-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IFGnvMArMoQCRuirUFhZtXbIzycKv5n4qWY0prNkCJLZDivUyHi4QQmliUW1Nq2m hZuePSsif182kxOGmoMclg== 0001013762-05-001601.txt : 20051117 0001013762-05-001601.hdr.sgml : 20051117 20051117171518 ACCESSION NUMBER: 0001013762-05-001601 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20051101 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051117 DATE AS OF CHANGE: 20051117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDTECH MINING CORP CENTRAL INDEX KEY: 0000763846 STANDARD INDUSTRIAL CLASSIFICATION: [9995] IRS NUMBER: 133250816 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 002-95836-NY FILM NUMBER: 051213342 BUSINESS ADDRESS: STREET 1: 3-11 BELLROSE DRIVE STREET 2: SUITE 314 CITY: ST. ALBERT STATE: A0 ZIP: T8N 5C9 BUSINESS PHONE: (780) 498-2289 MAIL ADDRESS: STREET 1: 3-11 BELLROSE DRIVE STREET 2: SUITE 314 CITY: ST. ALBERT STATE: A0 ZIP: T8N 5C9 FORMER COMPANY: FORMER CONFORMED NAME: EGAN SYSTEMS INC DATE OF NAME CHANGE: 19950606 FORMER COMPANY: FORMER CONFORMED NAME: FOREIGN PATENT DEVELOPMENT CORP DATE OF NAME CHANGE: 19870520 8-K 1 nov1720058k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): November 11, 2005 GOLDTECH MINING CORPORATION (Exact name of registrant as specified in its charter) Nevada 002-95836-NY 13-3250816 (State or Other Jurisdiction (Commission File (I.R.S. Employer of Incorporation) Number) Identification Number) Dalian Dong Tai Industrial Waste Treatment Co., Ltd No. 1 Huaihe West Road E-T-D-Zone, Dalian, China 116600 (Address of principal executive offices) (zip code) 0411-87622850 (Registrant's telephone number, including area code) Copies to: Marc A. Ross, Esq. Sichenzia Ross Friedman Ference LLP 1065 Avenue of the Americas New York, New York 10018 Phone: (212) 930-9700 Fax: (212) 930-9725 3-11 Bellrose Drive, Suite 314, St. Alberta, Alberta, Canada T8N 5C9 (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01 Entry into a Material Definitive Agreement. On November 11, 2005, Goldtech Mining Corporation (the "Company") entered into a Share Exchange Agreement (the "Agreement") with China Industrial Waste Management Ltd, a Delaware corporation ("CIWM") and the shareholders of CIWM (the "CIWM Shareholders"), which closed on November 11, 2005. Pursuant to the Agreement, the Company acquired all of the outstanding equity stock of CIWM from the CIWM Shareholders. As consideration for the acquisition of CIWM, the Company issued 64,000 shares of the Company's Series A Convertible Preferred Stock to the CIWM Shareholders. These issuances are exempt from registration requirements under Regulation D under the Securities Act of 1933, as amended. Each share of Series A Convertible Preferred Stock is convertible into 10,000 shares of common stock and is entitled to 10,000 votes on each matter submitted to the stockholders. The holders of the Series A Convertible Preferred Stock have contractually agreed not to convert such shares until the Company has increased its authorized number of shares of common stock. In connection with the Agreement, Jinqing Dong and John Leo were appointed to the Board of Directors and Jinqing Dong was appointed Chief Executive Officer and Chief Financial Officer and John Leo was appointed Secretary. BUSINESS OF CHINA INDUSTRIAL WASTE MANAGEMENT, INC. Overview China Industrial Waste Management, Inc., through its 90%-owned subsidiary, Dalian Dong Tai Industrial Waste Treatment Co., Ltd. ( "Dalian Dong Tai"), is of the earliest specialized companies engaged in centralized waste treatment in the People's Republic of China. Dalian Dong Tai is engaged in the collection, treatment, disposal and recycle of industrial wastes. Currently, Dalian Dong Tai has more than 600 clients. Dalian Dong Tai recovers all types of industrial wastes. The industrial wastes will be used as raw material to produce chemical and metallurgy products or to receive innocuous treatment through incineration, burial, or water treatment. Dalian Dong Tai also provides waste disposal solutions and realty management service to its clients. Waste Recycle Treatment Systems Currently Dalian Dong Tai has established various recycle treatment systems that are able to handle the following kinds of wastes: 1. Electric Garbage Dismantle System 2. Organic Solvent Distillation Recycle System 3. Fluorescent Tube Treatment System 4. Organic Macromolecular Waste Destructive Distillation Cracking System 5. Treatment System for Catalyst Containing Valuable Metals 6. Waste Etchant Liquor Treatment System 7. Comprehensive Treatment System for Industrial Waste Water 8. Incineration System for Solid Waste 9. Hazard Waste Landfill 10. Ordinary Industrial Solid Waste Landfill Electric Garbage Dismantle System After classification and dismantlement of copy machine's cartridge and electric components of PCB, the system can recover much metal and plastic with high value and limit the unrecyclable waste to the minimum. Through the dismantlement of white electric garbage from waste household electric appliance and waste product from house appliance manufacturer, the recyclable metrical can be recovered and the hazardous material like phosphor and Freon will go through innocuous treatment. The system was built in 1997, including large disintegrator, electronic weigher, oven, vacuum cleaner, decorticator and large goods elevator. The annual processing capacity of the system is 2,000 tons. The system is able to treat TV picture tube, photocopier cartridge and various electronic components. 1 Organic Solvent Distillation Recycle System Dalian Dong Tai Industrial Waste Treatment Co., Ltd established the organic solvent distillation recycle system in 1992. This system includes raw material storage tank, rectifying tower, and flashing tower. The system is capable of treating organic solvents including triclene, acetone, ethyl acetate, isopropyl alcohol, propylene glycol monomethyl ether methyl alcohol, methylbenzene, and cyclohexanone, etc. The annual capacity is 1,800 tons. The recycle product can be repeatedly used as the industry raw material. Since 2000, this system has been listed and promoted as the "national key environmental project" by the State Environmental Protection Administration for 4 consecutive years. Dalian Dong Tai is also listed as the technology supporting unit of the "National Technology Achievement Promotion Project". This system also won the second prize of Dalian Technology Innovations. Dalian Dong Tai has established very strict regulation of disposal for the treatment of toxic and hazardous chemical waste. No environmental pollution accident has ever occurred since the establishment of Dalian Dong Tai. Dalian Dong Tai has established relationships with over 40 enterprises in dealing with toxic chemical waste. Fluorescent Tube Treatment System Dalian Dong Tai has developed a waste fluorescent tube treatment system. The system is able to conduct innocuous treatment of fluorescent tube through negative-pressure shattering, mercury adsorption, glass cleaning, metal separation, absorption and cleaning liquid treatment. Currently the treatment capacity is 1,000 pieces/hour. Organic Macromolecular Waste Destructive Distillation Cracking System Canon Dalian Business Machines Co. Ltd is a sole-investor enterprise set up by Canon (China) Co. Ltd. It mainly produces the cartridge of laser printer. The treatment of the waste powdered ink was problematic, so Dalian Dong Tai developed the unique waste powdered ink destructive distillation pyrolysis treatment technique. This system can transform the waste powdered ink into fuel with high calorific value. The residue can also be used to produce cement. The system was built in 1995 and is composed of destructive distillation cracking oven, heat exchange device and air storage tank. The system is able to treat photocopier and printer powdered ink, and organic macromolecular materials such as polystyrene, polypropylene resin, polycarbonate, rubber materials, oil sludge, etc. The annual treatment capacity can reach 500 tons. Catalyst with Valuable Metals Treatment System The treatment system for catalyst with valuable metals developed by Dalian Dong Tai allows it to apply plasma technology to the comprehensive utilization and treatment of hazardous waste. Through the melting in the plasma oven and extraction of rare metal, the system can extract such rare metals as cobalt, nickel, molybdenum, vanadium, etc. The slag can be used as the raw material to produce cement. The annual treatment capacity of the system is 2,000 tons. This technology has won the third prize of National Technology Advancement and is sponsored by the National Technology Innovation Funds for Small-and-Medium Sized Scientific and Technological Enterprise. Waste Etchant Liquor Treatment System This system includes material delivery device, reaction vessel, and filtering device etc. The system can process the waste copper acid-alkaline etchant liquor of PCB industry and produce copper sulphate through neutralization, acidification, and metathesis. The annual treatment capacity of the system is 2,000 tons. 2 Industrial Waste Comprehensive Treatment System The industrial waste comprehensive treatment system includes treatment tank, oil removal tank, reaction tank, precipitation tank, neutralization tank, absorption tank, filtering device and filter press. It's able to treat the ablution resulting from removing oil from metal surface, and grinding and cutting fluids resulting from machining.The designed capacity is 3 tons/hour. Solid Waste Incineration System The inappropriate handling of hazardous chemicals can trigger serious environment pollution. Dalian Dong Tai built the incineration system which includes two-stage incineration stove, residual heat recovery system and innocuous residual gas discharge system with advanced process. The major waste that can be processed include: waste organic solvent, waste oil, waste glue liquor, combustible solid industrial garbage, etc. The system has met national standard and is automatically operated. Hazard Waste Landfill The landfill is built in accordance with the national construction standard. It has a double HDPE impermeable layer lining and percolating water collection system. After stabilization and solidification, the toxic and hazardous waste will receive innocuous treatment. The system is able to handle all kinds of waste residue containing heavy metal and incinerate residues. The project covers an area of 112,350 square feet. The landfill capacity is 20,000 tons. Landfill for Ordinary Industrial Solid Waste The landfill for ordinary industrial solid waste is built according to national standard. It's equipped with single layer anti-seepage pretreatment system and collection system of percolating water. The landfill can process ordinary industrial waste of Class 1 and 2. The capacity of the landfill is 100,000 tons. Market/Customers The major sources of industrial waste in the Dalian area are industrial enterprises, medical units, scientific research institutions and university laboratories. According to statistics from Dalian Dong Tai, the amount of waste collected has been increasing every year. The amount in 2001 was 11,000 tons, 13,226 tons in 2002, 14,594 tons in 2003, and 18,460 tons in 2004.It estimated that the annual growth rate in the next ten years will be 20%. Currently the industrial waste treatment business is still new in China. There are only a few costal cities that have built or plan to build the industrial waste treatment facilities. Due to the industry's strict requirement of professional technology and management, the accession is limited by granting special operation license. Only those companies securing the special operation license issued by national or local government can engage in the business legally. To avoid the environmental risk caused by inappropriate transfer of hazardous waste due to disorder competition, China has set up the industry planning according to regionalism. In the national planning, Dalian Dong Tai is responsible for collecting and processing the industrial waste of Dalian and surrounding area. Hence the basic market is guaranteed to some degree. Dalian Dong Tai has won long-term contracts of disposing solid waste from more than 600 enterprises, among which are many famous multinational companies such as Canon, Pfizer, Toshiba, Toto, Posco-CFM Coated Steel, Fuji, Wepec, Ryobi, TDK, YKK, and Panasonic. The expenditure on solid waste treatment of Canon accounts for 26% of Dalian Dong Tai's total revenue. With the expansion of Dalian Dong Tai's client group, the share of revenue from Canon is decreasing every year. 3 Technology and Intellectual Property Dalian Dong Tai has established the Dong Tai Industrial Waste Disposal Technology Center with the Dalian University Institute for Ecoplanning and Development. The center currently has 22 professional engineers and 9 analysts. With cooperation from experts from Canada and the US based RPP International Consulting Company. Now under the support of Dalian University of Technology, the Center is focusing on the research of ecoplanning theory and policy, professional training, ecoplanning, ecological efficiency evaluation, case analysis of eco-industrial Park, community or eco city, and reality simulation or dynamic tracking realistic simulation. Since its establishment, Dalian Dong Tai has been in close cooperation with scientific research academy and universities, such as Dalian Institute of Chemical Physics (DICP), Beijing Institute of Mechanics, Chinese Academy of Sciences, Tsinghua University and Dalian University of Technology. Dalian Dong Tai took part in the compilation of National Waste Disposal Criteria with over 50 international enterprises such as China Electronics Engineering Design Institute, Intel (China) Co., Ltd, Motorola (China) Co., Ltd, and Del l(China) Co., Ltd. Dalian Dong Tai's R&D team specializes in environmental engineering, chemical engineering, water supply and drain system, surface treatment, biological engineering, metallurgy, machinery, electronics, and computer science. They are especially important to the research of innocuous treatment of industrial solid waste and the comprehensive waste utilization. The scientific achievements that have been applied in the business operation include: 1. The Comprehensive Utilization and Disposal of Waste Organic Solvent. It won the second prize of Dalian Technology Innovation and has been listed as the "National Key Practical Technology for Environmental Protection" by the Ministry of Science and Technology and the State Administration of Environmental Protection; 2. The Destructive Distillation Thermal Cracking of Powdered Ink; 3. The Safety Landfill of Hazardous Waste; 4. Pyrolysis Incineration Stove; 5. The Innocuous Treatment of Cyanide; 6. The Comprehensive Utilization of the Waste Etchant Liquor from PCB industry; 7. The Comprehensive Utilization and Disposal of Waste Catalyst. It won the third prize of Dalian Technology Innovation and has been listed as the "National Key Practical Technology for Environmental Protection" by the State Administration of Environmental Protection. It was supported by the Innovation Funds for Small-and-Medium Sized Scientific and Technological Enterprises of the Ministry of Science and Technology; 8. The treatment of PCB Industry's Waste Liquid containing heavy metal; 9. The Disposal of Medical Refuse; 10. The Disposal of Waste Battery; 11. The Innocuous Treatment of Arsenic Compound; 12. The Wet Oxidation of High Concentration Organic Waste; 13. The Disposal of Ordinary Industrial Waste; and 14. The Comprehensive Utilization and Innocuous Treatment of Electric Waste. Among the above technology, the following have been granted patent or accepted in patent application. Patents granted: o The Disposal of the Waste Powdered Ink of Copy Machine; Patent No. ZL 01 1 27963.X o Consecutive Destructive Distillation Stove Utility Model; Patent No.: 200420069745.5 o Plasma Fusion Pyrolysis Device; Patent No. : 200420069742.1 Application Acceptance: o The Disposal of Waste Catalyst, Acceptance No. : 200410021093.2 Government Regulation The industrial waste treatment business is still in its nascent stages in China. There are only a few costal cities that have built or even plan to build the industrial waste treatment facilities. The industry has high barriers to entry due to the central government's strict requirements of professional technology and management. Only those companies who have been granted the special operating license issued by the national and local governments are permitted to engage in the industrial waste business. Additionally, the central government has granted exclusive rights to companies to operate in the industrial waste business according to regions. As part of this national planning scheme, Dong Tai Industrial Waste Treatment Co. Ltd is responsible for collecting and processing the industrial waste in all of Dalian and its surrounding areas in the province. 4 Employees As of November 1, 2005 Dalian Dong Tai had 215 employees. The Company has not experienced any work stoppages and Dalian Dong Tai considers relations with its employees to be good. Dalian Dong Tai anticipates hiring additional employees as it increases production and collection of waste materials. Description of Property Dalian Dong Tai's principal executive offices are located at No. 1 Huailu West Road, EDT Zone. Dalian City, China 11660. In addition, Dalian Dong Tai has the following facilities:
-------------------------------------- ----------------------------------- ------------- Address Function Area (sqft) -------------------------------------- ----------------------------------- ------------- No.1, Dakai Huaihe West Road Office building and electric 90,233 waste disposal area -------------------------------------- ----------------------------------- ------------- Processing workshop of waste No.27, Dakai Huaihe West Road etchant liquor and analysis 19,698 lab -------------------------------------- ----------------------------------- ------------- Processing workshop of waste No.100, Dakai Tieshan West Road No.27 catalyst, waste water 72,588 processing station -------------------------------------- ----------------------------------- ------------- No.6 District, Haiqing (Outside the Northwest wall of Xitai Oil Refinery hazard waste safe landfill 112,350 Plan) -------------------------------------- ----------------------------------- ------------- Flame-retardant Plant of Xiaowang 214,000 Tuanyuan Development Zone Hazardous waste incineration field, waste classification and storage field -------------------------------------- ----------------------------------- ------------- Qianguan Village, Ganjinzi District industrial solid wastes landfill 107,000 -------------------------------------- ----------------------------------- ------------- No. 85, Dagu Hill project under construction 685,424 -------------------------------------- ----------------------------------- -------------
Dalian Dong Tai owns all of its property. Dalian Dong Tai believes that its properties are adequate for its current and immediately foreseeable operating needs. Legal Proceedings From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse affect on our business, financial condition or operating results. 5 RISK FACTORS IF WE ARE UNABLE TO RETAIN THE SERVICES OF MESSRS. DONG, LI OR LIU, OR IF WE ARE UNABLE TO SUCCESSFULLY RECRUIT QUALIFIED MANAGERIAL AND SALES PERSONNEL HAVING EXPERIENCE IN BUSINESS, WE MAY NOT BE ABLE TO CONTINUE OUR OPERATIONS. Our success depends to a significant extent upon the continued service of Mr. Jinqing Dong, our Chief Executive Officer and Chief Financial Officer, Mr. Jun Li, the Chief Operating Officer of Dalian Dong Tai and Mr. Ruigan Liu, the Chief Engineer of Dalian Dong Tai. Loss of the services of Messrs. Dong, Li or Liu could have a material adverse effect on our growth, revenues, and prospective business. We do not maintain key-man insurance on the life of Messrs. Dong, Li or Liu. In addition, in order to successfully implement and manage our business plan, we will be dependent upon, among other things, successfully recruiting qualified managerial and sales personnel having experience in business. Competition for qualified individuals is intense. There can be no assurance that we will be able to find, attract and retain existing employees or that we will be able to find, attract and retain qualified personnel on acceptable terms. WE RELY ON OUR GOVERNMENTAL PERMITS AND EXCLUSIVE RIGHTS TO OPERATE IN DALIAN, AND THE LOSS OF THE PERMITS OR EXCLUSIVE RIGHTS WOULD HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS. Only those companies who have been granted the special operating license issued by the national and local governments are permitted to engage in the industrial waste business in China. The national and local governments have strict requirements of professional technology and management. Additionally, the central government has granted exclusive rights to companies to operate in the industrial waste business according to regions. As part of this national planning scheme, Dong Tai Industrial Waste Treatment Co. Ltd is responsible for collecting and processing the industrial waste in all of Dalian and its surrounding areas in the province. Either the national or local government could determine that we do not meet the strict requirements of professional technology or management and revoke our permit to engage in the industrial waste business in China. Additionally, the central government could revoke our exclusive license and grant other companies the right to collect and process the industrial waste in Dalian and its surrounding areas in the province. The termination of our licenses or exclusive rights to operate would have a material adverse impact on our revenue source. IF WE FAIL TO INTRODUCE NEW PRODUCTS OR SERVICES, OR OUR EXISTING PRODUCTS OR SERVICES ARE NOT ACCEPTED BY POTENTIAL CUSTOMERS, WE MAY NOT GAIN OR MAY LOSE MARKET SHARE. Rapid technological changes and frequent new product and service introductions are typical for the markets we serve. Our future success will depend in part on continuous, timely development and introduction of new products and services that address evolving market requirements. To the extent we fail to introduce new and innovative products or services, we may lose market share to potential competitors, which will be difficult or impossible to regain. Any inability, for technological or other reasons, to successfully develop and introduce new products or services could reduce our growth rate or damage our business. We may experience delays in the development and introduction of products or services. We cannot assure that we will keep pace with the rapid rate of change in waste collection and disposal research or that our new products will adequately meet the requirements of the marketplace or achieve market acceptance. We have not experienced any difficulties with the preceding factors, however, there can be no assurance that we will not experience difficulties in the future. The expenses or losses associated with unsuccessful product or service development or lack of market acceptance of our new products and services could materially adversely affect our business, operating results and financial condition. OUR PRINCIPAL STOCKHOLDERS, OFFICERS AND DIRECTORS OWN A CONTROLLING INTEREST IN OUR VOTING STOCK AND INVESTORS WILL NOT HAVE ANY VOICE IN OUR MANAGEMENT. In connection with the acquisition of China Industrial Waste Management Inc., we have issued 64,000 shares of Series A Convertible Preferred Stock to the shareholders of China Industrial Waste Management Inc., including several which are now officers and directors. The Series A Convertible Preferred Stock are convertible into 640 million shares of common stock and, in the aggregate, have the right to cast 640 million votes in any vote by our shareholders. As a result, our officers and directors in the aggregate have the right to cast approximately 85% of all votes by our shareholders. As a result, these stockholders, acting together, will have the ability to control substantially all matters submitted to our stockholders for approval, including: 6 o election of our board of directors; o removal of any of our directors; o amendment of our certificate of incorporation or bylaws; and o adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us. As a result of their ownership and positions, our directors and executive officers collectively are able to influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, sales of significant amounts of shares held by our directors and executive officers, or the prospect of these sales, could adversely affect the market price of our common stock. Management's stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. THE ISSUANCE OF SHARES UPON CONVERSION OF THE SERIES A CONVERTIBLE PREFERRED STOCK WILL CAUSE IMMEDIATE AND SUBSTANTIAL DILUTION TO OUR EXISTING STOCKHOLDERS. Upon an increase in the authorized number of shares of common stock, the holders of the Series A Convertible Preferred Stock will have the right to convert their shares into 640 million shares of common stock, which will result in substantial dilution to the interests of other stockholders. IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS TO SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN THE SECONDARY MARKET. Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK. The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: o that a broker or dealer approve a person's account for transactions in penny stocks; and o the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must: o obtain financial information and investment experience objectives of the person; and o make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. 7 The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form: o sets forth the basis on which the broker or dealer made the suitability determination; and o that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. 8 MANAGEMENT Executive Officers and Directors Below are the names and certain information regarding the Company's executive officers and directors following the acquisition of Dalian Dong Tai. Name Age Position(s) with the Company - --------------- ----- -------------------------------------------------------- Jinqing Dong 48 Chief Executive Officer, Chief Financial Officer and Director John Leo 40 Secretary and Director Ralph Jordan 51 Director Jun Li 44 Chief Operating Officer, Dalian Dong Tai Industrial Waste Creatment Co., Ltd Ruigan Liu 45 Chief Engineer, Dalian Dong Tai Industrial Waste Treatment Co., Ltd Xin Guo 36 Chief Accounting Officer, Dalian Dong Tai Industrial Waste Creatment Co., Ltd ___________________ Officers are elected annually by the Board of Directors (subject to the terms of any employment agreement), at our annual meeting, to hold such office until an officer's successor has been duly appointed and qualified, unless an officer sooner dies, resigns or is removed by the Board. There are no family relationships among any of the Company's directors and executive officers. Background of Executive Officers and Directors Jinqing Dong.Mr. Dong was appointed Chief Executive Officer and Chief Financial Officer on November 11, 2005 and will become a director eleven days after mailing this Information Statement to shareholders of the Company as of the Record Date. Since founded in 1991, Mr. Dong has been the President of Dalian Dong Tai Industrial Waste Treatment Co., Ltd., a China-based company that is 90% owned by our wholly-owned subsidiary, China Industrial Waste Management Inc. Between 1982 and 1991, Mr. Dong worked for the Dalian Environmental Science Academy, mainly engaged in the disposal research of waste gas, waste water and industrial residue and the evaluation of the environment effects from industrial projects. Mr. Dong graduated from Dalian University of Technology in 1982 with a bachelors in environmental engineering. John Leo. Mr. Leo was appointed Secretary and a member of the Board of Directors on November 11, 2005. Since founded in December 2004, Mr. Leo has been the President of American Union Securities, Inc., a New York-based investment banking firm. Since founded in December 2001, Mr. Leo has been the Managing Member of Venture Capital Partners, LLC, a New York City-based private merchant banking and corporate consulting firm. Between June 2001 and December 2001, Mr. Leo was a Registered Principal and a Senior OTC Trader for AM Capital LLC, a New York-based brokerage firm. Between 1997 and June 2001, Mr. Leo was a Registered Principal, Senior OTC Trader and Financial Advisor for M.H. Meyerson and Company, Inc., a Jersey City-based brokerage firm. Mr. Leo holds NASD Series 7, 24, 55 and 63 registrations. Mr. Leo graduated from Rollins College in 1987, majoring in psychology. Ralph Jordan. Mr. Jordan has been a director of the Company since 1987 and President of the Company from September 2001 to March 2004. Mr. Jordan is the founder of Envyr Corporation and has been employed by it since 1986. Prior to founding Envyr, Mr. Jordan was employed by Data General Corp. where he headed the language department. 9 Jun Li. Mr. Li has served as the COO of Dalian Dong Tai Industrial Waste Treatment Co., Ltd since 1998. Mr. Li graduated from Dalian University of Technology in 1982, majoring in environmental engineering. He previously worked for the Dalian Vacuum Flask Factory and Dalian Yili International Chemical Co. Ltd as the Director of Technology and Chief Production Manager. Ruiguang Liu. Mr. Liu has served as chief engineer for Dalian Dong Tai Industrial Waste Treatment Co., Ltd since 1999. Mr. Liu graduated from Dalian University of Technology in 1982, majoring in basic organic synthesis. Xin Guo. Ms. Guo has served as chief accounting officer for Dalian Dong Tai Industrial Waste Treatment Co., Ltd since 2003. Ms. Guo graduated from Beijing University of Commerce in 1992 majoring in finance and received her Master's in Public Administration from China's Northeastern University in 2002. EXECUTIVE COMPENSATION The following table sets forth the annual and long-term compensation for services in all capacities to the Company for the fiscal years ended December 31, 2004, 2003 and 2002 paid to the Company's Chief Executive Officer and other executive officer who served as an executive officer during the last completed fiscal year.
SUMMARY COMPENSATION TABLE - ------------------------- ---- ------- --------- ------------ ---------------- ------------ ----------- ----------------- Options SARs Name & Principal Position Salary Bonus ($) Other Annual Restricted Stock (#) (1) LTIP All Other Year ($) Compensation Awards ($) Payouts ($) Compensation - ------------------------- ---- ------- --------- ------------ ---------------- ------------ ----------- ----------------- - ------------------------- ---- ------- --------- ------------ ---------------- ------------ ----------- ----------------- Ralph Jordan 2004 85,818 - 9,792 - - - - - ------------------------- ---- ------- --------- ------------ ---------------- ------------ ----------- ----------------- Chairman, CEO, CFO 2003 107,000 - 13,056 - - - - - ------------------------- ---- ------- --------- ------------ ---------------- ------------ ----------- ----------------- Sec. & Treas. 2002 112,000 - 13,056 - - - - - ------------------------- ---- ------- --------- ------------ ---------------- ------------ ----------- ----------------- - ------------------------- ---- ------- --------- ------------ ---------------- ------------ ----------- ----------------- Tracy Kroeker (1) 2004 90,000 - - - - - $176,000 - ------------------------- ---- ------- --------- ------------ ---------------- ------------ ----------- ----------------- President & Director 2003 - - - - - - - - ------------------------- ---- ------- --------- ------------ ---------------- ------------ ----------- ----------------- 2002 - - - - - - - - ------------------------- ---- ------- --------- ------------ ---------------- ------------ ----------- -----------------
(1) Effective April 1, 2004, the Company entered into an Employment Agreement with Tracy Kroeker. Ms. Kroeker is employed as the President of the Company. She is to be paid an annual salary of $120,000 at a rate of $10,000 per month. In October 2004, Ms. Kroeker was issued 2,200,000 shares of the Company's common stock as other compensation. Ms. Kroeker was paid no other consideration and she elected to defer her annual compensation. There are no current employment agreements between any individuals and Dalian Dong Tai. 10 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Except with respect to the Merger Agreement and as described in the following paragraphs, none of the Company's directors or officers, nor any of the incoming directors, nor any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to the Company's outstanding shares, nor any of the Company's promoters, nor any relative or spouse of any of the foregoing persons, has any material interest, direct or indirect, in any transaction since January 1, 2005 or in any presently proposed transaction that, in either case, has affected, or will materially affect, the Company. None of the Company's directors or officers, nor any incoming director is indebted to the Company. Dalian Dong Tai Industrial Waste Treatment Co., Ltd. established a special fund in 1999 of (129) (143) 300,000 yuan (about $37,500) in the form of no-interest loans, to help employees, who are not officers or directors, finance housing. Funds are distributed in accordance with employees' position and servicing time in Dong Ttai with a maximum of (129) (143) 50,000 (129) iapproximate $6,250 (129) jand a minimum of (129) (143) 10,000 (around $1,250) respectively. At least three years employment with Dalian Dong Tai is required to utilize this financing program. The maturity of each loan is three years. All employees are required to repay the loan in its entirety in the event that their employment terminates prior to the loan maturity date. Currently, there are outstanding loans of (129) (143) 192,900 yuan (approximately $24,112). As of November 11, 2005, Dalian Dong Tai will no longer make any further loans to employees. On November 2003, Dalian Dong Tai Industrial Waste Treatment Co. entered into an agreement with Warner Technology and Investment Corp. ("Warner"), a shareholder of CIWM. Pursuant to the agreement, Warner assisted CIWM and Dalian Dong Tai in preparing Dalian Don Tai's business plan, introduced CIWM to U.S. accountants and counsel, selected a U.S. corporation for the share exchange and assisted with its due diligence efforts. In addition, Warner agreed to assist CIWM with its listing application for the OTCBB and with public relations in the U.S., among other things. 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information, as of November 11, 2005 with respect to the beneficial ownership of the outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of the Company's executive officers and directors; and (iii) the Company's directors and executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.
Name and Address Shares of Percent of Beneficial Owner Common Stock of Class Jinqing Dong 469,040,000 (1) 98.37% Dalian Dong Tai Industrial Waste Treatment Co., Ltd No. 1 Huaihe West Road E-T-D-Zone, Dalian, China 116600 John Leo 46,500,000 (2) 85.68% 100 Wall Street 15th Floor New York, New York 10005 Ralph Jordan 1,004,900 (3) 12.93% 4904 Waters Edge Dr Suite 160 Raliegh, NC 27606 Jun Li 15,990,000 (1) 67.29% Dalian Dong Tai Industrial Waste Treatment Co., Ltd No. 1 Huaihe West Road E-T-D-Zone, Dalian, China 116600 Xin Guo 10,660,000 (1) 57.83% Dalian Dong Tai Industrial Waste Treatment Co., Ltd No. 1 Huaihe West Road E-T-D-Zone, Dalian, China 116600 Ruiguang Liu 0 0% Dalian Dong Tai Industrial Waste Treatment Co., Ltd No. 1 Huaihe West Road E-T-D-Zone, Dalian, China 116600 All officers and directors, after completion of the Acquisition (6 persons) 543,194,900 (4) 98.77% _______________________ Huaqin Zhou 41,080,000 (1) 84.09% 18 Kimberly Court East Hanover, NJ 07936 12 Warner Technology and Investment Corp. 19,420,000 (1) 71.41% 18 Kimberly Court East Hanover, NJ 07936 Wenyi Guo 15,990,000 (1) 67.29% Dalian Dong Tai Industrial Waste Treatment Co., Ltd No. 1 Huaihe West Road E-T-D-Zone, Dalian, China 116600 Duanfeng Zhu 15,990,000 (1) 67.29% Dalian Dong Tai Industrial Waste Treatment Co., Ltd No. 1 Huaihe West Road E-T-D-Zone, Dalian, China 116600 Tongjie Xing 5,330,000 (1) 40.68% Dalian Dong Tai Industrial Waste Treatment Co., Ltd No. 1 Huaihe West Road E-T-D-Zone, Dalian, China 116600 Tracy Kroeker 1,250,000 16.08% 3-11, Suite 314, Bellerose Drive St. Albert, Canada T8N 5C9 ___________________________________
(1) Represents shares underlying series A preferred stock. (2) Includes 38,750,000 shares underlying series A preferred stock owed by American Union Securities, Inc., of which Mr. Leo is the President and has voting and investment power over such shares. (3) Includes 1,000,000 shares owned by Envyr Corporation, of which Mr. Jordan is the President and has voting and investment control over such shares. (4) Includes shares as explained in footnotes (1), (2) and (3) for the named officers and directors. o No Director, executive officer, affiliate or any owner of record or beneficial owner of more than 5% of any class of voting securities of the Company is a party adverse to the Company or has a material interest adverse to the Company. 13 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded on the OTC Bulletin Board, referred to herein as the OTCBB, under the symbol "GMNC." The following table sets forth the high and low prices of its Common Stock, as reported by the OTCBB for each quarter since January 1, 2003. The quotations set forth below reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.
2005 ---------------------------- ------------------------ High Low --------------------------- ------------------------ 1st Quarter.................................. $ 2.00 $ 0.19 2nd Quarter.................................. $ 1.65 $ 0.75 3rd Quarter.................................. 1.01 0.31 4th Quarter (1).............................. 0.35 0.21 2004 --------------------------- ------------------------ High Low --------------------------- ------------------------ 1st Quarter.................................. $ 1.00 $ 0.80 2nd Quarter.................................. 0.95 0.42 3rd Quarter.................................. 0.55 0.17 4th Quarter.................................. 0.34 0.20 2003 ----------------------------------------------------- High Low ---------------------------- ------------------------ 1st Quarter.................................. $ 0.01 $ 0.01 2nd Quarter.................................. 0.01 0.01 3rd Quarter.................................. 0.01 0.01 4th Quarter (2).............................. 1.90 1.00 - --------------------------------------------------------------------------------------------------------
(1) As of November 16, 2005 (2) Reflect a 1:100 reverse stock split As of November 11, 2005, there were approximately 167 holders of record of the Company's common stock. Dividends The Company has never declared or paid any cash dividends on its common stock. The Company currently intends to retain future earnings, if any, to finance the expansion of its business. As a result, the Company does not anticipate paying any cash dividends in the foreseeable future. Securities Authorized for Issuance Under Equity Compensation Plans The following table shows information with respect to each equity compensation plan under which the Company's common stock is authorized for issuance as of the fiscal year ended December 31, 2004. 14
EQUITY COMPENSATION PLAN INFORMATION - ------------------------------------ ------------------------ ----------------------- --------------------------- Plan category Number of securities Weighted average Number of securities to be issued upon exercise price of remaining available for exercise of outstanding options, future issuance under outstanding options, warrants and rights equity compensation plans warrants and rights (excluding securities reflected in column (a) - ------------------------------------ ------------------------ ----------------------- --------------------------- (a) (b) (c) - ------------------------------------ ------------------------ ----------------------- --------------------------- Equity compensation plans approved -0- -0- -0- by security holders - ------------------------------------ ------------------------ ----------------------- --------------------------- - ------------------------------------ ------------------------ ----------------------- --------------------------- Equity compensation plans not -0- -0- -0- approved by security holders - ------------------------------------ ------------------------ ----------------------- --------------------------- - ------------------------------------ ------------------------ ----------------------- --------------------------- Total -0- -0- -0- - ------------------------------------ ------------------------ ----------------------- ---------------------------
INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company's directors and executive officers are indemnified as provided by the Nevada Revised Statutes and the Company's Bylaws. These provisions state that the Company's directors may cause the Company to indemnify a director or former director against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him as a result of him acting as a director. The indemnification of costs can include an amount paid to settle an action or satisfy a judgment. Such indemnification is at the discretion of the Company's board of directors and is subject to the Securities and Exchange Commission's policy regarding indemnification. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. Item 2.01 Completion of Acquisition or Disposition of Assets. See Item 1.01. Item 3.02 Unregistered Sales of Equity Securities. See Item 1.01. Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers See Item 1.01 Item 9.01 Financial Statements and Exhibits. (a) Financial statements of business acquired. Audited Financial Statements of China Industrial Waste Management Inc. as of December 31, 2004 and December 31, 2003 Unaudited financial statements of China Industrial Waste Management Inc. as of June 30, 2005 (b) Pro forma financial information. Pro forma financial information as of June 30, 2005 (c) Exhibits Exhibit Number Description - ------------------ ------------------------------------------------------------ 10.1 Share Exchange Agreement by and among Goldtech Mining Corporation, Dalian Acquisition Corp., China Industrial Waste Management Inc. and the shareholders of China Industrial Waste Management Inc. 15 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GOLDTECH MINING CORPORATION Dated: November 17, 2005 By: /s/ JINQING DONG ------------------- Name: Jinqing Dong Title: Chief Executive Officer 16 KABANI & COMPANY, INC. Certified Public Accountants 6033 West Century Blvd., Suite 810, Los Angeles, CA 90045 Phone (310) 694-3590 Fax (310) 410-0371 www.kabanico.com REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders Dalian Dongtai Industry Waste Treatment Co., Ltd. We have audited the accompanying consolidated balance sheet of Dalian Dongtai Industry Waste Treatment Co., Ltd. and subsidiaries as of December 31, 2004 and the related consolidated statements of income, stockholders' equity, and cash flows for the years ended December 31, 2004 and 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Dalian Dongtai Industry Waste Treatment Co., Ltd. and subsidiaries as of December 31, 2004, and the results of its consolidated operations and its cash flows for the years ended December 31, 2004 and 2003 in conformity with accounting principles generally accepted in the United States of America. /S/ Kabani & Company, Inc. CERTIFIED PUBLIC ACCOUNTANTS Los Angeles, California July 15, 2005 17 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD CONSOLIDATED BALANCE SHEET December 31, 2004
ASSETS CURRENT ASSETS: Cash & cash equivalents $ 2,372,385 Accounts receivable, net 108,868 Other receivable 192,195 Inventory 3,385 Loan to Employee 30,359 Due from related parties 444,918 Advances to Suppliers 157,159 Prepaid expense 13,068 -------------- Total current assets 3,322,337 PROPERTY AND EQUIPMENT, net 2,385,390 CONSTRUCTION IN PROGRESS: 196,134 NON-CURRENT ASSET: Long-term Investment 12,100 INTANGIBLE ASSET, net 1,520,874 -------------- $ 7,436,835 ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable & accrued expense $ 315,450 Other payable 211,878 -------------- Total current liabilities 527,328 Minority shareholders 247,311 STOCKHOLDERS' EQUITY: Share capital 2,178,000 Statutory reserve 663,282 Retained earnings 3,820,914 -------------- Total stockholders' equity 6,662,196
18 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2004 AND 2003
2004 2003 -------------- -------------- Revenue $ 4,143,530 $ 3,968,006 Cost of revenue 1,243,373 1,463,341 -------------- -------------- Gross profit 2,900,157 2,504,665 Operating expenses Selling expenses 177,123 168,607 General and administrative expenses 892,564 601,558 -------------- -------------- Total operating expenses 1,069,687 770,165 -------------- -------------- Income from operations 1,830,470 1,734,500 Non-operating Income (expense): Interest income 22,138 11,938 Rent income 46,759 56,923 Other expense (35,517) (35,874) -------------- -------------- Total non-operating income (expense) 33,380 32,987 -------------- -------------- Net income before minority interest 1,863,850 1,767,487 Minority interest (34,079) (137,570) -------------- -------------- Net Income $ 1,829,771 1,629,917 ============== ==============
19 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2004
Common Retained Total stock Statutory earnings stockholders' Amount reserve (deficit) equity -------------- -------------- -------------- ---------------- Balance, December 31, 2002 $ 242,000 $ 144,329 $ 2,816,179 $ 3,202,508 Net income for the year ended December 31, 2003 - - 1,629,917 1,629,917 Allocation to additional paid in capital 1,936,000 - (1,936,000) - Allocation to statutory reserve - 244,488 (244,488) - -------------- -------------- -------------- ---------------- Balance, December 31, 2003 2,178,000 388,817 2,265,608 4,832,425 Net income for the year ended December 31, 2004 - - 1,829,771 1,829,771 Allocation to statutory reserve - 274,466 (274,466) - -------------- -------------- -------------- ------------------- Balance December 31, 2004 $ 2,178,000 $ 663,282 $ 3,820,914 $ 6,662,196 ================ =============== ============== ===================
20 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2004 AND 2003
2004 2003 --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,829,771 $ 1,629,917 Adjustments to reconcile net income to net cash provided in operating activities: Minority interest 34,079 137,570 Depreciation and amortization 314,914 187,057 Write off of investment 108,900 - (Increase) / decrease in current assets: Accounts receivable 34,515 (35,382) Inventory (3,385) 2,190 Other receivable (153,697) 63,965 Loan to employee (3,799) (26,560) Due from related parties (425,981) (18,937) Advances to suppliers (96,659) (52,720) Prepaid expense (2,904) (10,164) Increase / (decrease) in current liabilities: Accounts payable (181,597) 394,792 Other payable (87,408) (68,433) --------------- --------------- Net cash provided by operating activities 1,366,749 2,203,295 --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES Payment on purchase of property (381,313) (2,288,717) Payment on purchase of long term Investment - (24,200) --------------- --------------- Net cash used in investing activities (381,313) (2,312,917) --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on long-term Loan - (465,850) Minority Investment 74,515 218,335 --------------- --------------- Net cash provided by in financing activities 74,515 (247,515) --------------- --------------- NET INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS 1,059,951 (357,137) CASH & CASH EQUIVALENTS, BEGINNING BALANCE 1,312,434 1,669,571 --------------- --------------- CASH & CASH EQUIVALENTS, ENDING BALANCE $ 2,372,385 $ 1,312,434 =============== ================
21 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND DESCRIPTION OF BUSINESS Dalian Dongtai Industry Waste Treatment Co., Ltd. (the "Company") was incorporated on January 9, 1991 with a registered capital of RMB 1,800,000(USD $217,800). The Company has two subsidiaries a) Precision Machine Co., Ltd and b) Wafangdian Dongtai Garbage Collection. The Company is located in Economic and Technology Development Zone, Dalian, People's Republic of China. The Company is engaged in the business of industrial solid waste disposal and treatment, as well as recycled products development and selling. The Company also provides service for environment protection technology consultation, pollution treatment, and waste managing process design. Precision Machine Co., Ltd., ("Precision"), , was incorporated by the Company on July 2, 2001. The Company has a 55% interest in this subsidiary.. The subsidiary is located in Economic and Technology Development Zone, Dalian, People's Republic of China and is engaged in the business of selling re-cycled products. Wafangdian Dongtai Garbage Collection, ("Wafangdian"), was incorporated by the Company on February 26, 2004.The Company has a 51% interest in this subsidiary. The subsidiary is located in Wafangdian district, Dalian, People's Republic of China. Wafangdian is inactive.. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents Cash and cash equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. Accounts and other receivable Accounts and other receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as needed. The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Terms of the sales vary from COD through a credit term up to 9 to 12 months. Reserves are recorded primarily on a specific identification basis. Advances to suppliers The Company advances to certain vendors for purchase of its material. The advances to suppliers are interest free and unsecured. The advances to suppliers amounted to $157,159 at December 31, 2004. 22 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Due from related parties The Company advances to related parties who own common interest in the amount of $444,918 as of December 31, 2004. The advances are non-interest bearing, due on demand and unsecured. Loan to employees At December 31, 2004, the Company has loan to its employees of $30,359. The loan is unsecured, non-interest bearing and due on demand. Inventory Inventories are stated at the lower of cost, as determined on a first-in, first-out basis, or market. The management compares the cost of inventories with the market value, and allowance is made for writing down the inventories to their market value, if lower. Property, equipment and construction in progress Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of: 30 years for building, 10 years for machinery, and 5 years for office equipment and 8 years for vehicles. At December 31, 2004, the following are the details of the property and equipment: Vehicle $ 274,984 Office instrument & equipment 343,670 Machinery & equipment 885,570 Building 1,811,434 Less: Accumulated depreciation (930,268) ------------ Net $ 2,385,390 ============ Long-lived assets Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations for a Disposal of a Segment of a Business." The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Company believes that, as of December 31, 2004 there were no significant impairments of its long-lived assets. 23 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Construction in progress Construction in progress consists of the design expenses and prepayments for engineers for the site to customize the plant and equipment. The total amount is up-to-date cost. We do not amortize till total project is done. As of December 31, 2004, the company has "construction in progress" in the amount of $196,134. It is the architecture fee and prepaid expense to engineer. Long-term Investment The Company invested 20% ownership of Ziguang Dongtai for the amount of $12,100. The investment is accounted for under the equity method. The carrying amount of the investment of $12,100 represents the Company's 20% of interest in the net asset of the investee. During the year the Company wrote off $108,900 of investment in an investee as it was impaired. Intangible Assets Intangible assets consist of "Rights to use land and build a plant" for 50 years and "Rights of use landfill" for 20 years. The methods to amortize intangible assets are a 50-year straight-line method and a 20-year straight-line for landfill. The Company also evaluates intangible assets for impairment, at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible assets, other long-lived assets and, goodwill is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss. Net intangible assets at December 31, 2004 were as follows: Right to use land $ 1,586,644 Less Accumulated amortization (65,768) ------------ $ 1,520,874 ============ Amortization expense for the Company's intangible assets for the year ended December 31, 2004 and 2003 amounted to $33,460 and $32,308, respectively. Amortization expense for the Company's intangible assets over the next five fiscal years is estimated to be: 2005-$33,460, 2006-$33,460, 2007-$33,460, 2008-$33,460 and 2009-$33,460. Minority Interest Minority interest represent 45% equity interest in Precision Machine Co., Ltd and 49% equity interest in Wafangdian Dongtai Garbage Collection. At December 31, 2004, minority interest amounted to $ 247,311. Minority share of income was $ 34,079 and $ 137,570 for the years ended December 31, 2004 and 2003 respectively. Fair value of financial instruments Statement of financial accounting standard No. 107, Disclosures about fair value of financial instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value. 24 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Revenue Recognition The Company's revenue recognition policies are in compliance with Staff accounting bulletin (SAB) 104. Revenue is recognized when services are rendered to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Advertising Costs The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising costs for the years ended December 31, 2004 and 2003 were insignificant. Stock-based compensation In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS No. 123 prescribes accounting and reporting standards for all stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123 requires compensation expense to be recorded (i) using the new fair value method or (ii) using the existing accounting rules prescribed by Accounting Principles Board Opinion No. 25, "Accounting for stock issued to employees" (APB 25) and related interpretations with proforma disclosure of what net income and earnings per share would have been had the Company adopted the new fair value method. The Company uses the intrinsic value method prescribed by APB 25 and has opted for the disclosure provisions of SFAS No.123. No options have been granted for the years ended December 31, 2004 and 2003. Income Taxes The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. LOCAL PRC INCOME TAX The Company is subject to People's Republic of China ("PRC") Enterprise Income Tax at a rate of 15% on the net income. According to PRC ruling, any join venture with foreigner investment will get special tax exempt treatment for first two years. The Company got tax exempt treatment for year 2004 and 2003. Accordingly, no provision for income taxes is recorded in the financial statements. No significant deferred tax liabilities or assets existed as of either December 31, 2004 or 2003. 25 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Foreign Currencies Translation Assets and liabilities in foreign currency are recorded at the balance sheet date at the rate prevailing on that date. Items of income statement are recorded at the average exchange rate. Gain or loss on foreign currency transactions are reflected on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component in the equity section of the balance sheet, as component of comprehensive income. The functional currency of the Company is Chinese Renminbi. Basic and diluted net loss per share Net loss per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Statement of Cash Flows: In accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows," cash flows from the Company's operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Segment Reporting Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure About Segments of an Enterprise and Related Information" requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. SFAS 131 has no effect on the Company's consolidated financial statements as the Company consists of one reportable business segment. All revenue is from customers in People's Republic of China. All of the Company's assets are located in People's Republic of China. Recent Pronouncements In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections." This statement applies to all voluntary changes in accounting principle and requires retrospective application to prior periods' financial statements of changes in accounting principle, unless this would be impracticable. This statement also makes a distinction between "retrospective application" of an accounting principle and the "restatement" of financial statements to reflect the correction of an error. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We are evaluating the effect the adoption of this interpretation will have on its financial position, cash flows and results of operations. 26 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires companies to recognize in the statement of operations the grant- date fair value of stock options and other equity-based compensation issued to employees. FAS No. 123R is effective beginning in the Company's first quarter of fiscal 2006. The Company believes that the adoption of this standard will have no material impact on its financial statements. 3. OTHER PAYABLE Other payable consists of the following as of December 31, 2004. Other accounts payable $ 75,126 Welfare payable (4,807) Tax Payable 140,389 Other accrued expenses 1,170 --------- Total $ 211,878 ========= 4. SHAREHOLDERS' EQUITY At February 16, 2001, the Company increased their register capital from RMB 1,800,000 (USD 217,800) to RMB 2,000,000 (USD 242,000). At May 24, 2003, the Company increased their register capital from RMB 2,000,000 (USD 242,000) to RMB 18,000,000 (USD 2,178,000). There were no common stock issuance during the year ended December 31, 2004. 5. EMPLOYEE WELFARE PLAN The Company has established its own employee welfare plan in accordance with Chinese law and regulations. The Company makes annual contributions of 14% of all employees' salaries to employee welfare plan. The total expense for the above plan was $15,041 and $12,636 for the year ended December 31, 2004 and 2003, respectively. 6. STATUTORY COMMON WELFARE FUND As stipulated by the Company Law of the People's Republic of China (PRC) as applicable to Chinese companies with foreign ownership, net income after taxation can only be distributed as dividends after appropriation has been made for the following: (i) Making up cumulative prior years' losses, if any; (ii) Allocations to the "Statutory surplus reserve" of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital; (iii) Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's "Statutory common welfare fund", which is established for the purpose of providing employee facilities and other collective benefits to the Company's employees; and (iv) Allocations to the discretionary surplus reserve, if approved in the shareholders' general meeting. 27 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The Company did not provide a reserve for the welfare fund for the years ended December 31, 2004 and 2003. 7. EARNINGS PER SHARE Earnings per share for year ended December 31, 2004 and 2003 were determined by dividing net income for the periods by the weighted average number of both basic and diluted shares of common stock and common stock equivalents outstanding. 8. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS The Company had two major vendors who provided over 10 % of the Company's raw materials for the year ended December 31, 2004. Total purchases from these vendors were 63 % of the Company's total raw materials purchases for the year ended December 31, 2004. The payable balance to these vendors amounted to $98,235 at December 31, 2004. One major customer accounted for 24% of the net revenue for the year ended December 31, 2004. The total receivable balance due from this customer was $657,460 at December 31, 2004. One major customer accounted for 100% of the net revenue for the year ended December 31, 2003. The total receivable balance due from this customer was $830,315 at December 31, 2003. The Company's operations are carried out in the People's Republic of China. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the People's Republic of China, by the general state of the People's Republic of China`s economy. The Company's business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. 9. RECLASSIFICATIONS Certain prior period amounts have been reclassified to conform to the year ended December 31, 2004 presentation. 28 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD & SUBSIDIARIES CONSOLIDATED BALANCE SHEET June 30, 2005 (Unaudited)
ASSETS CURRENT ASSETS: Cash & cash equivalents $ 3,177,192 Accounts receivable, net 397,484 Other receivable 309,928 Inventory 233,747 Advances to Suppliers 35,590 Prepaid expenses 26,164 -------------- Total current assets 4,180,105 PROPERTY AND EQUIPMENT, net 2,292,956 CONSTRUCTION IN PROGRESS: 215,296 NON-CURRENT ASSET: Prepaid rent 14,902 Long-term Investment 12,100 INTANGIBLE ASSET, net 1,503,462 -------------- $ 8,218,821 ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable & accrued expense $ 59,624 Other payable 163,617 -------------- Total current liabilities 223,241 Minority interest 232,823 STOCKHOLDERS' EQUITY: Share capital 2,178,000 Statutory reserve 828,366 Retained earnings 4,756,391 -------------- Total stockholders' equity 7,762,757 -------------- $ 8,218,821 ==============
29 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTH PERIODS ENDED JUNE 30,2005 AND 2004 (Unaudited)
For the Six Month Periods Ended June 30 2005 2004 -------------------- -------------------- Revenue $ 2,480,383 $ 1,948,706 Cost of revenue 675,309 522,460 -------------------- -------------------- Gross profit 1,805,074 1,426,246 Operating expenses Selling expenses 138,246 73,044 General and administrative expenses 389,154 404,646 -------------------- -------------------- Total operating expenses 527,400 477,690 -------------------- -------------------- Income from operations 1,277,674 948,556 Non-operating Income (expense): Interest income 5,628 - -------------------- -------------------- Total non-operating income (expense) 5,628 - -------------------- -------------------- Net income before minority interest and income tax 1,283,302 948,556 Minority interest 14,488 (28,037) -------------------- -------------------- Net income before minority interest 1,297,790 920,519 Income tax (197,229) - -------------------- -------------------- Net Income $ 1,100,561 $ 920,519 ==================== ====================
30 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD & SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED JUNE 30,2005 AND 2004 (Unaudited)
For the Six Month Periods Ended June 30 2005 2004 ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,100,561 $ 920,519 Adjustments to reconcile net income to net cash provided in operating activities: Minority interest (14,488) 28,037 Depreciation and amortization 92,434 93,398 (Increase) / decrease in current assets: Accounts receivable (288,616) (53,904) Inventory (230,362) 29,876 Other receivable (117,733) (212,466) Prepaid expenses 15,457 (22,880) Due from related parties 444,918 18,937 Advances to suppliers 121,569 60,500 Prepaid rent (13,096) 10,164 Increase / (decrease) in current liabilities: Accounts payable (255,826) (376,117) Other payable (140,695) (316,848) ---------------- ---------------- Net cash provided by operating activities 714,123 179,216 ---------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES Payment on purchase of property 90,684 (70,784) Receipt of cash on long term investment - 30,855 ---------------- ---------------- Net cash provided by (used in) investing activities 90,684 (39,929) ---------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term Loan - 465,850 ---------------- ---------------- NET INCREASE IN CASH & CASH EQUIVALENTS 804,807 605,137 CASH & CASH EQUIVALENTS, BEGINNING BALANCE 2,372,385 1,312,434 ---------------- ---------------- CASH & CASH EQUIVALENTS, ENDING BALANCE $ 3,177,192 $ 1,917,571 ================ ================
31 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. ORGANIZATION AND DESCRIPTION OF BUSINESS Dalian Dongtai Industry Waste Treatment Co., Ltd. (the "Company") was incorporated on January 9, 1991 with a registered capital of RMB 1,800,000(USD $217,800). The Company has two subsidiaries a) Precision Machine Co., Ltd and b) Wafangdian Dongtai Garbage Collection. The Company is located in Economic and Technology Development Zone, Dalian, People's Republic of China. The Company is engaged in the business of industrial solid waste disposal and treatment, as well as recycled products development and selling. The Company also provides service for environment protection technology consultation, pollution treatment, and waste managing process design. Precision Machine Co., Ltd., ("Precision"), was incorporated by the Company on July 2, 2001. The Company has a 55% interest in this subsidiary. The subsidiary is located in Economic and Technology Development Zone, Dalian, People's Republic of China and is engaged in the business of selling re-cycled products. Wafangdian Dongtai Garbage Collection, ("Wafangdian"), was incorporated by the Company on February 26, 2004.The Company has a 51% interest in this subsidiary. The subsidiary is located in Wafangdian district, Dalian, People's Republic of China. Wafangdian is inactive. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents Cash and cash equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. Accounts and other receivable Accounts and other receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as needed. The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Terms of the sales vary from COD through a credit term up to 9 to 12 months. Reserves are recorded primarily on a specific identification basis. 32 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Advances to suppliers The Company advances to certain vendors for purchase of its material. The advances to suppliers are interest free and unsecured. The advances to suppliers amounted to $35,590 for six month period ended as at June 30, 2005. Inventory Inventories are stated at the lower of cost, as determined on a first-in, first-out basis, or market. Management compares the cost of inventories with the market value, and allowance is made for writing down the inventories to their market value, if lower. Property, equipment and construction in progress Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of: 30 years for building, 10 years for machinery, and 5 years for office equipment and 8 years for vehicles. At December 31, 2004, the following are the details of the property and equipment: Vehicle $ 276,112 Office instrument & equipment 368,792 Machinery & equipment 858,989 Building 1,853,517 Less: Accumulated depreciation (1,064,454) ----------- $ 2,292,956 =========== Amortization expense for the Company's intangible assets for the six months ended June 30, 2005 and 2004 amounted to $15,729 and $15,729, respectively. Amortization expense for the Company's intangible assets for each of the next five fiscal years is estimated to be $33,460 per year. Long-lived assets Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations for a Disposal of a Segment of a Business." The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Company believes that, as of December 31, 2004 there were no significant impairments of its long-lived assets. 33 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Construction in progress Construction in progress consists of the design expenses and architect's fee. As of June 30, 2005, "construction in progress" amounted to $215,296. Long-term Investment Long term investments of $12,100 represent the Company's 20% investment in Ziguang Dongtai. The investment is accounted for under the equity method. The carrying amount of the investment as of June 30, 2005 of $12,100 represents the Company's 20% of interest in the net asset of the investee. Intangible Assets Intangible assets consist of "Rights to use land and to build a plant" for 50 years and "Rights of use landfill" for 20 years. The rights to use land and building amortized over 50-years and the right to use the landfill is being amortized over 20 years using the straight-line method. The Company evaluates intangible assets for impairment, at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible assets, other long-lived assets and, goodwill is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss. Net intangible assets at June 30, 2005 were as follows: ----------------------------------------- --------------------- Right to use land $ 1,519,943 Right to use landfill 66,701 ----------------------------------------- --------------------- Less: Accumulated amortization (83,182) ----------------------------------------- --------------------- $ 1,503,462 ----------------------------------------- --------------------- Minority Interest Minority interest represent 45% equity interest in Precision Machine Co., Ltd and 49% equity interest in Wafangdian Dongtai Garbage Collection. At June 30, 2005, minority interest amounted to $ 232,823. Minority share of loss and income of the investees was $ (14,488) and $ 28,037 for the six month periods ended as June 30, 2005 and 2004, respectively. Fair value of financial instruments Statement of financial accounting standard No. 107, Disclosures about fair value of financial instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value. 34 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Revenue Recognition The Company's revenue recognition policies are in compliance with Staff accounting bulletin (SAB) 104. Revenue is recognized when services are rendered to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Advertising Costs The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising costs for the six month periods ended, 2005 and 2004 were insignificant. Stock-based compensation In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS No. 123 prescribes accounting and reporting standards for all stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123 requires compensation expense to be recorded (i) using the new fair value method or (ii) using the existing accounting rules prescribed by Accounting Principles Board Opinion No. 25, "Accounting for stock issued to employees" (APB 25) and related interpretations with proforma disclosure of what net income and earnings per share would have been had the Company adopted the new fair value method. The Company uses the intrinsic value method prescribed by APB 25 and has opted for the disclosure provisions of SFAS No.123. No options have been granted for the six month periods ended June 30, 2005 and 2004. Income Taxes The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Tax expense for the six months ended June 30, 2005 represents, 15% PRC income tax on pre-tax income. LOCAL PRC INCOME TAX The Company is subject to People's Republic of China ("PRC") Enterprise Income Tax at a rate of 15% on the net income. According to PRC ruling, any joint venture with foreign investor gets special tax exempt treatment for first two years. The Company got tax exempt treatment for year 2004 and 2003. Accordingly, no provision for income taxes is recorded for the six months ended June 30, 2004. No significant deferred tax liabilities or assets existed as of June 30, 2005. Foreign Currencies Translation Assets and liabilities in foreign currency are recorded at the balance sheet date at the rate prevailing on that date. Items of income statement are recorded at the average exchange rate. Gain or loss on foreign currency transactions are reflected on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component in the equity section of the balance sheet, as component of comprehensive income. The functional currency of the Company is Chinese Renminbi. 35 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Basic and diluted net loss per share Net loss per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Statement of Cash Flows: In accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows," cash flows from the Company's operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Segment Reporting Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure About Segments of an Enterprise and Related Information" requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. SFAS 131 has no effect on the Company's consolidated financial statements as the Company consists of one reportable business segment. All revenue is from customers in People's Republic of China. All of the Company's assets are located in People's Republic of China. Recent Pronouncements In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections." This statement applies to all voluntary changes in accounting principle and requires retrospective application to prior periods' financial statements of changes in accounting principle, unless this would be impracticable. This statement also makes a distinction between "retrospective application" of an accounting principle and the "restatement" of financial statements to reflect the correction of an error. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We are evaluating the effect the adoption of this interpretation will have on its financial position, cash flows and results of operations. In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires companies to recognize in the statement of operations the grant- date fair value of stock options and other equity-based compensation issued to employees. FAS No. 123R is effective beginning in the Company's first quarter of fiscal 2006. 36 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The Company believes that the adoption of this standard will have no material impact on its financial statements. 3. OTHER PAYABLE Other payable consists of the following as of June 30, 2005 Other accounts payable $ 67,869 Welfare payable (7,845) Tax Payable 102,885 Other accrued expenses 708 --------- Total $ 163,617 ========= 4. SHAREHOLDERS' EQUITY At February 16, 2001, the Company increased its registered capital from RMB 1,800,000 (USD 217,800) to RMB 2,000,000 (USD 242,000). On May 24, 2003, the Company increased its registered capital from RMB 2,000,000 (USD 242,000) to RMB 18,000,000 (USD 2,178,000). There were no common stock issuance during six month periods ended June 30, 2005. 5. EMPLOYEE WELFARE PLAN The Company has established its own employee welfare plan in accordance with Chinese law and regulations. The Company makes annual contributions of 14% of all employees' salaries to employee welfare plan. The total expense for the above plan was $6,324 and $6,318 for the six month periods ended June 30, 2005 and 2004, respectively. 6. STATUTORY COMMON WELFARE FUND As stipulated by the Company Law of the People's Republic of China (PRC) as applicable to Chinese companies with foreign ownership, net income after taxation can only be distributed as dividends after appropriation has been made for the following: (i) Making up cumulative prior years' losses, if any; (ii) Allocations to the "Statutory surplus reserve" of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital; (iii) Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's "Statutory common welfare fund", which is established for the purpose of providing employee facilities and other collective benefits to the Company's employees; and (iv) Allocations to the discretionary surplus reserve, if approved in the shareholders' general meeting. The Company provided a reserve for the welfare fund for the six month period ended June 30, 2005 of $165,084. The Statutory reserve balance as of June 30, 2005 amounted to $828,366. 37 DALIAN DONGTAI INDUSTRY WASTE TREATMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 7. EARNINGS PER SHARE Earnings per share for six month periods as of June 30, 2005 and 2004 is determined by dividing net income for the periods by the weighted average number of both basic and diluted shares of common stock and common stock equivalents outstanding. At June 30, 2005 and 2004, there were no dilutive securities. 8. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS The Company had two major vendors who provided over 10 % of the Company's raw materials for the six month periods ended June 30, 2005. Total purchases from these vendors were 40 % of the Company's total raw materials purchases for the six month period ended June 30, 2005. The payable balance to these vendors amounted to $31,719 at June 30, 2005. One major customer accounted for 17% of the net revenue for the six month periods ended, 2005. The total receivable balance due from this customer was $169,930 at June 30, 2005. The total receivable balance due from this customer was $404,918 at June 30, 2005. The Company's operations are carried out in the People's Republic of China. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the People's Republic of China, by the general state of the People's Republic of China`s economy. The Company's business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. 9. RECLASSIFICATIONS Certain prior period amounts have been reclassified to conform to the six month periods ended June 30, 2005 presentation. 38 GOLDTECH MINING CORPORATION PRO FORMA STATEMENT OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2005 (Unaudited) The following Unaudited Pro Forma Statement of operations has been derived from the unaudited financial statements of Goldtech Mining Corporation, a Nevada Corporation (A) for the six month period ended June 30, 2005 and the unaudited financial statements of China Industrial Waste Management, Inc., a Delaware Corporation (B) for the six month period ended June 30, 2005. The Pro Forma Statements of Operations reflects the acquisition of B by A (a reporting company) on October 28, 2005 in a acquisition using reverse acquisition method of accounting and assumes that such acquisition was consummated as of January 1, 2005. The Pro Forma Statement of Operations and financial conditions should be read in conjunction with the Financial Statements of A, the Financial Statements of B and the Notes to the financial statements. The Pro Forma Statements do not purport to represent what the Company's results of operations and financial conditions would actually have been if the acquisition of A had occurred on the date information and the assumption set forth in the foot notes below, which management believes are reasonable.
A B Pro Forma Pro Forma (Historical) (Historical) Adjustment Combined ---------------- --------------- ------------------ ------------------ Net Revenue $ - $ 2,480,383 $ - $ 2,480,383 Cost of revenue - 675,309 - 675,309 ---------------- --------------- ------------------ ------------------ Gross profit - 1,805,074 - 1,805,074 Operating expenses 125,739 527,400 - 653,139 ---------------- --------------- ------------------ ------------------ Loss from operations (125,739) 1,277,674 - 1,151,935 Non-operating income (Expenses), minority interest and income tax 18,288 (177,113) - (158,825) ---------------- --------------- ------------------ ------------------ Net gain (loss) $ (107,451) $ 1,100,561 $ - $ 993,110 ================ =============== ================== ================== EARNINGS PER SHARE Weighted -average number of shares outstanding 7,628,770 12,800,000 20,428,770 ================ =============== ================== Gain (Loss) per share $ (0.01) $ 0.09 $ 0.05 ================ =============== ==================
NOTES: (1) Loss per share data shown above are applicable for both primary and fully diluted. (2) Weighted-average number of shares outstanding for the combined entity includes all shares issued before the acquisition as if outstanding as of January 1, 2005. (3) Weighted average number of shares outstanding for combined entity includes 7,628,770 shares of A as of June 30, 2005 and 12,800,000 shares of common stock issued to the shareholders of (B) pursuant to the stock acquisition and reorganization agreement and treated as if outstanding since January 1, 2005 39 GOLDTECH MINING CORPORATION PRO FORMA STATEMENT OF FINANCIAL CONDITIONS AS ON JUNE 30, 2005 (Unaudited) The following unaudited Pro Forma Statement of financial conditions has been derived from the unaudited financial statements of Goldtech Mining Corporation (A) as of June 30, 2005 and the unaudited financial statements of China Industrial Waste Management, Inc. (B) as of June 30, 2005. The unaudited Pro Forma Statements of financial conditions reflects the acquisition of B by A (a reporting company) in a merger using reverse acquisition method of accounting.
A B Pro Forma Pro Forma (Historical) (Historical) Adjustment Combined ---------------- --------------- ------------------ --------------- ASSETS Current Assets $ 354,904 $ 4,180,105 $ (354,904)(2) $ 4,180,105 Property & equipment, net - 2,292,956 - 2,292,956 Intangible assets, net - 1,503,462 - 1,503,462 Other non-current assets - 242,298 - 242,298 Mineral properties deferred development costs 205,000 - (205,000)(2) - ---------------- --------------- ------------------ --------------- TOTAL ASSETS $ 559,904 $ 8,218,821 $ (559,904) $ 8,218,821 ================ =============== ================== =============== LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities $ 360,767 $ 223,241 $ (360,767)(2)$ 223,241 Long-term liabilities 242,192 - (242,192)(2) - Minority interest - 232,823 - 232,823 Stockholders' equity; Common stock 7,629 2,178,000 (2) (2,178,000) (1) 20,429 12,800 (4) Additional paid in capital 6,639,526 - (2) (4,597,210) (3) 2,072,571 (12,800) (4) 43,055 (3) Statutory reserve - 828,366 - 828,366 Subscription receivable 85,000 - - 85,000 Retained earnings (deficit) (6,775,210) 4,756,391 6,775,210 (3) 4,756,391 ---------------- --------------- ------------------ --------------- Total stockholders' equity (deficit) (43,055) 7,762,757 - 7,762,757 ---------------- --------------- ------------------ --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 559,904 $ 8,218,821 $ (602,959) $ 8,218,821 ================ =============== ================== ===============
NOTES; (1) Elimination of Common stock of (B) before the acquisition (2) Elimination of assets and liabilities of (A) which has been taken over by the old management (3) Elimination of pre-acquisition equity of (B) (4) Adjustment of share capital for additional issuance on acquisition 40 GOLDTECH MINING CORPORATION PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 (Unaudited) The following Unaudited Pro Forma Statement of operations has been derived from the audited financial statements of Goldtech Mining Corporation, a Nevada Corporation (A) for the year ended December 31, 2004 and the audited financial statements of China Industrial Waste Management, Inc., a Delaware Corporation (B) for the year ended December 31, 2004. The Pro Forma Statements of Operations reflects the acquisition of B by A (a reporting company) on October 28, 2005 in a acquisition using reverse acquisition method of accounting and assumes that such acquisition was consummated as of January 1, 2004. The Pro Forma Statement of Operations and financial conditions should be read in conjunction with the Financial Statements of A, the Financial Statements of B and the Notes to the financial statements. The Pro Forma Statements do not purport to represent what the Company's results of operations and financial conditions would actually have been if the acquisition of A had occurred on the date indicated or to proj information and the assumption set forth in the foot notes below, which management believes are reasonable.
A B Pro Forma Pro Forma (Historical) (Historical) Adjustment Combined ---------------- --------------- ------------------ ------------------ Net Revenue $ - $ 4,143,530 $ - $ 4,143,530 Cost of revenue - 1,243,373 - 1,243,373 ---------------- --------------- ------------------ ------------------ Gross profit - 2,900,157 - 2,900,157 Operating expenses 1,433,966 1,069,687 - 2,503,653 ---------------- --------------- ------------------ ------------------ Loss from operations (1,433,966) 1,830,470 - 396,504 Non-operating income (Expenses), minority interest and income tax 152,828 (699) 152,129 Loss from discontinued operations (180,757) 0 - (180,757) ---------------- --------------- ------------------ ------------------ Net gain (loss) $ (1,461,895)$ 1,829,771 $ - $ 367,876 ================ =============== ================== ================== EARNINGS PER SHARE Weighted -average number of shares outstanding 13,837,843 12,800,000 26,637,843 ================ =============== ================== Gain (Loss) per share $ (0.11) $ 0.14 $ 0.01 ================ =============== ==================
NOTES: (1) Loss per share data shown above are applicable for both primary and fully diluted. (2) Weighted-average number of shares outstanding for the combined entity includes all shares issued before the acquisition as if outstanding as of January 1, 2004. (3) Weighted average number of shares outstanding for combined entity includes 13,837,843 weighted average shares of A as of December 31, 2004 and 12,800,000 shares of common stock issued to the shareholders of (B) pursuant to the stock acquisition and reorganization agreement and treated as if outstanding since January 1, 2004 41 CHINA INDUSTRIAL WASTE MANAGEMENT, INC. (A development stage company) BALANCE SHEET AUGUST 31, 2005
ASSETS CURRENT ASSETS: Cash & cash equivalents $ 500 --------- $ 500 ========= LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accrued expenses $ 3,285 STOCKHOLDERS' DEFICIT Common stock, .001 par value; Authorized shares 60,000,000; Issued and outstanding shares 1,280,000 128 Additional paid in capital 372 Deficit accumulated during the development stage (3,285) --------- Total stockholders' deficit (2,785) ---------
42 CHINA INDUSTRIAL WASTE MANAGEMENT, INC. (A development stage company) STATEMENTS OF OPERATIONS FOR THE PERIOD AUGUST 16, 2005 (INCEPTION) TO AUGUST 31, 2005
Net revenue $ - Operating expenses Organization cost 285 Professional fees 3,000 ----------- Operating loss (3,285) Provision for income tax - ----------- Net loss $ (3,285) ============ Basic and diluted net loss per share $ (0.00) =========== Basic and diluted weighted average shares outstanding 1,280,000 ===========
43 CHINA INDUSTRIAL WASTE MANAGEMENT, INC. (A development stage company) BALANCE SHEET AUGUST 31, 2005
ASSETS CURRENT ASSETS: Cash & cash equivalents $ 500 --------- $ 500 ========= LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accrued expenses $ 3,285 STOCKHOLDERS' DEFICIT Common stock, .001 par value; Authorized shares 60,000,000; Issued and outstanding shares 1,280,000 128 Additional paid in capital 372 Deficit accumulated during the development stage (3,285) --------- Total stockholders' deficit (2,785) ---------
44 CHINA INDUSTRIAL WASTE MANAGEMENT, INC. (A development stage company) STATEMENTS OF OPERATIONS FOR THE PERIOD AUGUST 16, 2005 (INCEPTION) TO AUGUST 31, 2005
Net revenue $ - Operating expenses Organization cost 285 Professional fees 3,000 ----------- Operating loss (3,285) Provision for income tax - ----------- Net loss $ (3,285) ============ Basic and diluted net loss per share $ (0.00) =========== Basic and diluted weighted average shares outstanding 1,280,000 ===========
45 CHINA INDUSTRIAL WASTE MANAGEMENT, INC. (A development stage company) STATEMENT OF STOCKHOLDERS' DEFICIT FOR THE PERIOD AUGUST 16, 2005 (INCEPTION) TO AUGUST 31, 2005
Common stock Deficit -------------------------- Additional accumulated Total Number of paid in during develop- stockholders' shares Amount capital ment stage deficit -------------- ---------- ----------- ------------- ------------ Balance at August 16, 2005 (inception) - $ - $ - $ - $ - Issuance of common stock 1,280,000 128 372 - 500 Net loss for the period August 16, 2005 (inception) through August 31, 2005 - - - (3,285) (3,285) -------------- ---------- ------------ ------------- ------------ Balance at August 31, 2005 1,280,000 $ 128 $ 372 $ (3,285) $ (2,785) ============== ========== ============ ============= ============
46 CHINA INDUSTRIAL WASTE MANAGEMENT, INC. (A development stage company) STATEMENT OF CASH FLOWS FOR THE PERIOD AUGUST 16, 2005 (INCEPTION) TO AUGUST 31, 2005
CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,285) Adjustments to reconcile net loss to net cash used in operating activities: Increase in current assets and current liabilities: Accrued expense 3,285 ----------- Net cash used in operating activities - ----------- NET INCREASE IN CASH & CASH EQUIVALENTS - CASH & CASH EQUIVALENTS, BEGINNING BALANCE - ----------- CASH & CASH EQUIVALENTS, ENDING BALANCE $ - ===========
47 CHINA INDUSTRIAL WASTE MANAGEMENT, INC. (A development stage company) STATEMENT OF STOCKHOLDERS' DEFICIT FOR THE PERIOD AUGUST 16, 2005 (INCEPTION) TO AUGUST 31, 2005
Common stock Deficit -------------------------- Additional accumulated Total Number of paid in during develop- stockholders' shares Amount capital ment stage deficit -------------- ---------- ----------- ------------- ------------ Balance at August 16, 2005 (inception) - $ - $ - $ - $ - Issuance of common stock 1,280,000 128 372 - 500 Net loss for the period August 16, 2005 (inception) through August 31, 2005 - - - (3,285) (3,285) -------------- ---------- ------------ ------------- ------------ Balance at August 31, 2005 1,280,000 $ 128 $ 372 $ (3,285) $ (2,785) ============== ========== ============ ============= ============
48 CHINA INDUSTRIAL WASTE MANAGEMENT, INC. (A development stage company) STATEMENT OF CASH FLOWS FOR THE PERIOD AUGUST 16, 2005 (INCEPTION) TO AUGUST 31, 2005
CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,285) Adjustments to reconcile net loss to net cash used in operating activities: Increase in current assets and current liabilities: Accrued expense 3,285 ----------- Net cash used in operating activities - ----------- NET INCREASE IN CASH & CASH EQUIVALENTS - CASH & CASH EQUIVALENTS, BEGINNING BALANCE - ----------- CASH & CASH EQUIVALENTS, ENDING BALANCE $ - ===========
49 EX-10 2 nov172005ex101.txt Exhibit 10.1 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER is made as of the 11th day of November 2005 AMONG: GOLDTECH MINING CORPORATION, a corporation formed pursuant to the laws of the State of Nevada and having an office for business located at 3-11 Bellrose Drive, Suite 314, St. Albert, Alberta, Canada T8N 5C9 ("GMNC") AND: DALIAN ACQUISITION CORP., a corporation formed pursuant to the laws of the State of Delaware and a wholly owned subsidiary of GMNC (the "Acquirer") AND: CHINA INDUSTRIAL WASTE MANAGEMENT INC., a corporation formed pursuant to the laws of the State of Delaware and having an office for business located at 100 Wall Street, 15th Floor, New York, NY 10005 ("CIWM") AND: JINQING DONG, an individual having an address at No. 1 Huailu West Road, E.D.T. Zone, Dalian City, R. R. China, 116600 AMERICAN UNION SECURITIES, INC., a corporation formed pursuant to the laws of the State of New York and having an office for business located at 100 Wall Street, 15th Floor, New York, New York 10005 HUAQIN ZHOU, an individual having an address at No. 1 Huailu West Road, E.D.T. Zone, Dalian City, R. R. China, 116600 WARNER TECHNOLOGY AND INVESTMENT CORP., a corporation formed pursuant to the laws of the State of New Jersey and having an office for business located at 100 Wall Street, 15th Floor, New York, New York 10005 JUN LI, an individual having an address at No. 1 Huailu West Road, E.D.T. Zone, Dalian City, R. R. China, 116600 WENYI GUO, an individual having an address at No. 1 Huailu West Road, E.D.T. Zone, Dalian City, R. R. China, 116600 RUIFENG ZHU, an individual having an address at No. 1 Huailu West Road, E.D.T. Zone, Dalian City, R. R. China, 116600 XIN GUO, an individual having an address at No. 1 Huailu West Road, E.D.T. Zone, Dalian City, R. R. China, 116600 JOHN C. LEO, an individual having an address at 15 Warren Street, #313, Jersey City, New Jersey 07302 TONGJIE XING, an individual having an address at No. 1 Huailu West Road, E.D.T. Zone, Dalian City, R. R. China, 116600 (individually, a "CIWM Shareholder" and collectively, the "CIWM Shareholders") WHEREAS: A. CIWM is a Delaware corporation engaged in the business of collecting, treating, disposing and recycling of industrial wastes in China through its majority-owned subsidiary, Dalian Dongtai Industrial Waste Treatment Co., Ltd.; B. The CIWM Shareholders own 1,280,000 CIWM Shares, being 100% of the presently issued and outstanding CIWM Shares; C. GMNC is a reporting company whose common stock is quoted on the NASD "Bulletin Board" and which is not presently engaged in any business; D. The respective Boards of Directors of GMNC, CIWM and the Acquirer deem it advisable and in the best interests of GMNC, CIWM and the Acquirer that CIWM merge with and into the Acquirer (the "Merger") pursuant to this Agreement and the Certificate of Merger, and the applicable provisions of the laws of the State of Delaware; and E. It is intended that the Merger shall qualify for United States federal income tax purposes as a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended. NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises and the mutual covenants, agreements, representations and warranties contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE 1 DEFINITIONS AND INTERPRETATION Definitions 1.1 In this Agreement the following terms will have the following meanings: (a) "Acquisition Shares" means the 64,000 GMNC Preferred Shares to be issued to the CIWM Shareholders at Closing pursuant to the terms of the Merger; (b) "Agreement" means this agreement and plan of merger among GMNC, the Acquirer, CIWM, and the CIWM Shareholders; 2 (c) "CIWM Accounts Payable and Liabilities" means all accounts payable and liabilities of CIWM, due and owing or otherwise constituting a binding obligation of CIWM (other than a CIWM Material Contract) as of June 30, 2005 as set forth in Schedule "K" hereto; (d) "CIWM Accounts Receivable" means all accounts receivable and other debts owing to CIWM, as of June 30, 2005 as set forth in Schedule "L" hereto; (e) "CIWM Assets" means the undertaking and all the property and assets of the CIWM Business of every kind and description wheresoever situated including, without limitation, CIWM Equipment, CIWM Inventory, CIWM Material Contracts, CIWM Accounts Receivable, CIWM Cash, CIWM Intangible Assets and CIWM Goodwill, and all credit cards, charge cards and banking cards issued to CIWM; (f) "CIWM Bank Accounts" means all of the bank accounts, lock boxes and safety deposit boxes of CIWM or relating to the CIWM Business as set forth in Schedule "M" hereto; (g) "CIWM Business" means all aspects of the business conducted by CIWM; (h) "CIWM Cash" means all cash on hand or on deposit to the credit of CIWM on the Closing Date; (i) "CIWM Debt to Related Parties" means the debts owed by CIWM and its subsidiaries to any CIWM Shareholder or to any family member thereof, or to any affiliate, director or officer of CIWM or any CIWM Shareholder as described in Schedule "N"; (j) "CIWM Equipment" means all machinery, equipment, furniture, and furnishings used in the CIWM Business, including, without limitation, the items more particularly described in Schedule "O" hereto; (k) "CIWM Financial Statements" means, collectively, the audited consolidated financial statements of GMNC for the fiscal years ended December 31, 2004 and 2003, together with the unqualified auditors' reports thereon, and the unaudited consolidated financial statements of GMNC for the six month period ended June 30, 2005, true copies of which are attached as Schedule "J" hereto. Subject to the consent of GMNC, unaudited financial statements for the same period shall be acceptable; (l) "CIWM Goodwill" means the goodwill of the CIWM Business together with the exclusive right of GMNC to represent itself as carrying on the CIWM Business in succession of CIWM subject to the terms hereof, and the right to use any words indicating that the CIWM Business is so carried on including the right to use the names "China Industrial Waste Management" or "Dalian Dongtai Industrial Waste Treatment Co., Ltd." or any variations thereof as part of the name of or in connection with the CIWM Business or any part thereof carried on or to be carried on by CIWM, the right to all corporate, operating and trade names associated with the CIWM Business, or any variations of such names as part of or in connection with the CIWM Business, all telephone listings and telephone advertising contracts, all lists of customers, books and records and other information relating to the CIWM Business, all necessary licenses and authorizations and any other rights used in connection with the CIWM Business; 3 (m) "CIWM Insurance Policies" means the public liability insurance and insurance against loss or damage to CIWM Assets and the CIWM Business as described in Schedule "P" hereto; (n) "CIWM Intangible Assets" means all of the intangible assets of CIWM, including, without limitation, CIWM Goodwill, all trademarks, logos, copyrights, designs, and other intellectual and industrial property of CIWM and its subsidiaries; (o) "CIWM Inventory" means all inventory and supplies of the CIWM Business as of June 30, 2005 as set forth in Schedule "Q" hereto; (p) "CIWM Material Contracts" means the burden and benefit of and the right, title and interest of CIWM in, to and under all trade and non-trade contracts, engagements or commitments, whether written or oral, to which CIWM is entitled in connection with the CIWM Business whereunder CIWM is obligated to pay or entitled to receive the sum of $5,000 or more including, without limitation, any pension plans, profit sharing plans, bonus plans, loan agreements, security agreements, indemnities and guarantees, any agreements with employees, lessees, licensees, managers, accountants, suppliers, agents, distributors, officers, directors, attorneys or others which cannot be terminated without liability on not more than one month's notice, and those contracts listed in Schedule "R" hereto; (q) "CIWM Shares" means all of the issued and outstanding shares of CIWM's equity stock; (r) "Closing" means the completion, on the Closing Date, of the transactions contemplated hereby in accordance with Article 9 hereof; (s) "Closing Date" means the day on which all conditions precedent to the completion of the transaction as contemplated hereby have been satisfied or waived; (t) "Effective Time" means the date of the filing of an appropriate Certificate of Merger in the form required by the State of Delaware, which certificate shall provide that the Merger shall become effective upon such filing; (u) "GMNC Accounts Payable and Liabilities" means all accounts payable and liabilities of GMNC, on a consolidated basis, due and owing or otherwise constituting a binding obligation of GMNC and its subsidiaries (other than a GMNC Material Contract) as of June 30, 2005 as set forth is Schedule "B" hereto; (v) "GMNC Accounts Receivable" means all accounts receivable and other debts owing to GMNC, on a consolidated basis, as of June 30, 2005 as set forth in Schedule "C" hereto; (w) "GMNC Assets" means the undertaking and all the property and assets of the GMNC Business of every kind and description wheresoever situated including, without limitation, GMNC Equipment, GMNC Inventory, GMNC Material Contracts, GMNC Accounts Receivable, GMNC Cash, GMNC Intangible Assets and GMNC Goodwill, and all credit cards, charge cards and banking cards issued to GMNC; (x) "GMNC Bank Accounts" means all of the bank accounts, lock boxes and safety deposit boxes of GMNC and its subsidiaries or relating to the GMNC Business as set forth in Schedule "D" hereto; 4 (y) "GMNC Business" means all aspects of any business conducted by GMNC and its subsidiaries; (z) "GMNC Cash" means all cash on hand or on deposit to the credit of GMNC and its subsidiaries on the Closing Date; (aa) "GMNC Common Shares" means the shares of common stock in the capital of GMNC; (bb) "GMNC Debt to Related Parties" means the debts owed by GMNC and its subsidiaries to any affiliate, director or officer of GMNC as described in Schedule "E" hereto; (cc) "GMNC Equipment" means all machinery, equipment, furniture, and furnishings used in the GMNC Business, including, without limitation, the items more particularly described in Schedule "F" hereto; (dd) "GMNC Financial Statements" means, collectively, the audited consolidated financial statements of GMNC for the fiscal years ended December 31, 2004 and 2003, together with the unqualified auditors' reports thereon, and the unaudited consolidated financial statements of GMNC for the six month period ended June 30, 2005, true copies of which are attached as Schedule "A" hereto; (ee) "GMNC Goodwill" means the goodwill of the GMNC Business including the right to all corporate, operating and trade names associated with the GMNC Business, or any variations of such names as part of or in connection with the GMNC Business, all books and records and other information relating to the GMNC Business, all necessary licenses and authorizations and any other rights used in connection with the GMNC Business; (ff) "GMNC Insurance Policies" means the public liability insurance and insurance against loss or damage to the GMNC Assets and the GMNC Business as described in Schedule "G" hereto; (gg) "GMNC Intangible Assets" means all of the intangible assets of GMNC and its subsidiaries, including, without limitation, GMNC Goodwill, all trademarks, logos, copyrights, designs, and other intellectual and industrial property of GMNC and its subsidiaries; (hh) "GMNC Inventory" means all inventory and supplies of the GMNC Business as of June 30, 2005, as set forth in Schedule "H" hereto; (ii) "GMNC Material Contracts" means the burden and benefit of and the right, title and interest of GMNC and its subsidiaries in, to and under all trade and non-trade contracts, engagements or commitments, whether written or oral, to which GMNC or its subsidiaries are entitled whereunder GMNC or its subsidiaries are obligated to pay or entitled to receive the sum of $5,000 or more including, without limitation, any pension plans, profit sharing plans, bonus plans, loan 5 agreements, security agreements, indemnities and guarantees, any agreements with employees, lessees, licensees, managers, accountants, suppliers, agents, distributors, officers, directors, attorneys or others which cannot be terminated without liability on not more than one month's notice, and those contracts listed in Schedule "I" hereto; (jj) "GMNC Preferred Shares" means the shares of preferred stock in the capital of GMNC; (kk) "Merger" means the merger, at the Effective Time, of CIWM and the Acquirer pursuant to this Agreement and Plan of Merger; (ll) "Merger Consideration" means the Acquisition Shares; (mm) "Place of Closing" means the offices of Sichenzia Ross Friedman Ference LLP, or such other place as GMNC and CIWM may mutually agree upon; (nn) "State Corporation Law" means the General Corporation Law of the State of Delaware; and (oo) "Surviving Company" means the Acquirer following the merger with CIWM. Any other terms defined within the text of this Agreement will have the meanings so ascribed to them. Captions and Section Numbers 1.2 The headings and section references in this Agreement are for convenience of reference only and do not form a part of this Agreement and are not intended to interpret, define or limit the scope, extent or intent of this Agreement or any provision thereof. Section References and Schedules 1.3 Any reference to a particular "Article", "section", "paragraph", "clause" or other subdivision is to the particular Article, section, clause or other subdivision of this Agreement and any reference to a Schedule by letter will mean the appropriate Schedule attached to this Agreement and by such reference the appropriate Schedule is incorporated into and made part of this Agreement. The Schedules to this Agreement are as follows: Information concerning GMNC Schedule "A" GMNC Financial Statements Schedule "B" GMNC Accounts Payable and Liabilities Schedule "C" GMNC Accounts Receivable Schedule "D" GMNC Bank Accounts Schedule "E" GMNC Debts to Related Parties Schedule "F" GMNC Equipment Schedule "G" GMNC Insurance Policies Schedule "H" GMNC Inventory Schedule "I" GMNC Material Contracts 6 Information concerning CIWM Schedule "J" CIWM Financial Statements Schedule "K" CIWM Accounts Payable and Liabilities Schedule "L" CIWM Accounts Receivable Schedule "M" CIWM Bank Accounts Schedule "N" CIWM Debts to Related Parties Schedule "O" CIWM Equipment Schedule "P" CIWM Insurance Policies Schedule "Q" CIWM Inventory Schedule "R" CIWM Material Contracts Agreement Schedule "S" Certificate of Designation for Series A Convertible Preferred Stock Severability of Clauses 1.4 If any part of this Agreement is declared or held to be invalid for any reason, such invalidity will not affect the validity of the remainder which will continue in full force and effect and be construed as if this Agreement had been executed without the invalid portion, and it is hereby declared the intention of the parties that this Agreement would have been executed without reference to any portion which may, for any reason, be hereafter declared or held to be invalid. ARTICLE 2 THE MERGER The Merger 2.1 At Closing, CIWM shall be merged with and into the Acquirer pursuant to this Agreement and Plan of Merger and the separate corporate existence of CIWM shall cease and the Acquirer, as it exists from and after the Closing, shall be the Surviving Company. Effect of the Merger 2.2 The Merger shall have the effect provided therefor by the State Corporation Law. Without limiting the generality of the foregoing, and subject thereto, at Closing (i) all the rights, privileges, immunities, powers and franchises, of a public as well as of a private nature, and all property, real, personal and mixed, and all debts due on whatever account, including without limitation subscriptions to shares, and all other choses in action, and all and every other interest of or belonging to or due to CIWM or the Acquirer, as a group, subject to the terms hereof, shall be taken and deemed to be transferred to, and vested in, the Surviving Company without further act or deed; and all property, rights and privileges, immunities, powers and franchises and all and every other interest shall be thereafter as effectually the property of the Surviving Company, as they were of CIWM and the Acquirer, as a group, and (ii) all debts, liabilities, duties and obligations of CIWM and the Acquirer, as a group, subject to the terms hereof, shall become the debts, liabilities and duties of the Surviving Company and the Surviving Company shall thenceforth be responsible and liable for all debts, liabilities, duties and obligations of CIWM and the Acquirer, as a group, and neither the rights of creditors nor any liens upon the property of CIWM or the Acquirer, as a group, shall be impaired by the Merger, and may be enforced against the Surviving Company. 7 Certificate of Incorporation; Bylaws; Directors and Officers 2.3 The Certificate of Incorporation of the Surviving Company from and after the Closing shall be the Certificate of Incorporation of the Acquirer until thereafter amended in accordance with the provisions therein and as provided by the applicable provisions of the State Corporation Law. The Bylaws of the Surviving Company from and after the Closing shall be the Bylaws of CIWM as in effect immediately prior to the Closing, continuing until thereafter amended in accordance with their terms, the Certificate of Incorporation of the Surviving Company and as provided by the State Corporation Law. The Directors of the Acquirer at the Effective Time shall continue to be the Directors of CIWM. Conversion of Securities 2.4 At the Effective Time, by virtue of the Merger and without any action on the part of the Acquirer, CIWM or the CIWM Shareholders, the shares of capital stock of each of CIWM and the Acquirer shall be converted as follows: (a) Capital Stock of the Acquirer. Each issued and outstanding share of the Acquirer's capital stock shall continue to be issued and outstanding and shall be converted into one share of validly issued, fully paid, and non-assessable common stock of the Surviving Company. Each stock certificate of the Acquirer evidencing ownership of any such shares shall continue to evidence ownership of such shares of capital stock of the Surviving Company. (b) Conversion of CIWM Shares. Each CIWM Share that is issued and outstanding at the Effective Time shall automatically be cancelled and extinguished and converted, without any action on the part of the holder thereof, into the right to receive at the time and in the amounts described in this Agreement an amount of Acquisition Shares equal to the number of Acquisition Shares divided by the number of CIWM Shares outstanding immediately prior to Closing. All such CIWM Shares, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the Acquisition Shares paid in consideration therefor upon the surrender of such certificate in accordance with this Agreement. Adherence with Applicable Securities Laws 2.5 The CIWM Shareholders agree that they are acquiring the Acquisition Shares for investment purposes and will not offer, sell or otherwise transfer, pledge or hypothecate any of the Acquisition Shares issued to them (other than pursuant to an effective Registration Statement under the Securities Act of 1933, as amended) directly or indirectly unless: (a) the sale is to GMNC; (b) the sale is made pursuant to the exemption from registration under the Securities Act of 1933,as amended, provided by Rule 144 thereunder; or (c) the Acquisition Shares are sold in a transaction that does not require registration under the Securities Act of 1933, as amended, or any applicable United States state laws and regulations governing the offer and sale of securities, and the vendor has furnished to GMNC an opinion of counsel to that effect or such other written opinion as may be reasonably required by GMNC. 8 The CIWM Shareholders acknowledge that the certificates representing the Acquisition Shares shall bear the following legend: NO SALE, OFFER TO SELL, OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE MADE UNLESS A REGISTRATION STATEMENT UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED, IN RESPECT OF SUCH SHARES IS THEN IN EFFECT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SAID ACT IS THEN IN FACT APPLICABLE TO SAID SHARES. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF GMNC Representations and Warranties 3.1 GMNC represents and warrants in all material respects to CIWM, with the intent that CIWM will rely thereon in entering into this Agreement and in approving and completing the transactions contemplated hereby, that: GMNC - Corporate Status and Capacity (a) Incorporation. GMNC is a corporation duly incorporated and validly subsisting under the laws of the State of Nevada, and is in good standing with the office of the Secretary of State for the State of Nevada; (b) Carrying on Business. GMNC does not currently conduct business, except for the actual operations of the corporation which are carried on in St. Albert, Alberta, Canada and does carry on any other material business activity in any other jurisdictions. GMNC is duly authorized to carry on such business in St. Albert, Alberta, Canada. The nature of the GMNC Business does not require GMNC to register or otherwise be qualified to carry on business in any other jurisdictions; (c) Corporate Capacity. GMNC has the corporate power, capacity and authority to own the GMNC Assets and to enter into and complete this Agreement; (d) Reporting Status; Listing. GMNC is required to file current reports with the Securities and Exchange Commission pursuant to section 12(g) of the Securities Exchange Act of 1934, the GMNC Common Shares are quoted on the NASD "Bulletin Board", and all reports required to be filed by GMNC with the Securities and Exchange Commission or NASD have been timely filed; Acquirer - Corporate Status and Capacity (e) Incorporation. The Acquirer is a corporation duly incorporated and validly subsisting under the laws of the State of Delaware, and is in good standing with the office of the Secretary of State for the State of Delaware; (f) Carrying on Business. Other than corporate formation and organization, the Acquirer has not carried on business activities to date. 9 (g) Corporate Capacity. The Acquirer has the corporate power, capacity and authority to enter into and complete this Agreement; GMNC - Capitalization (h) Authorized Capital. The authorized capital of GMNC consists of 95,000,000 GMNC Common Shares, $0.001 par value and 5,000,000 shares of preferred stock. $0.001 par value, of which 7,773,841 GMNC Common Shares, and no shares of Preferred Stock are presently issued and outstanding; (i) No Option. No person, firm or corporation has any agreement or option or any right capable of becoming an agreement or option for the acquisition of GMNC Common Shares or for the purchase, subscription or issuance of any of the unissued shares in the capital of GMNC; (j) Capacity. GMNC has the full right, power and authority to enter into this Agreement on the terms and conditions contained herein; Acquirer Capitalization (k) Authorized Capital. The authorized capital of the Acquirer consists of 200 shares of common stock, $0.001 par value, of which 200 shares of common stock are presently issued and outstanding; (l) No Option. No person, firm or corporation has any agreement or option or any right capable of becoming an agreement or option for the acquisition of any common or preferred shares in Acquirer or for the purchase, subscription or issuance of any of the unissued shares in the capital of Acquirer; (m) Capacity. The Acquirer has the full right, power and authority to enter into this Agreement on the terms and conditions contained herein; GMNC - Records and Financial Statements (n) Charter Documents. The charter documents of GMNC and the Acquirer have not been altered since the incorporation of each, respectively, except as filed in the record books of GMNC or the Acquirer, as the case may be; (o) Corporate Minute Books. The corporate minute books of GMNC and its subsidiaries are complete and each of the minutes contained therein accurately reflect the actions that were taken at a duly called and held meeting or by consent without a meeting. All actions by GMNC and its subsidiaries which required director or shareholder approval are reflected on the corporate minute books of GMNC and its subsidiaries. GMNC and its subsidiaries are not in violation or breach of, or in default with respect to, any term of their respective Certificates of Incorporation (or other charter documents) or by-laws. (p) GMNC Financial Statements. The GMNC Financial Statements present fairly, in all material respects, the assets and liabilities (whether accrued, absolute, contingent or otherwise) of GMNC, on a consolidated basis, as of the respective dates thereof, and the sales and earnings of the GMNC Business during the periods covered thereby, in all material respects and have been prepared in substantial accordance with generally accepted accounting principles consistently applied; 10 (q) GMNC Accounts Payable and Liabilities. There are no material liabilities, contingent or otherwise, of GMNC or its subsidiaries which are not disclosed in Schedule "B" hereto or reflected in the GMNC Financial Statements except those incurred in the ordinary course of business since the date of the said schedule and the GMNC Financial Statements, and neither GMNC nor its subsidiaries have guaranteed or agreed to guarantee any debt, liability or other obligation of any person, firm or corporation. Without limiting the generality of the foregoing, all accounts payable and liabilities of GMNC and its subsidiaries as of June 30, 2005 are described in Schedule "B" hereto; (r) GMNC Accounts Receivable. All the GMNC Accounts Receivable result from bona fide business transactions and services actually rendered without, to the knowledge and belief of GMNC, any claim by the obligor for set-off or counterclaim; (s) GMNC Bank Accounts. All of the GMNC Bank Accounts, their location, numbers and the authorized signatories thereto are as set forth in Schedule "D" hereto; (t) No Debt to Related Parties. Except as disclosed in Schedule "E" hereto, neither GMNC nor its subsidiaries are, and on Closing will not be, materially indebted to any affiliate, director or officer of GMNC except accounts payable on account of bona fide business transactions of GMNC incurred in normal course of the GMNC Business, including employment agreements, none of which are more than 30 days in arrears; (u) No Related Party Debt to GMNC. No director or officer or affiliate of GMNC is now indebted to or under any financial obligation to GMNC or its subsidiaries on any account whatsoever, except for advances on account of travel and other expenses not exceeding $5,000 in total; (v) No Dividends. No dividends or other distributions on any shares in the capital of GMNC have been made, declared or authorized since the date of GMNC Financial Statements; (w) No Payments. No payments of any kind have been made or authorized since the date of the GMNC Financial Statements to or on behalf of officers, directors, shareholders or employees of GMNC or its subsidiaries or under any management agreements with GMNC or its subsidiaries, except payments made in the ordinary course of business and at the regular rates of salary or other remuneration payable to them; (x) No Pension Plans. There are no pension, profit sharing, group insurance or similar plans or other deferred compensation plans affecting GMNC or its subsidiaries; (y) No Adverse Events. Since the date of the GMNC Financial Statements (i) there has not been any material adverse change in the financial position or condition of GMNC, its subsidiaries, its liabilities or the GMNC Assets or any damage, loss or other change in circumstances materially affecting GMNC, the GMNC Business or the GMNC Assets or GMNC' right to carry on the GMNC Business, other than changes in the ordinary course of business, 11 (ii) there has not been any damage, destruction, loss or other event (whether or not covered by insurance) materially and adversely affecting GMNC, its subsidiaries, the GMNC Business or the GMNC Assets, (iii) there has not been any material increase in the compensation payable or to become payable by GMNC to any of GMNC' officers, employees or agents or any bonus, payment or arrangement made to or with any of them, (iv) the GMNC Business has been and continues to be carried on in the ordinary course, (v) GMNC has not waived or surrendered any right of material value, (vi) Neither GMNC nor its subsidiaries have discharged or satisfied or paid any lien or encumbrance or obligation or liability other than current liabilities in the ordinary course of business, and (vii) no capital expenditures in excess of $5,000 individually or $10,000 in total have been authorized or made. GMNC - Income Tax Matters (z) Tax Returns. All tax returns and reports of GMNC and its subsidiaries required by law to be filed have been filed and are true, complete and correct, and any taxes payable in accordance with any return filed by GMNC and its subsidiaries or in accordance with any notice of assessment or reassessment issued by any taxing authority have been so paid; (aa) Current Taxes. Adequate provisions have been made for taxes payable for the current period for which tax returns are not yet required to be filed and there are no agreements, waivers, or other arrangements providing for an extension of time with respect to the filing of any tax return by, or payment of, any tax, governmental charge or deficiency by GMNC or its subsidiaries. GMNC is not aware of any contingent tax liabilities or any grounds which would prompt a reassessment including aggressive treatment of income and expenses in filing earlier tax returns; GMNC - Applicable Laws and Legal Matters (bb) Licenses. GMNC and its subsidiaries hold all licenses and permits as may be requisite for carrying on the GMNC Business in the manner in which it has heretofore been carried on, which licenses and permits have been maintained and continue to be in good standing except where the failure to obtain or maintain such licenses or permits would not have a material adverse effect on the GMNC Business; (cc) Applicable Laws. Neither GMNC nor its subsidiaries have been charged with or received notice of breach of any laws, ordinances, statutes, regulations, by-laws, orders or decrees to which they are subject or which apply to them the violation of which would have a material adverse effect on the GMNC Business, and to GMNC' knowledge, neither GMNC nor its subsidiaries are in breach of any laws, ordinances, statutes, regulations, bylaws, orders or decrees the contravention of which would result in a material adverse impact on the GMNC Business; 12 (dd) Pending or Threatened Litigation. There is no material litigation or administrative or governmental proceeding pending or threatened against or relating to GMNC, its subsidiaries, the GMNC Business, or any of the GMNC Assets nor does GMNC have any knowledge of any deliberate act or omission of GMNC or its subsidiaries that would form any material basis for any such action or proceeding; other than disclosed in public filings. (ee) No Bankruptcy. Neither GMNC nor its subsidiaries have made any voluntary assignment or proposal under applicable laws relating to insolvency and bankruptcy and no bankruptcy petition has been filed or presented against GMNC or its subsidiaries and no order has been made or a resolution passed for the winding-up, dissolution or liquidation of GMNC or its subsidiaries; (ff) Labor Matters. Neither GMNC nor its subsidiaries are party to any collective agreement relating to the GMNC Business with any labor union or other association of employees and no part of the GMNC Business has been certified as a unit appropriate for collective bargaining or, to the knowledge of GMNC, has made any attempt in that regard; (gg) Finder's Fees. Neither GMNC nor its subsidiaries are party to any agreement which provides for the payment of finder's fees, brokerage fees, commissions or other fees or amounts which are or may become payable to any third party in connection with the execution and delivery of this Agreement and the transactions contemplated herein; Execution and Performance of Agreement (hh) Authorization and Enforceability. The execution and delivery of this Agreement, and the completion of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate action on the part of GMNC and the Acquirer; (ii) No Violation or Breach. The execution and performance of this Agreement will not: (i) violate the charter documents of GMNC or the Acquirer or result in any breach of, or default under, any loan agreement, mortgage, deed of trust, or any other agreement to which GMNC or its subsidiaries are party, (ii) give any person any right to terminate or cancel any agreement including, without limitation, the GMNC Material Contracts, or any right or rights enjoyed by GMNC or its subsidiaries, (iii) result in any alteration of GMNC' or its subsidiaries' obligations under any agreement to which GMNC or its subsidiaries are party including, without limitation, the GMNC Material Contracts, (iv) result in the creation or imposition of any lien, encumbrance or restriction of any nature whatsoever in favor of a third party upon or against the GMNC Assets, (v) result in the imposition of any tax liability to GMNC or its subsidiaries relating to the GMNC Assets, or (vi) violate any court order or decree to which either GMNC or its subsidiaries are subject; 13 The GMNC Assets - Ownership and Condition (jj) Business Assets. The GMNC Assets comprise all of the property and assets of the GMNC Business, and no other person, firm or corporation owns any assets used by GMNC or its subsidiaries in operating the GMNC Business, whether under a lease, rental agreement or other arrangement, other than as disclosed in Schedules "F" or "I" hereto; (kk) Title. GMNC or its subsidiaries are the legal and beneficial owner of the GMNC Assets, free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances or other claims whatsoever, save and except as disclosed in Schedules "F" or "I" hereto; (ll) No Option. No person, firm or corporation has any agreement or option or a right capable of becoming an agreement for the purchase of any of the GMNC Assets; (mm) GMNC Insurance Policies. GMNC and its subsidiaries maintain the public liability insurance and insurance against loss or damage to the GMNC Assets and the GMNC Business as described in Schedule "G" hereto; (nn) GMNC Material Contracts. The GMNC Material Contracts listed in Schedule "I" constitute all of the material contracts of GMNC and its subsidiaries; (oo) No Default. There has not been any default in any material obligation of GMNC or any other party to be performed under any of the GMNC Material Contracts, each of which is in good standing and in full force and effect and unamended (except as disclosed in Schedule "I" hereto), and GMNC is not aware of any default in the obligations of any other party to any of the GMNC Material Contracts; (pp) No Compensation on Termination. There are no agreements, commitments or understandings relating to severance pay or separation allowances on termination of employment of any employee of GMNC or its subsidiaries. Neither GMNC nor its subsidiaries are obliged to pay benefits or share profits with any employee after termination of employment except as required by law; GMNC Assets - GMNC Equipment (qq) GMNC Equipment. The GMNC Equipment has been maintained in a manner consistent with that of a reasonably prudent owner and such equipment is in good working condition; GMNC Assets - GMNC Goodwill and Other Assets (rr) GMNC Goodwill. GMNC and its subsidiaries does not carry on the GMNC Business under any other business or trade names. GMNC does not have any knowledge of any infringement by GMNC or its subsidiaries of any patent, trademarks, copyright or trade secret; The GMNC Business (ss) Maintenance of Business. Since the date of the GMNC Financial Statements, GMNC and its subsidiaries have not entered into any material agreement or commitment except in the ordinary course and except as disclosed herein; 14 (tt) Subsidiaries. Except for the Acquirer, GMNC does not own any subsidiaries and does not otherwise own, directly or indirectly, any shares or interest in any other corporation, partnership, joint venture or firm; and GMNC - Acquisition Shares (uu) Acquisition Shares. The Acquisition Shares when delivered to the holders of CIWM Shares pursuant to the Merger shall be validly issued and outstanding as fully paid and non-assessable shares and the Acquisition Shares shall be transferable upon the books of GMNC, in all cases subject to the provisions and restrictions of all applicable securities laws. Non-Merger and Survival 3.2 The representations and warranties of GMNC contained herein will be true at and as of Closing in all material respects as though such representations and warranties were made as of such time. Notwithstanding the completion of the transactions contemplated hereby, the waiver of any condition contained herein (unless such waiver expressly releases a party from any such representation or warranty) or any investigation made by CIWM or the CIWM Shareholders, the representations and warranties of GMNC shall survive the Closing. Indemnity 3.3 GMNC agrees to indemnify and save harmless CIWM and the CIWM Shareholders from and against any and all claims, demands, actions, suits, proceedings, assessments, judgments, damages, costs, losses and expenses, including any payment made in good faith in settlement of any claim (subject to the right of GMNC to defend any such claim), resulting from the breach by it of any representation or warranty made under this Agreement or from any misrepresentation in or omission from any certificate or other instrument furnished or to be furnished by GMNC to CIWM or the CIWM Shareholders hereunder. ARTICLE 4 COVENANTS OF GMNC Covenants 4.1 GMNC covenants and agrees with CIWM that it will: (a) Conduct of Business. Until the Closing, conduct its business diligently and in the ordinary course consistent with the manner in which it generally has been operated up to the date of execution of this Agreement; (b) Preservation of Business. Until the Closing, use its best efforts to preserve the GMNC Business and the GMNC Assets and, without limitation, preserve for CIWM GMNC' and its subsidiaries' relationships with any third party having business relations with them; (c) Access. Until the Closing, give CIWM, the CIWM Shareholders, and their representatives full access to all of the properties, books, contracts, commitments and records of GMNC, and furnish to CIWM, the CIWM Shareholders and their representatives all such information as they may reasonably request; 15 (d) Procure Consents. Until the Closing, take all reasonable steps required to obtain, prior to Closing, any and all third party consents required to permit the Merger and to preserve and maintain the GMNC Assets notwithstanding the change in control of CIWM arising from the Merger; and (e) Name Change. Forthwith after the Closing, take such steps are required to change the name of GMNC to "China Industrial Waste Management Inc" or such similar name as may be acceptable to the board of directors of CIWM. Authorization 4.2 GMNC hereby agrees to authorize and direct any and all federal, state, municipal, foreign and international governments and regulatory authorities having jurisdiction respecting GMNC and its subsidiaries to release any and all information in their possession respecting GMNC and its subsidiaries to CIWM. GMNC shall promptly execute and deliver to CIWM any and all consents to the release of information and specific authorizations which CIWM reasonably requires to gain access to any and all such information. Survival 4.3 The covenants set forth in this Article shall survive the Closing for the benefit of CIWM and the CIWM Shareholders. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF CIWM AND THE CIWM SHAREHOLDERS Representations and Warranties 5.1 CIWM and the CIWM Shareholders jointly and severally represent and warrant in all material respects to GMNC, with the intent that it will rely thereon in entering into this Agreement and in approving and completing the transactions contemplated hereby, that: CIWM - Corporate Status and Capacity (a) Incorporation. CIWM is a corporation duly incorporated and validly subsisting under the laws of the State of Delaware, and is in good standing with the office of the Secretary of State for the State of Delaware; (b) Carrying on Business. CIWM, through its operating subsidiary, carries on business primarily in the People's Republic of China and does not carry on any material business activity in any other jurisdiction. CIWM has an office at 100 Wall Street, 15th Floor, c/o American Union, New York, NY 10005, and through its operating subsidiary has operations in Dalian City, People's Republic of China and in no other locations. The nature of the CIWM Business does not require CIWM to register or otherwise be qualified to carry on business in any other jurisdiction; (c) Corporate Capacity. CIWM has the corporate power, capacity and authority to own CIWM Assets, to carry on the Business of CIWM and to enter into and complete this Agreement; 16 CIWM - Capitalization (d) Authorized Capital. The authorized capital of CIWM consists of 60,000,000 shares of common stock, $.0001 par value per share; (e) Ownership of CIWM Shares. The issued and outstanding share capital of CIWM will on Closing consist of 1,280,000 common shares (being the CIWM Shares), which shares on Closing shall be validly issued and outstanding as fully paid and non-assessable shares. The CIWM Shareholders will be at Closing the registered and beneficial owners of 1,280,000 CIWM Shares. The CIWM Shares owned by the CIWM Shareholders will on Closing be free and clear of any and all liens, charges, pledges, encumbrances, restrictions on transfer and adverse claims whatsoever; (f) No Option. No person, firm or corporation has any agreement, option, warrant, preemptive right or any other right capable of becoming an agreement or option for the acquisition of CIWM Shares held by the CIWM Shareholders or for the purchase, subscription or issuance of any of the unissued shares in the capital of CIWM; (g) No Restrictions. There are no restrictions on the transfer, sale or other disposition of CIWM Shares contained in the charter documents of CIWM or under any agreement; CIWM - Records and Financial Statements (h) Charter Documents. The charter documents of CIWM have not been altered since its incorporation date, except as filed in the record books of CIWM; (i) Corporate Minute Books. The corporate minute books of CIWM are complete and each of the minutes contained therein accurately reflect the actions that were taken at a duly called and held meeting or by consent without a meeting. All actions by CIWM which required director or shareholder approval are reflected on the corporate minute books of CIWM. CIWM is not in violation or breach of, or in default with respect to, any term of its Certificates of Incorporation (or other charter documents) or by-laws. (j) CIWM Financial Statements. The CIWM Financial Statements present fairly, in all material respects, the assets and liabilities (whether accrued, absolute, contingent or otherwise) of CIWM, on consolidated basis, as of the respective dates thereof, and the sales and earnings of the CIWM Business during the periods covered thereby, in all material respects, and have been prepared in substantial accordance with generally accepted accounting principles consistently applied; (k) CIWM Accounts Payable and Liabilities. There are no material liabilities, contingent or otherwise, of CIWM which are not disclosed in Schedule "K" hereto or reflected in the CIWM Financial Statements except those incurred in the ordinary course of business since the date of the said schedule and the CIWM Financial Statements, and CIWM has not guaranteed or agreed to guarantee any debt, liability or other obligation of any person, firm or corporation. Without limiting the generality of the foregoing, all accounts payable and liabilities of CIWM as of June 30, 2005 are described in Schedule "K" hereto; 17 (l) CIWM Accounts Receivable. All CIWM Accounts Receivable result from bona fide business transactions and services actually rendered without, to the knowledge and belief of CIWM, any claim by the obligor for set-off or counterclaim; (m) CIWM Bank Accounts. All of the CIWM Bank Accounts, their location, numbers and the authorized signatories thereto are as set forth in Schedule "M" hereto; (n) No Debt to Related Parties. Except as disclosed in Schedule "N" hereto, CIWM is not, and on Closing will not be, materially indebted to any CIWM Shareholder nor to any family member thereof, nor to any affiliate, director or officer of CIWM or any CIWM Shareholder except accounts payable on account of bona fide business transactions of CIWM incurred in normal course of CIWM Business, including employment agreements with any CIWM Shareholder, none of which are more than 30 days in arrears; (o) No Related Party Debt to CIWM. Neither any CIWM Shareholder nor any director, officer or affiliate of CIWM are now indebted to or under any financial obligation to CIWM on any account whatsoever, except for advances on account of travel and other expenses not exceeding $5,000 in total; (p) No Dividends. No dividends or other distributions on any shares in the capital of CIWM have been made, declared or authorized since the date of the CIWM Financial Statements; (q) No Payments. No payments of any kind have been made or authorized since the date of the CIWM Financial Statements to or on behalf of any CIWM Shareholder or to or on behalf of officers, directors, shareholders or employees of CIWM or under any management agreements with CIWM, except payments made in the ordinary course of business and at the regular rates of salary or other remuneration payable to them; (r) No Pension Plans. There are no pension, profit sharing, group insurance or similar plans or other deferred compensation plans affecting CIWM; (s) No Adverse Events. Since the date of the CIWM Financial Statements: (i) there has not been any material adverse change in the consolidated financial position or condition of CIWM, its liabilities or the CIWM Assets or any damage, loss or other change in circumstances materially affecting CIWM, the CIWM Business or the CIWM Assets or CIWM's right to carry on the CIWM Business, other than changes in the ordinary course of business, (ii) there has not been any damage, destruction, loss or other event (whether or not covered by insurance) materially and adversely affecting CIWM, the CIWM Business or the CIWM Assets, (iii) there has not been any material increase in the compensation payable or to become payable by CIWM to any CIWM Shareholder or to any of CIWM's officers, employees or agents or any bonus, payment or arrangement made to or with any of them, (iv) the CIWM Business has been and continues to be carried on in the ordinary course, 18 (v) CIWM has not waived or surrendered any right of material value, (vi) CIWM has not discharged or satisfied or paid any lien or encumbrance or obligation or liability other than current liabilities in the ordinary course of business, and (vii) no capital expenditures in excess of $5,000 individually or $10,000 in total have been authorized or made; CIWM - Income Tax Matters (t) Tax Returns. All tax returns and reports of CIWM required by law to be filed have been filed and are true, complete and correct, and any taxes payable in accordance with any return filed by CIWM or in accordance with any notice of assessment or reassessment issued by any taxing authority have been so paid; (u) Current Taxes. Adequate provisions have been made for taxes payable for the current period for which tax returns are not yet required to be filed and there are no agreements, waivers, or other arrangements providing for an extension of time with respect to the filing of any tax return by, or payment of, any tax, governmental charge or deficiency by CIWM. CIWM is not aware of any contingent tax liabilities or any grounds which would prompt a reassessment including aggressive treatment of income and expenses in filing earlier tax returns; CIWM - Applicable Laws and Legal Matters (v) Licenses. CIWM holds all licenses and permits as may be requisite for carrying on the CIWM Business in the manner in which it has heretofore been carried on, which licenses and permits have been maintained and continue to be in good standing except where the failure to obtain or maintain such licenses or permits would not have a material adverse effect on the CIWM Business; (w) Applicable Laws. CIWM has not been charged with or received notice of breach of any laws, ordinances, statutes, regulations, by-laws, orders or decrees to which it is subject or which applies to it the violation of which would have a material adverse effect on the CIWM Business, and, to CIWM's knowledge, CIWM is not in breach of any laws, ordinances, statutes, regulations, by-laws, orders or decrees the contravention of which would result in a material adverse impact on the CIWM Business; (x) Pending or Threatened Litigation. There is no material litigation or administrative or governmental proceeding pending or threatened against or relating to CIWM, the CIWM Business, or any of the CIWM Assets, nor does CIWM have any knowledge of any deliberate act or omission of CIWM that would form any material basis for any such action or proceeding; (y) No Bankruptcy. CIWM has not made any voluntary assignment or proposal under applicable laws relating to insolvency and bankruptcy and no bankruptcy petition has been filed or presented against CIWM and no order has been made or a resolution passed for the winding-up, dissolution or liquidation of CIWM; (z) Labor Matters. CIWM is not a party to any collective agreement relating to the CIWM Business with any labor union or other association of employees and no part of the CIWM Business has been certified as a unit appropriate for collective bargaining or, to the knowledge of CIWM, has made any attempt in that regard and CIWM has no reason to believe that any current employees will leave CIWM's employ as a result of this Merger. 19 (aa) Finder's Fees. CIWM is not a party to any agreement which provides for the payment of finder's fees, brokerage fees, commissions or other fees or amounts which are or may become payable to any third party in connection with the execution and delivery of this Agreement and the transactions contemplated herein; Execution and Performance of Agreement (bb) Authorization and Enforceability. The execution and delivery of this Agreement, and the completion of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate action on the part of CIWM; (cc) No Violation or Breach. The execution and performance of this Agreement will not (i) violate the charter documents of CIWM or result in any breach of, or default under, any loan agreement, mortgage, deed of trust, or any other agreement to which CIWM is a party, (ii) give any person any right to terminate or cancel any agreement including, without limitation, CIWM Material Contracts, or any right or rights enjoyed by CIWM, (iii) result in any alteration of CIWM's obligations under any agreement to which CIWM is a party including, without limitation, the CIWM Material Contracts, (iv) result in the creation or imposition of any lien, encumbrance or restriction of any nature whatsoever in favor of a third party upon or against the CIWM Assets, (v) result in the imposition of any tax liability to CIWM relating to CIWM Assets or the CIWM Shares, or (vi) violate any court order or decree to which either CIWM is subject; CIWM Assets - Ownership and Condition (dd) Business Assets. The CIWM Assets comprise all of the property and assets of the CIWM Business, and neither the CIWM Shareholders nor any other person, firm or corporation owns any assets used by CIWM in operating the CIWM Business, whether under a lease, rental agreement or other arrangement, other than as disclosed in Schedules "O" or "R" hereto; (ee) Title. CIWM is the legal and beneficial owner of the CIWM Assets, free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances or other claims whatsoever, save and except as disclosed in Schedules "O" or "R" hereto; (ff) No Option. No person, firm or corporation has any agreement or option or a right capable of becoming an agreement for the purchase of any of the CIWM Assets; 20 (gg) CIWM Insurance Policies. CIWM maintains the public liability insurance and insurance against loss or damage to the CIWM Assets and the CIWM Business as described in Schedule "P" hereto; (hh) CIWM Material Contracts. The CIWM Material Contracts listed in Schedule "R" constitute all of the material contracts of CIWM; (ii) No Default. There has not been any default in any material obligation of CIWM or any other party to be performed under any of CIWM Material Contracts, each of which is in good standing and in full force and effect and unamended (except as disclosed in Schedule "R"), and CIWM is not aware of any default in the obligations of any other party to any of the CIWM Material Contracts; (jj) No Compensation on Termination. There are no agreements, commitments or understandings relating to severance pay or separation allowances on termination of employment of any employee of CIWM. CIWM is not obliged to pay benefits or share profits with any employee after termination of employment except as required by law; CIWM Assets - CIWM Equipment (kk) CIWM Equipment. The CIWM Equipment has been maintained in a manner consistent with that of a reasonably prudent owner and such equipment is in good working condition; CIWM Assets - CIWM Goodwill and Other Assets (ll) CIWM Goodwill. CIWM carries on the CIWM Business only under the name "CIWM Incorporated" and variations thereof and under no other business or trade names. CIWM does not have any knowledge of any infringement by CIWM of any patent, trademark, copyright or trade secret; The Business of CIWM (mm) Maintenance of Business. Since the date of the CIWM Financial Statements, the CIWM Business has been carried on in the ordinary course and CIWM has not entered into any material agreement or commitment except in the ordinary course; and (nn) Subsidiaries. CIWM does not own any subsidiaries and does not otherwise own, directly or indirectly, any shares or interest in any other corporation, partnership, joint venture or firm and CIWM does not own any subsidiary and does not otherwise own, directly or indirectly, any shares or interest in any other corporation, partnership, joint venture or firm. Non-Merger and Survival 5.2 The representations and warranties of CIWM and the CIWM Shareholders contained herein will be true at and as of Closing in all material respects as though such representations and warranties were made as of such time. Notwithstanding the completion of the transactions contemplated hereby, the waiver of any condition contained herein (unless such waiver expressly releases a party from any such representation or warranty) or any investigation made by GMNC, the representations and warranties of CIWM and the CIWM Shareholders shall survive the Closing. 21 Indemnity 5.3 CIWM and the CIWM Shareholders jointly and severally agree to indemnify and save harmless GMNC from and against any and all claims, demands, actions, suits, proceedings, assessments, judgments, damages, costs, losses and expenses, including any payment made in good faith in settlement of any claim (subject to the right of CIWM and the CIWM Shareholders to defend any such claim), resulting from the breach by any of them of any representation or warranty of such party made under this Agreement or from any misrepresentation in or omission from any certificate or other instrument furnished or to be furnished by CIWM or the CIWM Shareholders to GMNC hereunder. ARTICLE 6 COVENANTS OF CIWM AND THE CIWM SHAREHOLDERS Covenants 6.1 CIWM and the CIWM Shareholders covenant and agree with GMNC that they will: (a) Conduct of Business. Until the Closing, conduct the CIWM Business diligently and in the ordinary course consistent with the manner in which the CIWM Business generally has been operated up to the date of execution of this Agreement; (b) Preservation of Business. Until the Closing, use their best efforts to preserve the CIWM Business and the CIWM Assets and, without limitation, preserve for GMNC CIWM's relationships with their suppliers, customers and others having business relations with them; (c) Access. Until the Closing, give GMNC and its representatives full access to all of the properties, books, contracts, commitments and records of CIWM relating to CIWM, the CIWM Business and the CIWM Assets, and furnish to GMNC and its representatives all such information as they may reasonably request; (d) Procure Consents. Until the Closing, take all reasonable steps required to obtain, prior to Closing, any and all third party consents required to permit the Merger and to preserve and maintain the CIWM Assets, including the CIWM Material Contracts, notwithstanding the change in control of CIWM arising from the Merger; (e) Reporting and Internal Controls. From and after the Effective Time, the CIWM Shareholders shall forthwith take all required actions to implement internal controls on the business of the Surviving Company to ensure that the Surviving Company and GMNC comply with Section 13(b)(2) of the Securities and Exchange Act of 1934; (f) Audited Financial Statements. Immediately upon execution of this Agreement, cause to be prepared audited financial statements of CIWM in compliance with the requirements of Regulation SB as promulgated by the Securities and Exchange Commission, such audited financial statements to be provided no later than 2 business days after the Closing Date; and 22 (g) Name Change. Forthwith after the Closing, take such steps are required to change the name of GMNC to "China Industrial Waste Management, Inc" or such similar name as may be acceptable to the board of directors of GMNC. Authorization 6.2 CIWM hereby agrees to authorize and direct any and all federal, state, municipal, foreign and international governments and regulatory authorities having jurisdiction respecting CIWM to release any and all information in their possession respecting CIWM to GMNC. CIWM shall promptly execute and deliver to GMNC any and all consents to the release of information and specific authorizations which GMNC reasonably require to gain access to any and all such information. Survival 6.3 The covenants set forth in this Article shall survive the Closing for the benefit of GMNC. ARTICLE 7 CONDITIONS PRECEDENT Conditions Precedent in favor of GMNC 7.1 GMNC' obligations to carry out the transactions contemplated hereby are subject to the fulfillment of each of the following conditions precedent on or before the Closing: (a) all documents or copies of documents required to be executed and delivered to GMNC hereunder will have been so executed and delivered; (b) all of the terms, covenants and conditions of this Agreement to be complied with or performed by CIWM or the CIWM Shareholders at or prior to the Closing will have been complied with or performed; (c) GMNC shall have completed its review and inspection of the books and records of CIWM and shall be satisfied with same in all material respects; (d) title to the CIWM Shares held by the CIWM Shareholders and to the CIWM Assets will be free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances or other claims whatsoever, save and except as disclosed herein; (e) the Certificate of Merger shall be executed by CIWM in form acceptable for filing with the Delaware Secretary of State; (f) subject to Article 8 hereof, there will not have occurred (i) any material adverse change in the financial position or condition of CIWM, its liabilities or the CIWM Assets or any damage, loss or other change in circumstances materially and adversely affecting the CIWM Business or the CIWM Assets or CIWM's right to carry on the CIWM Business, other than changes in the ordinary course of business, none of which has been materially adverse, or 23 (ii) any damage, destruction, loss or other event, including changes to any laws or statutes applicable to CIWM or the CIWM Business (whether or not covered by insurance) materially and adversely affecting CIWM, the CIWM Business or the CIWM Assets; (g) GMNC's issued and outstanding common share capital shall be reduced to 4,823,841 GMNC Common Shares by the return to treasury of 2,950,000 GMNC Common Shares and GMNC shall have received a release in form satisfactory to CIWM from the persons returning such shares in that regard; and (h) the transactions contemplated hereby shall have been approved by all other regulatory authorities having jurisdiction over the subject matter hereof, if any. Waiver by GMNC 7.2 The conditions precedent set out in the preceding section are inserted for the exclusive benefit of GMNC and any such condition may be waived in whole or in part by GMNC at or prior to Closing by delivering to CIWM a written waiver to that effect signed by GMNC. In the event that the conditions precedent set out in the preceding section are not satisfied on or before the Closing, GMNC shall be released from all obligations under this Agreement. Conditions Precedent in Favor of CIWM and the CIWM Shareholders 7.3 The obligation of CIWM and the CIWM Shareholders to carry out the transactions contemplated hereby is subject to the fulfillment of each of the following conditions precedent on or before the Closing: (a) all documents or copies of documents required to be executed and delivered to CIWM hereunder will have been so executed and delivered; (b) all of the terms, covenants and conditions of this Agreement to be complied with or performed by GMNC at or prior to the Closing will have been complied with or performed; (c) CIWM shall have completed its review and inspection of the books and records of GMNC and its subsidiaries and shall be satisfied with same in all material respects; (d) GMNC will have delivered the Acquisition Shares to be issued pursuant to the terms of the Merger to CIWM at the Closing and the Acquisition Shares will be registered on the books of GMNC in the name of the holder of CIWM Shares at the Effective Time; (e) title to the Acquisition Shares will be free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances or other claims whatsoever; (f) the Certificate of Merger shall be executed by the Acquirer in form acceptable for filing with the Delaware Secretary of State; (g) the filing of the Certificate of Designation for the Series A Convertible Preferred Stock with the Nevada Secretary of State, in the form attached hereto as Schedule "S"; (h) subject to Article 8 hereof, there will not have occurred 24 (i) any material adverse change in the financial position or condition of GMNC, its subsidiaries, their liabilities or the GMNC Assets or any damage, loss or other change in circumstances materially and adversely affecting GMNC, the GMNC Business or the GMNC Assets or GMNC' right to carry on the GMNC Business, other than changes in the ordinary course of business, none of which has been materially adverse, or (ii) any damage, destruction, loss or other event, including changes to any laws or statutes applicable to GMNC or the GMNC Business (whether or not covered by insurance) materially and adversely affecting GMNC, its subsidiaries, the GMNC Business or the GMNC Assets; (h) GMNC' issued and outstanding common share capital shall be reduced to 4,823,841 GMNC Common Shares (prior to the conversion of outstanding shares of Series A Preferred Stock, by the return to treasury of 2,950,000 GMNC Common Shares and GMNC shall have received a release in form satisfactory to CIWM from the persons returning such shares in that regard; (i) the transactions contemplated hereby shall have been approved by all other regulatory authorities having jurisdiction over the subject matter hereof, if any; and (j) the satisfaction of all liabilities of GMNC on or prior to the Closing Date. Waiver by CIWM and the CIWM Shareholders 7.4 The conditions precedent set out in the preceding section are inserted for the exclusive benefit of CIWM and the CIWM Shareholders and any such condition may be waived in whole or in part by CIWM or the CIWM Shareholders at or prior to the Closing by delivering to GMNC a written waiver to that effect signed by CIWM and the CIWM Shareholders. In the event that the conditions precedent set out in the preceding section are not satisfied on or before the Closing CIWM and the CIWM Shareholders shall be released from all obligations under this Agreement. Nature of Conditions Precedent 7.5 The conditions precedent set forth in this Article are conditions of completion of the transactions contemplated by this Agreement and are not conditions precedent to the existence of a binding agreement. Each party acknowledges receipt of the sum of $1.00 and other good and valuable consideration as separate and distinct consideration for agreeing to the conditions of precedent in favor of the other party or parties set forth in this Article. Termination 7.6 Notwithstanding any provision herein to the contrary, if the Closing does not occur on or before November 10, 2005, this Agreement will be at an end and will have no further force or effect, unless otherwise agreed upon by the parties in writing. Confidentiality 7.7 Notwithstanding any provision herein to the contrary, the parties hereto agree that the existence and terms of this Agreement are confidential and that if this Agreement is terminated pursuant to the preceding section the parties agree to return to one another any and all financial, technical and business documents delivered to the other party or parties in connection with the 25 negotiation and execution of this Agreement and shall keep the terms of this Agreement and all information and documents received from CIWM and GMNC and the contents thereof confidential and not utilize nor reveal or release same, provided, however, that GMNC will be required to issue news releases regarding the execution and consummation of this Agreement and file a Current Report on Form 8-K with the Securities and Exchange Commission respecting the proposed Merger contemplated hereby together with such other documents as are required to maintain the currency of GMNC' filings with the Securities and Exchange Commission. ARTICLE 8 RISK Material Change in the Business of CIWM 8.1 If any material loss or damage to the CIWM Business occurs prior to Closing and such loss or damage, in GMNC' reasonable opinion, cannot be substantially repaired or replaced within sixty (60) days, GMNC shall, within two (2) days following any such loss or damage, by notice in writing to CIWM, at its option, either: (a) terminate this Agreement, in which case no party will be under any further obligation to any other party; or (b) elect to complete the Merger and the other transactions contemplated hereby, in which case the proceeds and the rights to receive the proceeds of all insurance covering such loss or damage will, as a condition precedent to GMNC' obligations to carry out the transactions contemplated hereby, be vested in CIWM or otherwise adequately secured to the satisfaction of GMNC on or before the Closing Date. Material Change in the GMNC Business 8.2 If any material loss or damage to the GMNC Business occurs prior to Closing and such loss or damage, in CIWM's reasonable opinion, cannot be substantially repaired or replaced within sixty (60) days, CIWM shall, within two (2) days following any such loss or damage, by notice in writing to GMNC, at its option, either: (a) terminate this Agreement, in which case no party will be under any further obligation to any other party; or (b) elect to complete the Merger and the other transactions contemplated hereby, in which case the proceeds and the rights to receive the proceeds of all insurance covering such loss or damage will, as a condition precedent to CIWM's obligations to carry out the transactions contemplated hereby, be vested in GMNC or otherwise adequately secured to the satisfaction of CIWM on or before the Closing Date. ARTICLE 9 CLOSING Closing 9.1 The Merger and the other transactions contemplated by this Agreement will be closed at the Place of Closing in accordance with the closing procedure set out in this Article. 26 Documents to be Delivered by CIWM 9.2 On or before the Closing, CIWM and the CIWM Shareholders will deliver or cause to be delivered to GMNC: (a) the original or certified copies of the charter documents of CIWM and all corporate records documents and instruments of CIWM, the corporate seal of CIWM and all books and accounts of CIWM; (b) all reasonable consents or approvals required to be obtained by CIWM for the purposes of completing the Merger and preserving and maintaining the interests of CIWM under any and all CIWM Material Contracts and in relation to CIWM Assets; (c) certified copies of such resolutions of the shareholder and director of CIWM as are required to be passed to authorize the execution, delivery and implementation of this Agreement; (d) an acknowledgement from CIWM and the CIWM Shareholders of the satisfaction of the conditions precedent set forth in section 7.3 hereof; (e) the Certificate of Merger, duly executed by CIWM; (f) Opinion of counsel; and (g) such other documents as GMNC may reasonably require to give effect to the terms and intention of this Agreement. Documents to be Delivered by GMNC 9.3 On or before the Closing, GMNC shall deliver or cause to be delivered to CIWM and the CIWM Shareholders: (a) share certificates representing the Acquisition Shares duly registered in the names of the holders of shares of CIWM Common Stock; (b) certified copies of such resolutions of the directors of GMNC as are required to be passed to authorize the execution, delivery and implementation of this Agreement; (c) a certified copy of a resolution of the directors of GMNC dated as of the Closing Date appointing the nominees of CIWM as officers of CIWM; (d) an undated resolution of the directors of GMNC appointing the nominees of the CIWM Shareholders listed below in Article 10 to the board of directors of GMNC; (e) undated resignations of Ralph Jordan, Ron Shaver and Tracy Kroeker as directors of GMNC; (f) undated resignations of Ron Shaver and Tracy Kroeker as officers of GMNC; (g) an acknowledgement from GMNC of the satisfaction of the conditions precedent set forth in section 7.1 hereof; 27 (h) Opinion of counsel; (i) documentation evidencing the return to treasury of 2,950,000 GMNC Common Shares and release in form satisfactory to CIWM from the persons returning such shares; (j) Waiver and release in favor of the Company executed by Tracy Kroeker; (k) Assumption of Liabilities Agreement executed by Tracy Kroeker and GMNC; (l) the Certificate of Merger, duly executed by the Acquirer; (m) a certified copy of the Certificate of Designation as filed with the Nevada Secretary of State; and (n) such other documents as CIWM may reasonably require to give effect to the terms and intention of this Agreement. ARTICLE 10 POST-CLOSING MATTERS Forthwith after the Closing, GMNC, CIWM and the CIWM Shareholders agree to use all their best efforts to: (a) file the Certificate of Merger with Secretary of State of the State of Delaware; (b) issue a news release reporting the Closing; (c) file with the Securities and Exchange Commission a report on Form 14f1 disclosing the change in control of GMNC and, 10 days after such filing, date the resolutions appointing to the board of directors of GMNC John C. Leo, and forthwith date and accept the resignations of Ralph Jordan, Tracy Kroeker and Ron Shaver as directors of GMNC; (d) file a Form 8-K with the Securities and Exchange Commission within four business days disclosing the terms of this Agreement and audited financial statements of CIWM as well as pro forma financial information of CIWM and GMNC as required by Regulation SB as promulgated by the Securities and Exchange Commission; (e) file reports on Forms 13D and 3 with the Securities and Exchange Commission disclosing the acquisition of the Acquisition Shares by the CIWM Shareholders, as necessary; and (f) take such steps are required to change the name of GMNC to "China Industrial Waste Management Inc." or such similar name as may be acceptable to the board of directors of GMNC. 28 ARTICLE 11 GENERAL PROVISIONS Arbitration 11.1 The parties hereto shall attempt to resolve any dispute, controversy, difference or claim arising out of or relating to this Agreement by negotiation in good faith. If such good negotiation fails to resolve such dispute, controversy, difference or claim within fifteen (15) days after any party delivers to any other party a notice of its intent to submit such matter to arbitration, then any party to such dispute, controversy, difference or claim may submit such matter to arbitration in the City of New York, New York. Notice 11.2 Any notice required or permitted to be given by any party will be deemed to be given when in writing and delivered to the address for notice of the intended recipient by personal delivery, prepaid single certified or registered mail, or telecopier. Any notice delivered by mail shall be deemed to have been received on the fourth business day after and excluding the date of mailing, except in the event of a disruption in regular postal service in which event such notice shall be deemed to be delivered on the actual date of receipt. Any notice delivered personally or by telecopier shall be deemed to have been received on the actual date of delivery. Addresses for Service 11.3 The address for service of notice of each of the parties hereto is as follows: (a) GMNC or the Acquirer: Goldtech Mining Corporation 3-11 Bellrose Drive, Suite 314 St. Albert, Alberta, Canada T8N 5C9 Attn: Tracy Kroeker, CEO Phone: (780) 498-2289 Telecopier: (780) 973 -6314 (b) CIWM or the CIWM Shareholders China Industrial Waste Management Inc. No. 1 Huailu West Road, E.D.T. Zone, Dalian City, R. R. China, 116600 Attn: Jinqing Dong, President Phone: (212) 232-0120 Telecopier: (212) 785-5867 Change of Address 11.4 Any party may, by notice to the other parties change its address for notice to some other address in North America and will so change its address for notice whenever the existing address or notice ceases to be adequate for delivery by hand. A post office box may not be used as an address for service. Further Assurances 11.5 Each of the parties will execute and deliver such further and other documents and do and perform such further and other acts as any other party may reasonably require to carry out and give effect to the terms and intention of this Agreement. 29 Time of the Essence 11.6 Time is expressly declared to be the essence of this Agreement. Entire Agreement 11.7 The provisions contained herein constitute the entire agreement among CIWM, the CIWM Shareholders, the Acquirer and GMNC respecting the subject matter hereof and supersede all previous communications, representations and agreements, whether verbal or written, among CIWM, the CIWM Shareholders, the Acquirer and GMNC with respect to the subject matter hereof. Enurement 11.8 This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns. Assignment 11.9 This Agreement is not assignable without the prior written consent of the parties hereto. Counterparts 11.10 This Agreement may be executed in counterparts, each of which when executed by any party will be deemed to be an original and all of which counterparts will together constitute one and the same Agreement. Delivery of executed copies of this Agreement by telecopier will constitute proper delivery, provided that originally executed counterparts are delivered to the parties within a reasonable time thereafter. Applicable Law 11.11 This Agreement is subject to the laws of the State of New York. [Remainder of page intentionally left blank.] 30 IN WITNESS WHEREOF the parties have executed this Agreement effective as of the day and year first above written. GOLDTECH MINING CORPORATION By: /s/ TRACY KROEKER - ----------------------------- ------------------ Witness Tracey Kroeker, Chief Executive Officer Name Address DALIAN ACQUISITION CORP. By: /s/ TRACY KROEKER - ----------------------------- ----------------- Witness Tracey Kroeker, Chief Executive Officer Name Address CHINA INDUSTRIAL WASTE MANAGEMENT INC. By: /s/ JINQING DONG - ----------------------------- ---------------------- Witness Jinqing Dong, President Name Address /s/ JINQING DONG - ----------------------------- ---------------- Witness JINQING DONG Name Address 31 /s/ JOHN C. LEO - ----------------------------- --------------- Witness AMERICAN UNION SECURITIES, INC. - ----------------------------- Name By: John C. Leo, President Address /s/ HUAQIN ZHOU - ----------------------------- ---------------- Witness HUAQIN ZHOU Name Address /s/ HUAKANG ZHOU - ----------------------------- ----------------- Witness WARNER TECHNOLOGY AND INVESTMENT CORP. Name By: HuaKang Zhou, President Address /s/ JUN LI - ----------------------------- ---------- Witness JUN LI Name Address /s/ WENYI GUO - ----------------------------- -------------- Witness WENYI GUO Name Address /s/ DUANFENG ZHU - ----------------------------- ---------------- Witness DUANFENG ZHU Name Address /s/ XIN GUO - ----------------------------- ----------- Witness XIN GUO Name Address /s/ JOHN C. LEO - ----------------------------- --------------- Witness JOHN C. LEO - ----------------------------- Name Address /s/ TONGJIE XING - ----------------------------- ---------------- Witness TONGJIE XING Name Address -----END PRIVACY-ENHANCED MESSAGE-----