form-s8.htm
As filed
with the Securities and Exchange Commission on December 3, 2008
Registration
No. 333-_________
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
S-8
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
|
CHINA
DIRECT, INC.
|
|
(Exact
name of registrant as specified in its
charter)
|
|
Florida
|
13-3876100
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
431
Fairway Drive, Suite 200, Deerfield Beach, Florida
|
33441
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
|
China
Direct, Inc. 2008 Non-Executive Stock Incentive Plan
2006
Equity Compensation Plan
|
|
(Full
title of plan)
|
__________________________________
Lazarus
Rothstein
Vice
President and General Counsel
China
Direct, Inc.
431
Fairway Drive, Suite 200
Deerfield
Beach, Florida 33441
(954)
363-7333
(Name,
address, telephone number, including area code, of agent for
service)
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
|
|
|
|
|
|
|
|
Large
accelerated filer
o
|
|
Accelerated
filer o
|
|
Non-accelerated
filer o
(Do
not check if a smaller reporting company)
|
|
Smaller
reporting company þ
|
__________________________________
CALCULATION
OF REGISTRATION FEE
|
Title
of securities to be registered
|
|
Amount
to be registered
|
|
|
Proposed maximum offering price
per share(3)
|
|
|
Proposed
maximum aggregate offering price
|
|
|
Amount
of registration fee
|
|
|
Common
stock, par value $0.0001 per share (1)
|
|
|
3,000,000 |
|
|
$ |
1.60 |
|
|
$ |
4,800,000 |
|
|
$ |
188.64 |
|
|
Common
stock, par value $0.0001 per share(2)
|
|
|
381,250 |
|
|
|
1.60 |
|
|
|
610,000 |
|
|
|
23.97 |
|
|
Total
|
|
|
3,381,250 |
|
|
|
|
|
|
$ |
5,410,000 |
|
|
$ |
212.61 |
|
(1) This
Registration Statement covers 3,000,000 shares of the Registrant's Common Stock
which have been authorized for issuance under the China Direct, Inc. 2008
Non-Executive Stock Incentive Plan;
(2) This
Registration Statement covers 381,250 shares of the Registrant's Common Stock
which have been authorized for issuance under Registrant’s 2006 Equity
Compensation Plan.
(3) Estimated
solely for the purpose of calculating the registration fee based on the average
of the high and low prices of the Registrant's common stock as reported on
December 1, 2008 in accordance with Rule 457(h)(1) under the Securities Act of
1933, as amended.
INTRODUCTORY
STATEMENT
This
registration statement relates to two separate prospectuses. The
first prospectus relates to future issuances to China Direct, Inc. (the
“Company”) employees, directors, consultants and others of up to 3,000,000
shares of the Company’s common stock, $0.0001 par value, per share (the “Common
Stock”) pursuant to the Company’s 2008 Non-Executive Stock Incentive Plan (the
“2008 Non-Executive Plan”).
This
registration statement also includes a reoffer prospectus that relates to the
reoffer or resale of any shares of the Company’s Common Stock that have been
previously issued under the 2008 Non-Executive Stock Incentive Plan and that are
issuable upon the exercise of stock options awarded under the 2006 Equity
Compensation Plan (the "2006 Equity Plan”).
PART
I
INFORMATION
REQUIRED IN THE SECTION 10(a) PROSPECTUS
The
documents containing the information required by Part I of Form S-8 have
been or will be sent or given to the participants in the Plans being registered
hereby as specified by Rule 428(b)(1) of Regulation C under the Securities
Act of 1933, as amended (the “Securities Act”), and such documents taken
together with the documents incorporated by reference in this registration
statement shall constitute a prospectus that meets the requirements of Section
10(a) of the Securities Act. Pursuant to Rule 428 of the Securities Act,
such documents are not required to be filed with the Securities and Exchange
Commission as part of this registration statement or as an Exhibit
hereto.
PROSPECTUS
CHINA
DIRECT, INC.
607,898
shares
of
Common
Stock
This
reoffer prospectus is a combined prospectus relating to shares of our common
stock, par value $0.0001 per share (the “Common Stock”), that have been
registered with the Securities and Exchange Commission (the “SEC”) and that have
been or may be acquired by certain of our employees and officers (the “Selling
Stockholders”) pursuant to awards made to them under our 2008 Non-Executive
Stock Incentive Plan (the “2008 Non-Executive Plan”) and our 2006 Equity
Compensation Plan (the “2006 Equity Plan”) (the 2008 Non-Executive Plan and the
2006 Equity Plan are hereinafter referred to as the “Plans”). The shares of
Common Stock relating to the 2008 Non-Executive Plan and the 2006 Equity Plan
issuable to the Selling Stockholders have been registered with the SEC on the
registration statement on Form S-8 of which this reoffer prospectus is filed as
a part.
The
Selling Stockholders are offering and selling up to 607,898 shares (the
“Shares”) of Common Stock that have been or hereafter may be acquired by the
Selling Stockholders pursuant to awards under the Plans, including 226,648
restricted shares of Common Stock pursuant to awards made to them under our 2008
Non-Executive Plan and 381,250 shares of Common Stock that have been or
hereafter may be acquired by such Selling Stockholders upon the exercise of
options to purchase Common Stock pursuant to awards made to them under our 2006
Equity Plan. We will not receive any proceeds from the sale of the Shares.
However, we will receive proceeds, if any, from the exercise of the options
granted under the Plans.
The
Selling Stockholders may offer their Shares through public or private
transactions, in the over-the-counter markets or on any exchanges on which our
Common Stock is traded at the time of sale, at prevailing market prices or at
privately negotiated prices. The Selling Stockholders may engage brokers or
dealers who may receive commissions or discounts from the Selling Stockholders.
We will pay substantially all of the expenses incident to the registration of
such shares, except for the selling commissions.
Our
Common Stock is listed on the NASDAQ Global Market under the symbol
"CDS". On December 1, 2008, the closing price of our common
stock was $1.48 per share.
INVESTING
IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING
ON PAGE 3 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN MATTERS THAT YOU
SHOULD CONSIDER BEFORE MAKING A DECISION TO PURCHASE OUR
SECURITIES.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is December 3, 2008
You
should rely only on the information contained or incorporated by reference into
this prospectus. We have not authorized any person to give any information or to
make any representations other than those contained or incorporated by reference
in this prospectus, and, if given or made, you must not rely upon such
information or representations as having been authorized. This prospectus does
not constitute an offer to sell or the solicitation of an offer to buy any
securities other than the securities described in this prospectus or an offer to
sell or the solicitation to buy such securities in any circumstances in which
such offer or solicitation is unlawful. You should not assume that the
information we have included in this prospectus is accurate as of any date other
than the date of this prospectus or that any information we have incorporated by
reference is accurate as of any date other than the date of the document
incorporated by reference regardless of the time of delivery of this prospectus
or of any securities registered hereunder.
When used
herein, "China Direct", "we", "us" or "our" refers to China Direct, Inc., a
Florida corporation, and our subsidiaries.
We are a
management and advisory services organization which owns and consults with
business entities operating in the People’s Republic of China (“PRC”). We
operate in two primary divisions: (i) Management Services and (ii) Advisory
Services. Our Management Services division acquires controlling interest in
Chinese business entities which we consolidate as either our wholly or majority
owned subsidiaries. Through this ownership control, we provide management advice
as well as investment capital, enabling these subsidiaries to successfully
expand their businesses. Our Advisory Services division provides consulting
services to Chinese entities seeking access to the U.S. capital markets. As of
the date of this prospectus, our Management Services division oversees 14
subsidiaries in various industries with over 2,100 employees in the PRC. Our
Advisory Services division currently has five clients which trade publicly in
the U.S. markets.
Within
our two divisions, we maintain and report three business segments as defined in
SFAS No. 131 after giving effect to our decision to exit the clean technology
segment during this period:
|
|
Magnesium
segment,
|
|
|
Basic
Materials segment, and
|
|
|
Consulting
segment.
|
Our
Magnesium segment is currently our largest segment by revenue, assets and number
of portfolio companies. Magnesium is used in a variety of markets and
applications due to the physical and mechanical properties of the element and
its alloys. Global production of magnesium was estimated to be approximately
755,000 metric tons in 2007. China represents approximately 80% of the global
production of magnesium. We currently have eight portfolio companies in our
Magnesium segment.
Our Basic
Materials segment includes the sale and distribution of industrial grade
synthetic chemicals consisting primarily of: glacial acetic acid and acetic acid
derivatives, acrylic acid and acrylic ester, vinyl acetate-ethylene (“VAE”) and
polyvinyl alcohol (“PVA”). In addition, through our subsidiary CDI (Beijing)
International Trading Co., Ltd, we are engaged in the distribution of wood and
steel products primarily to companies engaged in industrial and civil
construction projects in the PRC. We started construction at CDI Jixiang Metal
Co., Ltd. which we expect to complete in the first quarter of 2009 and are
awaiting an independent valuation of the ore deposits at this
location.
Our
Consulting segment provides services to Chinese entities seeking access to the
U.S. capital markets. These services include general business consulting,
Chinese regulatory advice, translation services; formation of entities in the
PRC, coordination of professional resources, strategic alliances and
partnerships, advice on effective means of accessing U.S. capital markets,
mergers and acquisitions, coordination of Sarbanes-Oxley compliance, and
corporate asset evaluations.
Our
Corporate Information
We were
incorporated in Delaware in July 1999. In June 2007 we domesticated
the company in the State of Florida. Our principal executive offices
are located at 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441, and
our telephone number at that address is (954) 363-7333. We maintain an Internet
website at www.chinadirectinc.com
.. We have not incorporated by reference into this prospectus the information in,
or that can be accessed through, our website, and you should not consider it to
be a part of this prospectus.
This
prospectus contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are
statements other than historical information or statements of current condition
and are based upon our current expectations and projections about future events.
When used in this prospectus, the words ‘‘believe’’, ‘‘anticipate’’, ‘‘intend’’,
‘‘estimate’’, ‘‘expect’’, ‘‘will’’, ‘‘should’’, ‘‘may’’ and similar expressions,
or the negative of such words and expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
such words or expressions. These forward-looking statements are subject to known
and unknown risks, uncertainties and other factors which may cause actual
results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. These forward-looking statements were
based on various factors and were derived utilizing numerous assumptions and
other factors that could cause our actual results to differ materially from
those in the forward-looking statements. These factors include, but
are not limited to: continued global economic weakness which is expected to
reduce demand for our products in each of our segments; our ability to acquire
operating companies in China in a cost effective manner that enhance our
financial condition; our need for additional financing which we may not be able
to obtain on acceptable terms, the dilutive effect additional capital raising
efforts in future periods may have on our current shareholders and the increased
interest expense in future periods related to additional debt financing; our
ability to effectively integrate our acquisitions and to manage our growth and
our inability to fully realize any anticipated benefits of acquired business;
the value of the equity securities we accept as compensation is subject to
adjustment which could result in losses to us in future periods; the Investment
Company Act of 1940 which limits the value of securities we can accept as
payment for our business consulting services which may limit our future
revenues; our dependence on certain key personnel; the lack various legal
protections in certain agreements to which we are a party and which are material
to our operations which are customarily contained in similar contracts prepared
in the United States; our ability to assure that related party transactions are
fair to our company; Yuwei Huang an executive officer of several of our
magnesium subsidiaries is also an owner and executive officer of several
companies which directly compete with our magnesium business; the risks and
hazards inherent in the mining industry on the operations of our basic materials
segment; the effect of changes resulting from the political and economic
policies of the Chinese government on our assets and operations located in the
PRC; the influence of the Chinese government over the manner in which our
Chinese subsidiaries must conduct our business activities; the impact on future
inflation in China on economic activity in China; the impact of any recurrence
of severe acute respiratory syndrome, or SAR’s, or another widespread public
health problem; the limitation on our ability to receive and use our revenues
effectively as a result of restrictions on currency exchange in China; our
ability to enforce our rights due to policies regarding the regulation of
foreign investments in China; our ability to comply with the United States
Foreign Corrupt Practices Act which could subject us to penalties and other
adverse consequences; and our ability to establish adequate management, legal
and financial controls in the PRC. Most of these factors are
difficult to predict accurately and are generally beyond our
control. You should consider the areas of risk described in
connection with any forward-looking statements that may be made
herein. Readers are cautioned not to place undue reliance on these
forward-looking statements and readers should carefully review this report in
its entirety, including the risks described in "Risk Factors." Except
for our ongoing obligations to disclose material information under the Federal
securities laws, we undertake no obligation to release publicly any revisions to
any forward-looking statements, to report events or to report the occurrence of
unanticipated events. These forward-looking statements speak only as
of the date of this prospectus, and you should not rely on these statements
without also considering the risks and uncertainties associated with these
statements and our business.
An
investment in our securities involves a significant degree of
risk. You should not invest in our securities unless you can afford
to lose your entire investment. You should consider carefully the
following risk factors and other information in this prospectus before deciding
to invest in our securities. If any of the following risks and
uncertainties develops into actual events, our business, financial condition or
results of operations could be materially adversely affected and you could lose
your entire investment in our company.
RISKS
RELATED TO OUR BUSINESS
THE
SUCCESS OF OUR BUSINESS MODEL IS DEPENDENT UPON OUR ABILITY TO ACQUIRE OPERATING
COMPANIES IN CHINA. THE ACQUISITION OF NEW BUSINESSES IS COSTLY AND SUCH
ACQUISITIONS MAY NOT ENHANCE OUR FINANCIAL CONDITION.
Our
primary business and operational focus is on our Management Services
division. Our growth strategy is to acquire companies or controlling
interests in companies that operate in China and that have services, products,
technologies, industry specializations or geographic coverage that extend or
complement our existing business. The process to undertake a
potential acquisition is time-consuming and costly. We expect to
expend significant resources to undertake business, financial and legal due
diligence on our potential acquisition targets and there is no guarantee that we
will acquire the company after completing due diligence. The process
of identifying and consummating an acquisition could result in the use of
substantial amounts of cash, potentially dilutive issuances of equity securities
and exposure to undisclosed or potential liabilities of acquired
companies. In addition, even if we are successful in acquiring
additional companies, there are no assurances that the operations of these
businesses will enhance our future financial condition. To the extent that a
business we acquire does not meet the performance criteria used to establish a
purchase price, some or all of the goodwill related to that acquisition could be
charged against our future earnings, if any.
WE
MAY NEED ADDITIONAL FINANCING TO FUND ACQUISITIONS AND OUR OPERATIONS WHICH WE
MAY NOT BE ABLE TO OBTAIN ON ACCEPTABLE TERMS. ADDITIONAL CAPITAL RAISING
EFFORTS IN FUTURE PERIODS MAY BE DILUTIVE TO OUR THEN CURRENT SHAREHOLDERS OR
RESULT IN INCREASED INTEREST EXPENSE IN FUTURE PERIODS.
We may
need to raise additional working capital to continue to make acquisitions and
fund our operations. Our future capital requirements depend, however,
on a number of factors, including our operations, the financial condition of an
acquisition target and its needs for capital, our ability to grow revenues from
other sources, our ability to manage the growth of our business and our ability
to control our expenses. If we raise additional capital through the
issuance of debt, this will result in increased interest expense. If
we raise additional capital through the issuance of equity or convertible debt
securities, the percentage ownership of our company held by existing
shareholders will be reduced and those shareholders may experience significant
dilution. As we will generally not be required to obtain the consent of our
shareholders before entering into acquisition transactions, shareholders are
dependent upon the judgment of our management in determining the number of, and
characteristics of stock issued as consideration in an
acquisition. In addition, new securities may contain certain rights,
preferences or privileges that are senior to those of our Common Stock. We
cannot assure you that we will be able to raise the working capital as needed in
the future on terms acceptable to us, if at all. If we do not raise capital as
needed, we will be unable to fully implement our business model, fund our
ongoing operations or grow our company.
OUR
MANAGEMENT MAY BE UNABLE TO EFFECTIVELY INTEGRATE OUR ACQUISITIONS AND TO MANAGE
OUR GROWTH AND WE MAY BE UNABLE TO FULLY REALIZE ANY ANTICIPATED BENEFITS OF
THESE ACQUISITIONS.
We are
subject to various risks associated with our growth strategy, including the risk
that we will be unable to identify and recruit suitable acquisition candidates
in the future or to integrate and manage the acquired companies. We
face particular challenges in that our acquisition strategy is based on
companies located in and operating within China. Acquired companies'
histories, the geographical location, business models and business cultures will
be different from ours in many respects. Even if we are successful in
identifying and closing acquisitions of companies, our directors and executive
management will face significant challenges in their efforts to integrate the
business of the acquired companies or assets and to effectively manage our
continued growth. Any future acquisitions will be subject to a number of
challenges, including:
|
|
•
|
the
diversion of management time and resources and the potential disruption of
our ongoing business;
|
|
|
•
|
difficulties
in maintaining uniform standards, controls, procedures and
policies;
|
|
|
•
|
unexpected
costs and time associated with upgrading both the internal accounting
systems as well as educating each of their staffs as to the proper methods
of collecting and recording financial data;
|
|
|
•
|
potential
unknown liabilities associated with acquired
businesses;
|
|
|
•
|
the
difficulty of retaining key alliances on attractive terms with partners
and suppliers; and
|
|
|
•
|
the
difficulty of retaining and recruiting key personnel and maintaining
employee morale.
|
There can
be no assurance that our efforts to integrate the operations of any acquired
assets or companies will be successful, that we can manage our growth or that
the anticipated benefits of these proposed acquisitions will be fully
realized.
THE
VALUE OF THE EQUITY SECURITIES WE ACCEPT AS COMPENSATION IS SUBJECT TO
ADJUSTMENT WHICH COULD RESULT IN LOSSES TO US IN FUTURE PERIODS.
Historically
we have accepted equity securities of our consulting clients as compensation for
services. These securities are reflected on our balance sheet as
"investment in marketable securities held for sale" and "investment in
marketable securities held for sale - related party". We evaluate quarterly the
carrying value of each investment for a possible increase or decrease in
value. Because we do not want to be considered an investment company,
it is to our benefit to keep the carrying values of these securities as low as
possible. This quarterly evaluation may result in an adjustment to
the carrying value of our investment in marketable securities which could
adversely affect our operating results for the corresponding quarters in that we
might be required to reduce the carrying value of these
investments. In addition, if we are unable to liquidate these
securities, we will be required to write off the investments which would
adversely affect our financial position.
THE
INVESTMENT COMPANY ACT OF 1940 WILL LIMIT THE VALUE OF SECURITIES WE CAN ACCEPT
AS PAYMENT FOR OUR BUSINESS CONSULTING SERVICES WHICH MAY LIMIT OUR FUTURE
REVENUES.
We have
historically accepted stock as payment for our services and will likely continue
to do so in the future, but only to the extent that it does not cause us to
become classified as an investment company under the Investment Company Act
1940. To the extent that we are required to reduce the amount of
stock we accept as payment for our business consulting services to avoid
becoming an investment company, our future revenues from our business consulting
services may substantially decline if our client companies cannot pay our fees
in cash. A reduction in the amount of our consulting fees will
materially adversely affect our financial condition and results of operations in
future periods. Any future change in our fee structure for our
business consulting services could also severely limit our ability to attract
business consulting clients in the future.
WE
ARE DEPENDENT ON CERTAIN KEY PERSONNEL AND THE LOSS OF THESE KEY PERSONNEL COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Our
success is, to a certain extent, attributable to the management, sales and
marketing, and operational expertise of key personnel of our subsidiaries in
China who perform key functions in the operation of our business as well as our
U.S. based management team. We do not exercise any substantive day to
day supervision over the activities of key members of our China based management
team which includes Messrs. Wuliang Zhang, Yuwei Huang and Jingdong
Chen. The loss of one or more of these key employees or our senior
management, including our chief executive officer and president could have a
material adverse effect upon our business, financial condition, and results of
operations and the results of operations.
CERTAIN
AGREEMENTS TO WHICH WE ARE A PARTY AND WHICH ARE MATERIAL TO OUR OPERATIONS LACK
VARIOUS LEGAL PROTECTIONS WHICH ARE CUSTOMARILY CONTAINED IN SIMILAR CONTRACTS
PREPARED IN THE UNITED STATES.
Our
subsidiaries include companies organized under the laws of the PRC and all of
their business and operations are conducted in China. We are a party to certain
contracts related to our operations in China. While these
contracts contain the basic business terms of the agreements between the
parties, these contracts do not contain certain clauses which are customarily
contained in similar contracts prepared in the U.S., such as representations and
warranties of the parties, confidentiality and non-compete clauses, provisions
outlining events of defaults, and termination and jurisdictional
clauses. Because our contracts in China omit these customary clauses,
notwithstanding the differences in Chinese and U.S. laws, we may not have the
same legal protections as we would if the contracts contained these additional
clauses. We anticipate that our Chinese subsidiaries will likely
enter into contracts in the future which will likewise omit these customary
legal protections. While we have not been subject to any adverse
consequences as a result of the omission of these customary clauses, and we
consider the contracts to which we are a party to contain all the material terms
of our business arrangements with the other party, future events may occur which
lead to a dispute which could have been avoided if the contracts included
customary clauses in conformity with U.S. standards. Contractual
disputes which may arise from this lack of legal protection could divert
management's time from the operation of our business, require us to expend funds
attempting to settle a possible dispute, limit the time our management would
otherwise devote to the operation of our business, and have a material adverse
effect on our business, financial condition and results of
operations.
FROM
TIME TO TIME WE ENGAGE IN RELATED PARTY TRANSACTIONS. THERE ARE NO ASSURANCES
THAT THESE TRANSACTIONS ARE FAIR TO OUR COMPANY.
From time
to time our subsidiaries enter into transactions with related parties which
include the payment of fees for consulting services, purchases from or sales to
a related party, and advancing related parties significant sums as prepayments
for future goods or services and working capital, among other
transactions. We have policies and procedures in place which require
the pre-approval of loans between related parties. Notwithstanding
these policies, we cannot assure you that in every instance the terms of the
transactions with related parties are on terms as fair as we might receive from
or extend to third parties.
YUWEI
HUANG AN EXECUTIVE OFFICER OF SEVERAL OF OUR MAGNESIUM SUBSIDIARIES IS ALSO AN
OWNER AND EXECUTIVE OFFICER OF SEVERAL COMPANIES WHICH DIRECTLY COMPETE WITH OUR
MAGNESIUM BUSINESS.
Mr. Yuwei
Huang who serves as an executive officer of several of our Magnesium segment
subsidiaries is also the Chairman of a competitor of ours, Taiyuan YiWei
Magnesium Industry Co., Ltd. (“YiWei Magnesium”). YiWei Magnesium, a
minority owner of two of our Magnesium segment subsidiaries, owns interests in
several other magnesium factories, a magnesium alloy factory and a magnesium
powder desulphurization reagent factory, all located in China. Due to
Mr. Huang’s interest in our competitors, he is subject to certain inherent
conflicts of interest and there can be no assurances that our business and
operations will not be adversely impacted as a result of these
conflicts.
THE
OPERATIONS OF OUR BASIC MATERIALS SEGMENT ARE SUBJECT TO RISKS AND HAZARDS
INHERENT IN THE MINING INDUSTRY.
Our Basic
Materials segment plans to engage in the mining and processing of zinc. If we
engage in the mining and processing of zinc, these operations are subject to
risks and hazards inherent in the mining industry, including, but not limited
to, ground fall, flooding, environmental hazards and the discharge of toxic
chemicals, explosions and other accidents, unanticipated variations in grade and
other geological problems, water conditions, surface or underground conditions,
metallurgical and other processing problems, mechanical equipment performance
problems, the lack of availability of materials and equipment, the occurrence of
accidents, labor force disruptions, force majeure factors, unanticipated
transportation costs, and weather conditions. Any of these risks
could result in work stoppages, delays in production, the development of
properties, production commencement dates and production quantities, increased
production costs and rates, damage to or destruction of mines and other
production facilities, injury or loss of life, damage to property, environmental
damage, and possible legal liability for such damages.
RISKS
RELATED TO DOING BUSINESS IN CHINA
A
SUBSTANTIAL PORTION OF OUR ASSETS AND OPERATIONS ARE LOCATED IN THE PRC AND ARE
SUBJECT TO CHANGES RESULTING FROM THE POLITICAL AND ECONOMIC POLICIES OF THE
CHINESE GOVERNMENT.
Our
business operations could be restricted by the political environment in the
PRC. The PRC has operated as a socialist state since 1949 and is
controlled by the Communist Party of China. In recent years, however,
the government has introduced reforms aimed at creating a "socialist market
economy" and policies have been implemented to allow business enterprises
greater autonomy in their operations. Changes in the political
leadership of the PRC may have a significant effect on laws and policies related
to the current economic reform programs, other policies affecting business and
the general political, economic and social environment in the PRC, including the
introduction of measures to control inflation, changes in the rate or method of
taxation, the imposition of additional restrictions on currency conversion and
remittances abroad, and foreign investment. Moreover, economic
reforms and growth in the PRC have been more successful in certain provinces
than in others, and the continuation or increases of such disparities could
affect the political or social stability of the PRC.
Although
we believe that the economic reform and the macroeconomic measures adopted by
the Chinese government have had a positive effect on the economic development of
China, the future direction of these economic reforms is uncertain and the
uncertainty may decrease the attractiveness of our company as an investment,
which may in turn result in a decline in the trading price of our Common
Stock.
WE
CANNOT ASSURE YOU THAT THE CURRENT CHINESE POLICIES OF ECONOMIC REFORM WILL
CONTINUE. BECAUSE OF THIS UNCERTAINTY, THERE ARE SIGNIFICANT ECONOMIC RISKS
ASSOCIATED WITH DOING BUSINESS IN CHINA.
Although
the majority of productive assets in China are owned by the Chinese government,
in the past several years the government has implemented economic reform
measures that emphasize decentralization and encourages private economic
activity. In keeping with these economic reform policies, the PRC has
been openly promoting business development in order to bring more business into
the PRC. Because these economic reform measures may be inconsistent
or ineffective, there are no assurances that:
• the
Chinese government will continue its pursuit of economic reform
policies;
• the
economic policies, even if pursued, will be successful;
• economic
policies will not be significantly altered from time to time; or
• business
operations in China will not become subject to the risk of
nationalization.
We cannot
assure you that we will be able to capitalize on these economic reforms,
assuming the reforms continue. Because our business model is
dependent upon the continued economic reform and growth in China, any change in
Chinese government policy could materially adversely affect our ability to
continue to implement our business model. China's economy has experienced
significant growth in the past decade, but such growth has been uneven across
geographic and economic sectors and has recently been slowing. Even
if the Chinese government continues its policies of economic reform, there are
no assurances that economic growth in that country will continue or that we will
be able to take advantage of these opportunities in a fashion that will provide
financial benefit to us.
THE
CHINESE GOVERNMENT EXERTS SUBSTANTIAL INFLUENCE OVER THE MANNER IN WHICH OUR
CHINESE SUBSIDIARIES MUST CONDUCT OUR BUSINESS ACTIVITIES.
The PRC
only recently has permitted provincial and local economic autonomy and private
economic activities. The government of the PRC has exercised and
continues to exercise substantial control over virtually every sector of the
Chinese economy through regulation and state ownership. Accordingly,
government actions in the future, including any decision not to continue to
support recent economic reforms and to return to a more centrally planned
economy or regional or local variations in the implementation of economic
policies, could have a significant effect on economic conditions in the PRC or
particular regions of the PRC, and could require us to divest ourselves of any
interest we then hold in our Chinese subsidiaries.
FUTURE
INFLATION IN CHINA MAY INHIBIT ECONOMIC ACTIVITY IN CHINA.
In recent
years, the Chinese economy has experienced periods of rapid expansion and high
rates of inflation. During the past 10 years, the rate of inflation
in China has been as high as 20.7% and as low as -2.2%. These factors
have led to the adoption by the PRC government, from time to time, of various
corrective measures designed to restrict the availability of credit or regulate
growth and contain inflation. While inflation has been more moderate
since 1995, high inflation in the future could cause the PRC government to
impose controls on credit and/or prices, or to take other action, which could
inhibit economic activity in China. Any actions by the PRC government
to regulate growth and contain inflation could have the effect of limiting our
ability to grow our revenues in future periods.
ANY
RECURRENCE OF SEVERE ACUTE RESPIRATORY SYNDROME, OR SARS, OR ANOTHER WIDESPREAD
PUBLIC HEALTH PROBLEM, COULD INTERRUPT OUR OPERATIONS.
A renewed
outbreak of SARS or another widespread public health problem in China could have
a negative effect on our operations. Our operations may be impacted by a number
of health-related factors, including the following:
|
|
•
|
quarantines
or closures of some of our offices which would severely disrupt our
operations;
|
|
|
•
|
the
sickness or death of our key management and employees; or
|
|
|
|
•
|
a
general slowdown in the Chinese economy.
|
|
An
occurrence of any of the foregoing events or other unforeseen consequences of
public health problems could result in a loss of revenues in future periods and
could impact our ability to conduct the operations of our Chinese subsidiaries
as they are presently conducted. If we were unable to continue the
operations of our Chinese subsidiaries as they are now conducted, our revenues
in future periods would decline and our ability to continue as a going concern
could be in jeopardy. If we were unable to continue as a going
concern, you could lose your entire investment in our company.
RESTRICTIONS
ON CURRENCY EXCHANGE MAY LIMIT OUR ABILITY TO RECEIVE AND USE OUR REVENUES
EFFECTIVELY. WE MAY NOT HAVE READY ACCESS TO CASH ON DEPOSIT IN BANKS IN THE
PRC.
Because a
substantial portion of our revenues are in the form of Renminbi (RMB), the main
currency used in China, any future restrictions on currency exchanges may limit
our ability to use revenue generated in RMB to fund any future business
activities outside China or to make dividend or other payments in U.S.
Dollars. Although the Chinese government introduced regulations in
1996 to allow greater convertibility of the RMB for current account
transactions, significant restrictions still remain, including primarily the
restriction that foreign-invested enterprises may only buy, sell or remit
foreign currencies, after providing valid commercial documents, at those banks
authorized to conduct foreign exchange business. In addition,
conversion of RMB for capital account items, including direct investment and
loans, is subject to government approval in China, and companies are required to
open and maintain separate foreign exchange accounts for capital account
items. At September 30, 2008 our PRC subsidiaries had approximately
$12.1 million on deposit in banks in China, which represented approximately 62%
of our cash. We cannot be certain that we could have ready access to
that cash should we wish to transfer it to bank accounts outside the PRC nor can
we be certain that the Chinese regulatory authorities will not impose more
stringent restrictions on the convertibility of the RMB, especially with respect
to foreign exchange transactions.
WE
MAY BE UNABLE TO ENFORCE OUR RIGHTS DUE TO POLICIES REGARDING THE REGULATION OF
FOREIGN INVESTMENTS IN CHINA.
The PRC's
legal system is a civil law system based on written statutes in which decided
legal cases have little value as precedent, unlike the common law system
prevalent in the United States. The PRC does not have a
well-developed, consolidated body of laws governing foreign investment
enterprises. As a result, the administration of laws and regulations
by government agencies may be subject to considerable discretion and variation,
and may be subject to influence by external forces unrelated to the legal merits
of a particular matter. China's regulations and policies with respect
to foreign investments are evolving. Definitive regulations and
policies with respect to such matters as the permissible percentage of foreign
investment and permissible rates of equity returns have not yet been
published. Statements regarding these evolving policies have been
conflicting and any such policies, as administered, are likely to be subject to
broad interpretation and discretion and to be modified, perhaps on a
case-by-case basis. The uncertainties regarding such regulations and
policies present risks which may affect our ability to achieve our stated
business objectives. If we are unable to enforce any legal rights we
may have under our contracts or otherwise, our ability to compete with other
companies in our industry could be limited which could result in a loss of
revenue in future periods which could have a material adverse effect on our
business, financial condition and results of operations.
FAILURE
TO COMPLY WITH THE UNITED STATES FOREIGN CORRUPT PRACTICES ACT COULD SUBJECT US
TO PENALTIES AND OTHER ADVERSE CONSEQUENCES.
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. Corruption, extortion, bribery, pay-offs, theft and other
fraudulent practices occur from time-to-time in the PRC. We can make
no assurance, however, that our employees or other agents will not engage in
such 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.
WE
MAY HAVE DIFFICULTY ESTABLISHING ADEQUATE MANAGEMENT, LEGAL AND FINANCIAL
CONTROLS IN THE PRC.
PRC
companies have in some cases, been resistant to the adoption of Western styles
of management and financial reporting concepts and practices, which include
sufficient corporate governance, internal controls and, computer, financial and
other control systems. In addition, we may have difficulty in hiring
and retaining a sufficient number of qualified employees to work in the
PRC. As a result of these factors, we may experience difficulties 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 with future
acquisitions. Therefore, we may, in turn, experience difficulties in
implementing and maintaining adequate internal controls. Any such deficiencies,
weaknesses or lack of compliance could have a material adverse effect on our
business, financial condition and results of operations.
RISKS
RELATED TO OUR SECURITIES
Investing
in the securities to be offered pursuant to this prospectus may involve certain
risks. In addition to the below risks regarding our Common Stock, we will
include a description of the material risks relating to particular securities in
the prospectus supplement for those securities. You should carefully consider
the important factors set forth herein and under the heading ‘‘Risk Factors’’ in
the applicable supplement to this prospectus before investing in any securities
that may be offered.
OUR
CONTROLLING STOCKHOLDERS MAY TAKE ACTIONS THAT CONFLICT WITH YOUR
INTERESTS.
As of the
date of this prospectus, all of our officers and directors beneficially own
approximately 58.3% of our Common Stock and will be able to exercise control
over all matters requiring stockholder approval, including the election of
directors, amendment of our certificate of incorporation and approval of
significant corporate transactions, and they will have significant control over
our management and policies. The directors elected by these stockholders will be
able to significantly influence decisions affecting our capital structure. This
control may have the effect of delaying or preventing changes in control or
changes in management, or limiting the ability of our other stockholders to
approve transactions that they may deem to be in their best interest. For
example, our controlling stockholders will be able to control the sale or other
disposition of our operating businesses and subsidiaries to another
entity.
THE
PRICE OF OUR COMMON STOCK MAY FLUCTUATE SUBSTANTIALLY AND YOUR INVESTMENT MAY
DECLINE IN VALUE.
The
market price of our Common Stock is likely to be highly volatile and may
fluctuate substantially due to many factors, including:
|
|
•
|
actual
or anticipated fluctuations in our results of operations from quarter to
quarter;
|
|
|
•
|
variance
in our financial performance from the expectations of market
analysts;
|
|
|
•
|
conditions
and trends in the end markets we serve and changes in the estimation of
the size and growth rate of these markets;
|
|
|
•
|
announcements
of significant acquisitions or contracts by us or our
competitors;
|
|
|
•
|
loss
of one or more of our significant customers;
|
|
|
•
|
legislation;
|
|
|
•
|
changes
in market valuation or earnings of our competitors;
|
|
|
•
|
the
trading volume of our Common Stock; and
|
|
|
•
|
general
economic conditions.
|
In
addition, the stock market in general, and the Nasdaq and the market for
companies with China based operations in particular, have experienced extreme
price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of the affected companies. These broad market and
industry factors may materially harm the market price of our Common Stock,
regardless of our operating performance. In the past, following periods of
volatility in the market price of a company’s securities, securities
class-action litigation has often been instituted against that company. Such
litigation, if instituted against us, could result in substantial costs and a
diversion of management’s attention and resources, which could have a material
adverse effect on our business, financial condition and results of
operations.
FUTURE
SALES OF COMMON STOCK BY SOME OF OUR EXISTING STOCKHOLDERS OR HOLDERS OF OUR
WARRANTS AND STOCK OPTIONS COULD CAUSE OUR STOCK PRICE TO DECLINE.
As of the
date of this prospectus, our Chief Executive Officer, President and Executive
Vice President – Advisory Services beneficially own approximately 58.1% of our
outstanding Common Stock or options to purchase our Common Stock. In
addition, holders of our warrants have the right to purchase 4,618,312 shares of
our Common Stock at prices ranging from $2.50 to $15.00 per
share. Holders of options to purchase shares of our Common Stock,
including the Selling Stockholders, have the right to purchase 6,571,220 shares
of our Common Stock at prices ranging from $0.01 to $56.25 per
share. Sales of such shares in the public market, as well as shares
we may issue upon the exercise of outstanding options, could cause the market
price of our Common Stock to decline significantly. The perception among
investors that these sales may occur could produce the same effect.
PROVISIONS
OF OUR ARTICLES OF INCORPORATION AND BYLAWS MAY DELAY OR PREVENT A TAKEOVER
WHICH MAY NOT BE IN THE BEST INTERESTS OF OUR SHAREHOLDERS.
Provisions
of our articles of incorporation and bylaws may be deemed to have anti-takeover
effects, which include when and by whom special meetings of our shareholders may
be called, and may delay, defer or prevent a takeover attempt. In addition,
certain provisions of Florida law also may be deemed to have certain
anti-takeover effects which include that control of shares acquired in excess of
certain specified thresholds will not possess any voting rights unless these
voting rights are approved by a majority of a corporation’s disinterested
shareholders. In addition, our articles of incorporation authorizes
the issuance of up to 10,000,000 shares of preferred stock with such rights and
preferences as may be determined by our Board of Director, of which 12,950
shares have been designated as our series A convertible preferred stock and the
remaining 9,987,050 shares remain without designation. Our board of
directors may, without shareholder approval, issue preferred stock with
dividends, liquidation, conversion or voting rights that could adversely affect
the voting power or other rights of our common shareholders.
RISKS
RELATED TO THIS OFFERING
This
prospectus permits Selling Stockholders to resell their shares of Common
Stock. If they do so, the market price for our Common Stock may fall
and purchasers of our Common Stock may be unable to resell them.
We have
summarized below certain key provisions of the 2006 Equity Compensation Plan
(the “2006 Equity Plan”). This summary may not contain all the information that
is important to you. You should review the entire 2006 Equity Plan, a copy of
which is included as Exhibit 10.14 to Form 8-K filed with the SEC on August 17,
2006.
Shares
Available
The
maximum number of shares of our Common Stock that were originally available
under the 2006 Equity Plan was 10,000,000. As of the date of this
Prospectus, 9,606,750 shares are available for issuance under that plan and only
381,250 shares are covered by this Registration Statement. No further
awards will be made under the 2006 Equity Plan.
Eligibility
All
employees, officers, outside directors, consultants and advisors are eligible to
participate in the 2006 Equity Plan.
Administration
The
administrator of the 2006 Equity Plan is the Compensation Committee of our Board
of Directors (the “Committee”). The Committee has the authority to, among other
things:
|
|
·
|
construe
the 2006 Equity Plan and any award under the 2006 Equity
Plan;
|
|
|
·
|
select
the directors, officers, employees and non-employee service providers to
whom awards may be granted and the time or times at which awards will be
granted;
|
|
|
·
|
determine
the number of shares of our Common Stock to be covered by or used for
reference purposes for any award;
|
|
|
·
|
modify, extend
or renew outstanding awards, or accept the surrender of
outstanding awards and substitute new
awards;
|
|
|
·
|
impose
any term, limitation or condition upon an award under the 2006 Equity Plan
that the Committee deems appropriate to achieve the objective of the 2006
Equity Plan;
|
|
|
·
|
adopt
rules and regulations for carrying out the 2006 Equity Plan;
and
|
|
|
·
|
amend
the terms and conditions of awards previously granted under the 2006
Equity Plan so long as such new terms and conditions are consistent with
the terms of the 2006 Equity Plan and that if such amendment is
detrimental to the participant in the 2006 Equity Plan, such participant's
consent is obtained.
|
Types
of Awards
The types
of awards that may be made under the 2006 Equity Plan are stock options, stock
appreciation rights, restricted stock awards, and reload options. The Committee
may fix the terms of each award, including, to the extent relevant, the
following: (1) exercise price for options, base price for stock appreciation
rights, and purchase price, if any, for restricted stock awards, (2) vesting
requirements and other conditions to exercise, (3) term and termination, (4)
effect, if any, of change of control and (5) method of exercise and of any
required payment by the recipient. Additional information concerning the types
of awards that may be made is set forth below.
Stock Options. The
Committee may grant options that are qualified as "incentive stock options"
under Section 422 of the Internal Revenue Code ("ISOs") and options that are not
so qualified ("Non-Qualified Options"). ISOs are subject to certain special
limitations, including the following: (1) the exercise price per share may not
be less than 100% of the fair market value per share of our Common Stock as of
the grant date (110% of such fair market value, if the recipient owns more than
10% of the total combined voting power of all classes of our outstanding
shares), (2) the term may not exceed 10 years, and (3) the recipient must be an
employee of our company.
Stock Appreciation
Rights. A stock appreciation right gives the holder the opportunity to
benefit from the appreciation of our Common Stock over a specified base price
determined by the Committee. Upon exercise of a stock appreciation right, the
holder has the right to receive in respect of each share subject thereto a
payment equal to the excess, if any, of: (1) the fair market value of a share of
our Common Stock as of the exercise date over (2) the specified base price. At
the discretion of the Committee, any required payment may be made in cash,
shares of our Common Stock, or both.
Restricted Stock
Awards. A restricted stock award entitles the recipient to acquire shares
of our Common Stock for no consideration or for the consideration specified by
the Committee. The shares will be subject to such vesting periods and other
restrictions and conditions as the Committee determines.
Reload Options.
Concurrently with the award of a Nonqualified Stock Option and/or Incentive
Stock Option, the Committee may grant a Reload Option to enable the employee to
purchase a number of shares for either cash or shares. The Reload Option becomes
effective only if the employee uses Common Stock of the company owned by him for
at least twelve months to purchase the shares issuable to him upon his exercise
of either the underlying Non-Qualified Option or ISO. The Reload
Option is designed to replace those shares used as the purchase price, and the
number of Reload Options will equal the number of shares of the company's Common
Stock used by the employee to exercise the underlying option. Reload options are
subject to the identical material restrictions as govern the respective
Non-Qualified Options or ISOs they replace. The Reload Option price
will be the fair market value of a share of our Common Stock (110% of such fair
market value, if the recipient owns more than 10% of the total combined voting
power of all classes of our outstanding shares) on the date the reload option
becomes effective, that is, the date on which the underlying option shall have
been exercised.
Certain
Corporate Transactions
If
certain corporate transactions specified in the 2006 Equity Plan occur, the
Committee may make appropriate or equitable adjustments to the 2006 Equity Plan
and awards, including (1) the number of shares of stock that can be granted; (2)
the number and kind of shares or other securities subject to any then
outstanding awards and (3) the exercise price, base price, or purchase price
applicable to outstanding awards under the 2006 Equity Plan.
The
Committee may cancel outstanding awards, but not outstanding stock or restricted
stock awards, in connection with any merger or consolidation of our company or
any sale or transfer of all or part of our assets or business, or any similar
event. The Committee may determine to make no compensation whatsoever for any
canceled awards that are not in-the-money (as defined below) or for any canceled
awards to the extent not vested. We are required to provide payment in cash or
other property for the in-the-money value of the vested portion of awards that
are in-the-money and that are canceled as aforesaid. Awards are in-the-money
only to the extent of their then realizable market value, without taking into
account the potential future increase in the value of the award (whether under
Black-Scholes-type formulas or otherwise).
Term
of 2006 Equity Plan
No award
may be granted under the 2006 Equity Plan after the close of business on July
28, 2016, the day immediately preceding the tenth anniversary of the effective
date of the 2006 Equity Plan. However, all awards made prior to such time will
remain in effect in accordance with their terms.
Certain
Federal Income Tax Considerations
Matters Relating to Section
162(m) of the Internal Revenue Code. Section 162(m) of the Internal
Revenue Code places a $1,000,000 annual limit on the compensation deductible by
us paid to certain of its executives. The limit, however, does not apply to
"qualified performance-based compensation." We believe that awards of stock
options, SARs and certain other "performance-based compensation" awards under
the 2006 Equity Plan will qualify for the performance-based compensation
exception to the deductibility limit.
Matters Relating to Change
of Control. The Committee may provide that the vesting of an
award be accelerated upon a change of control. In such event, all or a portion
of the relevant award may be deemed a "parachute payment." Under provisions of
the Internal Revenue Code, (1) the recipient of an "excess parachute payments"
(as defined in Section 280G of the Internal Revenue Code) would be required to
pay a 20% excise tax thereon (in addition to income tax otherwise owed) and (2)
the "excess parachute payment" would not be deductible to our company. If any of
our executive officers is required to pay such an excise tax, we will be
required to pay the executive an amount that is sufficient on an after-tax basis
to offset such payment.
Non-Qualified
Options. No income will be recognized by a participant upon the grant of
a non-qualified option. Upon exercise, the participant will generally have
ordinary income in the amount equal to the excess of the fair market value of
the shares acquired over the exercise price. The income recognized by an
employee participant will be subject to tax withholding. Upon a later sale of
such shares, the participant will have capital gain or loss in an amount equal
to the difference between the amount realized on such sale and the tax basis of
the shares sold. We will be entitled to a tax deduction in the same amount as
the ordinary income recognized by the participant with respect to shares
acquired upon exercise of the non-qualified option.
Incentive Stock
Options. No income will be recognized by a participant upon
the grant of an incentive stock option. Further, the participant will recognize
no income at the time of exercise (although a participant may have income for
purposes of alternative minimum tax calculations) and we will not be allowed a
deduction for federal income tax purposes in connection with the grant or
exercise of an option. If the participant holds the acquired shares two years
from the date of grant and one year from the date of exercise the entire gain
(or loss) realized when the participant eventually disposes of the stock is
treated as long term capital gain (or loss). If the shares are disposed of
before such holding period requirements are satisfied, the participant will
recognize ordinary income in an amount equal to the lesser of the difference
between (1) the exercise price and the fair market value of the shares on the
date of exercise or (2) the exercise price and the sales proceeds. Any remaining
gain or loss will be treated as capital gain or loss. We will be entitled to a
federal income tax deduction equal to the amount of ordinary income recognized
by the participant.
Effective
Date of the 2006 Equity Plan
The 2006
Equity Plan, as to the issuance of incentive stock options, become effective on
September 18, 2006.
We are
registering the Shares offered by this prospectus for the account of the Selling
Stockholders identified in the section of this prospectus entitled “Selling
Stockholders.” All of the net proceeds from the sale of the Shares will go to
the Selling Stockholders who offer and sell their Shares. We will not receive
any part of the proceeds from the sale of such Shares. We may receive proceeds
of up to approximately $1,100,625 if all the options are exercised and no
cashless-exercise procedure is used. We anticipate that any such proceeds will
be utilized for working capital and other general corporate purposes. We cannot
estimate how many, if any, options may be exercised for cash.
The
Selling Stockholders are persons listed in the table below who have acquired or
hereafter may acquire shares of Common Stock pursuant to awards under the Plans,
including 226,648 restricted shares of Common Stock and 381,250 shares of Common
Stock that have been or hereafter may be acquired upon the exercise of options
to purchase Common Stock. Each Selling Stockholder will receive all of the net
proceeds from the sale of his or her Shares offered by this Reoffer
Prospectus.
The table
and notes below describe, with respect to each Selling Stockholder, as of
December 1, 2008: (a) the name of the Selling Stockholder; (b) his or her
relationship to us during the last three years; (c) the total number of shares
of Common Stock he or she beneficially owned as of the date of this prospectus;
(d) the number of Shares which he or she may offer pursuant to this prospectus;
and (e) the amount and the percentage of our Common Stock that he or she would
own after completion of this offering, assuming he or she disposes of all of the
Shares being offered by him or her pursuant to this prospectus. The information
contained in this table and notes may be amended or supplemented from time to
time.
Name
and Position With Us
|
|
Number
of Shares Owned Prior to Offering
|
|
Number
of Shares
Registered
Hereby
|
|
Number
of Shares to Be Owned After
Offering(*)
|
|
|
|
|
|
|
|
|
|
Andrew
Goldrich(1)
|
|
85,300
|
|
62,250
|
|
23,050
|
|
Chaorui
Lu(2)
|
|
19,000
|
|
19,000
|
|
-
|
|
Clarke
Schaumann(3)
|
|
5,748
|
|
5,748
|
|
-
|
|
David
Barnes(4)
|
|
17,500
|
|
5,000
|
|
12,500
|
|
Gang
Liu(5)
|
|
1,200
|
|
1,200
|
|
-
|
|
George
Leibowitz(6)
|
|
5,000
|
|
5,000
|
|
-
|
|
Jianje
Ye(7)
|
|
15,000
|
|
3,000
|
|
12,000
|
|
Jie
Wu(8)
|
|
3,000
|
|
3,000
|
|
-
|
|
Lazarus
Rothstein(9)
|
|
5,700
|
|
5,700
|
|
-
|
|
Liang
Xu(10)
|
|
22,000
|
|
13,000
|
|
9,000
|
|
Liangming
Fang(11)
|
|
3,000
|
|
3,000
|
|
-
|
|
Lillian
Wong(12)
|
|
15,000
|
|
15,000
|
|
-
|
|
Lixing
Zhang(13)
|
|
22,000
|
|
13,000
|
|
9,000
|
|
Michael
Anise(14)
|
|
10,000
|
|
10,000
|
|
-
|
|
Michael
Feldman(15)
|
|
10,000
|
|
10,000
|
|
-
|
|
Qingchen
Zhao(16)
|
|
63,000
|
|
15,000
|
|
48,000
|
|
Shaojing
Guan(17)
|
|
6,000
|
|
6,000
|
|
-
|
|
Sheldon
Steiner(18)
|
|
27,500
|
|
5,000
|
|
12,500
|
|
Wuliang
Zhang(19)
|
|
150,000
|
|
44,000
|
|
106,000
|
|
Xiaowen
Zhuang(20)
|
|
401,540
|
|
256,000
|
|
145,540
|
|
Yi
Liu(21)
|
|
123,000
|
|
95,000
|
|
28,000
|
|
Yong
Xia(22)
|
|
22,000
|
|
13,000
|
|
9,000
|
|
TOTAL:
|
|
1,032,488
|
|
607,898
|
|
414,590
|
|
(*)
|
Assumes
all Shares registered under this prospectus will be
sold.
|
|
(1)
|
The
number of shares owned includes 70,300 shares of Common Stock underlying
options to purchase Common Stock at an exercise price of $2.50 expiring in
2011. The number of shares to be offered includes 47,250 shares
of Common Stock underlying options to purchase Common Stock at an exercise
price of $2.50 expiring in 2011 granted pursuant to the 2006 Equity Plan
and 15,000 shares of restricted Common Stock granted pursuant to the 2008
Non-Executive Plan.
|
|
(2)
|
The
number of shares owned and offered includes 19,000 shares of restricted
Common Stock granted pursuant to the 2008 Non-Executive
Plan.
|
|
(3)
|
The
number of shares owned and offered includes 5,748 shares of restricted
Common Stock granted pursuant to the 2008 Non-Executive
Plan.
|
|
(4)
|
The
number of shares owned includes 12,500 shares of Common Stock underlying
options to purchase Common Stock at an exercise price of $3.00 expiring in
2011. The number of shares offered includes 5,000 shares of
restricted Common Stock granted pursuant to the 2008 Non-Executive
Plan. Mr. David Barnes is a member of the board of
directors.
|
|
(5)
|
The
number of shares owned and offered includes 1,200 shares of restricted
Common Stock granted pursuant to the 2008 Non-Executive
Plan.
|
|
(6)
|
The
number of shares owned and offered includes 5,000 shares of restricted
Common Stock granted pursuant to the 2008 Non-Executive
Plan. Mr. George Leibowitz is a member of the board of
directors.
|
|
(7)
|
The
number of shares owned includes 12,000 shares of Common Stock underlying
options to purchase Common Stock at an exercise price of $5.00 expiring in
2012. The number of shares offered includes 3,000 shares of
restricted Common Stock granted pursuant to the 2008 Non-Executive
Plan.
|
|
(8)
|
The
number of shares owned and offered includes 3,000 shares of restricted
Common Stock granted pursuant to the 2008 Non-Executive
Plan.
|
|
(9)
|
The
number of shares owned and offered includes 5,700 shares of restricted
Common Stock granted pursuant to the 2008 Non-Executive
Plan.
|
|
(10)
|
The
number of shares owned includes 9,000 shares of Common Stock underlying
options to purchase Common Stock at an exercise price of $5.00 expiring in
2011. The number of shares offered includes 3,000 shares of
Common Stock underlying options to purchase Common Stock at an exercise
price of $5.00 expiring in 2011 granted pursuant to the 2006 Equity Plan
and 10,000 shares of restricted Common Stock granted pursuant to the 2008
Non-Executive Plan.
|
|
(11)
|
The
number of shares owned and offered includes 3,000 shares of restricted
Common Stock granted pursuant to the 2008 Non-Executive
Plan.
|
|
(12)
|
The
number of shares owned and offered 15,000 shares of Common Stock
underlying options to purchase Common Stock at an exercise price of $7.50
expiring in 2010 granted pursuant to the 2006 Equity
Plan.
|
|
(13)
|
The
number of shares owned includes 9,000 shares of Common Stock underlying
options to purchase Common Stock at an exercise price of $5.00 expiring in
2011. The number of shares offered includes 3,000 shares of
Common Stock underlying options to purchase Common Stock at an exercise
price of $5.00 expiring in 2011 granted pursuant to the 2006 Equity Plan
and 10,000 shares of restricted Common Stock granted pursuant to the 2008
Non-Executive Plan.
|
|
(14)
|
The
number of shares owned and offered includes 10,000 shares of restricted
Common Stock granted pursuant to the 2008 Non-Executive
Plan.
|
|
(15)
|
The
number of shares owned and offered 10,000 shares of Common Stock
underlying options to purchase Common Stock at an exercise price of $7.50
expiring in 2009 granted pursuant to the 2006 Equity
Plan.
|
|
(16)
|
The
number of shares owned includes 48,000 shares of Common Stock underlying
options to purchase Common Stock at an exercise price of $5.00 expiring in
2011. The number of shares offered includes 15,000 shares of
restricted Common Stock granted pursuant to the 2008 Non-Executive
Plan.
|
|
(17)
|
The
number of shares owned and offered includes 6,000 shares of restricted
Common Stock granted pursuant to the 2008 Non-Executive
Plan.
|
|
(18)
|
The
number of shares owned includes 10,000 shares of Common Stock and 12,500
shares of Common Stock underlying options to purchase Common Stock at an
exercise price of $3.00 expiring in 2011. The number of shares
offered includes 5,000 shares of restricted Common Stock granted pursuant
to the 2008 Non-Executive Plan. Mr. Sheldon Steiner is a member
of the board of directors.
|
|
(19)
|
The
number of shares owned includes 106,000 shares of Common Stock underlying
options to purchase Common Stock at an exercise price of $5.00 expiring in
2011. The number of shares offered includes 44,000 shares of
Common Stock underlying options to purchase Common Stock at an exercise
price of $2.50 expiring in 2011 granted pursuant to the 2006 Equity
Plan. Mr. Wuliang Zhang is executive vice president of our
magnesium segment.
|
|
(20)
|
The
number of shares owned includes 145,540 shares of Common Stock underlying
options to purchase Common Stock at an exercise price of $2.50 expiring in
2011. The number of shares offered includes 256,000 shares of
Common Stock underlying options to purchase Common Stock at an exercise
price of $2.50 expiring in 2011 granted pursuant to the 2006 Equity
Plan. Mr. Xiaowen Zhuang is general manager of CDI Shanghai
Management Co., Ltd., a wholly owned subsidiary of CDI China,
Inc. Mr. Zhuang is the brother of Yuejian (James) Wang Ph.D.,
our CEO and Chairman.
|
|
(21)
|
The
number of shares owned includes 28,000 shares of Common Stock underlying
options to purchase Common Stock at an exercise price of $2.50 expiring in
2012. The number of shares offered includes 95,000 shares of
Common Stock granted pursuant to the 2008 Non-Executive
Plan. Ms. Yi (Jenny) Liu, VP of Finance, serves as our
principal accounting and financial officer.
|
|
(22)
|
The
number of shares owned includes 9,000 shares of Common Stock underlying
options to purchase Common Stock at an exercise price of $5.00 expiring in
2011. The number of shares offered includes 3,000 shares of
Common Stock underlying options to purchase Common Stock at an exercise
price of $5.00 expiring in 2011 granted pursuant to the 2006 Equity Plan
and 10,000 shares of Common Stock granted pursuant to the 2008
Non-Executive Plan.
|
Unless
otherwise noted, all of the Selling Stockholders are either an employee,
consultant, former employee or former consultant to us. None of the
Selling Stockholders will own more than one percent of our Common Stock at
December 1, 2008 following the sale by such Selling Stockholder of all of
his or her Shares of Common Stock registered under this Reoffer
Prospectus.
Because
the Selling Stockholders may offer all or some of their Common Stock from time
to time, and none is obligated to sell any such shares, we cannot estimate the
amount of the Common Stock that will be held by the Selling Stockholders after
this offering. Also, this prospectus does not include awards that we may grant
to the Selling Stockholders in the future. Such shares may subsequently be sold
pursuant to this prospectus, as supplemented to reflect the offering of such
shares for resale or in transactions exempt from the registration requirements
of the Securities Act. See “Plan of Distribution” for further
information.
The
Selling Stockholders may resell under this prospectus up to 607,898 Shares that
have been or may be issued to the Selling Stockholders. The Selling Stockholders
may sell the Shares from time to time and may also decide not to sell all the
Shares they are permitted to sell under this prospectus. The Selling
Stockholders will act independently of us in making decisions with respect to
the timing, manner and size of each sale. The Selling Stockholders may effect
such transactions by selling the Shares to or through broker-dealers. Subject to
the restrictions described in this prospectus, the Shares being offered under
this prospectus may be sold from time to time by the Selling Stockholders in any
of the following ways:
|
|
·
|
through
a broker or brokers, acting as principals or agents. Transactions through
broker-dealers may include block trades in which brokers or dealers will
attempt to sell our Common Stock as agent but may position and resell the
block as principal to facilitate the transaction. Our Common Stock may be
sold through dealers or agents or to dealers acting as market makers.
Broker-dealers may receive compensation in the form of discounts,
concessions, or commissions from the Selling Stockholders and/or the
purchase of our Common Stock for whom such broker-dealers may act as
agents or to whom they sell as principal, or both (which compensation as
to a particular broker-dealer might be in excess of customary
commissions);
|
|
|
·
|
on
any national securities exchange or quotation service on which our Common
Stock may be listed or quoted at the time of sale, in the over-the-counter
market, or in transactions otherwise than on such exchanges or services or
in the over-the-counter market; or
|
|
|
·
|
in
private sales directly to
purchasers.
|
To the
extent required, this prospectus may be amended or supplemented from time to
time to describe a specific plan of distribution. In effecting sales,
broker-dealers engaged by the Selling Stockholders may arrange for other
broker-dealers to participate in the resales. The Selling
Stockholders may enter into option or other transactions with broker-dealers,
which require the delivery of shares to the broker-dealer. The broker-dealer may
then resell or otherwise transfer such shares pursuant to this
prospectus.
The
Selling Stockholders also may loan or pledge Shares to a broker-dealer. The
broker-dealer may sell the Shares so loaned, or upon a default the broker-dealer
may sell the Shares so pledged, pursuant to this prospectus. Broker-dealers or
agents may receive compensation in the form of commissions, discounts or
concessions from Selling Stockholders. Broker-dealers or agents may also receive
compensation from the purchasers of Shares for whom they act as agents or to
whom they sell as principals, or both. Compensation as to a particular
broker-dealer might be in excess of customary commissions and will be in amounts
to be negotiated in connection with transactions involving Shares.
Broker-dealers or agents and any other participating broker-dealers or the
Selling Stockholders may be deemed to be “underwriters” within the meaning of
Section 2(11) of the Securities Act in connection with sales of Shares.
Accordingly, any such commission, discount or concession received by them and
any profit on the resale of Shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act. Because the
Selling Stockholders may be deemed to be “underwriters” within the meaning of
Section 2(11) of the Securities Act, the Selling Stockholders will be subject to
the prospectus delivery requirements of the Securities Act. In addition, any
Shares of a Selling Stockholder covered by this prospectus which qualify for
sale pursuant to Rule 144 promulgated under the Securities Act may be sold under
Rule 144 rather than pursuant to this prospectus.
The
Shares may be sold by Selling Stockholders only through registered or licensed
brokers or dealers if required under applicable state securities laws. In
addition, in certain states the Shares may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied
with.
Under
applicable rules and regulations under the Exchange Act, any person engaged in
the distribution of Shares may not simultaneously engage in market making
activities with respect to our Common Stock for a period of two business days
prior to the commencement of such distribution. In addition, each Selling
Stockholder will be subject to applicable provisions of the Exchange Act and the
associated rules and regulations under the Exchange Act, including Regulation M,
which provisions may limit the timing of purchases and sales of Shares by the
Selling Stockholders. We will make copies of this prospectus available to the
Selling Stockholders and have informed them of the need for delivery of copies
of this prospectus to purchasers at or prior to the time of any sale of the
Shares.
We will
file a supplement to this prospectus, if required, pursuant to Rule 424(b) under
the Securities Act upon being notified by a Selling Stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
Shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer. Such supplement will
disclose:
|
|
·
|
the
name of each such Selling Stockholder and of the participating
broker-dealer(s);
|
|
|
·
|
the
number of Shares involved;
|
|
|
·
|
the
price at which such Shares were
sold;
|
|
|
·
|
the
commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
|
|
|
·
|
that
such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus;
and
|
|
|
·
|
other
facts material to the transaction.
|
We will
bear all costs, expenses and fees in connection with the registration of the
Shares. The Selling Stockholders will bear all commissions and discounts, if
any, attributable to the sales of the Shares.
Our
authorized capital stock consists of 1,000,000,000 shares of Common Stock, par
value $.0001 per share, 10,000,000 shares of preferred stock, par value $.0001
per share, of which 12,950 shares have been designated as Series A convertible
preferred stock. The following description of our Common Stock and
our preferred stock is a summary. You should refer to our articles of
incorporation and our bylaws for the actual terms of our capital
stock.
Common
Stock
As of
December 1, 2008 there were 23,477,142 outstanding shares of our Common
Stock. Holders of shares of Common Stock are entitled to one vote for
each share on all matters to be voted on by the shareholders. Holders
of Common Stock do not have cumulative voting rights. Holders of
Common Stock are entitled to share ratably in dividends, if any, as may be
declared from time to time by the board of directors in its discretion from
funds legally available therefor. In the event of a liquidation,
dissolution or winding up of our company, the holders of Common Stock are
entitled to share pro rata all assets remaining after payment in full of all
liabilities. All of the outstanding shares of Common Stock are fully
paid and non-assessable. Holders of Common Stock have no preemptive
rights to purchase our Common Stock. There are no conversion or
redemption rights or sinking fund provisions with respect to the Common
Stock.
Preferred
Stock
The board
of directors is authorized to provide for the issuance of shares of preferred
stock in series and, by filing an amendment pursuant to the applicable law of
Florida, to establish from time to time the number of shares to be included in
each such series, and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions thereof without any further vote or action by the
shareholders. Any shares of preferred stock so issued would have
priority over the Common Stock with respect to dividend or liquidation
rights. Any future issuance of preferred stock may have the effect of
delaying, deferring or preventing a change in control of our company without
further action by the shareholders and may adversely affect the voting and other
rights of the holders of Common Stock. At present, we have no plans
to issue any preferred stock nor adopt any series, preferences or other
classification of preferred stock.
The
issuance of shares of preferred stock, or the issuance of rights to purchase
such shares, could be used to discourage an unsolicited acquisition
proposal. For instance, the issuance of a series of preferred stock
might impede a business combination by including class voting rights that would
enable the holder to block such a transaction, or facilitate a business
combination by including voting rights that would provide a required percentage
vote of the shareholders. In addition, under certain circumstances,
the issuance of preferred stock could adversely affect the voting power of the
holders of the Common Stock. Although the board of directors is
required to make any determination to issue such stock based on its judgment as
to the best interests of our shareholders, the board of directors could act in a
manner that would discourage an acquisition attempt or other transaction that
some, or a majority, of the shareholders might believe to be in their best
interests or in which shareholders might receive a premium for their stock over
the then market price of such stock. The board of directors does not
at present intend to seek shareholder approval prior to any issuance of
currently authorized stock, unless otherwise required by law or stock exchange
rules. We have no present plans to issue any preferred
stock.
Series
A Convertible Preferred Stock
As of
September 30, 2008 there were 1,006.25 shares of our Series A convertible
preferred stock outstanding. The designations, rights and preferences
of the Series A convertible preferred stock include:
|
|
•
|
the
stated value of each share is $1,000;
|
|
|
•
|
the
shares have no voting rights;
|
|
|
•
|
the
shares pay quarterly dividends in arrears at the rate of 8% per annum
beginning on April 1, 2008 and on each conversion date. Subject
to certain conditions, the dividends are payable at our option in cash or
shares of our Common Stock valued at the lower of the conversion price or
the average of the weighted average price of our Common Stock on the 10
consecutive trading days immediately preceding the dividend
date;
|
|
|
•
|
each
share is convertible into shares of our Common Stock at a conversion price
of $7.00 per share, subject to adjustment in the event of default as
specified in the Series A convertible preferred stock. In the
event of a default, the conversion price will be 90% of the lower of the
conversion price or $7.45 until the default has been
cured;
|
|
|
•
|
the
conversion price of the Series A convertible preferred stock is subject to
proportional adjustment in the event of stock splits, stock dividends and
similar corporate events. In addition, the conversion price is
subject to adjustment if we issue or sell shares of our Common Stock for a
consideration per share less than the conversion price then in effect, or
issue options, warrants or other securities convertible or exchange for
shares of our Common Stock at a conversion or exercise price less than the
conversion price of the Series A convertible preferred stock then in
effect. If either of these events should occur, the conversion
price is reduced to the lowest price at which these securities were issued
or are exercisable;
|
|
|
•
|
the
Series A convertible preferred stock are not convertible to the extent
that (a) the number of shares of our Common Stock beneficially owned by
the holder and (b) the number of shares of our Common Stock issuable upon
the conversion of the Series A convertible preferred stock or otherwise
would result in the beneficial ownership by the holder of more than 4.99%
of our then outstanding Common Stock. This ownership limitation
can be increased to 9.99% by the holder upon 61 days notice to
us;
|
|
|
•
|
whenever
a holder converts all or any portion of the Series A convertible preferred
stock, if we should redeem the shares, or if the holder requests
redemption, we are required to issue the holder a number of shares a
number of shares (the "Make Whole Amount”) equal to the product of the
dividend rate and the stated value of the shares, subject to certain
instances in which we are required to pay that amount in cash;
and
|
|
|
•
|
the
shares are redeemable by us under certain conditions, and the holders may
also require us to redeem the shares upon the occurrence of certain
events.
|
Warrants
At
December 1, 2008 we have issued and outstanding warrants to purchase a total of
4,618,312 shares of our Common Stock at exercise prices ranging from $2.50 to
$15.00 per share as follows:
| |
|
|
Warrants
Outstanding and Exercisable
|
|
| |
|
|
|
|
|
Weighted
|
|
|
|
|
| |
|
|
|
|
|
Average
|
|
|
Weighted
|
|
| |
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
Rang
of
|
|
|
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Exercise
prices
|
|
|
Shares
|
|
|
Life
(Years)
|
|
|
Price
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
$
|
2.50
|
|
|
|
50,000
|
|
|
|
3.17
|
|
|
$
|
2.50
|
|
|
|
4.00
|
|
|
|
473,750
|
|
|
|
3.04
|
|
|
|
4.00
|
|
|
|
7.50
|
|
|
|
60,000
|
|
|
|
1.64
|
|
|
|
7.50
|
|
|
|
8.00
|
|
|
|
2,050,000
|
|
|
|
4.37
|
|
|
|
8.00
|
|
|
|
10.00
|
|
|
|
1,869,562
|
|
|
|
2.99
|
|
|
|
10.00
|
|
|
|
11.00
|
|
|
|
25,000
|
|
|
|
2.52
|
|
|
|
11.00
|
|
|
|
15.00
|
|
|
|
90,000
|
|
|
|
1.64
|
|
|
|
15.00
|
|
|
|
|
|
|
|
4,618,312
|
|
|
|
3.56
|
|
|
$
|
8.49
|
|
Certain
of the warrants are subject to anti-dilution protections afforded to the
purchasers. In the event we were to issue any shares of Common Stock or
securities convertible into or exercisable for shares of Common Stock to any
third party purchaser at an exercise price per share which is less than the
exercise price per warrant share without the consent of the holder of the
warrant, the holder has the right to elect to retroactively substitute any term
of any such other offering. This right is subject to certain limited exceptions,
including strategic license agreements, mergers and similar acquisitions and
certain option programs.
Transfer
agent
Computer
Share Trust Co., Inc. is the transfer agent for our Common Stock.
The
validity of the securities offered by this prospectus will be passed upon for us
by Lazarus Rothstein, Esq., our Vice President, General Counsel and Secretary.
Mr. Rothstein beneficially owns restricted shares of our Common Stock granted
under the 2008 Non-Executive Stock Incentive Plan.
Our
audited consolidated balance sheets as of December 31, 2007 and 2006, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the years ended December 31, 2007 and 2006 incorporated by reference
in the registration statement of which this prospectus is a part have been
audited by Sherb & Co., LLP, independent registered public accounting firm,
as indicated in their report with respect thereto, and have been so included in
reliance upon the report of such firm given on their authority as experts in
accounting and auditing.
We file
annual, quarterly and other reports, proxy statements and other information with
the SEC. You may read and copy any materials that we file at the
SEC's Public Reference Room, 100 F Street, N.E., Washington, D.C.
20549. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a website at www.sec.gov that contains reports, proxy and information
statements, and other information regarding issuers such as our company that
file electronically with the SEC. In addition, because our stock is
listed for trading on the NASDAQ Global Market, you can read and copy reports
and other information concerning us at the offices of the NASDAQ Stock Market
located at One Liberty Plaza, 165 Broadway, New York, New York
10006. We maintain a website at www.chinadirectinc.com. We
have not incorporated by reference into this prospectus the information in, or
that can be accessed through, our website, and you should not consider it to be
a part of this prospectus.
We have
filed with the SEC a registration statement on Form S-8 (of which this
prospectus is a part) under the Securities Act with respect to the securities to
be sold by pursuant to this prospectus. This prospectus does not contain all of
the information set forth in the registration statement because certain parts of
the registration statement are omitted in accordance with the rules and
regulations of the SEC. You should refer to the registration
statement, including the exhibits, for further information about us and the
securities being offered pursuant to this prospectus. Statements in
this prospectus regarding the provisions of certain documents filed with, or
incorporated by reference in, the registration statement are not necessarily
complete and each statement is qualified in all respects by that
reference. You may inspect a copy of the registration statement,
including the exhibits and schedules, without charge at the SEC’s Public
Reference Room; obtain a copy from the SEC upon payment of the fees prescribed
by the SEC; or obtain a copy from the SEC’s website.
Our
principal executive offices are located at 431 Fairway Drive, Suite 200,
Deerfield Beach, Florida 33441. Our telephone number at
this location is (954) 363-7333.
The SEC
allows us to "incorporate by reference" the information we file with them, which
means that we can disclose important information to you by referring you to
those documents. The information incorporated by reference is considered to be
part of this prospectus, and later information filed with the SEC will update
and supersede this information. We incorporate by reference the
documents listed below, any of such documents filed since the date this
registration statement was filed and any future filings with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
the termination of the offering of securities covered by this
prospectus:
|
|
·
|
our
Annual Report on Form 10-K for the year ended December 31,
2007;
|
|
|
·
|
a
Current Report on Form 8-K as filed on March 31,
2008;
|
|
|
·
|
a
second Current Report on Form 8-K as filed on March 31,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on April 2,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on May 1,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on May 8,
2008;
|
|
|
·
|
our
Quarterly Report on Form 10-Q for the period ended March 31, 2008 as filed
on May 8, 2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on May 12,
2008;
|
|
|
·
|
a
second Current Report on Form 8-K as filed on May 12,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on May 20,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on June 3,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on August 7,
2008;
|
|
|
·
|
our
Quarterly Report on Form 10-Q for the period ended June 30, 2008 as filed
on August 7, 2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on September 12,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on September 22,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on November 13,
2008;
|
|
|
·
|
our
Quarterly Report on Form 10-Q for the period ended September 30, 2008 as
filed on November 13, 2008; and
|
|
|
·
|
a
Current Report on Form 8-K as filed on November 20,
2008.
|
We will
provide without charge to any person to whom this prospectus is delivered, on
the written or oral request of such person, a copy of any or all of the
foregoing documents incorporated by reference, excluding exhibits, unless we
have specifically incorporated an exhibit in the incorporated
document. Written requests should be directed to: Corporate
Secretary, China Direct, Inc., 431 Fairway Drive, Deerfield Beach, Florida
33441.
Each
document or report subsequently filed by us pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 after the date hereof and prior
to the termination of the offering of the securities shall be deemed to be
incorporated by reference into this prospectus and to be a part of this
prospectus from the date of filing of such document, unless otherwise provided
in the relevant document. Any statement contained herein, or in a
document all or a portion of which is incorporated or deemed to be incorporated
by reference herein, shall be deemed to be modified or superseded for purposes
of the registration statement and this prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of the
registration statement or this prospectus.
INFORMATION
REQUIRED IN REGISTRATION STATEMENT
ITEM
3. INCORPORATION OF DOCUMENTS BY REFERENCE
The
following documents filed with the SEC are hereby incorporated by reference in
this Registration Statement:
|
|
·
|
our
Annual Report on Form 10-K for the year ended December 31,
2007;
|
|
|
·
|
a
Current Report on Form 8-K as filed on March 31,
2008;
|
|
|
·
|
a
second Current Report on Form 8-K as filed on March 31,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on April 2,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on May 1,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on May 8,
2008;
|
|
|
·
|
our
Quarterly Report on Form 10-Q for the period ended March 31, 2008 as filed
on May 8, 2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on May 12,
2008;
|
|
|
·
|
a
second Current Report on Form 8-K as filed on May 12,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on May 20,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on June 3,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on August 7,
2008;
|
|
|
·
|
our
Quarterly Report on Form 10-Q for the period ended June 30, 2008 as filed
on August 7, 2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on September 12,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on September 22,
2008;
|
|
|
·
|
a
Current Report on Form 8-K as filed on November 13,
2008;
|
|
|
·
|
our
Quarterly Report on Form 10-Q for the period ended September 30, 2008 as
filed on November 13, 2008; and
|
|
|
·
|
a
Current Report on Form 8-K as filed on November 20,
2008.
|
All
documents filed by the Company or the Plan under Section 13(a), 13(c), 14, and
15(d) of the Exchange Act after the date of this Registration Statement and
prior to the filing of a post-effective amendment to this Registration Statement
indicating that all securities offered have been sold or that deregisters the
distribution of all securities then remaining unsold, will be deemed to be
incorporated by reference into this Registration Statement and will be a part of
this Registration Statement from the date that document was filed. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for the purposes
of this Registration Statement to the extent that a statement contained in this
Registration Statement or in any other subsequently filed document that also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
ITEM
4. DESCRIPTION OF SECURITIES
Not
applicable.
ITEM
5. INTERESTS OF NAMED EXPERTS AND COUNSEL
The
validity of the securities has been passed upon by Lazarus Rothstein, Esq., Vice
President, General Counsel and Secretary for the Company. Mr. Rothstein
beneficially owns restricted shares of the Registrant’s Common Stock granted
under the 2008 Non-Executive Stock Incentive Plan.
ITEM
6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The
Florida Business Corporation Act permits the indemnification of directors,
employees, officers and agents of a Florida corporation. Under our articles of
incorporation and bylaws, our directors are not liable for monetary damages for
breach of fiduciary duty, except in connection with:
|
|
•
|
a
breach of the director's duty of loyalty to us or our
shareholders;
|
|
|
•
|
acts
or omissions not in good faith or which involve intentional misconduct,
fraud or a knowing violation of
law;
|
|
|
•
|
a
transaction from which our director received an improper benefit;
or
|
|
|
•
|
an
act or omission for which the liability of a director is expressly
provided under Florida law.
|
In
addition, our bylaws provide that we must indemnify our officers and directors
to the fullest extent permitted by Florida law for all expenses incurred in the
settlement of any actions against such persons in connection with their having
served as officers or directors. The effect of Florida law, our
articles of incorporation and our bylaws is to require us to indemnify our
officers and directors for any claim arising against those persons in their
official capacities if the person acted in good faith and in a manner that he or
she reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
We also
maintain an insurance policy under which coverage is provided to our directors
and officers to insure against certain liabilities that such persons may incur
in their capacities as directors and officers of the company.
To the
extent indemnification for liabilities arising under the Securities Act of 1933
may be permitted to our directors, officers or control persons, we have been
informed that in the opinion of the SEC, this indemnification is against public
policy as expressed in the Securities Act of 1933 and is
unenforceable.
ITEM
7. EXEMPTION FROM REGISTRATION CLAIMED
The award
of Shares of our Common Stock and Common Stock options to the Selling
Stockholders was made in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid and the
issuance of such shares, when completed, will qualify for exemption under
Section 4(2) of the Securities Act of 1933 since the sale by us did not involve
a public offering. The Selling Stockholders had access to information normally
provided in a prospectus regarding us. The offering was not a “public offering”
as defined in Section 4(2) due to the insubstantial number of persons involved,
size of the offering, manner of the offering and number of shares awarded. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, the Selling Stockholders had the necessary
investment intent as required by Section 4(2) since they Group agreed to allow
us to include a restrictive legend on any of the shares acquired stating that
such shares are restricted pursuant to Rule 144 of the 1933 Securities Act.
These restrictions ensure that these shares would not be immediately
redistributed into the market and therefore not be part of a “public offering”.
Based on an analysis of the above factors, we believe that we will have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the award of our Common Stock and options to purchase our Common
Stock.
ITEM
8. EXHIBITS
|
Exhibit
Number
|
Exhibit
|
|
5.1
|
|
|
10.1
|
2008
Non-Executive Stock Incentive Plan (incorporated herein by reference to
Appendix E filed as a part of the Company’s Proxy Statement filed with the
Commission on April 30, 2008 (Commission File No.
001-33694)).
|
|
10.2
|
2006
Equity Compensation Plan (incorporated herein by reference to Exhibit
10.14 filed as part of the Company’s Form 8-K filed with the Commission on
August 17, 2006 (Commission File No. 000-26415)).
|
|
23.1
|
|
|
23.2
|
Consent
of Lazarus Rothstein, Esq., Vice President, General Counsel and Secretary.
(included in Exhibit 5.1) (1)
|
|
24
|
Power
of Attorney (included on signature page to this Registration Statement).
(1)
|
ITEM 9.
UNDERTAKINGS
The
undersigned registrant hereby undertake:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range is reflected in
the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the " Calculation of
Registration Fee” table in the effective registration statement;
and
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement;
provided, however, that
paragraphs (1)(i) and (1)(ii) do not apply to this registration statement on
Form S-8 to the extent that the information required to be included in a
post-effective amendment by those paragraphs is contained in reports filed with
or furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That,
for purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3)
To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability of the registrant under the Securities
Act of 1933 to any purchaser in the initial distribution of the securities: The
undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
i. Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424;
ii.
Any free writing prospectus relating to the offering prepared by or on
behalf of the undersigned registrant or used or referred to by the undersigned
registrant;
iii.
The portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
iv.
Any other communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
(5)
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant’s annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan’s annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(6) Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the
Securities Act of 1933, as amended, the Registrant certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing
on Form S-8 and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Deerfield Beach,
Florida on December 3, 2008.
|
|
CHINA
DIRECT, INC.
|
|
|
|
|
|
|
By:
|
/s/
Yuejian (James) Wang
|
|
|
|
Yuejian
(James) Wang, Chief Executive Officer, Chairman, principal executive
officer
|
Each
person whose signature appears below hereby constitutes and appoints Yuejian
(James) Wang, David Stein and Lazarus Rothstein and each of them, his or her
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) and supplements to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, and hereby grants to such
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or either of them, or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/S/
Yuejian (James) Wang
|
|
Chief
Executive Officer and Chairman (Principal Executive
Officer)
|
|
December 3,
2008
|
|
Yuejian
(James) Wang
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Yi (Jenny) Liu
|
|
Vice
President, Finance, principal accounting and financial
officer
|
|
December 3,
2008
|
|
Yi
(Jenny) Liu,
|
|
|
|
|
|
|
|
|
|
|
|
/S/
Marc Siegel
|
|
President,
Director
|
|
December 3,
2008
|
|
Marc
Siegel
|
|
|
|
|
|
|
|
|
|
|
|
/S/
David Barnes
|
|
Director
|
|
December 3,
2008
|
|
David
Barnes
|
|
|
|
|
|
|
|
|
|
|
|
/S/
George Leibowitz
|
|
Director
|
|
December 3,
2008
|
|
George
Leibowitz
|
|
|
|
|
|
|
|
|
|
|
|
/S/
Sheldon Steiner
|
|
Director
|
|
December 3,
2008
|
|
Sheldon
Steiner
|
|
|
|
|
|
|
|
|
|
|