As filed
with the Securities and Exchange Commission on February 9,
2010
Registration
No. 333-[ ]
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
CHINA
AGRITECH, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
75-2955368
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
Number)
|
Room
3F No. 11 Building, Zhonghong International Business Garden, Future Business
Center,
Chaoyang
North Road, Chaoyang District, Beijing,
People’s
Republic of China 100024
(86)
10-59621278
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)
Yu
Chang
Room
3F No. 11 Building, Zhonghong International Business Garden, Future Business
Center,
Chaoyang
North Road, Chaoyang District, Beijing, People’s Republic of China,
100024
(86)
10-59621278
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
Copies
to:
Mitchell
S. Nussbaum, Esq.
Loeb
& Loeb LLP
345
Park Avenue
New
York, New York 10154
Telephone:
(212) 407-4000
Fax:
(212) 407-4990
Approximate date of commencement of
proposed sale to the public:
From time to time after the effective date
of this registration statement as determined by the Registrant.
If the
only securities being registered on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box.
¨
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 of the Securities Act of 1933, other than
securities offered only in connection with dividend or interest reinvestment
plans, check the following box.
x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and lit the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
¨
If this
Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, please check
the following box.
¨
If this
Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, please
check the following box.
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer
¨
Accelerated
filer
¨
Non-accelerated filer
¨
Smaller
reporting company
x
(Do not
check if a smaller reporting company)
CALCULATION
OF REGISTRATION FEE
Title of each Class of
Security being
Registered (1)
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Amount Being
Registered
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Proposed Maximum
Offering Price Per
Security
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Proposed Maximum
Aggregate Offering
Price
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Amount of
Registration Fee
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|
|
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Common
Stock, $0.001 par value per share
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(3)(4)
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|
|
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(3)
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|
|
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(3)
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(3)
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Preferred
Stock, $0.001 par value per share
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|
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(3)(4)
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|
|
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(3)
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|
|
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(3)
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(3)
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Warrants
|
|
|
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(3)(4)
|
|
|
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(3)
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|
|
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(3)
|
|
|
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(3)
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Debt
securities
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|
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(3)(4)
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(3)
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(3)
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(3)
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Units
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(3)(4)
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(3)
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(3)
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(3)
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Total
Offering
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$
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100,000,000
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(3)(4)
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100
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%
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$
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100,000,000
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$
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7,130
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(5)
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(1) This
registration statement includes $100,000,000 of securities which may be issued
by the registrant from time to time in indeterminate amounts and at
indeterminate times. Securities registered hereunder may be sold separately,
together or as units with other securities registered hereunder.
(2) The
registration fee for securities to be offered by the Registrant is based on an
estimate of the Proposed Maximum Aggregate Offering Price of the securities, and
such estimate is solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
(3)Not
required to be included in accordance with General Instruction II.D. of Form S-3
under the Securities Act..
(4)
Subject to footnote (1), pursuant to Rule 416 under the Securities Act of 1933,
as amended, the Registrant is also registering such additional indeterminate
number of shares as may become necessary to adjust the number of shares issued
by the Registrant as a result of a stock split, stock dividend or similar
adjustment of its outstanding common stock.
(5) Paid
herewith.
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment that specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act or until this Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
The
information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
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PRELIMINARY
PROSPECTUS
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SUBJECT
TO COMPLETION, DATED FEBRUARY 9,
2010
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CHINA
AGRITECH, INC.
$100,000,000
Common
Stock
Preferred
Stock
Debt
Securities
Warrants
Units
We may
offer and sell, from time to time in one or more offerings, any combination of
common stock, preferred stock, debt securities, warrants, or units having a
maximum aggregate offering price of $100,000,000. When we decide to sell a
particular class or series of securities, we will provide specific terms of the
offered securities in a prospectus supplement.
The
prospectus supplement may also add, update or change information contained in or
incorporated by reference into this prospectus. However, no prospectus
supplement shall offer a security that is not registered and described in this
prospectus at the time of its effectiveness. You should read this
prospectus and any prospectus supplement, as well as the documents incorporated
by reference or deemed to be incorporated by reference into this prospectus,
carefully before you invest.
This
prospectus may not be used to offer or sell our securities unless accompanied by
a prospectus supplement relating to the offered securities. Our common stock is
traded on The NASDAQ Global Market under the symbol “CAGC.” Each
prospectus supplement will contain information, where applicable, as to our
listing on The NASDAQ Global Market or any other securities exchange of the
securities covered by the prospectus supplement.
These
securities may be sold directly by us, through dealers or agents designated from
time to time, to or through underwriters or through a combination of these
methods. See “Plan of Distribution” in this prospectus. We may also describe the
plan of distribution for any particular offering of our securities in a
prospectus supplement. If any agents, underwriters or dealers are involved in
the sale of any securities in respect of which this prospectus is being
delivered, we will disclose their names and the nature of our arrangements with
them in a prospectus supplement. The net proceeds we expect to receive from any
such sale will also be included in a prospectus supplement.
Investing
in our securities involves various risks. See “Risk Factors” on page 3 for
more information on these risks. Additional risks, if any, will be described in
the prospectus supplement related to a potential offering under the heading
“Risk Factors”. You should review that section of the related prospectus
supplement for a discussion of matters that investors in such securities should
consider.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities, or passed upon the adequacy or
accuracy of this prospectus or any accompanying prospectus supplement. Any
representation to the contrary is a criminal offense.
The date
of this Prospectus
is ,
2010
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission (the “SEC”) using a “shelf” registration process. Under
this shelf registration process, we may offer from time to time securities
having a maximum aggregate offering price of $100,000,000. Each time we offer
securities, we will prepare and file with the SEC a prospectus supplement that
describes the specific amounts, prices and terms of the securities we offer. The
prospectus supplement also may add, update or change information contained in
this prospectus or the documents incorporated herein by reference. You should
read carefully both this prospectus and any prospectus supplement together with
additional information described below under the caption “Where You Can Find
More Information.”
This
prospectus does not contain all the information provided in the registration
statement we filed with the SEC. For further information about us or our
securities offered hereby, you should refer to that registration statement,
which you can obtain from the SEC as described below under “Where You Can Find
More Information.”
You
should rely only on the information contained or incorporated by reference in
this prospectus or a prospectus supplement. We have not authorized any other
person to provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it. This
prospectus is not an offer to sell securities, and it is not soliciting an offer
to buy securities, in any jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus or any
prospectus supplement, as well as information we have previously filed with the
SEC and incorporated by reference, is accurate as of the date of those documents
only. Our business, financial condition, results of operations and prospects may
have changed since those dates.
We may
sell securities through underwriters or dealers, through agents, directly to
purchasers or through a combination of these methods. We and our agents reserve
the sole right to accept or reject in whole or in part any proposed purchase of
securities. The prospectus supplement, which we will prepare and file with the
SEC each time we offer securities, will set forth the names of any underwriters,
agents or others involved in the sale of securities, and any applicable fee,
commission or discount arrangements with them. See “Plan of
Distribution.”
Unless
otherwise mentioned or unless the context requires otherwise, when used in this
prospectus, the terms “China Agritech”, “Company”, “we”, “us”, and “our” refer
to China Agritech, Inc. and its wholly-owned subsidiaries. “China” and the “PRC”
refer to the People’s Republic of China.
The share
information contained herein, gives retroactive effect to the Company’s 2-for-1
forward stock split effective as of February 1, 2010.
PROSPECTUS
SUMMARY
The
following summary, because it is a summary, may not contain all the information
that may be important to you. This prospectus incorporates important business
and financial information about the Company that is not included in, or
delivered with this prospectus. Before making an investment, you
should read the entire prospectus carefully. You should also carefully read the
risks of investing discussed under “Risk Factors” and the financial statements
included in our other filings with the SEC, including in our Annual Report on
Form 10-K, which we filed with the SEC on March 31, 2009, and in our
Quarterly Reports on Form 10-Q which we filed with the SEC on May 14, 2009,
August 14, 2009, and November 12, 2009, respectively. This information is
incorporated by reference into this prospectus, and you can obtain it from the
SEC as described below under the headings “Where You Can Find Additional
Information About Us” and “Incorporation of Certain Documents by
Reference.”
We will
provide to each person, including any beneficial owner, to whom a prospectus is
delivered, a copy of any or all of the information that has been incorporated by
reference in the prospectus but not delivered with the prospectus. You may
request a copy of these filings, excluding the exhibits to
such filings which we have not specifically incorporated by reference
in such filings, at no cost, by writing us at the following address: China
Agritech, Inc., Room 3F No. 11 Building, Zhonghong International Business
Garden, Future Business Center, Chaoyang North Road, Chaoyang District, Beijing,
PRC 100024 and our telephone number is +86
10-59621278.
The
Offering
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission (the “SEC”) utilizing a shelf registration process.
Under this shelf registration process, we may sell any combination
of:
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debt securities, in
one or more series;
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warrants to purchase any of the
securities listed above;
and/or
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units consisting of one or more
of the foregoing.
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in one or
more offerings up to a total dollar amount of $100,000,000. This prospectus
provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
specific offering and include a discussion of any risk factors or other special
considerations that apply to those securities. The prospectus supplement may
also add, update or change information contained in this prospectus. You should
read both this prospectus and any prospectus supplement together with the
additional information described under the heading “Where You Can Find
Additional Information About Us.”
Our
Company
We
manufacture and sell organic liquid compound fertilizers, organic granular
compound fertilizers and related agricultural products in the People’s Republic
of China (the “PRC”) through our direct and indirect subsidiaries: Anhui
Agritech Development Co. Ltd.
(“Anhui Agritech”),
Agritech Fertilizer Limited (“Beijing Agritech”), China Tailong Holdings Company
Limited (“Tailong”), Pacific Dragon Fertilizer Co. Ltd. (“Pacific Dragon”), and
Xinjiang Agritech Agriculture Resources Co., Ltd (“Xinjiang
Agritech”). For the nine months ended September 30, 2009,
approximately 65% of our revenues were derived from the sale of our liquid
organic fertilizer products, while approximately 35% of our revenues were
derived from the sale of our granular organic fertilizer products.
Our main
products include spray, water-flush, dip and granular fertilizer products and
other customized, crop specific fertilizers that are tailored to our customers’
specific requirements. Our liquid fertilizer products can be applied on a
widespread basis via spraying by machine or aircraft. Our products
have been recognized for their quality and effectiveness by leading industry
associations and have been certified by the PRC government at the national
level, which is an endorsement of the effectiveness of the products in all
regions of the PRC.
Our
products:
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promote
photosynthesis, root system growth and transmission of nutrients to
seeds;
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equilibrate
absorption of nutrients to speed a plant’s
maturity;
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eliminate
the damage of harmful radicals to
plants;
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increase
protein and vitamin content levels;
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accelerate
the accumulation of photosynthesis materials and cell
concentration;
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increase
plants’ reservation ability to resist drought, resistance and the
utilization rate of basic fertility;
and
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foster
the development of plant life along with neutral or acidic
pesticides.
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We
believe that our brand reputation and ability to tailor our products to meet the
requirements of various regions of the PRC affords us a competitive advantage.
We purchase the majority of our raw materials from suppliers located in the PRC
and use suppliers that are located in close proximity to our manufacturing
facilities, which helps us to contain our cost of revenue.
The
demand for our products has steadily increased. Our annual production capacity
as of September 30 2009 was approximately 13,000 metric tons of organic liquid
compound fertilizers whereas our annual production capacity for granular
fertilizers as of September 30, 2009 was approximately 200,000 metric tons,
consisting of 100,000 metric tons in Anhui, 50,000 metric tons in Harbin, and
50,000 tons in our newly completed plant in Xinjiang.
We plan
to build and open between 30 and 50 branded large-scale distribution centers in
central and eastern provinces in 2010 to sell our own organic fertilizers and
third party sourced products, including seeds, pesticides, and other
agricultural products throughout the PRC, and hope to expand into southern and
western provinces in 2011. Each distribution center can cover 80 to
100 franchised retail stores under our management. We hope to use these
locations and franchised stores to introduce small individual farmers to our
products, educate them about the benefits of organic fertilizer over chemical
fertilizer, and teach them how to properly use our products. We believe that
these franchised stores will introduce our products to a vast network of farmers
who otherwise operate outside of our existing distribution network and outside
of the reach of traditional advertising media.
Our
Growth Strategy
We
believe that our increased capacity to produce organic granular compound
fertilizer products, which have a lower price point and greater market appeal
than our premier organic liquid compound fertilizer products, makes us well
positioned to expand sales and increase revenues. We have focused on
the expansion of our granular production because the market for organic granular
fertilizer is larger than the current market for organic liquid fertilizer due
to the familiarity and tradition of farmers’ using granular fertilizers. In
addition, the per unit amount of granular fertilizer used for sowing coverage is
much higher than the amount used for liquid
fertilizer.
Our goal
is to further expand our product’s market share throughout the PRC by
establishing branded chain stores which will sell our own branded
products (e.g., organic fertilizers) and international and local sourced
products (e.g., seeds, pesticides and other agricultural
products). Our growth strategy includes the following
strategies;
Continue Organic Growth
Initiatives.
We believe that the current fertilizer market is
fragmented and represents an excellent opportunity for us to gain additional
market share from our competitors, mainly chemical fertilizer
manufacturers. We intend to establish branded chain stores by
converting our current offices into a flagship store and distribution center and
inviting our current distributors to join in our line as franchisees to operate
chain stores under our brand. We also intend to leverage our strong
brand, quality customer services and quality of our products to gain incremental
business in the fertilizer market. Finally, we strongly believe that
as we continue to grow, economies of scale and enforced brand awareness will
bring strong profitability to us.
Expand the lines of our
products.
Beside our current organic fertilizers, we
will source, either internally or locally, other agricultural products, like
seeds, pesticides, agricultural equipments and tools to expand the lines of our
products to meet all the necessities of farmers in the PRC. All these
products will be sold through our branded chain stores directly to farmers, who
are the end customers.
Capitalize upon Strong Industry
Dynamics in the PRC
. Continued economic growth in the PRC,
coupled with evolving government policy on preservation of farmlands by
promoting use of organic fertilizers on one hand and improvement of farmer’s
income on another hand, present us with significant future growth
opportunities. We believe that with continued strong government
commitment, we will continue to benefit from it.
Execute Strategic
Acquisitions.
We intend to acquire certain domestic targets
that are accretive and synergistic to our growth strategy.
Competitive
Advantages
We
believe we are well-positioned to continue to be the largest manufacturer of
organic compound fertilizers in the PRC and to become a leading distributor of
organic compound fertilizers in the PRC and beyond. We believe we
have several competitive advantages, including the following:
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Well
established brand name products;
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Established
distribution channel in northern and eastern provinces of the
PRC; and
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Food
grown with our products may be eligible to receive a AA Green Food
rating.
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Our
Competitive Strengths
We
believe that the following competitive strengths enable us to compete
effectively in the fertilizer market in the PRC:
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·
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Strong
Market Position.
We are a leading manufacturer of
fertilizer products and, more specifically, organic fertilizer products in
liquid form, in the PRC.
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Recognized
and Certified Product Offerings
. Our Tailong liquid
brand of fertilizer products was favorably recognized by the China
Association for Quality Supervision and the China Quality Standard
Research Center in 2006 for product quality, brand reputation and customer
loyalty. Our fertilizer products also have been certified by
the Ministry of
Agriculture.
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·
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Established
Distribution Network.
We sell the majority of our
fertilizer products through an extensive distribution network of regional
factories, which help us to establish a local presence in each community
we serve with multi-level sales support and to educate local retailers and
farmers on the benefits of our fertilizer products. Since 2007
we have sold our Green Vitality products to Sinochem Fertilizer Co., Ltd,
the PRC’s largest integrated agricultural company, which utilizes its own
distribution network to distribute our
products.
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Efficient
Infrastructure.
We have created a flexible and
responsive infrastructure, which allows us to efficiently manufacture and
deliver high-quality fertilizer products within a short delivery
time.
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·
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Broad
Customer Base.
We developed a diversified customer base
of farmers and retailers located throughout the PRC and are not dependent
on, or heavily concentrated in, any single customer or customer
base.
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Our
Strategy
We
believe that our strong competitive position, our ability to meet customer
demands and our well-regarded product offerings will enable us to benefit from
the anticipated growth in the PRC fertilizer market. We are committed
to enhancing our sales, profitability and cash flows through the following
strategies:
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·
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Capitalize
on our brand reputation to increase sales of new and existing
products
. We intend to leverage the favorable
reputation of our fertilizer products through collaboration with academic
and governmental institutions which can attest to the quality of our
current product offerings. We plan to develop new compounds to
better meet the changing needs of the PRC’s agricultural communities by
tailoring our product offerings to meet the local needs of the farmers and
to create greater reliability of fertilizer products nationwide. Over the
past year we added an organic granular compound fertilizer to our product
lines and constructed a granular fertilizer line near each of our existing
factories, located in Harbin, Beijing and
Xinjiang.
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·
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Expand Our
Domestic Operation
. We intend to build or acquire
additional organic granular fertilizer factories in strategic locations in
the PRC to serve new agricultural areas in Hebei and Sichuan provinces.
When our recently completed Xinjian facility commences commercial
production in early 2010 our organic granular compound fertilizer
production capacity will reach 200,000 metric
tons.
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·
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Build &
Operate Franchized Retail Stores in the PRC
. We plan to
open between 30 and 50 large-scale distribution centers throughout the
PRC’s central provinces in 2010, and hope to expand into eastern and
western provinces in 2011. Each distribution center could cover
up to 100 franchised retail chain stores. We hope to use the
franchised retail chain stores to introduce small provincial farmers to
our products, educate them about the benefits of organic fertilizer over
chemical fertilizer, and teach them how to properly use our
products. We believe that these chain stores will
introduce our products to a vast network of farmers who otherwise operate
outside of our existing distribution network and outside of the reach of
traditional advertising media.
|
|
·
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Enhance
Brand Awareness
. Our core future focus will be to build
and enhance brand awareness of our “Lvlingbao” and “Tailong” products, as
well as our “Green Vitality” product line and organic granular compound
fertilizer by launching an extensive advertising campaign to educate
retailers and farmers on the benefits of our liquid organic compound
products. We expect to combine these marketing efforts with our
planned retail store expansion into locations that have little or no
current exposure to our products. We believe that this strategy will allow
us to expand our distribution and sales outside of our traditional base in
northeast regions of the PRC and capture a larger market
share.
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·
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Increase
Sales into Select Foreign Markets
. We plan to leverage
our product offerings and brand reputation to expand our product sales
into select markets outside of the PRC. In June 2009 we entered
into a 6-year marketing and distribution agreement with Odyssey
International (Trading) Group Ltd., a Hong Kong corporation ("Odyssey")
that provides for Odyssey to have the exclusive marketing and distribution
rights for the Company's Lvlingbao series of organic liquid compound
fertilizers in certain target markets, including, but not limited to,
Central and South America, South Africa, Asian countries. and
overseas markets.
|
Recent
Private Placement
On
October 19, 2009 we issued (i) an aggregate of 2,785,536 shares of common stock
and (ii) warrants to purchase up to an aggregate of 1,857,028 shares of common
stock at an initial exercise price of approximately $5.38 per share, subject to
adjustment, to Carlyle Asia Growth Partners IV, L.P. and CAGP IV Co-Investment,
L.P. (collectively, the “Carlyle Investors”) for a purchase price of
$15,000,000. The exercise price of the warrants has a floor of approximately
$1.3285 per share, and in the event that the warrants are exercised at that
price, we would issue an additional 2,333,331 shares (the “Additional Warrant
Shares”). We are obligated to issue up to 7,000,000 shares of common
stock (the “Make-Good Shares”) to the Carlyle Investors in the event that we
fail to meet a predetermined net income target of $11.5 million for the fiscal
year ending December 31, 2009. If we meet the net income target we
will not issue any additional shares upon exercise of the warrants or any
Make-Good Shares. The warrants issued to the Carlyle Investors will
become exercisable on April 19, 2010 and expire April 19, 2012.
We
granted the Carlyle Investors a one-year right of participation in future
offerings by us of shares of our common stock, debt or equity securities
convertible, exercisable or exchangeable into common stock, or debt
securities. The right of participation was granted individually, on a
pro rata basis based upon each investor’s original subscription amount, and
collectively no less than $5 million and no more than $10 million. In
addition, we granted the Carlyle Investors the right to collectively designate
one person to serve as a member of our board of directors. On
December 23, 2009, we appointed Carlyle’s designee, Zheng “Anne” Wang, to serve
as a member of our Board of directors. On January 8, 2010, the board
of directors also appointed Charles Law to serve as a member of our board of
directors. The board of directors determined that Mr. Law was an
“independent director” as that term is defined and determined in accordance with
Rule 5605(a)(2) of the Marketplace Rules of The NASDAQ Stock Market, LLC and
Section 10A(m)(3) of the Securities Exchange Act of 1934, as
amended.
In
connection with the transaction, we entered into a registration rights
agreement, pursuant to which the Company agreed to prepare and file a
registration statement covering the resale of the 1,392,768 shares and the
warrants to purchase up to an aggregate of 928,514 shares of common stock
(collectively, the “Registrable Securities”) no later than January 31,
2010. On February 1, 2010, we agreed with Carlyle to extend the
deadline for filing such registration statement until March 1,
2010.
Corporate
Structure
China
Agritech, Inc. is a holding company with no operations other than acting as a
holding company for its PRC wholly owned subsidiaries, Pacific Dragon, Anhui
Agritech, Beijing Agritech and Xinjiang Agritech.
Our
executive offices are located in the PRC at Room 3F No. 11 Building, Zhonghong
International Business Garden, Future Business Center, Chaoyang North Road,
Chaoyang District, Beijing, PRC 100024 and our telephone number is
+86 10-59621278. Our website address is
www.chinaagritechinc.com.
RISK
FACTORS
Investing
in our securities involves risk. The prospectus supplement applicable to a
particular offering of securities will contain a discussion of the risks
applicable to an investment in China Agritech and to the particular types of
securities that we are offering under that prospectus supplement. Before making
an investment decision, you should carefully consider the risks described below
and the risks described under “Risk Factors” in the applicable prospectus
supplement, or risks any updated in our Quarterly Reports on Form 10-Q, together
with all of the other information appearing in or incorporated by reference into
this prospectus and any applicable prospectus supplement, in light of your
particular investment objectives and financial circumstances. Our business,
financial condition or results of operations could be materially adversely
affected by any of these risks. The trading price of our securities could
decline due to any of these risks, and you may lose all or part of your
investment.
Risks
Related To Our Business
If
we fail to effectively expand our current operations and capacity to satisfy
demand for our granular fertilizer products, our results of operations and
business prospects could be impaired.
We
believe that over the next year demand for our granular fertilizer products will
outgrow our present production capacity of 200,000 metric tons. Our future
success depends on our ability to expand our business to address the growth in
demand for our granular fertilizer products. Because our industry is highly
competitive, if we are unable to increase our production capabilities to meet
increased demand for our products, we may lose existing customers, as well as
potential additional customers, to competitors with greater production
capacities. If we lose our existing customers our revenues could
decrease and accordingly our overall financial performance could be
significantly impaired. In addition, we currently rely on
distributors to distribute our products to multiple end users.
Our
ability to add production capacity and increase output is subject to significant
risks and uncertainties, including:
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the
availability of additional funding to build manufacturing facilities and
purchase raw materials on favorable terms or at
all;
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our
management and minimization of delays and cost overruns caused by problems
with our suppliers of raw materials and third-party vendors;
and
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our
receipt of any necessary government approvals or permits that may be
required to expand our operations in a timely manner or at
all.
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If we
cannot successfully implement additional production capacity increases
efficiently and cost-effectively, we will be unable to satisfy any increased
demand for our granular fertilizers, which could significantly impair our
financial performance.
If our
projections regarding the future market demand for our products are inaccurate,
our operating results and our overall business may suffer.
We have
made significant capital investments in anticipation of rapid growth in the
organic compound fertilizer market in the PRC. The expansion of our internal
manufacturing capabilities has required significant up-front fixed costs.
Additionally, we plan on allocating future working capital to build branded
chain stores in 2010 in order to add new distribution channels to sell our
products in new markets throughout the PRC. If market demand for our products
does not increase as quickly as we have anticipated and align with our expanded
manufacturing capacity, we may be unable to offset these costs and to achieve
economies of scale, and our operating results may be adversely affected as a
result of high operating expenses, reduced margins and underutilization of
capacity. Our ability to meet such excess customer demand could also depend on
our ability to raise additional capital and effectively scale our manufacturing
operations.
If
we cannot protect the proprietary formula and manufacturing processes for our
concentrated organic liquid and granular compound fertilizer it could increase
our competition and cause our operating results to suffer.
Our
success will depend in part on our ability to protect our proprietary formula
and manufacturing process for organic liquid and granular compound fertilizer
products. We rely on trade secrets to protect our proprietary formulas and
manufacturing processes. We have not applied for patents for our
technology and formulas because we believe an application for such patents would
result in public knowledge of our proprietary technology and formulas and could
lead competitors to attempt to copy our products, thereby increasing
competition. Only certain of our key employees have knowledge of our proprietary
technology and formulas. This could in turn result in a decrease of our market
share and hurt our operating results.
In
December 2005, our subsidiary Pacific Dragon entered into a license agreement
with Mr. Yu Chang, our Chairman CEO and President, under which Mr. Chang granted
us an exclusive license to use his know-how in manufacturing Tailong organic
liquid compound fertilizer on a royalty-free basis. Under the license agreement,
Mr. Chang has the obligation to maintain the confidentiality of this technology
and is prohibited from licensing this technology to any third party or using the
technology for his own benefit.
Despite
these precautions, the legal regime protecting intellectual property rights in
the PRC is weak. If we are not able to enforce our licensing agreement with Mr.
Chang and fully protect our proprietary trade secrets, if our employees
unintentionally or willfully disclose our confidential technology or know-how to
competitors, or if our competitors independently develop similar or superior
products, our competitors may be able to more effectively offer products similar
to ours and/or produce products with a cost structure similar to ours, if not
better, and we may thereby lose any competitive advantage that we currently
have. If we are forced to take legal action to protect our proprietary formulas
and processes, we will incur significant expense and further could not guarantee
a favorable outcome.
In
addition, our competitors may counterfeit our products and use our trademark.
These counterfeit products could damage our reputation and create confusion for
our customers. Our financial results would be negatively impacted by the lost
sales to the fake and/or competitive product or by lost sales from a damaged
reputation.
Our
proprietary fertilizer formulas may become obsolete which could materially
adversely affect the competitiveness of our future fertilizer
products.
The
production of our fertilizer products is based on our proprietary fertilizer
formulas. Our future success will depend upon our ability to address the
increasingly sophisticated needs of our customers by supporting existing and
emerging humic acid fertilizer products and by developing and introducing
enhancements to our existing products and new products on a timely basis that
keep pace with evolving industry standards and changing customer requirements.
If our proprietary formula becomes obsolete as our competitors develop better
products than ours, our future business and financial results could be adversely
affected.
We
may be subject to more stringent governmental regulation on our
products.
The
manufacture and sale of our agricultural products in the PRC is regulated by the
PRC Ministry of Agriculture and the local government of the Provinces in which
our factories are situated. The legal and regulatory regime governing our
industry is evolving, and we may become subject to different, including more
stringent, requirements than those currently applicable to us. While we believe
a more stringent standard will have more of an adverse impact on those
manufacturers with poor quality products, we cannot assure you any regulatory
change will not adversely affect our business.
Potential
environmental liability could have a material adverse effect on our operations
and financial condition.
To our
knowledge, neither the production nor the sale of our products constitutes
activities, or generate materials that create any environmental hazards or
violate the current PRC environmental laws. Although it has not been alleged by
PRC government officials that we have violated any current environmental
regulations, we cannot assure you that the PRC government will not amend the
current PRC environmental protection laws and regulations in a way that could
adversely impact us. Our business and operating results may be materially and
adversely affected if we were to be held liable for violating existing
environmental regulations or if we were to increase expenditures to comply with
environmental regulations affecting our operations.
If
we fail to maintain an effective system of internal control over financial
reporting, we may not be able to accurately report our financial results. As a
result, current and potential investors could lose confidence in our financial
reporting, which could harm our business and have an adverse effect on our stock
price.
Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to
annually furnish a report by our management on our internal control over
financial reporting. Such report must contain, among other matters, an
assessment by our principal executive officer and our principal financial
officer on the effectiveness of our internal control over financial reporting,
including a statement as to whether or not our internal control over financial
reporting is effective as of the end of our fiscal year. This assessment must
include disclosure of any material weakness in our internal control over
financial reporting identified by management. In addition, under current SEC
rules, we will be required to obtain an attestation from our independent
registered public accounting firm as to our internal control over financial
reporting for our annual report on Form 10-K for our fiscal year ending December
31, 2010. Performing the system and process documentation and evaluation needed
to comply with Section 404 is both costly and challenging. During the course of
our testing we may identify deficiencies which we may not be able to remediate
in time to meet the deadline imposed by the Sarbanes-Oxley Act of 2002 for
compliance with the requirements of Section 404. In addition, if we fail to
maintain the adequacy of our internal controls, as such standards are modified,
supplemented or amended from time to time, we may not be able to ensure that we
can conclude on an ongoing basis that we have effective internal controls over
financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of
2002. Failure to achieve and maintain an effective internal control environment
could also cause investors to lose confidence in our reported financial
information, which could have a material adverse effect on the price of our
common stock.
As
of September 30, 2009, we had approximately $40.6 million of accounts
receivable for our liquid fertilizers, or 42.5% of our total
assets
We sell
approximately 80% of our organic liquid fertilizer in northern provinces of the
PRC. In these provinces, we typically extend our customers credit for
their purchase of our products to allow them to use the proceeds of their
harvests to repay us for their purchase of our products, which typically spans
from six to nine months. As of September 30, 2009, liquid organic fertilizers
made up approximately 65.1% of our revenue. As of September 30,
2009, we had approximately $40.6 million of accounts receivable from customers
of liquid fertilizers, or 42.5% of our total assets. If customers
responsible for a significant amount of accounts receivable were to become
insolvent or otherwise unable to pay for products and services, or to make
payments in a timely manner, our business, results of operations or financial
condition could be materially adversely affected. A natural disaster, such as a
wildfire, flood or drought, or an economic or industry downturn could materially
adversely affect the collection of these accounts receivable, which could result
in longer payment cycles, increased collection costs and defaults in excess of
management's expectations. A significant deterioration in our ability to collect
on accounts receivable could also impact the cost or availability of financing
available to us. Working capital management, including prompt and diligent
billing and collection, is an important factor in our results of operations and
liquidity. We cannot assure you that natural disasters, system problems,
industry trends or other issues will not extend our collection period, adversely
impact our working capital.
We
depend heavily on Mr. Yu Chang, our CEO, President, Secretary and director, and
without his services our prospects would be severely limited.
Our
future business and results of operations depend in significant part upon the
continuing contribution of Mr. Yu Chang, our CEO, President, Secretary and
Chairman. Mr. Chang has extensive experience in the organic compound fertilizer
industry and is directly involved in all of our business operations. Mr. Chang
has an employment agreement with our subsidiary, Pacific Dragon, which
automatically renewed on January 5, 2008 for a term of 3 years. We
currently have no employment agreement with Mr. Chang and Mr. Chang is not
obligated to devote any specified number of hours to working for
us. There can be no assurance that we will be able to reach an
agreement with Mr. Chang on terms favorable to us, if at all. If Mr.
Chang ceases to be employed by us, we may have difficulty finding a suitable
replacement with equal leadership and industry experience, and our business
would suffer because we will not have the leadership needed to capitalize on
market opportunities and to direct our growth, leading to a possible decrease in
revenues and inappropriate capital investments in projects that may not benefit
our long-term growth. Mr. Chang has both sales contacts in the Agricultural
industry and know-how to produce our products, making his expertise both unique
and valuable to us. We do not maintain key-person insurance on any of
our executive officers.
We
depend heavily on skilled research and development personnel, and any loss of
such personnel, or the failure to continue to attract such personnel in the
future, could harm our business.
The
agricultural chemicals business is specialized and requires the employment of
personnel with significant scientific and operational experience in the
industry. Accordingly, we must attract, recruit and retain a sizeable workforce
of technically and scientifically competent employees. Our ability to
effectively implement our business strategy will depend upon, among other
factors, the successful recruitment and retention of additional management and
other key personnel that have the necessary scientific, technical and
operational skills and experience with the fertilizer industry. These
individuals are difficult to find in the PRC and we may not be able to retain
such skilled employees. If we are unable to hire individuals with the requisite
experience we may not be able to produce enough products to optimize profits,
research and development initiatives may be delayed and we may encounter
disruptions in production and research which will negatively impact our
financial condition.
We
currently rely on a small number of third parties to supply the key raw
materials we use to produce our products.
Our
business depends upon the availability of key raw materials, including humic
acid, nitrogen, phosphorus, kalium, and other supplementary material. We rely on
only a few external suppliers for these raw materials and we have only
non-binding supply agreements. In fiscal year 2008, we purchased approximately
14.8% of our humic acid from Harbin Hai Heng Chemical Distriution Co. Ltd.,
approximately 33.8% of our nitrogen, phosphorus and kalium from Beijing Zhongxin
Chemical Technology Development Co., and approximately 27.1% of our other
supplementary material from Shenzhen Hongchou Technology Company. Our
purchases through September 30, 2009 were from similar sources and in similar
amounts, and for the 2010 fiscal year we expect that our raw materials suppliers
will be substantially similar to past years and the amount of raw materials will
increase commensurate with the increase in the demand for our fertilizer
products. We have entered into written agreements with all of these suppliers,
each under supply agreements that expire in December 2010. If any of our major
suppliers were to default or become unable to deliver the raw materials in
sufficient quantities, we may be unable to purchase these raw materials from
alternative sources on the same or similar terms, which could result in a
significant increase in our operating costs. When these supply agreements expire
in December 2010, we may be unable to negotiate new agreements with these
suppliers on terms favorable to us, or at all. In addition, any
disruption in the supply of our raw materials could cause delay in the delivery
of our products which would be harmful to our sales reputation and business. If
supply is disrupted the increased amount we have to pay for raw materials could
negatively impact our margins, cause us to delay deliveries which may cause us
to breach contracts or damage customer relationships or cause us to cease
production if an alternate supplier cannot be found. If we were unable to
procure replacement supplies, our inability to meet the production demands of
our customers could cause the loss of customers and/or market share. Our
financial results could be negatively impacted by the lost sales or decreased
margins.
We
rely on a limited number of products to achieve most of our
revenues.
We derive
a substantial percentage of our revenues from a limited number of products, and
we expect these products to continue to account for a large percentage of our
revenues in the near term. For example, our liquid organic fertilizer accounted
for 91.0% and 65.1% of our revenue for the year ended December 31, 2008 and for
the nine months ended September 30, 2009, respectively, while granular
fertilizer accounted for 9.0% and 34.9% of our revenue for the year ended
December 31, 2008 and September 30, 2009, respectively. Continued
market acceptance of these products is, therefore, critical to our future
success. Our business, operating results, financial condition, and cash flows
could therefore be adversely affected by: a decline in demand for even a limited
number of our products; a failure to achieve continued market acceptance of our
key products; export restrictions or other regulatory or legislative actions
which could limit our ability to sell those products to key customer or market
segments; an improved version of products being offered by a competitor in the
market in which we participate; increased pressure from competitors that offer
broader product lines; technological change that we are unable to address with
our products; or a failure to release new or enhanced versions of our products
on a timely basis. This may impact our ability to maintain or expand
our business with certain customers.
Our
liquid and granular fertilizer sales have seasonal variations and adverse
weather conditions could reduce demand for our products.
We
experience seasonal variations in our revenues and our operating costs. The peak
selling season for our liquid fertilizer products is from April through
September. Periods of cold weather may delay the application of the liquid
fertilizer, or render it unnecessary, thereby reducing demand for such
fertilizer products. During the fiscal year ended December 31, 2008,
approximately 64.9% of our annual liquid fertilizer sales volume came from the
second and third fiscal quarters, when demand for our liquid fertilizer products
typically peaks during planting season and prior to harvest. We believe that the
peak selling season for our granular fertilizer products is from October through
March. Although the peak selling seasons for our liquid and
granular do not overlap, we may still experience seasonal variations,
and we cannot assure you that sales of our granular fertilizer products will
mitigate the seasonal impact of liquid fertilizer sales.
If
we are unable to design, manufacture, and market products in a timely and
efficient manner, we may not remain as competitive.
Some of
our products are characterized by continuing technological advancement, changes
in customer requirements, and evolving product
standards. Accordingly, we devote a substantial amount of resources
to product development. To compete successfully, we must develop and offer new
and/or improved products that provide increasingly higher levels of performance
and reliability. New technologies may be untested or unproven. In
some instances, product requirements or specifications may be
modified. As a result, we may experience technological and other
performance difficulties, which may result in delays, setbacks and cost
overruns. Product development is highly uncertain and we cannot
assure you that we will successfully develop new products. Our inability to
develop and offer new and/or improved products or to achieve customer acceptance
of these products could limit our ability to compete in the market or to grow
revenues at desired rates of growth.
Our
ability to attract new customers in the PRC depends on the continued transition
from the use of less expensive chemical fertilizers to organic fertilizers that
we sell.
We
estimate that approximately 90% of the fertilizer products used in the PRC today
are chemical fertilizers, rather than organic fertilizers. Farmers in
the PRC have been using chemical fertilizers for decades, and we believe that
our growth depends on our ability to convince these farmers to switch to organic
fertilizers, such as our products, despite the increased cost of such
products. Many prospective customers are rural farmers that are
isolated and, we believe, lack an understanding of the environmental and health
benefits of our organic fertilizer products. Even if these potential
customers are aware of the benefits of our products, we believe that the
increased cost of our products as compared to chemical fertilizers may be
prohibitive for some rural farmers. While we may take steps, though
our distributors, to educate users of chemical fertilizers about the benefits of
our products, we believe that it will be difficult to convince significant
numbers of small farmers, some of who use no fertilizer at all, to purchase our
products. If we cannot continue to drive the transition to organic
fertilizer products in the provinces that we serve, our sales will stagnate and
our financial results will suffer.
Our
entry into foreign markets exposes us to changes in foreign regulations and
other risks inherent to international business, any of which could effect our
results of operations.
In June
2009, we granted exclusive marketing and distribution rights for certain of our
Lvlingbao liquid organic fertilizer products to Odyssey International (Trading)
Group Ltd. (“Odyssey”), which plans to market our products in Central and South
America, South Africa and certain Southeast Asian
countries. Distributing our products in these markets presents risks
including:
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volatility
in general economic, social and political
conditions;
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differing
tax rates, tariffs, exchange controls or other similar
restrictions;
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changes
in currency rates;
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inability
to repatriate income or capital;
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changes
in, and compliance with, domestic and foreign laws and regulations which
impose a range of restriction on operations, trade practices, trade
partners and investment decisions;
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seizure
of our products by foreign
governments
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boycotts
and embargoes that may be imposed by the international community on
countries in which we operate;
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disruptions
due to civil war, election outcomes, shortages of commodities, power
interruptions or inflation; the imposition of unexpected taxes or other
payments on revenues; and
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Any of
these risks could limit our ability to operate or have a negative impact on our
profitability.
We
have granted exclusive rights to market and distribute our Lvlingbao line of
liquid organic compound fertilizers to Odyssey International
(Trading) Group Ltd. (“Odyssey”) and their efforts to market and distribute our
products are outside of our control.
In June
2009 we granted Odyssey the exclusive right to market and distribute our
Lvlingbao III liquid organic compound fertilizers in Guangdong, Guangxi and
Hainan provinces within the PRC, as well as Central and South America, South
Africa and certain Southeast Asian countries. The revenue we earn
from the sale of our products under the agreement depends heavily on Odyssey’s
efforts. Odyssey has significant discretion in determining the efforts and
resources it applies to the marketing and sale of our products, and Odyssey has
a significant number of other clients whose products it distributes.
Furthermore, regardless of the effort and resources they invest, Odyssey may not
be effective in distributing or marketing our products. A
disagreement between us and Odyssey could lead to lengthy and expensive dispute
resolution proceedings as well as to extensive financial and operational
consequences to us, and have a material adverse effect on our business, results
of operations and financial condition. If our relationship with Odyssey were to
terminate, we may not be able to enter into another distribution and marketing
agreement with a company with similar resources to distribute our products and
perform on acceptable terms or at all. As a result, we could experience delays
in our ability to distribute our products and increased expenses, all of which
would have a material adverse affect on our business, results of operations and
financial condition.
Our
operating results will suffer if the price of raw materials increases and we
cannot pass the increased cost through to our customers.
The
primary raw materials included in our products are humic acid, nitrogen,
phosphorus, kalium and other supplementary material. The prices for these raw
materials are subject to market forces largely beyond our control, including
energy costs, organic chemical feedstock, market demand, and freight costs. The
prices for these raw materials may fluctuate significantly based upon changes in
these forces. Our operating results may be seriously harmed if we are unable to
pass any raw material price increases through to our customers due to lower
margins from our sales. If we are forced to increase prices of our products due
to increases in the prices of raw materials, the demand for our products could
decrease, which could materially harm our operations and financial
results.
If
we cannot renew our fertilizer registration certificate, which expires in 2012,
we will be unable to sell some of our products which will cause our sales
revenues to significantly decrease.
All
manufacturers of fertilizers produced in the PRC must be registered with the PRC
Ministry of Agriculture. No fertilizer can be manufactured without such
registration. There are two kinds of registrations: interim registration and
formal registration. The interim registration is valid for one year and applies
to fertilizers in the stages of in-the-field testing and test selling.
Fertilizers that have completed in-the-field testing and test selling must
obtain formal registration, which is valid for five years, and thereafter must
be renewed each five years. We have obtained a Formal Fertilizer Registration
Certificate covering all of our fertilizer products from the PRC Ministry of
Agriculture. Such certificate was issued on May 28, 2008 and will expire in
December 2012.
Our
belief is that the PRC Ministry of Agriculture generally will grant an
application for renewal in the absence of illegal activity by the applicant.
However, there is no guarantee that the PRC Ministry of Agriculture will grant
renewal of our Formal Fertilizer Registration Certificate. If we cannot obtain
the necessary renewal, we will not be able to manufacture and sell our
fertilizer products in China which will cause the termination of our commercial
operations.
The
markets in which we operate are highly competitive and fragmented and we may not
be able to maintain market share.
We
operate in highly competitive markets and compete with numerous local PRC
fertilizer manufacturers and we expect competition to persist and intensify in
the future. Our competitors are mainly domestic leaders in the fertilizer
markets in China. Our small local competitors may have better access in certain
local markets to customers and prospects, an enhanced ability to customize
products to a particular region or locality and more established local
distribution channels within a small region. We also compete with large PRC
national competitors who may have competitive advantages over us in certain
areas such as access to capital, technology, product quality, economies of scale
and brand recognition and may also be better positioned than us to develop
superior product features and technological innovations and to exploit and adapt
to market trends. Additionally, we may not be able to conduct in-depth research
and analysis on our current or new markets due to the lack of public or
third-party sources of competitive information available on our industry and
competitors in the PRC. Therefore, we may not have a clear estimate of the
current number of our direct competitor or such competitors' revenues or market
share.
In
addition, China's entry into the World Trade Organization may lead to increased
foreign competition for us. International producers and traders import products
into China that generally are of higher quality than those produced in the local
Chinese market. If they are localized and become recognized as the type of
fertilizer we produce, we may face additional competition. If we are not
successful in our marketing and advertising efforts to increase awareness of our
brands, our revenues could decline, which could have a material adverse effect
on our business, financial condition, results of operations and share price. We
cannot assure you that additional competitors will not enter our existing
markets, or that we will be able to compete successfully against existing or new
competition
We
do not presently maintain business disruption insurance. Any disruption of the
operations in our factories would damage our business and disrupt our production
and have a material adverse effect on our business, financial position on
results of operations.
Our
business could be materially and adversely affected by power shortages, natural
disasters, terrorist attacks or other events in the PRC. For example, in early
2008, parts of the PRC suffered a wave of strong snow storms that severely
impacted public transportation systems and the power supply in those areas. In
May 2008, Sichuan Province in the PRC suffered a strong earthquake measuring
approximately 8.0 on the Richter scale that caused widespread damage and
casualties. The May 2008 Sichuan earthquake may have a material adverse effect
on the general economic conditions in the areas affected by the earthquake. In
July 2008, explosive devices were detonated on several buses in Kunming, Yunnan
Province of the PRC, which resulted in disruptions to public transportation
systems in Kunming and casualties. Any future natural disasters, terrorist
attacks or other events in the PRC could cause a reduction in usage of, or other
severe disruptions to, public transportation systems and could have a material
adverse effect on our business and results of operations.
The
demand for our organic fertilizer products fluctuates significantly with weather
conditions, which may delay the application of the fertilizer or render it
unnecessary at all. If any natural disasters, such as flood, drought, hail,
tornado or earthquake, occur, demands for our products will be reduced. In
addition, in some cases, we allow our distributors to purchase our products
partially on credit. The distributors, in turn, may sell the fertilizer to
farmers on credit. If any natural disaster occurs, reduced crop yields may cause
farmers to default on their payments which could harm our cash flow and results
of operations. If we are unable to collect on our sales our cash flows will
decrease and we will have additional expenses from bad debts which will harm our
published financials results.
While we
have property damage insurance and automobile insurance, we do not carry
business disruption insurance, which is not readily available in the PRC. Any
disruption of the operations in our factories would have a significant negative
impact on our ability to manufacture and deliver products, which would cause a
potential diminution in sales, the cancellation of orders, damage to our
reputation and potential lawsuits.
The
fertilizer products that we manufacture pose safety risks and could expose us to
product liability claims.
Defects
in, or unknown harmful effects caused by, organic and inorganic chemical and
elements in our products could subject us to potential product liability claims
that our products cause some harm to the human body or to property. Although we
have adopted safety measures of industry standard in our research, development
and manufacturing processes, accidents may still occur. Any accident, either at
the manufacturing phase or during the use of our products, may subject us to
significant liabilities to persons harmed by these products. We have renewed
product liability insurance to cover claims from personal injuries or property
damage caused by our products for the period from July 11, 2009 to July 10,
2010. Our insurance coverage was limited to approximately $585,000 (RMB
4,000,000) and may not have been sufficient to cover potential
claims. A successful claim against us that is in excess of our
insurance coverage could significantly harm our business and financial
condition. Public perception that our products are not safe, whether justified
or not, could impair our reputation, involve us in litigation, damage our brand
names and our business. As of the filing of this prospectus, no product
liability claim has ever been brought against us. However, if we are involved in
litigation in the future the potential judgment or settlement along with the
litigation costs could harm our financial performance.
SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS
This
prospectus or any accompanying prospectus supplement, including the documents
that we incorporate by reference, may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Forward-looking statements include those that
express plans, anticipation, intent, contingency, goals, targets or future
development and/or otherwise are not statements of historical fact. Any
forward-looking statements are based on our current expectations and projections
about future events and are subject to risks and uncertainties known and unknown
that could cause actual results and developments to differ materially from those
expressed or implied in such statements.
In some
cases, you can identify forward-looking statements by terminology, such as
“expects,” “anticipates,” “intends,” “estimates,” “plans,” “believes,” “seeks,”
“may,” “should”, “could” or the negative of such terms or other similar
expressions. Accordingly, these statements involve estimates, assumptions and
uncertainties that could cause actual results to differ materially from those
expressed in them. Any forward-looking statements are qualified in their
entirety by reference to the risk factors described herein and those included in
any accompanying prospectus supplement or in any document incorporated by
reference into this prospectus.
You
should read this prospectus and any accompanying prospectus supplement and the
documents that we reference herein and therein and have filed as exhibits to the
registration statement, of which this prospectus is part, completely and with
the understanding that our actual future results may be materially different
from what we concurrently expect. You should assume that the information
appearing in this prospectus, any accompanying prospectus supplement and any
document incorporated herein by reference is accurate as of its date only.
Because the risk factors referred to above, as well as the risk factors referred
to on page 9 of this prospectus and incorporated herein by reference, could
cause actual results or outcomes to differ materially from those expressed in
any forward-looking statements made by us or on our behalf, you should not place
undue reliance on any forward-looking statements. Further, any forward-looking
statement speaks only as of the date on which it is made, and we undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to time, and it
is not possible for us to predict which factors will arise. In addition, we
cannot assess the impact of each factor on our business or the extent to which
any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements. We qualify
all of the information presented in this prospectus, any accompanying prospectus
supplement and any document incorporated herein by reference, and particularly
our forward-looking statements, by these cautionary
statements.
USE
OF PROCEEDS
Except as
otherwise provided in the applicable prospectus supplement, we intend to use the
net proceeds from the sale of the securities covered by this prospectus for
general corporate purposes, which may include, but is not limited to, working
capital, capital expenditures, research and development expenditures,
acquisitions of new technologies or businesses and the establishment of branded
chain stores. The precise amount, use and timing of the application
of such proceeds will depend upon our funding requirements and the availability
and cost of other capital. Additional information on the use of net proceeds
from an offering of securities covered by this prospectus may be set forth in
the prospectus supplement relating to the specific offering.
RATIO
OF EARNINGS TO FIXED CHARGES
Not
applicable to smaller reporting companies.
PLAN
OF DISTRIBUTION
We may
sell the securities being offered pursuant to this prospectus to or through
underwriters, through dealers, through agents, or directly to one or more
purchasers or through a combination of these methods. The applicable prospectus
supplement will describe the terms of the offering of the securities,
including:
·
|
the name or names of any
underwriters, if, and if required, any dealers or
agents;
|
·
|
the purchase price of the
securities and the proceeds we will receive from the
sale;
|
·
|
any underwriting discounts and
other items constituting underwriters’
compensation;
|
·
|
any discounts or concessions
allowed or reallowed or paid to dealers;
and
|
·
|
any securities exchange or market
on which the securities may be listed or
traded.
|
We may
distribute the securities from time to time in one or more transactions
at:
·
|
a fixed price or prices, which
may be changed;
|
·
|
market prices prevailing at the
time of sale;
|
·
|
prices related to such prevailing
market prices; or
|
O
nly underwriters named in
the prospectus supplement are underwriters of the securities offered by the
prospectus supplement.
If
underwriters are used in an offering, we will execute an underwriting agreement
with such underwriters and will specify the name of each underwriter and the
terms of the transaction (including any underwriting discounts and other terms
constituting compensation of the underwriters and any dealers) in a prospectus
supplement. The securities may be offered to the public either through
underwriting syndicates represented by managing underwriters or directly by one
or more investment banking firms or others, as designated. If an underwriting
syndicate is used, the managing underwriter(s) will be specified on the cover of
the prospectus supplement. If underwriters are used in the sale, the offered
securities will be acquired by the underwriters for their own accounts and may
be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Any public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time. Unless
otherwise set forth in the prospectus supplement, the obligations of the
underwriters to purchase the offered securities will be subject to conditions
precedent, and the underwriters will be obligated to purchase all of the offered
securities, if any are purchased.
We may
grant to the underwriters options to purchase additional securities to cover
over-allotments, if any, at the public offering price, with additional
underwriting commissions or discounts, as may be set forth in a related
prospectus supplement. The terms of any over-allotment option will be set forth
in the prospectus supplement for those securities.
If we use
a dealer in the sale of the securities being offered pursuant to this prospectus
or any prospectus supplement, we will sell the securities to the dealer, as
principal. The dealer may then resell the securities to the public at varying
prices to be determined by the dealer at the time of resale. The names of the
dealers and the terms of the transaction will be specified in a prospectus
supplement.
We may
sell the securities directly or through agents we designate from time to time.
We will name any agent involved in the offering and sale of securities and we
will describe any commissions we will pay the agent in the prospectus
supplement. Unless the prospectus supplement states otherwise, any agent will
act on a best-efforts basis for the period of its appointment.
We may
authorize agents or underwriters to solicit offers by institutional investors to
purchase securities from us at the public offering price set forth in the
prospectus supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. We will describe the
conditions to these contracts and the commissions we must pay for solicitation
of these contracts in the prospectus supplement.
In
connection with the sale of the securities, underwriters, dealers or agents may
receive compensation from us or from purchasers of the securities for whom they
act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell the securities to or through dealers, and those dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters or commissions from the purchasers for whom they may act
as agents. Underwriters, dealers and agents that participate in the distribution
of the securities, and any institutional investors or others that purchase
securities directly for the purpose of resale or distribution, may be deemed to
be underwriters, and any discounts or commissions received by them from us and
any profit on the resale of the common stock by them may be deemed to be
underwriting discounts and commissions under the Securities Act.
We may
provide agents, underwriters and other purchasers with indemnification against
particular civil liabilities, including liabilities under the Securities Act, or
contribution with respect to payments that the agents, underwriters or other
purchasers may make with respect to such liabilities. Agents and underwriters
may engage in transactions with, or perform services for, us in the ordinary
course of business.
To
facilitate the public offering of a series of securities, persons participating
in the offering may engage in transactions that stabilize, maintain, or
otherwise affect the market price of the securities. This may include
over-allotments or short sales of the securities, which involves the sale by
persons participating in the offering of more securities than have been sold to
them by us. In exercising the over-allotment option granted to those persons. In
addition, those persons may stabilize or maintain the price of the securities by
bidding for or purchasing securities in the open market or by imposing penalty
bids, whereby selling concessions allowed to underwriters or dealers
participating in any such offering may be reclaimed if securities sold by them
are repurchased in connection with stabilization transactions. The effect of
these transactions may be to stabilize or maintain the market price of the
securities at a level above that which might otherwise prevail in the open
market. Such transactions, if commenced, may be discontinued at any time. We
make no representation or prediction as to the direction or magnitude of any
effect that the transactions described above, if implemented, may have on the
price of our securities.
Unless
otherwise specified in the applicable prospectus supplement, any common stock
sold pursuant to a prospectus supplement will be eligible for listing on The
NASDAQ Global Market, subject to official notice of issuance. Any underwriters
to whom securities are sold by us for public offering and sale may make a market
in the securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice.
In order
to comply with the securities laws of some states, if applicable, the securities
offered pursuant to this prospectus will be sold in those states only through
registered or licensed brokers or dealers. In addition, in some states
securities may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and complied with.
DESCRIPTIONS
OF THE SECURITIES WE MAY OFFER
The
descriptions of the securities contained in this prospectus, together with any
applicable prospectus supplement, summarize all the material terms and
provisions of the various types of securities that we may offer. We will
describe in the applicable prospectus supplement relating to a particular
offering the specific terms of the securities offered by that prospectus
supplement. We will indicate in the applicable prospectus supplement if the
terms of the securities differ from the terms we have summarized below. We will
also include in the prospectus supplement information, where applicable,
material United States federal income tax considerations relating to the
securities.
We may
sell from time to time, in one or more offerings:
·
|
shares of our common
stock;
|
·
|
shares of our preferred
stock;
|
·
|
debt
securities, in one or more series;
|
·
|
warrants
to purchase any of the securities listed above;
and/or
|
·
|
units
consisting of one or more of the
foregoing.
|
This
prospectus may not be used to consummate a sale of securities unless it is
accompanied by a prospectus supplement.
Capital
Stock
General
The
following description of common stock and preferred stock, together with the
additional information we include in any applicable prospectus supplement,
summarizes the material terms and provisions of the common stock and preferred
stock that we may offer under this prospectus, but is not complete. For the
complete terms of our common stock and preferred stock, please refer to our
certificate of incorporation, as may be amended from time to time, any
certificates of designation for our preferred stock, and our bylaws, as amended
from time to time. The Delaware General Corporation Law may also affect the
terms of these securities. While the terms we have summarized below will apply
generally to any future common stock or preferred stock that we may offer, we
will describe the specific terms of any series of these securities in more
detail in the applicable prospectus supplement. If we so indicate in a
prospectus supplement, the terms of any common stock or preferred stock we offer
under that prospectus supplement may differ from the terms we describe
below.
Common
Stock
We are
authorized to issue 100,000,000 shares of common stock, par value, $0.001 per
share. As of February 1, 2010, 17,329,142 shares of common stock are
outstanding, held by 951 holders of record. We have 83,680,958,
authorized and unissued shares of common stock which are available for future
issuance without additional stockholder approval, of which 1,800,000 shares of
common stock have been reserved for issuance under our 2008 Equity Incentive
Plan. While the additional shares are not designed to deter or
prevent a change of control, under some circumstances we could use them to
create voting impediments or to frustrate persons seeking to effect a takeover
or otherwise gain control, by, for example, issuing shares in private placements
to purchasers who might side with the board of directors in opposing a hostile
takeover bid.
Holders
of our common stock are entitled to one vote for each share they own on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Subject to the preferences and rights, if any, applicable to outstanding
preferred stock, holders of common stock are entitled to receive dividends if
and when declared by the board of directors. Subject to the prior rights of the
holders, if any, of preferred stock, holders of common stock are entitled to
share ratably in any distribution of our assets upon liquidation, dissolution or
winding-up, after satisfaction of all debts and other
liabilities.
On
February 1, 2010, we effected a 2 for 1 forward split of our common stock on the
basis of two shares for every one outstanding shares, so that every outstanding
share of common stock before the forward stock split was converted into two
shares of common stock after the forward stock split.
Our
common stock is listed on The NASDAQ Global Market under the symbol “CAGC.” The
transfer agent and registrar for our common stock is Securities Transfer
Corporation..
Preferred
Stock
Our board
of directors is authorized to issue up to the total of 10,000,000 shares of
preferred stock, par value $0.001 per share, without any further action by the
stockholders. Our board of directors may also divide the shares of preferred
stock into series and fix and determine the relative rights and preferences of
the preferred stock, such as the designation of series and the number of shares
constituting such series, dividend rights, redemption and sinking fund
provisions, liquidation and dissolution preferences, conversion or exchange
rights and voting rights, if any. Issuance of preferred stock by our board of
directors will result in such shares having dividend and/or liquidation
preferences senior to the rights of the holders of our common stock and could
dilute the voting rights of the holders of our common stock. Once
designated by our board of directors, each series of preferred stock will have
specific financial and other terms that will be described in a prospectus
supplement. The description of the preferred stock that is set forth in any
prospectus supplement is not complete without reference to the documents that
govern the preferred stock. These include our certificate of incorporation, as
amended, and any certificates of designation that our board of directors may
adopt. Prior to the issuance of shares of each series of preferred stock, the
board of directors is required by the Delaware General Corporation Law and our
certificate of incorporation to adopt resolutions and file a certificate of
designations with the Secretary of State of the State of Delaware. The
certificate of designations fixes for each class or series the designations,
powers, preferences, rights, qualifications, limitations and restrictions,
including, but not limited to, some or all of the following:
·
|
the number of shares constituting
that series and the distinctive designation of that series, which number
may be increased or decreased (but not below the number of shares then
outstanding) from time to time by action of the board of
directors;
|
·
|
the dividend rate and the manner
and frequency of payment of dividends on the shares of that series,
whether dividends will be cumulative, and, if so, from which
date;
|
·
|
whether that series will have
voting rights, in addition to any voting rights provided by law, and, if
so, the terms of such voting
rights;
|
·
|
whether that series will have
conversion privileges, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the conversion rate in
such events as the board of directors may
determine;
|
·
|
whether or not the shares of that
series will be redeemable, and, if so, the terms and conditions of such
redemption;
|
·
|
whether that series will have a
sinking fund for the redemption or purchase of shares of that series, and,
if so, the terms and amount of such sinking
fund;
|
·
|
whether or not the shares of the
series will have priority over or be on a parity with or be junior to the
shares of any other series or class in any
respect;
|
·
|
the rights of the shares of that
series in the event of voluntary or involuntary liquidation, dissolution
or winding up of the corporation, and the relative rights or priority, if
any, of payment of shares of that series;
and
|
·
|
any other relative rights,
preferences and limitations of that
series.
|
All
shares of preferred stock offered hereby will, when issued, be fully paid and
nonassessable, including shares of preferred stock issued upon the exercise of
preferred stock warrants or subscription rights, if any.
Although
our board of directors has no intention at the present time of doing so, it
could authorize the issuance of a series of preferred stock that could,
depending on the terms of such series, impede the completion of a merger, tender
offer or other takeover attempt.
Options/Warrants
As of
February 1, 2010 we had outstanding options to purchase a total of
245,000 shares of our Common Stock and outstanding warrants to purchase a total
of 1,857,028 shares of our Common Stock.
|
·
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On
October 19, 2009 we issued a warrant to purchase up to an aggregate of
1,857,028 shares of common stock at an initial exercise price of
approximately $5.38 per share, subject to adjustment, to Carlyle Asia
Growth Partners IV, L.P. and CAGP IV Co-Investment, L.P. The warrants
issued to the Carlyle Investors will become exercisable on April 19, 2010
and expire April 19, 2012. The exercise price of the warrants
has a floor of approximately $1.3285 per share, and in the event that the
warrants are exercised at that price, we would issue an additional
4,666,662 shares
|
Warrants
The
following description, together with the additional information we may include
in any applicable prospectus supplement, summarizes the material terms and
provisions of the warrants that we may offer under this prospectus and any
related warrant agreement and warrant certificate. While the terms summarized
below will apply generally to any warrants that we may offer, we will describe
the specific terms of any series of warrants in more detail in the applicable
prospectus supplement. If we indicate in the prospectus supplement, the terms of
any warrants offered under that prospectus supplement may differ from the terms
described below. Specific warrant agreements will contain additional important
terms and provisions and will be incorporated by reference as an exhibit to the
registration statement which includes this prospectus.
General
We may
issue warrants for the purchase of common stock, preferred stock and/or debt
securities in one or more series. We may issue warrants independently or
together with common stock, preferred stock and/or debt securities, and the
warrants may be attached to or separate from these securities.
We will
evidence each series of warrants by warrant certificates that we may issue under
a separate agreement. We may enter into a warrant agreement with a warrant
agent. Each warrant agent may be a bank that we select which has its principal
office in the United States and a combined capital and surplus of at least
$200,000,000. We may also choose to act as our own warrant agent. We will
indicate the name and address of any such warrant agent in the applicable
prospectus supplement relating to a particular series of warrants.
We will
describe in the applicable prospectus supplement the terms of the series of
warrants, including:
·
|
the
offering price and aggregate number of warrants
offered;
|
·
|
if applicable, the designation
and terms of the securities with which the warrants are issued and the
number of warrants issued with each such security or each principal amount
of such security;
|
·
|
if applicable, the date on and
after which the warrants and the related securities will be separately
transferable;
|
·
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in the case of warrants to
purchase debt securities, the principal amount of debt securities
purchasable upon exercise of one warrant and the price at, and currency in
which, this principal amount of debt securities may be purchased upon such
exercise;
|
·
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in the case of warrants to
purchase common stock or preferred stock, the number or amount of shares
of common stock or preferred stock, as the case may be, purchasable upon
the exercise of one warrant and the price at which and currency in which
these shares may be purchased upon such
exercise;
|
·
|
the manner of exercise of the
warrants, including any cashless exercise
rights;
|
·
|
the warrant agreement under which
the warrants will be issued;
|
·
|
the effect of any merger,
consolidation, sale or other disposition of our business on the warrant
agreement and the warrants;
|
·
|
anti-dilution provisions of the
warrants, if any;
|
·
|
the terms of any rights to redeem
or call the warrants;
|
·
|
any provisions for changes to or
adjustments in the exercise price or number of securities issuable upon
exercise of the warrants;
|
·
|
the dates on which the right to
exercise the warrants will commence and expire or, if the warrants are not
continuously exercisable during that period, the specific date or dates on
which the warrants will be
exercisable;
|
·
|
the manner in which the warrant
agreement and warrants may be
modified;
|
·
|
the identities of the warrant
agent and any calculation or other agent for the
warrants;
|
·
|
federal income tax consequences
of holding or exercising the
warrants;
|
·
|
the terms of the securities
issuable upon exercise of the
warrants;
|
·
|
any securities exchange or
quotation system on which the warrants or any securities deliverable upon
exercise of the warrants may be listed or quoted;
and
|
·
|
any other specific terms,
preferences, rights or limitations of or restrictions on the
warrants.
|
Before
exercising their warrants, holders of warrants will not have any of the rights
of holders of the securities purchasable upon such exercise,
including:
·
|
in the case of warrants to
purchase debt securities, the right to receive payments of principal of,
or premium, if any, or interest on, the debt securities purchasable upon
exercise or to enforce covenants in the applicable indenture;
or
|
·
|
in the case of warrants to
purchase common stock or preferred stock, the right to receive dividends,
if any, or, payments upon our liquidation, dissolution or winding up or to
exercise voting rights, if
any.
|
Exercise
of Warrants
Each
warrant will entitle the holder to purchase the securities that we specify in
the applicable prospectus supplement at the exercise price that we describe in
the applicable prospectus supplement. Unless we otherwise specify in the
applicable prospectus supplement, holders of the warrants may exercise the
warrants at any time up to 5:00 P.M. eastern time on the expiration date that we
set forth in the applicable prospectus supplement. After the close of business
on the expiration date, unexercised warrants will become
void.
Holders
of the warrants may exercise the warrants by delivering the warrant certificate
representing the warrants to be exercised together with specified information,
and paying the required exercise price by the methods provided in the applicable
prospectus supplement. We will set forth on the reverse side of the warrant
certificate, and in the applicable prospectus supplement, the information that
the holder of the warrant will be required to deliver to the warrant
agent.
Upon
receipt of the required payment and the warrant certificate properly completed
and duly executed at the corporate trust office of the warrant agent or any
other office indicated in the applicable prospectus supplement, we will issue
and deliver the securities purchasable upon such exercise. If fewer than all of
the warrants represented by the warrant certificate are exercised, then we will
issue a new warrant certificate for the remaining amount of
warrants.
Enforceability
of Rights By Holders of Warrants
Any
warrant agent will act solely as our agent under the applicable warrant
agreement and will not assume any obligation or relationship of agency or trust
with any holder of any warrant. A single bank or trust company may act as
warrant agent for more than one issue of warrants. A warrant agent will have no
duty or responsibility in case of any default by us under the applicable warrant
agreement or warrant, including any duty or responsibility to initiate any
proceedings at law or otherwise, or to make any demand upon us. Any holder of a
warrant may, without the consent of the related warrant agent or the holder of
any other warrant, enforce by appropriate legal action the holder’s right to
exercise, and receive the securities purchasable upon exercise of, its warrants
in accordance with their terms.
Warrant
Agreement Will Not Be Qualified Under Trust Indenture Act
No
warrant agreement will be qualified as an indenture, and no warrant agent will
be required to qualify as a trustee, under the Trust Indenture Act. Therefore,
holders of warrants issued under a warrant agreement will not have the
protection of the Trust Indenture Act with respect to their
warrants.
Governing
Law
Each
warrant agreement and any warrants issued under the warrant agreements will be
governed by New York law.
Calculation
Agent
Any
calculations relating to warrants may be made by a calculation agent, an
institution that we appoint as our agent for this purpose. The prospectus
supplement for a particular warrant will name the institution that we have
appointed to act as the calculation agent for that warrant as of the original
issue date for that warrant, if any. We may appoint a different institution to
serve as calculation agent from time to time after the original issue date
without the consent or notification of the holders. The calculation agent’s
determination of any amount of money payable or securities deliverable with
respect to a warrant will be final and binding in the absence of manifest
error.
Debt
Securities
The
following description, together with the additional information we include in
any applicable prospectus supplements, summarizes the material terms and
provisions of the debt securities that we may offer under this prospectus.
While the terms we have summarized below will generally apply to any future debt
securities we may offer under this prospectus, we will describe the particular
terms of any debt securities that we may offer in more detail in the applicable
prospectus supplement. The terms of any debt securities we offer under a
prospectus supplement may differ from the terms we describe
below. As of the date of this prospectus, we have no
outstanding registered debt securities.
We will
issue senior notes under a senior indenture, which we will enter into with the
trustee to be named in the senior indenture. We will issue subordinated
notes under a subordinated indenture, which we will enter into with the trustee
to be named in the subordinated indenture. We have filed forms of these
documents as exhibits to the registration statement of which this prospectus is
a part. We use the term “indentures” to refer to both the senior indenture
and the subordinated indenture.
The
indentures will be qualified under the Trust Indenture Act of 1939. We use
the term “debenture trustee” to refer to either the senior trustee or the
subordinated trustee, as applicable.
The
following summaries of material provisions of the senior notes, the subordinated
notes and the indentures are subject to, and qualified in their entirety by
reference to, all the provisions of the indenture applicable to a particular
series of debt securities. We urge you to read the applicable prospectus
supplements related to the debt securities that we sell under this prospectus,
as well as the complete indentures that contain the terms of the debt
securities. Except as we may otherwise indicate, the terms of the senior
and the subordinated indentures are identical.
General
The terms
of each series of debt securities will be established by or pursuant to a
resolution of our board of directors and set forth or determined in the manner
provided in an officers’ certificate or by a supplemental indenture. Debt
securities may be issued in separate series without limitation as to aggregate
principal amount. We may specify a maximum aggregate principal amount for the
debt securities of any series. The particular terms of each series of debt
securities will be described in a prospectus supplement relating to such series,
including any pricing supplement. The prospectus supplement will set
forth:
·
the title;
·
the principal amount being offered, and, if a series, the total amount
authorized and the total amount outstanding;
·
any limit on the amount that may be issued;
·
whether or not we will issue the series of debt securities in global form
and, if so, the terms and who the depositary will be;
·
the maturity date;
·
whether and under what circumstances, if any, we will pay additional
amounts on any debt securities held by a person who is not a U.S. person for tax
purposes, and whether we can redeem the debt securities if we have to pay such
additional amounts;
·
the annual interest rate, which may be fixed or variable, or the method
for determining the rate, the date interest will begin to accrue, the dates
interest will be payable and the regular record dates for interest payment dates
or the method for determining such dates;
·
whether or not the debt securities will be secured or unsecured, and the
terms of any secured debt;
·
the terms of the subordination of any series of subordinated
debt;
·
the place where payments will be payable;
·
restrictions on transfer, sale or other assignment, if any;
·
our right, if any, to defer payment of interest and the maximum length of
any such deferral period;
·
the date, if any, after which, the conditions upon which, and the price
at which we may, at our option, redeem the series of debt securities pursuant to
any optional or provisional redemption provisions, and any other applicable
terms of those redemption provisions;
·
the date, if any, on which, and the price at which we are obligated,
pursuant to any mandatory sinking fund or analogous fund provisions or
otherwise, to redeem, or at the holder’s option to purchase, the series of debt
securities and the currency or currency unit in which the debt securities are
payable;
·
whether the indenture will restrict our ability and/or the ability of our
subsidiaries to, among other things,:
·
incur additional indebtedness;
·
issue additional securities;
·
create liens;
·
pay dividends and make distributions in respect of our capital stock and
the capital stock of our subsidiaries;
·
redeem capital stock;
·
place restrictions on our subsidiaries’ ability to pay dividends, make
distributions or transfer assets;
·
make investments or other restricted payments;
·
sell or otherwise dispose of assets;
·
enter into sale-leaseback transactions;
·
engage in transactions with stockholders and affiliates;
·
issue or sell stock of our subsidiaries; or
·
effect a consolidation or merger;
·
whether the indenture will require us to maintain any interest coverage,
fixed charge, cash flow-based, asset-based or other financial
ratios;
·
a discussion of any material or special U.S. federal income tax
considerations applicable to the debt securities;
·
information describing any book-entry features;
·
provisions for a sinking fund purchase or other analogous fund, if
any;
·
whether the debt securities are to be offered at a price such that they
will be deemed to be offered at an “original issue discount” as defined in
paragraph (a) of Section 1273 of the Internal Revenue
Code;
·
the procedures for any auction and remarketing, if any;
·
the denominations in which we will issue the series of debt securities,
if other than denominations of $1,000 and any integral multiple
thereof;
·
if other than dollars, the currency in which the series of debt
securities will be denominated; and
·
any other specific terms, preferences, rights or limitations of, or
restrictions on, the debt securities, including any events of default that are
in addition to those described in this prospectus or any covenants provided with
respect to the debt securities that are in addition to those described above,
and any terms that may be required by us or advisable under applicable laws or
regulations or advisable in connection with the marketing of the debt
securities.
Conversion
or Exchange Rights
We will
set forth in the prospectus supplement the terms on which a series of debt
securities may be convertible into or exchangeable for common stock or other
securities of ours or a third party, including the conversion or exchange rate,
as applicable, or how it will be calculated, and the applicable conversion or
exchange period. We will include provisions as to whether conversion or
exchange is mandatory, at the option of the holder or at our option. We
may include provisions pursuant to which the number of our securities or the
securities of a third party that the holders of the series of debt securities
receive upon conversion or exchange would, under the circumstances described in
those provisions, be subject to adjustment, or pursuant to which those holders
would, under those circumstances, receive other property upon conversion or
exchange, for example in the event of our merger or consolidation with another
entity.
Consolidation,
Merger or Sale
The
indentures in the forms initially filed as exhibits to the registration
statement of which this prospectus is a part do not contain any covenant that
restricts our ability to merge or consolidate, or sell, convey, transfer or
otherwise dispose of all or substantially all of our assets. However, any
successor of ours or the acquirer of such assets must assume all of our
obligations under the indentures and the debt securities.
If the
debt securities are convertible for our other securities, the person with whom
we consolidate or merge or to whom we sell all of our property must make
provisions for the conversion of the debt securities into securities that the
holders of the debt securities would have received if they had converted the
debt securities before the consolidation, merger or sale.
Events
of Default Under the Indenture
The
following are events of default under the indentures in the forms initially
filed as exhibits to the registration statement with respect to any series of
debt securities that we may issue:
·
if we fail to pay interest when due and payable and our failure continues
for 90 days and the time for payment has not been extended or
deferred;
·
if we fail to pay the principal, sinking fund payment or premium, if any,
when due and payable and the time for payment has not been extended or
delayed;
·
if we fail to observe or perform any other covenant contained in the debt
securities or the indentures, other than a covenant specifically relating to
another series of debt securities, and our failure continues for 90 days after
we receive notice from the debenture trustee or holders of at least 25% in
aggregate principal amount of the outstanding debt securities of the applicable
series; and
·
if specified events of bankruptcy, insolvency or reorganization
occur.
If an
event of default with respect to debt securities of any series occurs and is
continuing, other than an event of default specified in the last bullet point
above, the debenture trustee or the holders of at least 25% in aggregate
principal amount of the outstanding debt securities of that series, by notice to
us in writing, and to the debenture trustee if notice is given by such holders,
may declare the unpaid principal of, premium, if any, and accrued interest, if
any, due and payable immediately. If an event of default specified in the
last bullet point above occurs with respect to us, the principal amount of and
accrued interest, if any, of each issue of debt securities then outstanding
shall be due and payable without any notice or other action on the part of the
debenture trustee or any holder.
The
holders of a majority in principal amount of the outstanding debt securities of
an affected series may waive any default or event of default with respect to the
series and its consequences, except defaults or events of default regarding
payment of principal, premium, if any, or interest, unless we have cured the
default or event of default in accordance with the indenture. Any waiver
shall cure the default or event of default.
Subject
to the terms of the indentures, if an event of default under an indenture shall
occur and be continuing, the debenture trustee will be under no obligation to
exercise any of its rights or powers under such indenture at the request or
direction of any of the holders of the applicable series of debt securities,
unless such holders have offered the debenture trustee reasonable
indemnity. The holders of a majority in principal amount of the
outstanding debt securities of any series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the debenture trustee, or exercising any trust or power conferred on the
debenture trustee, with respect to the debt securities of that series, provided
that:
·
the direction so given by the holder is not in conflict with any law or
the applicable indenture; and
·
subject to its duties under the Trust Indenture Act of 1939, the
debenture trustee need not take any action that might involve it in personal
liability or might be unduly prejudicial to the holders not involved in the
proceeding.
A holder
of the debt securities of any series will only have the right to institute a
proceeding under the indentures or to appoint a receiver or trustee, or to seek
other remedies if:
·
the holder has given written notice to the debenture trustee of a
continuing event of default with respect to that series;
·
the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of that series have made written request, and such
holders have offered reasonable indemnity, to the debenture trustee to institute
the proceeding as trustee; and
·
the debenture trustee does not institute the proceeding and does not
receive from the holders of a majority in aggregate principal amount of the
outstanding debt securities of that series other conflicting directions within
90 days after the notice, request and offer.
These
limitations do not apply to a suit instituted by a holder of debt securities if
we default in the payment of the principal, premium, if any, or interest on, the
debt securities.
We will
periodically file statements with the debenture trustee regarding our compliance
with specified covenants in the indentures.
Modification
of Indenture; Waiver
We and
the debenture trustee may change an indenture without the consent of any holders
with respect to specific matters, including:
·
to fix any ambiguity, defect or inconsistency in the
indenture;
·
to comply with the provisions described above under “
—
Consolidation, Merger or
Sale”;
·
to comply with any requirements of the SEC in connection with the
qualification of any indenture under the Trust Indenture Act of
1939;
·
to evidence and provide for the acceptance of appointment hereunder by a
successor trustee;
·
to provide for uncertificated debt securities and to make all appropriate
changes for such purpose;
·
to add to, delete from, or revise the conditions, limitations and
restrictions on the authorized amount, terms or purposes of issuance,
authorization and delivery of debt securities or any series, as set forth in the
indenture;
·
to provide for the issuance of and establish the form and terms and
conditions of the debt securities of any series as provided under “
—
General” to establish the
form of any certifications required to be furnished pursuant to the terms of the
indenture or any series of debt securities, or to add to the rights of the
holders of any series of debt securities;
·
to add to our covenants such new covenants, restrictions, conditions or
provisions for the protection of the holders, to make the occurrence, or the
occurrence and the continuance, of a default in any such additional covenants,
restrictions, conditions or provisions an event of default, or to surrender any
of our rights or powers under the indenture; or
·
to change anything that does not materially adversely affect the
interests of any holder of debt securities of any series.
In
addition, under the indentures, the rights of holders of a series of debt
securities may be changed by us and the debenture trustee with the written
consent of the holders of at least a majority in aggregate principal amount of
the outstanding debt securities of each series that is affected. However,
we and the debenture trustee may only make the following changes with the
consent of each holder of any outstanding debt securities affected:
·
extending the fixed maturity of the series of debt
securities;
·
reducing the principal
amount, reducing the rate of or extending the time of payment of interest, or
reducing any premium payable upon the redemption of any debt securities;
or
·
reducing the percentage of
debt securities, the holders of which are required to consent to any amendment,
supplement, modification or waiver.
Discharge
Each
indenture provides that we can elect to be discharged from our obligations with
respect to one or more series of debt securities, except that the following
obligations survive until the maturity date or the redemption date:
·
register the transfer or exchange of debt securities of the
series;
·
replace stolen, lost or mutilated debt securities of the
series;
·
maintain paying agencies;
·
hold monies for payment in trust; and
·
appoint any successor trustee;
and the
following obligations survive the maturity date or the redemption
date:
·
recover excess money held by the debenture trustee; and
·
compensate and indemnify the debenture trustee.
In order
to exercise our rights to be discharged, we must deposit with the debenture
trustee money or government obligations sufficient to pay all the principal of,
any premium, if any, and interest on, the debt securities of the series on the
dates payments are due.
Form,
Exchange and Transfer
We will
issue the debt securities of each series only in fully registered form without
coupons and, unless we otherwise specify in the applicable prospectus
supplement, in denominations of $1,000 and any integral multiple thereof.
The indentures provide that we may issue debt securities of a series in
temporary or permanent global form and as book-entry securities that will be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York, known as DTC, or another depositary named by us and identified in a
prospectus supplement with respect to that series. See “Legal Ownership of
Securities” for a further description of the terms relating to any book-entry
securities.
At the
option of the holder, subject to the terms of the indentures and the limitations
applicable to global securities described in the applicable prospectus
supplement, the holder of the debt securities of any series can exchange the
debt securities for other debt securities of the same series, in any authorized
denomination and of like tenor and aggregate principal amount.
Subject
to the terms of the indentures and the limitations applicable to global
securities set forth in the applicable prospectus supplement, holders of the
debt securities may present the debt securities for exchange or for registration
of transfer, duly endorsed or with the form of transfer endorsed thereon duly
executed if so required by us or the security registrar, at the office of the
security registrar or at the office of any transfer agent designated by us for
this purpose. Unless otherwise provided in the debt securities that the
holder presents for transfer or exchange, we will make no service charge for any
registration of transfer or exchange, but we may require payment of any taxes or
other governmental charges.
We will
name in the applicable prospectus supplement the security registrar, and any
transfer agent in addition to the security registrar, that we initially
designate for any debt securities. We may at any time designate additional
transfer agents or rescind the designation of any transfer agent or approve a
change in the office through which any transfer agent acts, except that we will
be required to maintain a transfer agent in each place of payment for the debt
securities of each series.
If we
elect to redeem the debt securities of any series, we will not be required
to:
·
issue, register the transfer of, or exchange any debt securities of any
series being redeemed in part during a period beginning at the opening of
business 15 days before the day of mailing of a notice of redemption of any debt
securities that may be selected for redemption and ending at the close of
business on the day of the mailing; or
·
register the transfer of or exchange any debt securities so selected for
redemption, in whole or in part, except the unredeemed portion of any debt
securities we are redeeming in part.
Information
Concerning the Debenture Trustee
The
debenture trustee, other than during the occurrence and continuance of an event
of default under an indenture, undertakes to perform only those duties as are
specifically set forth in the applicable indenture. Upon an event of
default under an indenture, the debenture trustee must use the same degree of
care as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the debenture trustee is under no
obligation to exercise any of the powers given it by the indentures at the
request of any holder of debt securities unless it is offered reasonable
security and indemnity against the costs, expenses and liabilities that it might
incur.
Payment
and Paying Agents
Unless we
otherwise indicate in the applicable prospectus supplement, we will make payment
of the interest on any debt securities on any interest payment date to the
person in whose name the debt securities, or one or more predecessor securities,
are registered at the close of business on the regular record date for the
interest.
We will
pay principal of and any premium and interest on the debt securities of a
particular series at the office of the paying agents designated by us, except
that, unless we otherwise indicate in the applicable prospectus supplement, we
may make interest payments by check that we will mail to the holder or by wire
transfer to certain holders. Unless we otherwise indicate in a prospectus
supplement, we will designate the corporate office of the debenture trustee in
the City of New York as our sole paying agent for payments with respect to debt
securities of each series. We will name in the applicable prospectus
supplement any other paying agents that we initially designate for the debt
securities of a particular series. We will maintain a paying agent in each
place of payment for the debt securities of a particular series.
All money
we pay to a paying agent or the debenture trustee for the payment of the
principal of or any premium or interest on any debt securities that remains
unclaimed at the end of two years after such principal, premium or interest has
become due and payable will be repaid to us, and the holder of the debt security
thereafter may look only to us for payment thereof.
Governing
Law
The
indentures and the debt securities will be governed by and construed in
accordance with the laws of the State of New York, except to the extent that the
Trust Indenture Act of 1939 is applicable.
Subordination
of Subordinated Debt Securities
The
subordinated debt securities will be subordinate and junior in priority of
payment to certain of our other indebtedness to the extent described in a
prospectus supplement. The indentures in the forms initially filed as
exhibits to the registration statement of which this prospectus is a part do not
limit the amount of indebtedness that we may incur, including senior
indebtedness or subordinated indebtedness, and do not limit us from issuing any
other debt, including secured debt or unsecured debt.
Units
We may
issue units comprised of one or more of the other securities described in this
prospectus or in any prospectus supplement in any combination. Each unit will be
issued so that the holder of the unit is also the holder, with the rights and
obligations of a holder, of each security included in the unit. The unit
agreement under which a unit is issued may provide that the securities included
in the unit may not be held or transferred separately, at any time or at any
time before a specified date or upon the occurrence of a specified event or
occurrence.
The
applicable prospectus supplement will describe:
·
|
the designation and terms of the
units and of the securities comprising the units, including whether and
under what circumstances those securities may be held or transferred
separately;
|
·
|
any unit agreement under which
the units will be issued;
|
·
|
any provisions for the issuance,
payment, settlement, transfer or exchange of the units or of the
securities comprising the units;
and
|
·
|
whether the units will be issued
in fully registered or global
form.
|
LITIGATION
From time
to time, we may become involved in various lawsuits and legal proceedings which
arise in the ordinary course of business. Litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from
time to time that may harm our business.
LEGAL
MATTERS
Certain
legal matters governed by the laws of the State of New York and of Delaware with
respect to the validity of the offered securities will be passed upon for us by
Loeb & Loeb LLP, New York, New York.
EXPERTS
The
consolidated balance sheet of China Agritech, Inc. and Subsidiaries as of
December 31, 2008, and the related consolidated income statements, stockholders’
equity, and cash flows for the year then ended included in this
registration statement have been so included in reliance on
the report of Crowe Horwath LLP, independent registered public
accounting firm, given on the authority of such firm as experts in accounting
and auditing.
The
consolidated balance sheet of China Agritech Inc. and Subsidiaries as of
December 31, 2007, and the related consolidated statements of income,
stockholders’ equity, and cash flows for the year ended December 31, 2007 have
been audited by Kabani & company, Inc. an independent registered public
accounting firm, as set forth in their report which is incorporated by
reference, and have been so incorporated in reliance upon the report of such
firm given on the authority of such firm as experts in accounting and
auditing.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION ABOUT US
We have
filed a registration statement on Form S-3 with the SEC for the securities we
are offering by this prospectus. This prospectus does not include all of the
information contained in the registration statement. You should refer to the
registration statement and its exhibits for additional information. We will
provide to each person, including any beneficial owner, to whom a prospectus is
delivered, a copy of any or all of the information that has been incorporated by
reference in the prospectus but not delivered with the prospectus. We
will provide this information upon oral or written request, free of
charge. Any requests for this information should be made by calling
or sending a letter to the Secretary of the Company, c/o China Agritech, Inc.,
at the Company’s office located Room 3F No. 11 Building, Zhonghong International
Business Garden, Future Business Center, Chaoyang North Road, Chaoyang District,
Beijing, China 100024 People’s Republic of China (86) 10-59621278.
.
We are
required to file annual and quarterly reports, current reports, proxy
statements, and other information with the SEC. We make these documents publicly
available, free of charge, on our website at www.bioaobo.com as soon as
reasonably practicable after filing such documents with the SEC. You can read
our SEC filings, including the registration statement, on the SEC’s website at
http://www.sec.gov. You also may read and copy any document we file with the SEC
at its public reference facility at:
Public
Reference Room
100 F
Street N.E.
Washington,
DC 20549.
Please
call the SEC at 1-800-732-0330 for further information on the operation of the
public reference facilities.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The
following documents filed by us with the Securities and Exchange Commission are
incorporated by reference in this prospectus:
·
|
Annual Report on Form 10-K for
the fiscal year ended December 31, 2008, filed on March 31,
2009;
|
·
|
Quarterly Reports on Form 10-Q
for the fiscal quarter ended March 31, 2009, filed on May 14,
2009, for the fiscal quarter ended June 30, 2009, filed on
August 14, 2009 and for the fiscal quarter ended September 30, 2009, filed
on November 12, 2009; and
|
·
|
Current Reports on Form 8-K or
8-K/A, filed on February 18, 2009, February 19, 2009, March 10, 2009,
March 19, 2009, May 7, 2009, May 15, 2009, May 21, 2009, June 9, 2009,
June 18, 2009, August 19, 2009, September 23, 2009, October 20, 2009,
November 18, 2009,December 30, 2009 and January 8, 2010;
and
|
·
|
The description of our Common
Stock set forth in our Registration Statement on Form 8-A (Registration
No. 001-34458) filed with the SEC on September 15, 2009,
including any amendments thereto or reports filed for the purpose of
updating such description.
|
All
documents subsequently filed with the Securities and Exchange Commission by us
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, after the
date of the initial registration statement (other than current reports or
portions thereof furnished under Items 2.02 or 7.01 of Form 8-K), prior to the
termination of this offering, shall be deemed to be incorporated by reference
herein and to be part of this prospectus from the respective dates of filing of
such documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes hereof or of the related prospectus supplement to the
extent that a statement in any other subsequently filed document which is
also incorporated or deemed to be incorporated herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus.
$100,000,000
CHINA
AGRITECH, INC.
Common
Stock
Preferred
Stock
Debt
Securities
Warrants
Units
PROSPECTUS
,
2010
We
have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in or incorporated by reference
into this prospectus. You must not rely on any unauthorized information. If
anyone provides you with different or inconsistent information, you should not
rely on it. This prospectus does not offer to sell any shares in any
jurisdiction where it is unlawful. Neither the delivery of this prospectus, nor
any sale made hereunder, shall create any implication that the information in
this prospectus is correct after the date hereof.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution.
The
following table sets forth an estimate of the fees and expenses relating to the
issuance and distribution of the securities being registered hereby, other than
underwriting discounts and commissions, all of which shall be borne by China
Agritech. All of such fees and expenses, except for the SEC
Registration Fee, are estimated:
SEC
Registration Fee
|
|
$
|
7,130
|
|
Transfer
agent’s fees and expenses
|
|
|
5,000
|
*
|
Printing
and engraving expenses
|
|
|
15,000
|
*
|
Accounting
fees and expenses
|
|
|
20,000
|
*
|
Legal
fees and expenses (including blue sky services and
expenses)
|
|
|
75,000
|
*
|
Miscellaneous
|
|
|
5,000
|
*
|
Total
|
|
$
|
127,130
|
*
|
*
Estimated
Item
15. Indemnification of Officers and Directors
Our
Amended and Restated Certificate of Incorporation provides that all directors,
officers, employees and agents of the registrant shall be entitled to be
indemnified by us to the fullest extent permitted by under Delaware
law.
Section
145 of the Delaware General Corporation Law concerning indemnification of
officers, directors, employees and agents is set forth below.
“Section
145. Indemnification of officers, directors, employees and agents;
insurance.
(a) A
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
(b) A
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by the person in connection with the
defense or settlement of such action or suit if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
(c) To
the extent that a present or former director or officer of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of this section, or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
(d) Any
indemnification under subsections (a) and (b) of this section (unless ordered by
a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because the
person has met the applicable standard of conduct set forth in subsections (a)
and (b) of this section. Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e)
Expenses (including attorneys' fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the corporation
as authorized in this section. Such expenses (including attorneys' fees)
incurred by former directors and officers or other employees and agents may be
so paid upon such terms and conditions, if any, as the corporation deems
appropriate.
(f) The
indemnification and advancement of expenses provided by, or granted pursuant to,
the other subsections of this section shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office. A right to
indemnification or to advancement of expenses arising under a provision of the
certificate of incorporation or a bylaw shall not be eliminated or impaired by
an amendment to such provision after the occurrence of the act or omission that
is the subject of the civil, criminal, administrative or investigative action,
suit or proceeding for which indemnification or advancement of expenses is
sought, unless the provision in effect at the time of such act or omission
explicitly authorizes such elimination or impairment after such action or
omission has occurred.
(g) A
corporation shall have power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of such person's status as
such, whether or not the corporation would have the power to indemnify such
person against such liability under this section.
(h) For
purposes of this section, references to "the corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued.
(i) For
purposes of this section, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to "serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The
indemnification and advancement of expenses provided by, or granted pursuant to,
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
(k) The
Court of Chancery is hereby vested with exclusive jurisdiction to hear and
determine all actions for advancement of expenses or indemnification brought
under this section or under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).”
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers, and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment of expenses
incurred or paid by a director, officer or controlling person in a successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, we
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to the court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Paragraph
10 of our Amended and Restated Certificate of Incorporation
provides:
“The
corporation shall, to the fullest extent permitted by Section 145 of the General
Corporation Law of the State of Delaware, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.”
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons, pursuant to the
foregoing provisions or otherwise, we have been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by a director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The
underwriting agreement, if an underwriting agreement is utilized, may provide
for indemnification by any underwriters of the company, our directors, our
officers who sign the registration statement and our controlling persons (if
any) for some liabilities, including liabilities arising under the Securities
Act.
Item
16. Exhibits
Exhibit
Number
|
|
Description of Document
|
|
|
|
1.1*
|
|
Form
of underwriting agreement with respect to common stock, preferred stock,
warrants or debt securities.
|
|
|
|
4.1*
|
|
Form
of specimen common stock certificate, if any.
|
|
|
|
4.2*
|
|
Form
of specimen certificate for preferred stock of registrant, if
any.
|
|
|
|
4.3*
|
|
Certificate
of designation for preferred stock, if any.
|
|
|
|
4.5
**
|
|
Form
of indenture with respect to senior debt securities, to be entered into
between registrant and a trustee acceptable to the registrant, if
any.
|
|
|
|
4.6
**
|
|
Form
of indenture with respect to subordinated debt securities, to be
entered into between registrant and a trustee acceptable to the
registrant, if any.
|
|
|
|
4.7*
|
|
Form
of debt securities, if any.
|
|
|
|
4.8*
|
|
Form
of warrant agreement and warrant certificate, if any.
|
|
|
|
4.9*
|
|
Form
of unit agreement and unit certificate, if any.
|
|
|
|
5.1**
|
|
Opinion
of Loeb & Loeb LLP as to the legality of certain securities being
registered.
|
|
|
|
23.1**
|
|
Consent
of Crowe Horwath, LLP, an independent registered public accounting
firm.
|
|
|
|
23.2**
|
|
Consent
of Kabani & Company, Inc., an independent registered public accounting
firm.
|
|
|
|
23.3**
|
|
Consent
of Loeb & Loeb LLP, with respect to certain securities being
registered (included in Exhibit 5.1).
|
|
|
|
24.1**
|
|
Power
of Attorney (included on signature pages to the registration
statement).
|
|
|
|
25.1***
|
|
Statement
of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as
amended, of a trustee acceptable to the registrant, as trustee under the
Indenture.
|
|
|
|
99.1**
|
|
Audited
Consolidated Financial Statements as of and for the years ended December
31, 2008 and
2007.
|
*
To the
extent applicable, to be filed by a post-effective amendment or as an exhibit to
a document filed under the Securities Exchange Act, as amended, and incorporated
by reference herein.
**
Filed
herewith.
***
To
the extent applicable, to be filed under Form 305B2.
(1)
Incorporated by reference from the Current Report on Form 8-K, filed with the
Commission on April 10, 2007.
Item
17. Undertakings.
(a) The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the
effective registration statement;
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement. Provided, however, that the
undertakings set forth in paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) above
do not apply if the registration statement is on Form S-3 or Form F-3 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the Commission by
the registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act that are incorporated by reference in the registration statements
or is contained in a form of prospectus filed pursuant to Rule 424(b) that is a
part of the registration statement
(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(b) The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended, each filing of the
registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) That,
for the purpose of determining liability under the Securities Act of 1933 to any
purchaser:
(1) Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to
be part of the registration statement as of the date the filed prospectus was
deemed part of and included in the registration statement; and
(2) Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as
part of a registration statement in reliance on Rule 430B relating to an
offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of
providing the information required by section 10(a) of the Securities Act of
1933 shall be deemed to be part of and included in the registration statement as
of the earlier of the date such form of prospectus is first used after
effectiveness or the date of the first contract of sale of securities in the
offering described in the prospectus. As provided in Rule 430B, for liability
purposes of the issuer and any person that is at that date an underwriter, such
date shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale
prior to such effective date, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such effective
date.
(d) That,
for the purpose of determining liability of the registrant under the Securities
Act of 1933 to any purchaser in the initial distribution of the securities, the
undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser: (i) Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) any free writing prospectus relating to the offering prepared by or on
behalf of the undersigned registrant or used or referred to by the undersigned
registrant; (iii) the portion of any other free writing prospectus relating to
the offering containing material information about the undersigned registrant or
its securities provided by or on behalf of the undersigned registrant; and (iv)
any other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(e) If
and when applicable, the undersigned registrant, hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Act.
(f)
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies that
it has reasonable grounds to believe that it meets the requirements for filing
on Form S-3 and has duly caused this Registration Statement on Form S-3 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Beijing, People’s Republic of China, on the 9th day of February,
2010.
CHINA
AGRITECH, INC.
|
|
|
|
By
|
/s/
Yu Chang
|
|
|
Name:
Yu Chang
|
|
|
Title: Chief
Executive Officer
|
|
POWER
OF ATTORNEY
KNOW ALL
BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Yu Chang and Yau-Sing Tang or either of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this registration statement, and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
Name
|
|
Position
|
|
Date
|
|
|
|
|
|
|
|
Chief
Executive Officer, President, Secretary and Chairman (Principal Executive
Officer)
|
|
February
9, 2010
|
/s/
Yu Chang
|
|
|
|
|
Yu
Chang
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Financial Officer and Controller
|
|
February
9, 2010
|
/s/
Yau-Sing Tang
|
|
(Principal
Financial Officer and Principal Accounting Officer)
|
|
|
Yau-Sing
Tang
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
February
9, 2010
|
/s/
Xiao-Rong Teng
|
|
|
|
|
Xiao-Rong
Teng
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
February
9, 2010
|
/s/
Gene Michael Bennett
|
|
|
|
|
Gene
Michael Bennett
|
|
|
|
|
|
|
Director
|
|
February
9, 2010
|
/s/
Lun Zhang Dai
|
|
|
|
|
Lun
Zhang Dai
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
February
9, 2010
|
/s/
Hai Lin Zhang
|
|
|
|
|
Hai
Lin Zhang
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
February
9, 2010
|
/s/
Zheng Wang
|
|
|
|
|
Zheng
Wang
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
February
9, 2010
|
/s/
Charles Law
|
|
|
|
|
Charles
Law
|
|
|
|
|
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