As
filed with the Securities Exchange Commission on February 24, 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
KANDI
TECHNOLOGIES, CORP.
(Exact
name of registrant as specified in its charter)
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Delaware
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90-0363723
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
Number)
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Jinhua
City Industrial Zone
Jinhua,
Zhejiang Province
People’s
Republic of China
Post Code
321016
(86-579)
83906856
(Address,
including zip code, and telephone number, including area code,
of
registrant's principal executive offices)
Hu
Xiaoming
Kandi
Technologies, Corp.
Jinhua
City Industrial Zone
Jinhua,
Zhejiang Province
People’s
Republic of China
Post Code
321016
(86-579)
83906856
(Name,
address, including zip code, and
telephone
number, including area code, of agent for service)
Copy
to:
Robert S.
Matlin, Esq.
Robert
Shin, Esq.
K&L
Gates LLP
599
Lexington Avenue
New York,
NY 10022
212-536-3900
Approximate
date of commencement of proposed sale to the public: from time to time after the
registration statement becomes effective.
If the
only securities being registered on this Form are being offered pursuant to
dividend or reinvestment plans, please check the following box. o
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under 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 of 1933, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
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. o
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, check the
following box. o
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 classes of
securities pursuant to Rule 413(b) under the Securities Act, check the following
box. o
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 definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
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Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting company x
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CALCULATION
OF REGISTRATION FEE
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TITLE OF EACH CLASS
OF SECURITIES TO BE
REGISTERED
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AMOUNT TO
BE
REGISTERED
(1)
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PROPOSED
MAXIMUM
OFFERING
PRICE PER
UNIT (2)
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PROPOSED
MAXIMUM
OFFERING
PRICE
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AMOUNT OF
REGISTRATION
FEE (3)
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Common
Stock, par value $0.001 per share
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6,897,708
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$ |
4.11 |
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$ |
28,349,579.88 |
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$ |
2,021.33 |
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(1)
6,897,708 shares of Common Stock, par value $0.001 per share, of Kandi
Technologies, Corp., a Delaware corporation (the “Company”), are being
registered hereunder. These shares of Common Stock may be issued upon
conversion of senior secured convertible notes or otherwise pursuant to the
terms of the senior secured convertible notes and/or upon exercise of the
warrants issued in conjunction with such notes (such aggregate amount of shares
calculated by the Company as of the date of this Registration Statement based on
130% of the sum of (i) the maximum number of shares of Common Stock initially
issuable upon conversion of senior secured convertible notes, (ii) the maximum
number of other shares of Common Stock initially issuable pursuant to the
convertible notes and (iii) the maximum number of shares of Common Stock
initially issuable upon exercise of the warrants issued in conjunction with the
notes). In
addition to both economic and standard antidilution adjustments, the
conversion price of the notes is subject to additional adjustments
described below in “Recent Developments - Description of the Securities Under
the Financing - Notes - Conversion and Conversion Price
Adjustments”. For purposes of the calculation of the maximum number
of shares of Common Stock initially issuable upon conversion of the notes,
the Company has assumed such additional adjustments will result in an adjusted
conversion price of $2.75, which represents the lowest conversion price
adjustment permitted pursuant to such additional adjustment provisions in the
notes. The Company further has assumed for purposes of calculating
the maximum number of other shares of Common Stock initially issuable pursuant
to the notes that the closing price of each trading day used in determining
such number of other shares of Common Stock in accordance with the terms of
the notes will equal $4.14, which was the closing price on February 19,
2010. In
accordance with Rule 416(a) under the Securities Act of 1933, as amended (the
“Securities Act”), the Registrant is also registering hereunder an indeterminate
number of shares that may be issued and resold resulting from stock splits,
stock dividends or similar transactions.
(2)
Estimated solely for the purpose of calculating the registration fee pursuant to
Rule 457(c) of the Securities Act based upon the price of $4.11 which was the
average of the high and low bid prices for the Company’s Common Stock on NASDAQ
Capital Market on February 19, 2010.
(3)
Computed in accordance with Section 6(b) of the Securities Act. 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 WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION
8(a), MAY DETERMINE.
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The
information in this preliminary prospectus is not complete and may be
changed. We may not sell securities under this registration statement
until the registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an offer to
sell any securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
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PROSPECTUS
SUBJECT
TO COMPLETION, DATED February 24, 2010
6,897,708
Shares of Common Stock
KANDI
TECHNOLOGIES, CORP.
We are registering 6,897,708 shares of
our common stock, par value $0.001 per share (the “Common Stock”) for sale by
the selling stockholders set forth herein issuable
upon conversion of senior secured convertible notes or otherwise pursuant to the
terms of the senior secured convertible notes and/or upon exercise of the
warrants issued in conjunction with such notes. Such aggregate amount
of shares calculated by the Company as of the date of this Registration
Statement based on 130% of (i) the maximum number of shares of Common
Stock issuable upon conversion of senior secured convertible notes issued on
January 21, 2010 (the “Notes”), (ii) the maximum number of other shares of
Common Stock issuable pursuant to the Notes and (iii) the maximum number of
shares of Common Stock issuable upon exercise of warrants issued in conjunction
with the Notes (the “Warrants”). In
addition to both economic and standard antidilution adjustments, the conversion
price of the Notes is subject to additional adjustments described below in
“Recent Developments - Description of the Securities Under the Financing - Notes
- Conversion and Conversion Price Adjustments”. For purposes of the
calculation of the maximum number of shares of Common Stock initially issuable
upon conversion of the Notes, the Company has assumed such additional
adjustments will result in an adjusted conversion price of $2.75, which
represents the lowest conversion price adjustment permitted pursuant to such
additional adjustment provisions in the Notes. The Company further
has assumed for purposes of calculating the maximum number of other shares of
Common Stock initially issuable pursuant to the Notes that the closing price of
each trading day used in determining such number of other shares of Common Stock
in accordance with the terms of the Notes will equal $4.14, which was the
closing price on February 19, 2010.
The selling stockholders identified in
this prospectus, or their pledgees, donees, transferees or other
successors-in-interest, may offer the shares from time to time through public or
private transactions at prevailing market prices, at prices related to
prevailing market prices or at privately negotiated prices. We will not receive
any proceeds from the sale of the shares of Common Stock or Warrants. However,
we may receive proceeds in connection with the exercise of the Warrants, if they
are exercised for cash. The selling stockholders will sell the shares
of Common Stock and Warrants in accordance with the “Plan of Distribution” set
forth in this prospectus. The selling stockholders will bear all
commissions and discounts, if any, attributable to the sales of shares of Common
Stock and Warrants. We will bear all costs, expenses and fees in connection with
the registration of the shares of Common Stock and Warrants.
Investing in our securities involves
risks. See ‘‘Risk Factors’’ beginning on page 11.
Our Common Stock is traded on The
NASDAQ Capital Market under the symbol “KNDI.” The last reported
price of our Common Stock on February 19, 2010 was $4.14 per
share.
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 the prospectus. Any
representation to the contrary is a criminal offense.
The date
of this prospectus is ___________ __ , 2010
TABLE
OF CONTENTS
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Page No.
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SUMMARY
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1
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RECENT
DEVELOPMENTS
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5
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SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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10
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RISK
FACTORS
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11
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USE
OF PROCEEDS
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18
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SELLING
STOCKHOLDERS
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18
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PLAN
OF DISTRIBUTION
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21
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LEGAL
MATTERS
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24
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EXPERTS
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24
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INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
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24
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WHERE
YOU CAN FIND ADDITIONAL INFORMATION
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25
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You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you with
information that is different from that contained in this prospectus. 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. The information in this prospectus is complete and accurate only as
of the date of the front cover regardless of the time of delivery of this
prospectus or of any sale of shares. Except where the context requires
otherwise, in this prospectus, the words “Company,” “Kandi,” “we,” “us” and
“our” refer to Kandi Technologies, Corp., a Delaware
corporation.
PROSPECTUS
SUMMARY
This summary highlights selected
information from this prospectus. It does not contain all of the information
that is important to you. We encourage you to carefully read this entire
prospectus and the documents to which we refer you. The following summary is
qualified in its entirety by reference to the detailed information appearing
elsewhere in this prospectus.
Our
Company
Kandi Technologies, Corp., founded in
2003 and headquartered in Zhejiang Province, The Peoples Republic of China, (the
PRC), achieved a listing on NASDAQ in March, 2008 with the symbol:
KNDI. Kandi is one of China’s leading producers of all terrain
recreational vehicles, including go-karts, where it has been China’s number one
exporter. Kandi has increased its focus on fuel efficient vehicles,
including the all-electric mini-car, the Kandi COCO. The Company has
also begun to shift its sales away from the export market to the growing
domestic Chinese market. Kandi believes that its mini-cars will
become the Company’s largest revenue and profit generators. The Company’s
products can be viewed at http://www.chinakandi.com
..
General
Kandi’s products include off-road
vehicles (which includes ATVs, UTVs, and go-karts), motorcycles and
mini-cars.
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The Years Ended of December 31
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2008
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2007
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Sales Revenue
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Costs
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Sales Revenue
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Costs
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Off-Road
Business
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$ |
39,654,296 |
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$ |
30,263,909 |
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$ |
33,434,662 |
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$ |
26,294,696 |
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Motorcycle
Business
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3,297 |
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4,227 |
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- |
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- |
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Mini-Car
Business
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856,195 |
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651,732 |
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- |
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- |
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Total
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$ |
40,513,788 |
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$ |
30,919,868 |
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$ |
33,434,662 |
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$ |
26,294,696 |
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Off-Road
Vehicles
In 2003 Kandi began mass production of
go-karts. The Company is now one of the leading manufacturers of go-karts in the
People’s Republic of China (PRC), producing approximately 15% of China’s global
exports of this popular recreational vehicle. Kandi produces a wide range of
go-karts, from the 90cc class to the 1,000cc class in cylinder displacement.
Kandi also produces four-wheeled all-terrain vehicles (ATVs) and specialized
utility vehicles (UTVs), which are ATVs special-fitted for agricultural and
industrial use.
Motorcycle
Products
In late 2008, Kandi began sales of its
newest motorcycle, the three-wheeled “TT,” which was designed for enhanced
safety and comfort, while maintaining the convenience and fuel efficiency of a
motorcycle. The Company expects significant growth in the sales of
the TT and expects to expand the product line in the near term.
Mini-Car
Products
Kandi began sales of its gas-powered
super-mini car (“CoCo”) in August 2008. The first generation of CoCo was
designed for local neighborhood driving, with a 250cc single cylinder, 4-stroke
water-cooled engine with a top speed of 25 mph, achieving 60 mpg. In 2009, the
Company launched the electric CoCo, a stylish mini-car which runs on electrical
power. The electric CoCo is designed to achieve a top speed of 25mph, and will
have a driving range of 80 miles on a single full charge. The Company expects to
sell 50% of the electric CoCo it produces in China, with the rest exported to
markets in North America.
The following table shows the breakdown
of Kandi’s revenues from its customers by geographical markets based on the
location of the customer during the fiscal years ended December 31, 2008 and
2007:
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The Years Ended of December 31
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2008
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2007
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Sales Revenue
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Units
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Percentage
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Sales Revenue
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Units
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Percentage
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North
America
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$ |
7,292,482 |
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9,010 |
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18 |
% |
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$ |
23,889,263 |
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33,446 |
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72 |
% |
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Europe
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- |
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- |
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- |
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6,264,492 |
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8,246 |
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19 |
% |
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China
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32,816,168 |
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40,545 |
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81 |
% |
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2,783,342 |
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3,665 |
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8 |
% |
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Other
Regions
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405,138 |
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501 |
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1 |
% |
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497,565 |
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458 |
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1 |
% |
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Total
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$ |
40,513,788 |
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50,056 |
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100 |
% |
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$ |
33,434,662 |
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45,815 |
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100 |
% |
Sales and
Distribution
Kandi’s sales are made through
third-party distributors, which distribute Kandi’s products to local wholesalers
and retail dealers. Worldwide, Kandi sells its products through six main
independent distributors for off-road vehicles.
Components
and Parts, Raw Materials and Sources of Supply
Kandi manufactures the frames of its
vehicles and assembles the vehicles in its factory in Jinhua,
China. Other components and parts, such as engines, shock absorbers,
electrical equipment and tires, are purchased from numerous
suppliers. The principal raw materials used by Kandi are steel plate,
aluminum, special steels, steel tubes, paints, and plastics, which are purchased
from several suppliers. The most important raw material purchased is
steel plate.There were six suppliers who accounted for more than 5% of the
Company’s purchases of major components and parts and principal raw materials
during the fiscal year ended December 31, 2008. Kandi does not have and does not
anticipate having any difficulty in obtaining its required materials from
suppliers and considers its contracts and business relations with the suppliers
to be satisfactory.
Seasonality
Kandi’s motorcycle and off-road vehicle
businesses have historically experienced some seasonality. However,
this seasonality has not generally been material to our financial
results.
Competitive
Strengths
The global small vehicle markets are
highly competitive. Competition in such markets is based upon a number of
factors, including price, quality, reliability, styling, product features and
warranties. As a relatively new entrant into the market, many of our competitors
are more diversified and have financial and marketing resources that are
substantially greater than those of Kandi.
Employees
As of December 31, 2008, Kandi had a
total of 562 employees. None of our employees are represented by any collective
bargaining agreements.
Environmental
and Safety Regulation
Emissions
The United States Environmental
Protection Agency (“EPA”) and the California Air Resources Board (“CARB”) have
adopted emissions regulations applicable to Kandi’s products. CARB has emissions
regulations for ATVs and off-road vehicles which the Company already meets. In
October 2002, the EPA established new corporate average emission standards
effective for model years 2006 through 2012 for non-road recreational vehicles,
including ATVs and off-road vehicles.
Kandi’s motorcycles are also subject to
EPA and CARB emission standards. Kandi believes that its motorcycles have always
complied with these standards. The CARB regulations required additional
motorcycle emission reductions in model year 2008 which the Company met. The EPA
adopted the CARB emission limits in a January 2004 rulemaking that allows an
additional two model years to meet these new CARB emission requirements on a
nationwide basis.
Kandi’s products are also subject to
international laws and regulations related to emissions in places where it sells
its products outside the United States. Europe currently regulates emissions
from certain of the Company’s ATV-based products, motorcycles, and mini-cars and
the Company meets these requirements. Canada’s emission regulations for
motorcycles are similar to those in the U.S. In December 2006 Canada proposed a
new regulation that would essentially adopt the U.S. emission standards for ATVs
and off-road vehicles. These regulations are expected to become effective in
2009.
Kandi believes that its off-road
vehicles, motorcycles and mini-cars have always complied with applicable
emission standards and related regulations in the United States and
internationally. Kandi is unable to predict the ultimate impact of the adopted
or proposed regulations on Kandi and its business.
Use
regulation
State and federal laws and regulations
have been promulgated or are under consideration relating to the use or manner
of use of Kandi’s products. Some states and localities have adopted, or are
considering the adoption of, legislation and local ordinances which restrict the
use of ATVs and off-road vehicles to specified hours and locations. The federal
government also has restricted the use of ATVs and off-road vehicles in some
national parks and federal lands. In several instances this restriction has been
a ban on the recreational use of these vehicles. Kandi is unable to predict the
outcome of such actions or the possible effect on its business. Kandi believes
that its business would be no more adversely affected than those of its
competitors by the adoption of any pending laws or regulations.
Product
Safety and Regulation
Safety
Regulation
The federal government and individual
states have promulgated or are considering promulgating laws and regulations
relating to the use and safety of Kandi’s products. The federal government is
the primary regulator of product safety. The Consumer Product Safety Commission
(“CPSC”) has federal oversight over product safety issues related to ATVs and
off-road vehicles. The National Highway Transportation Safety Administration
(“NHTSA”) has federal oversight over product safety issues related to on-road
motorcycles.
In August 2008, the Consumer Product
Safety Improvement Act (the “Act”) was passed. The Act includes a provision that
requires all manufacturers and distributors who import into or distribute ATVs
in the United States to comply with the ANSI/SVIA safety standards which were
previously voluntary. The Act also requires the same manufacturers and
distributors to have ATV action plans filed with the CPSC that are substantially
similar to the voluntary action plans that were previously in effect. Kandi
currently complies with the ANSI/SVIA standard.
Kandi’s motorcycles are subject to
federal vehicle safety standards administered by NHTSA. Kandi’s motorcycles are
also subject to various state vehicle safety standards. Kandi believes that its
motorcycles have always complied with safety standards relevant to
motorcycles.
Kandi’s products are also subject to
international standards related to safety in places where it sells its products
outside the United States. Kandi believes that its motorcycles and mini-cars
have always complied with applicable safety standards in the United States and
internationally.
Principal
Executive Offices
Our principal executive office is
located in the Jinhua City Industrial Zone in Jinhua, Zhejiang Province, PRC,
321016 and our telephone number (86-0579) 88-2239700.
The
Offering
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Shares
of Common Stock being registered hereunder
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6,897,708
shares of Common Stock1
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Common
stock outstanding as of February 19, 2010
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19,961,000
shares of Common Stock
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Use
of Proceeds
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We
will not receive any of the proceeds from the sale of the shares of Common
Stock or Warrants. We may receive proceeds in connection with the exercise
of the Warrants, if exercised for cash. We intend to use any proceeds from
the exercise of any of the Warrants for working capital and other general
corporate purposes. There is no assurance that any of the Warrants will
ever be exercised for cash, if at all.
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Risk
Factors
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An
investment in our securities involves a high degree of risk and could
result in a loss of your entire investment. Prior to making an investment
decision, you should carefully consider all of the information in this
prospectus and, in particular, you should evaluate the risk factors set
forth under the caption “Risk Factors” beginning on
page 8.
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The
NASDAQ Capital Market Symbol
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KNDI
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1 The
6,897,708 shares issuable
upon conversion of the Notes or otherwise pursuant to the terms of the Notes
and/or upon exercise of the Warrants issued in conjunction with such notes
was calculated by the Company as of the date of this Registration Statement
based on 130% of (i) the maximum number of shares of Common Stock
issuable upon conversion of the Notes, (ii) the maximum number of other shares
of Common Stock issuable pursuant to the Notes and (iii) the maximum number of
shares of Common Stock issuable upon exercise of warrants issued in conjunction
with the Warrants. In
addition to both economic and standard antidilution adjustments, the conversion
price of the notes is subject to additional adjustments described below in
“Recent Developments - Description of the Securities Under the Financing - Notes
- Conversion and Conversion Price Adjustments”. For purposes of the
calculation of the maximum number of shares of Common Stock initially issuable
upon conversion of the Notes, the Company has assumed such additional
adjustments will result in an adjusted conversion price of $2.75, which
represents the lowest conversion price adjustment permitted pursuant to such
additional adjustment provisions in the Notes. The Company further
has assumed for purposes of calculating the maximum number of other shares of
Common Stock initially issuable pursuant to the Notes that the closing price of
each trading day used in determining such number of other shares of Common Stock
in accordance with the terms of the Notes will equal $4.14, which was the
closing price on February 19, 2010.
RECENT
DEVELOPMENTS
On January 21, 2010 (the “Closing
Date”), we consummated a private placement of $10,000,000 senior secured
convertible notes and warrants to purchase an aggregate of 800,000 shares of
Common Stock at a purchase price of $10,000,000 in a private placement to Hudson
Bay Fund LP, Hudson Bay Overseas Fund, Ltd., and Capital Ventures International
(the “Investors”) pursuant to a Securities Purchase Agreement, dated as of
January 21, 2010 (the “Securities Purchase Agreement”), on the terms set forth
below (the “Financing”).
Pursuant to the Securities Purchase
Agreement, each Investor purchased a Note and a Warrant. As discussed
more fully below, the Notes are convertible into shares of the Company’s Common
Stock (as converted, the “Conversion Shares”), and are entitled to earn interest
which may be paid in cash or in shares of Common Stock (the “Interest
Shares”). The Warrants are exercisable into shares of Common Stock
(as exercised, the “Exercise Shares”). The Conversion Shares, the
Interests Shares and the Exercise Shares are all subject to standard
anti-dilution provisions.
The terms of the Financing include a
beneficial ownership limitation applicable to the conversion of the Notes and
the exercise of the Warrants, such that no Holder (as defined below) may convert
its Notes or exercise its Warrants if, after such conversion or exercise, the
Holder would beneficially own, together with its affiliates, more than 4.99% of
the then issued and outstanding shares of Common Stock. Each Holder
may lower this limitation percentage at any time or increase this limitation
percentage to any other percentage not in excess of 9.99% upon sixty one (61)
days’ prior written notice to the Company.
In connection with the Financing, the
Company paid commissions to FT Global Capital, Inc., Brean Murray, Carret &
Co. and Canaccord Adams Inc. (the “Placement Agents”), in the aggregate amount
of $700,000, including expenses, and issued the Placement Agents warrants to
purchase an aggregate of 80,000 shares of Common Stock at an exercise price of
$6.5625 per share, subject to the same resetting provisions as in the Warrants
as described below.
Registration
Requirements
In connection with the Financing, the
Company is required to file a Registration Statement on Form S-3 with the
Securities and Exchange Commission (“SEC”) covering the resale of the Conversion
Shares, any Interest Shares, and the Exercise Shares. No later than
sixty (60) days after the Closing Date, the Company shall register for resale,
by the Investors or their permitted assigns (each, a “Holder”), at least the
number of shares of Common Stock equal to 130% of the sum of (i) the maximum
number of Conversion Shares issuable upon conversion of the Notes, (ii) the
maximum number of Interest Shares issuable on the Notes, and (iii) the maximum
number of Exercise Shares issuable upon exercise of the Warrants.
The Company has agreed to use its best
efforts to have the Registration Statement declared effective within ninety (90)
calendar days after the Closing Date, or one hundred twenty (120) calendar days
after the Closing Date in the event the Registration Statement is subject to a
full review by the SEC. The Company is obliged to amend the
Registration Statement or file a new Registration Statement in the event the
number of shares available under any Registration Statement is insufficient to
cover the securities issuable or exercisable under the Financing.
In the event that Form S-3 is not
available for the registration of the resale of the securities issuable or
exercisable under the Financing, the Company shall register such securities on
another appropriate form reasonably acceptable to the Investors and shall
undertake to register such securities on Form S-3 as soon as such form is
available. At all times, however, the Company shall maintain the
effectiveness of all Registration Statements then in effect until such time as a
Registration Statement on Form S-3 covering the resale of all the securities
issuable or exercisable under the Financing has been declared effective by the
SEC.
The Company will pay liquidated damages
of 1.5% of each Holder’s initial investment in the Notes and Warrants sold in
the Financing per month if the Registration Statement is not filed or declared
effective within the foregoing time periods or ceases to be effective prior to
the expiration of certain deadlines provided for in the Registration Rights
Agreement, dated as of the Closing Date. However, no liquidated
damages shall be paid (i) with respect to any securities being registered that
we are not permitted to include in the Registration Statement due to the SEC’s
application of Rule 415, or (ii) with respect to any Holder, solely because such
Holder is required to be described as an underwriter under applicable securities
laws, and such Holder elects not to have its shares registered.
Pledge
Agreement
In connection with the Financing,
Excelvantage Group Limited, the holder of approximately 60% of our outstanding
shares of Common Stock (the “Majority Stockholder”) entered into a Shareholder
Pledge Agreement with the Investors as of the Closing Date in order to induce
the Investors to purchase the Notes and Warrants under the
Financing. Under the terms of the pledge agreement, the Majority
Stockholder agreed to grant to each Investor a separate, continuing security
interest in 2,800,000 shares of Common Stock held by the Majority Stockholder
(the “Pledged Shares”). The security interest in the Pledged Shares
was granted in order to secure prompt payment and due performance by the Company
and the Majority Stockholder of all liabilities, obligations and undertakings
owed to the Investors arising out of, outstanding under, advanced or issued
pursuant to the Financing. At all times, the value of the Pledged
Shares shall equal or exceed the aggregate principal amount outstanding under
the Notes, and the Majority Stockholder shall deliver such additional collateral
as is necessary for the value of such Pledged Shares to at least equal (if not
exceed) the aggregate principal amount outstanding under the
Notes. The Pledged Shares are to be returned to the Majority
Stockholder upon repayment or conversion of the Notes to Common
Stock.
Restriction
Period
For the period commencing on the
Closing Date and ending on the date immediately following the ninety (90) day
trading day anniversary of the effectiveness of the Registration Statement (the
“Effective Date”), the Company shall not offer, sell, grant or otherwise dispose
of any of its Common Stock (or the Common Stock of any of its subsidiaries) or
securities exercisable or convertible into shares of Common Stock, debt,
preferred stock or other instrument or security that is, at any time,
convertible into or exchangeable or exercisable for shares of Common Stock, or
securities exercisable to convertible into shares of Common Stock (a “Subsequent
Placement”). In addition to the foregoing restrictions, for a period
of one (1) year after the Closing Date, the Investors have a right to
participate in any Subsequent Placement; except that the foregoing restrictions
do not apply to certain issuances of the Company’s securities, including,
without limitation, issuances (i) under an approved equity incentive plan
(limited to 15% of the issued and outstanding shares of Common Stock immediately
prior to the Closing Date), and (ii) in connection with mergers, acquisitions,
strategic business partnerships or joint ventures, in each case with
non-affiliated third parties.
Description
of the Securities Under the Financing
Notes
The Notes issued under the Financing
are 2-year senior convertible notes with an aggregate principal amount of $10
million. The Notes will accrue interest at a rate of 6% per annum
beginning on January 21, 2010 (the “Issuance Date”), which will be paid on
January 15, April 15, July 15, and October 15 of each year to the record Holder
of each Note. The interest accrued is payable in Interest Shares,
although the Company may, at its option and upon written notice to each Holder
of the Notes, make such interest payments in cash or in a combination of cash
and Interest Shares. If a Note is converted prior to maturity, the
Company will pay the Holder an amount equal to the total interest that would
accrue on the Note from the Closing Date through maturity, less any interest
payments already made with respect to the converted Note.
Conversion and Conversion Price
Adjustments
Any Holder of a Note is entitled to
convert the Note into Conversion Shares at any time by delivery of a notice of
conversion to the Company (“Conversion Notice”). On or before the
third trading day after receipt of the Conversion Notice, the Company must
deliver to the Holder such number of Conversion Shares to which the Holder is
entitled pursuant to the conversion. The number of Conversion Shares the Holder
will receive upon conversion of the Notes will be determined by dividing the
amount of principal being converted plus any accrued and unpaid interest
(“Conversion Amount”) by the conversion price effective at the time of the
conversion (the “Conversion Price”, and such calculation, the “Conversion
Rate”).
The Notes have an initial Conversion
Price of $6.25. The Conversion Price may be reset on the twenty-first
(21st)
consecutive trading day following (i) the date on which a Registration Statement
registering all the shares of Common Stock issuable pursuant to the terms of the
Notes and Warrants (the “Registrable Securities”) is declared effective by the
SEC, or (ii) if earlier, each of
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the
date the Registrable Securities may first be sold under Rule 144;
and
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the
date that any of the Registrable Securities are registered in a
Registration Statement.
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If the Conversion Price is subject to
adjustment as set forth above, it will be reset to the lower of:
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the
then-existing Conversion Price; and
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90%
of the average of the volume weighted average prices for each of the
preceding ten complete consecutive trading
days.
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At no time, however, will the
Conversion Price be reset below $2.75 per share as a result of a conversion
price adjustment.
The Conversion Price may also be
subject to adjustment upon any change of control of the Company, any subdivision
or combination of any one or more classes of Common Stock, or any issuance or
sale by the Company of any shares of Common Stock at a price lower than the
effective Conversion Price immediately prior to such issuance or sale (a
“Dilutive Issuance”).
Rights Under the Notes
Purchase
Rights
The Holders of the Notes are entitled
to purchase rights in the event the Company grants, issues or sells any options,
convertible securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common
Stock. Each Holder will be entitled to acquire such number of
additional securities which the Holder could have acquired if the Holder had
held the number of shares of Common Stock acquirable upon complete conversion of
the Note.
Redemption Rights of the
Holders
At their option, the Holders of the
Notes are entitled to redemption rights on all or any portion of the Notes upon
the occurrence of (a) a change of control of the Company or (b) certain
triggering events constituting an event of default, such as:
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failure
of the Company to file or maintain a Registration Statement under which
the Holders may sell any securities issuable or exercisable under the
Financing;
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suspension
from trading of the Common Stock;
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failure
by the Company to convert the Notes into Conversion Shares within five (5)
days of the conversion date;
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failure
by the Company to pay interest or other amounts due on the
Notes;
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failure
to remove any restrictive legend on the certificates of the Conversion
Shares; and
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suspension
from trading or failure of the Common Stock to be listed on a national
securities exchange for a period of five (5) consecutive trading days or
for more than an aggregate of ten (10) trading days in any 365-day
period.
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Redemption Rights of the
Company
Any principle amount of the Notes
outstanding at maturity will be redeemed by the Company for the Conversion
Amount at such time. The Company is entitled to redeem, at any time
after the six (6) month anniversary of the Effective Date (or such date that all
of the securities issued or issuable under the Financing are eligible for
resale), all, but not less than all, of the Conversion Amount remaining under
the Notes if the closing sale price of the Common Stock listed on the principal
market on which the Common Stock is sold exceeds 175% of the Conversion Price
for fifteen (15) consecutive trading days and certain other conditions as set
forth in the Notes are met. The Company is also entitled to call the
Notes for redemption at any time after the six (6) month anniversary of the
Effective Date, and upon delivery of a call redemption notice to the Holders of
the Notes, will pay the Holders an amount of cash equal to 125% of the sum of
any Conversion Amount being redeemed plus any accrued and unpaid
interest.
Miscellaneous
The Holders of the Notes are not
entitled to voting rights in their capacities as such, except as required by
law.
Reservation of Shares of Common
Stock
Pursuant to the terms of the Financing,
the Company must, with respect to each of the Notes, initially reserve a number
of shares of Common Stock equal to 130% of the entire Conversion Rate with
respect to the entire Conversion Amount of each Note as of the Issuance
Date. Thereafter, the Company must take all actions necessary to
reserve and keep available out of its authorized and unissued Common Stock such
number of shares of Common Stock equal to 130% of the number of shares of Common
Stock necessary to effect the conversion of all of the Notes then
outstanding.
Warrants
The Warrants issued under the Financing
have a term of three (3) years and are immediately exercisable upon issuance
into an aggregate of 800,000 fully paid and nonassessable Exercise Shares at an
exercise price of $6.5625 per share (the “Exercise Price”).
Exercise and Exercise Price
Adjustments
The Holders may exercise the Warrants
at any time by delivering to the Company a written notice of exercise and
payment of an amount equal to the effective Exercise Price (as of the date of
exercise) multiplied by the number of Exercise Shares as to which the Warrant is
being exercised. Upon receipt of the notice of exercise and payment,
the Company will issue and deliver to the Holder the number of Exercise Shares
to which the Holder is entitled pursuant to the exercise.
The Exercise Price may be reset on
twenty-first (21st)
consecutive trading day following (i) the date on which a Registration Statement
registering all the Registrable Securities is declared effective by the SEC, or
(ii) if earlier, each of
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the
date the Registrable Securities may first be sold under Rule 144;
and
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the
date that any of the Registrable Securities are registered in a
Registration Statement.
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If the Conversion Price is subject to
adjustment as set forth above, it will be reset to the lower
of:
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the
then-existing Exercise Price; and
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110%
of the average of the volume weighted average prices for each of the
preceding ten (10) complete consecutive trading
days.
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At no time, however, will the Exercise
Price be reset below $3.00 per share as a result of the foregoing
adjustment.
The Exercise Price is also subject to
adjustment in the event the Company, at any time after the Issuance Date, pays a
stock dividend on, subdivides or combines one or more classes of its then
outstanding shares of Common Stock, or issues or sells any shares of Common
Stock pursuant to a Dilutive Issuance.
Simultaneously with any adjustment to
the Exercise Price, the number of Exercise Shares that may be purchased upon
exercise of the Warrants will be increased or decreased proportionally, such
that after such adjustment, the aggregate Exercise Price payable for the
adjusted number of Exercise Shares will be the same as the aggregate Exercise
Price in effect immediately prior to such adjustment of the number of Exercise
Shares that may be purchased upon exercise of the Warrants.
Rights Under the Warrants
Participation
Rights
The Holders of the Warrants are
entitled to participate in any dividend or other distribution of assets, or
rights to acquire assets, the Company makes to holders of shares of Common
Stock, and the Holders are entitled to participation rights in the event the
Company grants, issues or sells any options, convertible securities or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock, to the same extent that each Holder would
have participated if such Holder had held the number of Exercise Shares
acquirable upon complete exercise of the Warrants immediately before the date on
which record is taken for such a distribution.
Cashless
Exercise
The Holders of the Warrants are
entitled to a cashless exercise of the Warrants if, at the time of the exercise
of the Warrants, a Registration Statement is not effective for the resale by the
Holder of all of the Exercise Shares.
Miscellaneous
The Holders of the Warrants, solely in
their capacities as such, are not entitled to vote or receive dividends or be
deemed the holder of any share capital of the Company, and Holders do not have
any rights of a stockholder of the Company, including any right to vote, give or
withhold consent to any corporate action, receive notice of meetings, receive
dividends or subscription rights or otherwise prior to the exercise of the
Warrants.
Reservation of Shares of Common
Stock
Pursuant to the terms of the Financing,
the Company must at all times keep reserved for issuance under the Warrants the
number of shares of Common Stock necessary to satisfy the Company’s obligations
to issue Exercise Shares. If at any time the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to satisfy
its obligations under the Warrants, the Company shall take all action necessary
to increase the number of authorized shares of Common Stock to a sufficient
amount.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains
forward-looking statements. Forward-looking statements provide our current
expectations or forecasts of future events. Forward-looking statements include
statements about our expectations, beliefs, plans, objectives, intentions,
assumptions and other statements that are not historical facts. Words or phrases
such as “anticipate,” “believe,” “continue,” “ongoing,” “estimate,” “expect,”
“intend,” “may,” “plan,” “potential,” “predict,” “project” or similar words or
phrases, or the negatives of those words or phrases, may identify
forward-looking statements, but the absence of these words does not necessarily
mean that a statement is not forward-looking.
The risk factors referred to in this
prospectus could materially and adversely affect our business, financial
conditions and results of operations and cause actual results or outcomes to
differ materially from those expressed in any forward-looking statements made by
us, and you should not place undue reliance on any such forward-looking
statements. Any forward-looking statement speaks only as of the date on which it
is made and we do not undertake any obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. The risks and uncertainties described below are not the only ones we
face. New factors emerge from time to time, and it is not possible for us to
predict which will arise. There may be additional risks not presently known to
us or that we currently believe are immaterial to our business. 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. If any such
risks occur, our business, operating results, liquidity and financial condition
could be materially affected in an adverse manner. Under such circumstances, you
may lose all or part of your investment.
The industry and market data contained
in this prospectus are based either on our management’s own estimates or, where
indicated, independent industry publications, reports by governmental agencies
or market research firms or other published independent sources and, in each
case, are believed by our management to be reasonable estimates. However,
industry and market data is subject to change and cannot always be verified with
complete certainty due to limits on the availability and reliability of raw
data, the voluntary nature of the data gathering process and other limitations
and uncertainties inherent in any statistical survey of market shares. We have
not independently verified market and industry data from third-party sources. In
addition, consumption patterns and customer preferences can and do change. As a
result, you should be aware that market share, ranking and other similar data
set forth herein, and estimates and beliefs based on such data, may not be
verifiable or reliable.
RISK
FACTORS
You
should carefully consider the risks described below together with all of the
other information included in this report before making an investment decision
with regard to our securities. The statements contained herein that
are not historic facts are forward-looking statements that are subject to risks
and uncertainties that could cause actual results to differ materially from
those set forth in or implied by forward-looking statements. If any
of the following risks actually occur, our business, financial condition or
results of operations could be harmed. In that case, the trading price of our
Common Stock could decline, and you may lose all or part of your
investment.
Risks
Relating to Our Overall Business Operations
Our
limited operating history may not serve as an adequate basis to judge our future
prospects and results of operations.
We have a
limited operating history because we have only been in operation since
2003. This limited operating history, and the unpredictability of the
machinery production industry, makes it difficult for investors to evaluate our
businesses and predict future operating results. An investor in our securities
must consider the risks, uncertainties and difficulties frequently encountered
by companies in new and rapidly evolving markets. The risks and
difficulties we face include challenges in accurate financial planning as a
result of limited historical data and the uncertainties resulting from having
had a relatively limited time period in which to implement and evaluate our
business strategies as compared to older companies with longer operating
histories.
We
may not be able to comply with all applicable government
regulations.
We are
subject to extensive governmental regulation by the central, regional and local
authorities in the PRC, where our business operations take place. We believe
that we are currently in substantial compliance with all laws and governmental
regulations and that we have all material permits and licenses required for our
operations. Nevertheless, we cannot assure investors that we will continue to be
in substantial compliance with current laws and regulations, or that we will be
able to comply with any future laws and regulations. To the extent that new
regulations are adopted, we will be required to conform our activities in order
to comply with such regulations. Failure to comply with applicable laws and
regulations could subject us to civil remedies, including fines, injunctions,
recalls or seizures, as well as potential criminal sanctions, which could have a
material adverse effect on its business, operations and finances.
Compliance
with environmental regulations can be expensive, and noncompliance with these
regulations may result in adverse publicity and potentially significant monetary
damages and fines.
We use,
generate and discharge toxic, volatile and otherwise hazardous chemicals and
wastes in our research and development and manufacturing activities, and our
business operations generate noise, waste water, and gaseous and other
industrial wastes. We are therefore required to comply with all national and
local regulations regarding protection of the environment. We are in compliance
with current environmental protection requirements and have all necessary
environmental permits to conduct our business. However, if more stringent
regulations are adopted in the future, the costs of compliance with these new
regulations could be substantial. Additionally, if we fail to comply with
present or future environmental regulations, we may be required to pay
substantial fines, suspend production or cease operations. Any failure by us to
control the use of, or to restrict adequately the discharge of, hazardous
substances could subject us to potentially significant monetary damages and
fines or suspensions in our business operations. Certain laws, ordinances and
regulations could limit our ability to develop, use, or sell our
products.
Our
business depends substantially on the continuing efforts of our executive
officers, and our business may be severely disrupted if we lose their
services.
Our
future success depends substantially on the continued services of our executive
officers, especially our CEO and President, Mr. Hu Xiaoming. We do not maintain
key man life insurance on any of our executive officers. If any of
our executive officers are unable or unwilling to continue in their present
positions, we may not be able to replace them readily, if at
all. Therefore, our business may be severely disrupted, and we may
incur additional expenses to recruit and retain new officers. In
addition, if any of our executives joins a competitor or forms a competing
company, we may lose some of our customers.
We
may be subject to product liability claims, recalls or warranty claims, which
could be expensive, damage our reputation and result in a diversion of
management resources.
The
Company may be subject to lawsuits resulting from injuries associated with the
use of the vehicles that it sells. The Company may incur losses relating to
these claims or the defense of these claims. There is a risk that claims or
liabilities will exceed our insurance coverage. In addition, the Company may be
unable to retain adequate liability insurance in the future.
The
Company may also be required to participate in recalls involving our vehicles if
any prove to be defective, or we may voluntarily initiate a recall or make
payments related to such claims as a result of various industry or business
practices or the need to maintain good customer relationships. Such a recall
would result in a diversion of resources. While we do maintain product liability
insurance, we cannot assure you that it will be sufficient to cover all product
liability claims, that such claims will not exceed our insurance coverage limits
or that such insurance will continue to be available on commercially reasonable
terms, if at all. Any product liability claim brought against us could have a
material adverse effect on our results of operations.
Risks
Relating to Our Vehicle Machinery Production Operations
We
may be subject to significant potential liabilities as a result of defects in
production and product liability.
Through
our machinery production operations, we may be subject to production defect and
product liability arising in the ordinary course of business. These claims are
common to the machinery production industry and can be costly.
With respect to certain general
liability exposures, including manufacturing defect and product liability,
interpretation of underlying current and future trends, assessment of claims and
the related liability and reserve estimation process is highly subjective due to
the complex nature of these exposures, with each exposure exhibiting unique
circumstances. Furthermore, once claims are asserted for construction defects,
it is difficult to determine the extent to which the assertion of these claims
will expand geographically. We may not have sufficient funds available to cover
any liability for damages, the cost of repairs, and/or the expense of litigation
surrounding such claims, and future claims may arise out of events or
circumstances not covered by insurance and not subject to effective
indemnification agreements with our subcontractors.
The
vehicle machinery industry is highly competitive and we are subject to risks
relating to competition that may adversely affect our performance.
The
vehicle machinery industry is highly competitive, and our continued success
depends upon our ability to compete effectively in markets that contain numerous
competitors, some of which have significantly greater financial, marketing and
other resources than we have. Competition may reduce fee structures, potentially
causing us to lower our fees or prices, which may adversely impact our profits.
New or existing competition that uses a business model that is different from
our business model may put pressure on us to change our model so that we can
remain competitive.
Our
business is subject to the risk of supplier concentrations.
We depend
on a limited number of suppliers for the sourcing of major components and parts
and principal raw materials. As a result of this concentration in our supply
chain, our business and operations would be negatively affected if any of our
key suppliers were to experience significant disruption affecting the price,
quality, availability or timely delivery of their products. The partial or
complete loss of one of these suppliers, or a significant adverse change in our
relationship with any of these suppliers, could result in lost revenue, added
costs and distribution delays that could harm our business and customer
relationships. In addition, concentration in our supply chain can exacerbate our
exposure to risks associated with the termination by key suppliers of our
distribution agreements or any adverse change in the terms of such agreements,
which could have a negative impact on our revenues and
profitability.
General economic
conditions may negatively impact our results.
The
consumption of entertainment products such as go-karts and mini-cars is
dependant on continued economic growth, and the duration, pace and full extent
of the current growth environment remains unclear. Moderate or severe economic
downturns or adverse conditions may negatively affect our operations. These
conditions may be widespread or isolated to one or more geographic regions. A
tightening of the labor markets in one or more geographic regions may result in
fewer qualified applicants for job openings in our facilities. Higher wages,
related labor costs and other increasing cost trends may negatively impact our
results as wages and related labor costs.
Risks
Related to Doing Business in China
Change
in political and economic conditions may affect our business operations and
profitability.
Since our
business operations are primarily located in China, our business operations and
financial position are subject, to a significant degree, to the economic,
political and legal developments in China.
China's
government started implementing its economic reform policy in 1978, which
enabled China’s economy to gradually transform from a "planned economy" to a
"socialist market economy." In 1993, the concept of the socialist market economy
was introduced into the Constitution of China, and the country has since
experienced accelerated development of a market economy. A noteworthy recent
phenomenon is that non-state owned enterprises, such as private enterprises,
play an increasingly important role in the Chinese economy and the degree of
direct control by the PRC government over the economy is gradually
declining.
While the
Chinese government has not halted its economic reform policy since 1978, any
significant adverse changes in the social, political and economic conditions of
China may fundamentally impact China’s economic reform policies, and thus the
Company's operations and profits may be adversely affected.
Change
in tax laws and regulations in China may affect our business
operations.
Various
tax reform policies have been implemented in the PRC in recent years. Businesses
are still awaiting guidance from the government in interpreting certain PRC tax
policies. Moreover, there can be no assurance that the existing tax laws and
regulations will not be revised or amended in the future.
Uncertainties
with respect to the Chinese legal system could have a material adverse effect on
us and may restrict the level of legal protections to foreign
investors.
China's
legal system is based on statutory law. Unlike the common law system, statutory
law is based primarily on written statutes. Previous court decisions may be
cited as persuasive authority but do not have a binding effect. Since 1979, the
PRC government has been promulgating and amending the laws and regulations
regarding economic matters, such as corporate organization and governance,
foreign investment, commerce, taxation and trade. However, since
these laws and regulations are relatively new, and the PRC legal system
continues to rapidly evolve, the interpretation of many laws, regulations and
rules is not always uniform and enforcement of these laws, regulations and rules
involves uncertainties, which may limit legal protections available to
us.
In
addition, any litigation in China may be protracted and may result in
substantial costs and diversion of resources and management attention. The legal
system in the China cannot provide the investors with the same level of
protection as in the U.S. The Company is governed by the law and regulations
generally applicable to local enterprises in China. Many of these laws and
regulations were recently introduced and remain experimental in nature and
subject to changes and refinements. Interpretation, implementation and
enforcement of the existing laws and regulations can be uncertain and
unpredictable and therefore may restrict the legal protections of foreign
investors.
Changes
in Currency Conversion Policies in China may have an material adverse effect on
us.
Renminbi
(“RMB”) is not a freely exchangeable currency. Since 1998, the State
Administration of Foreign Exchange of China has promulgated a series of
circulars and rules in order to enhance verification of foreign exchange
payments under a Chinese entity’s current account items, and has imposed strict
requirements on borrowing and repayments of foreign exchange debts from and to
foreign creditors under the capital account items and on the creation of foreign
security in favor of foreign creditors.
This may
complicate foreign exchange payments to foreign creditors under the current
account items and thus will affect the ability to borrow under international
commercial loans, the creation of foreign security, and the borrowing of RMB
under guarantees in foreign currencies. Furthermore, the value of RMB may become
subject to supply and demand, which could be largely impacted by international
economic and political environments. Any fluctuations in the exchange
rate of RMB could have an adverse effect on the operational and financial
condition of the Company and its subsidiaries in China.
You
may experience difficulties in effecting service of legal process, enforcing
foreign judgments or bringing original actions based on United States or other
foreign laws against us, our management or the experts named in the
prospectus.
We
conduct substantially all of our operations in China and substantially all of
our assets are located in China. In addition, all of our senior executive
officers reside in China. As a result, it may not be possible to effect service
of process within the United States or elsewhere outside China upon our senior
executive officers, including with respect to matters arising under U.S. federal
securities laws or applicable state securities laws. Moreover, our PRC counsel
has advised us that the PRC does not have treaties with the United States or
many other countries providing for the reciprocal recognition and enforcement of
judgment of courts.
Risks
Relating to Ownership of Our Securities
Our
stock price may be volatile, which may result in losses to our
shareholders.
The stock
markets have experienced significant price and trading volume fluctuations, and
the market prices of companies listed on the NASDAQ Capital Market, the stock
market in which shares of our Common Stock are listed, have been volatile in the
past and have experienced sharp share price and trading volume changes. The
trading price of our Common Stock is likely to be volatile and could fluctuate
widely in response to many factors, including the following, some of which are
beyond our control:
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variations
in our operating results;
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changes
in expectations of our future financial performance, including financial
estimates by securities analysts and
investors;
|
|
|
•
|
changes
in operating and stock price performance of other companies in our
industry;
|
|
|
•
|
additions
or departures of key personnel; and
|
|
|
•
|
future
sales of our Common Stock.
|
Domestic
and international stock markets often experience significant price and volume
fluctuations. These fluctuations, as well as general economic and political
conditions unrelated to our performance, may adversely affect the price of our
Common Stock.
One
stockholder owns a substantial portion of our outstanding Common Stock, which
may enable this stockholder to influence many significant corporate actions and
in certain circumstances may prevent a change in control that would otherwise be
beneficial to our other shareholders.
Excelvantage
Group Limited controls approximately 60.12% of our outstanding shares of Common
Stock. As a result, Excelvantage Group Limited could have a substantial impact
on matters requiring the vote of the shareholders, including the election of our
directors and most corporate actions. This control could delay, defer or prevent
others from initiating a potential merger, takeover or other change in our
control, even if these actions would benefit our other shareholders and the
Company. This control could adversely affect the voting and other rights of our
other shareholders and could depress the market price of our Common
Stock.
Our
common shares are thinly traded and you may be unable to sell at or near ask
prices, or at all.
We cannot
predict the extent to which an active public market for trading our Common Stock
will be sustained. Our common shares have historically been sporadically or
“thinly-traded,” meaning that the number of persons interested in purchasing our
common shares at or near bid prices at any given time may be relatively small or
non-existent.
This
situation is attributable to a number of factors, including the fact that we are
a small company which is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community who generate or
influence sales volume. Even if we came to the attention of such
persons, those persons tend to be risk-averse and may be reluctant to follow,
purchase, or recommend the purchase of shares of an unproven company such as
ours until such time as we become more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give you any assurance
that a broader or more active public trading market for our Common Stock will
develop or be sustained, or that current trading levels will be
sustained.
The
market price for our Common Stock is particularly volatile given our status as a
relatively small company with a small and thinly traded “float” and lack of
current revenues which could lead to wide fluctuations in our share price. You
may be unable to sell your Common Stock at or above your purchase price if at
all, which may result in substantial losses to you.
Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (2)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and (5) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.
Substantial
sales of the shares of our Common Stock issuable upon conversion of our senior
secured convertible notes or exercise of warrants could adversely affect our
stock price or our ability to raise additional financing in the public capital
markets.
We issued
$10,000,000 2-year senior secured convertible notes and warrants to purchase an
aggregate of 800,000 shares of Common Stock to certain institutional investors
on January 21, 2010. Under the terms of the notes, the maximum number
of shares of Common Stock issuable upon conversion is 3,636,364 shares (not
including any shares of Common Stock which the Company may issue as interest
payments in lieu of cash), representing approximately 13% of our outstanding
Common Stock on a fully diluted basis.
If the
note holders convert their notes or if they exercise the warrants and sell a
substantial number of shares of our Common Stock in the future, or if investors
perceive that these sales may occur, the market price of our Common Stock could
decline or market demand for our Common Stock could be sharply reduced. The
conversion of the notes and subsequent sale of a substantial number of shares of
our Common Stock could also adversely affect demand for, and the market price
of, our Common Stock. Each of these transactions could adversely affect our
ability to raise additional financing by issuing equity or equity-based
securities in the public capital markets.
Antidilution
and other provisions in the senior secured convertible notes and the warrants
issued to the note holders may also adversely affect our stock price or our
ability to raise additional financing.
The
senior secured convertible notes and the warrants issued to the institutional
holders described above contains antidilution provisions that provide for
adjustment of the note conversion price and the warrant exercise price, and the
number of shares issuable under the warrants, upon the occurrence of certain
events. If we issue shares of our Common Stock, or securities convertible into
our Common Stock, at prices below the conversion price or exercise price, as
applicable, the conversion price of the notes will be reduced and the warrant
exercise price will be reduced and the number of shares issuable under the
warrant will be increased. The amount of such adjustment if any, will be
determined pursuant to a formula specified in the note and the warrant and will
depend on the number of shares issued and the offering price of the subsequent
issuance of securities. Adjustments to the warrant pursuant to these
antidilution provisions may result in significant dilution to the interests of
our existing stockholders and may adversely affect the market price of our
Common Stock. The antidilution provisions may also limit our ability to obtain
additional financing on terms favorable to us.
Moreover,
we may not realize any cash proceeds from the exercise of the warrants. A holder
of the warrant may opt for a cashless exercise of all or part of the warrant
under certain circumstances. In a cashless exercise, the holder of the warrant
would make no cash payment to us, and would receive a number of shares of our
common stock having an aggregate value equal to the excess of the then-current
market price of the shares of our common stock issuable upon exercise of the
warrant over the exercise price of the warrant. Such an issuance of common stock
would be immediately dilutive to the interests of other
stockholders.
We
do not anticipate paying any cash dividends.
We
presently do not anticipate that we will pay dividends on any of our capital
stock in the foreseeable future. If payment of dividends does occur at some
point in the future, it would be contingent upon our revenues and earnings, if
any, capital requirements, and general financial condition. The payment of any
dividends will be within the discretion of our Board of Directors. We presently
intend to retain all earnings, if any, to implement our business plan;
accordingly, we do not anticipate the declaration of any dividends in the
foreseeable future.
Fluctuation
in the value of the RMB may have a material adverse effect on your
investment.
The
change in value of the RMB against the U.S. dollar, the Euro and other
currencies is affected by changes in China’s political and economic conditions,
among other things. On July 21, 2005, the PRC government changed its
decade-old policy of pegging the value of the RMB to the U.S. dollar. Under
the new policy, the RMB is permitted to fluctuate within a narrow and managed
band against a basket of certain foreign currencies. This change in policy has
resulted in approximately 2.1% appreciation of RMB against the U.S. dollar.
While the international reaction to the RMB revaluation has generally been
positive, there remains significant international pressure on the PRC government
to adopt an even more flexible currency policy, which could result in a further
and more significant appreciation of the RMB against the U.S. dollar. As a
portion of our costs and expenses is denominated in RMB, the revaluation in July
2005 and potential future revaluation has and could further increase our costs.
In addition, as we rely entirely on dividends paid to us by our operating
subsidiaries, any significant revaluation of the RMB may have a material adverse
effect on our revenues and financial condition. For example, to the extent that
we need to convert U.S. dollars we receive from this offering into RMB for
our operations, appreciation of the RMB against the U.S. dollar would have
an adverse effect on the RMB amount we receive from the conversion. Conversely,
if we decide to convert our RMB into U.S. dollars for the purpose of making
payments for dividends on our ordinary shares or for other business purposes,
appreciation of the U.S. dollar against the RMB would have a negative
effect on the U.S. dollar amount available to us.
If
the Company were to be delisted from NASDAQ, our Common Stock could be subject
to “penny stock” rules which could negatively impact our liquidity and our
shareholders’ ability to sell their shares.
Our
Common Stock is currently listed on the NASDAQ Capital Market. We must comply
with numerous NASDAQ MarketPlace rules in order to maintain the listing of our
Common Stock on NASDAQ. There can be no assurance that we can continue to meet
the requirements to maintain the NASDAQ listing of our Common Stock. If we are
unable to maintain our listing on NASDAQ, the market liquidity of our Common
Stock may be severely limited.
Volatility
in Our Common Share Price May Subject Us to Securities Litigation.
The
market for our Common Stock is characterized by significant price volatility as
compared to seasoned issuers, and we expect that our share price will continue
to be more volatile than a seasoned issuer for the indefinite future. In the
past, plaintiffs have often initiated securities class action litigation against
a company following periods of volatility in the market price of its securities.
We may, in the future, be the target of similar litigation. Securities
litigation could result in substantial costs and liabilities and could divert
management's attention and resources.
The
Elimination of Monetary Liability Against our Directors, Officers and Employees
under Delaware law and the Existence of Indemnification Rights of our Directors,
Officers and Employees May Result in Substantial Expenditures by our Company and
may Discourage Lawsuits Against our Directors, Officers and
Employees.
Our
articles of incorporation do not contain any specific provisions that eliminate
the liability of our directors for monetary damages to our company and
shareholders; however, we are prepared to give such indemnification to our
directors and officers to the extent provided for by Delaware law. We may also
have contractual indemnification obligations under our employment agreements
with our officers. The foregoing indemnification obligations could result in our
company incurring substantial expenditures to cover the cost of settlement or
damage awards against directors and officers, which we may be unable to recoup.
These provisions and resultant costs may also discourage our company from
bringing a lawsuit against directors and officers for breaches of their
fiduciary duties, and may similarly discourage the filing of derivative
litigation by our shareholders against our directors and officers even though
such actions, if successful, might otherwise benefit our company and
shareholders.
Past
Activities Of Stone Mountain and Our Affiliates May Lead to Future
Liability.
Prior to
Stone Mountain entering into the share exchange agreement with Continental on
June 29, 2007, Stone Mountain engaged in businesses unrelated to our current
operations. Any liabilities relating to such prior business against which we are
not completely indemnified may have a material adverse effect on
us.
We
may need additional capital, and the sale of additional shares or other equity
securities could result in additional dilution to our shareholders.
We
believe that our current cash, cash equivalents, and anticipated cash flow from
operations will be sufficient to meet our anticipated cash needs for the near
future. We may, however, require additional cash resources due to changed
business conditions or other future developments, including any investments or
acquisitions we may decide to pursue. If our resources are insufficient to
satisfy our cash requirements, we may seek to sell additional equity or debt
securities or obtain a credit facility. The sale of additional equity securities
could result in dilution to our shareholders. The incurrence of indebtedness
would result in increased debt service obligations and could result in operating
and financing covenants that would restrict our operations. We cannot assure you
that financing will be available in amounts or on terms acceptable to us, if at
all.
Our
business is subject to changing regulations related to corporate governance and
public disclosure that have increased both our costs and the risk of
noncompliance.
Because
our Common Stock is publicly traded, we are subject to certain rules and
regulations of federal, state and financial market exchange entities charged
with the protection of investors and the oversight of companies whose securities
are publicly traded. These entities, including the Public Company Accounting
Oversight Board, the SEC and NASDAQ, have issued requirements and regulations
and continue to develop additional regulations and requirements in response to
corporate scandals and laws enacted by Congress, most notably the Sarbanes-Oxley
Act of 2002. Our efforts to comply with these regulations have resulted in, and
are likely to continue resulting in, increased general and administrative
expenses and diversion of management time and attention from revenue-generating
activities to compliance activities. Because new and modified laws, regulations
and standards are subject to varying interpretations in many cases due to their
lack of specificity, their application in practice may evolve over time as new
guidance is provided by regulatory and governing bodies. This evolution may
result in continuing uncertainty regarding compliance matters and additional
costs necessitated by ongoing revisions to our disclosure and governance
practices.
USE
OF PROCEEDS
We will not receive any proceeds from
the sale of the Common Stock by the selling stockholders. We may receive
proceeds from the issuance of shares of our Common Stock upon the exercise of
the Warrants, if exercised for cash. We intend to use any proceeds from exercise
of the Warrants for working capital and other general corporate
purposes.
SELLING
STOCKHOLDERS
The
shares of Common Stock being offered by the selling stockholders are those
issuable to the selling stockholders upon conversion of the Notes and otherwise
pursuant to the terms of the Notes with respect to the Notes and exercise of the
Warrants. For additional information regarding the issuance of the Notes and the
Warrants, see “Recent Developments” above. We are registering the shares of
Common Stock in order to permit the selling stockholders to offer the shares for
resale from time to time. Except for the ownership of the Notes and the Warrants
issued pursuant to the Financing, the selling stockholders who were investors in
the Financing have not had any material relationship with us within the past
three years.
The table
below lists the selling stockholders and other information regarding the
beneficial ownership (as determined under Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder) of
the shares of Common Stock held by each of the selling stockholders. The second
column lists the number of shares of Common Stock beneficially owned by the
selling stockholders, based on their respective ownership of shares of Common
Stock, Notes and Warrants, as of February 19, 2010, assuming conversion of
the Notes and exercise of the Warrants held by each such selling stockholder on
that date.
The third
column lists the shares of Common Stock being offered by this prospectus by the
selling stockholders and does not take in account any limitations on (i)
conversion of the Notes or issuance of Common Stock set forth therein or (ii)
exercise of the Warrants set forth therein.
In
accordance with the terms of a registration rights agreement with the holders of
the Notes and the Warrants, this prospectus generally covers the resale of
6,897,708 shares of Common Stock issuable upon conversion of the Notes or
otherwise pursuant to the terms of the Notes and/or upon exercise of the
Warrants issued in conjunction with such notes. Such aggregate amount of shares
calculated by the Company as of the date of this Registration Statement is based
on 130% of the sum of (i) the maximum number of shares of Common Stock issuable
upon conversion of the Notes, (ii) the maximum number of other shares of Common
Stock issuable pursuant to the Notes and (iii) the maximum number of shares of
Common Stock issuable upon exercise of the Warrants, in each case, determined as
if the outstanding Notes and Warrants were converted or exercised (as the case
may be) in full (without regard to any limitations on conversion, issuance of
Common Stock or exercise contained therein) as of the trading day immediately
preceding the date this registration statement was initially filed with the
SEC. In
addition to both economic and standard antidilution adjustments, the conversion
price of the notes is subject to additional adjustments described below in
“Recent Developments - Description of the Securities Under the Financing - Notes
- Conversion and Conversion Price Adjustments”. For purposes of the
calculation of the maximum number of shares of Common Stock initially issuable
upon conversion of the Notes, the Company has assumed such additional
adjustments will result in an adjusted conversion price of $2.75, which
represents the lowest conversion price adjustment permitted pursuant to such
additional adjustment provisions in the Notes. The Company further
has assumed for purposes of calculating the maximum number of other shares of
Common Stock initially issuable pursuant to the Notes that the closing price of
each trading day used in determining such number of other shares of Common Stock
in accordance with the terms of the Notes will equal $4.14, which was the
closing price on February 19, 2010. Because
the conversion price of the Notes and the exercise price of the Warrants may be
adjusted, the number of shares that will actually be issued may be more or less
than the number of shares being offered by this prospectus. The fourth column
assumes the sale of all of the shares offered by the selling stockholders
pursuant to this prospectus.
Under the
terms of the Notes and the Warrants, a selling stockholder may not convert the
Notes or exercise the Warrants to the extent (but only to the extent) such
selling stockholder or any of its affiliates would beneficially own a number of
shares of our Common Stock which would exceed 4.99%. The number of shares in the
second column reflects these limitations. The selling stockholders may sell all,
some or none of their shares in this offering. See “Plan of
Distribution.”
|
Name of Selling Stockholder
|
|
Number of Shares of Common
Stock Owned Prior to Offering
(1)(2)
|
|
|
Maximum Number of
Shares of Common
Stock to be Sold
Pursuant to this
Prospectus(3)
(4)
|
|
|
Number of Shares of Common
Stock Owned After Offering(2)
|
|
|
|
|
Number
|
|
|
Percent
|
|
|
|
|
|
Number
|
|
|
Percent
|
|
|
Hudson Bay Fund,
LP (5)
|
|
|
492,000 |
|
|
|
2.46 |
% |
|
|
1,414,030 |
|
|
|
0 |
|
|
|
* |
|
|
Hudson Bay Overseas
Fund Ltd. (6)
|
|
|
708,000 |
|
|
|
3.55 |
% |
|
|
2,034,824 |
|
|
|
0 |
|
|
|
* |
|
|
Capital Ventures
International (7)
|
|
|
1,200,000 |
|
|
|
6.01 |
% |
|
|
3,448,854 |
|
|
|
0 |
|
|
|
* |
|
(1)
Beneficial ownership is determined in accordance with the rules of the SEC.
Shares of Common Stock subject to options or warrants currently exercisable or
exercisable within 60 days of the date of this prospectus, are deemed
outstanding for computing the percentage ownership of the stockholder holding
the options or warrants and securities that are currently convertible or
convertible within 60 days of the date of this prospectus, but are not deemed
outstanding for computing the percentage ownership of any other stockholder.
Unless otherwise indicated in the footnotes to this table, we believe
stockholders named in the table have sole voting and sole investment power with
respect to the shares set forth opposite such stockholder’s name. Percentage of
ownership is based on 19,961,000 shares of Common Stock outstanding as of
February 19, 2010.
(2)
Pursuant to the terms of the Notes and the Warrants, at no time may a holder of
Notes and Warrants convert or exercise such holder’s Note or Warrant into shares
of our Common Stock if the conversion or exercise would result in such holder
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) more than 4.99% of our then issued and
outstanding shares of Common Stock; provided, however, that each holder may
lower this limitation percentage at any time or increase this limitation
percentage to any other percentage not in excess of 9.99% upon 61 days’ prior
written notice to the Company. The 4.99% beneficial ownership limitation does
not prevent a stockholder from selling some of its holdings and then receiving
additional shares. Accordingly, each stockholder could exercise and sell more
than 4.99% of our Common Stock without ever at any one time holding more than
this limit. The number and percent of shares of our Common Stock to be held by
the selling stockholders after the offering of the resale securities, assumes
all of the resale securities are sold by the selling stockholders and that the
selling stockholders do not acquire any other shares of our Common Stock prior
to their assumed sale of all of the resale shares.
(3)
Includes the maximum number of shares of Common Stock that each selling
stockholder may sell, regardless of the 4.99% beneficial ownership limitation,
more fully explained in footnote 2.
(4)
Includes shares of Common Stock, which may be issued upon conversion of the
Notes or otherwise pursuant to the terms of the Notes and/or upon exercise of
the Warrants issued in conjunction with the Notes (such aggregate amount of
shares calculated by the Company as of the date of this Registration Statement
based on 130% of the sum of (i) the maximum number of shares of Common Stock
initially issuable upon conversion of the Notes, (ii) the maximum number of
other shares of Common Stock initially issuable pursuant to the Notes and (iii)
the maximum number of shares of Common Stock initially issuable upon exercise of
the Warrants). For
purposes of the calculation of the maximum number of shares of Common Stock
initially issuable upon conversion of the Notes, the Company has assumed such
additional adjustments will result in an adjusted conversion price of $2.75,
which represents the lowest conversion price adjustment permitted pursuant to
such additional adjustment provisions in the Notes. The Company
further has assumed for purposes of calculating the maximum number of other
shares of Common Stock initially issuable pursuant to the Notes that the closing
price of each trading day used in determining such number of other shares of
Common Stock in accordance with the terms of the Notes will equal $4.14, which
was the closing price on February 19, 2010.
(5)
Includes shares of Common Stock, which may be issued upon conversion of the
Notes or otherwise pursuant to the terms of the Notes and/or upon exercise of
the Warrants issued in conjunction with the Notes (such aggregate amount of
shares calculated by the Company as of the date of this Registration Statement
based on 130% of the sum of (i) the maximum number of shares of Common Stock
initially issuable upon conversion of the Notes held by Hudson Bay Fund LP, (ii)
the maximum number of other shares of Common Stock initially issuable pursuant
to the Notes held by Hudson Bay Fund LP and (iii) the maximum number of shares
of Common Stock initially issuable upon exercise of the Warrant held by Hudson
Bay Fund LP). In
addition to both economic and standard antidilution adjustments, the conversion
price of the notes is subject to additional adjustments described below in
“Recent Developments - Description of the Securities Under the Financing - Notes
- Conversion and Conversion Price Adjustments”. For purposes of the
calculation of the maximum number of shares of Common Stock initially issuable
upon conversion of the Notes, the Company has assumed such additional
adjustments will result in an adjusted conversion price of $2.75, which
represents the lowest conversion price adjustment permitted pursuant to such
additional adjustment provisions in the Notes. The Company further
has assumed for purposes of calculating the maximum number of other shares of
Common Stock initially issuable pursuant to the Notes that the closing price of
each trading day used in determining such number of other shares of Common Stock
in accordance with the terms of the Notes will equal $4.14, which was the
closing price on February 19, 2010. Sander Gerber shares voting and
investment power over these securities. Sander Gerber disclaims beneficial
ownership over the securities held by Hudson Bay Fund LP. The selling
shareholder acquired the securities offered for its own account in the ordinary
course of business, and at the time it acquired the securities, it had no
agreements, plans or understandings, directly or indirectly to distribute the
securities.
(6) Includes
shares of Common Stock, which may be issued upon conversion of the Notes or
otherwise pursuant to the terms of the Notes and/or upon exercise of the
Warrants issued in conjunction with the Notes (such aggregate amount of shares
calculated by the Company as of the date of this Registration Statement based on
130% of the sum of (i) the maximum number of shares of Common Stock initially
issuable upon conversion of the Notes held by Hudson Bay Overseas Fund LTD, (ii)
the maximum number of other shares of Common Stock initially issuable pursuant
to the Notes held by Hudson Bay Overseas Fund LTD and (iii) the maximum number
of shares of Common Stock initially issuable upon exercise of the Warrant held
by Hudson Bay Overseas Fund LTD). In
addition to both economic and standard antidilution adjustments, the conversion
price of the notes is subject to additional adjustments described below in
“Recent Developments - Description of the Securities Under the Financing - Notes
- Conversion and Conversion Price Adjustments”. For purposes of the
calculation of the maximum number of shares of Common Stock initially issuable
upon conversion of the Notes, the Company has assumed such additional
adjustments will result in an adjusted conversion price of $2.75, which
represents the lowest conversion price adjustment permitted pursuant to such
additional adjustment provisions in the Notes. The Company further
has assumed for purposes of calculating the maximum number of other shares of
Common Stock initially issuable pursuant to the Notes that the closing price of
each trading day used in determining such number of other shares of Common Stock
in accordance with the terms of the Notes will equal $4.14, which was the
closing price on February 19, 2010. Sander Gerber shares voting and
investment power over these securities. Sander Gerber disclaims beneficial
ownership over the securities held by Hudson Bay Overseas Fund LTD. The selling
shareholder acquired the securities offered for its own account in the ordinary
course of business, and at the time it acquired the securities, it had no
agreements, plans or understandings, directly or indirectly to distribute the
securities.
(7) Includes
shares of Common Stock, which may be issued upon conversion of the Notes or
otherwise pursuant to the terms of the Notes and/or upon exercise of the
Warrants issued in conjunction with the Notes (such aggregate amount of shares
calculated by the Company as of the date of this Registration Statement based on
130% of the sum of (i) the maximum number of shares of Common Stock initially
issuable upon conversion of the Notes held by Capital Ventures International,
(ii) the maximum number of other shares of Common Stock initially issuable
pursuant to the Notes held by Capital Ventures International and (iii) the
maximum number of shares of Common Stock initially issuable upon exercise of the
Warrant held by Capital Ventures International). In
addition to both economic and standard antidilution adjustments, the conversion
price of the notes is subject to additional adjustments described below in
“Recent Developments - Description of the Securities Under the Financing - Notes
- Conversion and Conversion Price Adjustments”. For purposes of the
calculation of the maximum number of shares of Common Stock initially issuable
upon conversion of the Notes, the Company has assumed such additional
adjustments will result in an adjusted conversion price of $2.75, which
represents the lowest conversion price adjustment permitted pursuant to such
additional adjustment provisions in the Notes. The Company further
has assumed for purposes of calculating the maximum number of other shares of
Common Stock initially issuable pursuant to the Notes that the closing price of
each trading day used in determining such number of other shares of Common Stock
in accordance with the terms of the Notes will equal $4.14, which was the
closing price on February 19, 2010. Heights Capital Management, Inc., the
authorized agent of Capital Ventures International, has discretionary authority
to vote and dispose of the shares held by Capital Ventures International and may
be deemed to be the beneficial owner of these shares. Capital
Ventures International is affiliated with one or more registered
broker-dealers. Capital Ventures International purchased the shares
being registered hereunder in the ordinary course of business and at the time of
purchase, had no agreements or understandings, directly or indirectly, with any
other person to distribute such shares.
* Less
than 1%.
PLAN
OF DISTRIBUTION
We are
registering the shares of Common Stock issuable upon conversion of the Notes and
otherwise pursuant to the terms of the Notes and exercise of the Warrants to
permit the resale of these shares of Common Stock by the holders of the Notes
and Warrants from time to time after the date of this prospectus. We will not
receive any of the proceeds from the sale by the selling stockholders of the
shares of Common Stock. We will bear all fees and expenses incident
to our obligation to register the shares of Common Stock.
The
selling stockholders may sell all or a portion of the shares of Common Stock
held by them and offered hereby from time to time directly or through one or
more underwriters, broker-dealers or agents. If the shares of Common Stock are
sold through underwriters or broker-dealers, the selling stockholders will be
responsible for underwriting discounts or commissions or agent’s commissions.
The shares of Common Stock may be sold in one or more transactions at fixed
prices, at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale or at negotiated prices. These sales may be
effected in transactions, which may involve crosses or block transactions,
pursuant to one or more of the following methods:
|
|
·
|
on
any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;
|
|
|
·
|
in
the over-the-counter market;
|
|
|
·
|
in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
|
|
|
·
|
through
the writing or settlement of options, whether such options are listed on
an options exchange or
otherwise;
|
|
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
|
·
|
privately
negotiated transactions;
|
|
|
·
|
short
sales made after the date the Registration Statement is declared effective
by the SEC;
|
|
|
·
|
broker-dealers
may agree with the selling securityholders to sell a specified number of
such shares at a stipulated price per
share;
|
|
|
·
|
a
combination of any such methods of sale;
and
|
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell shares of Common Stock under Rule 144
promulgated under the Securities Act of 1933, as amended, if available, rather
than under this prospectus. In addition, the selling stockholders may transfer
the shares of Common Stock by other means not described in this prospectus. If
the selling stockholders effect such transactions by selling shares of Common
Stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of Common Stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of
the shares of Common Stock or otherwise, the selling stockholders may enter into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of Common Stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of Common Stock short and
deliver shares of Common Stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales. The
selling stockholders may also loan or pledge shares of Common Stock to
broker-dealers that in turn may sell such shares.
The
selling stockholders may pledge or grant a security interest in some or all of
the Notes, Warrants or shares of Common Stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of Common Stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act amending, if necessary, the list of
selling stockholders to include the pledgee, transferee or other successors in
interest as selling stockholders under this prospectus. The selling stockholders
also may transfer and donate the shares of Common Stock in other circumstances
in which case the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this
prospectus.
To the
extent required by the Securities Act and the rules and regulations thereunder,
the selling stockholders and any broker-dealer participating in the distribution
of the shares of Common Stock may be deemed to be “underwriters” within the
meaning of the Securities Act, and any commission paid, or any discounts or
concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular
offering of the shares of Common Stock is made, a prospectus supplement, if
required, will be distributed, which will set forth the aggregate amount of
shares of Common Stock being offered and the terms of the offering, including
the name or names of any broker-dealers or agents, any discounts, commissions
and other terms constituting compensation from the selling stockholders and any
discounts, commissions or concessions allowed or re-allowed or paid to
broker-dealers.
Under the
securities laws of some states, the shares of Common Stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
some states the shares of Common Stock may not be sold unless such shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
There can
be no assurance that any selling stockholder will sell any or all of the shares
of Common Stock registered pursuant to the registration statement, of which this
prospectus forms a part.
The
selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, including, without
limitation, to the extent applicable, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the shares of Common Stock
by the selling stockholders and any other participating person. To the extent
applicable, Regulation M may also restrict the ability of any person engaged in
the distribution of the shares of Common Stock to engage in market-making
activities with respect to the shares of Common Stock. All of the foregoing may
affect the marketability of the shares of Common Stock and the ability of any
person or entity to engage in market-making activities with respect to the
shares of Common Stock.
We will
pay all expenses of the registration of the shares of Common Stock pursuant to
the registration rights agreement, estimated to be
$[ ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or “blue sky” laws; provided, however, a selling stockholder
will pay all underwriting discounts and selling commissions, if any. We will
indemnify the selling stockholders against liabilities, including some
liabilities under the Securities Act in accordance with the registration rights
agreements or the selling stockholders will be entitled to contribution. We may
be indemnified by the selling stockholders against civil liabilities, including
liabilities under the Securities Act that may arise from any written information
furnished to us by the selling stockholder specifically for use in this
prospectus, in accordance with the related registration rights agreements or we
may be entitled to contribution.
Once sold
under the registration statement, of which this prospectus forms a part, the
shares of Common Stock will be freely tradable in the hands of persons other
than our affiliates.
LEGAL
MATTERS
K&L
Gates LLP will pass upon the validity of the securities being offered
hereby.
EXPERTS
The
consolidated financial statements of Kandi Technologies, Corp. as of December
31, 2008 and 2007, and for the years then ended, have been incorporated by
reference herein in reliance upon the report of Weinberg & Company, P.A., an
independent registered public accounting firm incorporated by reference herein,
and upon the authority of said firm as experts in accounting and
auditing.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC
allows us to incorporate by reference the information we file with them, which
means:
|
|
•
|
incorporated documents are
considered part of the
prospectus;
|
|
|
•
|
we can disclose important
information to you by referring you to those documents;
and
|
|
|
•
|
information that we file with the
SEC after the date of this prospectus will automatically update and
supersede the information contained in this prospectus and incorporated
filings.
|
We
incorporate by reference the documents listed below that we filed with the SEC
under the Exchange Act:
|
|
•
|
our Annual Report on Form 10-K
for the year ended December 31,
2008;
|
|
|
•
|
our Quarterly Reports on Form
10-Q for the quarters ended March 31, 2009, June 30, 2009 and September
30, 2009;
|
|
|
•
|
our Current Reports on Form 8-K
filed on July 2, 2009 and January 21,
2010;
|
|
|
•
|
our
Proxy Statement on Form DEF14A filed on November 6, 2009;
and
|
|
|
•
|
the description of our Common
Stock contained in the registration statement on Form S-8 (Registration
No. 333-156582) filed with the SEC on January 6, 2009, and all amendments
and reports filed for the purpose of updating that
description.
|
We also
incorporate by reference each of the documents that we file with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (1) after the date of the
initial filing of this registration statement, of which this prospectus forms a
part, prior to the effectiveness of this registration statement and (2) after
the date of this prospectus until the offering of the securities terminates. We
will not, however, incorporate by reference in this prospectus any documents or
portions thereof that are not deemed “filed” with the SEC, including any
information furnished pursuant to Item 2.02 or Item 7.01 of our current reports
on Form 8-K after the date of this prospectus unless, and except to the extent,
specified in such current reports.
We will
provide you with a copy of any of these filings (other than an exhibit to these
filings, unless the exhibit is specifically incorporated by reference into the
filing requested) at no cost, if you submit a request to us by writing or
telephoning us at the following address and telephone number:
Kandi
Technologies, Corp.
Jinhua
City Industrial Zone
Jinhua,
Zhejiang Province
People’s
Republic of China
Post Code
321016
Tel:
(86-579) 83906856
Any
statement contained or incorporated by reference in this prospectus shall be
deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained herein, or in any subsequently filed document
which also is incorporated herein by reference, modifies or supersedes such
earlier statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.
Any statement made in this prospectus concerning the contents of any contract,
agreement or other document is only a summary of the actual contract, agreement
or other document. If we have filed or incorporated by reference any contract,
agreement or other document as an exhibit to the registration statement, you
should read the exhibit for a more complete understanding of the document or
matter involved. Each statement regarding a contract, agreement or other
document is qualified by reference to the actual document.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a
registration statement on Form S-3 under the Securities Act with respect to the
shares of Common Stock and Warrants offered hereby. This prospectus, which
constitutes a part of the registration statement, does not contain all of the
information set forth in the registration statement or the exhibits and
schedules filed therewith. For further information about us and the Common Stock
offered hereby, reference is made to the registration statement and the exhibits
and schedules filed therewith.
A copy of the registration statement
and the exhibits and schedules filed therewith may be inspected without charge
at the public reference room maintained by the SEC, located at 100 F Street,
N.E., Washington, D.C. 20549, and copies of all or any part of the registration
statement may be obtained from such offices upon the payment of the fees
prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference room. We also file annual, quarterly and
current reports, proxy statements and other information with the SEC. The SEC
also maintains an Internet web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. The address of the site is http://www.sec.gov.
You
should rely only on the information contained in this document. We have not
authorized anyone to give any information that is different. 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. The
information in this prospectus is complete and accurate as of the date on the
cover, but the information may change in the future.
6,897,708
Shares of Common Stock
KANDI
TECHNOLOGIES, CORP.
PROSPECTUS
___________,
2010
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution
The
following table sets forth the expenses payable by the Registrant in connection
with the sale and distribution of the securities being registered hereby. All
amounts are estimated except the Securities and Exchange Commission registration
fee.
|
Securities
and Exchange Commission registration fee
|
|
$ |
2,021.33 |
|
|
Accounting
fees and expenses
|
|
$ |
5,000 |
|
|
Printing
and engraving
|
|
$ |
5,000 |
|
|
Legal
fees and expenses
|
|
$ |
30,000 |
|
|
|
|
|
|
|
|
Total
|
|
$ |
42,012.33 |
|
Item
15. Indemnification of Directors and Officers
We
have entered into indemnification agreements with each of our directors and
officers that provide the director or officer will not be personally liable to
us or our stockholders for or with respect to any acts or omissions in the
performance of his duties as a director or officer to the fullest extent
permitted by the DGCL or any other applicable law.
Section
145 of the DGCL provides that a corporation may indemnify directors and officers
as well as other employees and agents of the corporation against expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement, in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation, as a derivative action), if they acted in good faith
and in a manner they 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 their conduct was unlawful. A
similar standard is applicable in the case of actions by or in the right of the
corporation, except that indemnification only extends to expenses (including
attorneys’ fees) actually and reasonably incurred in connection with the defense
or settlement of such action, and no indemnification shall be made where the
person seeking indemnification has been found liable to the corporation, unless
and only to the extent that a court determines is fair and reasonable in view of
all circumstances.
Our
certificate of incorporation provides that we shall indemnify and hold harmless
any person who was or is a party or is threatened to be made a party or is
otherwise involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that the person is or was a director or an officer of the Company,
or is or was serving at our request, while a director or officer of the Company,
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan, against all expense, liability and loss (including
attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such person in connection
with such action, suit or proceeding to the fullest extent permitted or required
by Delaware law. Except with respect to proceedings to enforce rights to
indemnification, we will indemnify any such person in connection with a
proceeding described above initiated by such person only if such proceeding was
authorized by our board of directors.
Section
102(b)(7) of the DGCL provides that a certificate of incorporation may contain a
provision eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision may not eliminate or limit the
liability of a director (i) for any breach of the director’s duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 (relating to liability for unauthorized acquisitions or
redemptions of, or dividends on, capital stock) of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit. Our
certificate of incorporation contains such a provision.
The indemnification provisions
contained in our certificate of incorporation are in addition to any other right
that a person may have or acquire under any statute, bylaw, resolution of
shareholders or directors or otherwise.
Item
16. Exhibits
The
following documents are exhibits to the registration statement:
|
Exhibit Number
|
|
Description
|
|
|
|
|
|
4.1**
|
|
Certificate
of Incorporation of Stone Mountain Resources Inc. (filed as Exhibit 3.1 to
our Form SB-2, filed April 1, 2005 (Registration No. 333-123735)),
incorporated herein by reference
|
|
|
|
|
|
4.2**
|
|
Certificate
of Amendment of Certificate of Incorporation of Stone Mountain Resources,
Inc.
|
|
|
|
|
|
4.3**
|
|
By-laws
(filed as Exhibit 3.2 to our Form SB-2, filed April 1, 2005 (Registration
No. 333-123735)), incorporated herein by reference
|
|
|
|
|
|
5.1*
|
|
Opinion
of K&L Gates LLP
|
|
|
|
|
|
10.1**
|
|
Securities
Purchase Agreement, dated as of January 21, 2010 between Kandi
Technologies, Corp. and the Investors listed on the Schedule of Buyers
attached thereto (“SPA”)
|
|
|
|
|
|
10.2**
|
|
Form
of Senior Secured Convertible Note issuable under the
SPA
|
|
|
|
|
|
10.3**
|
|
Form
of Warrant issuable under the SPA
|
|
|
|
|
|
10.4**
|
|
Registration
Rights Agreement, dated as of January 21, 2010 between Kandi Technologies,
Corp. and the Investors listed in the SPA
|
|
|
|
|
|
10.5**
|
|
Shareholder
Pledge Agreement, dated as of January 21, 2010 between Kandi Technologies,
Corp. and Excelvantage Group Limited
|
|
|
|
|
|
10.6**
|
|
Voting
Agreement, dated as of January 21, 2010 between Kandi Technologies, Corp.
and Excelvantage Group Limited
|
|
|
|
|
|
10.7**
|
|
Placement
Agent Agreement, dated as of January 19, 2010 among Kandi Technologies,
Corp., FT Global Capital, Inc. and Brean Murray, Carret &
Co.
|
|
|
|
|
|
10.8*
|
|
Consulting
Agreement, dated as of September 21, 2009 between Kandi Technologies,
Corp. and FirsTrust Group, Inc.
|
|
|
|
|
|
23.1*
|
|
Consent
of Weinberg & Company, P.A., Independent Registered Public Accounting
Firm
|
|
|
|
|
|
23.2*
|
|
Consent
of K&L Gates LLP (contained in Exhibit 5.1)
|
|
|
|
|
|
24.1
|
|
Power
of Attorney (included in the signature page to the Registration
Statement)
|
*Filed
herewith
**Previously
filed.
Item
17. Undertakings
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 a 20 percent change in the maximum
aggregate offering price set forth in the “Calculation of Registration Fee”
table in the effective registration statement; and
(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 (1)(i), (1)(ii) and (1)(iii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement, or is contained in a form of prospectus filed pursuant
to Rule 424(b) that is part of this registration statement.
|
2.
|
That, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment 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.
|
|
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.
|
|
4.
|
That, for the purpose of
determining liability under the Securities Act of 1933 to any
purchaser:
|
(i) 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
(ii) 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 a part of and included in
the registration statement as of the earlier 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 a 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.
|
5.
|
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.
The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to Section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 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.
The
undersigned registrant hereby undertakes to supplement the prospectus, after the
expiration of the subscription period, to set forth the results of the
subscription offer, the transactions by the underwriters during the subscription
period, the amount of unsubscribed securities to be purchased by the
underwriters, and the terms of any subsequent reoffering thereof. If any public
offering by the underwriters is to be made on terms differing from those set
forth on the cover page of the prospectus, a post-effective amendment will be
filed to set forth the terms of such offering.
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 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 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 all of the requirements for
filing on Form S-3 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Jinhua, The People’s Republic of China, on the 24th day of
February, 2010.
|
|
KANDI
TECHNOLOGIES, CORP.
|
|
|
|
|
|
|
By:
|
/s/ Hu Xiaoming
|
|
|
|
Hu
Xiaoming
|
|
|
|
President,
Chief Executive Officer and
Chairman
of the Board
|
KNOW ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Hu Xiaoming and Zhu Xiaoying, and each of them acting
individually, his true and lawful attorneys-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, as amended, and all post-effective amendments thereto,
and to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that such attorneys-in-fact
and agents or any of them, or his or their substitute or 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.
|
/s/ Hu Xiaoming
|
|
President,
Chief Executive Officer and
Chairman
of the Board
|
|
February
24, 2010
|
|
Hu
Xiaoming
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
/s/ Zhu Xiaoying
|
|
Chief
Financial Officer and Director
|
|
February
24, 2010
|
|
Zhu
Xiaoying
|
|
(Principal
Financial Officer and Principal
Accounting
Officer)
|
|
|
|
|
|
|
|
|
|
/s/ Zheng Mingyang
|
|
Director
|
|
February
24, 2010
|
|
Zheng
Mingyang
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Qian Min
|
|
Director
|
|
February
24, 2010
|
|
Qian
Min
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Yao Zhengming
|
|
Director
|
|
February
24, 2010
|
|
Yao
Zhengming
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Fong Heung Sang
|
|
Director
|
|
February
24, 2010
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Fong
Heung Sang
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/s/ Hu Wangyuan
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Director
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February
24, 2010
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Hu
Wangyuan
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EXHIBIT
INDEX
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Exhibit Number
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Description
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4.1**
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Certificate
of Incorporation of Stone Mountain Resources Inc. (filed as Exhibit 3.1 to
our Form SB-2, filed April 1, 2005 (Registration No. 333-123735)),
incorporated herein by reference
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4.2**
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Certificate
of Amendment of Certificate of Incorporation of Stone Mountain Resources,
Inc.
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4.3**
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By-laws
(filed as Exhibit 3.2 to our Form SB-2, filed April 1, 2005 (Registration
No. 333-123735)), incorporated herein by reference
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5.1*
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Opinion
of K&L Gates LLP
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10.1**
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Securities
Purchase Agreement, dated as of January 21, 2010 between Kandi
Technologies, Corp. and the Investors listed on the Schedule of Buyers
attached thereto (“SPA”)
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10.2**
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Form
of Senior Secured Convertible Note issuable under the
SPA
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10.3**
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Form
of Warrant issuable under the SPA
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10.4**
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Registration
Rights Agreement, dated as of January 21, 2010 between Kandi Technologies,
Corp. and the Investors listed in the SPA
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10.5**
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Shareholder
Pledge Agreement, dated as of January 21, 2010 between Kandi Technologies,
Corp. and Excelvantage Group Limited
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10.6**
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Voting
Agreement, dated as of January 21, 2010 between Kandi Technologies, Corp.
and Excelvantage Group Limited
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10.7**
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Placement
Agent Agreement, dated as of January 19, 2010 among Kandi Technologies,
Corp., FT Global Capital, Inc. and Brean Murray, Carret &
Co.
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10.8*
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Consulting
Agreement, dated as of September 21, 2009 between Kandi Technologies,
Corp. and FirsTrust Group, Inc.
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23.1*
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Consent
of Weinberg & Company, P.A., Independent Registered Public Accounting
Firm
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23.2*
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Consent
of K&L Gates LLP (contained in Exhibit 5.1)
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24.1
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Power
of Attorney (included in the signature page to the Registration
Statement)
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*Filed
herewith.
**Previously
filed.