China Growth Stocks

[GorillaGorilla]

CPQQ and trying to understand Financing Agreements

I know that ratobranco has been banging the table on understanding financing agreements. I've been playing with CPQQ's.

So, in 2010 say they make $6 M in operating income - realistic if they don't get the new plant this year.


So imp phrase is "which number of shares should be equal to the percentage of variation between the actual net income and the target net income". The other important fact is escrow is approx 2 Million shares.

Agreement 6M/7M = 86%.

So, the variation is 14% in this case?
So, they get 14% of the 2M shares in Escrow?


So, Variation * Escrow Size = Financier-Kickback
So, 0.14 * 2,080,000 = 291,200 shares to financiers?


rich

(Also, note for perspective buyers there is a clause to take back money for each month after May they don't get uplisted.)


Financing Key Pharpses in relation to Escrow:


http://www.sec.gov/Archives/edgar/data/1418134/000118518509001268/chinapower8k120309.htm

Key Phrase 1:


Delivery of additional shares of Common Stock to the Buyers on a pro rata basis for no additional consideration in the event that the Company’s income from operations for each of the fiscal years ending December 31, 2009 and 2010 is less than $4,500,000 and $7,000,000 respectively, which number of shares should be equal to the percentage of variation between the actual net income and the target net income, provided that no additional shares shall be delivered to the Buyers if such variation is 10% or less;

Key Phrase 2:


Make Good Escrow Agreement


In connection with the Purchase Agreement, the Company also entered into a Make Good Escrow Agreement dated as of November 30, 2009 with the Buyers and Escrow, LLC (the “Escrow Agent”), where the Company committed to place 2,080,000 shares of Common Stock into escrow to be delivered to the Buyers if the Company fails to achieve the income targets as set forth in the Purchase Agreement. A form of such Make Good Escrow Agreement is filed herewith as Exhibit 10.2.


rich