DD Support Board and Research Team

[samsamsamiam]

IPO Pulled as Chinese Regulators Question Reverse Merger Ownership Structure

Here lies the problem. Yes it is a REAL steel company. but it is a
Chinese Steel company just like another Joseph Meuse r/m deal - A.G. Volney
Center , a public shell company that acquired Dachang Hui Autonomous
County Baosheng Steel Products Co., before renaming itself Buddha
Steel.
The Chinese Government determined that the company's ownership
structure violated policies related to foreign-invested enterprises.
-----------------
Joseph Meuse Shareholder in Newly Public Chinese Steel Company
Posted April 30, 2010 4:31PM PST
A Chinese steel maker near Beijing reverse merged into the shell
company A.G. Volney Center, giving the shareholders of the new company
a stake of about 98.75%.

About 66.4% of Dachang Hui Autonomous County Baosheng Steel Products
Co. is owned by an entity controlled by CEO Hongzhong Li. Joseph
Meuse, who runs the shell sponsor Belmont Partners, owns a stake of
about 7%.
Filing: 8-K

=========
http://reversemerger.dealflow.com/wires/article.cfm?title=IPO-Pulled-Chinese-Regulators-Question-Reverse-Merger-Ownership-Structure&id=jwhdklcumhzqtoq

IPO Pulled as Chinese Regulators Question Reverse Merger Ownership Structure
Posted March 29, 2011 1:00PM PST
A Chinese steel company that completed a reverse merger last April
pulled its first underwritten public offering after the Chinese
government determined that the company's ownership structure violated
policies related to foreign-invested enterprises.

In a regulatory filing from yesterday, Buddha Steel said that it is
terminating the various consulting and contractual agreements that
allow a Delaware corporation to be the owner of the Chinese operating
company "as if they never occurred."

All future claims have been waived, all parties will return money made
under the agreements, and Buddha Steel will separate from the Chinese
business and revert to being a shell company.

The company was previously known as A.G. Volney Center, a public shell
company that acquired Dachang Hui Autonomous County Baosheng Steel
Products Co., before renaming itself Buddha Steel.

The situation is believed to be the first Chinese reverse merger to be hindered by the country's complex regulations around foreign investment and money leaving the country. Reverse mergers have been forced to work around the regulations in order to complete transactions. However, the structures never received approval from the Chinese government.

Buddha Steel last amended its registration statement in November with plans to raise up to $38 million. It had set a price range of $13.50 to $16.50 for 2.3 million shares, including the over-allotment option.

Ladenburg Thalmann & Co. was set as the sole underwriter.

This is not the first hiccup for Buddha Steel as a U.S. public
company. In early January, the company said that it had understated
provisions for income taxes, which resulted in a overstatement of
income, for the first three quarters last year.

The situation does not bode well for Chinese reverse mergers. Over the past year, some Chinese companies using reverse mergers to bypass IPOs have been hammered by allegations of fraudulent financials and other business dealings in research reports by firms short their stock.
Several companies are facing delistings and investigation by the Securities and Exchange Commission over the allegations.


=================
Now compare the two S-1's filed by both Meuse r/m Steel companies -
Budda Steel,Inc. and Longhai Steel, Inc. Notice the set-up.
The risks are laid out in both as to what the Chinese government might
determine.

Longhai Steel Inc.
page 10
"RISKS RELATED TO THE VIE AGREEMENTS
The PRC government may determine that the VIE Agreements are not in
compliance with applicable PRC laws, rules and regulations.
Kalington Consulting manages and operates our steel wire production
business through Longhai pursuant to the rights it holds under the VIE
Agreements. Almost all economic benefits and risks arising from
Longhai’s operations are transferred to Kalington Consulting under
these agreements. Details of the VIE Agreements are set out in “OUR
BUSINESS — Acquisition of Kalington Limited” below.
There are risks involved with the operation of our business in
reliance on the VIE Agreements, including the risk that the VIE
Agreements may be determined by PRC regulators or courts to be
unenforceable. Our PRC counsel has provided a legal opinion that the
VIE Agreements are binding and enforceable under PRC law, but has
further advised that if the VIE Agreements were for any reason
determined to be in breach of any existing or future PRC laws or
regulations, the relevant regulatory authorities would have broad
discretion in dealing with such breach, including:
• imposing economic penalties;
• discontinuing or restricting the operations of Longhai or Kalington
Consulting;
• imposing conditions or requirements in respect of the VIE Agreements
with which Longhai or Kalington Consulting may not be able to comply;
• requiring our company to restructure the relevant ownership
structure or operations;
• taking other regulatory or enforcement actions that could adversely
affect our company’s business; and
• revoking the business licenses and/or the licenses or certificates
of Kalington Consulting, and/or voiding the VIE Agreements.
Any of these actions could adversely affect our ability to manage,
operate and gain the financial benefits of Longhai, which would have a
material adverse impact on our business, financial condition and
results of operations.
----------------------
The Chinese government obviously thought there was a problem with Budda Steel.

"IPO Pulled as Chinese Regulators Question Reverse Merger Ownership Structure
Posted March 29, 2011 1:00PM PST
A Chinese steel company that completed a reverse merger last April
pulled its first underwritten public offering after the Chinese
government determined that the company's ownership structure violated
policies related to foreign-invested enterprises."

---------------------
Budda Steel, Inc.
http://www.sec.gov/Archives/edgar/data/1367777/000114420410062816/v203078_s1a.htm
page 15
"The PRC government may determine that the VIE Agreements are not in
compliance with applicable PRC laws, rules and regulations.

We manage and operate Baosheng Steel, our operating entity, through
HAIC pursuant to the rights its holds under the VIE Agreement. By
reason of the VIE Agreements, Baosheng Steel is a variable interest
entity (“VIE”). Almost all economic benefits and risks arising from
Baosheng Steel’s operations are transferred to HAIC under these
agreements. Details of the VIE Agreements are set out in “Our
Corporate Structure – VIE Agreements.”

There are risks involved with the operation of our business in
reliance on the VIE Agreements, including the risk that the VIE
Agreements may be determined by PRC regulators or courts to be
unenforceable. Our PRC counsel, AllBright Law Offices, has provided a
legal opinion that the VIE Agreements are binding and enforceable
under PRC law, but has further advised that if the VIE Agreements were
for any reason determined to be in breach of any existing or future
PRC laws or regulations, the relevant regulatory authorities would
have broad discretion in dealing with such breach, including:
·
imposing economic penalties;
·
discontinuing or restricting the operations of HAIC or Baosheng Steel;
·
imposing conditions or requirements with respect to the VIE Agreements
with which HAIC or Baosheng Steel may not be able to comply;
·
requiring our company to restructure the relevant ownership structure
or operations;
·
taking other regulatory or enforcement actions that could adversely
affect our company’s business; and
·
revoking the business licenses and/or the licenses or certificates of
HAIC, and/or voiding the VIE Agreements.

Any of these actions could adversely affect our ability to manage,
operate and gain the financial benefits of Baosheng Steel, which would
have a material adverse impact on our business, financial condition
and results of operations. If we are unable to restructure our
relationship with Baosheng Steel in such circumstances, our resulting
corporate structure (Buddha, Gold Promise and HAIC) would have
essentially no operations or means of operating a steel business."

-----------
Note the offering for Budda Steel, Inc. was officially withdrawn in a
filing March 28, 2011:
http://www.sec.gov/Archives/edgar/data/1367777/000114420411017688/0001144204-11-017688-index.htm

http://www.sec.gov/Archives/edgar/data/1367777/000114420411017688/v216329_rw.htm

-------------


note the same underwriter - Ladenburg Thalmann & Co.


I believe this was about the same time that ACTN/Longhai requested the
Nasdaq to pull their offering and Nasdaq withdrew their
certification approval.
http://www.sec.gov/Archives/edgar/vprr/11/9999999997-11-000719

Also the abrupt resignation of two of the main officers some months later.
http://www.sec.gov/Archives/edgar/data/1296286/000120445911001984/0001204459-11-001984-index.htm


It wasn't a coincidence.


The touts may spin that new people were brought in to get it onto
Nasdaq - but I firmly believe the real problem is that the Chinese
Government will also step forward on Longhai and invalidate the
business structure given it is step up the same way just like it did for Budda.


==============

Curiously another Meuse shell - QING - also pulled their registration.
and the SEC does seem to be questioning his deals - as they did with
the ACTN/Longhai deal:
http://www.sec.gov/Archives/edgar/data/1296286/000000000010026062/filename1.pdf

http://www.sec.gov/Archives/edgar/data/1296286/000000000010023525/filename1.pdf

-------------
Some may say that Meuse is no longer involved - and I have read an
email and a comment in an article that said he wasn't doing this type
of work anymore (not a
surprise given the SEC was breathing down his neck),but whether he is
involved or not - I think the biggest risk is if the Chinese
government steps forward like they did for the Budda deal and
invalidates the ownership structure.

http://online.barrons.com/article/SB50001424052970203822504576048012938012584.html?mod=BOL_hpp_mag

"Calling Barron's from Tibet, Meuse said he moved to China in March
2010 and retired from supplying reverse-merger shells to concentrate
on private-equity investing. "I wanted to get out of the situation
where you can't really control what you've got," he said of his
reverse-merger deals. "

-------------
RichAndPoor ShareMonday, May 10, 2010 10:19:57 AM
Re: NonePost # of 26813
Just received an email from Joseph Meuse that he's moving to China to
keep the momentum going with his Chinese clients! That's good news for
all Meuse shells! Here's the email text.


Dear Friends,
As you know Belmont Partners has worked with a number of Chinese
clients over the years.
As our China practice has grown tremendously over the last year, I am now presented with the opportunity to move to Shanghai with my family so that I can work full time with our Chinese clients. I absolutely believe, as I'm sure many of you do, that the opportunity that China offers is a once in our lifetime experience.
I will be living and working in Puxi (in Shanghai) and invite you to please stop by when your there. I am best reached by email or mobile
(listed below).
Thank you for your continued support and friendship.
Joseph Meuse
Managing Director
BELMONT PARTNERS, LLC.
360 Main Street
P.O. Box 393
Washington, VA 22747
540.675.3149 (office)
540.878.3418 (mobile)
540.675.3369 (fax)
www.belmontpartners.net

-------------
a few other names to watch for:
Ryan Nail/the Crone Law Group
PASSALAQUA JOSEPH J
Craig Burton
William H. Luckman
Tsoi Tik Man.
MaloneBailey LLP

===============
I do know a number of the touts on ACTN have been "involved" with Joe Meuse's shells before - so I do not know if Meuse had anything to do with this sudden burst of activity on that stock - but judging by the volume spike and comparing it to IHUB postings (Oct 26th) - it appears 100% IHUB hype and dump. Although I believe some will have difficulty with such low volume given the stock was at a standstill not so long ago.