding traffic violations and other minoroffenses);

 

(3) was subject to any order, judgment or decree, not subsequentlyreversed, suspended or vacated, of any court of competent jurisdiction,permanently or temporarily enjoining, barring, suspending or otherwise limitinghis involvement in any type of business, securities or banking activities; or

 

(4)was found by a court of competent jurisdiction (in a civil action), theSecurities and Exchange Commission or the Commodity Futures Trading Commissionto have violated a federal or state securities or commodities law, and thejudgment has not been reversed, suspended or vacated.

 

AUDIT COMMITTEE FINANCIAL EXPERT

 

We do not currently have an Audit Committee Financial Expert.  We have undergone a significant change inmanagement since our recent completion of a private placement of 5,500,000shares of Common Stock and a change in control of the Company.  We have recently completed our search forprincipal executive officers.  We havealso recently adopted an Audit Committee Charter, which is attached hereto asExhibit 99.1. We intend to begin an active search for individuals who willqualify to serve on our audit committee and as an audit committee financialexpert.

 

COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT

 

Section 16(a) of the Securities Exchange Act requires ourdirectors, executive officers and persons who own more than 10% of our commonstock to file reports of ownership and changes in ownership of our common stockwith the Securities and Exchange Commission. Directors, executive officers andpersons who own more than 10% of our common stock are required by Securitiesand Exchange Commission regulations to furnish to us copies of all Section 16(a)forms they file.

 

To our knowledge, based solely upon review of the copies of suchreports received or written representations from the reporting persons, webelieve that during our 2003 fiscal year our directors, executive officers andpersons who own more than 10% of our common stock complied with allSection 16(a) filing requirements, except as set forth below:

 

Section 16(a) Beneficial Ownership Reporting Compliance

 
| **Name**           |   | **# of Late  Report** |   | **# of  Transactions  Not Timely Reported** |   | **Failure to  File Form(s)** |   |
|--------------------|--------|-----------------------|--------|---------------------------------------------|--------|------------------------------|--------|
| William S. Roberts |   | 2                     |   | 1                                           |   | 4 and 5                      |   |
| Wallace Pidcock    |   | 2                     |   | 1                                           |   | 4 and 5                      |   |
| Kristine Ramsey    |   | 2                     |   | 1                                           |   | 4 and 5                      |   |

 

CODE OF ETHICS

 

We have recently adopted a Code of Ethics that applies to our principalexecutive officer, principal financial officer, principal accounting officer orcontroller or persons performing similar functions. A copy of the Code is

 

11

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attached as Exhibit 14.1 to this annual report. A copy of the Code ofEthics will be made available to any shareholder, free of charge, upon writtenrequest to the Company.

 

**ITEM10.****                                              EXECUTIVECOMPENSATION**

### ** **

REMUNERATION OF OFFICERS AND DIRECTORS

 

During the past three fiscal years the only cash compensation we paidto our chief executive officer or to any officer was $5,198 paid to each ofWilliam Roberts and Kristine Ramsey in 2001. Accordingly, no table relating toexecutive compensation has been included in this Annual Report.

 

OPTION/SAR GRANTED DURING THE LAST FISCAL YEAR

 

We did not have a stock option or stock appreciation rights plan during2003. Therefore this section is not applicable.

 

LONG TERM INCENTIVE PLANS/AWARDS IN LAST FISCAL YEAR

 

We do not have long-term incentive plans and consequently has made nosuch awards.  Therefore thissection is not applicable.

 

EQUITY INCENTIVE PLAN

 

We do not have an equity incentive plan.  Therefore this section is not applicable.

 

DIRECTORS’ COMPENSATION

 

The current members of the Board of Directors are generally not paidfor their services as a director. Directors are reimbursed for certain approvedexpenses incurred in connection with Company business and for certain approvedexpenses incurred in connection with attendance at non-telephonic Boardmeetings and non-telephonic committee meetings.

 

**ITEM11.****                                              SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

### ** **

The following table sets forth, as of March 31, 2004, informationregarding the beneficial ownership of our common stock with respect to each ofour executive officers, each of our directors, each person known by us to ownbeneficially more than 5% of the common stock, and all of our directors andexecutive officers as a group. The term “executive officer” is defined as theChief Executive Officer, the President and the Chief Financial Officer. Eachindividual or entity named has sole investment and voting power with respect toshares of common stock indicated as beneficially owned by them, subject tocommunity property laws, where applicable, except where otherwise noted.

 
| **Name and Address Of Beneficial  Owner**                |   | **Number of  Shares Beneficially  Owned (4)** |   | **Percentage  of Shares  Beneficially Owned (4)** |   |
|----------------------------------------------------------|--------|-----------------------------------------------|--------|---------------------------------------------------|--------|
| YaLi Xu (1)                                              |   | 0                                             |   | 14,000                                            |   |
| Xiaobin Liu (1)                                          |   | 0                                             |   | 0                                                 |   |
| Zhongping Wang (1)                                       |   | 0                                             |   | 0                                                 |   |
| Xuemei Fang (2)                                          |   | 3,100,000                                     |   | 55.2                                              | %      |
| ZhongNan Xu (2)                                          |   | 2,100,000                                     |   | 37.4                                              | %      |
| Mark Peterson Roth IRA (3)                               |   | 300,000                                       |   | 5.3                                               | %      |
|                                                     |   |                                          |   |                                              |   |
| All Officers, Directors and 5% Shareholders  (7 persons) |   |                                          |   | 98.3                                              | %      |

 

12

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----

(1)               Theaddress of the persons is c/o Kubla Khan, Inc., 57-71 # High-Tech IndustrialPark Nan Shan, District ShenZhen, P.R. China 51805.

(2)               Theaddress of the persons is 202 C Yu Luan Yuan, WanKe City Garden, XiangMei Rd.,Shenzen, P.R. China 518034.

(3)               Theaddress of such person is 440 East 400 South Salt Lake City, Utah 84111.

(4)               Sharesof common stock subject to stock options and warrants that are currentlyexercisable or exercisable within 60 days or shares that otherwise may beacquired within 60 days of this Report are deemed to be beneficially owned bythe person holding the options and warrants or person with the right to acquiresuch shares for computing such person’s percentage, but are not treated asoutstanding for computing the percentage of any other person.

 

**ITEM 12.****                                              CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS**

### ** **

During calendar years 2002 and 2003, we were parties to an agreementwith William Roberts, our former President and a director, whereby we rentedoffice space from Mr. Roberts on a month-to-month basis for  $500 per month.  This agreement terminated on March 31, 2004 upon theconsummation of the private offering of 5,500,000 shares of our Common Stock.

 

**ITEM13.****                                              EXHIBITSAND REPORTS ON FORM 8-K**

### ** **

(a) Financial Statements (included in Part II of this Report):

 

Report of Independent Certified Public Accountant Financial Statements

Balance Sheets

Statement of Loss And Accumulated Deficit Statements of Cash Flows

Statements of Stockholder’s Equity

Notes to Consolidated Financial Statements

 

(b) Reports on Form 8-K:

 

On April 6,  2004,  we filed a Report on Form 8-K with respectto the dismissal of our former auditors.

 

On April 8, 2004, we filed a Report on Form 8-K with respect tothe change in control of the Company.

 

(c) Exhibits

 
| 3.1.1 |   | Articles of Incorporation (Exhibit 3.1.1 to Registration Statement on  Form SB-2, filed with the Commission on September 19, 2000)           |
|-------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1.2 |   | Amendment Articles of Incorporation (Exhibit 3.1.2 to Registration  Statement on Form SB-2, filed with the Commission on September 19, 2000) |
| 3.2   |   | Bylaws (Exhibit 3.2 to Registration Statement on Form SB-2, filed  with the Commission on September 19, 2000)                                |
| 14.1  |   | Code of Ethics                                                                                                                                    |
| 16.1  |   | Letter Re: Change in Certifying Accountant (Exhibit 16.1 to Form 8-k  filed with the Commission on April 6, 2004)                            |
| 23.1  |   | Consent of Moores Rowland Mazars                                                                                                                  |
| 23.2  |   | Consent of Randy Simpson CPA, PC                                                                                                                  |
| 31.1  |   | Certification of Chief Executive Officer pursuant to Section 302  of the Sarbanes-Oxley Act of 2002                                          |
| 31.2  |   | Certification of Chief Financial Officer pursuant to Section 302  of the Sarbanes-Oxley Act of 2002.                                         |
| 32.1  |   | Certification of Chief Executive Officer pursuant to Section 906  of the Sarbanes-Oxley Act of 2002.                                         |
| 32.2  |   | Certification  of Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley  Act.                                                    |
| 99.1  |   | Charter  of the Audit Committee                                                                                                                   |

 

13

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**ITEM14.****                                              PRINCIPALACCOUNTANT FEES AND SERVICES**

 

AUDITFEE

 

The aggregate fees billed for each of the last two fiscal years forprofessional services rendered by the principal account for the audit of ourannual financial statement and review of financial statements included in our10-KSB reports and services normally provided by the accountant in connectionwith statutory and regulatory filings or engagements were $1,290 for fiscalyear ended 2002 and $5,000 for fiscal year ended 2003.

 

AUDIT-RELATED FEES

 

The aggregate fees billed in each of the last two fiscal years forassurance and related services by the principal accountant that are reasonablyrelated to the performance of the audit or review of our financial statementsthat are not reported above were $525 for fiscal year ended 2002 and consistedof quarterly reviews.  There were nofees for other audit related services for fiscal year ended 2003.

 

TAX FEES

 

We did not incur any fees in either of the last two fiscal years forprofessional services rendered by the principal accountant for tax compliance,tax advice, and tax planning.

 

ALL OTHER FEES

 

There were no other aggregate fees billed in either of the last twofiscal years for products and services provided by the principalaccountant,  other than the servicesreported above.

 

We do not have an audit committee currently serving and as a result ourboard of directors performs the duties of an audit committee. Our board ofdirectors will evaluate and approve in advance, the scope and cost of theengagement of an auditor before the auditor renders audit and non-auditservices.  We do not rely onpre-approval policies and procedures.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

We are a reporting company and file annual, quarterly and specialreports, proxy statements and other information with the Commission.  You may inspect and copy these materials atthe Public Reference Room maintained by the Commission at 450 Fifth Street,N.W., Washington, D.C. 20549.  Pleasecall the Commission at 1-800-SEC-0330 for more information on the PublicReference Room. You can also find our Commission filings at the Commission’swebsite at www.sec.gov.  We intend tofurnish our stockholders with annual reports containing audited financial statementsand such other periodic reports as we may determine to be appropriate or as maybe required by law.

 

Certain documents listed above in Part III, Item 13 of this Report, asexhibits to this Report on Form 10-KSB, are incorporated by reference from otherdocuments previously filed by us.

 

14

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of theSecurities Act of 1934, the registrant has duly caused this Report to be signedon its behalf by the undersigned, thereunto duly authorized.

 
|                     | KUBLA KHAN, INC. |
|--------------------------|------------------|
|                     |             |
| Date: April 9, 2004 | By:              | /s/ YaLi Xu |   |
|                     |             | YaLi Xu |
|                     |             | Chief Executive Officer |
|                     |             | and Director |
|                          |                  |  |  |  |

 

Pursuant to the requirements of the Securities Exchange Act of 1934,this Report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.

 
| **Signature**                |   | **Capacity  in Which Signed** |                                            | **Date** |
|------------------------------|--------|-------------------------------|-------------------------------------------------|----------|
|                         |   |                          |                                            |     |
| By:  /s/ YaLi Xu        |   |                          | President, Chief Executive Officer and Director |     | April 9, 2004 |
| YaLi Xu                      |   |                          |                                            |     |
|                         |   |                          |                                            |     |
|                         |   |                          |                                            |     |
| By:  /s/ XiaoBin Liu    |   |                          | Chief Financial Officer                         |     | April 9, 2004 |
| XiaoBin Liu                  |   |                          |                                            |     |
|                         |   |                          |                                            |     |
|                         |   |                          |                                            |     |
| By:  /s/ ZhongPing Wang |   |                          | Secretary and Director                          |     | April 9, 2004 |
| ZhongPing Wang               |   |                          |                                            |     |
|                         |   |                          |                                            |     |
|                         |   |                          |                                            |     |
| By:  /s/ ZhongNan Xu    |   |                          | Director                                        |     | April 9, 2004 |
| ZhongNan Xu                  |   |                          |                                            |     |

 

15

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**Kubla Khan, Inc.(A Development Stage Company)FINANCIAL STATEMENTS**

 

December 31, 2003

 

CONTENTS

 
| Independent Auditors’ Report                  |   |
|----------------------------------------------------|--------|
|                                               |   |
| Balance  Sheets                                    |   |
|                                               |   |
| Statements of Operations                           |   |
|                                               |   |
| Statements of Stockholders’ Equity  (Deficit) |   |
|                                               |   |
| Statement of Cash Flows                            |   |
|                                               |   |
| Notes to Financial Statements                      |   |

 

 

16

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**Independent****Auditors’Report**

 

 

To the Board of Directors andStockholders ofKubla Khan, Inc.(A Development Stage Company)Salt Lake City, UT

 

 

We have audited the accompanyingbalance sheet of Kubla Khan, Inc. (a development stage company) as of December 31, 2003, and therelated statements of operations, stockholders’ equity (deficit) and cash flowsfor the year then ended. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audit. The financialstatements of the Company as of and for the year ended December 31, 2002were audited by other auditors whose report dated March 29, 2003.

 

We conducted our audit inaccordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that ouraudit provides 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 Kubla Khan, Inc, as ofDecember 31, 2003 and the results of its operationsand its cash flows for the year thenended, in conformitywith generally accounting principles accepted in the United States of America.

 

The accompanying financialstatements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 6, the Company is in the development stage and has limited assets, limited working capital, andhas sustained losses during its development stage which together raisesubstantial doubt about its ability to continue as a going concern. Managementplan regarding those matters are also described in the Note 6. The financial statements do not include any adjustments that mightresult from the outcome of this uncertainty.

 

 
| **Moores Rowland M**azars      |
|--------------------------------|
| *Chartered Accountants*        |
| *Certified Public Accountants* |
| Hong Kong                      |
|                           |
| Date: April 8, 2004       |

 

F-1

----

 

Independent Auditors’ Report

 

 

To the Board of Directors and Stockholders of

**Kubla Khan, Inc.**

**(A Development Stage Company)**

**Salt Lake City, UT**

 

We have audited the accompanying balance sheet of Kubla Khan, Inc. (a development stage company) as of December 31, 2002 and the related statements of operations, shareholder’s equity and cash flows for the year ended December 31, 2002 and the periods from inception (March 28, 2000) through December 31, 2001 and December 31, 2002. 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 audit.

 

We conducted our audit in accordance with generally accepted auditing standards.  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 audit of the financial statements provides a reasonable basis for our opinion.

 

In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the financial position of Kubla Khan, Inc, as of December 31, 2002 and the results of its operations, shareholder’s equity and cash flows for the year ended December 31, 2002 and the periods from inception (March 28, 2000) through December 31, 2001 and December 31, 2002, in conformity with generally accepted accounting principles.

 

 
| Randy Simpson, CPA, P.C.   |
|----------------------------|
| A Professional Corporation |
| March 29, 2003        |
| Sandy, Utah                |

 

F-2

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**Kubla Khan,Inc.**

**(ADevelopment Stage Company)**

**Balance Sheets**

AtDecember 31, 2003 and 2002

 
|                                                                                                    |   | **As of  December 31,** |       |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------|------------|
|                                                                                                    |   | **2003**                     |       | **2002** |   |
|                                                                                                    |   | **US$**                      |       | **US$** | ** ** |
| **ASSETS**                                                                                              |   |                         |       |   |   |
|                                                                                                    |   |                         |       |   |   |
| **Current assets**                                                                                      |   |                         |       |   |   |
| Cash                                                                                                    |   | **3,794**                    |       | 9,138 |   |
| Inventory                                                                                               |   | **—**                   |       | 9,830 |   |
| Deposit                                                                                                 |   | **10**                       |       | 10 |   |
| Prepaid  Expenses                                                                                       |   | **—**                   |       | 500 |   |
| Total Current  Assets                                                                                   |   | **3,804**                    |       | 19,478 |   |
|                                                                                                    |   |                         |       |   |   |
| Property and  Equipment – Net of Depreciation of $1,593                                            |   | **—**                   |       | 590 |   |
|                                                                                                    |   |                         |       |   |   |
| TOTAL ASSETS                                                                                            |   | **3,804**                    |       | 20,068 |   |
|                                                                                                    |   |                         |       |   |   |
| **LIABILITIES & STOCKHOLDERS’ EQUITY  (DEFICIT)**                                              |   |                         |       |   |   |
|                                                                                                    |   |                         |       |   |   |
| **Current Liabilities**                                                                                 |   |                         |       |   |   |
| Accounts Payable                                                                                        |   | **6,815**                    |       | 199 |   |
| Total Current Liabilities                                                                               |   | **6,815**                    |       | 199 |   |
|                                                                                                    |   |                         |       |   |   |
| Commitment and contingencies                                                                            |   |                         |       |   |   |
|                                                                                                    |   |                         | ** ** |   |   |
| **Stockholders’ Equity  (Deficit)**                                                                |   |                         | ** ** |   |   |
| Common Stock, $0.001 par value Authorized 50,000,000 shares; 111,744 shares issued and outstanding |   | **112**                      | ** ** | 112 |   |
| Paid-in  Capital                                                                                        |   | **79,407**                   | ** ** | 75,814 |   |
| Accumulated  deficit                                                                                    |   | **(82,530**                  | **)**      | (56,057 | ) |
| Total  Stockholders’ Equity (Deficit)                                                              |   | **(3,011**                   | **)**      | 19,869 |   |
|                                                                                                    |   |                         | ** ** |   |   |
| **TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  (DEFICIT)**                                          |   | **3,804**                    | ** ** | 20,068 |   |
|                                                                                                    |   |                         | ** ** |   |   |
| The  accompanying notes are an integral part of these financial statements.                             |   |                         | ** ** |   |   |

 

F-3

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**Kubla Khan,Inc.**

**(ADevelopment Stage Company)**

**Statements of Operations**

Yearsended December 31, 2003, 2002 and 2001

 
|                                              |   | **For the  year ended December 31,** |       | **From  Inception  March 28,  2000 through  December 31,** |       |
|---------------------------------------------------|--------|-------------------------------------------|------------|----------------------------------------------------------------------|------------|
|                                              |   | **2003**                                  |       | **2002**                                                             | ** ** | **2001** | ** ** | **2003** | ** ** |
|                                              |   | **US$**                                   | ** ** | **US$**                                                              | ** ** | **US$** | ** ** | **US$** | ** ** |
|                                              |   |                                      | ** ** |                                                                 |       |   |   |   | ** ** |
| Sales                                             |   | **390**                                   | ** ** | 1,329                                                                |       | 5,086 |   | **6,805** | ** ** |
|                                              |   |                                      | ** ** |                                                                 |       |   |   |   | ** ** |
| Cost of Sales                                     |   | **308**                                   | ** ** | 1,019                                                                |       | 3,890 |   | **5,217** | ** ** |
|                                              |   |                                      | ** ** |                                                                 |       |   |   |   | ** ** |
| Gross Profit                                      |   | **82**                                    | ** ** | 310                                                                  |       | 1,196 |   | **1,588** | ** ** |
|                                              |   |                                      | ** ** |                                                                 |       |   |   |   | ** ** |
| Cost and Expenses:                                |   |                                      | ** ** |                                                                 |       |   |   |   | ** ** |
| General administrative                            |   | **(17,689 **                         | **)**      | (13,472                                                         | )          | (21,967  | ) | **(55,988** | **)** |
| Travel expenses                                   |   | **(1,001**                                | **)**      | (4,660                                                               | )          | (6,796 | ) | **(13,407** | **)** |
| Professional fees                                 |   | **(7,865**                                | **)**      | (3,367                                                               | )          | (2,491 | ) | **(13,723** | **)** |
| Organizational expenses                           |   | **—**                                |       | —                                                               |       | — |   | **(1,000** | **)** |
|                                              |   |                                      | ** ** |                                                                 |       |   |   |   | ** ** |
| Net Loss                                          |   | **(26,473**                               | **)**      | (21,189                                                              | )          | (30,058 | ) | **(82,530** | **)** |
|                                              |   |                                      |       |                                                                 |       |   |   |   |   |
| Net loss per share  (Basic and Diluted)           |   | **(0.23**                                 | **)**      | (0.19                                                                | )          | (0.35 | ) |   | ** ** |
|                                              |   |                                      | ** ** |                                                                 |       |   |   |   | ** ** |
| Weighted Average Shares Common Stock  Outstanding |   | **111,744**                               | ** ** | 111,744                                                              |       | 86,265 |   |   | ** ** |

 

The accompanying notes are an integral partof these financial statements.

 

F-4

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**Kubla Khan,Inc.**

**(ADevelopment Stage Company)**

**Statements of Stockholders’ Equity(Deficit)**

Forthe period from inception (March 28, 2000) through year endedDecember 31, 2003

 
|                                                                                           |   |                  |       |                 |       |                     |       |                                            |       |
|------------------------------------------------------------------------------------------------|--------|-----------------------|------------|----------------------|------------|--------------------------|------------|-------------------------------------------------|------------|
|                                                                                           |   | **Common  stock**     |       | **Paid-in  capital** |       | **Accumulated  deficit** |       | **Total  shareholders’  equity (deficit)** |       |
| **Number of  shares**                                                                          |   | **$ .001 par  value** |
|                                                                                           |   |                  |       | **US$**              | ** ** | **US$**                  | ** ** | **US$**                                         | ** ** | **US$** |   |
|                                                                                           |   |                  |       |                 |       |                     |       |                                            |       |   |   |
| Beginning Balance                                                                              |   | —                |       | —               |       | —                   |       | —                                          |       | — |   |
|                                                                                           |   |                  |       |                 |       |                     |       |                                            |       |   |   |
| Issuance of 36,744 shares of common stock  for $7,500 cash                                     |   | 36,744                |       | 37                   |       | 7,463                    |       | —                                          |       | 7,500 |   |
|                                                                                           |   |                  |       |                 |       |                     |       |                                            |       |   |   |
| Capital contribution of services of $1,980  and facilities of $750                             |   | —                |       | —               |       | 2,730                    |       | —                                          |       | 2,730 |   |
|                                                                                           |   |                  |       |                 |       |                     |       |                                            |       |   |   |
| Net loss for the period from inception –  (March 28, 2000) to December 31, 2000 |   | —                |       | —               |       | —                   |       | (4,810                                          | )          | (4,810 | ) |
| As of December 31, 2000                                                                   |   | 36,744                |       | 37                   |       | 10,193                   |       | (4,810                                          | )          | 5,420 |   |
|                                                                                           |   |                  |       |                 |       |                     |       |                                            |       |   |   |
| Capital contribution of services of $660  and facilities of $553                               |   | —                |       | —               |       | 1,213                    |       | —                                          |       | 1,213 |   |
|                                                                                           |   |                  |       |                 |       |                     |       |                                            |       |   |   |
| Issuance of 75,000 shares of common stock  for $75,000 cash, net of offering costs of $10,517  |   | 75,000                |       | 75                   |       | 64,408                   |       | —                                          |       | 64,483 |   |
|                                                                                           |   |                  |       |                 |       |                     |       |                                            |       |   |   |
| Net loss for the year ended  December 31, 2001                                            |   | —                |       | —               |       | —                   |       | (30,058                                         | )          | (30,058 | ) |
| As of December 31, 2001                                                                   |   | 111,744               |       | 112                  |       | 75,814                   |       | (34,868                                         | )          | 41,058 |   |
|                                                                                           |   |                  |       |                 |       |                     |       |                                            |       |   |   |
| Net loss for the year ended  December 31, 2002                                            |   | —                |       | —               |       | —                   |       | (21,189                                         | )          | (21,189 | ) |
| As of December 31, 2002                                                                   |   | 111,744               |       | 112                  |       | 75,814                   |       | (56,057                                         | )          | 19,869 |   |
|                                                                                           |   |                  |       |                 |       |                     |       |                                            |       |   |   |
| Capital contribution of facilities                                                             |   | —                |       | —               |       | 3,593                    |       | —                                          |       | 3,593 |   |
| Net loss for the year ended  December 31, 2003                                            |   | —                |       | —               |       | —                   |       | (26,473                                         | )          | (26,473 | ) |
|                                                                                           |   |                  |       |                 |       |                     |       |                                            |       |   |   |
| **As of  December 31, 2003**                                                              |   | **111,744**           | ** ** | **112**              | ** ** | **79,407**               | ** ** | **(82,530**                                     | **)**      | **(3,011** | **)** |

 

The accompanying notes are an integral part of these financial statements.

 

F-5

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**Kubla KhanInc.**

**(ADevelopment Stage Company)**

**Statements of Cash Flows**

Yearsended December 31, 2003, 2002 and 2001

 
|                                                            |   | **For the  year ended December 31,** |        | **From  Inception  March 28, 2000   through  December 31,** |       |
|-----------------------------------------------------------------|--------|-------------------------------------------|-------------|-----------------------------------------------------------------------|------------|
|                                                            |   | **2003**                                  |        | **2002**                                                              |       | **2001** |   | **2003** |   |
|                                                            |   | **US$**                                   | ** **  | **US$**                                                               | ** ** | **US$** | ** ** | **US$** |   |
|                                                            |   |                                      |        |                                                                  |       |   |   |   |   |
| **Cash flows used in  operating activities:**                   |   |                                      | ** **  |                                                                  |       |   |   |   |   |
| Net Loss                                                        |   | **(26,473**                               | **) ** | (21,189                                                               | )     | (30,058 | )  | **(82,530** | **) ** |
| Non-cash expenses:                                              |   |                                      | ** **  |                                                                  |       |   |   |   | ** ** |
| Capital contribution of services and  facilities by stockholder |   | **3,593**                                 |        | —                                                                |       | 1,213 |   | **7,536** | ** ** |
| Depreciation                                                    |   | **590**                                   | ** **  | 649                                                                   |       | 354 |   | **1,593** | ** ** |
| Inventory written off                                           |   | **9,522**                                 | ** **  | —                                                                |       | — |   | **9,522** | ** ** |
|                                                            |   |                                      | ** **  |                                                                  |       |   |   |   | ** ** |
| Net cash used in operating activities                           |   | **(12,768**                               | **) ** | (20,540                                                               | )     | (28,491 | )  | **(63,879** | **) ** |
|                                                            |   |                                      | ** **  |                                                                  |       |   |   |   | ** ** |
| **Changes in  operating assets and liabilities**:               |   |                                      |        |                                                                  |       |   |   |   |   |
| (Increase) decrease in accounts receivable                      |   | **—**                                | ** **  | 2,050                                                                 |       | (2,050 | )  | **—** | ** ** |
| (Increase) decrease in inventory                                |   | **308**                                   | ** **  | 1,071                                                                 |       | (10,901 | )  | **(9,522** | **) ** |
| (Increase) decrease in deposits                                 |   | **—**                                | ** **  | —                                                                |       | (10 | )  | **(10** | **) ** |
| (Increase) decrease in prepaid expenses                         |   | **500**                                   | ** **  | (500                                                                  |       | — |   | **—** | ** ** |
| Increase (decrease) in accounts payable                         |   | **6,616**                                 | ** **  | (44                                                                   | )     | (1,106 | )  | **6,815** | ** ** |
| Net cash used by operations                                     |   | **(5,344**                                | **) ** | (17,963                                                               | )     | (42,558 | )  | **(66,596** | **) ** |
|                                                            |   |                                      | ** **  |                                                                  |       |   |   |   | ** ** |
| **Cash flows used in  investing activities:**                   |   |                                      |        |                                                                  |       |   |   |   |   |
| Purchase of office equipment                                    |   | **—**                                | ** **  | —                                                                |       | (1,593 | )  | **(1,593** | **) ** |
| Net cash used in investing activities                           |   | **—**                                | ** **  | —                                                                |       | (1,593 | )  | **(1,593** | **) ** |
|                                                            |   |                                      | ** **  |                                                                  |       |   |   |   | ** ** |
| **Cash flows from  financing activities:**                      |   |                                      |        |                                                                  |       |   |   |   |   |
| Issuance of common stock for cash                               |   | **—**                                | ** **  | —                                                                |       | 75,000 |   | **82,500** | ** ** |
| Offering costs charged to capital                               |   | **—**                                | ** **  | —                                                                |       | (10,517 | )  | **(10,517** | **) ** |
| Net decrease (increase) in deferred  offering costs             |   | **—**                                | ** **  | —                                                                |       | 7,350 |   | **—** | ** ** |
| Advances by (repayments to)  officers/stockholder               |   | **—**                                | ** **  | —                                                                |       | (606 | ) | **—** | ** ** |
|                                                            |   |                                      |        |                                                                  |       |   |   |   |   |
| Net cash from financing activities                              |   | **—**                                | ** **  | —                                                                |       | 71,277 |   | **3,794** | ** ** |
|                                                            |   |                                      | ** **  |                                                                  |       |   |   |   | ** ** |
| **Increase (decrease)  in cash**                                |   | **(5,344**                                | **) ** | (17,963                                                               | )     | 27,076 |   |   | ** ** |
|                                                            |   |                                      | ** **  |                                                                  |       |   |   |   | ** ** |
| **Cash, at beginning  of period**                               |   | **9,138**                                 | ** **  | 27,101                                                                |       | 25 |   |   | ** ** |
|                                                            |   |                                      | ** **  |                                                                  |       |   |   |   | ** ** |
| **Cash, at end of  period**                                     |   | **3,794**                                 | ** **  | 9,138                                                                 |       | 27,101 |   |   | ** ** |
|                                                            |   |                                      | ** **  |                                                                  |       |   |   |   | ** ** |
| Supplemental cash flow disclosures:                             |   |                                      |        |                                                                  |       |   |   |   |   |
| Interest paid                                                   |   | **—**                                | ** **  | —                                                                |       | — |   | **—** | ** ** |
| Income taxes paid                                               |   | **—**                                | ** **  | —                                                                |       | — |   | **—** | ** ** |

 

The accompanying notes are an integral part of these financialstatements.

 

F-6

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**1.****             ****NATURE OFBUSINESS**

 

Kubla Khan, Inc. was incorporated on March 28,2000, in the state of Utah. Prior to 2001, the Company had not conducted anyoperations and had incurred only expenses for travel for the review of variousbusiness opportunities and marketing strategies. Accordingly, the Companyprepares its financial statements in compliance with the requirements fordevelopment stage companies.

 

During 2001, upon completion of a public offering ofits common stock, the Company began doing business as an overstock and overrunspecialist whereby it purchases excess production of clothing and otherpersonal items from manufacturers or jobbers. These items are then transportedto the Intermountain Area where they are sold directly to the public, sold todiscount retail stores, or placed on consignment with such stores.

 

OnMarch 31, 2004, the Company entered into a subscription agreement with twoinvestors, Fang Xuemei and Xu ZhongNan, to issue and sell 5,000,000 fully paidand non-assessable shares of the restricted Common Stock of the Company, parvalue $0.001, at a per share purchase price of $0.10, for an aggregate of$500,000. The new investors then own approximately 89% of the issued andoutstanding stock. Followingthe change of the Company’s control, the Company abandoned the above-mentionedbusiness. Currently, the Company seeks to identify and complete merger oracquisition with private entities.

 

**2.****              SIGNIFICANTACCOUNTING POLICIES**

 

**a.****               Basis**

 

The Companyuses the accrual method of accounting.

 

**b.****               Revenue recognition**

 

Sales arerecorded on the date the products are shipped to customers.

 

**c.****               Inventory**

 

Inventoriesof products held for resale are valued at the lower of cost or market, usingthe FIFO method. Certain product inventory is consigned to retail stores fordisposition. However, such items continue to be reflected in the Company’sinventory until the consignee sells them. At that time a sale is recorded andsuch items are removed from the Company’s inventory and charged to cost of sales.

 

**d.****               Property and equipment**

 

Property andequipment are recorded at acquisition cost and depreciated over their estimateduseful lives using accelerated methods. Maintenance and repairs are charged toexpense. Renewals and betterments, which substantially extend the useful life,are capitalized. The cost and accumulated depreciation of disposed assets areeliminated from the accounts. Profits and losses resulting from suchdisposition are included in income.

 

F-7

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Property andequipment consists of the following as of December 31, 2003 and 2002:

 
|                       |   | **2003** |   | **2002** |   |
|----------------------------|--------|----------|--------|----------|--------|
|                       |   | **US$**  |   | **US$**  |   |
| Computer equipment         |   | 1,593    |   | 1,593    |   |
| Accumulated depreciation   |   | (1,593   | )      | (1,003   | )      |
|                       |   |     |   |     |   |
| Net property and equipment |   | —   |   | 590      |   |

 

**e.****               Income taxes**

 

The Companyhas not provided for deferred tax assets or liabilities because it has a taxloss carryforward of approximately $82,530 at December 31, 2003 availableto offset future profits for the next 20 years. No tax benefit for the loss carryforwardhas been established due to the Company’s lack of operating history and itsability to demonstrate that it can realize a profit from future operations.

 

**f.****                 Useof estimates**

 

The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesof America requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities at the date of the financialstatement and the reported amounts of revenues and expense during the reportingperiod. Actual results could differ from those estimates.

 

**g.****              Per shareinformation**

 

Per share information has been computed using the weighted averagenumber of common shares outstanding during the period.

 

**h.****              Related parties**

 

Parties are considered to be related if one party has the ability,directly or indirectly, to control the other party or exercise significantinfluence over the other party in making financial and operating decisions.Parties are also considered to be related if they are subject to common controlor common significant influence.

 

**i.****                 Accountingpronouncements**

 

There are no new accounting pronouncements for which adoption isexpected to have a material effect on the Company’s financial statements.

 

F-8

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**3.****              COMMON STOCK /DEFERRED OFFERING COSTS**

 

##### ***During 2000, the Company issued 36,744 shares of its commonstock to four individuals for $7,500 cash. In May 2001, the Company completedan initial public offering (IPO) of 75,000 shares of its common stock at $1.00per share. Costs related to the IPO consisting of legal and accounting costs aswell as filing fees were deferred and included in other assets atDecember 31, 2001. Such costs were charged as a reduction to paid incapital upon successful completion of the IPO in 2001.***

##### * *

**4.****              INCOME TAXES**

 

The Company has adopted the provision of SFASNo. 109 “Accounting for Income Taxes’. It requires recognition of deferred taxliabilities and assets for the expected future tax consequences. Under thismethod, deferred tax liabilities and assets are determined based on thedifferences between the financial statement and tax basis of assets andliabilities using enacted tax rates in effect for the year in which thedifferences are expected to reverse.

 

The Company’stotal deferred tax assets as of December 31, 2003 is as follows

 
|                             |   | **US$** |     |
|----------------------------------|--------|---------|----------|
| Net operating loss carry-forward |   | 13,500  | * * |
| Valuation allowance              |   | (13,500 | )        |
|                             |   | —  |     |

 

##### ***The difference between the income tax benefit in theaccompanying statements of operations and the amount that would result if thestatutory rate was applied to pre-tax loss is as follow:***

##### * *

|                                 |   | **For the years ended December 31,** |       |
|--------------------------------------|--------|-------------------------------------------|------------|
|                                 |   | **2003**                                  |       | **2002** |   | **2001** |   |
|                                 |   | **US$******                               |       | **US$** |   | **US$** |   |
| Income tax expense at statutory rate |   | **4,500**                                 | ** ** | 4,000 |   | 5,000 |   |
| Valuation allowance                  |   | **(4,500**                                | **)**      | (4,000 | ) | (5,000 | ) |
|                                 |   | —                                    |       | — |   | — |   |

 

##### ***The net operating loss carried forward of $82,530 for federaltax purposes will expire in*****the year 2023.**

##### * *

##### ***5.*****                                     ****RELATEDPARTY TRANSACTIONS**

##### * *

The Company currently rents its office space from the president onmonth-to-month basis for $500 per month.

 

The president of the Company donated 6 months of rental expenses atamount of $3,000 and non-reimbursed expenses paid by him at amount of $593 ascapital contribution in 2003.

 

F-9

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**6.****                                      GOINGCONCERN**

 

The Companyhas nominal assets with which to create operating capital. It has anaccumulated deficit of $82,530 at December 31, 2003. These factors raisesubstantial doubt about the Company’s ability to continue as a going concern.

 

Subsequent to the balance sheet date, the Companyhas increased its issued and outstanding capital as detailed in note 7 to thefinancial statements. The management of the Company believes that the proceedsof the offering as mentioned in note 7 to the financial statements, togetherwith other available funds, will be sufficient to meet the Company’santicipated needs for the new business plan and for working capital and capitalexpenditures for at least the next thirteen months and, accordingly, as aresult of the Company’s proposed plan to identify and complete merger or acquisition with private entities, the Company will remain a going concern inthe foreseeable future.

 

**7.****                                      SUBSEQUENTEVENTS**

 

OnMarch 31, 2004, the Company completed a private offering of 5,500,000shares of restricted common stock, par value $0.001, at a per share purchaseprice of $0.10 to seven unaffiliated individuals, resulting in gross proceedsof $550,000 in cash to the Company. The proceeds will be applied to fund theCompany’s proposed plan to identifyand complete merger or acquisition with private entities.

 

F-10

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