Tekumo Inc (TKMO)

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Chinese Digital Entertainment Company Plans Reverse Merger

http://reversemerger.dealflowmedia.com/wires/top_wires.cfm#2

Posted March 26, 2009 4:57PM PST
A digital entertainment company in China agreed on Monday to a reverse merger with the U.S. shell company Trestle Holdings Inc. that could include up to $8 million in financing.

Trestle Holdings will issue preferred shares to Moqizone Holdings Limited, a Cayman Island company, that are convertible into a 95% stake in the shell.

Moqizone controls a Chinese company that provides digital entertainment to Internet cafes in China.

An additional 900 convertible shares will be held in escrow until Moqizone achieves $19.2 million in revenue for the fiscal year ending March 2010, according to a filing with the Securities and Exchange Commission.

If the company doesn't meet its revenue goal, it will release about a quarter of a share to certain investors for each $1 in revenue the company falls short. Any remaining escrowed shares will be returned to the shell's current owners, including MKM Capital Opportunity Fund.

MKM purchased a majority stake in the shell in August for $475,000 from W Holdings LLC, a subsidiary of W-Net Inc. At that time, Strategic Turnaround Equity Partners acquired the remaining shares held by W Holdings and $75,507 in cash in exchange for 33.33% of the W Holdings "membership interest" held by Strategic Turnaround.

W-Net had bought the shell for $350,000 in 2007. Trestle previously developed and sold digital tissue imaging and telemedicine equipment that linked users and data at different locations.

Moqizone can also earn warrants to purchase an additional 900,000 shares for $1.62 million, or $1.80 each, if the company earns at least $21.56 million in revenue next year.

Trestle shares closed at 1.9 cents yesterday, up from 0.6 cents prior to the announcement of the merger agreement.

The closing is conditional on Moqizone delivering audited financials for the previous two years and obtaining at least $4 million in financing. The financing will consist of units of 8% exchangeable notes due March 2011 and warrants.

The company will change its name to Moqizone Holding Corp. after the transaction is completed.

Steven Weiss, at the New York law firm of Hodgson Russ LLP, is advising Moqizone. New York-based Sichenzia Ross Friedman Ference LLP is advising the shell.

Filing: 8-K