UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 29, 2012

 

METHA ENERGY SOLUTIONS INC.

(Exact name of registrant as specified in its charter)

 

Delaware   333-152539   32-0251358
(State or other jurisdiction of   (Commission File Number)   (IRS Employer Identification No.)
incorporation)        

 

Room 205, Building A

No. 1 Torch Road, High-Tech Zone

Dalian, China

  116023
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: + 86 (411) 3973-1515

 

  410 Park Avenue, 15th Floor, New York, NY 10022  
  (Former name or former address, if changed since last report)  

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

 

 
 

 

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This Current Report on Form 8-K (this “Report”) contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “seeks,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. These risks and uncertainties include, but are not limited to, the factors described in the section captioned “Risk Factors” below. Given these uncertainties, you should not place undue reliance on these forward-looking statements.  Such statements may include, but are not limited to, information related to: anticipated operating results; relationships with our merchants and subscribers; consumer demand; financial resources and condition; changes in revenues; changes in profitability; changes in accounting treatment; cost of sales; selling, general and administrative expenses; interest expense; the ability to produce the liquidity or enter into agreements to acquire the capital necessary to continue our operations and take advantage of opportunities; legal proceedings and claims.

 

Also, forward-looking statements represent our estimates and assumptions only as of the date of this Report. You should read this Report and the documents that we reference and file or furnish as exhibits to this Report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

 

USE OF CERTAIN DEFINED TERMS

 

Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company,” or “the Company” are to the combined business of Metha Energy Solutions, Inc. and its consolidated subsidiaries.

 

In addition, unless the context otherwise requires and for the purposes of this Report only:

 

  “Closing Date” means October 29, 2012;
  “Dalian Tianyi” refers to our variable interest entity Dalian Tianyi Culture Development Co., Ltd., a PRC limited company ;
  “Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
  “HK Science& Technology” refers to our subsidiary Science & Technology World Website Hong Kong MediaHolding Co., Ltd., a Hong Kong company ;
  “Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;
  “MGYS” refers to Metha Energy Solutions Inc., a Delaware corporation;
  “PRC” and “China” refers to the People’s Republic of China, excluding, for the purpose of this prospectus, Taiwan and the special administrative regions of Hong Kong and Macau;
  “PRC Operating Subsidiaries” and “PRC Operating Entities” refers to “Science & Technology (Dalian)” and “Dalian Tanyi” ;
  “Renminbi” and “RMB” refers to the legal currency of China;
  “Science & Technology Media” refers to Science & Technology World Website Media Group Co., Ltd., a British Virgin Islands company;
  “Science & Technology Holding” refers to Science & Technology World Website Media Holding Co., Ltd., a British Virgin Islands company;
  “Science & Technology Trading” or “WFOE” refers to our indirect subsidiary of Science & Technology World Website Trade (Dalian) Co., Ltd., a PRC limited company ;
  “Science & Technology (Dalian)” refers to our variable interest entity Science & Technology World Network (Dalian) Co., Ltd., a PRC limited company ;
  “SEC” refers to the Securities and Exchange Commission;
  “Securities Act” refers to the Securities Act of 1933, as amended; and
  “U.S. dollars,” “dollars,” “US$,” “$” and “USD” refers to the legal currency of the United States.

 

 
 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

Acquisition of Science & Technology Media

 

On the Closing Date, we entered into a Share Exchange Agreement (the “Exchange Agreement”) with (i) Science & Technology Holding, (ii) Science & Technology Media, (iii) the shareholders of Science & Technology Holding (the “Science & Technology Shareholders”) and (iv) our former principal shareholder pursuant to which we acquired all of the outstanding capital stock of Science & Technology Media from Science & Technology Holding in exchange for the issuance of 50,000,000 shares of our common stock to the Science & Technology Shareholders (the “Share Exchange”).  The shares issued to the Science & Technology Shareholders in the Share Exchange constituted approximately 95% of our issued and outstanding shares of common stock as of and immediately after the consummation of the Share Exchange.  In connection with the closing, 10,000,000 shares of our common stock held by our former principal shareholder have been cancelled. As a result of the Share Exchange, Science & Technology Media became our wholly owned subsidiary and Wei Jiang and HuiAn Peng became our principal stockholders.

 

The transaction was regarded as a reverse merger whereby Science & Technology Media was considered to be the accounting acquirer as it retained control of Metha Energy Solutions Inc. after the Share Exchange.

 

The foregoing description of the Share Exchange Agreement is qualified in its entirety by reference to the provisions of the Exchange Agreement filed as Exhibit   2.1 to this Report, which is incorporated by reference herein.

 

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

 

The disclosure in Item 1.01 of this Report regarding the Share Exchange is incorporated herein by reference in its entirety.

  

FORM 10 DISCLOSURE

 

As disclosed elsewhere in this Report, we acquired Science & Technology Media on the Closing Date pursuant to the Share Exchange, which was accounted for as a recapitalization effected by a share exchange.  Item 2.01(f) of Form 8-K provides that if the Company was a shell company, other than a business combination related shell company (as those terms are defined in Rule 12b-2 under the Exchange Act) immediately before the Share Exchange, then the Company must disclose the information that would be required if the Company were filing a general form for registration of securities on Form 10 under the Exchange Act reflecting all classes of the Company’s securities subject to the reporting requirements of Section 13 of the Exchange Act upon consummation of the Share Exchange.

 

The transaction was regarded as a reverse merger whereby Science & Technology Media was considered to be the accounting acquirer as it retained control of Metha Energy Solutions Inc., after the Share Exchange.

 

To the extent that the Company might have been considered to be a shell company immediately before the Share Exchange, we are providing below the information that we would be required to disclose on Form 10 under the Exchange Act if we were to file such form.  Please note that the information provided below relates to the Company after the acquisition of Science & Technology Media, except that information relating to periods prior to the date of the Share Exchange relate only to Science & Technology Media and its affiliates unless otherwise specifically indicated.

 

DESCRIPTION OF BUSINESS

 

Business Overview

 

Science & Technology Media is a multi-languages portal website that serves to the technology industry and provides advertising opportunities to the companies through our diverse business network in China; we well-positioned our business in the science and technology field and currently operate our website through three different versions in Chinese, English and Japanese. Right now, we have 34 domestic channels including every province, city, autonomous region, cities with independent planning status, Hong Kong, Macau and Tai Wan.

 

We mainly provide online platform to business entrepreneurs/corporations with a B2B marketplace that can help our customers:

 

· establish their brand image through online magazine, online corporate multimedia advertisement, executives interviews, institutional alliances and flexible membership package that tailor made based on what our customers need.
· set up company online exhibition to introduce their products to the public, where they have our tailor-made corporate introduction and factory facilities online show room;
· B2B product purchase platform for companies and end-users;
 
 

 

· online job opportunity section for corporate clients; and
· corporate blogs.

 

We also offer a range of business management software, internet infrastructure services and export-related services, and provide educational services to incubate enterprise management and e-commerce professionals.

 

Besides our various service models that we provide to enterprises customers, we also provide “home-oriented” online experience to our technicians, science and technology professionals, where they can easily find information related to their work, job opportunities within the technology industry, moreover, they can also meet friends, professionals through our website. BBS is part of our service that users can upload and download software and data, read news and bulletins, and exchange messages with other users either through email or in public message board.

 

We currently derive a substantial portion of our revenues from online advertising services. Our advertising solutions present corporate users with attractive opportunities to combine the visual impact and engagement of traditional television-like multimedia advertisements and online magazines with the interactivity and precise targeting capabilities of the Internet. We strive to promote a novel and unique advertising environment on our website to attract technology enterprises.

 

We were mainly focus on the technology development, and clients marketing in 2010 and 2011. During the past two years, we have positioned ourselves in a fast growing industry – Internet. Despite said above, we also work closely with traditional media channels, such as magazine, TV channels. So far, we have built a steady relationship with four major Chinese magazines: 315online, China Brand, China High-Tech zone and Da Lian Machinery.

 

Moreover, we also work closely with WO 3G mobile TV, which is a new media channel through mobile that developed by Liaoning broadcast TV and China Unicom, which is the second largest mobile phone operator in China. With the new strategic cooperation with 3G, we will therefore, have a new platform for entrepreneurs, local government or any entities that have the needs to advertise their business and corporate cultures through a new channel.

 

We are a team combined with passionate employees and a perceiving management team, since the beginning of our business, our company has spent great effort on the website and market development in 2010 and 2011.

 

During the past two years, we have attracted clients from different industries: governments, academic institutions, OEM, Environmental technology firms, and other high-tech companies.

 

Our mission is to develop a worldwide online platform for science and technology companies. Our company believes the network can change the world, bring people, corporate from miles away into one online world to share, to work, to communicate.

 

Our Corporate History and Background

 

Science & Technology World Website Media Group Co., Ltd was organized under the laws of the British Virgin Islands on February 15, 2011 to serve as a holding company for our PRC operations. On September 16, 2011, Science & Technology Media established HK Science and Technology in Hong Kong to serve as an intermediate holding company.

 

On January 20, 2012, HK Science and Technology established WFOE in the PRC. On January 21, 2012, the WFOE respectively entered into a series of agreements with Dalian Tianyi, Science & Technology (Dalian) and their respective shareholders (the “Contractual Arrangements”). The relationship with Dalian Tianyi, Science & Technology (Dalian) and their respective shareholders are governed by the Contractual Arrangements. The Contractual Arrangements is comprised of a series of agreements, including Exclusive Technical Consulting Service Agreements and Operating Agreements, through which WFOE has the right to advise, consult, manage and operate Dalian Tianyi and Science & Technology (Dalian), and collect 85% of their respective net profits. In order to further reinforce the WFOE’s rights to control and operate Dalian Tianyi and Science & Technology (Dalian), the shareholders of Dalian Tianyi and Science & Technology (Dalian) have granted WFOE, under the Exclusive Equity Interest Purchase Agreement, the exclusive right and option to acquire all of their equity interests respectively in Dalian Tianyi and Science & Technology (Dalian). Furthermore, the shareholders of Dalian Tianyi and Science & Technology (Dalian) is under the procedure of pledging all of their equity interests respectively in Dalian Tianyi and Science & Technology (Dalian) to WFOE under the Exclusive Equity Interest Pledge Agreement, and through the Exclusive Equity Interest Pledge Agreement, WFOE can collect the remaining 15% of Dalian Tianyi and Science & Technology (Dalian)’s respective net profits.  According to the Power of Attorney executed by the shareholders of Dalian Tianyi and Science & Technology (Dalian), they exclusively authorized WFOE to perform and exercise any and all of the shareholder’s rights in Dalian Tianyi and Science & Technology (Dalian).

 

HK Science and Technology and WFOE are considered foreign investor and foreign invested enterprise respectively under PRC law. As a result, HK Science and Technology and WFOE are subject to limitations under PRC law on foreign ownership of Chinese companies. According to the Catalogue of Industries for Guiding Foreign Investment (2011 Revision) (the “Catalogue”), there are four kinds of industries which are encouraged, permitted, restricted and prohibited for foreign investment. The primary business of Dalian Tianyi and Science & Technology (Dalian) are within the category in which foreign investment is currently restricted. The Contractual Arrangements with Dalian Tianyi and Science & Technology (Dalian) allow the Company to substantially control Dalian Tianyi and Science & Technology (Dalian) through WFOE without any equity relationship.

 
 

 

 

According to the Power of Attorney executed by the shareholders of Dalian Tianyi and Science & Technology (Dalian), they exclusively authorized WFOE to perform and exercise any and all of the shareholder’s rights in Dalian Tianyi and Science & Technology (Dalian).

 

As a result of the Contractual Arrangements, under generally accepted accounting principles in the United States, or U.S. GAAP, Science & Technology Media is considered the primary beneficiary of Dalian Tianyi and Science & Technology (Dalian) and thus consolidates their results in its consolidated financial statements.

 

 

On the Closing Date, we entered into the Share Exchange Agreement with (i) Science & Technology Holding (ii) Science & Technology Media, (iii) the Science & Technology Holding Shareholders and (iv) our former principal shareholder pursuant to which we acquired all of the outstanding capital stock of Science & Technology Media from Science & Technology Holding in exchange for the issuance of 50,000,000 shares of our common stock to the Science & Technology Shareholders. The shares issued to the Science & Technology Shareholders in the Share Exchange constituted approximately 95% of our issued and outstanding shares of common stock as of and immediately after the consummation of the Share Exchange.  In connection with the closing, 10,000,000 shares of our common stock held by our former principal shareholder have been cancelled. As a result of the Share Exchange, Science & Technology Media became our wholly owned subsidiary and Wei Jiang and HuiAn Peng became our principal stockholders. The Share Exchange was accounted for as a recapitalization effected by a share exchange, wherein Science & Technology is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of Science & Technology have been brought forward at their book value and no goodwill has been recognized. 

  

Corporate Information

 

Our principal executive offices are located at Room 205, Building A, No. 1, Torch Road, Hi-tech Zone, Dalian, China, 116023, the People’s Republic of China. Our telephone number at this address is +86 (411) 39731515.

 

 

 
 

 

Our Competitive Strengths

 

We believe that the following strengths contribute to our success and differentiate us from our competitors:

 

We are well positioned in a highly fragmented and competitive market. Our China-based website for technology allow us to utilize cost-competitive domestic labor and resources to manage costs, provides a close proximity to our customers to better understand and service their needs and allows us to have real time updates on prevailing market conditions in China.

 

We run our business with an attractive and various business models. We provide a broad range of services to entrepreneurs and corporations that include online exhibition, online magazine, online corporate multimedia advertisement, Executives interviews, institutional alliances and flexible membership package that tailor made based on what our customers need.

 

We have development strong business relationship with local enterprises throughout China, and business professionals, we also work closely with main media press. We work closely with major scientifically magazines, local governments, major media channels, and high-tech enterprises throughout China from different industry. So far, we have built a steady relationship with four major Chinese magazines: 315online, China Brand, China High-Tech Zone and Da lian Machinery. We also work closely with WO (UMTS/3G network service brand by China Unicom) 3G mobile TV, which is a new mobile media that developed by Liaoning broadcast TV and China Unicom (China Unicom is the second largest mobile phone operator in the country).

 

We also undertake big events to spread out our brand name. And therefore, earn the opportunities with other major media companies and enterprises. For example, in 2012, June to July, we have worked on the events called “China Brand image spokesman competition”

 

During the 21st century, Chinese brands are about to step into a new age. To set up a well-known brand, a company would need a high quality image spokesman to represent its product besides the high quality of its product. The aim of this contest is to select high quality image spokesman for emerging national brand, the advisory institutions for this contest include General Administration of Quality Supervision, Inspection and Quarantine of PRC, China Enterprise Confederation, China Enterprise Directors Association, China Radio and Television Association and China Council for the Promotion of Famous Brand Strategy. After local selection and final contest, a hundred brand image spokesmen will be chosen as winners of this contest. We have set up a team to deal with the work of contest design, operation, promotion and sponsorship. Local contest will be held by different local enterprises who have related qualifications and our authorization. The income of this event is mainly from the sponsorship of the final contest, endowment of co-organizers, sponsor from exclusive product enterprise, and 500,000 RMB from each enterprise who undertake the local contest.

 

We have an experienced management and operational teams with extensive market knowledge. Our management team and key operations and technical personnel have extensive management skills, relevant operational experience and industry knowledge. We have created and maintained a stable management team and have been able to retain our core management and key technical personnel since our inception. We believe that our management team’s experience, longstanding customer relationships and in depth knowledge of the Chinese market will enable us to continue our successful execution of expansion strategies and take advantage of market opportunities that may arise.

 

Multi-language website provides potential opportunities to attract clients from all over the world. We have currently operated our website through 3 languages: Chinese, English and Japanese. We believe with our multi-language portal website, more audience from the world will be able to learn, to communicate, and share information through our website.

 

Our Growth Strategy

 

Our mission is to become the primary source of technology information, knowledge, products platform for the Chinese population across any Internet-enabled device and moreover, we hope we can attract international technology professionals and enterprises through our multi-languages website. We intend to achieve our mission by expanding our content library and user base, enhancing our brand and improving our business model. More specifically, we plan to implement the following strategies:

 

· Increase the breadth and depth of our online technology content library . We have more than 25 in-house editors to collect and translate the most updated news through the world. However, we believe the long-term strategy of having a global growth is by improving the strength and capability to collect prompt information in time, and therefore, turning ourselves into one of the Chinese top online news channel.

 

· Further enhance our brand recognition . We have a limited history that have not yet build adequate exposure in our business, as that said, we will dedicate more effort on company brand management through a cost effective way. Such as promote our brand through our strategic cooperation partners, high-technology product representative agent, carry out important social events with famous media channels and brands.

 

 
 
· Expand and diversify our revenue sources . Our current revenue is mainly generated from online advertising for our customers through membership sales model. With the increase of our market share, brand recognition, and technology development, we will be able to work with most high-tech companies to develop a stable and active online trading platform , therefore, we will derive a new revenue stream from the trading platform (please refer to “our business and service” section for more information).

 

· New stream to generate revenue through 3G Mobile TV . As the 2008 Olympic competition was rebroadcasted on mobile TV at the first time, the new media such as mobile TV created a new space for advertising business. This new opportunity is critical with the development of mobile, moreover, smart phone users.

 

The 12th Five-Year Plan issued by China’s Ministry of Industry and Information Technology (MIIT) established aggressive development targets for the China telecommunications industry from 2011 to 2015. During this time, China’s mobile communications user base will reach more than 1.1 billion with total Internet users climbing to 600 million, representing a 40% penetration rate (www.iresearchchina.com).

 

Therefore, as analyzed above, we have targeted this market as a new potential platform for our service to our clients, that will create a new location to advertise their business on a smart phone. We are working closely with WO 3G mobile TV, which is a new mobile media that developed by Liaoning broadcast TV and China Unicom, the second largest mobile phone operator in the country.

 

· Expand our online network infrastructure and optimize our services . In order to improve website hits, we have revised our website from time to time to provide the most user-oriented set up for our web page to make it more in line with general practice for a website, but also exaggerate our advantages and diversity of the website.

 

· Recruit additional qualified employees and enhance our research and development capabilities . In connection with the expansion of our business, we plan to continue recruiting more highly qualified individuals to conduct our operations of our website while maintaining the consistency and quality of the services that we deliver. We also plan to recruit more high profile personnel in our research and development department and invest in enhancing our research and development capabilities to be more competitive. Where appropriate, we will also endeavor to partner with domestic and international companies in order to expand our technological capabilities.

 

Our Services

 

We currently generate our revenue through our diverse advertisement package to our business clients. To be our customers, the companies need to have the three distinct criteria:

 

The member companies need to have its own technology created and have innovative project or have had significant success in the technology industry;
The member companies are reputable in their industry, and can influence the whole industry with their reputation;
The member companies have fine product quality and recognized brand in the industry.

 

We have classified our service package as follow (Service fee in RMB):

 

    Executive vice president   Vice president   Executive director   Director
Fee/ year   500,000   300,000   150,000   80,000
Service Item                
Front page ad   3 years,20MM* 50mm   2 years,20MM* 50MM   2 years,20MM* 50MM   1 year,20MM* 50MM
Online exhibition display   3 years   2 years   2 years   1 year
multilanguage online profile   3 years   2 years   2 years   1 year
setup trading platfrom   3 years   2 years   2 years   1 year
Job recruiting   3 years   2 years   2 years   1 year
online magazine advertisement   3 years   2 years   1 year   1 year
annual conference,submit   at least once a year   at least once a year   at least once a year   Twice a year
Make special subject   Yes   Yes   Yes   Yes
Keyword for searching engine   1 year   1 year   1 year   6 months
design website   Yes   Yes   Yes   NO
referal business   first year   first year   first year   Yes
Discount on subsidiary for S&T   Yes   Yes   Yes   Yes
articles on tradtional magazine   2 to 3   2   1( within 5000 words)   1(within 2500 words)

 

Detailed explanation for our service items:

Front page ad: front page advertisement for our membership companies on our website;

Online exhibition display: display our membership companies’ products and corporate profile on our website;

 

 
 

 

Multilanguage online profile: develop the membership company’s corporate profile with more than one language. They can choose to develop their corporate profile in English, Japanese or other languages;

Setup trading platform: help our membership company to setup an online trading section on our website under the online trading section;

Job recruiting: setup a corporate recruiting section on our website for our membership companies, to help them recruit new employees from our website resources;

Online magazine advertisement: we help our membership companies to design and display their own corporate magazine on our website;

Annual conference/submit: we organize conferences for more than one time in a year; the topic for each conference can vary. The membership companies will be invited to join the conference we organize;

Make special subject: our firm can compose an article based on a specific topic for our membership company that related to their corporate business, such as CEO interview; corporate interview;

Keyword for searching engine: we can set the name of our membership client’s firm as the keyword in the our search engine, so when any individual or corporate wants to search any information on our website, the keyword will show up immediately;

Design website: we provide website design service to our membership company;

Referral business: we introduce business for our membership company within our website

Discount on subsidiary for S&T: if our membership company wants to be an alliance of Science and Technology (Dalian), we can give discount to them for being an alliance;

Articles on traditional magazine: we can write one or more articles related to our membership client to introduce their corporate culture, corporate information or the CEO stories;

 

Our innovative business model that differentiate us from other advertising companies:

 

Online Exhibition

 

The “Online-Expo” of the Company is a brand-new mode of product exhibition. We put our members product information on the internet through this window based on actual exhibition locations; it is a percept complement to the “International High-tech product exhibition of Dalian”. Each exhibiter has its own web page, and all information about the exhibiter and its products are available to internet users on the page. According to actual exhibition, we divide the “Internet Expo” into 14 sections, including software, electronics, internet, cartoon, manufacture, biology, medicine, communications, automobile, energy, environmental protection, aerospace, new material and agriculture.

 

We have set up an integral database for every single exhibiter on the “Internet Expo”, all the data such as exhibition information; daily turnover and the attention rate of the product are available on their respective web page.

 

Business Mode of Software and Information Service

 

The Company has established a team to deal with software R&D and outsource services; these groups realize our website’s daily technique upgrade and also support related R&D of “The Internet of things” industry. At the meanwhile the company is seeking for cooperation with other companies, we take on all kinds of software outsource services. These services shall add extra profit to our company.

 

Online Trading Platform

 

The Company has a self-contained online transaction platform for technology products. It caters for the needs of most of the internet users who are likely to make technology product deals on the internet. But, some of the new products cannot be shown on the internet because of its own characteristics. We also have a professional team to deal with the promotion of these kinds of product, and we will knit a distribution net all over the Chinese mainland and main cities overseas.

 

Our Company has a strict product selecting procedure. Before we introduce a product to customers, we will verify the qualification of the manufacturing enterprise and make a series test of the products’ function and performance. Furthermore, we work directly with enterprises to cut down the number of intermediate links, so as to enhance the price advantage of the products.

 

In the near future, we plan to work together with our clients on marketing their products, and derive a new channel to make profit of our business.

 

There are two main operating procedures that we will consider: one is exclusive distribution of technology product and the other one is equity participation program. When we adopt the first strategy, we will buy out all the distribution right of a product in a specific area from a company; on top of that we will put this product on our promotion network. Our revenue comes from the price difference of the product.

 

 
 

 

When it comes to the second procedure, we will select a product which is likely to have a vigorous momentum in the future. We will cooperate with the manufacturing enterprise through cash investment, technology investment or other cooperative mode. As stated, we will act as a shareholder of the company we invested in and participant the business operation of this enterprise. Our revenue comes from the profit distribution of the enterprise.

 

Our Customers

 

We started generate revenue in 2010. We target companies that:

 

a. need to have its own technology created and have innovative project or have had significant success in the technology industry;

b. are reputable in their industry, and can influence the whole industry with their reputation;

c. have fine product quality and recognized brand in the industry.

 

We have various customers that come from different industries, such as: logistics, energy, social society, healthcare, construction, machinery, clothing, food and retailing and so forth. Our revenue increased approximately 15 times in 2011, in comparison with 2010, attributed to our aggressive marketing strategy.

 

Sales and Marketing

 

Sales to customers in China account for all of our revenue. We target our sales efforts primarily in major leading companies in China; however, we tend to focus on the local companies in Dalian for the beginning of our business, and then start to get in touch with companies throughout all China. We have developed and strive to maintain a diversified sales network that allows us to effectively market products and services to our customers. Our sales and marketing team currently consists of 19 employees. Our executive management team is also actively involved in business development and in managing our key client relationships.

 

Research and Development

 

Because of the nature of our business, we are required to improve our technology ability in a high frequency in order to compete with other business competitors in the business.

 

Since the beginning of our operation in 2010, we have striven to work on our website by increase the input of our database, develop new channels and functions on our website, create new platform for job recruitment, trading through different industries, and design, edit, and publish online journals and carried out other activities to dramatically enlarge our service capability.

 

We have upgraded our website three times in the past a year and half, made great effort of each time:

 

End of 2010 to January 2011, we managed to setup and create the Science & Technology website; In 7 months later, we upgraded our website with the development of network construction and database; from the beginning of 2012, we have setup clear strategy and timeline on what we will develop and how we will upgrade our website in order to improve our existing services and further broaden our product offering. We will also recruit more highly qualified experts to enhance its capability.

 

Competition

 

Our business model is to provide our B2B platform to technology enterprises, and our revenue is generated from advertisement business through our membership payment model. We believe that we have the unique business model; however, we still acknowledge the competition from the advertising market in china. Our competitor includes companies that provide the same advertising portal website to B2B customers and also the portal website that provide services to individuals, the large internet companies such as : Sohu.com, Sina.com, Baidu.com and others. We also face competition from large online video advertisers such as.Youku.com, Tudou.com and 56.com and others.

 

Traditional media channel (magazine, newspapers, and radio), telecommunications, street showcase, billboard, frame and public transport advertising companies are also our competitors.

 

Intellectual Property

We have recognized the material impact on how to protect our intellectual property.

 

Trademarks

 

We are registering the following trademark with the Trademark Office, State Administration for Industry and Commerce in the PRC:

 

 
 

 

No.   Registration(Application) No.   Trademark   Applicant   Item Category   Application Date
1   10494489 and 10494470     Science & Technology  (Dalian)  

35*

42*

  16 th ,February,
2012
2   10494453 and 10494499   TWWTN   Science &Technology  (Dalian)  

35*

42*

  16 th
February ,2012

 

*35: Product/service category:

1. Advertising; 2 advertising agency; 3 Advertising space for rent;4 Online advertising on the data communication network; 5 advertising planning; 6 advertising design; 7 advertising publication; 8 Rental for advertising time on communication media; 9 direct email advertising;10 provide models for advertising or promotion purpose

*42: Product/service category:

1. Computer software design; 2 transfer data and document into electronic media;3 help the others to create or maintain website; 4 packaging design; 5 Exterior design for industrial product;6 Fashion design; 7 artwork appraisal; 8.Written graphic arts design; 9 Computer programming; 10 Managing computer stations.

  

Domain Names

 

Dalian Tianyi owns five domain names, which are www.twwtn.com , www.twwtn.cn , www.twwtn.net , www.twwtn.com.cn and www.twwtn.org.

  

Governmental Approval and Regulation

 

Patent

 

In accordance with the PRC Patent Law, the State Intellectual Property Office is responsible for administering patents in the PRC. The patent administration departments of provincial, autonomous region or municipal governments are responsible for administering patents within their respective jurisdictions.

 

The Chinese patent system adopts a "first to file" principle, which means that, where more than one person files a patent application for the same invention, a patent will be granted to the person who filed the application first. To be patentable, invention or utility models must meet three conditions: novelty, inventiveness and practical applicability. A patent is valid for 20 years in the case of an invention and 10 years in the case of utility models and designs. A third-party user must obtain consent or a proper license from the patent owner to use the patent. Otherwise, the use constitutes an infringement upon patent rights.

 

Trademarks

 

Registered trademarks in the PRC are protected by the Trademark Law of the PRC which came into effect in 1982 and was revised in 1993 and 2001 and the Regulations for the Implementation of Trademark Law of PRC which came into effect in 2002. A trademark can be registered in the PRC with the Trademark Office under the State Administration for Industry and Commerce, or the SAIC. The protection period for a registered trademark in the PRC is ten years starting from the date of registration and may be renewed if an application for renewal is filed within six months prior to expiration.

 

Copyright

 

Copyright in the PRC is protected by the Copyright Law of the PRC which was promulgated in 1990 and revised in 2001 and February 2010 and the Regulation for the Implementation of the Copyright Law of the PRC which came into effect in September 2002. Under the revised Copyright Law, copyright protections have been extended to information network and products transmitted on information network. Copyrights are reserved by the author, unless specified otherwise by the laws. According to Article 16 of the Copyright Law, if a work constitutes “work for hire”, the employer, instead of the employee, is considered the legal author of the work and will enjoy the copyrights of such “work for hire” other than rights of authorship. “Works for hire” include, (1) drawings of engineering designs and product designs, maps, computer software and other works for hire, which are created mainly with the materials and technical resources of the legal entity or organization with responsibilities being assumed by such legal entity or organization; (2) those works the copyrights of which are, in accordance with the laws or administrative regulations or under contractual arrangements, enjoyed by a legal entity or organization. The actual creator may enjoy the rights of authorship of such “work for hire.”

 

A copyright owner may transfer its copyrights to others or permit others to use its copyrighted works. Use of copyrighted works of others generally requires a licensing contract with the copyright owner. The protection period for copyrights in the PRC varies, with 50 years as the minimum. The protection period for a “work for hire” where a legal entity or organization owns the copyright (except for the right of authorship) is 50 years, expiring on December 31 of the fiftieth year after the first publication of such work.

 

 
 

 

 

Facilities

 

We currently operate in the following facility under a lease agreement. The aggregate monthly payment under these leases is RMB 43,828 (approximately $6,929), as set forth on the table below:

 

Facility   Address   Lessor   Space
(Square Meters)
    Monthly
Rent
    Lease Period  
Dalian (headquarters)   Room 205, Building A, No. 1, Torch Road, Hi-tech Zone, Dalian, China   DaLian Hi-Tech Enterprises Service Center     1440.92     $ 6,929       May 1, 2012 to April 30, 2013  

 

Employees

 

As of October 2012, we had a total of 77 employees. We have paid the social insurance coverage for our full time employees for certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees, which are carried out under PRC law. The following table shows the number of our employees by function.

 

 

Function   Number Of Employees  
Management     7  
Technicians and Engineers     13  
Editorials     30  
Sales and Marketing     16  
Accounting     2  
Administration     9  
Total     77  

 

We believe that we maintain a satisfactory working relationship with our employees, and we have not experienced any significant labor disputes or any difficulty in recruiting staff for our operations. None of our employees is represented by a labor union.

 

Our employees in China participate in a state pension plan organized by Chinese municipal and provincial governments. We are required to make monthly contributions to the plan for each employee at the rate of 20% of his or her average assessable salary. In addition, we are required by Chinese law to cover employees in China with various types of social insurance. We believe that we are in material compliance with the relevant PRC laws.

  

RISK FACTORS

 

  An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this Report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our shares of common stock could decline and you may lose all or part of your investment. See “Cautionary Note Regarding Forward Looking Statements” above for a discussion of forward-looking statements and the significance of such statements in the context of this Report.

 

Risks Related to Our Business

 

We have a history of operating losses and there can be no assurance that we can achieve or maintain profitability.

 

We have a history of operating losses and may not achieve or sustain profitability. We cannot guarantee that we will become profitable.  Even if we achieve profitability, given the competitive and evolving nature of the industry in which we operate, we may be unable to sustain or increase profitability and our failure to do so would adversely affect the Company’s business, including our ability to raise additional funds.

 

We face intense competition. If we do not continue to innovate and provide products and services that are useful to users, we may not remain competitive, and our revenues and operating results could be adversely affected.

 

Our business is rapidly evolving and intensely competitive, and is subject to changing technology, shifting user needs, and frequent introductions of new products and services. We have many competitors in different industries, including Sohu, Youku, Sina and other industry players. Our current and potential competitors range from large and established companies to emerging start-ups. Established companies have longer operating histories and more established relationships with customers and users, and they can use their experience and resources in ways that could affect our competitive position, including by making acquisitions, investing aggressively in research and development, aggressively initiating intellectual property claims (whether or not meritorious) and competing aggressively for advertisers and websites. Emerging start-ups may be able to innovate and provide products and services faster than we can.

 
 

  

Our competitors are constantly developing innovations in web search, online advertising, and web-based products and services. As a result, we must continue to invest significant resources in research and development, including through acquisitions, in order to enhance our web search technology and our existing products and services, and introduce new products and services that people can easily and effectively use. If we are unable to provide quality products and services, then our users may become dissatisfied and move to a competitor’s products and services.

 

Our business depends substantially on the continuing efforts of our senior management and other key personnel, and our business may be severely disrupted if we lost their services.

 

Our future success heavily depends on the continued service of our senior management and other key employees. If one or more of our senior executives are unable or unwilling to continue to work for us in their present positions, we may have to spend a considerable amount of time and resources searching, recruiting, and integrating the replacements into our operations, which would substantially divert management’s attention from our business and severely disrupt our business. This may also adversely affect our ability to execute our business strategy. Moreover, if any of our senior executives joins a competitor or forms a competing company, we may lose customers, suppliers, know-how, and key employees.

 

Our senior management’s limited experience managing a publicly traded company may divert management’s attention from operations and harm our business.

 

Our senior management team has no experience managing a publicly traded company and complying with federal securities laws, including compliance with recently adopted disclosure requirements on a timely basis.  Our management will be required to design and implement appropriate programs and policies in responding to increased legal, regulatory compliance and reporting requirements, and any failure to do so could lead to the imposition of fines and penalties and harm our business.

 

We may be unable to attract and retain qualified, experienced, highly skilled personnel, which could adversely affect the implementation of our business plan.

 

Our success depends to a significant degree upon our ability to attract, retain and motivate skilled and qualified personnel. As we become a more mature company in the future, we may find recruiting and retention efforts more challenging. If we do not succeed in attracting, hiring and integrating excellent personnel, or retaining and motivating existing personnel, we may be unable to grow effectively. The loss of any key employee, including members of our senior management team, and our inability to attract highly skilled personnel with sufficient experience in our industries could harm our business.

  

Our products may infringe the intellectual property rights of third parties, and third parties may infringe our proprietary rights, either of which may result in lawsuits, distraction of management and the impairment of our business.

 

As the number of patents, copyrights, trademarks and other intellectual   property rights in our industry increases, products based on our technology may   increasingly become the subject of infringement claims.  Third parties could   assert infringement claims against us in the future.  Infringement claims with or   without merit could be time consuming, result in costly litigation, cause   product shipment delays or require us to enter into royalty or licensing   agreements.  Royalty or licensing agreements, if required, might not be available   on terms acceptable to us, or at all.  We may initiate claims or litigation against third   parties for infringement of our proprietary rights or to establish the validity   of our proprietary rights.  Litigation to determine the validity of any claims,   whether or not the litigation is resolved in our favor, could result in   significant expense to us and divert the efforts of our technical and management   personnel from productive tasks.  If there is an adverse ruling against us in any   litigation, we may be required to pay substantial damages, discontinue the use   and sale of infringing products, and expend significant resources to develop   non-infringing technology or obtain licenses to infringing technology.  Our   failure to develop or license a substitute technology could prevent us from   selling our products.

 

We will incur increased costs as a result of being a public company.

 

We will face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, including the requirements of Section 404, as well as new rules and regulations subsequently implemented by the SEC, the Public Company Accounting Oversight Board (the “PCAOB”), impose additional reporting and other obligations on public companies. We expect that compliance with these public company requirements will increase our costs and make some activities more time-consuming. A number of those requirements will require us to carry out activities we have not done previously.  For example, we will adopt new internal controls and disclosure controls and procedures. In addition, we will incur additional expenses associated with our SEC reporting requirements. Furthermore, if we identify any issues in complying with those requirements (for example, if we or our accountants identify a material weakness or significant deficiency in our internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect us, our reputation or investor perceptions of us. We also expect that it will be difficult and expensive to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.  As a result, it may be more difficult for us to attract and retain qualified persons to serve on the Company’s board of directors or as executive officers. Advocacy efforts by stockholders and third parties may also prompt even more changes in corporate governance and reporting requirements. We expect that the additional reporting and other obligations imposed on us by these rules and regulations will increase our legal and financial compliance costs and administrative fees significantly. These increased costs will require us to divert a significant amount of money that we could otherwise use to expand our business and achieve our strategic objectives.

 

 
 

 

Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

 

As a Delaware corporation, we are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Some foreign companies, including some that may compete with our company, may not be subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may occur from time-to-time in the Angola or any other countries in which we conduct our business. However, our employees or other agents may engage in conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

 

Risks Related to Our Corporate Structure

 

If the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply with PRC governmental restrictions on foreign investment in telecommunication business, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

 

Current PRC laws and regulations place certain restrictions on foreign ownership of companies that engage in telecommunication business. Specifically, foreign investors are not allowed to own more than a 50% equity interest in any PRC company engaging in value-added telecommunications businesses. We conduct our operations in China principally through the Contractual Arrangements among our WFOE, PRC Operating Entities and their shareholders. Our Contractual Arrangements enable us to exercise effective control over PRC Operating Entities and treat them as our consolidated affiliated entity.

 

The Circular regarding Strengthening the Administration of Foreign Investment in and Operation of Value added Telecommunications Business, or the Circular, issued by the Ministry of Industry and Information Technology, or the MIIT, in July 2006, reiterated the regulations on foreign investment in telecommunications businesses, which require foreign investors to set up foreign-invested enterprises and obtain a business operating license to conduct any value-added telecommunications business in China. Under the Circular, a domestic company that holds a telecommunications value-added services operation license is prohibited from leasing, transferring or selling the license to foreign investors in any form, and from providing any assistance, including providing resources, websites or facilities, to foreign investors that conduct value added telecommunications business illegally in China. Furthermore, the relevant trademarks and domain names that are used in the value-added telecommunications business must be owned by the local license holder. The Circular further requires each telecommunications value-added services operation license holder to have the necessary facilities for its approved business operations and to maintain such facilities in the regions covered by its license. In addition, all value-added telecommunications mobile payment service providers are required to maintain network and information security in accordance with the standards set forth under relevant PRC regulations. Due to a lack of interpretative materials from the regulator, it is unclear what impact the Circular will have on us or the other Chinese telecommunications and Internet companies that have adopted the same or similar corporate and contractual structures as ours.

 

We cannot assure you, however, that we will be able to enforce these agreements. Although we believe we are in compliance with current PRC regulations, we cannot assure you that the PRC government would agree that these Contractual Arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. PRC laws and regulations governing the validity of these Contractual Arrangements are uncertain and the relevant government authorities have broad discretion in interpreting these laws and regulations. If the PRC government determines that we do not comply with applicable laws and regulations, it could revoke our business and operating licenses, require us to discontinue or restrict our operations, restrict our right to collect revenues, block our websites, impose additional conditions or requirements with which we may not be able to comply, or take other regulatory or enforcement actions against us that could be harmful to our business. The imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business. The PRC government may also require us to restructure our operations entirely if it comes to find that our contractual arrangements do not comply with applicable laws and regulations. It is unclear how such mandatory restructuring could impact our business and operating results, as the PRC government has not yet found such contractual arrangements to be in non-compliance. However, any such restructuring may cause significant disruption to our business operations.

 

 
 

 

The relevant regulatory authorities would have broad discretion in dealing with such violations. If a relevant authority determines that we do not fully comply with applicable laws and regulations, it could revoke our business and operating licenses, require us to discontinue or restrict our operations, restrict our right to collect revenues, impose additional conditions or requirements with which we may not be able to comply, or take other regulatory or enforcement actions against us that could be harmful to our business. The relevant regulatory authorities may also require us to restructure our operations entirely if it finds that our Contractual Arrangements do not comply with applicable laws and regulations. It is unclear how a restructuring could impact our business and operating results, as no PRC authorities have yet found any such Contractual Arrangements to be in non-compliance. However, any such restructuring may cause significant disruption to our business operations.

 

Our contractual arrangements with PRC Operating Entities and their shareholders may not be as effective in providing control over these entities as direct ownership.

 

We have no equity ownership interest in PRC Operating Entities and rely on the Contractual Arrangements to control and operate PRC Operating Entities. The Contractual Arrangements may not be as effective in providing control over PRC Operating Entities as direct ownership. For example, PRC Operating Entities could fail to take actions required for our business or fail to pay dividends to WFOE despite its contractual obligation to do so. If PRC Operating Entities fails to perform its obligation under the Contractual Arrangements, we may have to rely on legal remedies under PRC law, which may not be effective. In addition, we cannot assure you that PRC Operating Entities’ stockholders will always act in our best interests.

 

Our Contractual Arrangements with PRC Operating Entities may result in adverse tax consequences to us.

 

As a result of our corporate structure and contractual arrangements between WFOE and PRC Operating Entities, WFOE is effectively subject to the 5% PRC business tax on revenues derived from PRC Operating Entities pursuant to the Contractual Arrangements. WFOE is subject to the business tax, while PRC Operating Entities, as a manufacturer, instead of a service provider, is not subject to the business tax. Moreover, we would be subject to adverse tax consequences if the PRC tax authorities were to determine that the Contractual Arrangements between WFOE and PRC Operating Entities were not on an arm’s length basis and therefore constitute a favorable transfer pricing. As a result, the PRC tax authorities could request that we adjust its taxable income upward for PRC tax purposes. Such a pricing adjustment could adversely affect us by:

 

· increasing PRC Operating Entities’s tax expenses without reducing WFOE’s tax expenses, which could subject PRC Operating Entities to late payment fees and other penalties for under-payment of taxes; and/or
· resulting in WFOE’s loss of its preferential tax treatment.

 

Perfection of the pledges in our Equity Interest Pledge Agreements with PRC Operating Entities and their registered shareholders may be adversely affected due to failure to register these Equity Interest Pledge Agreements.

 

Under our Equity Interest Pledge Agreements with the PRC Operating Entities and their registered shareholders, these registered shareholders have pledged all of their respective equity interests in the PRC Operating Entities to us. According to the PRC Property Rights Law, which became effective on October 1, 2007, a pledge is not deemed to be validly created without registration with the relevant local administration for industry and commerce. We are applying to register the equity pledges by the shareholders of the PRC Operating Entities with the relevant offices of the administration for industry and commerce. Although under PRC laws and regulations, the administration for industry and commerce should register a pledge immediately upon receiving a complete application, the registration process could take longer in practice. If the equity pledges are not successfully registered, they would not be deemed as validly created security interests under the PRC Property Rights Law. If the PRC Operating Entities breached their obligations under the agreements with us, there is a risk that we may not be able to successfully enforce the pledges if the Equity Interest Pledge Agreements have not been registered with the relevant administration for industry and commerce.

 

Risks Related to Doing Business in China

 

Adverse changes in political and economic policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could reduce the demand for our products and materially and adversely affect our competitive position.

 

Substantially all of our business operations are conducted in China. Accordingly, our business, results of operations, financial condition and prospects are subject to economic, political and legal developments in China. Although the Chinese economy is no longer a planned economy, the PRC government continues to exercise significant control over China’s economic growth through direct allocation of resources, monetary and tax policies, and a host of other government policies such as those that encourage or restrict investment in certain industries by foreign investors, control the exchange between RMB and foreign currencies, and regulate the growth of the general or specific market. These government involvements have been instrumental in China’s significant growth in the past 30 years. In response to the recent global and Chinese economic downturn, the PRC government has adopted policy measures aimed at stimulating the economic growth in China. If the PRC government’s current or future policies fail to help the Chinese economy achieve further growth or if any aspect of the PRC government’s policies limits the growth of our industry or otherwise negatively affects our business, our growth rate or strategy, our results of operations could be adversely affected as a result.

 
 

  

New labor laws in the PRC may adversely affect our results of operations.

 

On June 29, 2007, the PRC government promulgated a new labor law, namely, the Labor Contract Law of the PRC, or the New Labor Contract Law, which became effective on January 1, 2008.  The New Labor Contract Law imposes greater liabilities on employers and significantly affects the cost of an employer’s decision to reduce its workforce.  Further, it requires certain terminations be based upon seniority and not merit.  In the event we decide to significantly change or decrease our workforce, the New Labor Contract Law could adversely affect our ability to enact such changes in a manner that is most advantageous to our business or in a timely and cost-effective manner, thus materially and adversely affecting our financial condition and results of operations.

 

Our failure to fully comply with PRC labor laws exposes us to potential liability.

 

Companies operating in China must comply with a variety of labor laws, including certain social insurance, housing fund and other staff welfare-oriented payment obligations. There exist uncertainties as to the interpretation, implementation and enforcement of such obligations. If relevant governmental authorities determine that we have not complied fully with such obligations, we may be in violation of applicable PRC labor laws and we cannot assure you that PRC governmental authorities will not impose penalties on us for any failure to comply. In addition, in the event that any current or former employee files a complaint with relevant governmental authorities, we may be subject to making up such staff-welfare oriented obligations as well as paying administrative fines. Our failure to comply with PRC labor laws could expose us to potential liability.

 

Imposition of trade barriers and taxes may reduce our ability to do business internationally, and the resulting loss of revenue could harm our profitability .

 

We may experience barriers to conducting business and trade in our targeted emerging markets in the form of delayed customs clearances, customs duties and tariffs.  In addition, we may be subject to repatriation taxes levied upon the exchange of income from local currency into foreign currency, substantial taxes on profits, revenues, assets and payroll, as well as value-added tax.  The markets in which we plan to operate may impose onerous and unpredictable duties, tariffs and taxes on our business and products, and there can be no assurance that this will not reduce the level of sales that we achieve in such markets, which would reduce our revenues and profits.

 

Under the Enterprise Income Tax Law, we may be classified as a “Resident Enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC stockholders.

 

China passed a new Enterprise Income Tax Law, or the EIT Law, and it is implementing rules, both of which became effective on January 1, 2008. Under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise.

 

On April 22, 2009, the State Administration of Taxation of China issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice, further interpreting the application of the EIT Law and its implementation to offshore entities controlled by a Chinese enterprise or group. Pursuant to the Notice, an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group will be classified as a “non-domestically incorporated resident enterprise” if (i) its senior management in charge of daily operations reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) its substantial assets and properties, accounting books, corporate stamps, board and stockholder minutes are kept in China; and (iv) at least half of its directors with voting rights or senior management often resident in China. A resident enterprise would be subject to an enterprise income tax rate of 25% on its worldwide income and must pay a withholding tax at a rate of 10% when paying dividends to its non-PRC stockholders. However, it remains unclear as to whether the Notice is applicable to an offshore enterprise controlled by a Chinese natural person. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.

 

If the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Currently, we do not have any non-China source income. Second, under the EIT Law and its implementing rules, dividends paid to us from our PRC subsidiaries would qualify as “tax-exempt income.” Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC stockholders and with respect to gains derived by our non-PRC stockholders from transferring our shares.

 

 
 

 

If we were treated as a “resident enterprise” by PRC tax authorities, we would be subject to taxation in both the U.S. and China, and our PRC tax may not be creditable against our U.S. tax.

 

Uncertainties with respect to the PRC legal system could adversely affect us.

 

We conduct all of our business through our subsidiaries in China. Our operations in China are governed by PRC laws and regulations. Our PRC subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws and regulations applicable to wholly foreign-owned enterprises. The PRC legal system is based on statutes. Prior court decisions may be cited for reference but have limited precedential value.

 

Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

 

PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our PRC operating subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

 

In utilizing the proceeds of this offering in the manner described in “Use of Proceeds,” as an offshore holding company of our PRC operating subsidiaries, we may make loans to our PRC subsidiaries, or we may make additional capital contributions to our PRC subsidiaries. Any loans to our PRC subsidiaries are subject to PRC regulations. For example, loans by us to our subsidiaries in China, which are FIEs, to finance their activities cannot exceed statutory limits and must be registered with the State Administration of Foreign Exchange, or SAFE. On August 29, 2008, SAFE promulgated Circular 142, a notice regulating the conversion by a foreign-invested company of foreign currency into RMB by restricting how the converted RMB may be used. The notice requires that RMB converted from the foreign currency-denominated capital of a foreign-invested company may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC unless such investments are otherwise provided for in the business scope. The foreign currency-denominated capital shall be verified by an accounting firm before converting into RMB. In addition, SAFE strengthened its oversight over the flow and use of RMB funds converted from the foreign currency-denominated capital of a foreign-invested company. To convert such capital into RMB, the foreign-invested company must report the use of such RMB to the bank, and the RMB must be used to the reported purposes. According to Circular 142, change of the use of such RMB without approval is prohibited. In addition, such RMB may not be used to repay RMB loans if the proceeds of such loans have not yet been used. Violations of Circular 142 may result in severe penalties, including substantial fines as set forth in the Foreign Exchange Administration Rules.

 

We may also decide to finance our subsidiaries by means of capital contributions. These capital contributions must be approved by the Ministry of Commerce of China, or MOFCOM, or its local counterpart. We may not be able to obtain these government approvals on a timely basis, if at all, with respect to future capital contributions by us to our PRC subsidiaries. If we fail to receive such approvals, we will not be able to use the proceeds of this offering and capitalize our PRC operations, which could adversely affect our liquidity and our ability to fund and expand our business.

 

Governmental control of currency conversion may affect the value of your investment.

 

The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Under our current corporate structure, our income is primarily derived from dividend payments from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our security-holders.

 

 
 

 

Fluctuation in the value of the RMB may have a material adverse effect on the value of your investment.

 

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. 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 an approximately 21.2% appreciation of the RMB against the U.S. dollar between July 21, 2005 and June 30, 2009. Provisions on Administration of Foreign Exchange, as amended in August 2008, further changed China’s exchange regime to a managed floating exchange rate regime based on market supply and demand. Since reaching a high against the U.S. dollar in July 2008, however, the RMB has traded within a narrow band against the U.S. dollar, remaining within 1% of its July 2008 high but never exceeding it. As a consequence, the RMB has fluctuated sharply since July 2008 against other freely-traded currencies, in tandem with the U.S. dollar. It is difficult to predict how long the current situation may continue and when and how it may change again. Substantially all of our revenues and costs are denominated in the RMB, and a significant portion of our financial assets are also denominated in RMB. We principally rely on dividends and other distributions paid to us by our subsidiaries in China. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, the ADSs or ordinary shares in U.S. dollars. Any fluctuations of the exchange rate between the RMB and the U.S. dollar could also result in foreign currency translation losses for financial reporting purposes.

 

PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to penalties and limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute profits to us, or otherwise adversely affect us.

 

On October 21, 2005, the SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Return Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or Notice 75, which became effective as of November 1, 2005. According to Notice 75, prior registration with the local SAFE branch is required for PRC residents to establish or to control an offshore company for the purposes of financing such offshore company with assets or equity interests in an onshore enterprise located in the PRC, or an offshore special purpose company. An amendment to registration or filing with the local SAFE branch by such PRC resident is also required for the injection of equity interests or assets of an onshore enterprise in the offshore special purpose company or overseas funds raised by such offshore company, or any other material change involving a change in the capital of the offshore special purpose company. Moreover, Notice 75 applies retroactively. As a result, PRC residents who have established or acquired control of offshore special purpose companies that have made onshore investments in the PRC in the past are required to have completed the relevant registration procedures with the local SAFE branch by March 31, 2006.

Our current PRC shareholders and/or PRC beneficial owners have registered with the SAFE under the relevant SAFE regulations. While we believe our PRC shareholders and/or PRC beneficial owners have complied with existing SAFE registration procedures, any future failure by any of our shareholders and/or beneficial owners who are PRC residents, or controlled by a PRC resident, to comply with relevant requirements under this regulation could subject such shareholders, beneficial owners and/or our PRC subsidiaries to fines and legal sanctions and may also limit our ability to contribute additional capital (including using the proceeds from this offering) into our PRC subsidiaries or to provide loans to our PRC subsidiaries, limit our PRC subsidiary’s ability to distribute dividends to our company, or otherwise adversely affect our business.

 

The application of PRC regulations relating to the overseas listing of PRC domestic companies is uncertain, and we may be subject to penalties for failing to request approval of the PRC authorities prior to listing our shares in the U.S.

 

On August 8, 2006, six PRC government agencies, namely, the Ministry of Commerce, or MOFCOM, the State Administration for Industry and Commerce, or SAIC, the China Securities Regulatory Commission, or CSRC, the State Administration of Foreign Exchange, or SAFE, the State Assets Supervision and Administration Commission, or SASAC, and the State Administration for Taxation, or SAT, jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “New M&A Rules”), which became effective on September 8, 2006. The New M&A Rules purport, among other things, to require offshore “special purpose vehicles,” that are (1) formed for the purpose of overseas listing of the equity interests of PRC companies via acquisition and (2) are controlled directly or indirectly by PRC companies and/or PRC individuals, to obtain the approval of the CSRC prior to the listing and trading of their securities on overseas stock exchanges. Based on our understanding of current PRC Laws, (i) the WFOE was incorporated by a foreign owned enterprise, and there was no acquisition of the equity or assets of a “PRC domestic company” as such term is defined under the New M&A Rules and (ii) no provision in the New M&A Rules clearly classifies the Contractual Arrangements between the WFOE and PRC Operating Entities as a type of transaction falling within the New M&A Rules. Therefore, we were and are not required to obtain the approval of CSRC under the New M&A Rules in connection with this offering.

 

However, there are substantial uncertainties regarding the interpretation, application and enforcement of the New M&A Rules and CSRC has yet to promulgate any written provisions or formally declare or state whether the overseas listing of a PRC-related company structured similar to ours is subject to the approval of CSRC. Any violation of these rules could result in fines and other penalties on our operations in China, restrictions or limitations on remitting dividends outside of China, and other forms of sanctions that may cause a material and adverse effect to our business, operations and financial conditions.

 
 

 

The new mergers and acquisitions regulations also established additional procedures and requirements that are expected to make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise that owns well-known trademarks or China’s traditional brands. We may grow our business in part by acquiring other businesses. Complying with the requirements of the new mergers and acquisitions regulations in completing this type of transactions could be time-consuming, and any required approval processes, including CSRC approval, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

 

Because our principal assets are located outside of the United States and with the exception of one director, our directors and all our officers reside outside of the United States, it may be difficult for you to enforce your rights based on the United States Federal securities laws against us and our officers and directors in the United States or to enforce judgments of United States courts against us or them in the PRC.

 

With the exception of one director, all of our officers and directors reside outside of the United States. In addition, our operating subsidiaries are located in the PRC and all of their assets are located outside of the United States. China does not have a treaty with United States providing for the reciprocal recognition and enforcement of judgments of courts. It may therefore be difficult for investors in the United States to enforce their legal rights based on the civil liability provisions of the United States federal securities laws against us in the courts of either the United States or the PRC and, even if civil judgments are obtained in courts of the United States, to enforce such judgments in PRC courts. Further, it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement against us or our officers and directors of criminal penalties, under the United States federal securities laws or otherwise.

 

We may have limited legal recourse under PRC law if disputes arise under our contracts with third parties.

 

The Chinese government has enacted some laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. If our new business ventures are unsuccessful, or other adverse circumstances arise from these transactions, we will face the risk that the parties to these ventures may seek ways to terminate the transactions, or, may hinder or prevent us from accessing important information regarding the financial and business operations of these acquired companies. The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces unrelated to the legal merits of a particular matter or dispute may influence their determination. Any rights we may have to specific performance, or to seek an injunction under PRC law, in either of these cases, are severely limited, and without a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations. Although legislation in China over the past 30 years has significantly improved the protection afforded to various forms of foreign investment and contractual arrangements, these laws, regulations and legal requirements are relatively new and their interpretation and enforcement involve uncertainties, which could limit the legal protection available to us, and foreign investors, including you. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital and could have a material adverse impact on our operations.

 

We face uncertainty from the Circular on Strengthening the Administration of Enterprise Income Tax on Non-resident Enterprises’ Share Transfer (“Circular 698”) released in December 2009 by China’s State Administration of Taxation, or the SAT, effective as of January 1, 2008.

 

Pursuant to the Circular on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises (“Circular 698”) issued by the SAT on December 10, 2009, where a foreign investor transfers the equity interests of a PRC resident enterprise indirectly via disposing of the equity interests of an overseas holding company (an “Indirect Transfer”) and such overseas holding company is located in a tax jurisdiction that: (i) has an effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, the foreign investor shall report such Indirect Transfer to the competent tax authority of the PRC resident enterprise. The PRC tax authority will examine the true nature of the Indirect Transfer, and if the tax authority considers that the foreign investor has adopted an abusive arrangement in order to avoid PRC tax, they will disregard the existence of the overseas holding company and re-characterize the Indirect Transfer and as a result, gains derived from such Indirect Transfer may be subject to PRC withholding tax at the rate of up to 10%. Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the competent tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

 

 
 

 

Since Circular 698 became effective on January 1, 2008, we cannot assure you that our reorganization will not be subject to examination by PRC tax authorities or that any direct or indirect transfer of our equity interests in our PRC subsidiaries via our overseas holding companies will not be subject to a withholding tax of 10%.  

  

We may have difficulty establishing adequate management, legal and financial controls in the PRC.

 

The PRC historically has been deficient in Western style management and financial reporting concepts and practices, as well as in modern banking, and other control systems. We may have difficulty in hiring and retaining a sufficient number of qualified employees familiar with these concepts, practices and systems to work in the PRC. As a result of these factors, and especially given that we expect to be a publicly listed company in the U.S. and subject to regulation as such, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards. We may have difficulty establishing adequate management, legal and financial controls in the PRC. Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and other applicable laws, rules and regulations. This may result in significant deficiencies or material weaknesses in our internal controls, which could impact the reliability of our financial statements and prevent us from complying with rules and regulations of the Securities and Exchange Commission (the “SEC”) and the requirements of Sarbanes-Oxley. Any such deficiencies, weaknesses or lack of compliance could have a materially adverse effect on our business and the public announcement of such deficiencies could adversely impact our stock price.

 

It may be difficult to protect and enforce our intellectual property rights under PRC law.

 

Intellectual property rights in China are still developing, and there are uncertainties involved in the protection and the enforcement of such rights. While we are not currently dependent on our intellectual property rights, we still need to pay special attention to protecting our intellectual property and trade secrets. Failure to adequately protect our intellectual property rights could lead to losses, including a potential loss of a competitive advantage that cannot be compensated through a damages award.

 

Under PRC law, we are required to obtain permits and business licenses, and our failure to do so would adversely impact our ability to conduct business in China.

 

We hold various permits, business licenses, and approvals authorizing our operations and activities, which are subject to periodic review and reassessment by the Chinese authorities. Standards of compliance necessary to pass such reviews change from time to time and differ from jurisdiction to jurisdiction, leading to a degree of uncertainty. If renewals, or new permits, business licenses or approvals required in connection with existing or new facilities or activities, are not granted or are delayed, or if existing permits, business licenses or approvals are revoked or substantially modified, we will suffer a material adverse effect. If new standards are applied to renewals or new applications, it could prove costly to us to meet any new level of compliance.

 

Contract drafting, interpretation and enforcement in China involves significant uncertainty.

 

We have entered into numerous contracts governed by PRC law, many of which are material to our business. As compared with contracts in the United States, contracts governed by PRC law tend to contain less detail and are not as comprehensive in defining contracting parties’ rights and obligations. As a result, contracts in China are more vulnerable to disputes and legal challenges. In addition, contract interpretation and enforcement in China is not as developed as in the United States, and the result of any contract dispute is subject to significant uncertainties. Therefore, we cannot assure you that we will not be subject to disputes under our material contracts, and if such disputes arise, we cannot assure you that we will prevail.

 

We Face Risks Related To Health Epidemics.

 

Our business could be materially and adversely affected by the effects of H1N1 flu (swine flu), avian flu, severe acute respiratory syndrome or other epidemics or outbreaks. In April 2009, an outbreak of H1N1 flu (swine flu) first occurred in Mexico and quickly spread to other countries, including the United States and China. In the last decade, China has suffered health epidemics related to the outbreak of avian influenza and severe acute respiratory syndrome. Any prolonged occurrence or recurrence of H1N1 flu (swine flu), avian flu, severe acute respiratory syndrome or other adverse public health developments in China may have a material adverse effect on our business and operations. These health epidemics could result in severe travel restrictions and closures that would restrict our ability to ship our products. Potential outbreaks could also lead to temporary closure of our manufacturing facilities, our suppliers' facilities and/or our end-user customers' facilities, leading to reduced production, delayed or cancelled orders, and decrease in demand for our products. Any future health epidemic or outbreaks that could disrupt our operations and/or restrict our shipping abilities may have a material adverse effect on our business and results of operations.

 

 
 

 

We Face Risks Related To Natural Disasters, Terrorist Attacks Or Other Events In China That May Affect Usage Of Public Transportation, Which In Turn Could Have A Material Adverse Effect On Our Business And Results Of Operations.

 

Our business could be materially and adversely affected by natural disasters, terrorist attacks or other events in China. For example, in early 2008, parts of China suffered a wave of strong snow storms that severely impacted public transportation systems. In May 2008, Sichuan Province suffered a strong earthquake measuring approximately 8.0 on the Richter scale that caused widespread damage and casualties. The May 2008 Sichuan earthquake has had a material adverse effect on the general economic conditions in the areas affected by the earthquake. Any future natural disasters, terrorist attacks or other events in China could cause a reduction in usage of or other severe disruptions to public transportation systems and could have a material adverse effect on our business and results of operations.

 

Risks Related to Ownership of Our Common Stock

 

Our principal stockholders have voting control over matters submitted to a vote of the stockholders, and they may take actions that conflict with the interests of our other stockholders and holders of our debt securities.

 

In connection with the Share Exchange and certain share transfer, Mr. Wei Jiang received a total of 29,500,000 shares of our common stock and Mr. Huian Peng received a total of 19,000,000 shares of our common stock   Accordingly, Mr. Wei Jiang and Mr. Huian Peng, together, control more than 50% of the votes eligible to be cast by stockholders in the election of directors and generally.  As a result, Mr. Wei Jiang and Huian Peng have the power to control all matters requiring the approval of our stockholders, including the election of directors and the approval of mergers and other significant corporate transactions, following the Share Exchange.

 

Our common stock is quoted on the Pink Sheets which may have an unfavorable impact on our stock price and liquidity.

 

Our common stock is quoted on the Pink Sheets, which is a significantly more limited trading market than the New York Stock Exchange or The NASDAQ Stock Market.  The quotation of the Company’s shares on the Pink Sheets may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.

 

There is limited liquidity on the Pink Sheets which may result in stock price volatility and inaccurate quote information.

 

When fewer shares of a security are being traded on the Pink Sheets, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information.  Due to lower trading volumes in shares of our common stock, there may be a lower likelihood of one’s orders for shares of our common stock being executed, and current prices may differ significantly from the price one was quoted at the time of one’s order entry.

 

Because we became public by means of a “reverse merger,” we may not be able to attract the attention of major brokerage firms.

 

Additional risks may exist since we will become public through a “reverse merger.” Securities analysts of major brokerage firms may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of our common stock. We cannot assure you that brokerage firms will want to conduct any secondary offerings on behalf of our company in the future.

 

The sale of securities by us in any equity or debt financing could result in dilution to our existing stockholders and have a material adverse effect on our earnings.

 

Any sale of common stock by us in a future private placement offering could result in dilution to the existing stockholders as a direct result of our issuance of additional shares of our capital stock.  In addition, our business strategy may include expansion through internal growth, by acquiring subscribers email lists, or by establishing strategic relationships with targeted customers and vendor.  In order to do so, or to finance the cost of our other activities, we may issue additional equity securities that could dilute our stockholders’ stock ownership.  We may also assume additional debt and incur impairment losses related to goodwill and other tangible assets if we acquire another company and this could negatively impact our earnings and results of operations.

 

 
 

 

Future sales of our common stock in the public market could lower the price of our common stock and impair our ability to raise funds in future securities offerings.

 

Future sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could adversely affect the then prevailing market price of our common stock and could make it more difficult for us to raise funds in the future through a public offering of our securities.

 

Our common stock is thinly traded, so you may be unable to sell at or near asking prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.

 

Currently, the Company’s common stock is quoted in the Pink Sheets and future trading volume may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in Pink Sheets stocks and certain major brokerage firms restrict their brokers from recommending Pink Sheets stocks because they are considered speculative, volatile and thinly traded.  The Pink Sheets market is an inter-dealer market much less regulated than the major exchanges and our common stock is subject to abuses, volatility and shorting.  Thus, there is currently no broadly followed and established trading market for the Company’s common stock.  An established trading market may never develop or be maintained. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the liquidity of the shares traded there.

 

The trading volume of our common stock has been and may continue to be limited and sporadic.  As a result of such trading activity, the quoted price for the Company’s common stock on the Pink Sheets may not necessarily be a reliable indicator of its fair market value.  Further, if we cease to be quoted, holders would find it more difficult to dispose of our common stock or to obtain accurate quotations as to the market value of the Company’s common stock and as a result, the market value of our common stock likely would decline.

 

Our common stock is subject to price volatility unrelated to our operations.

 

The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting the Company’s competitors or the Company itself. In addition, the Pink Sheets is subject to extreme price and volume fluctuations in general.  This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

 

We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.

 

Our common stock is subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the “penny stock rule.”  Section 15(g) sets forth certain requirements for transactions in penny stock, and Rule 15g-9(d) incorporates the definition of “penny stock” that is found in Rule 3a51-1 of the Exchange Act.  The SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. We are subject to the SEC’s penny stock rules.

 

Since our common stock is deemed to be penny stock, trading in the shares of our common stock is subject to additional sales practice requirements on broker-dealers who sell penny stock to persons other than established customers and accredited investors.  “Accredited investors” are persons with assets in excess of $1,000,000 (excluding the value of such person’s primary residence) or annual income exceeding $200,000 or $300,000 together with their spouse. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such security and must have the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt the rules require the delivery, prior to the first transaction of a risk disclosure document, prepared by the SEC, relating to the penny stock market.  A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities.  Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in an account and information to the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealer to trade and/or maintain a market in our common stock and may affect the ability of the Company’s stockholders to sell their shares of common stock.

 

There can be no assurance that our shares of common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock was exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock if the SEC finds that such a restriction would be in the public interest.

 

 
 

 

Our Board of Directors’ ability to issue undesignated preferred stock and the existence of anti-takeover provisions may depress the value of our common stock.

 

Our authorized capital includes 5,000,000 shares of undesignated preferred stock.  Our Board of Directors has the power to issue any or all of the shares of preferred stock, including the authority to establish one or more series and to fix the powers, preferences, rights and limitations of such class or series, without seeking stockholder approval.  Further, as a Delaware corporation, we are subject to provisions of the Delaware General Corporation Law regarding “business combinations.”  Our Board of Directors may, in the future, consider adopting additional anti-takeover measures. The authority of our board of directors to issue undesignated stock and the anti-takeover provisions of Delaware law, as well as any future anti-takeover measures adopted by us, may, in certain circumstances, delay, deter or prevent takeover attempts and other changes in control of us that are not approved by our Board of Directors.  As a result, our stockholders may lose opportunities to dispose of their shares at favorable prices generally available in takeover attempts or that may be available under a merger proposal and the market price, voting and other rights of the holders of common stock may also be affected.

 

We do not expect to pay dividends in the foreseeable future.

 

We do not intend to declare dividends for the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and growth of our business.  Therefore, our stockholders will not receive any funds unless they sell their common stock, and stockholders may be unable to sell their shares on favorable terms or at all.

 

 
 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

 

The information and financial data discussed below is derived from the audited combined financial statements of Science & Technology World Network (Dalian) Co., Ltd. and Dalian Tianyi Culture Development Co., Ltd. for its fiscal years ended December 31, 2011 and 2010, and the unaudited consolidated financial statements of Science & Technology World Website Media Group Co., Ltd. for its six month periods ended June 30, 2012 and unaudited combined financial statements of Science & Technology World Website Media Group Co., Ltd. for its six month periods ended June 30, 2011.  The financial statements were prepared and presented in accordance with generally accepted accounting principles in the United States. The information and financial data discussed below is only a summary and should be read in conjunction with the historical financial statements and related notes contained elsewhere in this Report. The financial statements contained elsewhere in this Report fully represent The Company’s financial condition and operations; however, they are not indicative of the Company’s future performance.  See “Cautionary Note Regarding Forward Looking Statements” above for a discussion of forward-looking statements and the significance of such statements in the context of this Report.

 

Use of Terms

 

Except as otherwise indicated by the context and for the purposes of this Management Discussion and Analysis only, references in this Management Discussion and Analysis to:

 

· “we,” “us,” “our,” “our Company”, “our Group”, or “the Company” are to the combined business of Science & Technology World Website Media Group Co., Ltd. and its consolidated subsidiaries, Science & Technology World Website Hong Kong Media Holding Co., Ltd and Science & Technology World Website Trade( Dalian) Co., Ltd , and variable interest entities, Science & Technology World Network (Dalian) Co., Ltd and Dalian Tianyi Culture Development Co., Ltd;

 

· “Science& Technology Holding” refers to Science & Technology World Website Media Holding Co., Ltd, a British Virgin Island company;

 

· “Science& Technology Media” refers to Science & Technology World Website Media Group Co., Ltd, a British Virgin Island company;

 

· “HK Science& Technology” refers to our subsidiary Science & Technology World Website Hong Kong Media Holding Co., Ltd, a Hong Kong company;

 

· “Science& Technology Trading” or the “WFOE” refer to our indirect subsidiary of Science & Technology World Website Trade ( Dalian) Co., Ltd, a PRC limited company;

 

· “Science & Technology (Dalian)” refers to our variable interest entity(VIE) Science & Technology World Network(Dalian) Co., Ltd., a PRC limited company;

 

· “Dalian Tianyi” refers to our variable interest entity(VIE) Dalian Tianyi Culture Development Co., Ltd., a PRC limited company;

 

· “Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;

 

· “PRC Operating Subsidiaries” and “PRC Operating Entities” refer to “Science & Technology (Dalian)” and “Dalian Tianyi”

 

· “PRC” and “China” refer to the People’s Republic of China, excluding, for the purpose of this prospectus, Taiwan and the special administrative regions of Hong Kong and Macau;

 

· “Renminbi” and “RMB” refer to the legal currency of China; and

 

· “U.S. dollars,” “dollars,” “US$” and “$”, “USD” refer to the legal currency of the United States.

 

OVERVIEW OF OUR BUISNESS

Science & Technology World Website Media Group Co., Ltd. (“Science & Technology Media” or “the Company”) is an emerging online media, search, community and mobile service group. We operate a multi-languages portal website that serves to the technology industry and provides advertising opportunities to the companies through our diverse business network in China. The Company currently operates its website through different versions in China.

As our main target, we provide online platform to business entrepreneurs/corporations with a B2B marketplace that can help our customers:

 

· Set their brand image through online magazine, online corporate multimedia advertisement, executives interviews, institutional alliances and flexible membership package that tailor made based on what our customers need.
· Set up customer’s online exhibition to introduce their products to the public, where they have our tailor-made corporate introduction and factory facilities online show room;
· B2B product purchase platform for companies and end-users;
 
 

 

· Online job opportunity section for corporate clients;
· Corporate blogs;

 

We currently derive a substantial portion of our revenues from online advertising services. Our advertising solutions present corporate users with attractive opportunities to combine the visual impact and engagement of traditional television-like multimedia advertisements and online magazines with the interactivity and precise targeting capabilities of the Internet. We strive to promote a novel and unique advertising environment on our website to attract technology enterprises.

 

We were organized under the laws of the British Virgin Islands on February 15, 2011 to serve as a holding company for our PRC operations. On September 16, 2011, we established HK Science and Technology in Hong Kong to serve as an intermediate holding company.

 

On January 20, 2012, HK Science and Technology established Science& Technology Trading in the PRC. Its purposes are, among others, a platform for online B2B service.

 

On January 21, 2012, Science & Technology World Website Trade (Dalian) Co., Ltd (the “WFOE” or “Science & Technology Trading”) respectively entered into a series of agreements with Dalian Tianyi Culture Development Co. Ltd (“Dalian Tianyi”), Science & Technology World Network (Dalian) Co. Ltd. (“Science & Technology (Dalian)”) and their respective shareholders (“Contractual Arrangements”). The relationship with Dalian Tianyi, Science & Technology (Dalian) and their respective shareholders are governed by the Contractual Arrangements. The Contractual Arrangements is comprised of a series of agreements, including Exclusive Technical Consulting Service Agreements and Operating Agreements, through which Science & Technology Trading has the right to advise, consult, manage and operate Dalian Tianyi and Science & Technology (Dalian), and collect 85% of their respective net profits. In order to further reinforce the Science & Technology Trading’s rights to control and operate Dalian Tianyi and Science & Technology (Dalian), the shareholders of Dalian Tianyi and Science & Technology (Dalian) have granted Science & Technology Trading, under the Exclusive Equity Interest Purchase Agreement, the exclusive right and option to acquire all of their equity interests respectively in Dalian Tianyi and Science &Technology (Dalian). Furthermore, the shareholders of Dalian Tianyi and Science & Technology (Dalian)are under the procedure of pledging all of their equity interests respectively in Dalian Tianyi and Science & Technology (Dalian) to Science & Technology Trading under the Exclusive Equity Interest Pledge Agreement, and through the Exclusive Equity Interest Pledge Agreement, Science & Technology Trading can collect the remaining 15% of Dalian Tianyi and Science & Technology (Dalian)’s respective net profits.  

 

HK Science and Technology and WFOE are considered foreign investor and foreign invested enterprise respectively under PRC law. As a result, HK Science and Technology and WFOE are subject to limitations under PRC law on foreign ownership of Chinese companies. According to the Catalogue of Industries for Guiding Foreign Investment (2011 Revision) (the “Catalogue”), there are four kinds of industries which are encouraged, permitted, restricted and prohibited for foreign investment. The primary business of Dalian Tianyi and Science & Technology (Dalian) are within the category in which foreign investment is currently restricted. The Contractual Arrangements with Dalian Tianyi and Science & Technology (Dalian) allow the Company to substantially control Dalian Tianyi and Science & Technology (Dalian) through WFOE without any equity relationship.

 

According to the Power of Attorney executed by the shareholders of Dalian Tianyi and Science & Technology (Dalian), they exclusively authorized WFOE to perform and exercise any and all of the shareholder’s rights in Dalian Tianyi and Science & Technology (Dalian).

 

As a result of the Contractual Arrangements, under generally accepted accounting principles in the United States, or U.S. GAAP, the Company is considered the primary beneficiary of Dalian Tianyi and Science & Technology (Dalian) (“VIEs”) and thus consolidates their results in its consolidated financial statements from January 21, 2012 on.

 

On October 29, 2012, Science & Technology World Website Media Group Co., Ltd. (“Science & Technology Media”) entered into a Share Exchange Agreement by and among (i) Science & Technology World Website Media Holding Co., Ltd (“Science & Technology Holding”), (ii) the principal shareholders of Metha Energy Solutions, Inc (“Metha Energy Solutions”) (iii) Metha Energy Solutions, Inc and (iv) the shareholders of Science &Technology Holding.

 

The acquisition is being accounted for as a “reverse merger,” and Science & Technology Media is deemed to be the accounting acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the acquisition will be those of Science &Technology Media and its wholly owned subsidiaries and VIEs, and will be recorded at the historical cost, and the consolidated financial statements after completion of the acquisition will include the assets, liabilities and operation of Metha Energy Solutions, Science & Technology Media and its wholly owned subsidiaries and VIEs from the closing date of the acquisition. As a result of the issuance of the shares of common stock pursuant to the Exchange Agreement, a change in control of occurred as a result of the acquisition.

 

 
 

 

In connection with the closing of the Exchange Agreement, Mr. Toft ApS, Metha Energy Solutions’ principal shareholder, agreed to cancel his 10,000,000 shares of the common stock that they owned in Metha Energy Solutions and to issue 50,000,000 shares to shareholders of Science & Technology Holding, who acquired a majority interest in Metha Energy Solutions in October 2012 for the purpose of the reverse acquisition of Science & Technology Media. Additionally, the existing officers and directors from Metha Energy Solutions resigned from its board of directors and all officer positions effective immediately after the closing of the reverse merger. Accordingly, Metha Energy Solutions appointed Mr. Wei Jiang, the former major shareholder of Science & Technology Holding as the Chairman of the Board and Chief Executive Officer.

 

Metha Energy Solutions’ directors approved the Exchange Agreement and the transactions contemplated thereby. Simultaneously, the directors of Science & Technology Media also approved the Exchange Agreement and the transactions contemplated thereby.

 

Prior to the Exchange Agreement, Metha Energy Solutions operated in the energy solution industry in New York City. Metha Energy Solutions was formed as a corporation pursuant to the laws of the State of Delaware on April 18, 2008.

 

As a result of the Exchange Agreement, Metha Energy Solutions acquired 100% of the processing and production operations of Science & Technology Media and its subsidiaries, the business and operations of which now constitutes its primary business and operations.   Specifically, as a result of the Exchange Agreement on October 29, 2012:

 

  £

Metha Energy Solutions acquired and now owns 100% of the issued and outstanding shares of capital stock of Science &Technology Media, a British Virgin Islands holding company which controls Dalian Tianyi, Science &Technology (Dalian) and their telecommunications business;

 

  £

Metha Energy Solutions issued 50,000,000 shares of common stock to the shareholders of Science & Technology Media shareholders; and

 

  £ Science & Technology Media were issued common stock of Metha Energy Solutions constituting approximately 95.02% of the fully diluted outstanding shares.

 

As a result of Metha Energy Solutions’ reverse acquisition of Science & Technology Media, Metha Energy Solutions has assumed the business and operations of Science & Technology Media with its principal activities engaged in the internet service business in the city of Dalian, Province of the People’s Republic of China.

 

Metha Energy Solutions’ corporate structure after the reorganization is set forth below:

  

 

 
 

  

Factors and Trends Affecting our Business

 

The internet and internet-related markets in China continued to evolve rapidly during the first half of 2012. According to a semiannual report issued by the China Internet Network Information Center (“CNNIC”), the total number of internet users in China had reached 538 million by the end of June 2012, an increase of 24.5 million from the end of 2011. The number of mobile internet users in China had reached 388 million by the end of June 2012, an increase of 32.7 million from the end of 2011, exceeding the 380 million desktop computer internet users as of June 2012. Mobile internet is becoming the top channel for Internet users to access websites in China. We believe that this large and expanding user base will continue to provide significant opportunities for our company to expand our product offerings and to explore new revenue streams.

 

However, China’s economy has been experiencing decelerating growth recently, with the result that many large advertisers were cautious regarding their spending on advertising in the face of this economy uncertainty. At the same time, we have been facing fierce competition arising from existing and new internet companies, which have been seizing advertising market share. We have noted that this macro-economic environment and increased competition has had some impact on our brand advertising business.

 

Due to above various factors, however, it is difficult for us at this point to predict growth trends for our brand advertising business through the end of 2012. 

We continue to be pleased with, and optimistic regarding, its growth and potential profitable opportunity. Our performance in the first half reflects the resilience of the online media industry in China despite the weakening global macroeconomic environment and economic slowdown in China. It also reflects the ongoing strength of our online content and the successful expansion into other fast-growing segments of the industry.

 

We believe, as discussed above, that there are significant opportunities to explore new revenue streams related to the online internet advertising market, in that regard, we will need to catch up with our peer competitors with respect to penetration of new online functions and features.

 

CRITICAL ACCOUNTING POLICIES AND MANAGEMENT ESTIMATES

 

Our discussion and analysis of our financial condition and results of operations relates to our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the consolidation, revenue recognition, income taxes and uncertain tax positions, computation of net loss per share, determination of net accounts receivable, and determination of functional currencies represent critical accounting policies that reflect the more significant judgments and estimates used in the preparation of our consolidated financial statements.

 

Principles of consolidation

 

The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries and VIEs. Upon consolidation, all balances and transactions between the Company and its subsidiaries and VIEs have been eliminated upon consolidation. We have entered into contractual arrangements with our VIEs and their shareholders, Mr. Wei Jiang, Mr. Huian Peng, Mrs. Lijuan Wang, Mr. ZhongMin He, Mrs. Guifen Gao, Mr. Dan He, Yang He, Mrs. Huilian An and Mrs. Ying Wang. PRC regulations require any foreign entities that invest in the advertising services industry to have at least two years of direct operations in the advertising industry outside of China. Since December 10, 2005, foreign investors have been allowed to own directly 100% of PRC companies operating an advertising business if the foreign entity has at least three years of direct operations in the advertising business outside of China or less than 100% if the foreign investor has at least two years of direct operations in the advertising industry outside of China. We do not currently directly operate an advertising business outside of China and cannot qualify under PRC regulations any earlier than two or three years after we commence any such operations outside of China or until we acquire a company that has directly operated an advertising business outside of China for the required period of time. Substantially all of our advertising business is currently provided through our contractual agreements with our PRC VIEs in China. Our PRC VIEs hold the requisite licenses to provide advertising services in China. Our PRC VIEs directly operate our advertising network. We have been and are expected to continue to be dependent on these PRC VIEs to operate our advertising business for the foreseeable future. We have entered into contractual agreements with the PRC VIEs, pursuant to which we, through the WFOE, provide technical support and consulting services to the PRC VIEs. In addition, we have entered into agreements with our PRC VIEs and each of their shareholders which provide us with the substantial ability to control these affiliates. Through these arrangements, we exercise effective control over the operations of these entities and receive the economic benefits of these entities. As a result of these contractual arrangements, under generally accepted accounting principles in the United States, or U.S. GAAP, we are considered the primary beneficiary of Dalian Tianyi and Science & Technology (Dalian) and thus consolidate their results in our consolidated financial statements.  

 

 
 

 

Use of estimates

 

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ from those estimates. Significant items subject to such estimates and assumptions include valuation allowances for receivables and recoverability of carrying amount and the estimated useful lives of long-lived assets.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 605, Revenue Recognition . Revenues are recognized when the four of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the service has been rendered, (iii) the fees are fixed or determinable, and (iv) collectability is reasonably assured. The recognition of revenue involves certain management judgments. The amount and timing of our revenues could be materially different for any period if management made different judgments or utilized different estimates.

 

Online Membership Revenue

 

Online membership revenue includes revenue from members for brand advertising services as well as others services.

 

The Company has the Arrangements with Nonrefundable Up-Front Fees Model (“the Model”) to recognize revenue for the online membership business. We apply the Model, where a contract is signed to establish a fixed price for our services to be provided for a period of time as a membership enrollment, for a majority of our online membership revenue. Revenue is recognized ratably over the membership periods on a straight line basis, unless evidence suggests that the revenue is earned or obligations are fulfilled in a different pattern, over the contractual term of the arrangement or the expected period, during which those specified services will be performed, whichever is longer. We provide advertisement placements to our advertising customers on our different website channels and in different formats, which can include, among other things, banners, links, logos, buttons, rich media, pre-roll and post-roll video screens, pause video screens and content integration, as specified in the contracts with the members. The members can choose various on line services from the membership contracts based on their yearly membership.

 

For online membership revenue recognition, prior to entering into contracts, we make a credit assessment of the customer to assess the collectability of the contract. For those contracts for which the collectability is determined to be reasonably assured, we recognize revenue when all revenue recognition criteria are met. For those contracts for which the collectability is determined not to be reasonably assured, we recognize revenue only when the cash was received and all other revenue recognition criteria are met.

 

Others Revenues

 

Other revenues are primarily generated from online advertisements which introduce our customer’s profile, product, and awareness promotion for their executive officers to build a better brand name for non-member companies. We follows the guidance of the Securities and Exchange Commission’s FASB Accounting Standards Codification No. 605 for revenue recognition for others revenues. The Company recognize others revenue when they are realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement that the services have been rendered to the customer, the sales price is fixed or determinable, the services are rendered and collectability is reasonably assured.

 

Income Taxes and Uncertain Tax Positions

 

Income Taxes

 

The Company follows ASC 740, Income Taxes , which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established to offset deferred tax assets. If based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized.

 

 
 

 

The Company adopted ASC 740-10-25 on January 1, 2012, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. Our estimated liability for unrecognized tax benefits, may be affected by changing interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute of limitations. The outcome for a particular audit cannot be determined with certainty prior to the conclusion of the audit and, in some cases, appeal or litigation process. The actual benefits ultimately realized may differ from our estimates. As each audit is concluded, adjustments, if any, are recorded in our financial statements. Additionally, in future periods, changes in facts, circumstances, and new information may require us to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changes occur. The Company has elected to classify interest and penalties related to an uncertain tax position, if and when required, as part of income tax expense in the consolidated statements of operations. The Company did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25.

 

Accounts Receivable

 

Accounts receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts as needed. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on aging data, historical collection experience, customer specific facts and economic conditions. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company did not have any off-balance-sheet credit exposure relating to its customers, suppliers or others. As of June 30, 2012 and December 31, 2011, management has determined that no allowance for doubtful accounts is required.

 

Property and equipment

 

Property and equipment mainly comprise computer equipment, hardware and office furniture. Property and equipment are recorded at cost less accumulated depreciation with no residual value. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.

 

Functional Currency Transaction and Translation

 

Functional Currency

 

An entity’s functional currency is the currency of the primary economic environment in which it operates, normally that is the currency of the environment in which the entity primarily generates and expends cash. Management’s judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements. The reporting currency of the Company is United States dollars (“US Dollars” or “$”), and the functional currency of HK Science & Technology is Hong Kong dollars (“HK Dollar”). The functional currency of the Company’s PRC subsidiary and VIEs is the Renminbi (“RMB’), and PRC is the primary economic environment in which the Company operates. The reporting currency of these consolidated financial statements is the United States dollar (“US Dollars” or “$”).

 

For financial reporting purposes, the financial statements of the Company’s PRC subsidiary and VIEs, which are prepared using the RMB, are translated into the Company’s reporting currency, the United States Dollar (“U.S. dollars”). Assets and liabilities are translated using the exchange rate at each balance sheet date.  Revenue and expenses are translated using average rates prevailing during each reporting period, and shareholders' equity is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income in owners’ equity.

 

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions.  The resulting exchange differences are included in the determination of net income of the consolidated financial statements for the respective periods.

 

The exchange rates applied are as follows:

 

    Period End     Average  
06/30/2012     6.3197       6.3255  
12/31/2011     6.3647       6.4735  
06/30/2011     6.4640       6.5482  
12/31/2010     6.6118       6.7788  
12/31/2009     6.8372       6.8212  

 

No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation.

Translations adjustments resulting from this process are included in accumulated other comprehensive loss in the shareholder’s equity were $7,078 and $7,963 as of June 30, 2012 and 2011, respectively.

  

 
 

 

RESULTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

 

The consolidated statement of loss for the six month ended June 30, 2012 includes results of operation of Science& Technology Media and its wholly owned subsidiaries and VIEs (Science& Technology (Dalian) and Dalian Tianyi).From January 1, 2012 through January 20, 2012, the statement of loss is under combined basis, because Science& Technology Media Group and its wholly owned subsidiaries, Science& Technology (Dalian) and Dalian Tianyi were under the same management of the Control Group and from January 21, 2012 through June 30, 2012, the statement of loss is under consolidated basis. The combined statement of loss for the six month ended June 30, 2011 includes results of operation of Science& Technology Media Group, Science& Technology (Dalian) and Dalian Tianyi.

 

The following table shows key components of our results of operations during the six months ended June 30, 2011 and 2012, in both US Dollars (“$”) and as a percentage of our net sales:

 

    June 30,     June 30,  
    2012     2011  
Revenues                
-      Third parties   $ 81,858     $ 43,456  
-      Related parties     13,174       -  
Cost of revenue                
-      Third parties     108,372       154,798  
-      Related parties     17,441       -  
Gross loss     (30,781 )     (111,342 )
                 
Operating expenses:                
Research and development     29,337       24,809  
Selling and marketing     64,830       74,431  
General and administrative     251,014       155,407  
Total operating expenses     345,181       254,647  
Loss from Operations     (375,962 )     (365,989 )
                 
Other income (expense):     23,930       (488 )
                 
Loss from operations before income taxes     (352,032 )     (366,477 )
Provision for income taxes     -       -  
Net loss     (352,032 )     (366,477 )
                 
Other comprehensive loss:                
Foreign currency translation gain (loss)   $ (7,078 )   $ (7,963 )
Comprehensive loss   $ (359,110 )   $ (374,440 )

  

Revenue

 

Total net sales were $95,032 for the six months ended June 30, 2012, compared to $43,456 for the corresponding periods in 2011. The increase in total net sales from the six months ended June 30, 2011 to the six months ended June 30, 2012 was $51,576. The increases were mainly attributable to increases in the membership revenues due to increase of enrollment of new members as we started ramp up our principle business in Q3, 2011.

 

COSTS AND EXPENSES

Cost of revenue

 

Total cost of revenues was $125,813 for the six months ended June 30, 2012, compared to $154,798 for the corresponding periods in 2011. The decrease in cost of revenues from the six months ended June 30, 2011 to the six months ended June 30, 2012 was $28,985due to reduced cooperation effort with paper-based magazine publishers which decreased cost for magazine advertisement.

 
 

 

Operating Expenses

 

Total operating expenses were $345,181 for the six months ended June 30, 2012, compared to $254,647 for the corresponding periods in 2011. The increase in operating expenses from the six months ended June 30, 2011 to the six months ended June 30, 2012 was $90,534. The increase was mainly attributable to increases in research and development expenses and general and administrative expenses.

 

Research and Development Expenses

Research and development expenses mainly consist of personnel-related expenses incurred for enhancement and maintenance of our Websites, and costs associated with new research, development and enhancement of existing products and services, which mainly include the development costs of online advertisement prior to the establishment of technological feasibility and maintenance costs after the website are available for marketing.

 

Research and development expenses were $29,337 for the six months ended June 30, 2012, compared to $24,809 for the corresponding periods in 2011.The increase in research and development expenses from the six months ended June 30, 2011 to the six months ended June 30, 2012 was $4,528. The increase was mainly attributable to increased travel expenses for training purposes.

 

Sales and Marketing Expenses

Sales and marketing expenses mainly consist of advertising and promotional expenditures, salary and benefits expenses for sales and marketing personnel, sales commissions and travel expenses.

 

Sales and marketing expenses were $64,830 for the six months ended June 30, 2012, compared to $74,431for the corresponding periods in 2011.The decrease in sales and marketing expenses from the six months ended June 30, 2011 to the six months ended June 30, 2012 was $9,601. The decreases were mainly attributable to decrease in advertising and conference expenditures as of results of cost controls.

 

General and Administrative Expenses

General and administrative expenses mainly consist of salary and benefits expenses, professional service fees, website hosting service fee, and office rental expenses.

 

General and administrative expenses were $251,014 for the six months ended June 30, 2012, compared to $155,407 for the corresponding periods in 2011.The increase in general and administrative expenses from the six months ended June 30, 2011 to the six months ended June 30, 2012 was $95,607. The increases were mainly from a $16,491increase in salary and benefits expenses, a$23,939increase in professional fees, a $8,574 increase in office rental expenses, a $18,646increase in social insurance expenses and a $27,957 in miscellaneous fee.

 

Loss from Operations

 

As a result of the foregoing, our operating loss was $375, 962 for the six and six months ended June 30, 2012, compared to $365,989 for the corresponding periods in 2011.

 

Other Income/Expense

 

Other income was $23,930 for the six months ended June 30, 2012, compared to other expenses of $488for the corresponding periods in 2011. The increases were mainly due to $24, 418increases in government subsidies from local government to encourage local investment.

 

Provision for Income Tax

 

Provision for income tax was nil for the six months ended June 30, 2012, compared to nil for the corresponding periods in 2011.TheCompany has not generated any net income and has no income tax expenses.

 

Net Loss

 

For the six months ended June 30, 2012, we had net loss of $352,032, compared to net loss of$366,477 for the corresponding periods of 2011.

 

GOING CONCERN AND LIQUIDITY

 

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company currently has limited recurring revenue and has generated cumulative net losses of $1,470, during the period from December 26, 2007 (inception of Dalian Tianyi) through June 30, 2012. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. As of June 30, 2012, Mr. Wei Jiang, the shareholder of the Company loaned an aggregated amount of $1,067,742 to the Company for its operation. There can be no assurance that the Company will be able to obtain additional debt or equity financing on terms acceptable to it, or if at all. Management does not expect to generate sufficient cash flow from operation until 2015 and plans to fund continuing operations through new financing from related parties and equity financing arrangements between 2012 and 2015. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required until it can generate sources of recurring revenues and to ultimately attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 
 

 

LIQUIDITY AND CAPITAL RESOURCES

 

Our principal sources of liquidity are cash and cash equivalents, short-term investments, loans from shareholders, as well as the cash flows generated from our operations.

 

As of June 30, 2012, we had cash and cash equivalents of approximately $202,021. As of June 30, 2011, we had cash and cash equivalents of approximately $171,792. Cash equivalents primarily comprise petty cash and cash in the bank accounts.

 

We believe our current liquidity and capital resources are sufficient to meet anticipated working capital needs, commitments and capital expenditures over the next twelve months. We may, however, require additional cash resources due to changes in business conditions and other future developments, or changes in general economic conditions.

 

Cash Generating Ability

 

We believe we will continue to generate strong cash flow from our membership business and other business, which, along with our available cash, will provide sufficient liquidity and financial flexibility.

 

Our cash flows were summarized below:

 

    June 30,     June 30,  
    2012     2011  
Net cash used in operating activities   $ (206,931 )   $ (744,019 )
Net cash provided by (used in) investing activities     12,690       (23,958 )
Net cash provided by financing activities     144,420       930,768  
Effect of exchange rate change on cash and cash equivalents     1,735       2,274  
Net increase (decrease) in cash and cash equivalents     (48,086 )     165,065  
Cash and cash equivalents at beginning of period     250,107       6,727  
                 
Cash and cash equivalents at end of period   $ 202,021     $ 171,792  

 

Net Cash Used In Operating Activities

 

For the six months ended June 30, 2012, $206,930 net cash used in operating activities was primarily attributable to our net loss of $ 352,032, adjusted by non-cash items of depreciation and amortization of $ 15,398, accounts receivable reduced by $16,863 due to better collection, prepaid expenses reduced by $6,176 due to less payment for telecommunication platform services, advanced from customers increased by $158,090, deferred revenue increased by $20,900 and accrued expenses increased by $80,370, offset by deferred tax assets increased by $97,109 and taxes receivable increased by $55,587. As such, the net cash used by operating activities did not increase as much as net loss.

 

For the six months ended June 30, 2011, $744,019net cash used in operating activities was primarily attributable to our net loss of $ 366,477, adjusted by non-cash items of depreciation and amortization of $12,772,advanced from customers increased by $9,926, accrued expenses increased by $19,705, and taxes receivable decreased by $170, offset by accounts receivable reduced by $7,636 due to slower collection, deferred tax assets increased by $219, prepaid expenses increased by $403,440 due to the payment for telecommunication platform services starting from the period, and deferred revenue decreased by $8,819. As such, the net cash used by operating activities increased more than net loss.

 

Net Cash Used in Investing Activities

 

For the six months ended June 30, 2012, net cash provided by investing activities of $ 12,690was primarily the result of loans from related parties of $31,358, offset by purchase of office equipment of $18,668.

 

For the six months ended June 30, 2011, net cash used in investing activities of $23,958was primarily the result of the purchase of office equipment.

 

Net Cash Provided by Financing Activities

 

For the six months ended June 30, 2012, net cash provided by financing activities of $144,420 was primarily the results of the loan from related parties for $47,427 and proceed of 96,993 from additional paid in capital from shareholders.

 

For the six months ended June 30, 2011, net cash provided by financing activities of $930,768 was primarily the results of the loan from related parties.

 

 
 

  

FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010

 

The following table shows key components of the results of operations during the year ended December 31, 2011 and 2010 of Science & Technology (Dalian) and Dalian Tianyi, in both $ and as a percentage of our net sales:

 

    For the Year Ended     For the Year Ended  
    December 31,     December 31,  
    2011     2010  
Revenue                
-      Third parties   $ 123,336     $ 8,792  
-      Related parties     6,363       -  
Cost of revenue                
-      Third parties     308,145       87,861  
-      Related parties     15,898       -  
Gross loss     (194,344 )     (79,069 )
                 
Operating expenses:                
Research and development expenses     56,807       35,585  
Selling and marketing expenses     159,750       54,981  
General and administrative expenses     379,590       144,178  
Total operating expenses     596,147       234,744  
  Loss from Operations     (790,491 )     (313,813 )
                 
Other income     258       553  
                 
Loss from operations before income taxes     (790,233 )     (313,260 )
Provision for income taxes     -       -  
Net loss     (790,233 )     (313,260 )
                 
Other comprehensive loss                
Foreign currency translation adjustment   $ (18,924 )   $ (7,902 )
Comprehensive loss   $ (809,157 )   $ (321,162 )

 

Revenue

 

Total revenues were $129,699 for the year ended December 31, 2011, compared to $8,792 for the corresponding periods in 2010. The increase in total revenues from the year ended December 31, 2010 to the year ended December 31, 2011 was $120,907. The increases were mainly attributable to increases in online members to 18 with average contract price of $44,287 from 5 with average contract price of $3,924.

 

COSTS AND EXPENSES

Cost of revenue

 

Total cost of revenues was $324,043 for the year ended December 31, 2011, compared to $87,861for the corresponding periods in 2010. The increase in cost of revenues from the year ended December 31, 2010 to the year ended December 31, 2011 was $236,182which was mainly attributable to increased labor cost and cooperation fee paid to paper-based magazine publishers for advertisement placement started in 2011.

 

 
 

 

Operating Expenses

 

Total operating expenses were $596,147 for the year ended December 31, 2011, compared to $234,744 for the corresponding periods in 2010. The increase in operating expenses from the year ended December 31, 2010 to the year ended December 31, 2011 was $361,403. The increase were mainly attributable to increases in sales and marketing expenses and general administrative expenses during the Company’s business expansion

 

Research and Development Expenses

Research and development expenses mainly consist of personnel-related expenses incurred for costs associated with new research in new products and services, development and enhancement of existing products and services, and enhancement of our websites,which mainly include the development costs of online advertisement and maintenance costs after the website is available for marketing.

 

Research and development expenses were $56,807 for the year ended December 31, 2011, compared to $35,585 for the corresponding periods in 2010.The increase in research and development expenses from the year ended December 31, 2010 to the year ended December 31, 2011 was $21,222. The increase mainly was driven by increase in salary and benefits expenses, which was mainly attributable to increased headcount to increase investment in the research and development.

 

Sales and Marketing Expenses

Sales and marketing expenses mainly consist of advertising and promotional expenditures, salary and benefits expenses, sales commissions and travel expenses.

 

Sales and marketing expenses were $159,750 for the year ended December 31, 2011, compared to $54,981 for the corresponding periods in 2010.The increase in sales and marketing expenses from the year ended December 31, 2010 to the year ended December 31, 2011 was $104,769. The increase mainly was driven by increase in salary and benefits expenses by $17,299, which was mainly attributable to increased headcount to drive up our membership services, increase in advertising and promotional expenditures as a result of increased marketing promotion activities by $14,752, increase in travel expenses by $29,925 and increase in miscellaneous expense by $42,793..

 

General and Administrative Expenses

General and administrative expenses mainly consist of salary and benefits expenses, professional service fees, and website hosting service fee, and office rental expenses.

 

General and administrative expenses were $379,590 million for the year ended December 31, 2011, compared to $144,178 for the corresponding periods in 2010.The increase in general and administrative expenses from the year ended December 31, 2010 to the year ended December 31, 2011 was $235,412. The increases were mainly from a $41,403increase in salary and benefits expenses, a$49,173 increase in professional fees, a $16,396 increase in office rental expenses, a $54,111 increase in social insurance expenses and a $74,329 in miscellaneous fee.

 

Loss from Operations

 

As a result of the foregoing, our operating loss was $ 790,491 for the year end December 31, 2011, compared to loss of $313,813for the corresponding periods in 2010.

 

Other Income

 

Other income was $258 for the year ended December 31, 2011, compared to other income of $553for the corresponding periods in 2010. The increases were mainly due to government subsidies and gain from currency conversion.

 

Income Tax Expense

 

Income tax expense was $nil for the year ended December 31, 2011, compared to $nil for the year ended December 31, 2010. The Company has not generated any net income and has no income tax expenses.

 

Net Loss

 

For the year ended December 31, 2011, we had net loss of $790,233, compared to the net loss of $313,260, for the year ended December 31, 2010.

 

GOING CONCERN AND LIQUIDITY

 

The financial statements have been prepared assuming that the Company will continue as a going concern. The Company currently has limited recurring revenue and has generated cumulative net loss of $1,118,344 during the period from December 26, 2007 (inception of Dalian Tianyi) through December 31, 2011. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. As of December 31, 2011, Mr. Jiang Wei, the shareholder of the Company loaned an aggregated amount of $1,059,521 to the Company for its operation. There can be no assurance that the Company will be able to obtain additional debt or equity financing on terms acceptable to it, or if at all. Management does not expect to generate sufficient cash flow from operation until 2015 and plans to fund continuing operations through new financing from related parties and equity financing arrangements. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required until 2013 when it can generate sources of recurring revenues and to ultimately attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 
 

 

LIQUIDITY AND CAPITAL RESOURCES

 

Our principal sources of liquidity are cash and cash equivalents, short-term investments, loans from shareholders, as well as the cash flows generated from our operations.

 

As of the year ended December 31, 2011, we had cash and cash equivalents of approximately $250,107. As of December 31, 2010, we had cash and cash equivalents of approximately $6,727. Cash equivalents primarily comprise petty cash and cash in the bank accounts.

 

We believe our current liquidity and capital resources are sufficient to meet anticipated working capital needs), commitments and capital expenditures over the next twelve months. We may, however, require additional cash resources due to changes in business conditions and other future developments, or changes in general economic conditions.

 

Cash Generating Ability

 

We believe we will continue to generate strong cash flow from our membership business and other business, which, along with our available cash, will provide sufficient liquidity and financial flexibility.

 

Our cash flows were summarized below:

 

    December 31,     December 31,  
    2011     2010  
Net cash used in operating activities   $ (652,492 )   $ (263,708 )
Net cash used in investing activities     (49,982 )     (85,325 )
Net cash provided by financing activities     941,507       355,375  
Effect of exchange rate change on cash and cash equivalents     4,347       169  
Net increase in cash and cash equivalents     243,380       6,511  
Cash and cash equivalents at beginning of year     6,727       216  
Cash and cash equivalents at end of year   $ 250,107     $ 6,727  

 

Net Cash Provided by Operating Activities

 

For the year ended December 31, 2011, $652,492net cash used in operating activities was primarily attributable to our net loss of $790,233, adjusted by non-cash items of depreciation and amortization of $27,528, advanced from customers increased by $286,552, deferred revenue increased by $223,604 and accrued expenses increased by $15,003, offset by accounts receivable increased by $21,627 due to slower collection, deferred tax assets increased by $221, prepaid expenses increased by $364,577 due to the payment for telecommunication platform services, and taxes receivable increased by $28,521. As such, the net cash used by operating activities did not increase as much as net loss.

 

For the year ended December 31, 2010, $263,708net cash used in operating activities was primarily attributable to our net loss of $313,260, adjusted by non-cash items of depreciation and amortization of $ 14,151, advanced from customers increased by $6,638, deferred revenue increased by $15,649, and accrued expenses increased by $27,325, offset by deferred tax assets increased by $74, prepaid expenses increased by $13,741 due to increased advanced payment for employee social benefit, and taxes receivable increased by $396. As such, the net cash used by operating activities did not increase as much as net loss.

 

Net Cash Used in Investing Activities

 

For the year ended December 31, 2011, net cash used in investing activities of $49,982 was primarily the result of the loans to related parties for $29,868 and purchase of office equipment for $20,114.

 

For the year ended December 31, 2010, net cash used in investing activities of $85,325 was primarily the result of the loans to related parties for $738 and purchase of office equipment for $84,587.

 

Net Cash Provided by Financing Activities

 

For the year ended December 31, 2011, net cash provided by financing activities of $941,507 was primarily the results of the due to related parties.

 

For the year ended December 31, 2010, net cash provided by financing activities of$355,375was primarily attributable to $177,024 from proceed of additional paid in capital contributed from shareholders and $ 178,351 from the due to related parties.

 

 
 

 

OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS

 

As of June 30, 2012 and 2011, we had lease agreements for the principal offices with commitment amount of $54,801 and $38,688, respectively. As of December 31, 2011 and 2010, we had lease agreements for the principal offices with commitment amount of $13,097 and $12,608, respectively. We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or product development services with us.

 

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

 

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This guidance improves the comparability, consistency and transparency of financial reporting and increases the prominence of items reported in other comprehensive income. The guidance provided by this update becomes effective for annual periods beginning on or after December 15, 2011. For nonpublic entities, the ASU is effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.

 

No other recently issued accounting standards are expected to have a material effect on the financial position, results of operations or cash flows of the Company.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information regarding our shares of common stock beneficially owned as of the date hereof for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group.  A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants or otherwise. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.

 

For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days as of the date hereof.  For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of the Closing Date is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.  The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

 

Unless otherwise specified, the address of each of the persons set forth below is in care of Science & Technology Website (DaLian) Media Co., Ltd., Room 205, Building A, No. 1 Torch Road, High-Tech Zone, Dalian, China 116023.

  

Title of Class   Name of Beneficial Owner     Amount and Nature
of Beneficial
Ownership
   

Percent of

Common Stock (1)  

 
      Executive Officers and Directors                  
Common Stock    

Wei Jiang (2)

Chairman

      29,500,000       56.06 %
Common Stock    

HuiAn Peng (3)

Chief Executive Officer and Director

      19,000,000       36.11 %
Common Stock    

Jie Liang

Secretary and Director

      0       0  
Common Stock     All directors and executive officers as a group (3 persons)       48,500,000       92.17
                         
      Other 5% Shareholders:                   
      None                  

 

(1) Based on 52,620,030 shares of common stock issued and outstanding as of the date hereof.
(2) Including 20,650,000 shares issued in the Share Exchange and 8,850,000 shares transferred from Zhongmin He, Yang He, Dan He, Guifen Gao and Lijuan Wang for $0.001 per share immediately after the closing of the Share Exchange.
(3) Including 12,850,000 shares issued in the Share Exchange and 6,150,000 shares transferred from Lijuan Wang for $0.001 per share immediately after the closing of the Share Exchange (collectively with (2), the “Share Transfer”).

    

 
 

 

DIRECTORS AND EXECUTIVE OFFICERS

 

Effective upon the closing of the Share Exchange, Jesper Toft resigned from our Board of Directors and as officer of the Company.  Also effective upon the closing of the Share Exchange, Wei Jiang, HuiAn Peng and Jie Liang were appointed to our Board of Directors to fill the vacancies created by the resignations of Jesper Toft.  In addition, our Board of Directors appointed Mr. Peng to serve as our Chief Executive Officer and Ms. Liang as our Secretary, effective immediately upon the closing of the Share Exchange.

 

The following sets forth information about our directors and executive officers as of the date of this Report and following the closing of the Share Exchange:

 

Name   Age   Position
Wei Jiang   53   Chairman
HuiAn Peng   57   Chief Executive Officer and Director
Jie Liang   32   Secretary and Director

 

Wei Jiang , president, senior designer, who used to be the president of XieheSi Decoration Company of Dalian from 1995 to 2000. From 2000 to November 2009, Mr Jiang served as the head of the academy of Pulan building design institution. Mr. Jiang has over 20 year’s management experience; he is currently in charge of the management and PR in the company.

 

HuiAn Peng , CEO, who has published over 40 articles on journals, reporting articles, and enterprise operation management works. He has also published hundreds of news articles in the provincial level and central governmental level journals. He has over 20 years of management experience in the media industry. He was serving as the company managing director at DaLian Northeast cultural development corporation through 2002 to 2010. In 2010, he became the member of board of directors, VP for Dalian TianYi, and the beginning of 2011, he is appointed as the CEO of Science & Technology Website (DaLian) Media Co., Ltd.

 

Liang Jie , corporate secretary, VP, she has over 7 years working experience in financial related and business administration work. Before she joined our company, she was the security business representative for Acctrue, a public listed company that listed in China Gem board. She started her career in 2004 as editor manager for commodities information channel at Shihua International Financial Information Co., Ltd, a wholly owned subsidiary by Sino-i Technology Ltd. ( HK stock: 0250).

  

Corporate Governance

 

The business and affairs of the Company are managed under the direction of the Board of Directors (the “Board”). Messrs. Jiang, Peng and Liang are the current members of the Board.

 

Term of Office

 

Directors are appointed for a one-year term to hold office until the next annual general meeting of stockholders or until removed from office in accordance with our bylaws. Our officers are appointed by our Board and hold office until removed by our Board.

 

All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. Our bylaws provide that officers are appointed annually by our Board and each executive officer serves at the discretion of our Board.

  

Director Independence

 

We use the definition of “independence” of The NASDAQ Stock Market to make this determination.  NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.  The NASDAQ listing rules provide that a director cannot be considered independent if:

 

the director is, or at any time during the past three years was, an employee of the company;
the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);

a family member of the director is, or at any time during the past three years was, an executive officer of the company;
the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);

 

 
 

 

the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

 

We have determined that none of the persons anticipated to become directors upon the closing of the Share Exchange is “independent” as defined by applicable SEC rules and NASDAQ Stock Market listing standards.

 

Board Committees

 

We do not have an audit, nominating or compensation committee. We intend, however, to establish an audit committee and a compensation committee of our Board in the future following the Share Exchange. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors and evaluating our accounting policies and our system of internal controls. The compensation committee will be primarily responsible for reviewing and approving our salary and benefits policies (including stock options) and other compensation of our executive officers.

 

Family Relationships

 

There are no family relationships among any of our officers or directors.

 

Involvement in Certain Legal Proceedings

 

To our knowledge, none of our current directors or executive officers has, during the past ten years:

 

  been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
  had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
  been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
  been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
  been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
  been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

 

Code of Ethics

 

The Company has not currently adopted a code of ethics.

 

EXECUTIVE COMPENSATION

 

The following sets forth information with respect to the compensation awarded or paid to Wei Jiang, our newly appointed Chairman, HuiAn Peng, our newly appointed chief executive officer and director, and Jie Liang, our newly appointed director, and Jesper Toft, our former director and officer, for all services rendered in all capacities to us and our subsidiaries.  These executive officers are referred to as the “named executive officers” throughout this Report.

  

 
 

 

The discussion below pertains to compensation awarded or paid by Science & Technology to Messrs. Jiang, Peng and Liang with respect to Science & Technology(Dalian)’s fiscal years ended December 31, 2011 and 2010 and compensation awarded or paid by the Company to Jesper Toft with respect to the Company’s fiscal years ended December 31, 2011 and 2010.

 

Summary Compensation

 

Name and Principal
Position
  Year     Salary
($)
    Bonus
($)
    Stock
Awards
($)
    Option
Awards
($)
    Non-Equity
Incentive Plan
Compensation
($)
    Non-Qualified
Deferred
Compensation
Earnings
($)
    All Other
Compensation
($)
    Totals
($)
 
Jesper Toft (1):                                                                  
Former CEO, CFO,     2011     $ 420,433       0       0       0       0       0       0     $ 420,433  
Chairman     2010     $ 144,000       0       0       0       0       0       0     $ 144,000  
Wei Jiang     2011     $ 10,195       0         0         0         0         0         0     $ 10,195  
Chairman     2010     $ 8,025       0         0         0         0         0         0     $ 8,025  
HuiAn Peng     2011     $ 9,639       0         0         0         0         0         0     $ 9,639  
CEO and director     2010     $ 7,583       0         0         0         0         0         0     $ 7,583  
Jie Liang     2011     $ 3,862       0        0         0         0         0         0     $ 3,862  
Director                                                                      

 

(1) All payments were made to Toft ApS as management fees. Jesper Toft, our former officer and director, has a controlling interest in Toft ApS.

 

None of our directors or senior management received any equity awards, including, options, restricted stock or other equity incentives in 2011. We do not set aside or accrue any amounts for pension, retirement or other benefits for our directors and senior management.

 

Outstanding Equity Awards at Fiscal Year-End Table

 

At December 31, 2011, MGYS had no outstanding equity awards. At December 31, 2011, Science & Technology had no outstanding equity awards.

 

Employment Agreements

 

There are no employment agreements between Science & Technology and its officers and directors.

 

Compensation of Directors

 

The Company has not compensated any of its directors for service on the Board of Directors. Management directors are not compensated for their service as directors, however they may receive compensation for their services as employees of the Company. The compensation received by our management directors is shown in the “Summary Compensation Table” above.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,

AND DIRECTOR INDEPENDENCE

 

Transactions with Related Persons

 

The following includes a summary of transactions since the beginning of fiscal 2010, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds $120,000 and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation”). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

 

  Pursuant to the Share Exchange Agreement, on the Closing Date we issued 50,000,000 shares of our common stock to the Science & Technology Shareholders.  Immediately after the Closing, Zhong Min He, Dan He, Yang He, Guifen Gao, LiJuan Wang transferred a total of 15,000,000 shares to Mr. Wei Jiang and Mr. HuiAn Peng. Accordingly, Wei Jiang and HuiAn Peng, together, control more than 50% of the votes eligible to be cast by stockholders in the election of directors and generally. As a result, Wei Jiang and HuiAn Peng became our principal stockholders. Messrs. Wei Jiang and HuiAn Peng were also appointed as the members of our Board of Directors.
  On the Closing Date, we entered into the Cancellation Agreement with Jesper Toft pursuant to which we assigned and transferred certain assets and liabilities under certain agreements to Toft ApS in exchange for the cancellation of 10,000,000 shares of our common stock.

 

 
 

 

Related Party Transaction of Science & Technology:

 

  At June 30, 2012 and 2011, the Company had a balance due to Mr. Wei Jiang, the majority shareholder and Chairman, of $1,059,521 and $1,051,339, respectively, for advances made to fund operations. This payable is due on demand, is non-interest bearing and has no maturity date.
  At June 30, 2012 and 2011, the Company had a balance due to Xie He Si, a related company owned by Chairman, of $80,384 and $78,589, respectively, for advances made to fund operations. This payable is due on demand, is non-interest bearing and has no maturity date.
  At June 30, 2011, the Company had a balance due from Mr. Huian Peng, the CEO, of $10.561 for Mr. Huian Peng to purchase materials and tools on behalf of Science & Science & Technology Website Media Group.

 

Director Independence

 

We do not have any independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination.  NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.  The NASDAQ listing rules provide that a director cannot be considered independent if:

 

  the director is, or at any time during the past three years was, an employee of the company;
  the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
  a family member of the director is, or at any time during the past three years was, an executive officer of the company;
  the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
  the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
  the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

 

Messrs. HuiAn Peng and Jie Liang are not considered independent because each of them serves as an executive officer of the Company. Mr. Jiang is not considered independent because he is a principal shareholder of the Company.

 

We do not currently have a separately designated audit, nominating or compensation committee.

 

LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

 

MARKET PRICE AND DIVIDENDS ON OUR COMMON EQUITY

AND RELATED STOCKHOLDER MATTERS

 

Market Information

 

Our common stock has been approved for quotation on The OTC Bulletin Board under the symbol “MGYS.”  However, no established public market exists for our common stock.  As of the date hereof, 52,620,030 shares of our common stock were issued and outstanding.

 

Holders

 

As of the date hereof, there were approximately 65 holders of record of our common stock, which does not include shares held by brokerage clearing houses, depositories or others in unregistered form.

  

 
 

 

Dividends

 

We have never declared or paid a cash dividend. Any future decisions regarding dividends will be made by our Board of Directors. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our Board of Directors has complete discretion on whether to pay dividends. Even if our Board of Directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the Board of Directors may deem relevant.

 

Penny Stock

 

Our common stock is subject to provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the “penny stock rule.” Section 15(g) sets forth certain requirements for transactions in penny stock, and Rule 15g-9(d) incorporates the definition of “penny stock” that is found in Rule 3a51-1 of the Exchange Act. The SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. The Company is subject to the SEC’s penny stock rules.

 

Since our common stock is deemed to be penny stock, trading in the shares of our common stock is subject to additional sales practice requirements on broker-dealers who sell penny stock to persons other than established customers and accredited investors. “Accredited investors” are persons with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such security and must have the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt the rules require the delivery, prior to the first transaction of a risk disclosure document, prepared by the SEC, relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in an account and information to the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealer to trade and/or maintain a market in our common stock and may affect the ability of the Company’s stockholders to sell their shares of common stock.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

We do not have in effect any compensation plans under which our equity securities are authorized for issuance.  The Company intends to adopt an equity compensation plan in which its directors, officers, employees and consultants shall be eligible to participate.  However, no formal steps have been taken as of the date of this Report to adopt such a plan.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

Reference is made to the disclosure set forth under Item 3.02 of this Report, which disclosure is incorporated by reference into this section.

 

DESCRIPTION OF SECURITIES

 

Introduction

 

In the discussion that follows, we have summarized selected provisions of our certificate of incorporation, bylaws and the Delaware General Corporation Law (the “DGCL”) relating to our capital stock. This summary is not complete. This discussion is subject to the relevant provisions of Delaware law and is qualified in its entirety by reference to our certificate of incorporation and our bylaws. You should read the provisions of our certificate of incorporation and our bylaws as currently in effect for provisions that may be important to you.

 

Authorized Capital Stock

 

Our authorized share capital consists of 100,000,000 shares of common stock, par value $0.001 per share and 10,000,000 shares of preferred stock, par value $0.001 per share (“Preferred Stock”), of which 100,000 shares are designated as Series A Convertible Preferred Stock and 100,000 shares are designated as Series B Convertible Preferred Stock.  As of the date hereof, 52,620,030 shares of our common stock were outstanding.

 

Common Stock

 

Each share of our common stock entitles its holder to one vote in the election of each director and on all other matters voted on generally by our stockholders, other than any matter that (1) solely relates to the terms of any outstanding series of preferred stock or the number of shares of that series and (2) does not affect the number of authorized shares of preferred stock or the powers, privileges and rights pertaining to the common stock. No share of our common stock affords any cumulative voting rights. This means that the holders of a majority of the voting power of the shares voting for the election of directors can elect all directors to be elected if they choose to do so.

  

 
 

 

Holders of our common stock will be entitled to dividends in such amounts and at such times as our Board of Directors in its discretion may declare out of funds legally available for the payment of dividends. We currently intend to retain our entire available discretionary cash flow to finance the growth, development and expansion of our business and do not anticipate paying any cash dividends on the common stock in the foreseeable future. Any future dividends will be paid at the discretion of our Board of Directors after taking into account various factors, including:

 

  general business conditions;
  industry practice;
  our financial condition and performance;
  our future prospects;
  our cash needs and capital investment plans;
  our obligations to holders of any preferred stock we may issue;
  income tax consequences; and
  the restrictions Delaware and other applicable laws and our credit arrangements then impose.

 

If we liquidate or dissolve our business, the holders of our common stock will share ratably in all our assets that are available for distribution to our stockholders after our creditors are paid in full and the holders of all series of our outstanding preferred stock, if any, receive their liquidation preferences in full.

 

Our common stock has no preemptive rights and is not convertible or redeemable or entitled to the benefits of any sinking or repurchase fund.

 

Preferred Stock

 

Our Board has the authority, within the limitations and restrictions in our certificate of incorporation, to issue 5,000,0000 shares of Preferred Stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of any series, without further vote or action by the stockholders. The issuance of shares of Preferred Stock may have the effect of delaying, deferring or preventing a change in our control without further action by the stockholders. The issuance of shares of Preferred Stock with voting and conversion rights may adversely affect the voting power of the holders of our common stock, including voting rights, of the holders of our common stock. In some circumstances, this issuance could have the effect of decreasing the market price of our common stock. We currently have no plans to issue any shares of preferred stock.

 

Undesignated Preferred Stock may enable our Board to render more difficult or to discourage an attempt to obtain control of our Company by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of our management. The issuance of shares of Preferred Stock may adversely affect the rights of our common stockholders. For example, any shares of Preferred Stock issued may rank prior to the common stock as to dividend rights, liquidation preference or both, may have full or limited voting rights and may be convertible into shares of common stock. As a result, the issuance of shares of Preferred Stock, or the issuance of rights to purchase shares of Preferred Stock, may discourage an unsolicited acquisition proposal or bids for our common stock or may otherwise adversely affect the market price of our common stock or any existing Preferred Stock.

 

Series A Convertible Preferred Stock

 

On July 10, 2008, the Company designated 100,000 shares as Series A Convertible Preferred Stock. As of June 30, 2012, the Company had 100,000 shares of Series A Convertible Preferred Stock issued and outstanding. The holders of the Series A Convertible Preferred Stock are entitled to receive, when and if declared by the Board of Directors out of funds readily available for the purpose, dividends payable in cash.  The aggregate amount of dividends paid to the holders of the Series A Convertible Preferred Stock shall be capped at $1,000,000.  After the Series A Convertible Preferred Stock dividends have been paid out, they will have no preference on dividends, but they will maintain their voting rights.  The holders of the Series A Convertible Preferred Stock are entitled to 1,000 votes per share they hold on all matters submitted to a vote of the stockholders of the Company’s common stock.  At any time on or after the issuance date, the holders of Series A Convertible Preferred Stock may convert a portion or all of their shares into common stock only on a one to one basis.

 

The Series A Convertible Preferred Stock was cancelled on October 22, 2012.

 

 
 

   

Series B Convertible Preferred Stock

 

On August 27, 2009, the Company designated 100,000 shares as Series B Convertible Preferred Stock. On August 27, 2009, the Company issued 100,000 shares of Series B Convertible Preferred Stock to an investor. The holders of the Series B Convertible Preferred Stock are entitled to receive, when and if declared by the Board of Directors out of funds readily available for the purpose, dividends payable in cash.  The aggregate amount of dividends paid to Series B Convertible Preferred Stock shall be capped at $570,000. The holders of the Series B Convertible Preferred Stock are entitled to one vote per share they hold on all matters submitted to a vote of the stockholders of the Company.  At any time on or after the issuance date, the holders of Series B Convertible Preferred Stock may convert a portion or all of their shares into common stock only on a one to one basis.

 

On May 16, 2011, the Company repurchased the 100,000 shares of the Series B Convertible Preferred Stock for a total price of approximately $570,000.  The shares are recorded as treasury shares.

 

The Series B Convertible Preferred Stock was cancelled on October 22, 2012.

 

Anti-Takeover Effects of Provisions of the DGCL and our Certificate of Incorporation and Bylaws

 

Provisions of the DGCL and our certificate of incorporation and bylaws could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions, summarized below, are expected to discourage certain types of coercive takeover practices and takeover bids that our Board of Directors may consider inadequate and to encourage persons seeking to acquire control of us to first negotiate with our Board of Directors. We believe that the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in improved terms for our stockholders.

 

Delaware Anti-Takeover Statute.   We are subject to Section 203 of the DGCL, an anti-takeover statute. In general, Section 203 of the DGCL prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an interested stockholder, unless the business combination or the acquisition of shares that resulted in a stockholder becoming an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years prior to the determination of interested stockholder status did own) 15% or more of a corporation’s voting stock. The existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by the Board of Directors, including discouraging attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

 

As of the Closing Date, we are not subject to Section 203 of the DGCL because we do not have a class of voting stock that is listed on a national securities exchange or held of record by more than 2,000 stockholders and we have not elected by a provision in our original Certificate of Incorporation or any amendment thereto to be governed by Section 203. Unless we adopt an amendment of our Certificate of Incorporation by action of our stockholders expressly electing not to be governed by Section 203, we would generally become subject to Section 203 of the DGCL at such time that we have a class of voting stock that is either listed on a national securities exchange or held of record by more than 2,000 stockholders, except that the restrictions contained in Section 203 would not apply if the business combination is with an interested stockholder who became an interested stockholder before the time that we have a class of voting stock that is either listed on a national securities exchange or held of record by more than 2,000 stockholders.

 

Amendments to Our Certificate of Incorporation. Under the DGCL, the affirmative vote of a majority of the outstanding shares entitled to vote thereon and a majority of the outstanding stock of each class entitled to vote thereon is required to amend a corporation’s certificate of incorporation. Under the DGCL, the holders of the outstanding shares of a class of our capital stock shall be entitled to vote as a class upon a proposed amendment, whether or not entitled to vote thereon by the certificate of incorporation, if the amendment would:

 

  increase or decrease the aggregate number of authorized shares of such class;
  increase or decrease the par value of the shares of such class; or
  alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely.

 

If any proposed amendment would alter or change the powers, preferences or special rights of one or more series of any class of our capital stock so as to affect them adversely, but shall not so affect the entire class, then only the shares of the series so affected by the amendment shall be considered a separate class for the purposes of this provision.

 

 
 

 

Vacancies in the Board of Directors. Our bylaws provide that, subject to limitations, any vacancy occurring in our Board of Directors for any reason may be filled by a majority of the remaining members of our Board of Directors then in office, even if such majority is less than a quorum. Each director so elected shall hold office until the expiration of the term of the other directors. Each such directors shall hold office until his or her successor is elected and qualified, or until the earlier of his or her death, resignation or removal.

 

Special Meetings of Stockholders. Under our bylaws, special meetings of stockholders may be called at any time by a majority of the members of the Board of Directors or by any officer instructed by the directors to call such a meeting. Under the DGCL, written notice of any special meeting must be given not less than 10 nor more than 60 days before the date of the special meeting to each stockholder entitled to vote at such meeting.

 

Requirements for Advance Notification of Stockholder Nominations and Proposals. Our bylaws establish advance notice procedures with respect to stockholder proposals and nomination of candidates for election as directors other than nominations made by or at the direction of our Board of Directors or a committee of our Board of Directors.

 

No Cumulative Voting. The DGCL provides that stockholders are denied the right to cumulate votes in the election of directors unless our certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation will not provide for cumulative voting.

 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

Reference is made to Item 4.01 of this Report.

 

INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

Section 145 of the DGCL provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses including attorneys’ fees, judgments, fines and amounts paid in settlement in connection with various actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation, such 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, if they had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of any actions by or in the right of the corporation, except that indemnification only extends to expenses, including attorneys’ fees, incurred in connection with the defense or settlement of such actions, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation’s certificate of incorporation, bylaws, agreement, a vote of stockholders or disinterested directors or otherwise.

 

Our certificate of incorporation provides that we will indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person or a person for whom such person is the legal representative, is or was a director or officer of us or, while a director or officer of us, is or was serving at our request as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other enterprise, including service with respect to employee benefit plans, against all liability and losses suffered and expenses (including attorneys’ fees) incurred by such person in connection with such action, suit or proceeding. Our certificate of incorporation also provides that we will pay the expenses incurred by a director or officer in defending any such proceeding in advance of its final disposition, subject to such person providing us with specified undertakings. Notwithstanding the foregoing, our certificate of incorporation provides that we shall be required to indemnify or make advances to a person in connection with a proceeding (or part thereof) initiated by such person only if the proceeding (or part thereof) was authorized by our Board of Directors. These rights are not exclusive of any other right that any person may have or may acquire under any statute, provision of our certificate of incorporation, bylaws, agreement, vote of stockholders or disinterested directors or otherwise. No amendment, modification or repeal of those provisions will in any way adversely affect any right or protection under those provisions of any person in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.

  

 
 

 

Our certificate of incorporation also permits us to secure and maintain insurance on behalf of any of our directors, officers, employees or agents and each person who is, or was, serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise for any liability asserted against and incurred by such person in any such capacity. We intend to obtain directors’ and officers’ liability insurance providing coverage to our directors and officers.

 

Delaware law also authorizes Delaware corporations to limit or eliminate the personal liability of their directors to them and their stockholders for monetary damages for breach of a director’s fiduciary duty of care. The duty of care requires that, when acting on behalf of the corporation, directors must exercise an informed business judgment based on all material information reasonably available to them. Absent the limitations Delaware law authorizes, directors of Delaware corporations are accountable to those corporations and their stockholders for monetary damages for conduct constituting gross negligence in the exercise of their duty of care. Delaware law enables Delaware corporations to limit available relief to equitable remedies such as injunction or rescission. Our certificate of incorporation limits the liability of our directors to us and our stockholders to the fullest extent Delaware law permits. Specifically, no director will be personally liable for monetary damages for any breach of the director’s fiduciary duty as a director, except for liability:

 

  for any breach of the director’s duty of loyalty to us or our stockholders;
  for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
  for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; and
  for any transaction from which the director derived an improper personal benefit.

 

This provision could have the effect of reducing the likelihood of derivative litigation against our directors and may discourage or deter our stockholders or management from bringing a lawsuit against our directors for breach of their duty of care, even though such an action, if successful, might otherwise have benefited us and our stockholders.

  

Item 3.02 Unregistered Sales of Equity Securities.

 

The information contained in Item 1.01 above is incorporated herein by reference in response to this Item 3.02.

 

The shares of common stock issued to the former shareholders of Science & Technology in connection with the Share Exchange were offered and sold in a private transaction in reliance upon exemptions from registration pursuant to Section 4(2) of the Securities Act, Regulation D and Regulation S promulgated under the Securities Act. Our reliance on Section 4(2) of the Securities Act was based upon the following factors: (a) the issuance of the securities was an isolated private transaction by us which did not involve a public offering; (b) there were only a limited number of offerees; (c) there were no subsequent or contemporaneous public offerings of the securities by us; (d) the securities were not broken down into smaller denominations; and (e) the negotiations for the sale of the stock took place directly between the offerees and us. Our reliance on Regulation S was based on that such shareholders were not a “U.S. person” as that term is defined in Rule 902(k) of Regulation S under the Act, and that such shareholders were acquiring our common stock, for investment purposes for their own respective accounts and not as nominees or agents, and not with a view to the resale or distribution thereof, and that the shareholders understood that the shares of our common stock may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.

 

Item 4.01     Changes in Registrant’s Certifying Accountant.

 

Effective on or about October 29, 2012, the Company terminated the services of its principal independent auditor, Webb & Company, P.A. (the “Former Accountant”).

 

The Former Accountant’s principal accountant’s report on the Company’s financial statements for its fiscal years ended December 31, 2011 and 2010 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit report on the Company’s financial statements for fiscal years ended December 31, 2011 and 2010 contained an explanatory paragraph which noted that there was substantial doubt about the Company’s ability to continue as a going concern.

 

The change in auditor was recommended, approved and ratified by the Company's Board of Directors.

 

 
 

 

Since the Company’s inception on April 18, 2008, through its most recent fiscal year ended December 31, 2011, and subsequent interim periods preceding this change of independent auditors, the Company is not aware of any disagreements with the Former Accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

 

The Company is not aware of any reportable events (as defined in Item 304(a)(iv) or (v) of Regulation S-K) that have occurred during the two most recent fiscal years and the interim periods preceding the dismissal of the Former Accountant.

 

The Company has engaged the firm of Marcum Bernstein & Pinchuk LLP (the “New Accountant”), as its new principle independent accountant effective October, 2012, to audit our financial records. During the two most recent fiscal years and the interim period preceding the appointment of the New Accountant, we have not consulted the New Accountant regarding either: the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on our financial statements, and neither a written report nor oral advice was provided to the Company that the Company considered an important factor in reaching a decision as to the accounting or financial reporting issue; or any matter that was either the subject of a disagreement or event (as defined in Item 304(a)(iv) or (v) of Regulation S-K).

  

Item 5.01 Changes in Control of Registrant.

 

Reference is made to the disclosure set forth under Item 2.01 of this report, which disclosure is incorporated herein by reference.

 

As a result of the Share Exchange and Share Transfer, Wei Jiang and HuiAn Peng, through the entities they controlled, owned an aggregate of 48,500,000 shares of common stock, or 92.17 % of our total voting power of all of our outstanding voting securities.  

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On the Closing Date, Jesper Toft submitted resignation letter pursuant to which he resigned as sole director and officer of the Company, effective upon the closing of the Share Exchange. The resignations of Jesper Toft were not in connection with any known disagreement with us on any matter.

 

On the Closing Date, Wei Jiang, HuiAn Peng and Jie Liang were appointed by our Board of Directors to fill the vacancies created by the resignation of Jesper Toft, effective upon the closing of the Share Exchange.

 

On the Closing Date, our Board of Directors appointed Mr. HuiAn Peng as our Chief Executive Officer and Ms. Jie Liang as our Secretary, effective upon the closing of the Share Exchange.

 

For certain biographical and other information regarding Messrs. Jiang, Peng and Liang, see the disclosure under “Item 2.01—Directors and Executive Officers” of this Report, which disclosure is incorporated herein by reference.

 

Item 5.06 Change in Shell Company Status.

 

To the extent that we might have been deemed to be a shell company prior to the closing of the Share Exchange, reference is made to the disclosure set forth under Items 2.01 and 5.01 of this Report, which disclosure is incorporated herein by reference.

  

Item 9.01 Financial Statements and Exhibits.

 

(a) Financial Statements of Business Acquired.

 

Filed herewith as Exhibit 99.1 to this Report and incorporated herein by reference are the Audited Combined Financial Statements for the years ended December 31, 2011 and 2010 for Science & Technology (Dalian) and Dalian Tianyi.

 

Filed herewith as Exhibit 99.2 to this Report and incorporated herein by reference are the Unaudited Interim Combined Financial Statements for the periods ended June 30, 2012 and 2011 for Science & Technology (Dalian) and Dalian Tianyi.

 

(b) Pro Forma Financial Information.

 

Filed herewith as Note 13 to Exhibit 99.2 to this Report and incorporated herein by reference is unaudited pro forma combined financial information of Metha Energy Solutions, Inc. and its subsidiaries.

 

(c) Shell Company Transactions.

 

Reference is made to Items 9.01(a) and 9.01(b) and the exhibits referred to therein which are incorporated herein by reference.

 

 
 

  

(d) Exhibits.

 

Certain of the agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:

 

  may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements;
  may apply standards of materiality that differ from those of a reasonable investor; and
  were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances.

 

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other time. Investors should not rely on them as statements of fact.

 

Exhibit

Number

  Description
2.1     Share Exchange Agreement, dated October, 2012, by and among Metha Energy Solutions Inc., its principal shareholder, Science & Technology Holding, Science & Technology Media and the shareholders of Science & Technology Holding.
3.1 (1)   Articles of Incorporation.
3.2 (2)   Certificate of Amendment to Articles of Incorporation.
3.3 (1)   Bylaws.
10.1     Cancellation Agreement, dated October 29, 2012, by and among Metha Energy Solutions Inc. and its principal shareholder.
10.2     Exclusive Technical Consulting Service Agreement with Science & Technology (Dalian), dated January 21, 2012
10.3     Exclusive Technical Consulting Service Agreement with Dalian Tianyi, dated January 21, 2012
10.4     Operating Agreement with Science & Technology (Dalian), dated January 21, 2012
10.5     Operating Agreement with Dalian Tianyi, dated January 21, 2012
16.1     Letter from Webb & Company, P.A.
99.1     Audited Combined Financial Statements for the years ended December 31, 2011 and 2010 for Science & Technology (Dalian) and Dalian Tianyi.
99.2     Unaudited Interim Combined Financial Statements for the periods ended June 30, 2012 and 2011 for Science & Technology (Dalian) and Dalian Tianyi.

 

(1) Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on July 28, 2008.

(1) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on November 9, 2009.

 

 
 

   

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: November 5, 2012 METHA ENERGY SOLUTIONS INC.
     
  By: /s/ HuiAn Peng
    HuiAn Peng
    Chief Executive Officer

 

 

SHARE EXCHANGE AGREEMENT

 

BY AND AMONG

 

METHA ENERGY SOLUTIONS INC.

 

AND

 

the principal shareholders of

METHA ENERGY SOLUTIONS INC.

 

AND

 

SCIENCE & TECHNOLOGY WORLD WEBSITE MEDIA GROUP CO., LTD.

 

AND

 

SCIENCE & TECHNOLOGY WORLD WEBSITE MEDIA HOLDING CO., LTD.

 

AND

 

THE SHAREHOLDERS OF SCIENCE & TECHNOLOGY WORLD WEBSITE MEDIA HOLDING CO., LTD.

 

Dated as of: October 29, 2012

 

 
 

 

TABLE OF CONTENTS

 

Article I DEFINITIONS 1
Section 1.1 Definitions 1
   
Article II SHARE EXCHANGE; CLOSING 6
Section 2.1 Cancellation and Share Exchange 6
Section 2.2 Closing 6
Section 2.3 Closing Deliveries by Acquiror and Acquiror Principal Shareholder 7
Section 2.4 Closing Deliveries by Acquiree, Parent and Acquiree Ultimate Shareholders 7
Section 2.5 Section 368 Reorganization 7
   
Article III REPRESENTATIONS OF ACQUIREE ULTIMATE SHAREHOLDERS 7
Section 3.1 Authority 7
Section 3.2 Binding Obligations 8
Section 3.3 No Conflicts 8
Section 3.4 Certain Proceedings 8
Section 3.5 No Brokers or Finders 8
Section 3.6 Investment Representations 9
Section 3.7 Stock Legends 11
Section 3.8 Disclosure 12
   
Article IV REPRESENTATIONS AND WARRANTIES OF THE ACQUIREE 12
Section 4.1 Organization and Qualification 12
Section 4.2 Authority 13
Section 4.3 Binding Obligations 13
Section 4.4 No Conflicts 13
Section 4.5 Subsidiaries 14
Section 4.6 Organizational Documents 14
Section 4.7 Capitalization 14
Section 4.8 No Brokers or Finders 14
Section 4.9 Disclosure 15
     
Article V 15
   
REPRESENTATIONS AND WARRANTIES OF THE PARENT 15
Section 5.1 Organization and Qualification 15
Section 5.2 Authority 15
Section 5.3 Binding Obligations 16
Section 5.4 No Conflicts 16
Section 5.6 Subsidiaries 16
Section 5.7 Organizational Documents 16
Section 5.8 No Brokers or Finders 17
Section 5.9 Disclosure 17
   
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR AND  THE ACQUIROR PRINCIPAL SHAREHOLDER 17

  

 
 

  

Section 6.1 Organization and Qualification 17
Section 6.2 Authority 18
Section 6.3 Binding Obligations 18
Section 6.4 No Conflicts 18
Section 6.5 Subsidiaries 19
Section 6.6 Organizational Documents 19
Section 6.7 Capitalization 19
Section 6.8 Compliance with Laws 20
Section 6.9 Certain Proceedings 21
Section 6.10 No Brokers or Finders 21
Section 6.11 Contracts 21
Section 6.12 Tax Matters 21
Section 6.13 Labor Matters 22
Section 6.14 Employee Benefits 23
Section 6.15 Title to Assets 23
Section 6.16 Intellectual Property 23
Section 6.17 Environmental Laws 23
Section 6.18 SEC Reports 24
Section 6.19 Internal Accounting Controls 24
Section 6.20 Application of Takeover Protections 25
Section 6.21 Transactions With Affiliates and Employees 25
Section 6.22 Liabilities 25
Section 6.23 Bank Accounts and Safe Deposit Boxes 25
Section 6.24 Investment Company 25
Section 6.25 Bank Holding Company Act 25
Section 6.26 Public Utility Holding Act 26
Section 6.27 Federal Power Act 26
Section 6.28 Money Laundering Laws 26
Section 6.29 Foreign Corrupt Practices 26
Section 6.30 Absence of Certain Changes or Events 26
Section 6.31 Disclosure 26
Section 6.32 Undisclosed Events 27
Section 6.33 Non-Public Information 27
   
Article VII CONDUCT PRIOR TO CLOSING 27
Section 7.1 Conduct of Business 27
Section 7.2 Restrictions on Conduct of Business 27
   
Article VIII ADDITIONAL AGREEMENTS 30
Section 8.1 Access to Information 30
Section 8.2 Legal Requirements 30
Section 8.3 Notification of Certain Matters 30
Section 8.4 Acquisition Proposals 30
   
Article IX POST CLOSING COVENANTS 31
Section 9.1 General 31
Section 9.2 Litigation Support 31

  

ii
 

  

Section 9.3 Assistance with Post-Closing SEC Reports and Inquiries 31
Section 9.4 Public Announcements 32
   
Article X TAX MATTERS 32
Section 10.1 Tax Periods Ending on or before the Closing Date 32
Section 10.2 Tax Periods Beginning Before and Ending After the Closing 32
Section 10.3 Indemnification 33
Section 10.4 Tax Sharing Agreements 33
Section 10.5 Certain Taxes 33
   
Article XI CONDITIONS TO CLOSING 33
Section 11.1 Conditions to Obligation of the Parties Generally 33
Section 11.2 Conditions to Obligation of the Acquiree Parties 34
Section 11.3 Conditions to Obligation of the Acquiror Parties 36
   
Article XII TERMINATION 37
Section 12.1 Grounds for Termination 37
Section 12.2 Procedure and Effect of Termination 39
Section 12.3 Effect of Termination 39
   
Article XIII SURVIVAL; INDEMNIFICATION 39
Section 13.1 Survival 39
Section 13.2 Indemnification by the Acquiror Principal Shareholder 40
Section 13.3 Matters Involving Third Parties 40
Section 13.4 Exclusive Remedy 41
   
Article XIV MISCELLANEOUS PROVISIONS 41
Section 14.1 Expenses 41
Section 14.2 Confidentiality 42
Section 14.3 Notices 42
Section 14.4 Further Assurances 43
Section 14.5 Waiver 44
Section 14.6 Entire Agreement and Modification 44
Section 14.7 Assignments, Successors, and No Third-Party Rights 44
Section 14.8 Severability 44
Section 14.9 Section Headings 44
Section 14.10 Construction 45
Section 14.11 Counterparts 45
Section 14.12 Specific Performance 45
Section 14.13 Governing Law; Submission to Jurisdiction 45
Section 14.14 Waiver of Jury Trial 46

   

iii
 

 

SHARE EXCHANGE AGREEMENT

 

This SHARE EXCHANGE AGREEMENT (“ Agreement ”), dated as of October __, 2012, is made by and among METHA ENERGY SOLUTIONS INC., a corporation organized under the laws of Delaware (the “ Acquiror ”), Toft ApS (the “ Acquiror Principal Shareholder ”), SCIENCE & TECHNOLOGY WORLD WEBSITE MEDIA GROUP CO., LTD., a corporation organized under the laws of British Virgin Islands (the “ Acquiree ”), and SCIENCE & TECHNOLOGY WORLD WEBSITE MEDIA HOLDING CO., LTD., a corporation organized under the laws of British Virgin Islands and the sole shareholder of the Acquiree (the “ Parent ”) and each of the Persons listed on Schedule I hereto who are shareholders of the Parent (collectively, the “ Acquiree Ultimate Shareholders ,” and individually an “ Acquiree Ultimate Shareholder ”). Each of the Acquiror, Acquiror Principal Shareholder, Acquiree and Acquiree Ultimate Shareholders are referred to herein individually as a “ Party ” and collectively as the “ Parties .”

 

RECITALS:

 

WHEREAS, the Acquiree Ultimate Shareholders have agreed to transfer to the Acquiror, and the Acquiror has agreed to acquire from the Acquiree Ultimate Shareholder, all of the Acquiree Shares (as defined below), which Acquiree Shares constitute all of the outstanding shares of Acquiree Common Stock (as defined below), in exchange for the issuance of 50,000,000 Acquiror Shares (as defined below) to the Acquiree Ultimate Shareholders, which Acquiror Shares shall constitute approximately 95% of the issued and outstanding shares of Acquiror Common Stock (as defined below) immediately after the closing of the transactions contemplated herein, in each case, on the terms and conditions as set forth herein;

 

WHEREAS, simultaneously, the Acquiror Principal Shareholder owning an aggregate of 10,000,000 shares of the Acuiror’s common stock agrees to cancel its shares pursuant to a cancellation agreement dated of an even date (the “ Cancellation Agreement ”).

 

NOW, THEREFORE, in consideration of the foregoing premises, and the covenants, representations and warranties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, the Parties, intending to be legally bound, hereby agree as follows:

 

Article I
DEFINITIONS

 

Section 1.1            Definitions . For all purposes of and under this Agreement, the following terms shall have the following respective meanings:

 

Accredited Investor ” has the meaning set forth in Rule 501 under the Securities Act.

 

Acquiree ” has the meaning set forth in the preamble.

 

 
 

 

Acquiree Common Stock ” means the common stock, par value $1.00 per share, of the Acquiree.

 

Acquiree Indemnified Parties ” means the Acquiree and the Acquiree Ultimate Shareholders and their respective Affiliates and the officers, directors and representatives of such Persons; provided that (i) the Acquiror shall be a member of the Acquiree Indemnified Parties after the Closing and (ii) none of the Acquiror Principal Shareholder nor the Acquiror Principal Shareholder’ Affiliates shall be members of the Acquiree Indemnified Parties at any time.

 

Acquiree Organizational Documents ” has the meaning set forth in Section 4.6 .

 

Acquiree Ultimate Shareholder ” and “ Acquiree Ultimate Shareholders ” have the respective meanings set forth in the preamble.

 

Acquiree Shares ” has the meaning set forth in Section 2.1 .

 

Acquiror ” has the meaning set forth in the recitals.

 

Acquiror Common Stock ” means the common stock, par value $0.001 per share, of the Acquiror.

 

Acquiror Disclosure Schedule ” has the meaning set forth in Article VI .

 

Acquiror Most Recent Fiscal Year End ” means December 31, 2011.

 

Acquiror Principal Shareholder ” has the meaning set forth in the preamble.

 

Acquiror Shares ” has the meaning set forth in the recitals.

 

Acquisition Transaction ” means any transaction or series of transactions involving: (a) any merger, consolidation, share exchange, business combination, issuance of securities, acquisition of securities, tender offer, exchange offer or other similar transaction; or (b) any sale (other than sales of inventory in the Ordinary Course of Business), lease (other than in the Ordinary Course of Business), exchange, transfer (other than sales of inventory in the Ordinary Course of Business), license (other than nonexclusive licenses in the Ordinary Course of Business), acquisition or disposition of assets.

 

Action ” means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or threatened before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign), stock market, stock exchange or trading facility.

 

Affiliate ” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Exchange Act.

 

Agreement ” has the meaning set forth in the preamble.

 

BHCA ” has the meaning set forth in Section 6.25 .

 

Business Day ” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in New York, New York are required or authorized to be closed.

 

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Cancellation Agreement ” has the meaning set for in the recitals.

 

Closing ” has the meaning set forth in Section 2.2 .

 

Closing Date ” has the meaning set forth in Section 2.2 .

 

Code ” means the Internal Revenue Code of 1986, as amended.

 

Competing Transaction Proposal ” means any inquiry, proposal, indication of interest or offer from any Third Party contemplating or otherwise relating to any Acquisition Transaction directly or indirectly involving the Acquiror, its business or any assets of the Acquiror (including, without limitation, any Acquisition Transaction involving Acquiror Principal Shareholder that would include the Acquiror, its business or any assets of the Acquiror).

 

Contract ” means any written or oral contract, lease, license, indenture, note, bond, agreement, arrangement, understanding, permit, concession, franchise or other instrument.

 

Damages ” has the meaning set forth in Section 13.2 .

 

Environmental Laws ” has the meaning set forth in Section 6.17 .

 

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the SEC thereunder, all as the same will then be in effect.

 

Federal Reserve ” has the meaning set forth in Section 6.25 .

 

GAAP ” means, with respect to any Person, generally accepted accounting principles in the U.S. applied on a consistent basis with such Person’s past practices.

 

Governmental Authority ” means any domestic or foreign, federal or national, state or provincial, municipal or local government, governmental authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, political subdivision, commission, court, tribunal, official, arbitrator or arbitral body.

 

Hazardous Materials ” has the meaning set forth in Section 6.17 .

  

Indebtedness ” means without duplication, (a) all indebtedness or other obligation of the Person for borrowed money, whether current, short-term, or long-term, secured or unsecured, (b) all indebtedness of the Person for the deferred purchase price for purchases of property outside the Ordinary Course of Business, (c) all lease obligations of the Person under leases which are capital leases in accordance with GAAP, (d) any off-balance sheet financing of the Person including synthetic leases and project financing, (e) any payment obligations of the Person in respect of banker’s acceptances or letters of credit (other than stand-by letters of credit in support of ordinary course trade payables), (f) any liability of the Person with respect to interest rate swaps, collars, caps and similar hedging obligations, (g) any liability of the Person under deferred compensation plans, phantom stock plans, severance or bonus plans, or similar arrangements made payable as a result of the transactions contemplated herein, (h) any indebtedness referred to in clauses (a) through (g) above of any other Person which is either guaranteed by, or secured by a security interest upon any property owned by, the Person and (i) accrued and unpaid interest of, and prepayment premiums, penalties or similar contractual charges arising as result of the discharge at Closing of, any such foregoing obligation.

 

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Indemnified Party ” has the meaning set forth in Section 13.3(a) .

 

Indemnifying Party ” has the meaning set forth in Section 13.3(a) .

 

Intellectual Property ” means all industrial and intellectual property, including, without limitation, all U.S. and non-U.S. patents, patent applications, patent rights, trademarks, trademark applications, common law trademarks, Internet domain names, trade names, service marks, service mark applications, common law service marks, and the goodwill associated therewith, copyrights, in both published and unpublished works, whether registered or unregistered, copyright applications, franchises, licenses, know-how, trade secrets, technical data, designs, customer lists, confidential and proprietary information, processes and formulae, all computer software programs or applications (not including the license to use a copy of the software the Acquiror received for media intelligence and data mining which shall be assigned or transferred to the Acquiror Principal Shareholder pursuant to Section 11.2(s) ), layouts, inventions, development tools and all documentation and media constituting, describing or relating to the above, including manuals, memoranda, and records, whether such intellectual property has been created, applied for or obtained anywhere throughout the world.

 

Knowledge ” shall mean, except as otherwise explicitly provided herein, actual knowledge after reasonable investigation. The Acquiror shall be deemed to have “Knowledge” of a matter if any of its officers, directors, stockholders, or employees has Knowledge of such matter. Phrases such as “to the Knowledge of the Acquiror” or the “Acquiror’s Knowledge” shall be construed accordingly.

 

Laws ” means, with respect to any Person, any U.S. or non-U.S., federal, national, state, provincial, local, municipal, international, multinational or other Law (including common law), constitution, statute, code, ordinance, rule, regulation or treaty applicable to such Person.

 

Liability ” means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes.

 

License ” means any security clearance, permit, license, variance, franchise, Order, approval, consent, certificate, registration or other authorization of any Governmental Authority or regulatory body, and other similar rights.

  

Lien ” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by Law.

 

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Material Adverse Effect ” means, with respect to any Person, a material adverse effect on the business, financial condition, operations, results of operations, assets, customer, supplier or employee relations or future prospects of such Person.

 

Money Laundering Laws ” has the meaning set forth in Section 6.28 .

 

Order ” means any order, judgment, ruling, injunction, assessment, award, decree or writ of any Governmental Authority or regulatory body.

 

Ordinary Course of Business ” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

 

Party ” and “ Parties ” have the respective meanings set forth in the preamble.

 

Person ” means all natural persons, corporations, business trusts, associations, companies, partnerships, limited liability companies, joint ventures and other entities, governments, agencies and political subdivisions.

 

Post-Closing Period ” has the meaning set forth in Section 10.2 .

 

Pre-Closing Period ” has the meaning set forth in Section 10.2 .

 

Principal Market ” means the OTC Bulletin Board.

 

Registration Statements ” has the meaning set forth in Section 6.18(b) .

 

Regulation S ” means Regulation S under the Securities Act, as the same may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.

 

SEC ” means the U.S. Securities and Exchange Commission, or any successor agency thereto.

 

SEC Reports ” has the meaning set forth in Section 6.18(a) .

 

Securities Act ” means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same will be in effect at the time.

 

Share Exchange ” has the meaning set forth in Section 2.1 .

 

Tax Return ” means all returns, declarations, reports, estimates, statements, forms and other documents filed with or supplied to or required to be provided to a Governmental Authority with respect to Taxes, including any schedule or attachment thereto and any amendment thereof.

 

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Tax ” or “ Taxes ” means all taxes, assessments, duties, levies or other charge imposed by any Governmental Authority of any kind whatsoever together with any interest, penalties, fines or additions thereto and any liability for payment of taxes whether as a result of (i) being a member of an affiliated, consolidated, combined, unitary or similar group for any period, (ii) any tax sharing, tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify any Person, (iii) being liable for another Person’s taxes as a transferee or successor otherwise for any period, or (iv) operation of Law.

 

Termination Date ” means October 31, 2012.

 

Third Party ” has the meaning set forth in Section 8.4(a) .

 

Third Party Claim ” has the meaning set forth in Section 13.3(a) .

 

Transaction Documents ” means, collectively, this Agreement and all agreements, certificates, instruments and other documents to be executed and delivered in connection with the transactions contemplated by this Agreement.

 

Treasury Regulations ” means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

 

U.S. ” means the United States of America.

 

U.S. Person ” has the meaning set forth in Regulation S under the Securities Act.

 

Article II
SHARE EXCHANGE; CLOSING

 

Section 2.1            Cancellation and Share Exchange . Simultaneously to the Closing, the Acquiror Principal Shareholder owning an aggregate of 10,000,000 shares of the Acquiror’s common stock (the “ Acquiror Shares ”) shall cancel its shares pursuant to the Cancellation Agreement. At the Closing, the Parent shall sell, transfer, convey, assign and deliver shares of Acquiree Common Stock (the “ Acquiree Shares ”), representing 100% of the issued and outstanding shares of Acquiree Common Stock, to the Acquiror, and in consideration therefor the Acquiror shall issue a total of 50,000,000 fully paid and nonassessable share of Acquiror Common Stock (the “ Acquiror Shares ”) to the Acquiree Ultimate Shareholders, as set forth beside the name of each such Acquiree Ultimate Shareholder on Schedule I hereto (the “ Share Exchange ”).

 

Section 2.2            Closing . Upon the terms and subject to the conditions of this Agreement, the transactions contemplated by this Agreement shall take place at a closing (the “ Closing ”) to be held at the offices of Anslow & Jaclin LLP located at 195 Route 9 South, Manalapan, NJ 07726, at a time and date to be specified by the Parties, which shall be no later than the second (2nd) Business Day following the satisfaction or, if permitted pursuant hereto, waiver of the conditions set forth in Article X , or at such other location, date and time as Acquiree and Acquiror Principal Shareholder shall mutually agree. The date and time of the Closing is referred to herein as the “ Closing Date .”

 

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Section 2.3            Closing Deliveries by Acquiror and Acquiror Principal Shareholder . At the Closing: (a) the Acquiror shall deliver, or cause to be delivered, a certificate evidencing the number of Acquiror Shares, set forth beside each Acquiree Ultimate Shareholder’s name on Schedule I hereto; and (b) the Acquiror and the Acquiror Principal Shareholder, as applicable, shall deliver, or cause to be delivered, to the Acquiree and the Acquiree Ultimate Shareholders, as applicable, the various documents required to be delivered as a condition to the Closing pursuant to Section 10.2 hereof.

 

Section 2.4            Closing Deliveries by Acquiree, Parent and Acquiree Ultimate Shareholders . At the Closing: (a) Parent shall deliver, or cause to be delivered, certificate(s) representing its Acquiree Shares, accompanied by an executed instrument of transfer for transfer by Parent of its Acquiree Shares to the Acquiror; and (b) the Acquiree, Parent and the Acquiree Ultimate Shareholders, as applicable, shall deliver, or cause to be delivered, to the Acquiror and the Acquiror Principal Shareholder, as applicable, the various documents required to be delivered as a condition to the Closing pursuant to Section 11.3 hereof.

 

Section 2.5            Section 368 Reorganization . For U.S. federal income Tax purposes, the Share Exchange is intended to constitute a “reorganization” within the meaning of Section 368(a)(1)(B) of the Code. The Parties hereby adopt this Agreement as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the Treasury Regulations. Notwithstanding the foregoing or anything else to the contrary contained in this Agreement, the Parties acknowledge and agree that no Party is making any representation or warranty as to the qualification of the Share Exchange as a reorganization under Section 368 of the Code or as to the effect, if any, that any transaction consummated prior to or after the Closing Date has or may have on any such reorganization status. The Parties acknowledge and agree that each (i) has had the opportunity to obtain independent legal and tax advice with respect to the transaction contemplated by this Agreement, and (ii) is responsible for paying its own Taxes, including without limitation, any adverse Tax consequences that may result if the transaction contemplated by this Agreement is not determined to qualify as a reorganization under Section 368 of the Code.

 

Article III
REPRESENTATIONS OF ACQUIREE ULTIMATE SHAREHOLDERS

 

The Acquiree Ultimate Shareholders severally, and not jointly, hereby represent and warrant to the Acquiror that the statements contained in this Article III are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as thought the Closing Date were substituted for the date of this Agreement throughout this Article III ) (except where another date or period of time is specifically stated herein for a representation or warranty).

  

Section 3.1            Authority . Such Acquiree Ultimate Shareholder has all requisite authority and power to enter into and deliver this Agreement and any of the other Transaction Documents to which such Acquiree Ultimate Shareholder is a party, and any other certificate, agreement, document or instrument to be executed and delivered by such Acquiree Ultimate Shareholder in connection with the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. This Agreement has been, and each of the Transaction Documents to which such Acquiree Ultimate Shareholder is a party will be, duly and validly authorized and approved, executed and delivered by such Acquiree Ultimate Shareholder.

 

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Section 3.2            Binding Obligations . Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed and delivered by the parties hereto and thereto other than such Acquiree Ultimate Shareholder, this Agreement and each of the Transaction Documents to which such Acquiree Ultimate Shareholder is a party are duly authorized, executed and delivered by such Acquiree Ultimate Shareholder, and constitutes the legal, valid and binding obligations of such Acquiree Ultimate Shareholder, enforceable against such Acquiree Ultimate Shareholder in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors rights generally.

 

Section 3.3            No Conflicts . Neither the execution or delivery by such Acquiree Ultimate Shareholder of this Agreement or any Transaction Document to which such Acquiree Ultimate Shareholder is a party, nor the consummation or performance by such Acquiree Ultimate Shareholder of the transactions contemplated hereby or thereby will, directly or indirectly, (a) contravene, conflict with, or result in a violation of any provision of the organizational documents of such Acquiree Ultimate Shareholder (if such Acquiree Ultimate Shareholder is not a natural Person); (b) contravene, conflict with, constitute a default (or an event or condition which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or acceleration of, any agreement or instrument to which such Acquiree Ultimate Shareholder is a party or by which the properties or assets of such Acquiree Ultimate Shareholder are bound; or (c) contravene, conflict with, result in any breach of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, impair the rights of such Acquiree Ultimate Shareholder under, or alter the obligations of any Person under, or create in any Person the right to terminate, amend, accelerate or cancel, or require any notice, report or other filing (whether with a Governmental Authority or any other Person) pursuant to, or result in the creation of a Lien on any of the assets or properties of the Acquiror under, any note, bond, mortgage, indenture, Contract, License, permit, franchise or other instrument or obligation to which such Acquiree Ultimate Shareholder is a party or any of such Acquiree Ultimate Shareholder’s assets and properties are bound or affected, except, in the case of clauses (b) or (c) for any such contraventions, conflicts, violations, or other occurrences as would not have a Material Adverse Effect on such Acquiree Ultimate Shareholder.

  

Section 3.4            Certain Proceedings . There is no Action pending against, or to the Knowledge of such Acquiree Ultimate Shareholder, threatened against or affecting, such Acquiree Ultimate Shareholder by any Governmental Authority or other Person with respect to such Acquiree Ultimate Shareholder that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement.

 

Section 3.5            No Brokers or Finders . No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against such Acquiree Ultimate Shareholder for any commission, fee or other compensation as a finder or broker, or in any similar capacity, based upon arrangements made by or on behalf of such Acquiree Ultimate Shareholder and such Acquiree Ultimate Shareholder will indemnify and hold the Acquiror and the Acquiror Principal Shareholder harmless against any liability or expense arising out of, or in connection with, any such claim.

 

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Section 3.6            Investment Representations . Each Acquiree Ultimate Shareholder severally, and not jointly, hereby represents and warrants, solely with respect to itself and not any other Acquiree Ultimate Shareholder, to the Acquiror as follows:

 

(a)           Purchase Entirely for Own Account . Such Acquiree Ultimate Shareholder is acquiring such Acquiree Ultimate Shareholder’s portion of the Acquiror Shares proposed to be acquired hereunder for investment for its own account and not with a view to the resale or distribution of any part thereof, and such Acquiror Shareholder has no present intention of selling or otherwise distributing such Acquiror Shares, except in compliance with applicable securities Laws.

 

(b)           Restricted Securities . Such Acquiree Ultimate Shareholder understands that the Acquiror Shares are characterized as “restricted securities” under the Securities Act inasmuch as this Agreement contemplates that, if acquired by the Shareholder pursuant hereto, the Acquiror Shares would be acquired in a transaction not involving a public offering. The issuance of the Acquiror Shares hereunder is being effected in reliance upon an exemption from registration afforded under Section 4(2) of the Securities Act. Such Acquiree Ultimate Shareholder further acknowledges that if the Acquiror Shares are issued to such Acquiree Ultimate Shareholder in accordance with the provisions of this Agreement, such Acquiror Shares may not be resold without registration under the Securities Act or the existence of an exemption therefrom. Such Acquiree Ultimate Shareholder represents that he is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act

 

(c)           Acknowledgment of Non-Registration . Such Acquiree Ultimate Shareholder understands and agrees that the Acquiror Shares to be issued pursuant to this Agreement have not been registered under the Securities Act or the securities Laws of any state of the U.S.

  

(d)           Status . By its execution of this Agreement, each Acquiree Ultimate Shareholder represents and warrants to the Acquiror as indicated on its signature page to this Agreement, either that: (i) such Acquiree Ultimate Shareholder is an Accredited Investor; or (ii) such Acquiree Ultimate Shareholder is not a U.S. Person. Each Acquiree Ultimate Shareholder understands that the Acquiror Shares are being offered and sold to such Acquiree Ultimate Shareholder in reliance upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Acquiree Ultimate Shareholder set forth in this Agreement, in order that the Acquiror may determine the applicability and availability of the exemptions from registration of the Acquiror Shares on which the Acquiror is relying.

 

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(e)           Additional Representations and Warranties . Such Acquiree Ultimate Shareholder, severally and not jointly, further represents and warrants to the Acquiror as follows: (i) such Person qualifies as an Accredited Investor; (ii) such Person consents to the placement of a legend on any certificate or other document evidencing the Acquiror Shares substantially in the form set forth in Section 3.8(a) ; (iii) such Person has sufficient knowledge and experience in finance, securities, investments and other business matters to be able to protect such Person’s or entity’s interests in connection with the transactions contemplated by this Agreement; (iv) such Person has consulted, to the extent that it has deemed necessary, with its tax, legal, accounting and financial advisors concerning its investment in the Acquiror Shares and can afford to bear such risks for an indefinite period of time, including, without limitation, the risk of losing its entire investment in the Acquiror Shares; (v) such Person has had access to the SEC Reports; (vi) such Person has been furnished during the course of the transactions contemplated by this Agreement with all other public information regarding the Acquiror that such Person has requested and all such public information is sufficient for such Person to evaluate the risks of investing in the Acquiror Shares; (vii) such Person has been afforded the opportunity to ask questions of and receive answers concerning the Acquiror and the terms and conditions of the issuance of the Acquiror Shares; (viii) such Person is not relying on any representations and warranties concerning the Acquiror made by the Acquiror or any officer, employee or agent of the Acquiror, other than those contained in this Agreement or the SEC Reports; (ix) such Person will not sell or otherwise transfer the Acquiror Shares, unless either (A) the transfer of such securities is registered under the Securities Act or (B) an exemption from registration of such securities is available; (x) such Person understands and acknowledges that the Acquiror is under no obligation to register the Acquiror Shares for sale under the Securities Act; (xi) such Person represents that the address furnished in Schedule I is the principal residence if he is an individual or its principal business address if it is a corporation or other entity; (xii) such Person understands and acknowledges that the Acquiror Shares have not been recommended by any federal or state securities commission or regulatory authority, that the foregoing authorities have not confirmed the accuracy or determined the adequacy of any information concerning the Acquiror that has been supplied to such Person and that any representation to the contrary is a criminal offense; and (xiii) such Person acknowledges that the representations, warranties and agreements made by such Person herein shall survive the execution and delivery of this Agreement and the purchase of the Acquiror Shares.

 

(f)           Additional Representations and Warranties of Non-U.S. Persons . Each Acquiree Ultimate Shareholder that is not a U.S. Person, severally and not jointly, further represents and warrants to the Acquiror as follows: (i) at the time of (A) the offer by the Acquiror and (B) the acceptance of the offer by such Person, of the Acquiror Shares, such Person was outside the U.S; (ii) no offer to acquire the Acquiror Shares or otherwise to participate in the transactions contemplated by this Agreement was made to such Person or its representatives inside the U.S.; (iii) such Person is not purchasing the Acquiror Shares for the account or benefit of any U.S. Person, or with a view towards distribution to any U.S. Person, in violation of the registration requirements of the Securities Act; (iv) such Person will make all subsequent offers and sales of the Acquiror Shares either (A) outside of the U.S. in compliance with Regulation S; (B) pursuant to a registration under the Securities Act; or (C) pursuant to an available exemption from registration under the Securities Act; (v) such Person is acquiring the Acquiror Shares for such Person’s own account, for investment and not for distribution or resale to others; (vi) such Person has no present plan or intention to sell the Acquiror Shares in the U.S. or to a U.S. Person at any predetermined time, has made no predetermined arrangements to sell the Acquiror Shares and is not acting as an underwriter or dealer with respect to such securities or otherwise participating in the distribution of such securities; (vii) neither such Person, its Affiliates nor any Person acting on behalf of such Person, has entered into, has the intention of entering into, or will enter into any put option, short position or other similar instrument or position in the U.S. with respect to the Acquiror Shares at any time after the Closing Date through the one year anniversary of the Closing Date except in compliance with the Securities Act; (viii) such Person consents to the placement of a legend on any certificate or other document evidencing the Acquiror Shares substantially in the form set forth in Section 3.8(b) and (ix) such Person is not acquiring the Acquiror Shares in a transaction (or an element of a series of transactions) that is part of any plan or scheme to evade the registration provisions of the Securities Act.

 

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Section 3.7            Stock Legends . Such Acquiree Ultimate Shareholder hereby agrees with the Acquiror as follows:

 

(a)           The certificates evidencing the Acquiror Shares issued to those Acquiree Ultimate Shareholders who are Accredited Investors, and each certificate issued in transfer thereof, will bear the following or similar legend:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.

  

(b)           The certificates evidencing the Acquiror Shares issued to those Acquiree Ultimate Shareholders who are not U.S. Persons, and each certificate issued in transfer thereof, will bear the following legend:

 

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, AND BASED ON AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THE PROVISIONS OF REGULATION S HAVE BEEN SATISFIED, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR (3) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

 

(c)           Other Legends . The certificates representing such Acquiror Shares, and each certificate issued in transfer thereof, will also bear any other legend required under any applicable Law, including, without limitation, any state corporate and state securities law, or Contract.

 

Section 3.8            Disclosure . No representation or warranty of such Acquiree Ultimate Shareholder contained in this Agreement or any other Transaction Document and no statement or disclosure made by or on behalf of such Acquiree Ultimate Shareholder to the Acquiror or the Acquiror Principal Shareholder pursuant to this Agreement or any other agreement contemplated herein contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.

 

Article IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIREE

 

The Acquiree hereby represents and warrants to the Acquiror that the statements contained in this Article IV are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as thought the Closing Date were substituted for the date of this Agreement throughout this Article IV ) (except where another date or period of time is specifically stated herein for a representation or warranty).

 

Section 4.1            Organization and Qualification . The Acquiree is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, has all requisite corporate authority and power, Licenses, authorizations, consents and approvals to carry on its business as presently conducted and to own, hold and operate its properties and assets as now owned, held and operated by it, and is duly qualified to do business and in good standing in each jurisdiction in which the failure to be so qualified would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on the Acquiree.

 

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Section 4.2            Authority . The Acquiree has all requisite authority and power (corporate and other), Licenses, authorizations, consents and approvals to enter into and deliver this Agreement and any of the other Transaction Documents to which the Acquiree is a party and any other certificate, agreement, document or instrument to be executed and delivered by the Acquiree in connection with the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents by the Acquiree and the performance by the Acquiree of its obligations hereunder and thereunder and the consummation by the Acquiree of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Acquiree. The Acquiree does not need to give any notice to, make any filing with, or obtain any authorization, consent or approval of any Person or Governmental Authority in order for the Parties to execute, deliver or perform this Agreement or the transactions contemplated hereby. This Agreement has been, and each of the Transaction Documents to which the Acquiree is a party will be, duly and validly authorized and approved, executed and delivered by the Acquiree.

 

Section 4.3            Binding Obligations . Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed and delivered by the parties hereto and thereto other than the Acquiree, this Agreement and each of the Transaction Documents to which the Acquiree is a party are duly authorized, executed and delivered by the Acquiree and constitutes the legal, valid and binding obligations of the Acquiree enforceable against the Acquiree in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors rights generally.

 

Section 4.4            No Conflicts . Neither the execution nor the delivery by the Acquiree of this Agreement or any Transaction Document to which the Acquiree is a party, nor the consummation or performance by the Acquiree of the transactions contemplated hereby or thereby will, directly or indirectly, (a) contravene, conflict with, or result in a violation of any provision of the Acquiree Organizational Documents, (b) contravene, conflict with or result in a violation of any Law, Order, charge or other restriction or decree applicable to the Acquiree, or by which the Acquiree or any of its respective assets and properties are bound or affected, (c) contravene, conflict with, result in any breach of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, impair the rights of the Acquiree under, or alter the obligations of any Person under, or create in any Person the right to terminate, amend, accelerate or cancel, or require any notice, report or other filing (whether with a Governmental Authority or any other Person) pursuant to, or result in the creation of a Lien on any of the assets or properties of the Acquiree under, any note, bond, mortgage, indenture, Contract, License, permit, franchise or other instrument or obligation to which the Acquiree is a party or by which the Acquiree or any of its respective assets and properties are bound or affected; or (d) contravene, conflict with, or result in a violation of, the terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any licenses, permits, authorizations, approvals, franchises or other rights held by the Acquiree or that otherwise relate to the business of, or any of the properties or assets owned or used by, the Acquiree, except, in the case of clauses (b), (c), or (d), for any such contraventions, conflicts, violations, or other occurrences as would not have a Material Adverse Effect on the Acquiree.

 

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Section 4.5            Subsidiaries . Except as provided in Schedule 4.5 , the Acquiree does not own, directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or other entity or enterprise. There are no Contracts or other obligations (contingent or otherwise) of the Acquiror to retire, repurchase, redeem or otherwise acquire any outstanding shares of capital stock of, or other ownership interests in, any other Person or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other Person.

 

Section 4.6            Organizational Documents . The Acquiree has delivered or made available to the Acquiror a true and correct copy of the Articles of Incorporation and Bylaws of the Acquiree and any other organizational documents of the Acquiree, each as amended, and each such instrument is in full force and effect (the “ Acquiree Organizational Documents ”). The Acquiree is not in violation of any of the provisions of the Acquiree Organizational Documents.

 

Section 4.7            Capitalization .

 

(a)           The authorized capital stock of the Acquiree consists of 50,000 shares of Acquiree Common Stock of which 50,000 shares of Acquiree Common Stock are issued and outstanding. Except as set forth above, no shares of capital stock or other voting securities of the Acquiree were issued, reserved for issuance or outstanding. All outstanding shares of the capital stock of the Acquiree are, and all such shares that may be issued prior to the Closing Date will be when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the Laws of the jurisdiction of the Acquiree’s formation, the Acquiree Organizational Documents or any Contract to which the Acquiree is a party or otherwise bound. There are not any bonds, debentures, notes or other Indebtedness of the Acquiree having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Acquiree Common Stock may vote. Except pursuant provided otherwise, there are no options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which the Acquiree is a party or by which it is bound (x) obligating the Acquiree to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, the Acquiree, (y) obligating the Acquiree to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking or (z) that give any Person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of the Acquiree. There are no outstanding Contracts or obligations of the Acquiree to repurchase, redeem or otherwise acquire any shares of capital stock of the Acquiree. There are no registration rights, proxies, voting trust agreements or other agreements or understandings with respect to any class or series of any capital stock or other security of the Acquiree.

 

Section 4.8            No Brokers or Finders . No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against the Acquiree for any commission, fee or other compensation as a finder or broker, or in any similar capacity, based upon arrangements made by or on behalf of the Acquiree, and the Acquiree will indemnify and hold the Acquiror and the Acquiror Principal Shareholder and harmless against any liability or expense arising out of, or in connection with, any such claim.

 

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Section 4.9            Disclosure . No representation or warranty of the Acquiree contained in this Agreement and no statement or disclosure made by or on behalf of the Acquiree to the Acquiror or the Acquiror Principal Shareholder pursuant to this Agreement or any other agreement contemplated herein contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.

 

Article V

REPRESENTATIONS AND WARRANTIES OF THE PARENT

 

The Parent hereby represents and warrants to the Acquiror that the statements contained in this Article V are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as thought the Closing Date were substituted for the date of this Agreement throughout this Article V ) (except where another date or period of time is specifically stated herein for a representation or warranty).

  

Section 5.1            Organization and Qualification . The Parent is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, has all requisite corporate authority and power, Licenses, authorizations, consents and approvals to carry on its business as presently conducted and to own, hold and operate its properties and assets as now owned, held and operated by it, and is duly qualified to do business and in good standing in each jurisdiction in which the failure to be so qualified would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on the Acquiree.

 

Section 5.2            Authority . The Parent has all requisite authority and power (corporate and other), Licenses, authorizations, consents and approvals to enter into and deliver this Agreement and any of the other Transaction Documents to which the Parent is a party and any other certificate, agreement, document or instrument to be executed and delivered by the Acquiree in connection with the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents by the Parent and the performance by the Parent of its obligations hereunder and thereunder and the consummation by the Parent of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Parent The Parent does not need to give any notice to, make any filing with, or obtain any authorization, consent or approval of any Person or Governmental Authority in order for the Parties to execute, deliver or perform this Agreement or the transactions contemplated hereby. This Agreement has been, and each of the Transaction Documents to which the Parent is a party will be, duly and validly authorized and approved, executed and delivered by the Parent.

 

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Section 5.3            Binding Obligations . Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed and delivered by the parties hereto and thereto other than the Parent, this Agreement and each of the Transaction Documents to which the Parent is a party are duly authorized, executed and delivered by the Parent and constitutes the legal, valid and binding obligations of the Parent enforceable against the Parent in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors rights generally.

 

Section 5.4            No Conflicts . Neither the execution nor the delivery by the Parent of this Agreement or any Transaction Document to which the Parent is a party, nor the consummation or performance by the Parent of the transactions contemplated hereby or thereby will, directly or indirectly, (a) contravene, conflict with, or result in a violation of any provision of the Parent Organizational Documents, (b) contravene, conflict with or result in a violation of any Law, Order, charge or other restriction or decree applicable to the Parent, or by which the Parent or any of its respective assets and properties are bound or affected, (c) contravene, conflict with, result in any breach of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, impair the rights of the Parent under, or alter the obligations of any Person under, or create in any Person the right to terminate, amend, accelerate or cancel, or require any notice, report or other filing (whether with a Governmental Authority or any other Person) pursuant to, or result in the creation of a Lien on any of the assets or properties of the Parent under, any note, bond, mortgage, indenture, Contract, License, permit, franchise or other instrument or obligation to which the Parent is a party or by which the Parent or any of its respective assets and properties are bound or affected; or (d) contravene, conflict with, or result in a violation of, the terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any licenses, permits, authorizations, approvals, franchises or other rights held by the Parent or that otherwise relate to the business of, or any of the properties or assets owned or used by, the Acquiree, except, in the case of clauses (b), (c), or (d), for any such contraventions, conflicts, violations, or other occurrences as would not have a Material Adverse Effect on the Parent.

 

Section 5.5            Ownership of Shares. Parent owns, of record and beneficially, and has good, valid and indefeasible title to and the right to transfer to the Acquiror pursuant to this Agreement, its Acquiree Shares free and clear of any and all Liens. There are no options, rights, voting trusts, stockholder agreements or any other Contracts or understandings to which Parent is a party or by which Parent or its Acquiree Shares are bound with respect to the issuance, sale, transfer, voting or registration of its Acquiree Shares. At the Closing Date, the Acquiror will acquire good, valid and marketable title to the Parent’s Acquiree Shares free and clear of any and all Liens.

 

Section 5.6            Subsidiaries . Except as provided in Schedule 4.6, the Parent does not own, directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or other entity or enterprise. There are no Contracts or other obligations (contingent or otherwise) of the Acquiror to retire, repurchase, redeem or otherwise acquire any outstanding shares of capital stock of, or other ownership interests in, any other Person or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other Person.

 

Section 5.7            Organizational Documents . The Parent has delivered or made available to the Acquiror a true and correct copy of the Articles of Incorporation and Bylaws of the Parent and any other organizational documents of the Parent, each as amended, and each such instrument is in full force and effect (the “ Parent Organizational Documents ”). The Parent is not in violation of any of the provisions of the Acquiree Organizational Documents.

 

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Section 5.8            No Brokers or Finders . No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against the Parent for any commission, fee or other compensation as a finder or broker, or in any similar capacity, based upon arrangements made by or on behalf of the Parent, and the Parent will indemnify and hold the Acquiror and the Acquiror Principal Shareholder and harmless against any liability or expense arising out of, or in connection with, any such claim.

 

Section 5.9            Disclosure . No representation or warranty of the Parent contained in this Agreement and no statement or disclosure made by or on behalf of the Parent to the Acquiror or the Acquiror Principal Shareholder pursuant to this Agreement or any other agreement contemplated herein contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.

 

Article VI
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR AND
THE ACQUIROR PRINCIPAL SHAREHOLDER

 

The Acquiror and the Acquiror Principal Shareholder, jointly and severally, hereby represent and warrant to the Acquiree, the Parent and each of the Acquiree Ultimate Shareholders, subject to the exceptions and qualifications specifically set forth or disclosed in writing in the disclosure schedule delivered by the Acquiror Principal Shareholder to the Acquiree, the Parent and the Acquiree Ultimate Shareholders simultaneously herewith (the “ Acquiror Disclosure Schedule ”), that the statements contained in this Article V are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as thought the Closing Date were substituted for the date of this Agreement throughout this Article V ) (except where another date or period of time is specifically stated herein for a representation or warranty). The Acquiror Disclosure Schedule shall be arranged according to the numbered and lettered paragraphs of this Article V and any disclosure in the Acquiror Disclosure Schedule shall qualify the corresponding paragraph in this Article V . The Acquiree, the Parent, the Acquiree Ultimate Shareholders and, after the Closing, the Acquiror, shall be entitled to rely on the representations and warranties set forth in this Article V regardless of any investigation or review conducted by the Acquiree, the Parent or the Acquiree Ultimate Shareholders prior to the Closing.

 

Section 6.1            Organization and Qualification . The Acquiror is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, has all requisite corporate authority and power, Licenses, authorizations, consents and approvals to carry on its business as presently conducted and to own, hold and operate its properties and assets as now owned, held and operated by it, and is duly qualified to do business and in good standing in each jurisdiction in which the failure to be so qualified would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on the Acquiror.

 

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Section 6.2            Authority . The Acquiror and the Acquiror Principal Shareholder have all requisite authority and power, Licenses, authorizations, consents and approvals to enter into and deliver this Agreement and any of the other Transaction Documents to which the Acquiror, the Acquiror Principal Shareholder or any of them is a party and any other certificate, agreement, document or instrument to be executed and delivered by the Acquiror, the Acquiror Principal Shareholder or any of them in connection with the transactions contemplated hereby and thereby and to perform their respective obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents by the Acquiror and the Acquiror Principal Shareholder and the performance by the Acquiror and the Acquiror Principal Shareholder of their respective obligations hereunder and thereunder and the consummation by the Acquiror and the Acquiror Principal Shareholder of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Acquiror and the Acquiror Principal Shareholder. Neither the Acquiror nor the Acquiror Principal Shareholder needs to give any notice to, make any filing with, or obtain any authorization, consent or approval of any Person or Governmental Authority in order for the Parties to execute, deliver or perform this Agreement or the transactions contemplated hereby. This Agreement has been, and each of the Transaction Documents to which the Acquiror, the Acquiror Principal Shareholder or any of them, as applicable, are a party will be, duly and validly authorized and approved, executed and delivered by the Acquiror and the Acquiror Principal Shareholder.

 

Section 6.3            Binding Obligations . Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed and delivered by the parties hereto and thereto other than the Acquiror and the Acquiror Principal Shareholder, this Agreement and each of the Transaction Documents to which the Acquiror, the Acquiror Principal Shareholder or any of them, as applicable, are a party are duly authorized, executed and delivered by the Acquiror and such Acquiror Principal Shareholder, as applicable, and constitutes the legal, valid and binding obligations of the Acquiror and such Acquiror Principal Shareholder, as applicable, enforceable against the Acquiror and such Acquiror Principal Shareholder, as applicable, in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors rights generally.

 

Section 6.4            No Conflicts . Neither the execution nor the delivery by the Acquiror or the Acquiror Principal Shareholder of this Agreement or any Transaction Document to which the Acquiror, the Acquiror Principal Shareholder or any of them is a party, nor the consummation or performance by the Acquiror and the Acquiror Principal Shareholder of the transactions contemplated hereby or thereby will, directly or indirectly, (a) contravene, conflict with, or result in a violation of any provision of the Acquiror Organizational Documents, (b) contravene, conflict with or result in a violation of any Law, Order, charge or other restriction or decree of any Governmental Authority or any rule or regulation of the Principal Market applicable to the Acquiror or the Acquiror Principal Shareholder, or by which the Acquiror or the Acquiror Principal Shareholder or any of their respective assets and properties are bound or affected, (c) contravene, conflict with, result in any breach of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, impair the rights of the Acquiror under, or alter the obligations of any Person under, or create in any Person the right to terminate, amend, accelerate or cancel, or require any notice, report or other filing (whether with a Governmental Authority or any other Person) pursuant to, or result in the creation of a Lien on any of the assets or properties of the Acquiror under, any note, bond, mortgage, indenture, Contract, License, permit, franchise or other instrument or obligation to which the Acquiror or the Acquiror Principal Shareholder is a party or by which the Acquiror or the Acquiror Principal Shareholder or any of their respective assets and properties are bound or affected; or (d) contravene, conflict with, or result in a violation of, the terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any Licenses, permits, authorizations, approvals, franchises or other rights held by the Acquiror or that otherwise relate to the business of, or any of the properties or assets owned or used by, the Acquiror, except, in the case of clauses (b), (c), or (d), for any such contraventions, conflicts, violations, or other occurrences as would not have a Material Adverse Effect on the Acquiror.

  

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Section 6.5            Subsidiaries . The Acquiror does not own, directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or other entity or enterprise. There are no Contracts or other obligations (contingent or otherwise) of the Acquiror to retire, repurchase, redeem or otherwise acquire any outstanding shares of capital stock of, or other ownership interests in, any other Person or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other Person.

 

Section 6.6            Organizational Documents . The Acquiror has delivered or made available to Acquiree a true and correct copy of the Certificate of Incorporation and Bylaws of the Acquiror and any other organizational documents of the Acquiror, each as amended, and each such instrument is in full force and effect (the “ Acquiror Organizational Documents ”). The Acquiror is not in violation of any of the provisions of its Acquiror Organizational Documents. The minute books (containing the records or meetings of the stockholders, the board of directors and any committees of the board of directors), the stock certificate books, and the stock record books of the Acquiror, each as provided or made available to the Acquiree, are correct and complete.

 

Section 6.7            Capitalization .

  

(a)           The authorized capital stock of the Acquiror consists of (i) 100,000,000 shares of Acquiror Common Stock, $.001 par value per share, of which 12,620,030 shares of Acquiror Common Stock are issued and outstanding; (ii) 10,000,000 shares of preferred stock, $0.001 par value per share, of which (A) 100,000 shares are designated as Series A Convertible Preferred Stock, $.001 par value per share, of which none are issued and outstanding; and (B) 100,000 shares are designated as Series B Convertible Preferred Stock, $.001 par value per share, of which none are issued and outstanding. Except as set forth above, no shares of capital stock or other voting securities of the Acquiror were issued, reserved for issuance or outstanding. All outstanding shares of the capital stock of the Acquiror are, and all such shares that may be issued prior to the Closing Date will be when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the Laws of the jurisdiction of the Acquiror’s organization, the Acquiror Organizational Documents or any Contract to which the Acquiror is a party or otherwise bound. There are not any bonds, debentures, notes or other Indebtedness of the Acquiror having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Acquiror Common Stock may vote. There are no options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which the Acquiror is a party or by which it is bound (x) obligating the Acquiror to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, the Acquiror, (y) obligating the Acquiror to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking or (z) that give any Person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of the Acquiror. There are no outstanding Contracts or obligations of the Acquiror to repurchase, redeem or otherwise acquire any shares of capital stock of the Acquiror. There are no registration rights, proxies, voting trust agreements or other agreements or understandings with respect to any class or series of any capital stock or other security of the Acquiror. The stockholder list provided to the Acquiree and the Acquiree Ultimate Shareholders is a current stockholder list generated by its stock transfer agent, and such list accurately reflects all of the issued and outstanding shares of the Acquiror Common Stock.

 

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(b)           The issuance of the Acquiror Shares to the Acquiree Ultimate Shareholders has been duly authorized and, upon delivery to the Acquiree Ultimate Shareholders of certificates therefor, respectively, in accordance with the terms of this Agreement, the Acquiror Shares, will have been validly issued and fully paid, and will be nonassessable, have the rights, preferences and privileges specified, will be free of preemptive rights and will be free and clear of all Liens and restrictions, other than Liens created by the Acquiree Ultimate Shareholders, and restrictions on transfer imposed by this Agreement and the Securities Act.

 

Section 6.8            Compliance with Laws . The business and operations of the Acquiror have been and are being conducted in accordance with all applicable Laws and Orders. The Acquiror is not in conflict with, or in default or violation of and, to the Knowledge of the Acquiror or the Acquiror Principal Shareholder, is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of or default under, any (i) Law, rule, regulation, judgment or Order, or (ii) note, bond, mortgage, indenture, Contract, License, permit, franchise or other instrument or obligation to which the Acquiror or the Acquiror Principal Shareholder is a party or by which the Acquiror or the Acquiror Principal Shareholder or any of their respective assets and properties are bound or affected. There is no agreement, judgment or Order binding upon the Acquiror or the Acquiror Principal Shareholder which has, or could reasonably be expected to have, the effect of prohibiting or materially impairing any business practice of the Acquiror or the conduct of business by the Acquiror as currently conducted. The Acquiror has filed all forms, reports and documents required to be filed with any Governmental Authority and the Acquiror has made available such forms, reports and documents to Acquiree and the Acquiree Ultimate Shareholders. As of their respective dates, such forms, reports and documents complied in all material respects with the applicable requirements pertaining thereto and none of such forms, reports and documents contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

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Section 6.9            Certain Proceedings . There is no Action pending against, or to the Knowledge of the Acquiror or the Acquiror Principal Shareholder, threatened against or affecting, the Acquiror or the Acquiror Principal Shareholder by any Governmental Authority or other Person with respect to the Acquiror or its respective businesses or that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement. The Acquiror is not in violation of and, to the Knowledge of Acquiror or the Acquiror Principal Shareholder, is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any applicable Law, rule, regulation, judgment or Order. The Acquiror or any director or officer (in his or her capacity as such) of the Acquiror, is or has not been the subject of any Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.

 

Section 6.10          No Brokers or Finders . No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against the Acquiror, or the Acquiror Principal Shareholder for any commission, fee or other compensation as a finder or broker, or in any similar capacity, based upon arrangements made by or on behalf of the Acquiror, or the Acquiror Principal Shareholder, and the Acquiror Principal Shareholder will indemnify and hold the Acquiror, the Acquiree and the Acquiree Ultimate Shareholders and harmless against any liability or expense arising out of, or in connection with, any such claim.

 

Section 6.11          Contracts . Except as disclosed in the SEC Reports, there are no Contracts that are material to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of the Acquiror. The Acquiror is not in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or to which it or any of its properties or assets is subject, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect of the Acquiror.

 

Section 6.12          Tax Matters .

  

(a)           Tax Returns . The Acquiror has filed all Tax Returns required to be filed (if any) by or on behalf of the Acquiror, as applicable, and has paid all Taxes of the Acquiror, as applicable, required to have been paid (whether or not reflected on any Tax Return). No Governmental Authority in any jurisdiction has made a claim, assertion or threat to the Acquiror that the Acquiror is or may be subject to taxation by such jurisdiction; there are no Liens with respect to Taxes on the Acquiror’s property or assets; and there are no Tax rulings, requests for rulings, or closing agreements relating to the Acquiror for any period (or portion of a period) that would affect any period after the date hereof.

 

(b)           No Adjustments, Changes . Neither the Acquiror nor any other Person on behalf of the Acquiror (a) has executed or entered into a closing agreement pursuant to Section 7121 of the Code or any predecessor provision thereof or any similar provision of state, local or foreign law; or (b) has agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of state, local or foreign law.

 

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(c)           No Disputes . There is no pending audit, examination, investigation, dispute, proceeding or claim with respect to any Taxes of the Acquiror, nor is any such claim or dispute pending or contemplated. The Acquiror has delivered to the Acquiree true, correct and complete copies of all Tax Returns and examination reports and statements of deficiencies assessed or asserted against or agreed to by the Acquiror, if any, since its inception and any and all correspondence with respect to the foregoing.

 

(d)           Not a U.S. Real Property Holding Corporation . The Acquiror is not and has never been a U.S. real property holding corporation within the meaning of Section 897(c)(2) of the Code at any time during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

 

(e)           No Tax Allocation, Sharing . The Acquiror is not and has never been a party to any Tax allocation or sharing agreement.

 

(f)           No Other Arrangements . The Acquiror is not a party to any Contract or arrangement for services that would result, individually or in the aggregate, in the payment of any amount that would not be deductible by reason of Section 162(m), 280G or 404 of the Code. The Acquiror is not a “consenting corporation” within the meaning of Section 341(f) of the Code. The Acquiror does not have any “tax-exempt bond financed property” or “tax-exempt use property” within the meaning of Section 168(g) or (h), respectively of the Code. The Acquiror does not have any outstanding closing agreement, ruling request, request for consent to change a method of accounting, subpoena or request for information to or from a Governmental Authority in connection with any Tax matter. During the last two years, the Acquiror has not engaged in any exchange with a related party (within the meaning of Section 1031(f) of the Code) under which gain realized was not recognized by reason of Section 1031 of the Code. The Acquiror is not a party to any reportable transaction within the meaning of Treasury Regulation Section 1.6011-4.

 

Section 6.13          Labor Matters .

 

(a)           There are no collective bargaining or other labor union agreements to which the Acquiror is a party or by which it is bound. No material labor dispute exists or, to the Knowledge of the Acquiror, is imminent with respect to any of the employees of the Acquiror.

  

(b)           Except as set forth in Section 5.13 of the Acquiror Disclosure Schedule, the Acquiror does not have any employees, independent contractors or other Persons providing services to them. The Acquiror is in full compliance with all Laws regarding employment, wages, hours, benefits, equal opportunity, collective bargaining, the payment of Social Security and other taxes, and occupational safety and health. The Acquiror is not liable for the payment of any compensation, damages, taxes, fines, penalties or other amounts, however designated, for failure to comply with any of the foregoing Laws.

 

(c)           No director, officer or employee of the Acquiror is a party to, or is otherwise bound by, any Contract (including any confidentiality, non-competition or proprietary rights agreement) with any other Person that in any way adversely affects or will materially affect (a) the performance of his or her duties as a director, officer or employee of the Acquiror or (b) the ability of the Acquiror to conduct its business. Each employee of the Acquiror is employed on an at-will basis and the Acquiror does not have any Contract with any of its employees which would interfere with its ability to discharge its employees.

 

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Section 6.14          Employee Benefits .

 

(a)           The Acquiror has not maintained or contributed to any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee, officer or director of the Acquiror. There are no employment, consulting, indemnification, severance or termination agreements or arrangements between the Acquiror and any current or former employee, officer or director of the Acquiror, nor does the Acquiror have any general severance plan or policy.

 

(b)           The Acquiror has not maintained or contributed to any “employee pension benefit plans” (as defined in Section 3(2) of ERISA), “employee welfare benefit plans” (as defined in Section 3(1) of ERISA) or any other benefit plan for the benefit of any current or former employees, consultants, officers or directors of the Acquiror.

 

(c)           Neither the consummation of the transactions contemplated hereby alone, nor in combination with another event, with respect to each director, officer, employee and consultant of the Acquiror, will result in (a) any payment (including, without limitation, severance, unemployment compensation or bonus payments) becoming due from the Acquiror, (b) any increase in the amount of compensation or benefits payable to any such individual or (c) any acceleration of the vesting or timing of payment of compensation payable to any such individual. No arrangement or other Contract of the Acquiror provides benefits or payments contingent upon, triggered by, or increased as a result of a change in the ownership or effective control of the Acquiror.

 

Section 6.15          Title to Assets . The Acquiror does not own any real property. The Acquiror has sufficient title to, or valid leasehold interests in, all of its properties and assets used in the conduct of its businesses. All such assets and properties, other than assets and properties in which the Acquiror has leasehold interests, are free and clear of all Liens, except for Liens that, in the aggregate, do not and will not materially interfere with the ability of the Acquiror to conduct business as currently conducted.

 

Section 6.16          Intellectual Property . The Acquiror does not own, use or license any Intellectual Property in its business as presently conducted.

 

Section 6.17          Environmental Laws . The Acquiror (a) is in compliance with all Environmental Laws (as defined below), (b) has received all Licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (c) is in compliance with all terms and conditions of any such License or approval where, in each of the foregoing clauses (a), (b) and (c), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on the Acquiror. The term “ Environmental Laws ” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “ Hazardous Materials ”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, Licenses, notices or notice letters, Orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

 

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Section 6.18          SEC Reports .

 

(a)           The Acquiror has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC since October 21, 2008, pursuant to the Exchange Act (the “ SEC Reports ”).

 

(b)           As of their respective dates, the SEC Reports and any registration statements filed by the Acquiror under the Securities Act (the “ Registration Statements ”) complied in all material respects with the requirements of the Exchange Act and the Securities Act, as applicable, and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports or Registration Statements, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All material Contracts to which the Acquiror is a party or to which the property or assets of the Acquiror are subject have been filed as exhibits to the SEC Reports and the Registration Statements as and to the extent required under the Exchange Act and the Securities Act, as applicable. The financial statements of the Acquiror included in the SEC Reports and the Registration Statements comply in all respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing, were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto, or, in the case of unaudited statements as permitted by Form 10-Q), and fairly present in all material respects (subject in the case of unaudited statements, to normal, recurring audit adjustments) the financial position of the Acquiror as at the dates thereof and the results of its operations and cash flows for the periods then ended. The disclosure set forth in the SEC Reports and Registration Statements regarding the Acquiror’s business is current and complete and accurately reflects operations of the Acquiror as it exists as of the date hereof.

 

Section 6.19          Internal Accounting Controls . The Acquiror maintains a system of internal accounting controls sufficient to provide reasonable assurance that (a) transactions are executed in accordance with management’s general or specific authorizations, (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (c) access to assets is permitted only in accordance with management’s general or specific authorization, and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Acquiror has established disclosure controls and procedures for the Acquiror and designed such disclosure controls and procedures to ensure that material information relating to the Acquiror is made known to the officers by others within the Acquiror. The Acquiror’s officers have evaluated the effectiveness of the Acquiror’s controls and procedures. Since the Acquiror Most Recent Fiscal Year End, there have been no significant changes in the Acquiror’s internal controls or, to the Knowledge of the Acquiror or the Acquiror Principal Shareholder, in other factors that could significantly affect the Acquiror’s internal controls.

 

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Section 6.20          Application of Takeover Protections . The Acquiror has taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Acquiror Organizational Documents or the Laws of its state of incorporation that is or could become applicable to the transactions contemplated hereby.

 

Section 6.21          Transactions With Affiliates and Employees . Except as disclosed in the SEC Reports, no officer, director, employee or stockholder of the Acquiror or any Affiliate of any such Person, has or has had, either directly or indirectly, an interest in any transaction with the Acquiror (other than for services as employees, officers and directors), including any Contract or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such Person or, to the Knowledge of the Acquiror or the Acquiror Principal Shareholder, any entity in which any such Person has an interest or is an officer, director, trustee or partner.

 

Section 6.22          Liabilities . Except as set forth on Section 6.23 of the Acquiror Disclosure Schedule, the Acquiror does not have any Liability (and there is no Action pending, or to the Knowledge of the Acquiror or the Acquiror Principal Shareholder, threatened against the Acquiror that would reasonably be expected to give rise to any Liability). The Acquiror is not a guarantor nor is it otherwise liable for any Liability or obligation (including Indebtedness) of any other Person. There are no financial or contractual obligations of the Acquiror (including any obligations to issue capital stock or other securities) executory after the Closing Date. All Liabilities of the Acquiror shall have been paid off at or prior to the Closing and shall in no event remain Liabilities of the Acquiror, the Acquiree or the Acquiree Ultimate Shareholders following the Closing.

 

Section 6.23          Bank Accounts and Safe Deposit Boxes . The Acquiror has several bank accounts which will be closed on or prior to the Closing.

 

Section 6.24          Investment Company . Neither the Acquiror nor its affiliate, immediately following the Closing, will become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

Section 6.25          Bank Holding Company Act . The Acquiror is not subject to the Bank Holding Company Act of 1956, as amended (the “ BHCA ”) and to regulation by the Board of Governors of the Federal Reserve System (the “ Federal Reserve ”). Neither the Acquiror nor any of its Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any equity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Acquiror nor any of its Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

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Section 6.26          Public Utility Holding Act . The Acquiror is not a “holding company,” or an “affiliate” of a “holding company,” as such terms are defined in the Public Utility Holding Act of 2005.

 

Section 6.27          Federal Power Act . The Acquiror is not subject to regulation as a “public utility” under the Federal Power Act, as amended.

 

Section 6.28          Money Laundering Laws . The operations of the Acquiror is and has been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all U.S. and non-U.S. jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Authority (collectively, the “ Money Laundering Laws ”) and no Proceeding involving the Acquiror with respect to the Money Laundering Laws is pending or, to the knowledge of the Acquiror, threatened.

  

Section 6.29          Foreign Corrupt Practices . The Acquiror, nor, to the Knowledge of the Acquiror or the Acquiror Principal Shareholder, any director, officer, agent, employee or other Person acting on behalf of the Acquiror has, in the course of its actions for, or on behalf of, the Acquiror (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (c) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (d) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

Section 6.30          Absence of Certain Changes or Events . Except as set forth in the SEC Reports, from the Acquiror Most Recent Fiscal Year End (a) the Acquiror has conducted its business only in Ordinary Course of Business; (b) there has not been any change in the assets, Liabilities, financial condition or operating results of the Acquiror, except changes in the Ordinary Course of Business that have not caused, in the aggregate, a Material Adverse Effect on the Acquiror; and (c) the Acquiror has not completed or undertaken any of the actions set forth in Section 6.2 . The Acquiror has not taken any steps to seek protection pursuant to any Law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Acquiror have any Knowledge or reason to believe that any of its respective creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.

 

Section 6.31          Disclosure . All documents and other papers delivered or made available by or on behalf of the Acquiror or the Acquiror Principal Shareholder in connection with this Agreement are true, complete, correct and authentic in all material respects. No representation or warranty of the Acquiror or the Acquiror Principal Shareholder contained in this Agreement and no statement or disclosure made by or on behalf of the Acquiror or the Acquiror Principal Shareholder to the Acquiree or any Acquiree Ultimate Shareholder pursuant to this Agreement or any other agreement contemplated herein contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.

 

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Section 6.32          Undisclosed Events . No event, Liability, development or circumstance has occurred or exists, or is contemplated to occur with respect to the Acquiror, or its businesses, properties, prospects, operations or financial condition, that would be required to be disclosed by the Acquiror under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Acquiror of its common stock and which has not been publicly announced or will not be publicly announced in a current report on Form 8-K filed by the Acquiror filed within four (4) Business Days after the Closing.

  

Section 6.33          Non-Public Information . Neither the Acquiror nor any Person acting on its behalf has provided the Acquiree or Acquiree Ultimate Shareholders or their respective agents or counsel with any information that the Acquiror or the believes constitutes material, non-public information except insofar as the existence and terms of the proposed transactions hereunder may constitute such information and except for information that will be disclosed by the Acquiror in a current report on Form 8-K filed by the Acquiror within four (4) Business Days after the Closing.

 

Article VII
CONDUCT PRIOR TO CLOSING

 

Section 7.1            Conduct of Business . At all times during the period commencing with the execution and delivery of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to the terms hereof or the Closing, the Acquiror Principal Shareholder shall, and shall cause the Acquiror to, (a) carry on its business diligently and in the usual, regular and Ordinary Course of Business, in substantially the same manner as heretofore conducted and in compliance with all applicable Laws, (b) pay or perform its material obligations when due, (c) use its commercially reasonable efforts, consistent with past practices and policies, to preserve intact its present business organization, keep available the services of its present officers and employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees and others with which it has business dealings, and (d) keep its business and properties substantially intact, including its present operations, physical facilities and working conditions. In furtherance of the foregoing and subject to applicable Law, the Acquiror shall confer with Acquiree, as promptly as practicable, prior to taking any material actions or making any material management decisions with respect to the conduct of the business of the Acquiror.

 

Section 7.2            Restrictions on Conduct of Business . Without limiting the generality of the terms of Section 7.1 hereof, except (i) as required by the terms hereof, or (ii) to the extent that Acquiree shall otherwise consent in writing, at all times during the period commencing with the execution and delivery of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to the terms hereof or the Closing, neither the Acquiror, nor the Acquiror Principal Shareholder shall do any of the following, or permit the Acquiror to do any of the following:

 

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(a)           except as required by applicable Law, waive any stock repurchase rights, accelerate, amend or change the period of exercisability of options or restricted stock, or reprice options granted under any employee, consultant or director stock plans or authorize cash payments in exchange for any options granted under any of such plans;

 

(b)           enter into any partnership arrangements, joint development agreements or strategic alliances, other than in the Ordinary Course of Business;

  

(c)           (i) increase the compensation or fringe benefits of, or pay any bonuses or special awards to, any present or former director, officer, stockholder or employee of the Acquiror (except for increases in salary or wages in the Ordinary Course of Business) or increase any fees to any independent contractors, (ii) grant any severance or termination pay to any present or former director, officer or employee of the Acquiror, (iii) enter into, amend or terminate any employment Contract, independent contractor agreement or collective bargaining agreement, written or oral, or (iv) establish, adopt, enter into, amend or terminate any bonus, profit sharing, incentive, severance, or other plan, agreement, program, policy, trust, fund or other arrangement that would be an employee benefit plan if it were in existence as of the date of this Agreement, except as required by applicable Law;

 

(d)           issue, deliver, sell, authorize, pledge or otherwise encumber, or propose any of the foregoing with respect to, any shares of capital stock or any securities convertible into, or exercisable or exchangeable for, shares of capital stock of the Acquiror, or subscriptions, rights, warrants or options to acquire any shares of capital stock or any securities convertible into, or exercisable or exchangeable for, shares of capital stock of the Acquiror or enter into other Contracts or commitments of any character obligating it to issue any such shares of capital stock of the Acquiror, or securities convertible into, or exercisable or exchangeable for, shares of capital stock of the Acquiror;

 

(e)           cause, permit or propose any amendments to any Acquiror Organizational Documents;

 

(f)           acquire or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, limited liability company, general or limited partnership, joint venture, association, business trust or other business enterprise or entity, or otherwise acquire or agree to acquire any assets other than in the Ordinary Course of Business;

 

(g)           adopt a plan of merger, complete or partial liquidation, dissolution, consolidation, restructuring, recapitalization or other reorganization;

 

(h)           except as required by applicable Law, adopt or amend any employee benefit plan or employee stock purchase or employee stock option plan, or enter into any employment Contract or collective bargaining agreement (other than offer letters and letter agreements entered into in the Ordinary Course of Business with employees who are terminable “at will”), pay any special bonus or special remuneration to any director or employee other than in the Ordinary Course of Business, or increase the salaries or wage rates or fringe benefits (including rights to severance or indemnification) of its officers;

 

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(i)           except in the Ordinary Course of Business, modify, amend or terminate any Contract to which the Acquiror is a party, or waive, delay the exercise of, release or assign any rights or claims thereunder;

 

(j)           sell, lease, license, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of any of its properties or assets, except in the Ordinary Course of Business;

  

(k)         (i) incur any Indebtedness or guarantee any such Indebtedness of another Person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Acquiror, guarantee any debt securities of another Person, enter into any “keep well” or other agreement to maintain any financial statement condition of another Person or enter into any arrangement having the economic effect of any of the foregoing, except for endorsements and guarantees for collection, short-term borrowings and lease obligations, in each case incurred in the Ordinary Course of Business, or (ii) make any loans, advances or capital contributions to, or investment in, any other Person, other than to the Acquiror;

 

(l)           pay, discharge or satisfy any claims (including claims of stockholders), Liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), except for the payment, discharge or satisfaction of liabilities or obligations in the Ordinary Course of Business or in accordance with their terms as in effect on the date hereof, or waive, release, grant, or transfer any rights of material value or modify or change in any material respect any existing License, Contract or other document, other than in the Ordinary Course of Business;

 

(m)         change any financial reporting or accounting principle, methods or practices used by it unless otherwise required by applicable Law or GAAP;

 

(n)          settle or compromise any litigation (whether or not commenced prior to the date of this Agreement);

 

(o)          (i) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (ii) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or (iii) purchase, redeem or otherwise acquire any shares of capital stock of the Acquiror or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities;

 

(p)          enter into any transaction with any of its directors, officers, stockholders, or other Affiliates;

 

(q)          make any capital expenditure in excess of $50,000;

 

(r)           (i) grant any license or sublicense of any rights under or with respect to any Intellectual Property; (ii) dispose of or let lapse and Intellectual Property, or any application for the foregoing, or any license, permit or authorization to use any Intellectual Property or (iii) amend, terminate any other Contract, license or permit to which the Acquiror is a party;

 

(s)          make, or permit to be made, without the prior written consent of Acquiree any material Tax election which would affect the Acquiror; or

 

(t)          commit to or otherwise to take any of the actions described in this Section 6.2 .

  

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Article VIII
ADDITIONAL AGREEMENTS

 

Section 8.1            Access to Information . The Acquiror shall afford Acquiree its accountants, counsel and other representatives (including the Acquiree Ultimate Shareholders), reasonable access, during normal business hours, to the properties, books, records and personnel of the Acquiror at any time prior to the Closing in order to enable Acquiree obtain all information concerning the business, assets and properties, results of operations and personnel of the Acquiror as Acquiree may reasonably request. No information obtained in the foregoing investigation by Acquiree pursuant to this Section 8.1 shall affect or be deemed to modify any representation or warranty contained herein or the conditions to the obligations of the Acquiror or the Acquiror Principal Shareholder to consummate the transactions contemplated hereby.

 

Section 8.2            Legal Requirements . The Parties shall take all reasonable actions necessary or desirable to comply promptly with all legal requirements which may be imposed on them with respect to the consummation of the transactions contemplated by this Agreement (including, without limitation, furnishing all information required in connection with approvals of or filings with any Governmental Authority, and prompt resolution of any litigation prompted hereby), and shall promptly cooperate with, and furnish information to, the other Parties to the extent necessary in connection with any such requirements imposed upon any of them in connection with the consummation of the transactions contemplated by this Agreement.

 

Section 8.3            Notification of Certain Matters . Acquiree shall give prompt notice to the Acquiror Principal Shareholder, and the Acquiror Principal Shareholder shall give prompt notice to the Acquiree, of the occurrence, or failure to occur, of any event, which occurrence or failure to occur would be reasonably likely to cause (i) any representation or warranty contained in this Agreement to be untrue or inaccurate at the Closing, such that the conditions set forth in Article X hereof, as the case may be, would not be satisfied or fulfilled as a result thereof, or (ii) any material failure of any Acquiree, Acquiree Ultimate Shareholder, the Acquiror or the Acquiror Principal Shareholder, as the case may be, or of any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. Notwithstanding the foregoing, the delivery of any notice pursuant to this Section 8.3 shall not limit or otherwise affect the rights and remedies available hereunder to the Party receiving such notice.

 

Section 8.4            Acquisition Proposals

 

(a)           From the date of this Agreement until the Closing Date or, if earlier, the termination of this Agreement, neither the Acquiror nor the Acquiror Principal Shareholder will, and neither the Acquiror nor the Acquiror Principal Shareholder will authorize or permit the any representative of the Acquiror or the Acquiror Principal Shareholder to, directly or indirectly: (i) solicit, initiate, knowingly encourage, induce or facilitate the making, submission or announcement of any Competing Transaction Proposal from any Person (other than Acquiree or the Acquiree Ultimate Shareholders, a “ Third Party ”) or take any action that could reasonably be expected to lead to a Competing Transaction Proposal, (ii) furnish any information regarding the Acquiror to any Third Party in connection with or in response to a Competing Transaction Proposal or an inquiry or indication of interest, (iii) engage in or continue any discussions or negotiations with any Third Party with respect to any Competing Transaction Proposal, (iv) approve, endorse or recommend any Competing Transaction Proposal or (v) enter into any letter of intent or similar document or any Contract contemplating or otherwise relating to any Competing Transaction Proposal.

 

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(b)           Concurrently with the execution of this Agreement, Acquiror and the Acquiror Principal Shareholder shall (i) immediately cease and cause to be terminated any existing discussions with any Person that relate to any Competing Transaction Proposal; (ii) as soon as practicable request each Person that has executed, within twelve (12) months prior to the date of this Agreement, a confidentiality agreement in connection with its consideration of a possible Competing Transaction Proposal to return or destroy all confidential information relating to the Acquiror heretofore furnished to such Person by or on behalf of the Acquiror Principal Shareholder or the Acquiror, subject to whatever rights, if any, that such Person has to retain any such information or avoid any demand for its return or destruction pursuant to the terms of the confidentiality agreement between such Person and the Acquiror Principal Shareholder or the Acquiror; and (iii) cause any physical or virtual data room containing any such information to no longer be accessible to or by any Person other than Acquiree, the Acquiree Ultimate Shareholders and their respective representatives.

 

Article IX
POST CLOSING COVENANTS

 

Section 9.1            General . In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request.

 

Section 9.2            Litigation Support . In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that existed on or prior to the Closing Date involving the Acquiror, each of the other Parties will cooperate with such Party and such Party’s counsel in the contest or defense, make available any personnel under their control, and provide such testimony and access to their books and records as shall be reasonably necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party.

  

Section 9.3            Assistance with Post-Closing SEC Reports and Inquiries . After the Closing Date, the Acquiror Principal Shareholder shall use its reasonable best efforts to provide such information available to them, including information, filings, reports, financial statements or other circumstances of the Acquiror occurring, reported or filed prior to the Closing, as may be necessary or required for the preparation of the post-Closing Date reports that the Acquiror is required to file with the SEC, or filings required to address and resolve matters as may relate to the period prior to the Closing and any SEC comments relating thereto or any SEC inquiry thereof.

 

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Section 9.4            Public Announcements . The Acquiror shall file with the SEC a Form 8-K describing the material terms of the transactions contemplated hereby as soon as practicable following the Closing Date but in no event more than four (4) business days following the Closing Date. Prior to the Closing Date, the Parties shall consult with each other in issuing the Form 8-K, press releases or otherwise making public statements or filings and other communications with the SEC or any regulatory agency or stock market or trading facility with respect to the transactions contemplated hereby and no Party shall issue any such press release or otherwise make any such public statement, filings or other communications without the prior written consent of the other Parties, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by Law, in which case the disclosing Party shall provide the other Parties with prior notice of no less than three (3) calendar days, of such public statement, filing or other communication and shall incorporate into such public statement, filing or other communication the reasonable comments of the other Parties.

 

Article X
TAX MATTERS

 

Section 10.1          Tax Periods Ending on or before the Closing Date . The Acquiror Principal Shareholder, at its expense, shall prepare or cause to be prepared in a manner consistent with prior practice and in accordance with applicable Law and file or cause to be filed all Tax Returns for the Acquiror for all periods ending on or prior to the Closing Date which are filed after the Closing Date. The Acquiror Principal Shareholder shall permit the Acquiree to review and comment on each such Tax Return described in the preceding sentence at least twenty (20) Business Days prior to the date such Tax Returns are required to be filed and the Acquiror Principal Shareholder shall take into account in a reasonable manner any changes to such Tax Returns as are reasonably requested by the Acquiree. The Acquiror Principal Shareholder shall be liable for and timely pay any Taxes of the Acquiror with respect to such periods. Acquiree agrees to cause the Acquiror to execute the Tax Returns and any necessary documents relating to the filing of Tax Returns for which Acquiror Principal Shareholder is responsible for preparing, which are filed after the Closing Date except to the extent that the Acquiree may be subject to any liability or penalty as a result of the execution of such Tax Returns or documents.

 

Section 10.2          Tax Periods Beginning Before and Ending After the Closing . For any tax period of the Acquiror which includes the Closing Date but that does not end on the Closing Date, the Acquiree shall timely prepare and file, at the Acquiree’s expense, all Tax Returns for all such periods and shall pay the Taxes due with respect to such Tax Returns. The Acquiree shall permit the Acquiror Principal Shareholder to review and comment on each such Tax Return described in the preceding sentence at least twenty (20) Business Days prior to the date such Tax Return is to be filed, and the Acquiree shall take into account in a reasonable manner any changes to such Tax Returns as are reasonably requested by the Acquiror Principal Shareholder. The Acquiror Principal Shareholder shall promptly pay to the Acquiree the excess of (1) the Taxes that are apportioned to the Acquiror Principal Shareholder under the terms of this Section 9.2 , over (2) the amount of such Taxes that would have appeared on any such Tax Return that have been paid by the Acquiror or the Acquiror Principal Shareholder on or prior to the Closing Date. For purposes of Section 10.2 , Acquiror Principal Shareholder shall be apportioned liability for Taxes for the period deemed to end at the close of business on the Closing Date (the “ Pre-Closing Period ”) and Acquiree shall be apportioned liability for Taxes for the period deemed to begin immediately after the Pre-Closing Period (the “ Post-Closing Period ”) to the greatest extent possible on the basis of the “closing of the books” method of apportionment; provided, however, in the case of Taxes (such as real estate taxes) not susceptible to such apportionment, such Tax liability shall be apportioned on the basis of the number of days elapsed in the Pre-Closing Period and Post-Closing Period.

 

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Section 10.3          Indemnification . The Acquiror Principal Shareholder shall be responsible for, and indemnify, defend and hold the Acquiror from and against, any and all Taxes imposed on or with respect to the Acquiror, the Acquiror’s assets, operations or activities for all periods (or portions thereof) ending on or prior to the Closing Date. The Acquiror shall be responsible for, and shall indemnify, defend and hold the Acquiror Principal Shareholder harmless from and against, any and all Taxes imposed on the Acquiror for all periods (or portions thereof) beginning after the Closing Date. Whenever in accordance with this Article IX , the Acquiror shall be required to pay Taxes related to periods (or portions thereof) ending on or prior to the Closing Date or the Acquiror Principal Shareholder shall be required to pay taxes related to periods (or portions thereof) beginning after the Closing Date, such payments shall be made on the later of fifteen (15) days after requested or fifteen (15) days before the requesting Party is required to pay or cause to be paid the related Tax liability. The obligations of the Parties set forth in this Section 10.3 shall be unconditional and absolute and shall remain in effect until the expiration of the applicable Tax statute of limitations.

 

Section 10.4          Tax Sharing Agreements . All tax sharing agreements or similar agreements with respect to or involving the Acquiror shall be terminated as of the open of business on the Closing Date and, after the Closing Date, the Acquiror shall not be bound thereby or have any Liability thereunder. The Acquiror Principal Shareholder and the Acquiror shall take all actions necessary to terminate such agreements at such time.

 

Section 10.5          Certain Taxes . All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement, shall be paid by the Acquiror Principal Shareholder when due, and the Acquiror Principal Shareholder will, at their expense, file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and fees, and, if required by applicable Law, the Acquiree will, and will cause its Affiliates to, join in the execution of any such Tax Returns and other documentation.

 

Article XI
CONDITIONS TO CLOSING

 

Section 11.1          Conditions to Obligation of the Parties Generally . The Parties shall not be obligated to consummate the transactions to be performed by each of them in connection with the Closing if, on the Closing Date, (i) any Action shall be pending or threatened before any Governmental Authority wherein an Order or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (ii) any Law or Order which would have any of the foregoing effects shall have been enacted or promulgated by any Governmental Authority; or (iii) the Acquiree shall not have received an audit report with respect to its two most recently completed fiscal years from an independent accounting firm that is registered with the Public Company Accounting Oversight Board.

 

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Section 11.2          Conditions to Obligation of the Acquiree Parties . The obligations of the Acquiree, the Parent and the Acquiree Ultimate Shareholders to enter into and perform their respective obligations under this Agreement are subject, at the option of the Acquiree and the Acquiree Ultimate Shareholders, to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by the Acquiree and the Acquiree Ultimate Shareholders in writing:

 

(a)            The representations and warranties of the Acquiror and the Acquiror Principal Shareholder set forth in this Agreement shall be true and correct in all material respects as of the Closing Date (except to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties shall be true and correct as of such date);

 

(b)           The Acquiror and the Acquiror Principal Shareholder shall have performed and complied with all of their covenants hereunder in all material respects through the Closing, except to the extent that such covenants are qualified by terms such as “material” and “Material Adverse Effect,” in which case the Acquiror Principal Shareholder and the Acquiror shall have performed and complied with all of such covenants in all respects through the Closing;

  

(c)           No action, suit, or proceeding shall be pending or, to the Knowledge of the Acquiror, threatened before any Governmental Authority wherein an Order or charge would (A) affect adversely the right of the Acquiree Ultimate Shareholders to own the Acquiror Shares or to control the Acquiror, or (B) affect adversely the right of the Acquiror to own its assets or to operate its business (and no such Order or charge shall be in effect), nor shall any Law or Order which would have any of the foregoing effects have been enacted or promulgated by any Governmental Authority;

 

(d)           No event, change or development shall exist or shall have occurred since the Acquiror Most Recent Fiscal Year End that has had or is reasonably likely to have a Material Adverse Effect on the Acquiror;

 

(e)            All consents, waivers, approvals, authorizations or Orders required to be obtained, and all filings required to be made, by the Acquiror for the authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated by this Agreement, shall have been obtained and made by the Acquiror and Acquiror shall have delivered proof of same to the Acquiree, the Parent and Acquiree Ultimate Shareholders;

 

(f)            Acquiror shall have filed all reports and other documents required to be filed by it under the U.S. federal securities laws through the Closing Date;

 

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(g)           There shall not be any outstanding obligation or Liability (whether accrued, absolute, contingent, liquidated or otherwise, whether due or to become due) of the Acquiror, whether or not known to the Acquiror, as of the Closing;

 

(h)            Acquiror shall have delivered to the Acquiree, the Parent and Acquiree Ultimate Shareholders a certificate, dated the Closing Date, executed by an officer of the Acquiror, certifying the satisfaction of the conditions specified in Sections 11.2(a) through 11.2(l) , inclusive, relating to the Acquiror;

 

(i)            The Acquiror Principal Shareholder shall have delivered to the Acquiree, the Parent and Acquiree Ultimate Shareholders a certificate, dated the Closing Date, executed by such Acquiror Principal Shareholder, certifying the satisfaction of the conditions specified in Section 11.2(a) and Section 11.2(b) , inclusive, relating to such Acquiror Principal Shareholder;

 

(j)            Acquiror shall have delivered to the Acquiree, the Parent and the Acquiree Shareholders (i) a certificate evidencing the formation and good standing of the Acquiror in its jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction of formation as of a date within five (5) days of the Closing Date; and (ii) a certificate evidencing the Acquiror’s qualification as a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction in which the Acquiror conducts business and is required to so qualify, as of a date within five (5) days of the Closing Date;

 

(k)           Acquiror shall have delivered to the Acquiree, the Parent and the Acquiree Ultimate Shareholders a certificate duly executed by the Secretary of the Acquiror and dated as of the Closing Date, as to (i) the resolutions as adopted by the Acquiror’s board of directors, in a form reasonably acceptable to the Acquiree, approving this Agreement and the Transaction Documents to which it is a party and the transactions contemplated hereby and thereby; (ii) the Acquiror Organizational Documents, each as in effect at the Closing; and (iv) the incumbency of each authorized officer of the Acquiror signing this Agreement and any other agreement or instrument contemplated hereby to which the Acquiror is a party;

  

(l)            Acquiror shall have delivered to the Acquiree, the Parent and the Acquiree Ultimate Shareholders a statement from the Acquiror’s transfer agent regarding the number of issued and outstanding shares of Acquiror Common Stock immediately before the Closing;

 

(m)           Acquiror shall have delivered to the Acquiree, the Parent and the Acquiree Ultimate Shareholders such pay-off letters and releases relating to Liabilities of the Acquiror as the Acquiree shall request;

 

(n)           Acquiror shall have delivered to the Acquiree, the Parent and the Acquiree Ultimate Shareholders duly executed letters of resignation from all of the directors and officers of the Acquiror, effective as of the Closing;

 

(o)           Acquiror shall have delivered to the Acquiree, the Parent and the Acquiree Ultimate Shareholders a duly executed release by the current directors, officers and 10% or greater stockholders of the Acquiror and from such former directors, officers and 10% or greater stockholders of the Acquiror as the Acquiree and the Acquiree Ultimate Shareholders shall reasonably request, in favor of the Acquiror, the Acquiree and the Acquiree Ultimate Shareholders;

 

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(p)           Acquiror shall have delivered to the Acquiree, the Parent and the Acquiree Ultimate Shareholders resolutions of the Acquiror’s board of directors (i) appointing HuiAn Peng to serve as Chief Executive Officer; (ii) appointing Jie Liang to serve as Secretary; (iii) nominating Wei Jiang to serve as Chairman of the Acquiror’s board of directors; and (iv) nominating HuiAn Peng and Jie Liang to serve as members of the Acquiror’s board of directors, effective as of the Closing;

 

(q)          Execution of the Cancellation Agreement by and between Acquiror and Acquiror Principal Shareholder, pursuant to which the 10,000,000 shares of common stock of the Acquiror held by Acquiror Principal Shareholder shall be cancelled at or prior to the Closing and that certain assets and liabilities of the Acquiror shall be assigned or transferred to the Acquiror Principal Shareholder;

 

(r)          Execution of certain cancellation agreement by and between Acquiror and Jesper Toft, pursuant to which the 100,000 shares of series A convertible preferred stock of the Acquiror held by Jesper Toft shall be cancelled prior to the Closing;

 

(s)          Execution of certain cancellation agreement by and between Acquiror and ViMachel ApS, pursuant to which the 10,000,000 shares of common stock of the Acquiror held by ViMachel ApS shall be cancelled prior to the Closing;

 

(t)           Acquiree and the Acquiree Ultimate Shareholders shall have completed their legal, accounting and business due diligence of the Acquiror and the results thereof shall be satisfactory to the Acquiree and the Acquiree Ultimate Shareholders in their sole and absolute discretion; and

  

(u)           All actions to be taken by the Acquiror, the Parent and the Acquiror Principal Shareholder in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to the Acquiree and the Acquiree Ultimate Shareholders.

 

Section 11.3          Conditions to Obligation of the Acquiror Parties . The obligations of the Acquiror and the Acquiror Principal Shareholder to enter into and perform their respective obligations under this Agreement are subject, at the option of the Acquiror and the Acquiror Principal Shareholder, to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by the Acquiror and the Acquiror Principal Shareholder in writing:

 

(a)           The representations and warranties of the Acquiree and the Acquire Shareholders set forth in this Agreement shall be true and correct in all material respects as of the Closing Date (except to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties shall be true and correct as of such date);

 

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(b)           The Acquiree and the Acquire Shareholders shall have performed and complied with all of their covenants hereunder in all material respects through the Closing, except to the extent that such covenants are qualified by terms such as “material” and “Material Adverse Effect,” in which case the Acquiree and the Acquire Shareholders shall have performed and complied with all of such covenants in all respects through the Closing;

 

(c)           All consents, waivers, approvals, authorizations or Orders required to be obtained, and all filings required to be made, by the Acquiror for the authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated by this Agreement, shall have been obtained and made by the Acquiree and Acquiree shall have delivered proof of same to the Acquiror and Acquiror Principal Shareholder;

 

(d)           Acquiree shall have delivered to the Acquiror and Acquiror Principal Shareholder a certificate, dated the Closing Date, executed by an officer of the Acquiree, certifying the satisfaction of the conditions specified in Sections 11.3(a) through 11.3(c) , inclusive, relating to the Acquiree;

 

(e)           Acquiree shall have delivered to the Acquiror and the Acquiror Principal Shareholder a certificate duly executed by the Secretary of the Acquiror and dated as of the Closing Date, as to (i) the resolutions as adopted by the Acquiror’s board of directors, in a form reasonably acceptable to the Acquiree, approving this Agreement and the Transaction Documents to which it is a party and the transactions contemplated hereby and thereby; (ii) the Acquiree Organizational Documents, each as in effect at the Closing; and (iii) the incumbency of each authorized officer of the Acquiree signing this Agreement and any other agreement or instrument contemplated hereby to which the Acquiree is a party;

  

(f)            Acquiror and the Acquiror Principal Shareholder shall have completed their legal, accounting and business due diligence of the Acquiree and the results thereof shall be satisfactory to the Acquiror and the Acquiror Principal Shareholder in their sole and absolute discretion; and

 

(g)           All actions to be taken by the Acquiree and the Acquiree Ultimate Shareholders in connection with consummation of the transactions contemplated hereby and all payments, certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to the Acquiror and the Acquiror Principal Shareholder.

 

Article XII
TERMINATION

 

Section 12.1          Grounds for Termination . Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date:

 

(a)           by the mutual written agreement of the Parties;

 

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(b)           by Acquiree and the Acquiree Ultimate Shareholders (by written notice of termination from Acquiree and the Acquiree Ultimate Shareholders to the Acquiror and the Acquiror Principal Shareholder, in which reference is made to this subsection) if the Closing has not occurred on or prior to the Termination Date, unless the failure of the Closing to have occurred is attributable to a failure on the part of Acquiree, the Parent or the Acquiree Ultimate Shareholders to perform any material obligation to be performed by Acquiree, the Parent or the Acquiree Ultimate Shareholders pursuant to this Agreement at or prior to the Closing;

 

(c)           by the Acquiror (by written notice of termination from the Acquiror to the Acquiree, the Parent and the Acquiree Ultimate Shareholders, in which reference is made to this subsection) if the Closing has not occurred on or prior to the Termination Date, unless the failure of the Closing to have occurred is attributable to a failure on the part of the Acquiror Principal Shareholder to perform any material obligation required to be performed by any such Acquiror Principal Shareholder pursuant to this Agreement at or prior to the Closing;

 

(d)           by the Acquiror or the Acquiree (by written notice of termination from such Party to the other Parties) if a Governmental Authority of competent jurisdiction shall have issued a final non-appealable Order, or shall have taken any other action having the effect of, permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; provided, however, that the right to terminate this Agreement under this Section 12.3(d) shall not be available to a Party if such Order was primarily due to the failure of such Party to perform any of its obligations under this Agreement;

 

(e)           by the Acquiror, Acquiree or the Acquiree Ultimate Shareholders (by written notice of termination from such Party to the other Parties) if any event shall occur after the date hereof that shall have made it impossible to satisfy a condition precedent to the terminating Party’s obligations to perform its obligations hereunder, unless the occurrence of such event shall be due to the failure of the terminating Party to perform or comply with any of the agreements, covenants or conditions hereof to be performed or complied with by such Party at or prior to the Closing;

  

(f)           by Acquiree or the Acquiree Ultimate Shareholders (by written notice of termination from Acquiree to the Acquiror Principal Shareholder, in which reference is made to this subsection) if, since the date of this Agreement, there shall have occurred any Material Adverse Effect on the Acquiror, or there shall have occurred any event or circumstance that, in combination with any other events or circumstances, could reasonably be expected to have, a Material Adverse Effect with respect to the Acquiror;

 

(g)           by the Acquiree (by written notice of termination from the Acquiree to the Acquiror and the Acquiror Principal Shareholder, in which reference is made to the specific provision(s) of this subsection giving rise to the right of termination) if (i) any of Acquiror’s or the Acquiror Shareholder’s representations and warranties shall have been inaccurate as of the date of this Agreement or as of a date subsequent to the date of this Agreement (as if made on such subsequent date), such that the condition set forth in Section 11.3(a) would not be satisfied and such inaccuracy has not been cured by Acquiror or the Acquiror Principal Shareholder within five (5) Business Days after its receipt of written notice thereof and remains uncured at the time notice of termination is given, (ii) any of the Acquiror’s or Acquiror Principal Shareholder’s covenants contained in this Agreement shall have been breached, such that the condition set forth in Section 11.3(b) would not be satisfied, or (iii) any Action shall be initiated, threatened or pending which could reasonably be expected to materially and adversely affect the Acquiror or Acquiree (including, without limitation, any such Action relating to any alleged violation of, or non-compliance with, any applicable Law or any allegation of fraud or intentional misrepresentation); or

 

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(h)           by the Acquiror and the Acquiror Principal Shareholder (by written notice of termination from the Acquiror to the Acquiree, the Parent and the Acquiree Ultimate Shareholders, in which reference is made to the specific provision(s) of this subsection giving rise to the right of termination) if (i) any of Acquiree’s or the Acquiree Ultimate Shareholder’s representations and warranties shall have been inaccurate as of the date of this Agreement or as of a date subsequent to the date of this Agreement (as if made on such subsequent date), such that the condition set forth in Section 11.2(a) would not be satisfied and such inaccuracy has not been cured by Acquiree or the Acquiree Ultimate Shareholders within five (5) Business Days after its receipt of written notice thereof and remains uncured at the time notice of termination is given, or (ii) any of the Acquiree’s or Acquiree Ultimate Shareholder’s covenants contained in this Agreement shall have been breached, such that the condition set forth in Section 11.2(b) would not be satisfied.

 

Section 12.2          Procedure and Effect of Termination . In the event of the termination of this Agreement by the Acquiror Principal Shareholder or Acquiree pursuant to Section 12.1 hereof, written notice thereof shall forthwith be given to the other Party. If this Agreement is terminated as provided herein (a) each Party will redeliver all documents, work papers and other material of any other Party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the Party furnishing the same; provided, that each Party may retain one copy of all such documents for archival purposes in the custody of its outside counsel and (b) all filings, applications and other submission made by any Party to any Person, including any Governmental Authority, in connection with the transactions contemplated hereby shall, to the extent practicable, be withdrawn by such Party from such Person.

  

Section 12.3          Effect of Termination . If this Agreement is terminated pursuant to Section 11.1 hereof, this Agreement shall become void and of no further force and effect, except for the provisions of (i) Article XIII , (iii) Sections 3.6 , 4.8, 5.8 and 6.10 hereof relating to brokers’ fees or commissions, (iv) Section 12.2 and this Section 12.3 .

 

Article XIII
SURVIVAL; INDEMNIFICATION

 

Section 13.1          Survival . All representations, warranties, covenants, and obligations in this Agreement shall survive two years after the Closing. The right to indemnification, payment of damages or other remedy based on such representations, warranties, covenants, and obligations will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of damages, or other remedy based on such representations, warranties, covenants, and obligations.

 

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Section 13.2          Indemnification by the Acquiror Principal Shareholder . From and after the execution of this Agreement, the Acquiror Principal Shareholder shall indemnify and hold harmless the Acquiree Indemnified Parties, from and against any all costs or expenses (including attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement (collectively, “ Damages ”) arising, directly or indirectly, from or in connection with: (a) any breach (or alleged breach) of any representation or warranty made by the Acquiror Principal Shareholder or the Acquiror in this Agreement or any Transaction Document or in any certificate delivered by the Acquiror Principal Shareholder or the Acquiror pursuant to this Agreement; or (b) any breach (or alleged breach) by the Acquiror Principal Shareholder or the Acquiror of any covenant or obligation of the Acquiror Principal Shareholder or the Acquiror in this Agreement or any Transaction Document required to be performed by the Acquiror Principal Shareholder or the Acquiror on or prior to the Closing Date or by the Acquiror Principal Shareholder after the Closing Date. The Acquiror Principal Shareholder shall be assigned the right to negotiate with or take any legal action again Serenergy A/S in connection with certain exclusive distribution agreement dated August 27, 2009, exclusive distribution and manufacturing license agreement dated August 27, 2009 and settlement agreement dated March 15, 2011 by and between the Acquiror and Serenergy A/S (the “ Assignment ”), pursuant to Section 11.2(s) . Any proceeds resulting from such legal action shall belong to the Acquiror Principal Shareholder. The Acquiror Principal Shareholder shall indemnify and hold harmless the Acquiree Indemnified Parties, from and against any Damages arising, directly or indirectly, from or in connection with the Assignment.

  

Section 13.3          Matters Involving Third Parties .

 

(a)           If any third party shall notify any Acquiree Indemnified Parties (the “ Indemnified Party ”) with respect to any matter (a “ Third Party Claim ”) which may give rise to a claim for indemnification against the Acquiror Principal Shareholder (the “ Indemnifying Party ”) under this Article XIII , then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party is thereby prejudiced.

 

(b)           Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified Party in writing within fifteen (15) days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against the entirety of any Damages the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim, (B) the Indemnifying Party provides the Indemnified Party with evidence acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder, (C) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, (D) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice adverse to the continuing business interests of the Indemnified Party, and (E) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently.

 

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(c)           So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section 13.3(b) above, (A) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably).

 

 

(d)           In the event any condition in Section 13.3(b) above is or becomes unsatisfied, however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith), (B) the Indemnifying Parties will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys’ fees and expenses), and (C) the Indemnifying Parties will remain responsible for any Damages the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Article XII .

 

Section 13.4          Exclusive Remedy . The Parties acknowledge and agree that the indemnification provisions in this Article XIII and in Article IIX hereof shall be the exclusive remedies of the Parties with respect to the transactions contemplated by this Agreement, other than for fraud and willful misconduct. Each Acquiror Principal Shareholder hereby agrees that such Acquiror Principal Shareholder will not make any claim for indemnification against the Acquiror by reason of the fact that such Acquiror Principal Shareholder was a director, officer, employee, or agent of the Acquiror or was serving at the request of the Acquiror as a partner, trustee, director, officer, employee, or agent of another entity (whether such claim is for judgments, damages, penalties, fines, costs, amounts paid in settlement, losses, expenses, or otherwise and whether such claim is pursuant to any statute, charter document, bylaw, agreement, or otherwise) with respect to any action, suit, proceeding, complaint, claim, or demand brought by the Acquiree against the Acquiror Principal Shareholder (whether such action, suit, proceeding, complaint, claim, or demand is pursuant to this Agreement, applicable Law, or otherwise).

 

Article XIV
MISCELLANEOUS PROVISIONS

 

Section 14.1          Expenses . Except as otherwise expressly provided in this Agreement, each Party will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated by this Agreement, including all fees and expenses of agents, representatives, counsel, and accountants. In the event of termination of this Agreement, the obligation of each Party to pay its own expenses will be subject to any rights of such Party arising from a breach of this Agreement by another Party.

 

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Section 14.2          Confidentiality .

 

(a)           The Parties will maintain in confidence, and will cause their respective directors, officers, employees, agents, and advisors to maintain in confidence, any written, oral, or other information obtained in confidence from another Person in connection with this Agreement or the transactions contemplated by this Agreement, unless (a) such information is already known to such Party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such Party, (b) the use of such information is necessary or appropriate in making any required filing with the SEC, or obtaining any consent or approval required for the consummation of the transactions contemplated by this Agreement, or (c) the furnishing or use of such information is required by or necessary or appropriate in connection with legal proceedings.

   

(b)           In the event that any Party is required to disclose any information of another Person pursuant to clause (b) or (c) of Section 14.2(a) above, the Party requested or required to make the disclosure (the “disclosing party”) shall provide the Person that provided such information (the “providing party”) with prompt notice of any such requirement so that the providing party may seek a protective Order or other appropriate remedy and/or waive compliance with the provisions of this Section 14.2 . If, in the absence of a protective Order or other remedy or the receipt of a waiver by the providing party, the disclosing party is nonetheless, in the opinion of counsel, legally compelled to disclose the information of the providing party, the disclosing party may, without liability hereunder, disclose only that portion of the providing party’s information which such counsel advises is legally required to be disclosed, provided that the disclosing party exercises its reasonable efforts to preserve the confidentiality of the providing party’s information, including, without limitation, by cooperating with the providing party to obtain an appropriate protective Order or other relief assurance that confidential treatment will be accorded the providing party’s information.

 

(c)           If the transactions contemplated by this Agreement are not consummated, each Party will return or destroy all of such written information each party has regarding the other Parties.

 

Section 14.3          Notices . All notices, demands, consents, requests, instructions and other communications to be given or delivered or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (i) if personally delivered, on the Business Day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or registered mail return receipt requested, two (2) Business Days after being mailed, (iii) if delivered by overnight courier (with all charges having been prepaid), on the Business Day of such delivery (as evidenced by the receipt of the overnight courier service of recognized standing), or (iv) if delivered by facsimile transmission or other electronic means, including email, on the Business Day of such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time, on the next succeeding Business Day. If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed address of which no notice was given (in accordance with this Section 14.4 ), or the refusal to accept same, the notice, demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is sent (as evidenced by a sworn affidavit of the sender). All such notices, demands, consents, requests, instructions and other communications will be sent to the following addresses or facsimile numbers as applicable:

 

42
 

 

If to Acquiror or the Acquiror Principal Shareholder, to:  

Metha Energy Solutions Inc.

c/o Anslow & Jaclin, LLP
195 Route 9 South, Second Floor

Manalapan, New Jersey 07726

Attn: Gregg E. Jaclin, Esq.

Telephone No.: 732-409-1212

     
If to the Acquiree, to:  

Science & Technology World Website Media Group Co., Ltd.

Room 205, Building A

No. 1 Torch Road, High-Tech Zone

Dalian, China

Telephone No.: +86 (411) 3973-1515

Facsimile No.: +86 (411) 3973-1515

     
With copies to:  

Anslow & Jaclin, LLP
195 Route 9 South, Second Floor

Manalapan, New Jersey 07726

Attention: Gregg E. Jaclin, Esq.

Telephone No.: 732-409-1212

Facsimile No.: 732-577-1188

     

If to the Parent, to:

 

Science & Technology World Website Media Group Co., Ltd.

Room 205, Building A

No. 1 Torch Road, High-Tech Zone

Dalian, China

Telephone No.: +86 (411) 3973-1515

Facsimile No.: +86 (411) 3973-1515

     
If to the Acquiree Ultimate Shareholders, to:   The applicable address set forth on Schedule I hereto.


or such other addresses as shall be furnished in writing by any Party in the manner for giving notices hereunder.

 

Section 14.4          Further Assurances . The Parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other Parties may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.

 

43
 

 

Section 14.5          Waiver . The rights and remedies of the Parties are cumulative and not alternative. Neither the failure nor any delay by any Party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable Law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other Parties; (b) no waiver that may be given by a Party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one Party will be deemed to be a waiver of any obligation of such Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

 

Section 14.6          Entire Agreement and Modification . This Agreement supersedes all prior agreements between the Parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the Parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the Party against whom the enforcement of such amendment is sought.

 

Section 14.7          Assignments, Successors, and No Third-Party Rights . No Party may assign any of its rights under this Agreement without the prior consent of the other Parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of and be enforceable by the respective successors and permitted assigns of the Parties. Except as set forth in Article XIII hereof, nothing expressed or referred to in this Agreement will be construed to give any Person other than the Parties any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.

 

Section 14.8          Severability . If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

 

Section 14.9          Section Headings . The headings of Articles and Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Article” or “Articles” or “Section” or “Sections” refer to the corresponding Article or Articles or Section or Sections of this Agreement, unless the context indicates otherwise.

 

44
 

 

Section 14.10          Construction . The Parties have participated jointly in the negotiation and construction of this Agreement. Each Party has retained independent legal counsel to advise on this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Unless otherwise expressly provided, the word “including” shall mean including without limitation. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of such representation, warranty, or covenant. All words used in this Agreement will be construed to be of such gender or number as the circumstances require.

 

Section 14.11          Counterparts . This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

Section 14.12          Specific Performance . Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the U.S. or any state thereof having jurisdiction over the Parties and the matter (subject to the provisions set forth in Section 14.13 below), in addition to any other remedy to which they may be entitled, at Law or in equity.

 

Section 14.13          Governing Law; Submission to Jurisdiction . This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware without regard to conflicts of Laws principles. Each of the Parties submits to the jurisdiction of any state or federal court sitting in the State of Delaware, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Each of the Parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto. Any Party may make service on any other Party by sending or delivering a copy of the process to the Party to be served at the address and in the manner provided for the giving of notices in Section 14.3 above. Nothing in this Section 14.13 , however, shall affect the right of any Party to serve legal process in any other manner permitted by Law or at equity. Each Party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by Law or at equity.

 

45
 

 

Section 14.14          Waiver of Jury Trial . EACH OF THE PARTIES HEREBY IRREVOCABLY WANES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

  

[Signatures follow on next page]

 

46
 

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first above written.

 

ACQUIROR:
 
METHA ENERY SOLUTIONS INC.
 
By: /s/ Jesper Toft
Name:  Jesper Toft
Title: Chief Executive Officer
 
ACQUIROR PRINCIPAL SHAREHOLDER:
 
Toft ApS
 
/s/ Jesper Toft

Name: Jesper Toft

Title: Chief Executive Officer


 

[Signatures continue on next page]

 

 
 

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first above written.

 

ACQUIREE:
 
SCIENCE & TECHNOLOGY WORLD WEBSITE MEDIA GROUP CO., LTD.
 
By: /s/ Wei Jiang
Name:  Wei Jiang
Title: Director

 

 
 

  

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first above written.

 

PARENT:
 
SCIENCE & TECHNOLOGY WORLD WEBSITE MEDIA HOLDING CO., LTD.
 
By: /s/ Wei Jiang
Name:  Wei Jiang
Title: Director

 

 

 
 

 

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first above written.

 

ACQUIREE ULTIMATE SHAREHOLDERS:
 
By: /s/ Wei Jiang
Name: Wei Jiang
 
By: /s/ HuiAn Peng
Name:  HuiAn Peng
 
By: /s/ Lijuan Wang
Name: Lijuan Wang
 
By: /s/ Zhongmin He
Name: Zhongmin He
 
By: /s/ Guifen Gao
Name: Guifen Gao
 
By: /s/ Dan He
Name: Dan He
 
By: /s/ Yang He
Name: Yang He
 
By: /s/ Huilian An
Name: Huilian An
 
By: /s/ Ying Wang
Name: Ying Wang

 

 
 

 

SCHEDULE I

 

Acquiree Ultimate Shareholders   Acquiree Shares
Held Prior to
the Closing
    Acquiror
Common Shares
to be Issued at
the Closing
 
Wei Jiang
2-5-30, No. 352, Nanshan Road
Pulandian City, Liaoning, China 116200
    20,650       20,650,000  
HuiAn Peng
2-3-1, No. 103, Shanluan Street, Zhongshan District
Dalian, Liaoning, China 116000
    12,850       12,850,000  
Lijuan Wang
2-1-1, No.63, Xiangyang Street
Wafangdian City, Liaoning, China 116300
    7,500       7,500,000  
Zhongmin He
1-3-1, No.47, Haiyue Street, Shahekou District
Dalian, Liaoning, China 116000
    3,000       3,000,000  
Guifen Gao
1-3-1,No.47, Haiyue Street, Shahekou District
Liaoning, Liaoning, China 116000
    1,500       1,500,000  
Dan He
1-3-1, No.47, Haiyue Streeet, Shahekou District
Dalian, Liaoning, China 116000
    1,500       1,500,000  
Yang He
2-3-3, No.23, Jinjiangyuan, Shahekou District
Dalian, Liaoning, China 116000
    1,500       1,500,000  
Huilian An
No.6, Jianping Alley, Xuanwu District
Beijing, China 100053
    1,000       1,000,000  
Ying Wang
1-5, No.125, Qixing Street, Zhongshan District
Dalian, Liaoning, China 116000
    500       500,000  
                 
Total     50,000       50,000,000  

 

 
 

  

Disclosure Schedule

 

Schedule 4.5 Subsidiaries

 

 

A. Science &Technology World Website Media Holding Co., Ltd. (“Parent”)

 

Parent is a limited liability company established on February 15, 2011 under the laws of British Virgin Islands, or BVI, and its registered address is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. Mr. Jiang Wei, Mr. Peng Huian, Ms. Wang Lijuan, Mr. He Zhongmin, Ms. Gao Guifen, Ms. He Dan, Ms. He Yang, Ms. An Huilian and Ms. Wang Ying holds 41.3%, 25.7%, 15%, 6%, 3%, 3%, 3%, 2%, and 1% shares of the Parent respectively. Mr. Jiang Wei, Mr. Peng Huian and Ms. Wang Lijuan are the directors of the BVI Co1.

 

 
 

 

B. Science &Technology World Website Media Group Co., Ltd. (“Acquiree”)

 

Acquiree is a limited liability company established on February 15, 2011 under the laws of British Virgin Islands, or BVI, and its registered address is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The Parent owns 100% of the issued and outstanding shares of capital stock of the Acquiree. Mr. Jiang Wei, Mr. Peng Huian and Ms. Wang Lijuan are the directors of the Acquiree.

 

C. Science & Technology World Website Hong Kong Media Holding Co., Ltd. (“HK Co.”)

 

HK Co. is a limited liability company established on September 16, 2011 under the laws of Hong Kong, and its registered address is Flat/room 1702 17F Sino Centre,Nathan Rd., Mongkok, Kln. H. K. Acquiree owns 100% of the issued and outstanding shares of capital stock of the HK Co. Mr. Jiang Wei, Mr. Peng Huian, Ms. Wang Lijuan and Mr. Cui Qi are the directors of the HK Co.

 

D. Science & Technology World Website Trade (Dalian) Co. Ltd. (“WFOE”)

 

WFOE is a limited liability company established on January 20, 2012 under the laws of the PRC, with its registered address at Room 309-1, No. 2B-44, Haitian Road, Bonded Zone, Dalian, China.

 

The registered capital of WFOE is USD 300,000, among which USD 60,000 has been paid by its shareholder, and the rest of the registered capital shall be fully paid up before January 19, 2014 according to the PRC Company Law and the WFOE’s Articles of Association.

 

WFOE is 100% owned by the HK Co. and Mr. Jiang Wei is the sole director of WFOE.

 

E. Dalian Tianyi Culture Development Co., Ltd. (“Dalian Tianyi”)

 

Dalian Tianyi was established in the PRC on December 26, 2007 as a limited liability company under the laws of the PRC.

 

The registered capital of Dalian Tianyi is RMB 1,000,000 which has been fully paid up by its shareholders.

 

Mr. Jiang Wei, Mr. Peng Huian, Ms. Wang Lijuan, Mr. He Zhongmin, Ms. Gao Guifen, Ms. He Dan, Ms. He Yang, Ms. An Huilian and Ms. Wang Ying holds 41.3%, 25.7%, 15%, 6%, 3%, 3%, 3%, 2%, and 1% shares of Dalian Tianyi respectively. Mr. Jiang Wei is the sole director of Dalian Tianyi.

 

F. Science & Technology World Network (Dalian), Co., Ltd. (“Science & Technology Dalian”)

 

Science & Technology Dalian was established in the PRC on June 8, 2010 as a limited liability company under the laws of the PRC.

 

The registered capital of Science & Technology Dalian is RMB 300,000 which has been fully paid up by its shareholders.

 

 
 

 

Mr. Jiang Wei, Mr. Peng Huian, Ms. Wang Lijuan, Mr. He Zhongmin, Ms. Gao Guifen, Ms. He Dan, Ms. He Yang, Ms. An Huilian and Ms. Wang Ying holds 41.3%, 25.7%, 15%, 6%, 3%, 3%, 3%, 2%, and 1% shares of Science & Technology Dalian respectively. Mr. Jiang Wei is the sole director of Science & Technology Dalian.

 

Contractual Arrangements

 

On January 21, 2012, Dalian Tianyi and Science & Technology Dalian (the “PRC Operating Companies”) and their respective shareholders entered into a set of contractual agreements with the WFOE. The relationships between the WFOE, PRC Operating Companies and their respective shareholders are governed by the contractual agreements.

 

 

 

 

SHARE PURCHASE AND CANCELLATION AGREEMENT

 

THIS AGREEMENT (the Agreement”) is hereby made effective this 29th day of October 2012, by and between METHA ENERGY SOLUTIONS INC., a Delaware corporation (the "Company"), and TOFT APS (the "Shareholder") with an address at Roennegade 9, 2100 Oesterbro, Denmark.

 

RECITALS

 

WHEREAS, the Company owns the interests listed on Schedule A (the “Interests”) attached hereto;

 

WHEREAS, the Shareholder is the holder and owner of ten million (10,000,000) shares of the Company’s common stock, par value $0.001 per share (the “Shares”);

 

WHEREAS, the Shareholder agrees to sell and the Company agrees to purchase and cancel the Shares in exchange for consideration as set forth herein below;

 

WHEREAS, the Company and the Shareholder deem it to be in their respective best interests to enter into this transaction pursuant to the terms and conditions of the Share Exchange Agreement dated October [ ], 2012, of which this Agreement is made a part thereto.

 

NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants contained herein (the sufficiency whereof is hereby acknowledged by the parties hereto), the parties hereby agree to and with each other as follows:

 

AGREEMENT

 

1.      STOCK PURCHASE . The Shareholder agrees to sell to the Company the Shares for consideration set forth in Sections 2 and Section 3 .

 

2.      PURCHASE PRICE . The Company agrees to purchase the Shares at a purchase price of One Hundred and Seventy-Five Thousand and NO/100 Dollars (USD $175,000.00) (the “Purchase Price”).

 

3.      SALE OF INTEREST . The Company agrees to sell and assigns and the Shareholder agrees to purchase from the Company, the Interests.

 

4.      CANCELLATION OF THE SHARES . The Shares shall be cancelled and returned to the treasury effective on the date of this Agreement.

 

5.      RELEASE. The Shareholder, together with its heirs, executors, administrators, and assigns, does hereby remise, release and forever discharge the Company, its respective directors, officers, shareholders, employees and agents, and their respective successors and assigns, of and from all claims, causes of action, suits and demands whatsoever which Shareholder ever had, now or may have howsoever arising out of the original grant and this cancellation of the Shares.

 

6.      INDEMNIFICATION . The Shareholder shall indemnify and hold the Company harmless from and against any and all costs or expenses (including attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement arising, directly or indirectly, out of the Interest prior to and after the date hereof.

 

1
 

 

7.      MUTUAL REPRESENTATIONS . The Company hereby represents and warrants to the Shareholder that it owns, of record and beneficially, and has good and marketable title to the Interests, all of which are free and clear of all liens, charges and encumbrances. The Shareholder hereby represents and warrants to the Company that he owns, of record and beneficially, and has good and marketable title to the Shares, all of which are free and clear of all liens, charges and encumbrances. As may be required, the parties will execute and deliver all such further documents (including but not limited to appropriate instruments of transfers and bought and sold notes), do or cause to be done all such further acts and things, and give all such further assurances as in the opinion of the Company or its counsel are necessary or advisable to give full effect to the provisions and intent of this Agreement.

 

8.      MISCELLANEOUS.

 

5.1        Stamp Duty, Legal and Accounting Fees . All stamp duty payable in Delaware in connection with the sale and purchase of shares in the Company shall be borne by the respective transferees and transferors in equal shares. The Shareholders and the Company shall each be responsible to pay their respective legal and accounting fees incurred by them in connection with the transactions contemplated by this Agreement, unless otherwise mutually agreed to in writing.

 

5.2        Waiver of Breach . All waivers under this Agreement shall be in writing. Any waiver by a party of the breach of any provision or of any condition precedent of this Agreement shall not operate as a waiver of any subsequent breach of that provision or as a waiver of the breach of any other provision or of any other condition precedent.

 

5.3          Severability . If any one or more provisions of this Agreement shall be adjudged or declared illegal or unenforceable, the same shall not in any way affect or impair the validity or enforceability of all or any other provision of this Agreement.

 

5.4          Governing Law . This Agreement and the performance hereof shall be construed and interpreted in accordance with the laws of Delaware. Any dispute arising under or out of this Agreement shall be submitted for resolution to an applicable state or federal court of competent jurisdiction that is located in Delaware.

 

5.5          Venue; Waivers . The Shareholder and Company irrevocably agree that all actions or proceedings in any way, manner or respect, arising out of or from or related to this agreement shall be litigated in courts having situs within the State of Delaware. The Shareholder and Company hereby waive any right they may have to transfer or change the venue of any litigation brought by another party hereto in accordance with this paragraph.

 

5.6          Assignment . No party may assign its rights, interest or obligations under this Agreement without the prior approval in writing of the other party.

 

5.7          No Third Party Beneficiaries . This Agreement shall not confer any rights or remedies on any Person other than the parties and their respective successors and permitted assigns.

 

2
 

 

5.8          Entire Agreement . This Agreement constitutes the entire agreement between the parties hereto in connection with the subject matter hereof. This Agreement may not be modified, amended, altered or extended orally, and no modification shall be effective unless in writing and signed by the parties hereto.

 

5.9          Binding Agreement . This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, representatives, successors and assigns.

 

5.10        Notices . All notices, requests, demands and other communications required or permitted to be given hereunder shall be in writing, and shall be deemed to have been given, when received, if delivered in person or by a reputable courier service (such as Federal Express), or three (3) business days following mailing, if mailed by certified mail, return receipt requested, postage prepaid, as follows:

 

IF TO SHAREHOLDER : Toft ApS

Roennegade 9

2100 Oesterbro, Denmark

Attn: Jesper Toft

Telephone No.:

Facsimile No.:

 

IF TO COMPANY: METHA ENERGY SOLUTIONS INC.

c/o Anslow & Jaclin, LLP
195 Route 9 South, Second Floor

Manalapan, New Jersey 07726

Attn: Gregg E. Jaclin, Esq.

Telephone No.: 732-409-1212

Facsimile No.: 732-577-1188

 

5.11        Exhibits and Schedules . The Exhibits and Schedules attached hereto constitute an integral part of this Agreement. Terms defined in this Agreement that are used in any Exhibit or Schedule attached hereto and are not otherwise defined therein shall have the meanings assigned to such terms in this Agreement. Terms defined in any Exhibit or Schedule attached hereto that are used in this Agreement or in any other Exhibit or Schedule which are not otherwise defined herein shall have the meanings assigned to such terms in such Exhibit or Schedule.

 

5.12        Headings . The headings contained in this Agreement are for convenience of reference only and shall not affect the meaning and interpretation of this Agreement.

 

5.13        Counterparts . This Agreement may be executed in multiple counterparts, each of which will be considered an original but all of which will constitute the same instrument, notwithstanding that fewer than all of the parties have signed the same counterpart. A counterpart signature page transmitted by facsimile machine will be given the same effect as an original signature page. Any party signing this Agreement by facsimile must provide the other parties with a manually signed signature page within ten (10) days after the date of this Agreement.

 

3
 

 

IN WITNESS WHEREOF, the parties hereto have placed their signatures hereon on the day and year first above written.

 

  THE SHAREHOLDER:
   
  Toft ApS
   
  /s/ Jesper Toft
  Name: Jesper Toft
  Title:
   
  THE COMPANY:
   
  METHA ENERGY SOLUTIONS INC.,
  A Delaware Corporation
   
  /s/ Jesper Toft
  Name: Jesper Toft
  Title: President and Chief Executive Officer

 

4
 

 

SCHEDULE A

 

1. License to use a copy of the data mining and media intelligence software;

 

2. Exclusive Distribution Agreement – United States, Canada, Israel, and the United Nations (“U.S. Agreement”) dated August 27, 2009 by and between the Company and Serenergy A/S;

 

3. U.S. Agreement Amendment dated as of November 10, 2009;

 

4. U.S. Agreement Amendment II dated as of January 12, 2010’

 

5. U.S. Agreement Amendment III dated as of February 8, 2010;

 

6. Exclusive Distribution and Manufacturing License Agreement – Vehicles (“Vehicles Agreement”) dated August 27, 2009 by and between the Company and Serenergy A/S;

 

7. Vehicles Agreement Amendment dated as of November 10, 2009;

 

8. Vehicles Agreement Amendment dated as of January 12, 2010;

 

9. Vehicles Agreement Amendment dated as of February 8, 2010;

 

10. Merger Agreement dated May 3, 2010 by and between the Company and Serenergy A/S;

 

11. Merger Agreement dated October 15, 2010 by and between the Company and Serenergy A/S;

 

12. Settlement Agreement dated March 15, 2011 by and between the Company and Serenergy A/S; and

 

13. Settlement Agreement Amendment dated January 12, 2010 by and between the Company and Serenergy A/S.

 

5

 

 

EXCLUSIVE TECHNICAL CONSULTING SERVICE AGREEMENT

 

EXCLUSIVE TECHNICAL CONSULTING SERVICE AGREEMENT

 

THIS EXCLUSIVE TECHNICAL CONSULTING SERVICE AGREEMENT (the “ Agreement ”) is entered into by and between the following parties effective as of January 21, 2012.

 

Party A: Science&Technology World Website Trade (Dalian) Co., Limited

Registered Address: _ Room 309-1,_No. 2B-44 ,Haitian Road, Bonded Zone, Dalian, China

 

Party B: Science&Technology World Network (Dalian) Co., Limited

Registered Address: Room914, Administrative Committee Office, Huayuankou Economic Zone, Dalian, China

(each a “ Party ” and collectively the “ Parties ”)

 

WHEREAS,

 

1. Party A, a wholly foreign-owned enterprise duly established and validly existing under the laws of the PRC, possesses professional knowledge, facilities, resources and skills to provide Party B with technical consulting services relevant to the development and operation of Party B’s business.

 

2. Party B, a limited liability company duly established and validly existing under the laws of the PRC agrees to accept the technical consulting services provided by Party A in accordance with this Agreement.

 

NOW THEREFORE, intending to be bound hereby, the Parties hereto agree as follows:

 

1. Technical Consulting Services; Exclusivity

 

1.1 During the term of this Agreement, Party A shall provide the following technical consulting services to Party B in accordance with this Agreement:
(i) Provision of advanced management skills to offer a framework for the construction of a new management platform;
(ii) Provision of technology information and materials related to Party B’s business development and operation. The content of the technology information and documents may be enhanced or diminished during the performance of this Agreement and upon mutual agreement to address each Party’s requirements; and

  (iii) Training of technical and managerial personnel for Party B and provision of required training documents. Party A will send technologists and managerial personnel to Party B to provide related technology and training services as necessary.

 

Page 1 of 7
 

 

EXCLUSIVE TECHNICAL CONSULTING SERVICE AGREEMENT

 

1.2 Party B hereby agrees to accept the technical consulting services provided by Party A. Party B further agrees that, during the term of this Agreement, it shall not accept technical consulting and services from any other party without the prior written consent of Party A.

 

1.3 Party A shall be the sole and exclusive owner of all right, title and interests to any and all intellectual property rights arising from the performance of this Agreement, including but not limited to, copyrights, patent, know-how and commercial secrets, whether such intellectual property is developed by Party A or Party B.

 

2. Consulting Fees

 

2.1 As consideration for the services provided by Party A under this Agreement, Party B shall pay a consulting fee to Party A equal to 85% of Party B’s annual net profit (the “Consulting Fee”).

 

2.2 In addition to the Consulting Fee mentioned above, Party B agrees to reimburse Party A for all necessary expenses related to the performance of this Agreement before the payment of such Consulting Fee, including but not limited to, travel expenses, expert fees, printing fees and mail costs.

 

2.3 Party B also agrees to reimburse Party A for taxes (not including income tax), customs and other expenditures related to Party A’s performance of this Agreement.

 

2.4 Party B shall pay such service fees to Party A on a year basis, with any over or underpayment by Party B to be reconciled once the annual net profit of Party B is determined at the end of Party B’s fiscal year. During the term of this Agreement, Party B shall make payments to Party A’s appointed bank account within three (3) working days after the end of the each a year, and the parties shall complete any reconciliation payment within three (3) days after the determination described in this Section 2.1. Party B shall send Party A a written report of service fees on a year basis. Party B shall fax or mail the copies of the remittance. In the event that Party B should fail to make timely payment of the Consulting Fee and other necessary expenses in accordance with this Agreement, Party B shall pay Party A a late fee based on ten percent (10%) compound annual interest from the date of such default.

 

2.5 Party B shall open a separate bank account for the Consulting Fees under this Agreement. Party A is entitled to appoint its own employee, PRC accountant or an international accountant to review or audit Party B’s account books in relation to the services provided hereunder from time to time. Any fees payable to such an accountant shall be paid by Party A. Party B shall provide any and all documents, account books, records, materials and information, as well as necessary assistance to the employee or accountant designated by Party A. The audit report issued by Party A’s employee shall be final and conclusive unless Party B gives written objection within seven (7) days after receiving such report. An audit report issued by Party A’s appointed accountant shall be deemed final and conclusive. Party A is entitled to serve Party B with a written request for payment at any time after receiving the audit report confirming the amount of the Consulting Fee. Party B shall pay within seven (7) days after receiving the notice in accordance with Article 2.4.

 

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EXCLUSIVE TECHNICAL CONSULTING SERVICE AGREEMENT

 

3. Representations and Warranties

 

3.1 Representations and Warranties of Party A

Party A hereby represents and warrants as follows:

 

3.1.1 It has the power to enter into and perform this Agreement in accordance with its constitutional documents and business scope, and has taken all necessary action to obtain all consents and approvals necessary to execute and perform this Agreement.

 

3.1.2 The execution and performance of this Agreement by Party A does not and will not result in any violation of enforceable or effective laws or contractual limitations.

 

3.1.3 Upon execution, this Agreement shall constitute the legal, valid and binding obligation of Party A and may be enforceable in accordance with the terms hereof.

 

3.2 Representations and Warranties of Party B

Party B hereby represents and warrants as follows:

 

3.2.1 Party B is a company that is duly registered, validly existing under the laws of the PRC and is authorized to enter into this Agreement.

 

3.2.2 Party B has the power to execute and perform this Agreement in accordance with its constitutional documents and business scope, has taken all necessary action to obtain all consents and approvals necessary to execute and perform this Agreement and the execution and performance of this Agreement does not and will not result in any violation of enforceable or effective laws or contractual limitations.

 

3.2.3 Upon its execution, this Agreement shall constitute the legal, valid and binding obligation of Party B, enforceable against it in accordance with the terms hereof.

 

4. Confidentiality

 

4.1 Party B agrees to use all reasonable and best efforts to protect and maintain the confidentiality of Party A’s confidential information received in connection with this Agreement. Party B shall not disclose, grant or transfer such confidential information to any third party. Upon termination of this Agreement Party B shall, upon Party A’s request, destroy or return to Party A any documents, materials or software containing any such confidential information, shall completely delete any such confidential information from any memory devices and shall not use or permit any third party to use such confidential information.

 

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EXCLUSIVE TECHNICAL CONSULTING SERVICE AGREEMENT

 

4.2 Pursuant to this Agreement, the term “confidential information” shall mean any technical information or business operation information which is unknown to the public, can bring about economic benefits, has practical utility and about which a Party has adopted secret-keeping measures.

 

4.3 Both Parties agree that the provisions of Article 4 shall survive notwithstanding the alteration, revocation or termination of this Agreement.

 

5. Indemnities

 

5.1 Party B shall indemnify Party A against any loss, damage, liability or expenses suffered or incurred by Party A as a result of or arising out of any litigation, claim or compensation request relating to the technical consulting services provided by Party A to Party B under this Agreement.

 

6. Effectiveness and Term of this Agreement

 

6.1 This Agreement shall be executed and come into effect as of the date first set forth above. The term of this Agreement shall be ten (10) years unless earlier termination as set forth in this Agreement or upon the mutual written agreement of the Parties hereto.

 

6.2 This Agreement may be extended prior to termination for one or more ten (10) year terms upon written notice by Party A, provided such extension is permitted by law and subject to the approval of the registration administration for the extension of Party B’s business duration. The parties will cooperate to renew this Agreement if such renewal is legally permitted at the time.

 

7. Termination of the Agreement

 

7.1 The Agreement shall terminate automatically on the expiration date unless it is otherwise renewed in accordance with this Agreement.

 

7.2 Throughout the term of this Agreement, Party B may not terminate this Agreement absent of gross negligence, bankruptcy, fraud or illegal action on the part of Party A. Notwithstanding the above, Party A may terminate this Agreement by providing written notice to Party B thirty (30) days before such termination.

 

7.3 The rights and obligations of both Parties under Article 4 and Article 5 of this Agreement shall survive after the termination of this Agreement.

 

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EXCLUSIVE TECHNICAL CONSULTING SERVICE AGREEMENT

 

8. Dispute Settlement

 

8.1 The Parties shall strive to settle any dispute arising from the interpretation or performance, or in connection with this Agreement through mutual negotiation. In case no settlement can be reached through negotiation, either Party may submit such dispute to the China International Economic and Trade Arbitration Committee for arbitration according to its current effective arbitration rules. The arbitration shall be held in Beijing, PRC. The arbitration proceedings shall be conducted in Chinese. The arbitration award shall be final and binding upon the Parties.

 

9. Force Majeure

 

9.1 A “Force Majeure Event” means any event which is out of the control of each party and that would be unavoidable or insurmountable even if the party affected by such event paid reasonable attention to it. Force Majeure Events shall include, but not be limited to, government actions, natural disasters, fire, explosion, typhoons, floods, earthquakes, tide, lightning or war. However, any lack of credit, assets or financing shall not be deemed a Force Majeure Event.

 

9.2 If the fulfillment of this Agreement is delayed or prevented due to a Force Majeure Event as defined above, the party affected by such a Force Majeure Event shall be free from any obligation to the extent of the delay or holdback. The party claiming the occurrence of a Force Majeure Event shall provide the other party with the steps of fulfilling the obligations of this Agreement.

 

9.3 Performance under this Agreement shall be suspended during the existence of such Force M