srm4u
10 years ago
I read some of the filings here and it just seems odd.
IE, one of biggest holders is: Fakei Investment Ltd. (FAKE ?)
And then there is a filing which states that someone is entitled to buy 1,259,530 shares at a price of $0.0001 per 100 shares.
Under the laws of the PRC, certain restrictions are placed on round trip investments through an acquisition of a PRC entity by an offshore special purpose vehicle owned by one or more PRC residents as well as foreign investment in iron and steel industry. To comply with these restrictions, on August 1, 2010, we, through Nuosen, entered into a Entrusted Management Agreement, Exclusive Option Agreement, and Covenant Letter (collectively, the “Entrustment Agreements”) with Hongri Metallurgy and shareholders of Hongri Metallurgy Shareholders, Fakei and YBS Group. We issued 44,083,529 restricted shares of our common stock to Karen Prudente, a US resident who entered into call option agreements (collectively, the “Call Option Agreements”) respectively with the shareholders of YBS Group, for YBS Group entering into the Entrustment Agreements. In addition, we issued 17,493,463 restricted shares of our common stock to Fakei, for Fakei entering into the Entrustment Agreements. According to the Call Option Agreements, Karen Prudente would transfer all restricted shares of our common stock she received to the shareholders of YBS Group subject to the terms and conditions thereunder and entrust the shareholders of Hebei with her voting rights in the Company. Karen Prudente’s role with respect to the restricted shares held by the Hongxing Shareholders is to manage the trust of the Hongxing Shareholders. These restricted shares issued to Karen Prudente and Fakei were issued in reliance upon the exemptions set forth in Section 4(2) of the Securities Act of 1933, as amended, on the basis that they were issued under circumstances not involving a public offering. As a result of the aforementioned transaction, the shareholders of YBS Group and Fakei obtained control of the Company.
Generally, we provide Hongri Metallurgy with technology consulting and management services pursuant to the Entrustment Agreements, the material terms which are as follows:
·Entrusted Management Agreement – pursuant to this agreement entered into by and among the Hongri Metallurgy Shareholders, Hongri Metallurgy, and Nuosen, the Hongri Metallurgy Shareholders and Hongri Metallurgy entrust the management of Hongri Metallurgy to Nuosen until (a) the winding up of Hongri Metallurgy, (b) the termination date of the agreement as determined by the parties, or (c) the date on which Nuosen acquires Hongri Metallurgy. During the term, Nuosen is fully and exclusively responsible for the management of Hongri Metallurgy. In consideration of such services, the Hongri Metallurgy Shareholders and Hongri Metallurgy will pay a fee to Nuosen as set forth in the agreement.
·Exclusive Option Agreement – pursuant to this agreement entered into by and among Nuosen, the Hongri Metallurgy Shareholders, and Hongri Metallurgy, the Hongri Metallurgy Shareholders grant Nuosen an irrevocable exclusive purchase option to purchase all or part of the shares of Hongri Metallurgy, currently owned by any of the Hongri Metallurgy Shareholders. Further, Hongri Metallurgy grants Nuosen an irrevocable exclusive purchase option to purchase all or part of the assets and business of Hongri Metallurgy. Nuosen and the Hongri Metallurgy Shareholders will enter into relevant agreements regarding the price of acquisition based on the circumstances of the exercise of the option, and the consideration shall be refunded to Nuosen or Hongri Metallurgy at no consideration in an appropriate manner decided by Nuosen. Upon the exercise of the option, Nuosen will be subject to non-competition restrictions as set forth in the agreement.
·Covenant Letter – pursuant to this letter, the Hongri Metallurgy Shareholders irrevocably covenant that without the prior written consent by Nuosen, the Hongri Metallurgy Shareholders would not transfer, pledge or create any encumbrance in other way on all or part of the contribution and share equity of Hongri Metallurgy, or increase or decrease the registered capital of Hongri Metallurgy, or divide or merge the Company or conduct any other activity which would change the registered capital or shareholding structure of Hongri Metallurgy.
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Table of Contents
Call Option Agreement
Liu Shenghong, our Chairman of Board of Directors and one of the shareholders of YBS Group and other several the shareholders of YBS Group (each of them, the “Purchaser”) have entered into call option agreements, dated as of August 10,], 2010 (collectively, the “Call Option Agreements”), with our major shareholder, Karen Prudente, pursuant to which they are entitled to purchase up to 100% of the issued and outstanding shares of Karen Prudente at a price of $0.0001 per 100 shares for a period of five years, as defined in the Call Option Agreements; the Option may be exercised, in whole or in part, in accordance with the following schedule: 34% of the Option Shares subject to the Option shall vest and become exercisable on January 1, 2012; 33% of the Option Shares subject to the Option shall vest and become exercisable on January 1, 2013 and 33% of the Option Shares subject to the Option shall vest and become exercisable on January 1, 2014.
Through the Entrustment Agreements , we have the ability to substantially influence Hongri Metallurgy’s daily operations and financial affairs, appoint its senior executives and approve all matters requiring shareholder approval. As a result of the Entrustment Agreements, which enable us to control Hongri Metallurgy and operate our business in the PRC through Hongri Metallurgy, we are considered the primary beneficiary of Hongri Metallurgy.
When we sell our equity or borrow funds we expect the proceeds will be forwarded to Hongri Metallurgy through Nuosen. We may also use the proceeds to repurchase our capital stock or for our corporate overhead expenses. If we borrow funds we expect to be the primary obligor on any debt. For example, in February 2011 we raised gross proceeds of $3,868,547 in a private placement from certain non-affiliated accredited investors in a private placement of our common stock. Net proceeds after our expenses were provided to Hongri Metallurgy through Nuosen.
Nuosen’s control over Hongri Metallurgy under the preceding agreements requires us to consolidate its financial statements pursuant to the FASB Interpretation 46, “Consolidation of Variable Interest Entities (VIEs)” (“FIN 46R”), an Interpretation of Accounting Research Bulletin No. 51 because Hongri Metallurgy is considered a variable interest entity of Nuosen.
FIN 46R requires a variable interest entity to be consolidated by any company that is subject to a majority of the risk of loss for the variable interest entity or is entitled to receive a majority of the variable interest entity’s residual returns. Since Nuosen is the primary and only beneficiary of Hongri Metallurgy (the variable interest entity), FIN 46R requires the consolidation of its financial statements with Nuosen and ultimately consolidated with Nuosen’s parent company, China Industrial Steel.
By causing our subsidiary Nuosen to enter into the Entrusted Agreements, we obtained substantially the same result as a direct share exchange, which is to permit us to consolidate the financial results of Hongri Metallurgy as our VIE.
http://www.sec.gov/Archives/edgar/data/1510871/000118518511000119/chinaindustrial-s1020311.htm#dilution
MadeBucksOnThis
10 years ago
China Industrial Steel, Inc. Reports Third -2-
parties 257,757 165,787 772,282 1,048,696 Total Selling and General and Administrative Expenses 1,856,540 745,151 4,003,002 2,989,116 ----------- ----------- ----------- ------------ Income From Operations 4,820,932 (3,122,899) 11,155,744 7,914,119 ----------- ----------- ----------- ------------ Other Income (Expenses) Interest and other income 55,592 137,276 109,265 191,885 Interest expense (847,765) (584,983) (3,334,508) (2,451,068) Interest expense - related parties (172,575) (177,674) (514,205) (1,464,263) Total Other Income (Expenses) (964,748) (625,381) (3,739,448) (3,723,446) ----------- ----------- ----------- ------------ Income from operation before income tax 3,856,184 (3,748,280) 7,416,296 4,190,673 Provision for income tax 1,092,562 - 2,230,355 1,384,392 Net Income 2,763,622 (3,748,280) 5,185,941 2,806,281 ----------- ----------- ----------- ------------ Earnings Per Share - Basic and Diluted $ 0.04 $ (0.05) $ 0.07 $ 0.04 Weighted Average Shares Outstanding - Basic and Diluted 73,620,391 73,620,391 73,620,391 73,585,924 Other Comprehensive Income: Foreign currency translation gain 570,656 2,042,302 3,560,960 243,850 Comprehensive Income $ 3,334,278 $(1,705,978) $ 8,746,901 $ 3,050,131 =========== =========== =========== ============ About China Industrial Steel, Inc. China Industrial Steel, Inc., ("CIS" or the "Company") through its wholly owned subsidiary, Handan Hongri Metallurgy Co., Ltd., produces and sells steel plate and steel bar for domestic and export customers. The Company currently operates three production lines from its headquarters on approximately 1,000 acres in Handan City in the Hebei Province, China, where steel production is a significant component of the regional economy. Forward-looking statements: The above news release contains forward-looking statements. The statements contained in this document that are not statements of historical fact, including but not limited to, statements identified by the use of terms such as "anticipate," "appear," "believe," "could," "estimate," "expect," "hope," "indicate," "intend," "likely," "may," "might," "plan," "potential," "project," "seek," "should," "will," "would," and other variations or negative expressions of these terms, including statements related to expected market trends and the Company's performance, are all "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. These statements are based on assumptions that management believes are reasonable based on currently available information, and include statements regarding the intent, belief or current expectations of the Company and its management. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performances, and are subject to a wide range of external factors, uncertainties, business risks, and other risks identified in filings made by the company with the Securities and Exchange Commission. Actual results may differ materially from those indicated by such forward-looking statements. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in the company's expectations with regard thereto or any change in events, conditions or circumstances upon which any statement is based. China Industrial Steel, Inc. www.chinaindustrialsteel.com For more information, please contact: Delong Zhou Chief Financial Officer Phone +1-917-825-2997 SOURCE China Industrial Steel, Inc. /Web site: http://www.chinaindustrialsteel.com (END) Dow Jones Newswires November 15, 2013 11:57 ET (16:57 GMT)
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