UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT
OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2020
Commission File Number: 333-226308
HUITAO TECHNOLOGY CO., LTD.
(Translation of registrant’s name into English)
9 North West Fourth Ring Road
Yingu Mansion Suite 1708, Haidian District
Beijing, People’s Republic of China 100190
Tel: +86 (10) 8520-5588
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Entry into Joint Venture Agreement
On March 10, 2020, CACM Group NY, Inc., (“CACM”) a New York corporation and wholly owned subsidiary of Huitao Technology Co., Ltd., a Cayman Islands company (“HHT” or “We”), entered into a certain joint venture agreement (the “JV Agreement”) with Baydolphin, Inc., a company organized under the laws of New York, (“Baydolphin”). Pursuant to the JV Agreement, among other things and subject to the terms and conditions contained therein, CACM and Baydolphin agreed to establish a limited company under the laws of New York, Baytao LLC (the “JV”), which will be the 100% owner of one or more operating entities in the U.S. to engage in the business of after-school education (the “Operating Entities”).
Pursuant to the JV Agreement, CACM shall contribute necessary capital for the Operating Entities to fund their operations and obtain the right to use of certain software platform and other technologies related to it from HHT, which will be provided to the JV and Operating Entities with no charge to facilitate the operation of the Operating Entities and provide online classes to the registered students of Operating Entities, and Baydolphin shall be responsible for managing the Operating Entities with its expertise in after-school education, including but not limited to recruiting and training personnel for the Operating Entities and implementing all promotional and marketing activities incidental to the Operating Entities. Eighty percent (80%) of the net profits or net loss of the joint venture will be distributed to or assigned to CACM and the remaining twenty percent (20%) being distributed to or assigned to Baydolphin.
The foregoing summary of the Joint Venture Agreement is subject to, and qualified in its entirety by, the full text of the form of Joint Venture Agreement, a copy of which are attached hereto as Exhibit 99.1.
Closing of a Private Placement
As disclosed in a Current Report on Form 6-K filed on January 23, 2020, HHT entered into a certain securities purchase agreement (the “SPA”) with Hou Sing International Business Limited (“Hou Sing”) pursuant to which the Company agreed to sell an aggregate of 2,000,000 ordinary shares at a per share purchase price of $1.00 (the “Shares”).
On March 12, 2020, the transaction contemplated by the SPA was consummated after all closing conditions were met and the Company issued the Shares to Hou Sing (the “Private Placement”). The Company received gross proceeds of $2,000,000.
Entry into Letter of Intent for Disposition
We currently have two lines of business: one is the engineering, production and sale of advanced ready-mix concrete for large scale construction projects in Beijing and surrounding area; and the other is the early childhood education service business which provide a smart education system to day cares and preschools in China. The concrete business is carried out by Xin Ao Construction Materials, Inc. (“Xin Ao”), which controls Beijing Xin Ao Concrete Group Co., Ltd. (“‘Beijing Xin Ao) via certain contractual arrangement. The Company’s recently acquired education service business is carried out via the Company’s wholly owned subsidiary, Sunway Kids International Education Group Ltd. (“Sunway Kids”), which controls Chengdu Hengshanghui Education Consulting Co., Ltd. via certain contractual arrangement.
Prior to acquisition of Sunway Kids in February 2020, our core business has been the concrete business. Our concrete business is highly affected by the economic cycle and government policies. The concrete industry was influenced by the decline in the macro economy in recent years. The entire concrete industry in the Beijing area experienced a slowdown in industry production and economic growth in the last few years as the Beijing government continues to enforce concrete production reformation and tightened environment laws from late 2017 to date. The reformation causes great uncertainties for local enterprises in the construction market. Since 2017, the pressure on small concrete companies has further increased and many have been shut down. Also, the Beijing government ordered the suspension of construction jobsites during winters to reduce air pollution since 2017. The operations of Beijing Xin Ao were also severely affected. As a result of the Company’s deteriorating cash position, we defaulted on bank loans and experienced a substantial increase in contingent liabilities. As of June 30, 2019, there was a default on a bank loan of $24,686,899. As of June 30, 2019, Beijing Xin Ao became subject to several civil lawsuits for which the Company estimated that it is more than likely to pay judgments in the amount of approximately $6.6 million (including interest and penalties of $1.3 million). During the years ended June 30, 2019 and 2018, there were additional estimated claims of approximately $3.5 million and $2.8 million, respectively.
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On November 18, 2019, we received a letter (the “Notification Letter”) from The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it was not in compliance with maintaining the minimum of $2.5 million in stockholders’ equity requirement for continued listing on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(1). On January 21, 2020, we received a letter (“Delisting Letter”) from Nasdaq notifying the Company that Nasdaq had determined to delist the Company’s securities from Nasdaq based upon the Company’s non-compliance with Nasdaq Listing Rule 5550(b)(1), unless the Company timely requested a hearing before a Nasdaq Hearings Panel (the “Panel”). Accordingly, the Company timely requested a hearing before the Panel and the Company is now awaiting the Panel’s decision. As discussed in more detail below, the Company believes it has taken certain actions to achieve compliance with the $2.5 million stockholders’ equity requirement for continued listing on The Nasdaq Capital Market and the Company is filing this Current Report to evidence such compliance.
The Company believes it would be very difficult, if possible at all, to turn around the concrete business. Although as of the date of this Current Report, the Company’s shareholders’ equity exceeds the minimum Nasdaq requirement of $2.5 million as discussed in detail below, management believes that the continued operation of the concrete business would pose challenges to maintaining the necessary minimum stockholder equity requirement over the long term. As such, the Company has been actively seeking to dispose the concrete business after the acquisition of Sunway Kids.
In that regard, on March 11, the Company, Xin Ao and Mr. Xianfu Han and Mr. Weili He (the “Purchasers”) entered into a non-binding letter of intent (“LOI”) pursuant to which the parties will pursue entering into a definitive agreement for the Purchasers to purchase all the issued and outstanding capital of Xin Ao from the Company for a purchase price to be determined, within the range of $500,000 to $1,000,000.
Stockholder Equity As of the Date of the Current Report
As disclosed in Current Report on Form 6-K filed on February 14, 2020, the Company completed the acquisition (the “Acquisition”) of Sunway Kids and issued 1,989,262 ordinary shares of the Company valued at approximately $4.18 million to the shareholders of Sunway Kids on February 14, 2020. Pursuant to the Acquisition agreement, the shareholders of Sunway Kids have the opportunity to earn additional cash consideration of up to $2 million based on achieving certain financial milestones over a five-year period that began on the date of closing of the Acquisition.
As disclosed in Current Report on Form 6-K filed on March 9, 2020, Hou Sing entered into certain loan assignment agreements dated January 15, 2020 with certain employees of the Beijing Xin Ao who had an outstanding debt to Beijing Xin Ao in the aggregate amount of approximately $4.26 million and delivered the full payment to the employees (the “Assigned Debt”). On January 15, 2020, the Company’s board of directors approved the conversion of the Assigned Debt as well as the conversion of debt in the aggregate amount of approximately $0.98 million that Beijing Xin Ao owed to Messrs. Xianfu Han, Weili He and an employee, at a per share conversion price of $1.54. The Company issued an aggregate of 3,403,037 ordinary shares of the Company to Hou Sing and Messrs. Xianfu Han, Weili He and the employee as a result of conversion of the aforementioned outstanding debts in the aggregate amount of approximately $5.24 million (the “Debt Conversion”).
As a result of the consummation of the Acquisition, Debt Conversion and Private Placement, the Company believes its stockholders’ equity exceeds The Nasdaq Capital Market continued listing requirement of $2.5 million, as set forth in Nasdaq Listing Rule 5550(b) as of the date of this Current Report.
Forward-Looking Statements
Certain statements made herein are “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “anticipate”, “believe”, “expect”, “estimate”, “plan”, “outlook”, and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Such forward-looking statements include timing of the proposed transaction; the business plans, objectives, expectations and intentions of the parties once the transaction is complete, and HHT’s estimated and future results of operations, business strategies, competitive position, industry environment and potential growth opportunities. These forward-looking statements reflect the current analysis of existing information and are subject to various risks and uncertainties. As a result, caution must be exercised in relying on forward-looking statements. Due to known and unknown risks, our actual results may differ materially from our expectations or projections. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
Financial Statements and Exhibits.
Exhibits.
| Exhibit No. | Description | |
| 99.1 | Joint Venture Agreement by and between CACM Group NY, Inc. and Baydolphin, Inc., dated March 10, 2020 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 16, 2020
| HUITAO TECHNOLOGY CO., LTD. | ||
| By: | /s/ Yang (Sean) Liu | |
| Name: | Yang (Sean) Liu | |
| Title: | Chief Executive Officer | |
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Exhibit 99.1
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT (the “Agreement”) is entered into as of March 10, 2020, by and between CACM Group NY, Inc. (“CACM”), a New York corporation, which is wholly owned by Huitao Technology Co., Ltd., (“Huitao”) and Baydolphin, Inc. (“Baydolphin”), a company organized under the laws of New York (each, a “Party”; collectively, the “Parties”);
WHEREAS, Baydolphin possesses the personnel and the knowledge to operate in the early childhood education business and is willing to establish a limited liability company, which shall 100% own one or more certain operating entities (the “Operating Entities”) in the United States to engage in the Business, on an exclusive basis with CACM;
WHEREAS, CACM is desirous of implementing the Business and is willing to provide the working capital and certain technology support for the Business and the Operating Entities;
WHEREAS, both CACM and Baydolphin believe that their combination of capabilities can successfully develop and operate the Business.
NOW, in consideration of their mutual promises, it is agreed as follows:
| 1. | JOINT VENTURE |
The Parties on this date create a joint venture named Baytao LLC (“JV”), a limited liability company in accordance with the laws of State of New York, for the purposes stated above, for the management and operation of the Business located at 1412 Broadway, 21st Floor, New York, NY 10018. The purpose of this Agreement is to clearly identify and describe the basis of understanding and the responsibilities of each Party as relates to the Business and the Operating Entities. The Parties agree to manage the JV in accordance with the LLC Operating Agreement of JV (the “Operating Agreement”)
| 2. | CONTRIBUTIONS AND RESPONSIBILITIES |
(a) Baydolphin, during the term of the JV, shall:
(i) provide its knowledge and expertise in the operation of the Business for each Operating Entity;
(ii) utilize JV’s working capital to operate and manage the Operation Entities for the benefit of the JV.
(iii) contribute the personnel and resources necessary for operation of the Operating Entities in a commercially reasonable manner consistent with the terms of the Operating Agreement in order to accomplish the following goals of the JV including but not limited to:
(A) negotiating agreements that are necessary to operate the Operating Entities in a commercially reasonable manner;
(B) recruiting teachers and other appropriate personal for each Operating Entity;
(C) organizing and implementing all promotions and marketing activities incidental to the Operating Entities.
(b) CACM, during the term of the JV, shall:
(i) contribute such an amount of capital to the JV pursuant to a budget for each Operating Entity jointly agreed to by the Parties (the “Operating Budget”), to fund the daily operation, including lease, recruiting and training personnel, marketing etc., of the Operating Entities within seven (7) business days upon the agreement of the Operating Budget for that particular Operating Entity.
(ii) obtain the right to use of certain software platforms and other related software technologies (the “Software”) from Huitao to facilitate the operation of Operating Entities and provide online classes to the registered students of Operating Entities. The Software shall be provided to be used by the JV and Operating Entities at no additional charge.
| 3. | PROPRIETARY RIGHTS. |
(a) The Parties agree that the leases and all other tangible and intangible assets including any intellectual property rights and know-how and the trademark of Baydolphin （倍多分） associated with the Baydolphin’s existing business located at 140-11 Ash Ave, a/k/a 43-31 Kissena Blvd, Flushing, NY 11355 (“Baydolphin Business”) shall remain the property of Baydolphin during the Term of this JV, and Baydolphin still has absolute rights to transfer, sell, assign any tangible and intangible assets and rights of Baydolphin Business during the Term of this JV.
(b) The Parties agree that all tangible and intangible assets including any intellectual property rights and know-how associated with the Software shall remain the property of Huitao during the Term of this JV, and Huitao still has absolute rights to transfer, sell, assign such tangible and intangible assets and rights of Huitao or CACM during the Term of this JV.
(c) Except as stipulated in this Sections 3(a) and 3(b), the Parties agree that the leases and all other tangible and intangible assets including any intellectual property rights and know-how associated with the Operating Entities or developed by the JV shall be the property of the JV during the Term of this JV.
(d) The Parties further agree that the Baydolphin Business is and shall continue to be separate from the JV and the JV’s Operating Entities unless JV and Baydolphin enters into written agreement.
| 4. | PROFITS & LOSSES. |
Subject to Term & Termination set forth in section 5 and section 6 below, Net Profits and Net Losses resulting from the JV shall be distributed as follows and in accordance with the Operating Agreement:
(a) The Net Profits of the Business shall be distributed and the percentage ownership of JV shall be as follows:
| CACM | 80% |
| Baydolphin | 20% |
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(b) Net Profits and Net Loss. As defined in the Operating Agreement, “Net Profits” and “Net Loss” shall mean for each fiscal year or other period, an amount equal to the JV’s taxable income or tax loss for such year or period. The JV shall allocate the Net Profits and Net Loss in accordance with the Operating Agreement;
| 5. | DISSOLUTION, LIQUIDATION AND TERMINATION |
(a) Upon dissolution, liquidation or termination of the JV, any remaining assets and cash of the JV shall be distributed in accordance with the terms of the Operating Agreement.
(b) If the JV is dissolved, liquidated or terminated before generating any profits from the operation of the Business, any remaining cash within the JV shall be distributed entirely to CACM after paying off all of the debts, liabilities and obligations incurred by the JV during the duration of its operation.
(c) In the event that the JV is dissolved, liquidated or terminated after it has generated certain profits from the operation of the Business, a liquidator shall be appointed by the Board of Managers of the JV to valuate the non-cash assets of the JV at fair market value.
(i) If the total value of all assets of the JV, including cash and non-cash assets, is less than one hundred thousand ($100,000) after paying off all of the debts, liabilities and obligations incurred by the JV during the duration of its operation, all the assets of the JV shall be distributed to CACM.
(ii) If the total value of all assets of the JV, including cash and non-cash assets, is more than one hundred thousand $100,000after paying off all of the debts, liabilities and obligations incurred by the JV during the duration of its operation, an equivalent of one hundred thousand $100,000 including cash and non-cash assets shall be first distributed to CACM; if there are any assets remaining after the distribution of one hundred thousand $100,000 assets to CACM, the remaining portion of assets shall be distributed to Baydolphin
(iii) After the distributions to both CACM and Baydolphin, any remaining value of the JV’s assets shall be distributed to other members of the JV in proportion to their respective interests in the JV.
| 6. | BOARD OF MANAGERS AND CHIEF EXECUTIVE OFFICER. |
(a) Pursuant to the Operating Agreement, the business of the JV shall be managed by the Board of Managers. CACM shall appoint three (3) of designees on the Board of Manager of the JV.and Baydolphin shall appoint two (2) of designees on the Board of Managers of the JV.
(b) The General Manger of the JV shall be appointed by CACM and report to the Board of Managers. All the capital expenditures that are above five thousand dollars ($5,000) shall be approved by the General Manager in advance.
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| 7. | TERM. |
The JV shall commence on the duly execution of this Agreement and the Operating Agreement (the “Transaction Documents”) (the “Commencement”) and continue until it is dissolved, liquidated and terminated pursuant to the Operating Agreement or as otherwise provided by law (with such period being referred to herein as the “Term”).
| 8. | SERVICES. |
Both of the Parties shall cooperate in carrying out the purposes of the JV and shall devote a substantial time to it, but both of the Parties may engage in any other business or activities.
| 9. | PUBLIC RELATIONS. |
The Parties shall not make any public statements, issue any press release, or disclose any details of this JV to any media, publicist, or the public at large, unless such statement is approved by the other Party in writing, and in advance of its publication.
| 10. | WARRANTIES. |
The Parties have the full power and authority and licenses and permits required by governmental authorities or otherwise necessary to carry on their businesses as now being conducted. The Parties have full power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and performance of this Agreement by the Parties has been duly and validly authorized by all necessary action on the part of the Parties and their shareholders/boards. This Agreement, when executed and delivered, shall constitute a valid and binding agreement, enforceable in accordance with its terms. The Parties’ execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder do not, and will not, violate, or result with the passage of time in the violation of, any provision of, or result in the acceleration or termination of, or entitle any Party to accelerate or terminate (whether after the giving of notice or lapse of time or both) any obligation under, or result in the creation or imposition of any lien, charge, pledge, security interest or other encumbrance upon any of the assets of the Parties pursuant to any provision of any mortgage, lien, lease, agreement, permit, indenture, license, instrument, law, order, arbitration award, judgment or decree to which any Party is a party or by which it or any of its assets may be hound. The Parties indemnify, defend and hold each other, and each of their respective affiliates, officers, directors, employees, agents, successors, and assigns harmless from and against any and all claims, losses, liabilities, damages, and expenses (including, without limitation, reasonable attorneys’ fees) arising from the inaccuracy of any representation or warranty made.
| 11. | LIMITS OF JOINT VENTURE. |
The relationship between the Parties shall be limited to the performance of this Joint Venture Agreement, solely in accordance with the terms of this Agreement. This Agreement shall be considered and deemed to be creating a joint venture for the sole purpose of carrying out the terms of this Agreement. Nothing herein shall be construed to create a general partnership between the Parties or to authorize either Party to act as general agent for the other Party, or to permit either Party to bid for or to undertake any other contracts for the other Party without the express written consent of the other Party.
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| 12. | ASSIGNMENT. |
Neither this Agreement nor any interest of either Party, including any interest in moneys belonging to or which may accrue to the JV in connection with this Agreement, or in any property of any kind employed or used in connection with this Agreement may be assigned, pledged, transferred, or hypothecated, without the prior written consent of the Parties hereto.
| 13. | ATTORNEY’S FEES AND LITIGATION COSTS. |
If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement, because of an alleged dispute, breach of, or default in connection with any of the provisions of this Agreement, the successful or prevailing Party shall be entitled to recover reasonable attorney’s fees and other costs incurred in that action or proceeding, in addition to any other relief to which that Party would be entitled.
| 14. | CONFIDENTIALITY. |
This Agreement is confidential. CACM and Baydolphin agree to treat any confidential information disclosed to it under this Agreement with strict confidentiality. Confidential Information includes any non-public information about either Party, including but not limited to financial information, technical information, and information about each other’s business strategy and know-how. Notwithstanding the foregoing, Baydolphin recognizes that U.S. securities laws govern the use of material, non-public information about CACM and/or its affiliated entities, and such information may be disclosed by the Parties as required by applicable law or regulation.
| 15. | ENTIRE AGREEMENT. |
This Agreement constitutes the entire agreement of the Parties with respect to the JV and supersedes all prior agreements, understandings and negotiations, whether written or oral, between the Parties. This Agreement may not be changed orally but only by an agreement or writing signed by all Parties which is expressly stated to be an amendment hereto.
| 16. | PROVISIONS SEVERABLE. |
In case any one or more provisions of this Agreement shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be in any way affected or impaired thereby.
| 17. | HEADINGS. |
Headings set forth herein are for the conveniences of the Parties only and not a part of the Agreement.
| 18. | INTERPRETATION. |
This Agreement shall be construed and interpreted under the laws of the State of New York.
| 19. | LOCATION. |
Any action or proceeding arising from this Agreement shall only be brought in the State of New York.
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| 20. | NOTICES. |
(a) All notices, requests, demands and other communication under this Agreement shall be in writing. Notices may be delivered personally, or by facsimile or by mail, postage prepaid, to the last known address of the Parties. A copy of any notices shall be sent to:
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To Baydolphin:
140-11 Ash Ave, IN Flushing, NY 11355 |
To CACM:
800 3rd Ave, 28th Floor New York, NY 10022 With a copy to (which shall not constitute a notice) Joan Wu, Esq. Hunter Taubman Fischer & Li LLC 1450 Broadway, 26th Floor New York, NY 10018 Fax: (212) 530 - 2208 |
(b) Any notices sent by mail, postage prepaid, will be deemed received three (3) business days after it is mailed. Each Party may designate a new address for purposes of this Agreement by notice to the other Party, in the manner set forth herein.
(c) Any notice sent by fax, will be deemed received on the business day sent, if the transmission receipt indicates successful transmission to the intended recipient before 5:00 p.m. EST that day, and one (1) business day after such transmission if the transmission receipt indicates successful transmission to the intended recipient between 5:00 p.m. EST and midnight that day.
| 21. | EXECUTION. |
This Agreement may be executed by facsimile and in one or more counterparts, each of which shall be deemed to be an original but, when taken together, shall constitute one agreement. The persons executing this Agreement represent that they have the necessary authority of their respective Party to do so.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year first above written.
| CACM GROUP NY, INC. | ||
| By: | /s/ Hui Xu | |
| Name: | Hui Xu | |
| Title: | Director | |
| Baydolphin, inc. | ||
| By: | /s/ Yicen Lin | |
| Name: | Yicen Lin | |
| Title: | General Manager | |
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