x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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¨
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TRANSITION REPORT
PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Nevada
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98-0500738
|
|
State
of other jurisdiction of
incorporation
or organization
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(I.R.S.
Employer Identification No.)
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1-D-1010 Yuanjing Park, Long Xiang
Road, Long Gang
District, Shenzhen, Guangdong
Province P.R.C.
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518117
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(Address
of principal executive offices)
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(Zip
Code)
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Title of each class
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Name of each exchange on which
registered
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|
Common Stock, $0.00001 par
value
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Title
of Class
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Large accelerated filer o
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Accelerated filer o
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Page
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||||
PART
I
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||||
Item
1.
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Business.
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3
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||
Item
1A.
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Risk
Factors.
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14
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||
Item
1B.
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Unresolved
Staff Comments.
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25
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||
Item
2.
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Properties.
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25
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Item
3.
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Legal
Proceedings.
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25
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Item
4.
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(Removed
and Reserved).
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25
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||||
PART
II
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||||
Item
5.
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Market
for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
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26
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||
Item
6.
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Selected
Financial Data.
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27
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||
Item
7.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operation.
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27
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Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk.
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28
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||
Item
8.
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Financial
Statements and Supplementary Data.
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28
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||
Item
9.
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Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure.
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29
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||
Item
9A.
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Controls
and Procedures.
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29
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||
Item
9B.
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Other
Information.
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30
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||
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||||
PART
III
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||||
Item
10.
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Directors,
Executive Officers and Corporate Governance.
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31
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||
Item
11.
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Executive
Compensation.
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34
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||
Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholders Matters.
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36
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||
Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence.
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37
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||
Item
14.
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Principal
Accountant Fees and Services.
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38
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||
PART
IV
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||||
Item
15.
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Exhibits
and Financial Statement Schedules.
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39
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·
|
Management
and Consulting Services Agreement. Under the Management
and Consulting Services Agreement between Junlong and Zhonghefangda,
Zhonghefangda provides management and consulting services to the VIE in
exchange for service fees up to 100% of the VIE’s Aggregate Net Profits
(as defined in the agreement). In consideration for its right to receive
the VIE’s aggregate net profits, Zhonghefangda will reimburse to the VIE
the full amount of Net Losses (as defined in the Agreement) incurred by
the VIE. During the term of the agreement, the VIE may not contract with
any other party to provide services that are the same or similar to the
services to be provided by Zhonghefangda pursuant to the agreement. The
term of this agreement is 20 years, renewable for succeeding periods of
the same duration until terminated pursuant to terms of the
agreement.
|
|
·
|
Option
Agreement. Under the Option Agreement, the shareholders of the VIE,
Mr. Dishan Guo, Mr. Jinzhou Zeng and Ms. Xiaofen Wang, or the VIE
Shareholders, who collectively own 100% of the equity interest in the VIE,
granted Zhonghefangda an exclusive, irrevocable option to purchase all or
part of their equity interests in the VIE, exercisable at any time and
from time to time, to the extent permitted under PRC law. The purchase
price of the equity interest will be equal to the original paid-in
registered capital of the transferor, adjusted proportionally if less than
all of the equity interest owned by the transferor is
purchased.
|
|
·
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Equity
Pledge Agreement.
The VIE Shareholders have pledged their entire equity interest in
the VIE to Zhonghefangda pursuant to the Equity Pledge Agreement. The
equity interests are pledged as collateral to secure the obligations of
the VIE under the Management and Consulting Services Agreement and the VIE
Shareholders’ obligations under the Option Agreement and the Proxy
Agreement.
|
|
·
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Voting
Rights Proxy Agreement. Pursuant to the Voting
Rights Proxy Agreement, each of the VIE Shareholders has irrevocably
granted and entrusted Zhonghefangda with all of the voting rights as a
shareholder of the VIE for the maximum period of time permitted by law.
Each VIE Shareholder has also covenanted not to transfer his or her equity
interest in the VIE to any party other than Zhonghefangda or a designee of
Zhonghefangda.
|
Company
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2009 Q1
Revenue
Million US$
|
Mobile
Value-Added
Service
(MVAS)
|
% of Revenue
Gaming /
Internet
Value-Added
Service
(IVAS)
|
Advertising
|
Operating
Margin
|
|||||||||||||||
Sohu
|
$ | 84.4 | 10 | % | 49 | % | 41 | % | 40 | % | ||||||||||
Baidu
|
$ | 81.9 | – | – | 100 | % | 27 | % | ||||||||||||
Sina
|
$ | 71.3 | 33 | % | – | 67 | % | 19 | % | |||||||||||
Shanda
|
$ | 111 | – | 97 | % | 3 | % | 40 | % | |||||||||||
NetEase
|
$ | 93 | – | 86 | % | 14 | % | 63 | % | |||||||||||
Tencent
|
$ | 204.1 | 20 | % | 70 | % | 10 | % | 51 | % | ||||||||||
Total
|
$ | 646 | 11 | % | 58 | % | 31 | % | 40 | % |
|
·
|
Company-owned
Cafés. Unlike most of our competitors who franchise their internet
cafés, all of our cafés are direct outlets. This model makes it easier to
carry out management decisions at each of our cafés. It also allows us to
maximize operating profit and create a consistent name
brand.
|
|
·
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Good Scale
of Operation. We have a registered capital of RMB 10 million (approximately
$1.47 million) with 36 cafés. The scale of operations allows us to control
cost and standardize store
management.
|
|
·
|
Proprietary
Software. We developed the software “SAFLASH” that provides fast
and stable internet connections. Its automatic flow control prevents users
from being disconnected when there is a disruption of internet traffic.
Stability is a key requirement for online gamers. Our research and
development team is working constantly to improve the
software.
|
|
·
|
Government
and Industry Relations. We have developed excellent working
relationship with the government that has assisted us to better comply
with internet café related laws and regulations and to understand
regulatory trends in our industry. Our CEO and CFO Dishan Guo is the
executive president of Shenzhen Longgang District Internet Industry
Association. This association is an associated department of the Ministry
of Culture and sets the internet café industry standards. As a result of
his involvement, Mr. Guo gains valuable insight into new standards and may
also have the opportunity to influence industry
standards.
|
|
Centralized
Oversight. All of our café managers are trained by, and under the
supervision of, our centralized operations manager, who is based at our
headquarters. As a result, our local managers are able to effectively
handle operational issues at the cafés. The local managers are trained to
provide a service level that meets Junlong’s service standards, and our
operations manager is able to effectively enforce policies and procedures
implemented by us.
|
|
·
|
We will
seek to grow by business expansion. We plan to expand in the
southwest and mid-east regions of the PRC
through acquisitions of local small chains, in order to meet the
requirements of applying for a national chain license. The national chain
license requires 30 internet cafés in three
provinces. We plan to accomplish acquisitions of internet cafés in
Guizhou in the third quarter, and Sichuan in the fourth
quarter in order to help us satisfy the requirements of obtaining a
national chain license. We also
want to fully develop our wholly-owned branches through effective
integration of resources. Most of our current competitors that offer
franchising simply provide a franchise license to entrepreneurs to get
started in exchange for a yearly fee. Junlong, on the other
hand,
is deeply involved in the operational management of its
company-owned cafés. After we obtain a national chain license, we will
focus on developing high-end internet cafés in the more developed cities
to create new concepts of internet café operation. We expect to
spread to the less developed cities in three years in order to gain
competitive market shares. We plan to put 20% of our resources to the less
developed cities for market integration after we are granted a national
license, which will effectively lay the foundation for us in those
cities.
|
|
·
|
We will
seek to grow by improving our company structure. To optimize our
resources and operations, we plan to improve our company structure so that
20% of our internet cafés will be large stores each with 300 or more
computers mainly focusing on movies, high-end games and entertainment; 50%
of cafés will be medium stores with 150 to 300 computers and a few movie
suites focusing on high-end games; 10% of cafés will be small stores in
the developed cities to spread our reputation with 100 to 150 computers.
In order to penetrate the less developed cities, we want to open 20% of
our stores in those cities. Our mission is to set up internet cafés all
over the PRC to become a real national chain and the industry
leader.
|
|
·
|
We will
seek to grow by location selection. Internet café is a retail
business. Internet cafés are located in highly populated areas so as to
attract customers. Junlong’s internet cafés are located at busy and well
attended areas such as industrial zones and business quarters. We have
conducted market research in Sichuan, Guizhou, Yunan provinces and
Chonqing municipalities in March. As a result of this market research, we
have identified the university areas in Sichuan and Chongqing, the
residential areas and business quarters in Yunan and Guizhou as prime
areas for the establishment of internet cafés. Our future expansion in the
south-western region will be built on the basis of these
locations.
|
|
·
|
Shenzhen Weiwo
Internet Café Chain Company. Weiwo was founded in 1997. Currently,
Weiwo has 14 cafés. The company mainly operates a franchise model, with
only 3 company owned cafés. The cafés are mainly located in Futian
district, Shenzhen City. The company concentrates on mid-range market.
Each café is relatively small with 100 to150 computers (for a total of
around 1,600 computers). Its franchised stores are charged a franchising
fee per month of approximately RMB 5,000 (approximately $735.29). Weiwo is
the smallest internet café chain company in
Shenzhen.
|
|
·
|
Shenzhen Bian Internet
Co. Ltd. Although the company entered into the internet café
industry in 2003, its current structure was founded on February 22, 2007
and obtained its regional internet café chain license in 2007. The company
operates mostly as a franchise model with 26 registered café, only 3 of
which are directly owned by the company. Each café has 80-150 computers.
It also has a few large cafés with more than 200 computers. The estimated
total number of computers owned by the company is 4,000. There is a
significant turnover in franchise ownership with around one third of the
franchise cafés transferring their licenses to other internet café
owners.
|
|
·
|
Quansu Internet Café
Chain Company. Quansu was founded in 1998 as a subsidiary
investment project of the Shenzhen Commercial Bank Investment Co. Ltd. The
company owns 36 cafés, 8 of which are directly owned and 28 of which are
franchises. Each café has 80-150 computers. The total number of computers
is approximately 6,000. The cafés are located in Baoan District, Futian
District and Luohu District. In May 2009, Quansu switched its major
business towards its internet cable connection business and public
telephone business.
|
|
·
|
Zhongqing
Network Home Co., Ltd.
|
|
·
|
Beijing
Cultural Development Co., Ltd.
|
|
·
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China
Digital Library Co., Ltd.
|
|
·
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Yalian
Telecommunication Network Co., Ltd.
|
|
·
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China
Heritage Information Center
|
|
·
|
Capital
Networks Limited
|
|
·
|
Great
Wall Broadband Network Service Co.,
Ltd.
|
|
·
|
China
United Telecommunications Co., Ltd. (China
Unicom)
|
|
·
|
CLP
Chinese Tong Communication Co.,
Ltd.
|
|
·
|
Reid
Investment Holding Company
|
|
·
|
Kunming – Yunnan
Jin-Zhao Yuan Culture Communication Network Co., Ltd. The company was
founded on May 1, 2003 by the Yunnan Provincial Department of Culture. It
obtained its business license and registration to operate a chain of
Internet cafés from the Industrial and Commercial Bureau of Yunnan
Province on April 31, 2004. It has a registered capital of RMB 10 million.
The company has opened approximately 15 cafés with an average of 200
computers in each café and a total of nearly 3,000
computers.
|
|
·
|
Chengdu – Chengdu
Shang Dynasty Networks Co., Ltd. The company was founded in 2002
with a registered capital of RMB 12 million. It would be most accurately
described as a multifunctional entertainment facility with coffee bars and
multi-function rooms. Its facilities have full range of digital
entertainment including hardware and software products, and professional
e-sport training. The company has four wholly owned cafés, and has more
than 20,000 registered members.
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Function
|
Number of
|
|
Employees
|
||
Senior
Management
|
41
|
|
Accounting
|
5
|
|
Staff
employees
|
373
|
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Total
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419
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|
·
|
Level
of government involvement in the
economy;
|
|
·
|
Control
of foreign exchange;
|
|
·
|
Methods
of allocating resources;
|
|
·
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Balance
of payments position;
|
|
·
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International
trade restrictions; and
|
|
·
|
International
conflict.
|
No.
|
Shop
|
Contract
Date
|
Lease
Period
|
Length
|
Lessor
|
Address
|
Rental
Deposit
|
Rent
|
||||||||||
1
|
Bujiqingbo
Shop
|
2006.01.01
|
2006.01
|
2012.01
|
6
|
Xiaodong
Gao
|
1st
Floor No.1 Xiashuijin xincun ,Buji neighbourhood , Longgang District,
Shenzhen
|
$3,831
|
$1,916
|
|||||||||
2
|
Bujiyongtong
Shop
|
2006.09.01
|
2005.09
|
2010.09
|
5
|
Shenzhen
Jiubaishilai Limited
|
3rd
floor, Buji neighbourhood, Yongfa Building Property, Lemin Road ,Longgang
District, Shenzhen
|
$17,093
|
$8,546
|
|||||||||
3
|
Dapengqunpeng
Shop
|
2006.09.01
|
2006.09
|
2011.09
|
5
|
Zhijun
Shao
|
No.1
east of Dapeng road ,Dapeng neighbourhood, Longgang District,
Shenzhen
|
$2,947
|
$1,474
|
|||||||||
4
|
Henggongsilian
Shop
|
2007.08.01
|
2007.08
|
2012.08
|
5
|
xuelin
Li
|
2nd
floor 11-4 Silian ,Henggang neighbourhood, Henggang District,
Shenzhen
|
$2,947
|
$1,474
|
|||||||||
5
|
Henggangsilian
Shop
|
2007.07.01
|
2007.07
|
2014.07
|
7
|
Shenzhen
Hongfu General Merchandise Ltd.
|
3rd
floor, Hongfu department store, west of Renming
road, Kenzi neighbourhood, Shenzhen
|
$2,947
|
$1,474
|
|||||||||
6
|
Lanmeng
Shop
|
2007.11.01
|
2007.11
|
2012.11
|
5
|
Xiaoxiong
Li
|
3rd
floor, Block C, Xiangfa building , Jihua Road , Buji District,
Shenzhen
|
$4,421
|
$2,210
|
|||||||||
7
|
Lanmeng
Shop
|
2006.02.01
|
2006.02
|
2012.02
|
6
|
Dezhong
Huang
|
3rd
floor, No. 25, Longping East Road Zonghe building , Longgang
neighbourhood, Shenzhen
|
$8,841
|
$4,421
|
|||||||||
8
|
Pengcheng
Shop
|
2007.12.05
|
2007.12
|
2012.12
|
5
|
Jianjun
Shen
|
3rd
floor, Pengcheng 2nd Industrial Area, Pengfei Road ,Dapeng neighbourhood,
Shenzhen
|
$5,894
|
$2,947
|
|||||||||
9
|
Pinghufumin
Shop
|
2007.10.01
|
2007.10
|
2012.10
|
5
|
Kaitian
Science develops Ltd
|
3rd
floor, Hutian Buliding, Fumin Industrial Area, Pinghu community, Pinghu
neighbourhood ,Longgang District,Shenzhen
|
$5,894
|
$2,947
|
|||||||||
10
|
Pinghupengchengyi
Shop
|
2009.01.03
|
2009.01
|
2014.01
|
5
|
Kailiang
Liu
|
2nd
Floor, 12 Fuchengaojiahu Road , LongGang neighbourhood,
Shenzhen
|
$3,831
|
$1,916
|
|||||||||
11
|
Pingshanliulian
Shop
|
2006.02.01
|
2006.02
|
2011.02
|
5
|
Shenzhen
Pingshan Technology Stands
|
3rd
floor, Xichechang,Jinbi Road, Pingshan Distrcit, Shenzhen
|
$3,536
|
$1,768
|
|||||||||
12
|
Pingshanpinghuan
Shop
|
2006.09.01
|
2006.09
|
2011.09
|
5
|
Zhiwei
Zou
|
3rd
floor, Jianshe Road, Pinghuan community , Pingshan neighbourhood,
Shenzhen
|
$5,305
|
$2,652
|
|||||||||
13
|
Yitongxun
Shop
|
2008.03.01
|
2008.03
|
2015.03
|
7
|
Shenzhen
Hongjingchuntian Real Estate Developement Ltd.
|
3rd
floor, Block 3, Hongjing Spring Garden, Longdong community, Longgang
neighbourhood, Shenzhen
|
$6,483
|
$3,242
|
|||||||||
14
|
Yinghao
Shop
|
2007.12.01
|
2007.12
|
2012.12
|
5
|
Longgang
General Merchandise Ltd.
|
2nd
floor, No.3 Yudujie Road, Longgang neighbourhood, Shenzhen
|
$3,242
|
$1,621
|
|||||||||
15
|
Yuanhu
Shop
|
2008.02.01
|
2008.02
|
2013.02
|
5
|
Zhongshen
Li
|
3rd
floor, Block B, 50 Xiangxixin Village,Yuanhu Industrial Area,Gaolefu Road,
BaoAn District, Shenzhen
|
$1,768
|
$884
|
|||||||||
16
|
Bujihonghan
Shop
|
2006.08.28
|
2006.08
|
2011.08
|
5
|
Shenzhen
Honghan Industry Ltd
|
1st&2nd
floor, No.28 Honghanhuayuan,Bantian Community, Buji
Street,Shenzhen
|
$2,505
|
$1,252
|
|||||||||
17
|
Bujinanling
Shop
|
2006.02.01
|
2006.02
|
2011.02
|
5
|
Shenzhen
Wanjia General merchandise Ltd.
|
No.125-134、136,Building
7, Nanlinghuayuan, Nanling Village, Buji Street,Longgang
District,Shenzhen
|
$6,778
|
$3,389
|
|||||||||
18
|
Hengganganliang
Shop
|
2008.11.25
|
2008.11
|
2013.11
|
5
|
Xiaobo
Jiang
|
2nd
floor ,No.72 Anliang,Anliang Community,Henggang Street,
Shenzhen
|
$2,063
|
$1,031
|
|||||||||
19
|
Henggangsongbai
Shop
|
2006.02.01
|
2006.02
|
2013.02
|
7
|
Shenzhen
Longguang Marketplace Development Ltd
|
3rd
floor, First Market, Henggang, Songbo Road, Henggang Street,
Shenzhen
|
$5,305
|
$2,652
|
|||||||||
20
|
Longchengailian
Shop
|
2006.02.01
|
2006.02
|
2011.02
|
5
|
Longgang
Ailian General Merchandise Ltd
|
3rd
floor, No.67 Shenhui Road, Ailian community,Longcheng Street,Longgang
District, Shenzhen
|
$7,368
|
$3,684
|
|||||||||
21
|
Longchenglongxiang
Shop
|
2009.01.05
|
2009.01
|
2014.01
|
5
|
Longgang
Potoubei Economic Development Ltd.
|
1st
floor, Nancunling, Ailian Society, Longcheng Neighbourhood, Longgang
District, Shenzhe
|
$2,947
|
$1,474
|
|||||||||
22
|
Pinghukangtian
Shop
|
2007.12.01
|
2007.12
|
2012.12
|
5
|
Shenzhen
Kangtian Economic Development Ltd.
|
3rd
floor, Kangtian Building, Kaitian Science Park, Futian Industrial
Area,Pinghu Street,lomggang district,shenzhen
|
$4,863
|
$2,431
|
|||||||||
23
|
pinghulantian
Shop
|
2007.11.01
|
2007.11
|
2012.11
|
5
|
Kaitian
Scientific Development Limited
|
3rd
floor, Kangtian Building, Kaitian Science Park, Futian Industrial
Area,Pinghu Street,Longgang District,Shenzhen
|
$4,421
|
$2,210
|
|||||||||
24
|
Yitong
Shop
|
2007.12.01
|
2007.12
|
2012.12
|
5
|
Sixiang
Yang
|
2nd
floor, A1 Building, Feifa Road,Biling community,Pingshan Street,Longgang
District,Shenzhen
|
$6,483
|
$3,242
|
|||||||||
25
|
Fuyuyuan
Shop
|
2008.11.01
|
2008.11
|
2013.11
|
5
|
Shenzhen
Dafanggong Commercial Development Ltd
|
2nd
floor, Building 1,Dafanggong Commerical Street,Pinghu community,Pinghu
street,Longgang District,Shenzhen
|
$3,242
|
$1,621
|
|||||||||
26
|
Biling
Shop
|
2008.11.01
|
2008.11
|
2013.11
|
5
|
Shenzhen
Longgang Renhe General Merchandise Ltd.
|
3rd
floor, Renhebaihuo Building, Biling Community, Pingshan Street,Longgang
District,Shenzhen
|
$2,947
|
$1,474
|
|||||||||
27
|
Junda
Shop
|
2006.02.01
|
2006.02
|
2011.02
|
5
|
Zhibing
Huang
|
2nd
floor, No.134 Hongmian Road,Aobei Community,Henggang Street,Longgang
District,Shenzen
|
$5,305
|
$2,652
|
|||||||||
28
|
Xinwangsu
Shop
|
2007.10.01
|
2007.10
|
2012.10
|
5
|
Shenzhen
Longbi Industry Limited
|
3rd
floor, 1st Commercial Building,Longbi Industrial Area,Bantian
Community,Buji Street,Longgang District,Shenzhen
|
$5,599
|
$2,800
|
|||||||||
29
|
Langman
Shop
|
2010.02.01
|
2010.02
|
2015.02
|
5
|
Shuangshuang
Yi
|
2nd
floor ,12 Jiahu Road,Fuchengao,Longgang District,Shenzhen
|
$5,157
|
$2,579
|
|||||||||
30
|
Chaosu
Shop
|
2010.02.01
|
2010.02
|
2015.02
|
5
|
Rong
Peng
|
2nd
floor, 1st Block, Jixianghuayuan, Jixiang Road,Central City,Longgang
District,Shenzhen
|
$5,894
|
$2,947
|
|||||||||
31
|
Changyou
Shop
|
2010.03.01
|
2010.03
|
2015.03
|
5
|
Xing
hua Long
|
2nd
floor, Jingxiao Building,Chuangye Road,Nanao Street,Longgang
District,Shenzhen
|
$7,126
|
$3,563
|
|||||||||
32
|
Shuangji
Shop
|
2010.03.10
|
2010.03
|
2015.03
|
5
|
Haijun
Jiang
|
2nd
floor, Kuichong 2nd Market,Zhenxing Road,Kuiyong Street,Longgang
District,Shenzhen
|
$5,231
|
$2,615
|
|||||||||
33
|
Yisu
Shop
|
2010.03.15
|
2010.03
|
2015.03
|
5
|
Zhuangshou
Chen
|
2nd
floor, Haixian Street Market, Nanao Street,Longgang
District,Shenzhen
|
$4,547
|
$2,274
|
|||||||||
34
|
Guangsu
Shop
|
2010.04.01
|
2010.04
|
2015.04
|
5
|
Huian
Luo
|
2nd
floor, No.36 Xinnan Road, Yantian District,Shenzhen
|
$4,589
|
$2,294
|
|||||||||
35
|
Aimin
Shop
|
2010.04.05
|
2010.04
|
2015.04
|
5
|
Yunhui
Xiong
|
2nd
Floor, Aiminshizhuang Building,Biyadi Roadm Kuichong Neighbourhood,
Longgang District,Shenzhen
|
$5,947
|
$2,974
|
|||||||||
36
|
Qingfeng
Shop
|
2010.04.10
|
2010.04
|
2015.04
|
5
|
Rongcan
Lin
|
1st
floor, No.43 Qingfeng Road,Yantian District,Shenzhen
|
$5,387
|
$2,694
|
|||||||||
37
|
Office
|
2010.06.17
|
2010.08
|
2012.08
|
2
|
Yibaode
Telecommunication Technology(Shenzhen) Limited
|
#2009-2010,4th
Building,ZhuoYue Century Centre,FuHua Third Road,FuTian
District,Shenzhen,Guangdong Province,PR China
|
$20,223
|
$10,112
|
|||||||||
38
|
Office
2
|
2009.10.23
|
2009.11
|
2010.11
|
1
|
Xuezheng
Yuan
|
No.1
Xinxin Garden, Fangjicun, Xudong Road, Wuchang, Wuhan, Hubei Province,
China 430062
|
$0
|
$10,000
|
/s/
Paula S. Morelli CPA
|
|
Paula
S. Morelli CPA P.C.
|
|
Freeport,
New York
|
|
September
11, 2009
|
June
30,
|
June
30,
|
|||||||
2010
|
2009
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 382 | $ | 2,673 | ||||
Prepaid
rent
|
3,333 | 3,333 | ||||||
Total
current assets
|
3,715 | 6,006 | ||||||
Other
assets
|
- | - | ||||||
Total
assets
|
$ | 3,715 | $ | 6,006 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued expenses payable
|
$ | 5,975 | $ | - | ||||
Current
portion of due to former majority stockholder
|
10,000 | - | ||||||
Total
current liabilities
|
15,975 | - | ||||||
Due
to former majority stockholder
|
32,000 | 10,000 | ||||||
Total
liabilities
|
47,975 | 10,000 | ||||||
Stockholders'
equity:
|
||||||||
Preferred
stock, $.00001 par value; authorized 100,000,000 shares, issued and
outstanding 0 shares
|
- | - | ||||||
Common
stock, $.00001 par value; authorized 100,000,000 shares, issued and
outstanding 6,173,600 and 6,173,600 shares, respectively
|
62 | 62 | ||||||
Additional
paid-in capital
|
112,479 | 112,479 | ||||||
Deficit
accumulated during the development stage
|
(156,801 | ) | (116,535 | ) | ||||
Total
stockholders' equity
|
(44,260 | ) | (3,994 | ) | ||||
Total
liabilities and stockholders' equity
|
$ | 3,715 | $ | 6,006 |
Cumulative
|
||||||||||||
during
the
|
||||||||||||
Development
|
||||||||||||
Stage
(March 14,
|
||||||||||||
Year
ended
|
Year
ended
|
2006
to
|
||||||||||
June 30, 2010
|
June 30, 2009
|
June 30, 2010)
|
||||||||||
Revenues:
|
$ | - | $ | - | $ | - | ||||||
Expenses:
|
||||||||||||
General
and administrative
|
40,266 | 36,135 | 156,801 | |||||||||
Total
expenses
|
40,266 | 36,135 | 156,801 | |||||||||
Net
income (loss)
|
$ | (40,266 | ) | $ | (36,135 | ) | $ | (156,801 | ) | |||
Net
income (loss) per share,
|
||||||||||||
Basic
and diluted
|
$ | (0.01 | ) | $ | (0.01 | ) | ||||||
Number
of common shares outstanding,
|
||||||||||||
Basic
and diluted
|
6,173,600 | 6,173,600 |
Deficit
|
||||||||||||||||||||
Accumulated
|
Total
|
|||||||||||||||||||
Common
Stock,
|
Additional
|
During
|
Stockholders'
|
|||||||||||||||||
$.00001
par value
|
Paid-in
|
Development
|
Equity
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Stage
|
(Deficiency)
|
||||||||||||||||
Shares
sold to officer and director at $.00001 per share in March
2006
|
3,350,000 | $ | 34 | $ | - | $ | - | $ | 34 | |||||||||||
Shares
sold at $.00001 per share in June 2006
|
725,000 | 7 | - | - | 7 | |||||||||||||||
Net
loss for the period March 14, 2006 (inception) to June 30,
2006
|
- | - | - | (4,041 | ) | (4,041 | ) | |||||||||||||
Balances,
June 30, 2006
|
4,075,000 | 41 | - | (4,041 | ) | (4,000 | ) | |||||||||||||
Shares
sold in public offering at $.10 per share in February and March 2007, less
offering costs of $20,000
|
1,325,000 | 13 | 112,487 | - | 112,500 | |||||||||||||||
Net
loss for the year ended June 30, 2007
|
- | - | - | (13,464 | ) | (13,464 | ) | |||||||||||||
Balances,
June 30, 2007
|
5,400,000 | 54 | 112,487 | (17,505 | ) | 95,036 | ||||||||||||||
Stock
dividend on August 24, 2007
|
21,600,000 | 216 | (216 | ) | - | - | ||||||||||||||
Return
and cancellation of stock dividend shares of four largest shareholders on
August 24, 2007
|
(20,826,400 | ) | (208 | ) | 208 | - | - | |||||||||||||
Net
loss for the year ended June 30, 2008
|
- | - | - | (62,895 | ) | (62,895 | ) | |||||||||||||
Balances,
June 30, 2008
|
6,173,600 | 62 | 112,479 | (80,400 | ) | 32,141 | ||||||||||||||
Net
loss for the year ended June 30, 2009
|
- | - | - | (36,135 | ) | (36,135 | ) | |||||||||||||
Balances,
June 30, 2009
|
6,173,600 | 62 | 112,479 | (116,535 | ) | (3,994 | ) | |||||||||||||
Net
loss for the year ended Jun 30, 2010
|
- | - | - | (40,266 | ) | (40,266 | ) | |||||||||||||
Balances,
June 30, 2010
|
6,173,600 | $ | 62 | $ | 112,479 | $ | (156,801 | ) | $ | (44,260 | ) |
Cumulative
|
||||||||||||
during
the
|
||||||||||||
Development
|
||||||||||||
Stage
(March 14,
|
||||||||||||
Year
ended
|
Year
ended
|
2006
to
|
||||||||||
June 30, 2010
|
June 30, 2009
|
June 30, 2010)
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income (loss)
|
$ | (40,266 | ) | $ | (36,135 | ) | $ | (156,801 | ) | |||
Changes
in operating assets and liabilities:
|
||||||||||||
Prepaid
rent
|
- | (3,333 | ) | (3,333 | ) | |||||||
Accounts
payable and accrued expenses payable
|
5,975 | (3,930 | ) | 5,975 | ||||||||
Net
cash provided by (used for) operating activities
|
(34,291 | ) | (43,398 | ) | (154,159 | ) | ||||||
Cash
flows from investing activities
|
- | - | - | |||||||||
Cash
flows from financing activities:
|
||||||||||||
Proceeds
from sales of common stock
|
- | - | 132,541 | |||||||||
Proceeds
from (repayment of) loans payable to former majority
stockholder
|
32,000 | 10,000 | 42,000 | |||||||||
Public
offering costs incurred
|
- | - | (20,000 | ) | ||||||||
Net
cash provided by (used for) financing activities
|
32,000 | 10,000 | 154,541 | |||||||||
Net
increase (decrease) in cash and cash equivalents
|
(2,291 | ) | (33,398 | ) | 382 | |||||||
Cash
and cash equivalents, beginning of period
|
2,673 | 36,071 | - | |||||||||
Cash
and cash equivalents, end of period
|
$ | 382 | $ | 2,673 | $ | 382 | ||||||
Supplemental
disclosures of cash flow information:
|
||||||||||||
Interest
paid
|
$ | - | $ | - | ||||||||
Income
taxes paid
|
$ | - | $ | - |
NAME
|
AGE
|
POSITION
|
||
Dishan
Guo
|
46
|
Chairman,
Chief Executive Officer and Chief Financial Officer
|
||
Zhenquan
Guo
|
33
|
Director
|
||
Lei
Li
|
45
|
Director
|
||
Wenbin
An
|
70
|
Director
|
||
Lizong
Wang
|
|
45
|
|
Director
|
|
·
|
We
shall indemnify its directors and officers, or any person serving at our
request, to the fullest extent permitted by the
NRS.
|
|
·
|
We
may at the discretion of the Board of Directors purchase and maintain
insurance on behalf of any person who holds or who has held any position
identified in the paragraph above against any and all liability incurred
by such person in any such position or arising out of his status as
such.
|
Name and Principal Position
|
Fiscal
Year
|
Salary
($)
|
Total
($)
|
|||||||
Dishan
Guo,
|
2010
|
44,118 | 44,118 | |||||||
Chief
Executive Officer (1)
|
2009
|
6,272 | 6,272 | |||||||
Xuezheng
Yuan,
|
2010
|
- | - | |||||||
Former
Chief Executive Officer (2)
|
2009
|
- | - |
(1)
|
On
July 2, 2010, we acquired Classic Bond in a reverse acquisition
transaction that was structured as a share exchange and in connection with
that transaction, Mr. Guo became our Chief Executive Officer and
President. Prior to the effective date of the reverse acquisition, Mr. Guo
served at Classic Bond’s VIE Junlong as its CEO. The annual, long term and
other compensation shown in this table include the amount Mr. Guo received
from Junlong prior to the consummation of the reverse
acquisition.
|
(2)
|
Xuezheng
Yuan resigned as our sole officer upon the closing of the reverse
acquisition of Classic Bond on July 2,
2010.
|
Name and Address of
Beneficial Owner
|
Office, If Any
|
Title of Class
|
Amount and
Nature of
Beneficial
Ownership(1)
|
Percent
of
Class(2)
|
||||||||
Officers and
Directors
|
||||||||||||
Dishan
Guo
|
Chairman
and Chief Executive Officer
|
Common
stock, $0.001 par value
|
12,008,750 | 59.45 | % | |||||||
Xuezheng
Yuan(3)
|
Director
|
Common
stock, $0.001 par value
|
20,510 | 0.1 | % | |||||||
Zhenquan
Guo(4)
|
Director
|
Common
stock, $0.001 par value
|
600,020 | 2.97 | % | |||||||
Lei
Li(4)
|
Director
|
Common
stock, $0.001 par value
|
— | — | ||||||||
Wenbin
An(4)
|
Director
|
Common
stock, $0.001 par value
|
— | — | ||||||||
Lizong
Wang(4)
|
Director
|
Common
stock, $0.001 par value
|
100,000 | 0.50 | % | |||||||
All
officers and directors as a group (2 persons named above)
|
Common
stock, $0.001 par value
|
12,008,750 | 59.45 | % | ||||||||
5% Security
Holders
|
||||||||||||
Dishan
Guo
|
Common
stock, $0.001 par value
|
12,008,750 | 59.45 | % |
(1)
|
Beneficial
Ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to securities.
Each of the beneficial owners listed above has direct ownership of and
sole voting power and investment power with respect to the shares of our
common stock.
|
(2)
|
A
total of 20,200,000 shares of our common stock are considered to be
outstanding pursuant to SEC Rule 13d-3(d)(1) as of September 20,
2010.
|
(3)
|
Xuezheng
Yuan resigned as our sole officer upon the closing of the reverse
acquisition of Classic Bond on July 2,
2010.
|
(4)
|
Zhenquan
Guo, Lei Li, Wenbin An and Lizong Wang joined our board of directors on
August 7, 2010.
|
|
·
|
On
June 11, 2010, Zhonghefangda entered into the Management and Consulting
Services Agreement with Junlong, pursuant to which Zhonghefangda agreed to
provide management and consulting services to the VIE in exchange for
service fees up to 100% of the VIE’s aggregate net profits during the term
of the agreement.
|
|
·
|
On
June 11, 2010, Zhonghefangda entered into the Option Agreement with
Junlong and the VIE Shareholders, whereby the VIE and the VIE Shareholders
granted Zhonghefangda an exclusive, irrevocable option to purchase all or
part of their equity interests in
Junlong.
|
|
·
|
On
June 11, 2010, Zhonghefangda entered into the Equity Pledge Agreement with
Junlong and the VIE Shareholders, whereby the VIE Shareholders have
pledged their entire equity interest in the VIE to Zhonghefangda. The
equity interests are pledged as collateral to secure the respective
obligations of the VIE and the VIE Shareholders under the Management and
Consulting Services Agreement, the Option Agreement and the Voting Rights
Proxy Agreement.
|
|
·
|
On
June 11, 2010, Zhonghefangda entered into the Voting Rights Proxy
Agreement with the VIE and the VIE Shareholders. The agreement requires
the VIE Shareholders to grant and entrust Zhonghefangda with all of the
voting rights as shareholders of the VIE for the maximum period of time
permitted by law.
|
|
·
|
On
July 2, 2010, we entered into a cancellation agreement with certain
shareholders, namely, Xuezheng Yuan, First Prestige, Inc., Shuihua Cheng,
Catalfa Holdings, Inc. and JD Infinity Holdings, Inc., whereby these
shareholders agreed to the cancellation of 4,973,600 shares of our common
stock owned by him. At the time he entered into the Cancellation
Agreement, Mr. Yuan was our sole director and
officer.
|
2010
|
$
|
3,500
|
EFP
Rotenberg, LLP
|
||
2010
|
$
|
8,750
|
Paula
S. Morelli, CPA, P.C.
|
||
2009
|
$
|
0
|
EFP
Rotenberg, LLP
|
||
2009
|
$
|
8,750
|
Paula
S. Morelli, CPA,
P.C.
|
2009
Junlong’s Audit
|
$ | 90,000 | ||
2010
Q1 Junlong Review
|
$ | 10,000 | ||
2010
Q2 Junlong Review
|
$ | 10,000 |
Exhibit No.
|
Description
|
|
2.1*
|
Form
of Share Exchange Agreement, dated July 2, 2010, among the Company,
Classic Bond Development Limited and its shareholders.
|
|
3.1**
|
Articles
of Incorporation of the Company
|
|
3.2**
|
Bylaws
of the Company
|
|
3.3***
|
Amended
and Restated Bylaws, adopted on July 30, 2010
|
|
4.1*
|
Form
of Cancellation Agreement, dated July 2, 2010, among the Company and
certain shareholders.
|
|
4.2**
|
Specimen
Stock Certificate
|
|
10.1*
|
Management
Consulting Service Agreement, dated June 11, 2010, among Zhonghefangda,
Junlong and Junlong’s shareholders.
|
|
10.2*
|
Equity
Pledge Agreement, dated June 11, 2010, among Zhonghefangda, Junlong and
Junlong’s shareholders.
|
|
10.3*
|
Option
Agreement, dated June 11, 2010, among Zhonghefangda, Junlong and Junlong’s
shareholders.
|
|
10.4*
|
Proxy
Agreement, dated June 11, 2010, among Zhonghefangda, Junlong and Junlong’s
shareholders.
|
|
10.5*
|
English
Translation of Employment Agreement, dated April 1, 2009, between Junlong
and Tu Fan.
|
|
10.6*
|
English
Translation of Form of Non-disclosure and Non-competition Agreement, dated
March 11, 2010, between Junlong and its employees.
|
|
10.7*
|
English
Summary of Loan Agreement, dated October 23, 2009, between Junlong and
Shenzhen Branch of China Construction Bank.
|
|
10.8*
|
English
Summary of Guaranty Contract of Maximum Amount, dated October 23, 2009,
between Dishan Guo and Shenzhen Branch of China Construction
Bank.
|
|
10.9*
|
English
Summary of Purchase Agreement, dated June 7, 2010, between Junlong and
Shenzhen SEG Industrial Investment Co., Ltd.
|
|
10.10*
|
English
Summary of Lease Contract, dated September 1, 2006, between Junlong and
Zou Zhiwei.
|
|
10.11*
|
English
Summary of Lease Contract, dated December 15, 2009, between Junlong and
Hao
Changsheng
|
10.12
|
Lease
contract re: No. 1 Xinxin Garden, Fangjicun, Xudong Road, Wuchang, Wuhan,
Hubei Province, China 430062 between the Company and Xuezheng
Yuan.
|
|
14.1****
|
Code
of Ethics
|
|
21*
|
Subsidiaries
of the Company.
|
|
31.1
|
Certification
of Principal Executive Officer and Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of
2002.
|
CHINA UNITECH GROUP, INC. | |
/s/
Dishan Guo
|
|
By:
Dishan Guo
|
|
Title:
Chief Executive Officer and Chief Financial
Officer
|
Name
and Title
|
Date
|
||
/s/
Dishan Guo
|
September
28, 2010
|
||
Dishan
Guo
|
|||
Title:
Chairman and Chief Executive Officer
|
|||
/s/
Zhenquan Guo
|
September
28, 2010
|
||
Zhenquan
Guo
|
|||
Title:
Director
|
|||
/s/
Lei Li
|
September
28, 2010
|
||
Lei
Li
|
|||
Title:
Director
|
|||
/s/
Wenbin
An
|
September
28, 2010
|
||
Wenbin
An
|
|||
Title:
Director
|
|||
/s/
Lizong
Wang
|
September
28, 2010
|
||
Lizong
Wang
|
|||
Title:
Director
|
|