Form 8-K for CHINA TELETECH HOLDING INC
29-Jan-2015
Entry into a Material Definitive Agreement, Completion of Acquisition
Item 1.01 Entry into a Material Definitive Agreement.
See Item 2.01, below, regarding the discussion of a Share Exchange Agreement dated as of January 28, 2015 (the "Share Exchange Agreement"), which was entered into by and among China Teletech Holding Inc., a Florida corporation ("China Teletech" or the "Company"), Shenzhen Jinke Energy Development Co., Ltd., a company organized under the laws of the People's Republic of China ("Jinke"), and Guangyuan Liu, the holder of 97% of the equity interest of Jinke (the "Jinke Shareholder"), pursuant to which China Teletech acquired 51% of the issued and outstanding equity securities of Jinke (the "Share Exchange"). In connection with the Share Exchange, the cooperation agreement dated June 30, 2014 into which Jinke and the Company previously entered was terminated and superseded in its entirety by the Share Exchange Agreement.
Reference is made to Item 2.01 for a description of the Share Exchange Agreement and the transactions contemplated thereunder. The descriptions of the Share Exchange Agreement are qualified in their entirety by reference to the complete text of the Share Exchange Agreement, which are attached hereto as Exhibit 2.1, and are incorporated by reference herein. You are urged to read the entire Share Exchange Agreement and the other exhibits attached hereto.
The preceding summaries of the Share Exchange Agreement are qualified in their entirety by reference to the complete text of the Share Exchange Agreement, which is attached hereto as Exhibit 2.1 and incorporated by reference herein. You are urged to read the entire Share Exchange Agreement attached hereto.
Item 2.01 Completion of Acquisition or Disposition of Assets.
OVERVIEW
As used in this report, unless otherwise indicated, the terms "we" and the "Company" refer to China Teletech Holding Inc., a Florida corporation, its wholly-owned subsidiary Global Telecom Holdings Limited ("Global Telecom") and 51%-owned subsidiary Jinke.
HISTORY
We were incorporated as Avalon Development Enterprises, Inc. on March 29, 1999, under the laws of the State of Florida. From inception until January 2007, we engaged in the business of acquiring commercial property and expanding into building cleaning, maintenance services, and equipment leasing as supporting ancillary services and sources of revenue. On January 10, 2007, the Company, Global Telecom Holdings, Ltd., a British Virgin Islands company ("GTHL"), and the shareholders of GTHL, entered into a share exchange agreement, pursuant to which the Company issued 39,817,500 shares of its restricted common stock to the shareholders of GTHL in exchange for all of the issued and outstanding capital stock of GTHL. Following the transaction on March 27, 2007, GTHL became our wholly-owned subsidiary and we changed our name to Guangzhou Global Telecom Holdings, Inc. and succeeded to the business of GTHL.
In 2007, we established four subsidiaries; namely, Zhengzhou Global Telecom Equipment Limited ("ZGTE"), Macau Global Telecom Company Limited ("MGT"), Huantong Telecom Hongkong Holding Limited ("HTHKH"), and Huantong Telecom Singapore Company PTE Limited ("HTS") with capital of RMB 500,000, Macau Dollar 300,000, Hong Kong Dollar 100 and Singapore Dollar 200,000, respectively. Simultaneously, we established a subsidiary; namely, Guangzhou Huantong Telecom Technology and Consultant Services, Ltd ("GHTTCS") with capital of RMB 8,155,730. Pursuant to a Stock Purchase Agreement dated April 9, 2008 and July 29, 2008, respectively, the Company acquired 50% of the issued and outstanding shares in the capital of Beijing Lihe Jiahua Technology and Trading Company Ltd ("BLJ") and 51% of the issued and outstanding shares in Guangzhou Renwoxing Telecom Co., Ltd. ("GRT"), a limited liability company incorporated in China. Pursuant to the terms of the Stock Purchase Agreements, the Shareholders agreed to sell and transfer the proportion of the shares to the Company for a purchase consideration of US$300,000 and US$291,833 respectively.
In 2009 and 2010, the Company disposed of its subsidiaries CHTTCS, ZGTE, MGT and BLJ due to their loss in operations. HTHKH and HTS were not able to commence operations since its inception, so the Company deregistered them in 2010.
On January 28, 2015, China Teletech closed the Share Exchange, described below, pursuant to which Jinke became a 51% owned subsidiary.
CORPORATE STRUCTURE
The corporate structure of the Company subsequent to the consummation of the Share Exchange is illustrated as follows:
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The address of our principal executive offices and corporate offices is c/o Corporation Service Company 1201 Hays Street, Tallahassee, FL. Our telephone number is (850) 521-1000.
PRINCIPAL TERMS OF THE SHARE EXCHANGE
On January 28, 2015, the Company, Jinke and the Jinke Shareholder entered into a Share Exchange Agreement pursuant to which the Company agreed to issue an aggregate of 20,000,000 shares of its common stock, $0.001 par value per share (the "Common Stock") to the Jinke Shareholder in exchange for 51% of the issued and outstanding securities of Jinke. Of the 20,000,000 shares to be issued by the Company, 16,000,000 were issued and delivered prior to closing and 4,000,000 . . .
Item 2.02 Results of Operations and Financial Condition.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and the related notes of Jinke appearing in Item 9.01 of this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should read the "Risk Factors" section included in Item 2.01 of this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Company Overview
As a result of the Share Exchange, we are a high-tech enterprise specializing in the R&D, production and marketing of polymer Li-ion batteries. We have a research and development team led by PhD and MS-level experts, and we possesses advanced production equipment and the state-of-the-art technologies. Currently, Jinke boasts approximately 11,531 square meters of workshop, with a daily production of all models of polymer Li-ion batteries over 50,000. Approximately 70% of our products are sold in China, and approximately 30% are sold overseas to Central Asia, U.S. and European markets.
The polymer Li-ion battery produced by our company has passed the international safety certification such as SGS, CE, ROHS. They are widely applied to portable DVD, notebook PC, mobile phone, Bluetooth product, MP3, MP4, PDA, digital camera, digital video camera, digital learning machine, electronic dictionary and other digital products as well as model plane, electric tool, electric toy and electric bikes. Our management systems of design, R&D, production and service are established in accordance with the ISO9001 standard. They ensure all stages in polymer Li-ion battery production comply with the international standard so as to guarantee our products' stable performance, reliable quality and effective cost.
During 2012-2013, we invested around $500,000 in improving equipment such as coating applicators, and roller press machines that will improve our efficiency and production capacity. The equipment has been installed and have improved the quality of our products, as well as increased our production capacity by 100%.
Going Concern
The audited consolidated financial statements for the fiscal years ended December 31, 2013 and 2012 and the unaudited consolidated financial statements for the three and nine months ended September 30, 2014 and 2013 have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As of December 31, 2013 and September 30, 2014, the Company has an accumulated loss of $3,289,029 and $3,813,442, respectively, due to the fact that the Company incurred losses over the past several years. Such losses have affected the Company's ability to pay PRC government tax and outstanding loans.
The losses are mainly attributable to Jinke's investments in equipment and R&D during the reporting periods. We have also invested significantly in building our own sales and marketing network, including the expansion into the Northern Chinese market and the establishment of a branch office in Shanghai.
Results of Operations
. . .
Item 3.02 Unregistered Sales of Equity Securities.
As of January 28, 2015, pursuant to the terms of the Share Exchange Agreement, we had issued an aggregate of 20 million shares of our Common Stock to the Jinke Shareholder in exchange for 51% of the issued and outstanding securities of Jinke. All of the securities issued pursuant to the Share Exchange Agreement were offered and issued in reliance upon the exemption from registration pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act") and Regulation S promulgated thereunder.
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue 1,000,000,000 shares of Common Stock, $0.01 par value per share. As of the date of this report, there are 125,213,776 shares of Common Stock issued and outstanding. Each outstanding share of Common Stock is entitled to one vote, either in person or by proxy, on all matters that may be voted upon by their holders at meetings of the stockholders.
All shares of common stock have equal rights and privileges with respect to voting, liquidation and dividend rights. Each share of common stock entitled the hold thereof (a) to one non-cumulative vote for each share held of record on all matters submitted to a vote of the stockholders; (b) to participate equally and to receive any and all such dividends as may be declared by the board of directors; and (c) to participate pro rata in any distribution of assets available for distribution upon liquidation. Holders of our common stock have no preemptive rights to acquire additional shares of common stock or any other securities. Our common stock is not subject to redemption and carries no subscription or conversion rights.
In addition, such authorized but unissued common shares could be used by the board of directors for defensive purposes against a hostile takeover attempt, including (by way of example) the private placement of shares or the granting of options to purchase shares to persons or entities sympathetic to, or contractually bound to support, management. We have no such present arrangement or understanding with any person. Further, the common shares may be reserved for issuance upon exercise of stock purchase rights designed to deter hostile takeovers, commonly known as a "poison pill."
At the completion of the Share Exchange, our officers and directors collectively own approximately 44.5% of the outstanding shares of our Common Stock on an undiluted basis. Accordingly, these stockholders are in a position to control all of our affairs.
MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our common stock trades in the OTC Pink marketplace under the symbol "CNCT". The OTC Pink marketplace is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter ("OTC") equity securities. An OTC Pink equity security generally is any equity that is not listed or traded on a national securities exchange.
Price Range of Common Stock
The following table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the OTC Pink quotation service. These bid prices represent prices quoted by broker-dealers on the OTC Pink quotation service. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.
High Low
Fiscal Year 2013
First quarter ended March 31, 2013 $ 0.47 $ 0.01
. . .
Item 5.01 Changes in Control of Registrant.
OVERVIEW
Although the Share Exchange did not result in a change in control of our company, for accounting purposes, the Share Exchange is being treated as a reverse acquisition.
At the consummation of the aforementioned Share Exchange, the size of the Board of Directors was increased to four directors, and Guangyuan Liu was appointed as a director of the Company. For complete information regarding our new officers and directors, refer to "Executive Officers, Directors and Key Employees" below under this Item 5.01.
A copy of the Exchange Agreement is filed as Exhibit 2.1 to this Current Report on Form 8-K. The transactions contemplated by the aforementioned Exchange Agreement were intended to be a "tax-free" reorganization pursuant to the provisions of Sections 351 and/or 368(a) of the Internal Revenue Code of 1986, as amended.
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Prior to the Share Exchange, Yankuan Li, Yuan Zhao and Dong Liu served as directors of the Company and Ms. Li served as President and Chief Executive Officer. Upon the closing of the aforementioned Share Exchange, Mr. Guangyuan Liu, General Manager of Jinke, was named to the Board of Directors of the Company. Ms. Li and Mr. Zhao remained as members of our Board of Directors.
Upon closing of the Share Exchange, our executive officers and directors are:
Name Age Position Position Since
Yankuan Li 54 President, Chief Executive Officer and Director January 2007
Dong Liu 42 Chairman March 2012
Yuan Zhao 32 Director March 2012
Guangyuan Liu 55 Director January 2015
Jane Yu 41 Chief Financial Officer and Secretary March 2013
Background of Officers and Directors
The following is a brief summary of the background of each director and executive officer of the Company:
Yankuan Li was appointed as and has been our President, Chief Executive Officer and Director since January 2007. She was appointed as our chief financial officer on April 15, 2010 and then subsequently resigned on March 30, 2012. She has been the Chairman of Guangzhou Global Telecommunication Company Limited since 2005. From 2004-2005, she was the General Manager of Guangzhou YueShen TaiYang Technology Ltd., a subsidiary of Pacificnet Inc. (Nasdaq: PACT). From 2003-2004, she was Managing Director of the phone card division of Guangzhou Trading Center of Renwoxing, responsible for phone cards. From 2000-2003, she was Department Manager of the Industrial and Commercial Bank of China Guangzhou Branch. Ms. Li holds a bachelor degree in Business Management of Beijing United University in 1998.
Dong Liu was appointed as our Chairman of the Board of Directors on March 30, 2012. Mr. Liu was the Director and General Manager of Shenzhen Rongxin Investment Company Limited, a company mainly engaged in the wholesale and distribution of mineral water and trading of wine in China since 2009. Mr. Liu had previously worked for China's state-owned enterprises in Hainan Province and Shenzhen for more than 10 years and participated in business development of many government- sponsored projects of various industries.
Yuan Zhao was appointed as our Director on March 30, 2012. Mr. Zhao was the Director of Guangzhou Rongxin Science and Technology Limited, a company mainly engaged in distribution of rechargeable phone cards and prepaid subway tickets in Guangzhou City, China since 2010. Previously, Mr. Zhao studied BBA in . . .
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Please refer to Item 2.01 - "Completion of Acquisition or Disposition of Assets "- "Our Directors and Executive Officers" above, which description is in its entirety incorporated by reference to this Item 5.02 of this report.
Item 5.06 Change in Shell Company Status
Prior to the closing of the Share Exchange, the Company was a "shell company" as defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act. As described above in Item 2.01, which is incorporated herein by reference into this Item 5.06, the Company ceased being a shell company upon the completion of the Share Exchange on January 28, 2015.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
FINANCIAL STATEMENTS OF SHENZHEN JINKE ENERGY DEVELOPMENT CO., LTD.
The financial statements of Jinke, as of and for years ended December 31, 2013 and 2012 and the nine months ended September 30, 2014 are provided below. You are encouraged to review the financial statements and related notes of Jinke.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Fiscal Years ended December 31, 2013 and 2012
Report Of Independent Registered Public Accounting Firm F-3
Consolidated Balance Sheets as of December 31, 2013 and 2012 F-4
Consolidated Statements of Operations for the Years Ended December 31, 2013 and 2012 F-5
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2013 and 2012 F-6
Consolidated Statements of Changes in Stockholders' Equity (Deficit) from January 1, 2012 To December 31, 2013 F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013 and 2012 F-8
Notes To Consolidated Financial Statements as of and for the Years Ended December 31, 2013 and 2012 F-9 - F-15
Nine Months Ended September 30, 2014
Report Of Independent Registered Public Accounting Firm F-18
Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013 F-19
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2014 and 2013 F-20
Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2014 and 2013 F-21
Consolidated Statements of Cash Flows for the Three and Nine Months Ended September 30, 2014 and 2013 F-22
Notes To Consolidated Financial Statements as of September 30, 2014 and December 31, 2013 F-23 - F-29
SHENZHEN JINKE ENERGY DEVELOPMENT CO., LTD.
audited Financial statements
December 31, 2013 AND 2012
(STATED IN U.S. DOLLARS)
F-1
SHENZHEN JINKE ENERGY DEVELOPMENT CO., LTD.
CONTENTS PAGES
Report of Independent Registered Public Accounting Firm F-3
Balance Sheet F-4
STATEMENTS OF OPERATIONS F-5
STATEMENTS OF COMPREHENSIVE LOSS F-6
Statements of stockholders' equity F-7
STATEMENTS OF CASH FLOWS F-8
Notes to financial statements F-9 - F-15
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To: Board of Directors and Stockholders of
Shenzhen Jinke Energy Development Co., Ltd
We have audited the accompanying balance sheets of Shenzhen Jinke Energy Development Co., Ltd as of December 31, 2013 and 2012, and the related statements of operations, comprehensive loss, stockholders' equity, and cash flows for each of the years ended December 31, 2013 and 2012. Shenzhen Jinke Energy Development Co., Ltd's management is responsible for these financial statements. 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. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 financial statements referred to above present fairly, in all material respects, the financial position of Shenzhen Jinke Energy Development Co., Ltd as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the years ended December 31, 2013 and 2012 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 9 to the financial statements, the Company had incurred substantial losses in previous years and has a working capital deficit, all of which raise substantial doubt about its ability to continue as a going concern. Management's plans in regards to these matters are also described in Note 9. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
San Mateo, California WWC, P.C.
December 1, 2014 Certified Public Accountants
F-3
SHENZHEN JINKE ENERGY DEVELOPMENT CO., LTD
BALANCE SHEETS
AS OF DECEMBER 31, 2013 AND 2012
(STATED IN U.S. DOLLARS)
DECEMBER 31, DECEMBER 31,
2013 2012
ASSETS
Current assets
Cash and equivalents $ 539,429 $ 363,439
Accounts receivable 2,121,907 1,482,423
Inventory 4,448,776 4,087,058
Other receivables and prepaid expenses 19,639 102,499
Advances to suppliers 2,401,558 1,819,266
Total current assets 9,531,309 7,854,685
Non-current assets
Plant and equipment, net 358,354 394,970
Other assets 125,049 -
TOTAL ASSETS $ 10,014,712 $ 8,249,655
LIABILITIES AND EQUITY
Current liabilities
Short-term loans $ 2,454,831 $ 1,253,749
Notes payable 239,591 380,886
Accounts and other payables 2,621,859 3,431,396
Advances from customers 1,630,534 933,300
Taxes payable 7,550 11,729
Due to related parties 4,810,132 3,640,038
Total current liabilities 11,764,497 9,651,098
TOTAL LIABILITIES $ 11,764,497 $ 9,651,098
STOCKHOLDERS' EQUITY
Registered capital 1,240,726 1,240,726
Accumulated other comprehensive income 298,518 346,196
Accumulated deficit (3,289,029 ) (2,988,365 )
TOTAL STOCKHOLDERS' EQUITY (1,749,785 ) (1,401,443 )
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,014,712 $ 8,249,655
