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OS fully diluted: 80.3M shares
JADE ART GROUP INC. is an US publicly-listed company trading on the OTCBB with the ticker symbol JADA. It is engaged in the processing and trading of artworks in the PRC through its wholly-owned subsidiary JIANGXI SHETAI JADE INDUSTRIAL CO.,LTD., ("JST"), which processes and trades raw jade and jade-carved artworks.
Jiangxi SheTai Jade Industrial Co., Ltd. ("JST") has an Exclusive Distribution Right Agreement with Wulateqianqi XiKai Mining Co., Ltd. ("XiKai") to distribute the mine's SheTai Jade to over 10 major cities and provinces in China. Although JST's current focus will be on the distribution of raw jade, JST plans to enter the higher margin jade-carving and retail jade businesses in the future. JST's development strategy is to use its advantage in raw material cost to quickly grow its distribution network and create an industrail chain from the mine to the retail store.
The SheTai Jade mine is an open-pit mine located in Inner Mongolia, China. Discovered in 2000, the mine is one of China’s largest jade mines in terms of proven reserves, with approximately six million metric tons. Mining capacity is expected to reach 40,000 tons per year in 2009. The expected life of this mine is well in excess of 50 years. The total value of the mine at current market prices is approximately $16 billion.
Address: #35, Baita Zhong Road, Yujiang County, Jiangxi Province, P.R. of China 335200
Due Diligence Links:
AMI Research Report May 2009 update (Click here)
Murphy Analytics Coverage of JADA June 2008 (Click here)
JADA mine Proven and Probable Reserves (Click here)
Investment Blog/Third Party News:
Why I'm Buying in China. TheStreet.com/Glen Bradford (June, 2009)
2010 First Quarter Financial Highlights:
- Revenue of $5.9 million represents a 19% increase over revenue of $5.0 million recorded in the first quarter of 2009.
- Gross profit was $4.8 million, compared to $3.9 million in the first quarter of 2009.
- Net income in the first quarter of 2010 was $3.2 million, an increase of 32% compared to net income of $2.4 million in the first quarter of 2009.
- Fully diluted earnings per share in the first quarter of 2010 increased to $0.04 from $0.03 in the first quarter of 2009.
As of March 31, 2010, Jade Art Group had cash and cash equivalents of $5.7 million, up from $147,392 as of December 31, 2009.
Current assets and current liabilities as of March 31, 2010, were $11.7 million and $3.2 million, respectively, yielding working capital of $8.5 million.
80.6M fully diluted shares, 30% held by directors and 5% holders.
Exclusive Distribution Right Agreement
Document No: XJ0801
Party A: WuLaTeQianQi XiKai Mining Company Limited. (XiKai)
Address: BaYinHuaHeShunZhuang, WuLaTe, Inner Mongolia, PRC
Party B: JiangXi SheTai Jade Industrial Company Limited. (JST)
Address: GuoXiDaDao #39, YuJiang County, JiangXi Province, PRC
Party C: Guoxi Holding Limited ("GHL"), 100% holding company of JST.
1, XiKai is a company with all necessary legal documents to conduct Jade Exploration Business in the People's Republic of China ("PRC").
2, JST is 100% owned by GHL, in PRC. JST's business involves: processing and distributing jade and jade-carved artworks.
Parties A, B and C, through the negotiation and in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, have reached an agreement as stated below:
Item 1 Period of Exclusive Distribution Right
This Agreement is effective for a period of 50 years from its execution date.
Item 2 Contents of Exclusive Distribution Right
Party A pledge:
1. Party A legally 100% owns the exclusive mining rights in the SheTai Jade Mine located in WuLaTeQianQi KunDuLunGou, PRC and holds all approvals, authorizations, concessions or the like, issued or granted by any governmental or regulatory authority which are necessary to perform its responsibilities as contemplated by this Agreement. No any other entity owns any right to mining and exploration in the SheTai jade Mine and there are no encumbrances or other restrictions which could in any way adversely affect the right or ability of Party A to perform its responsibilities in accordance with this Agreement.
2. Party A commits to sell 90% raw jade materials produced annually from SheTai Jade Mine to Party B and in no event less than 40,000 tons per year (the "Minimum Commitment"). For the remaining 10% of She Tai's total output, Part A cannot sell it for a price less than the price committed to Party B. Party A cannot sign any other forms of exclusive distribution agreement with any other third Party. Party B shall have no obligation to order the raw jade materials.
3. Party A commits to supply the ordered raw jade materials from Party B and shall use its reasonable efforts to deliver all raw jade materials ordered in accordance with the delivery dates requested by Party B. . Any failure to timely raw jade materials to Party B shall not be credited toward satisfying the Minimum Commitment and Party A shall be responsible for replacing materials included in any such failed delivery.
4. Party A is responsible and fully liable for the transportation costs associated with the Party B's distribution of the raw jade material from SheTai Jade Mine to location(s) in PRC designated by Party B.
5. Party A is responsible and fully liable for the security protection prior to delivery to location(s) in PRC designated by Party B in accordance with this item, including during the production and transportation process. Party B is not being held for any such liabilities.
Party B and Party C pledge:
1. In exchange for the exclusive rights granted to Party B under this Agreement, Party C agrees to transfer 100% ownership interest in Jiangxi Xida Wooden Carving Lacquerware Co., Ltd, its wholly owned subsidiary, to Party A. The transfer should occur within four months after the execution of this Agreement and is subject to Party B obtaining all requisite approvals and obtaining a fairness opinion favorable to the proposed transaction.
2. Party C also agrees to pay cash of 25 million RMB to Party A with 7 days after signing this Agreement, and pay cash of 35 million RMB to Party A with 90 days after signing this Agreement, for total cash consideration of 60 million RMB.
3. Party B has no ownership interest in the SheTai Jade Mine.
4. Party C's obligations under this Item 2 are based upon and made subject to the representations contained in Party A's pledge set forth in paragraph 1 of this Item 2 being true and accurate upon the execution of this Agreement and at the time Party C's obligations hereunder are due and owing.
Item 3 Price Policy
1. The price of raw jade materials varies based on the quality and weight of the raw jade material. However, the quality and weight to be supplied under this Agreement shall be consistent with an average price of not more than 2,000 RMB. This price is being locked up for the next five fiscal years. Every five years, both parties should have the opportunity to renew the price. (The revised price should not be beyond 10% of the locked up price for the immediately preceding five year period)
2. If Party C's delivery of Jiangxi Xida Wooden Carving Lacquerware Co., Ltd to Party A is determined by an independent third-party acceptable to the parties not to be fair to the shareholders of Party C or Party C otherwise timely fails to deliver Jiangxi Xida Wooden Carving Lacquerware Co., Ltd to Party A, Party A's exclusive remedy shall be to supply any raw jade material ordered by Party B thereafter at the increased price of 15,000 RMB per ton, subject to price adjustment as provided in paragraph 1 above of this Item 3.
3. Party B is obligated to submit payment to Party A within 3 months after its receipt of delivery of any raw jade materials ordered. Payments not timely submitted by Party B shall accrue interest on the unpaid amount after the 3 month period at the "prime rate" announced, from time to time, by Citibank at its principal office in New York City plus 5% per annum until paid in full.
Item 4 Default
1. Except for failure to submit payments or as otherwise provided in this Agreement, the defaulting Party or Parties shall compensate the other party or parties all direct or indirect economic loss caused by the default.
2. If Party A fails to supply to Party B the Minimum Commitment in any of the first five fiscal years of this Agreement, then Party A shall pay to Party C an amount equal to 18,000 RMB for each ton of raw jade material less than the Minimum Commitment which was not supplied to Party B in accordance with this Agreement during any such fiscal year.
3. Party A shall grant to Party C a security interest and first priority lien in the 100% ownership interest of Party A in Jiangxi Xida Wooden Carving Lacquerware Co., Ltd transferred to Party A under this Agreement. Party A further agrees to cooperate with Party C to enable it to take all such acts and file all such documentation as deemed necessary by Party C to effect and maintain a security interest and first priority lien in the ownership interest for the next five fiscal years.
Item 5 Termination
The Agreement can only be terminated by written consent singed by all three parties.
Item 6 Governing Law and resolution for dispute
1. Governing Law: This Agreement shall be governed by and construed in accordance with the laws of PRC applicable to contracts executed and to be wholly performed therein without giving effect to its conflicts of laws principles or rules.
2. All parties agree that any dispute concerning this Agreement shall first go to arbitration for the resolution. Arbitration will be venued in China.
Item 7 Entire Agreement
1. The provisions of this Agreement contain the entire Agreement between the parties with respect to the distribution rights referenced herein and supersede all prior Agreements and understandings (oral or written) relating to the subject matter hereof.
2. The rights and obligations contained in this Agreement respecting the use of the SheTai Jade Mine are binding on the parties hereto and their respective successors and permitted assigns and shall run with the SheTai Jade Mine.
3. This Agreement Agreement becomes effective immediately after all parties hereto have executed the Agreement, which Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one instrument. Agreement
Party A - WuLaTeQianQi XiKai Mining Company Limited
By: /s/ Xiaobing Wu
Name/Title: Xiaobing Wu
Party B - JiangXi SheTai Jade Industrial Company Limited
By: /s/ Hua-Cai Song
Name/Title: Hua-Cai Song, Chief Executive Officer
Party C - Guoxi Holding Limited
By: /s/ Hua-Cai Song
Name/Title: Hua-Cai Song, Chief Executive Officer
Source for Jade:
JADA and it's subsidiary have purchased exclusive rights to one of China's largest jade mines, the SheTai Jade mine for 50 years.
This provides JADA with jade at a price of RMB 2.000 ($250 USD) per ton with a 40,000 ton annual capacity, and provides JADA with gross margins of approximately 85%.
According to AMI research: