Consolidated Financial Statements of Northwest Bio-Technic Inc. and Subsidiary as of December 31, 2004 and 2003

Summary

This document presents the audited consolidated financial statements of Northwest Bio-Technic Inc. and its subsidiary for the years ending December 31, 2004 and 2003. Prepared by Jimmy C.H. Cheung & Co, Certified Public Accountants, the report includes balance sheets, statements of operations, stockholders' equity, and cash flows, along with accompanying notes. The audit confirms that the financial statements fairly represent the company's financial position and results in accordance with U.S. accounting standards.

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EX-10.3 2 v014117_ex10-3.txt BCA REMITTANCE LIMITED EXHIBIT 10.3 Financial Statements of Northwest Bio-Technic Inc. and Huifeng Biochemistry Joint Stock Company. .1 NORTHWEST BIO-TECHNIC INC. .2 AND SUBSIDIARY .3 FINANCIAL STATEMENTS .4 AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003 1 BCA REMITTANCE LIMITED .5 NORTHWEST BIO-TECHNIC INC. AND SUBSIDIARY .6 .7 CONTENTS Pages - -------------------------------------------------------------------------------- Report of Independent Registered Public Accounting Firm 3 - -------------------------------------------------------------------------------- Balance Sheets as of December 31, 2004 (Consolidated) and 2003 5 - -------------------------------------------------------------------------------- Statements of Operations and Comprehensive income (loss) for the years ended December 31, 2004 (Consolidated) and 2003 6 - -------------------------------------------------------------------------------- Statements of Stockholders' Equity for the years ended December 31, 2004 (Consolidated) and 2003 7 - -------------------------------------------------------------------------------- Statements of Cash Flows for the years ended December 31, 2004 (Consolidated) and 2003 8 - -------------------------------------------------------------------------------- Notes to Consolidated Financial Statements 9 - 15 - -------------------------------------------------------------------------------- 2 BCA REMITTANCE LIMITED [LOGO] Jimmy C.H. Cheung & Co Certified Public Accountants (A member of Kreston International) ..8 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of: Northwest Bio-Technic Inc. and Subsidiary We have audited the accompanying balance sheets of Northwest Bio-Technic Inc. and subsidiary as of December 31, 2004 (consolidated) and 2003 and the related statements of operations and comprehensive income (loss), changes in stockholders' equity and cash flows for the years ended December 31, 2004 (consolidated) and 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits of the financial statements provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Northwest Bio-Technic Inc. and subsidiary, as of December 31, 2004 (consolidated) and 2003, and the results of its operations and its cash flows for the years ended December 31, 2004 (consolidated) and 2003, in conformity with accounting principles generally accepted in the United States of America. JIMMY C.H. CHEUNG & CO Certified Public Accountants 3 BCA REMITTANCE LIMITED Hong Kong Date: January 29, 2005 ..9 304 Dominion Centre, 43 Queen's Road East, Wanchai, Hong Kong [LOGO] Tel: (852) 25295500 Fax: (852) 28651067 Email: ***@*** Website: http://www.jimmycheungco.com 4 BCA REMITTANCE LIMITED .10 NORTHWEST BIO-TECHNIC INC. AND SUBSIDIARY .11 BALANCE SHEETS AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
ASSETS 2004 (Consolidated) 2003 ------------ ------------ CURRENT ASSETS Cash and cash equivalents $ 167,511 $ 95,803 Accounts receivable, net of allowances 104,144 226,167 Inventories 1,302,025 897,006 Note receivable -- 506,774 Due from stockholders 62,493 632,210 Other receivables 335,058 98,138 ------------ ------------ Total Current Assets 1,971,231 2,456,098 PROPERTY AND EQUIPMENT, NET 879,503 667,843 OTHER ASSETS Investment in affiliate 31,190 -- Land use rights, net 133,974 -- ------------ ------------ TOTAL ASSETS $ 3,015,898 $ 3,123,941 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 56,454 $ 49,260 Other payables and accrued expenses 125,191 43,957 Value added tax payables 12,323 -- Income tax and other tax payables 6,684 98 Notes payable -- 241,642 Due to stockholders 193,433 9,079 ------------ ------------ Total Current Liabilities 394,085 344,036 ------------ ------------ COMMITMENTS AND CONTINGENCIES -- -- MINORITY INTEREST 58,915 67,277 ------------ ------------ STOCKHOLDERS' EQUITY $0.10 par value, 500,000 shares authorized, 500,000 shares issued and outstanding 50,000 50,000 Additional paid-in capital 4,526,996 4,476,996 Retained earnings (deficit) Unappropriated (2,021,348) (1,814,451) Appropriated 7,250 83 ------------ ------------ Total Stockholders' Equity 2,562,898 2,712,628 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,015,898 $ 3,123,941 ============ ============
.12 The accompanying notes are an integral part of these financial statements 5 BCA REMITTANCE LIMITED .13 NORTHWEST BIO-TECHNIC INC. AND SUBSIDIARY STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
2004 (Consolidated) 2003 ------------ ------------ NET SALES $ 2,478,763 $ 715,859 COST OF SALES (2,235,189) (683,430) ------------ ------------ GROSS PROFIT 243,574 32,429 ------------ ------------ OPERATING EXPENSES Selling expenses and distribution expenses 41,569 49,833 General and administrative expenses 395,342 41,729 Depreciation and amortization 9,012 5,543 ------------ ------------ Total Operating Expenses 445,923 97,105 ------------ ------------ LOSS FROM OPERATIONS (202,349) (64,676) OTHER INCOME (EXPENSES) Equity in loss of affiliate (211) -- Interest income, net 1,260 51,762 Other income, net 711 272 ------------ ------------ Total Other Income 1,760 52,034 ------------ ------------ LOSS FROM OPERATIONS BEFORE TAXES AND MINORITY INTEREST (200,589) (12,642) INCOME TAX EXPENSE (7,503) -- MINORITY INTEREST 8,362 6,606 ------------ ------------ NET LOSS (199,730) (6,036) OTHER COMPREHENSIVE LOSS Foreign currency translation loss -- -- ------------ ------------ COMPREHENSIVE LOSS $ (199,730) $ (6,036) ============ ============ Net loss share-basic and diluted $ (0.40) $ (0.01) ============ ============ Weighted average number of shares outstanding during the year- basis and diluted 500,000 500,000 ============ ============
.14 The accompanying notes are an integral part of these financial statements 6 BCA REMITTANCE LIMITED NORTHWEST BIO-TECHNIC INC. AND SUBSIDIARY STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
Additional Unappropriated Appropriated Common paid in retained retained stock Amount capital deficit earnings Total ------------ ------------ ------------ ------------ ------------ ------------ Stock issued to founders for cash 500,000 $ 50,000 $ 4,476,996 $ -- $ $ 4,526,996 Balance brought forward from 2002 -- -- (1,808,415) 83 (1,808,332) Net loss for the year -- -- (6,036) -- (6,036) ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2003 500,000 50,000 4,476,996 (1,814,451) 83 2,712,628 Contribution by the stockholders 50,000 -- -- 50,000 Net loss for the year -- -- (199,730) -- (199,730) Transfer from retained earnings to statutory and staff welfare reserves -- -- (7,167) 7,167 -- ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2004 (consolidated) 500,000 $ 50,000 $ 4,526,996 $ (2,021,348) $ 7,250 $ 2,562,898 ============ ============ ============ ============ ============ ============
.15 The accompanying notes are an integral part of these financial statements 7 BCC REMITTANCE LIMITED NORTHWEST BIO-TECHNIC INC. AND SUBSIDIARY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2004 (CONSOLIDATED) AND 2003
2004 (Consolidated) 2003 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (199,730) $ (6,036) Adjusted to reconcile net loss to cash provided by (used in) operating activities: Depreciation and amortization - cost of sales 85,085 66,642 Depreciation and amortization 9,012 5,543 Equity in loss of affiliate 211 -- Minority interest (8,362) (6,606) Changes in operating assets and liabilities (Increase) decrease in: Accounts receivable 122,023 (178,863) Inventories (405,019) 319,450 Other receivables (236,920) (69,131) Increase (decrease) in: Accounts payable 7,194 (15,876) Other payables and accrued expenses 81,234 (24,423) Value added tax payables 12,323 -- Income tax and other taxes payable 6,586 -- ------------ ------------ Net cash (used in) provided by operating activities (526,363) 90,700 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Decrease in note receivable 506,774 -- Purchase of property and equipment (305,070) (19,134) Investment in affiliate (31,401) -- Land use rights (134,661) -- ------------ ------------ Net cash provided by (used in) investing activities 35,642 (19,134) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of common stocks 50,000 -- Due from stockholders 569,717 (133,421) Decrease (increase) in note payable (241,642) 59,806 Due to stockholders 184,354 (99,317) ------------ ------------ Net cash provided by (used in) financing activities 562,429 (172,932) ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 71,708 (101,366) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 95,803 197,169 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF YEAR $ 167,511 $ 95,803 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Income taxes $ (7,503) $ -- ============ ============ Interest expenses $ -- $ (2,152) ============ ============
The accompanying notes are an integral part of these financial statements 8 BCC REMITTANCE LIMITED NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (A) Organization Northwest Bio-Technic Inc. ("Northwest") was incorporated in the British Virgin Islands ("BVI") on June 25, 2004. Xian Huifeng Biochemistry Joint-Stock Company Limited ("Huifeng Biochemistry") was incorporated in the People's Republic of China ("PRC") on January 20, 2000 as a company with limited liabilities and was restructured as a joint stock company on September 29, 2002 under the laws of the PRC. Huifeng Biochemistry produces plant extracts and bio-chemical products used as pharmaceutical raw materials in the PRC. Most of its products are distributed within the PRC and some European countries. On August 23, 2001, Huifeng Biochemistry established a 70% owned subsidiary, Xian Huifeng Biochemistry Engineering Company Limited ("Huifeng Engineering") in the PRC with a registered capital of $265,778. The subsidiary has no operations since its incorporation. On June 16, 2004 Huifeng Biochemistry acquired an 86.7% interest in Baoji Jinsen Pharmaceutical Company Limited, later renamed to Xian Huifeng Pharmaceutical Company Limited ("Huifeng Pharmaceutical"), a limited liability company in the PRC. On November 10, 2004 Huifeng Pharmaceutical increased its registered capital from $181,159 to $603,865. The increased registered capital was fully subscribed by a stockholder of the Company, diluting the Company's interest in Huifeng Pharmaceutical from 86.7% to 26%. During 2004, Huifeng Biochemistry's shareholders exchanged 100% of their ownership of Huifeng Biochemistry for 500,000 shares of Northwest Bio-Technic Inc. under a reorganization plan. The transfer has been accounted for as a reorganization of entities under common control as the companies were beneficially owned by principally identical shareholders and share common management. The financial statements have been prepared as if the reorganization had occurred retroactively. Northwest, Huifeng Biochemistry and Huifeng Engineering are hereafter referred to as (the "Company"). On December 20, 2004 two stockholders of the Company acquired 7,229,601 shares in Secured Data Inc. a US listed corporation ("Secured Data") for $300,000. On the same date, the Company's stockholders also entered into a Plan of Reorganization with Secured Data to exchange 30% of their outstanding shares for 80,735,590 shares of Secured Data. In addition, the Agreement calls for Secured Data to issue a Convertible Promissory Note for $1,900,000 that is convertible into 10,465,725 (post a one for eighteen reverse split) shares of Secured Data for the remaining 70% of the Company. As of January 29, 2005, the Convertible Note has not been exercised. (B) Use of estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (C) Principles of consolidation The accompanying 2004 consolidated financial statements include the accounts of Northwest and its 100% owned subsidiary Huifeng Biochemistry, 70% owned subsidiary Huifeng Engineering and 86.7% owned subsidiary Huifeng Pharmaceutical from the date of its acquisition on June 16, 2004 to the date of its dilution in November 10, 2004. The Company accounts for its investment in Huifeng Pharmaceutical from November 11, 2004 to December 31, 2004 under the equity method of accounting. The accompanying 2003 financial statements include the accounts of Huifeng Biochemistry and its 70% owned subsidiary Huifeng Engineering. Minority interest represents the minority shareholders' proportionate share of Huifeng Engineering and Huifeng Pharmaceutical. All significant inter-company balances and transactions have been eliminated in consolidation. 9 BCC REMITTANCE LIMITED NORTHWEST BIO-TECHNIC INC. AND SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED) (D) Cash and cash equivalents For purpose of the statements of cash flows, cash and cash equivalents include cash on hand and demand deposits with a bank with a maturity of less than three months. (E) Accounts receivable The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and recorded based on managements' assessment of the credit history with the customer and current relationships with them. As of December 31, 2004 and 2003, the Company considers all its accounts receivable to be collectable and no provision for doubtful accounts has been made in the financial statements. (F) Inventories Inventories are stated at the lower of cost or market value, cost being determined on a first in, first out method. The Company provides for inventory allowances based on excess and obsolete inventories determined principally by customer demand. (G) Property and equipment Property and equipment are stated at cost, less accumulated depreciation. Expenditures for additions, major renewals and betterments are capitalized and expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided on a straight-line basis, less estimated residual value over the assets' estimated useful lives. The estimated useful lives are as follows: Plant and machinery 10 Years Motor vehicles 10 Years Furniture, fixtures and equipment 5 Years Land use rights are stated at cost, less accumulated amortization. The land use rights are amortised over the term of the relevant rights of 50 years from the date of acquisition. 10 BCC REMITTANCE LIMITED (H) Long-lived assets In accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long- lived assets. The Company reviews long-lived assets to determine that carrying values are not impaired. (I) Fair value of financial instruments Statement of Financial Accounting Standards No. 107, "Disclosure About Fair Value of Financial Instruments," requires certain disclosures regarding the fair value of financial instruments. Trade accounts receivable, accounts payable, and accrued liabilities are reflected in the financial statements at fair value because of the short-term maturity of the instruments. (J) Revenue recognition The Company recognizes revenue upon delivery or shipment of the products, at which time title passes to the customer provided that: there are no uncertainties regarding customer acceptance; persuasive evidence of an arrangement exists; the sales price is fixed or determinable; and collectability is deemed probable. 11 BCC REMITTANCE LIMITED NORTHWEST BIO-TECHNIC INC. AND SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED) (K) Income taxes PRC income tax is computed according to the relevant laws and regulations in the PRC. The Company being registered as a new and high technology enterprise is entitled to an income tax reduction. According to the document of reductions approved by the local tax bureau, the income tax rate was reduced from 33% to 15%. The income tax expenses for 2004 and 2003 were $7,503 and $0 respectively. (L) Foreign currency translation The functional currency of the Company is the Chinese Renminbi ("RMB"). Transactions denominated in currencies other than RMB are translated into United States dollars using year end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transaction occurred. Net gains and losses resulting from foreign exchange translations are included in the statements of operations and stockholder's equity as other comprehensive income (loss). Cumulative translation adjustment amounts were insignificant at and for the years ended December 31, 2004 and 2003. (M) Comprehensive income (loss) The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to United States Dollar is reported as other comprehensive income (loss) in the statements of operations and stockholders' equity. Cumulative translation adjustment amounts were insignificant at and for the years ended December 31, 2004 and 2003. (N) Loss per share Basic loss per share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted income per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There are no potentially dilutive securities for 2004 and 2003. (O) Segments The Company operates in only one segment, thereafter segment disclosure is not presented. 2. ACCOUNTS RECEIVABLE Accounts receivable at December 31, 2004 and 2003 consisted of the following: 2004 2003 ------------ ------------ Accounts receivable $ 104,144 226,167 Less: allowance for doubtful accounts -- -- ------------ ------------ Accounts receivable, net $ 104,144 $ 226,167 ============ ============ As of December 31, 2004, the Company considered all accounts receivable collectable and has not recorded a provision for doubtful accounts. 12 BCC REMITTANCE LIMITED NORTHWEST BIO-TECHNIC INC. AND SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003 3. INVENTORIES Inventories at December 31, 2004 and 2003 consisted of the following: 2004 2003 ------------ ------------ Raw materials $ 1,047,780 $ 244,065 Work-in-progress 11,917 377,946 Finished goods 242,327 274,995 ------------ ------------ 1,302,025 897,006 Less: provision of obsolescence -- -- ------------ ------------ $ 1,302,025 $ 897,006 ============ ============ For both of the years ended December 31, 2004 and 2003, the Company did not have any obsolete inventories. 4. PROPERTY AND EQUIPMENT The following is a summary of property and equipment at December 31: 2004 2003 ------------ ------------ Plant and machinery $ 769,476 $ 806,845 Motor vehicles 87,262 37,304 Furniture and office equipment 20,251 13,808 Construction in progress 286,038 -- ------------ ------------ 1,163,027 857,957 Less: accumulated depreciation 283,525 190,114 ------------ ------------ Property and equipment, net $ 879,503 $ 667,843 ============ ============ Depreciation expenses for the years ended December 31, 2004 and 2003 were $93,411 and $72,185 respectively. 5. INVESTMENT IN AFFILIATE On June 16, 2004, the Company acquired an 86.7% interest in Baoji Jinsen Pharmaceutical Company Limited, later renamed to Xian Huifeng Pharmaceutical Company Limited ("Huifeng Pharmaceutical"), which owns licenses to manufacture two pharmaceutical products in the PRC. The balance of 13.3% is held by a stockholder of the Company. On November 10, 2004 Huifeng Pharmaceutical increased its registered capital from $181,159 to $603,865. The increased registered capital was fully subscribed by a stockholder of the Company, diluting the Company's interest in Huifeng Pharmaceutical from 86.7% to 26%. A summary of the unaudited financial statements of the affiliate as of December 31, 2004 is as follows: Current assets $ 425,641 Non-current assets 1,085 ------------ Total assets 426,727 ============ Current liabilities 4,831 Stockholders' equity 421,896 ------------ Total liabilities and stockholders' equity $ 426,727 ============ Revenue $ -- ============ Net loss from November 11, 2004 to December 31, 2004 (810) ============ The Company's share of the loss for 2004 : Company share at 26% and equity in loss of affiliate $ (211) ============ 13 BCC REMITTANCE LIMITED NORTHWEST BIO-TECHNIC INC. AND SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003 6. OTHER PAYABLES AND ACCRUED EXPENSES Other payables and accrued liabilities at December 31, 2004 consolidated and 2003 consist of the following: 2004 2003 ---------- ---------- Other payables $ 24,640 $ 30,556 Accrued expenses 93,599 9,483 Deposits received from customers 6,952 3,918 ========== ========== $ 125,191 $ 43,957 ========== ========== 7. COMMITMENTS AND CONTINGENCIES (A) Employee benefits The full time employees of the Company are entitled to employee benefits including medical care, welfare subsidies, unemployment insurance and pension benefits through a Chinese government mandated multi-employer defined contribution plan. The Company is required to accrue for those benefits based on certain percentages of the employees' salaries and make contributions to the plans out of the amounts accrued for medical and pension benefits. The total provision and contributions made for such employee benefits was $3,607 and $4,508 for the years ended December 31, 2004 and 2003, respectively. The Chinese government is responsible for the medical benefits and the pension liability to be paid to these employees. (B) Commitments The Company occupies office space from a third party under an operating lease which expires on March 2006 at a quarterly rental of $3,080. Accordingly, for the years ended December 31, 2004 and 2003, the Company recognized rental expense for these spaces in the amount of $12,319 and $12,319, respectively. As of December 31, 2004, the Company has outstanding commitments with respect to non-cancelable operating leases, which are due as follows: 2005 $ 12 ###-###-#### 3,080 ------------ $ 15,399 ============ 8. SHAREHOLDERS' EQUITY (A) Stock issuances During 2004, the Company issued 500,000 shares of common stock to founders for cash of $50,000. (B) Appropriated retained earnings The Company is required to make appropriations to reserves funds, comprising the statutory surplus reserve, statutory public welfare fund and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the People's Republic of China (the "PRC GAAP"). Appropriation to the statutory surplus reserve should be at least 10% of the after tax net income determined in accordance with the PRC GAAP until the reserve is equal to 50% of the entities' registered capital. Appropriations to the statutory public welfare fund are at 5% to 10% of the after tax net income determined in accordance with the PRC GAAP. The statutory public welfare fund is established for the purpose of providing employee facilities and other collective benefits to the employees and is non-distributable other than in liquidation. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors. During 2004 and 2003, the Company appropriated $7,167 and $83, respectively to the reserves funds based on its net income under PRC GAAP. 14 BCA REMITTANCE LIMITED NORTHWEST BIO-TECHNIC INC. AND SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 (CONSOLIDATED) AND 2003 9. RELATED PARTY TRANSACTIONS The Company had advanced funds totaling $62,493 and $632,210 to stockholders as of December 31, 2004 and 2003 respectively as short-term, unsecured loans free of interest payment. Stockholders had also advanced funds totaling $193,433 and $9,079 to the Company as of December 31, 2004 and 2003 respectively as short-term, unsecured loans free of interest payment. See Note 1 (A) for transactions with Secured Data. 10. CONCENTRATIONS AND RISKS During 2004 and 2003, 100% of the Company's assets were located in China and 90% of the Company's revenues were derived from companies located in China. The Company relied on two customers for approximately $790,217 and $802,324 respectively representing in aggregate 63% of sales for the year ended December 31, 2004, and three customers for approximately $78,865, $129,710 and 170,870 respectively representing in aggregate 58% of sales for the year ended December 31, 2003. At December 31, 2004 and 2003, accounts receivable from those customers totaled $32,119 and $149,814 respectively. The Company also relied on four suppliers for approximately $443,718, $269,547, $288,832 and $339,895 respectively representing in aggregate 62% of purchases for the year ended December 31, 2004, and three suppliers for approximately $107,789, $146,781 and $148,827 respectively representing in aggregate 72% of purchases for the year ended December 31, 2003. At December 31, 2004 and 2003, accounts payable to those two suppliers totaled $1,182 and $41,472 respectively. 15