UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): December 27, 2016
CAT9 Group Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware | 000-55367 | 47-2948011 | ||
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) |
(COMMISSION FILE NO.) | (IRS EMPLOYEE IDENTIFICATION NO.) |
Yudong Miaoshitai #46-9, Banan District, Chongqing, China
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
86 023 6293 2061
(ISSUER TELEPHONE NUMBER)
Chongqing BanNan District, YuDong YingDan Plaza 63 3, Chongqing, China
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting Material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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FORWARD LOOKING STATEMENTS
There are statements in this registration statement that are not historical facts. These “forward-looking statements” can be identified by use of terminology such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions. You should be aware that these forward-looking statements are subject to risks and uncertainties that are beyond our control. For a discussion of these risks, you should read this entire Registration Statement carefully, especially the risks discussed under “Risk Factors.” Although management believes that the assumptions underlying the forward looking statements included in this Registration Statement are reasonable, they do not guarantee our future performance, and actual results could differ from those contemplated by these forward looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. In the light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements contained in this Registration Statement will in fact transpire. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We do not undertake any obligation to update or revise any forward-looking statements.
Factors that might cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors” contained in this report. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Except as required by law, we expressly disclaim any obligation to update publicly any forward-looking statements for any reason after the date of this report, to conform these statements to actual results, or to changes in our expectations. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this report.
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CAT9 Group Inc.
SECTION 1
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
See Item 2.01, below, regarding the discussion of the Share Exchange Agreement dated December 27, 2016 (the "Share Exchange Agreement"), which was entered by and among CAT9 Group Inc., a Delaware corporation ("CAT9"); CAT9 Holdings Ltd., an exempted company organized and incorporated with limited liability under the laws of the Cayman Islands ("CAT9 Cayman"); CAT9 Investment China Limited, a company organized under the laws of Hong Kong, ("CAT9 HK"); and its wholly-owned subsidiary, Chongqing Field Industrial Company Ltd, a company organized under the laws of the People's Republic of China. A copy of the Share Exchange Agreement is filed as Exhibit 2.1, and a copy of the Subsidiaries is filed as Exhibit 21.1 to this Current Report on Form 8-K.
Immediately prior to the Share Exchange, we cancelled and retired 9,000,000 shares of our issued and outstanding common stock, (the “Cancelled Shares”), reducing our issued and outstanding shares to 1,000,000 shares of common stock. A cash amount of $1 was paid to Wenfa “Simon” Sun and Meihong “Sanya” Qian, our majority shareholders and owners of the Cancelled Shares, as consideration for cancelling the Cancelled Shares in connection with the Share Exchange. We issued a total of 19,000,000 shares of common stock pursuant to the Share Exchange and as a result of the cancellation of the Cancelled Shares and the Share Exchange; we had 20,000,000 shares of common stock issued and outstanding following the Share Exchange.
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ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
OVERVIEW
As used in this report, unless otherwise indicated, the terms "we", "Company" and "CAT9" refer to CAT9 Group Inc. , a Delaware corporation, formerly known as ANDES 4 Inc. ("ANDES 4"), its wholly-owned subsidiary, CAT9 Holdings Ltd, a company organized under the laws of the Cayman Islands, ("CAT9 Cayman"); CAT9 Cayman's wholly-owned subsidiary, CAT9 Investment China Limited, a company organized under the laws of Hong Kong ("CAT9 HK"); and its wholly-owned subsidiary, Chongqing Field Industrial Company Ltd, a company organized under the laws of the People's Republic of China.
"China" or "PRC" refers to the People's Republic of China. "RMB" or "Renminbi" refers to the legal currency of China and "$" or "U.S. Dollars" refers to the legal currency of the United States.
HISTORY
CAT9 Group Inc. (Formerly, ANDES 4 Inc., or the “Company”, or "Issuer", or “CAT9”) was incorporated in the State of Delaware on January 26, 2015 and was originally organized as a "blank check" shell company to investigate and acquire a target company or business seeking the perceived advantages of being a publicly held corporation.
On July 31, 2015, the sole officer and director of the Company entered into a Share Purchase Agreement (the “SPA”) pursuant to which he entered into an agreement to sell an aggregate of 10,000,000 shares of his shares of the Company’s common stock to Chongqing Field Industrial Company Ltd. (“CQFI”) at an aggregate purchase price of $40,000. These shares represent 100% of the Company’s issued and outstanding common stock. Effective upon the closing date of the Share Purchase Agreement, August 12, 2015, the sole officer and director of the Company executed the agreement and owned no shares of the Company’s stock and CQFI was the majority stockholder of the Company.
On May 2, 2016, the Company entered into Employee Agreements with Wenfa "Simon" Sun, its President, Chief Executive Officer, and Chairman of the Board of Directors, and MeiHong "Sanya" Qian, its Chief Financial Officer and Secretary. Pursuant to the Employment Agreement, the Company issued 6,000,000 shares of restricted common stock to Wenfa "Simon" Sun, and 4,000,000 shares of restricted common stock to MeiHong "Sanya" Qian. Both individuals have served in their respective positions for the Company since August 12, 2015. Prior to May 2, 2016, the Company had 10,000,000 shares issued and outstanding, and as of May 2, 2016, the Company had 20,000,000 shares issued and outstanding.
On May 3, 2016, the sole shareholder of the Company, CQFI consented to redemption of its 10,000,000 shares held in the Issuer. The Company redeemed an aggregate of 10,000,000 from CQFI of the then 10,000,000 shares of outstanding stock at a redemption price of $0.0001 per share for an aggregate redemption price of $1,000 . As a result of this action by CQFI, management of the Company now control 100% of the issued and outstanding shares. As of May 4, 2016, the Company had 10,000,000 shares issued and outstanding.
With the redemption and subsequent issuance of the 10,000,000 shares of restricted common stock, the Company effected a change in its control and the new majority shareholders became the current members of management of the Company.
On December 27, 2016, CAT9 closed a share exchange transaction, described below, pursuant to which CAT9 became the 100% parent of CAT9 Cayman, assumed the operations of CAT9 Cayman and its subsidiaries, including CAT9 Investment China, and Chongqing Field Industrial Company Ltd.
CAT9 Cayman is a holding company incorporated in August 20, 2015, under the laws of the Cayman Islands. CAT9 Investment China Limited was incorporated in September 10, 2015, under the laws of Hong Kong. CAT9 Investment China is a window for the group to handle the business operations outside of China.
Chongqing Field Industrial Company Ltd is located in Chongqing, PRC and was incorporated under the laws of the PRC on June26, 2014. Since its inception, Chongqing Field Industrial Company Ltd has operated through strategic alliance and distribution rights agreements in the PRC, the Company is engaged in the marketing and sales of (1) fresh fruits, vegetables meats (including primarily organic and non-organic from both domestically grown and imported (2) Acquisition of land for the planting of Acer Truncatum trees and harvesting of Acer Truncatum seeds to produce edible oil, (3) providing Hi-Tech cooperative farm management services in the PRC and overseas and (4) farm machinery such as tractors, cultivation, seeding, irrigation, fertilization and harvesting equipment.
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CAT9 corporate logo
CQFI logo
CORPORATE STRUCTURE
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CAT9 Group Inc. (Formerly, ANDES 4 Inc., or the “Company”, or "Issuer", or “CAT9”) was incorporated in the State of Delaware on January 26, 2015 and was originally organized as a "blank check" shell company to investigate and acquire a target company or business seeking the perceived advantages of being a publicly held corporation.
On December 27, 2016, CAT9 Group Inc. (i) closed a share exchange transaction, described below, pursuant to which CAT9 Group Inc. became the 100% parent of CAT9 Cayman Limited, CAT9 Investment China Limited, (ii) and assumed the operations of Chongqing Field Industrial Company Ltd.
Our principal executive offices and corporate offices are located at Yudong Miaoshitai #46-9, Banan District, Chongqing, People's Republic of China.
PRINCIPAL TERMS OF THE SHARE EXCHANGE
On December 27, 2016, CAT9 Group Inc., (formerly ANDES 4 Inc.) entered into a Share Exchange Agreement (the "Exchange Agreement") with CAT9 Cayman Limited, a company organized under the law of the Cayman Islands ("CAT9 Cayman"); CAT9 Investment China Limited, a company organized under the laws of Hong Kong ("CAT9 HK"); and its wholly-owned subsidiary, Chongqing Field Industrial Company Ltd, a company organized under the laws of the People's Republic of China. Pursuant to the Exchange Agreement, CAT9 Group Inc. agreed to issue an aggregate of 19,000,000 shares of its common stock to the CAT9 Cayman shareholders in exchange for all of the issued and outstanding securities of CAT9 Cayman. The Share Exchange closed on December 27, 2016.
Immediately prior to the Share Exchange, we cancelled and retired 9,000,000 shares of our issued and outstanding common stock, (the “Cancelled Shares”), reducing our issued and outstanding shares to 1,000,000 shares of common stock. A cash amount of $1 was paid to Wenfa “Simon” Sun and Meihong “Sanya” Qian, our majority shareholders and owners of the Cancelled Shares, as consideration for cancelling the Cancelled Shares in connection with the Share Exchange. We issued a total of 19,000,000 shares of common stock pursuant to the Share Exchange and as a result of the cancellation of the Cancelled Shares and the Share Exchange; we had 20,000,000 shares of common stock issued and outstanding following the Share Exchange.
Upon the closing of the Share Exchange, CAT9 Group Inc. issued an aggregate of 19,000,000 shares of its common stock to the CAT9 Cayman shareholders in exchange for all of the issued and outstanding securities of CAT9 Cayman. Prior to the closing of the Share Exchange, stockholders of CAT9 Group Inc. canceled an aggregate of 9,000,000 shares held by them such that there were 1,000,000 shares of common stock outstanding immediately prior to the Share Exchange. Immediately after the closing of the Share Exchange, we had 20,000,000 shares of common stock, no shares of preferred stock, no options, and no warrants issued and outstanding
The transactions contemplated by the Share Exchange Agreement were intended to be a "tax-free" reorganization pursuant to the provisions of Sections 351 and/or 368(a) of the Internal Revenue Code of 1986, as amended. Our shares of common stock are not currently listed or quoted for trading on any national securities exchange or national quotation system.
A copy of the Share Exchange Agreement is filed as Exhibit 2.1, and a copy of the Subsidiaries is filed as Exhibit 21.1 to this
Current Report on Form 8-K.
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CAT9 GROUP INC. BUSINESS
Overview
Our operating subsidiary, Chongqing Field Industrial Company Ltd., (CQFI) sells food stuffs and machinery through our strategic alliance and distribution rights and agreements in the PRC , CQFI engages high technology platforms such as the WeChat mobile application that connects rural farming communities with industrial purchasers of fresh fruits, vegetables and meats, including primarily organic and non-organic from both domestically grown and imported stock, primarily to restaurants and food related businesses such as restaurants and food suppliers, merchants, stores and supermarkets . Recently the company has entered into the business of growing, harvesting and the production of edible oil with the acquisition of Acer Truncatum Plantations via two agreements which provide a total of 1400 Mu (230 Acres) of land in Yunnan Province, China.These two agreements are filed within this Current Report on Form 8-K as exhibits. .We also engage in marketing and sales of (1) fresh fruits, vegetables meats (including primarily organic and non-organic from both domestically grown and imported (2) Acquisition of land for the planting of Acer Truncatum trees and harvesting of Acer Truncatum seeds to produce edible oil, (3) providing Hi-Tech cooperative farm management services in the PRC and overseas and (4) farm machinery such as tractors, cultivation, seeding, irrigation, fertilization and harvesting equipment.
As of the date of this Current Report on Form 8-K, CQFI employs a staff of 15 people and is located in Chongqing Municipality at Yudong Miaoshitai #46-9, Banan District, Chongqing, The People's Republic of China.
Products and Market
CQFI provides a robust offering from food product suppliers within the municipality of Chongqing, China. Through distribution rights and agreements, CQFI works as the product suppliers’ representative utilizing high technology platforms such as the WeChat mobile application to offer products to end purchasers such as individual consumers, restaurants and food suppliers, merchants, stores and supermarkets.
Food Product Suppliers represented by CQFI
Chongqing BananMaotang Sugar Wine Business | Sugar & Wine |
Chongqing Nianrui Food Co., Ltd ChongQingHongGaoLei Agriculture Co.,Ltd ChongQingFenGuMeiDi beekeeper Co., Ltd ShanDong Donkey-hide gelatin Co.Ltd ChongQingZhenJiu Food Co.,Ltd Xingguo Red Land Ecological Agriculture Development Co., Ltd
|
Sausage Meats Dried Bamboo Honey Gelatin Agricultural Products (fruits/vegetables) Acer Truncatum
|
CQFI also seeks to establish 1,000,000 mu (about 164,737 acres) of organic agricultural industry base, producing more than 200 varieties of organic food, actively encouraging 200,000 farmers working specifically in organic agriculture. The company plans to support 100 agricultural machinery companies, 1000 agricultural cooperatives, 5000 large agricultural farmers, to promote economy through modern planting and harvesting machinery. CQFI will work together with farmers to establish agricultural cooperatives, to help students, laid-off workers and veterans to establish micro-enterprises, in order to development both urban and rural areas so that, suppressed land and rural property can be activated. CQFI expects this initiative to begin developing inQ1 2017.
Competitive Advantages
We believe that our competitive advantages include offering modern farming equipment and technology needed for productive and cost effective farming, utilizing Hi-Tech GPS crop machinery, unmanned aerial vehicle (UAV) drone technology, and cooperative management of growing, harvesting and delivery logistics. Our proximity to regional fruit production centers enables us to purchase fresh fruits directly from farmers, avoid the need to transport fresh fruit over long distances to processing facilities, reducing our transportation expenses and damage to fresh fruit during transportation and helps us maintain high quality of finished products by preserving freshness. In addition using innovative on-line off-line (O2O) marketing and distribution platform such as the WeChat mobile application allows the consumers to order their fresh foods directly to their door providing a much greater market penetration.
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Research and Development
We will continue to research and develop new methods for Hi-Tech seeding, irrigation, growth monitoring and harvesting to enhance the yield and productivity for farmers.
Sample of Products being offered via WeChat mobile application
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Industry and Principal Markets
Global Farm Management Market
According to Markets and Markets, a market research firm, the global farm management market is poised to grow to over $5.5 billion in total market value by the end of 2020, representing a compound annual growth rate (CAGR) of 12.64%. Global farm management products are highly segmented and are technology driven utilizing global positioning satellite technology (GPS), remote sensing, variable rate technology, hardware automation, yield, soil, water and climate sensing technology.
World Agricultural Equipment Market
We also address the agricultural equipment market by offering heavy machinery and farm equipment to potential customers. This market is expected to grow at a CAGR of 9.6% to reach $302 billion by 2022 according to Statistics MRC. Key drivers to this growth are expected to be world population growth, increase for food production demand, and the need for mechanization of farming techniques.
Principal Markets
We support farmers in the Chongqing region within China by marketing their products to customers through utilizing high technology platforms. Currently, this comprises the majority of our business activity. We expect to grow through expanding our business through additional lines of commerce such as offering heavy machinery and farm equipment to countries in Africa.
Internationally, we have a strong focus in developing business relations in Africa due to favorable population demographics. Africa has consistently been ranked as one of the poorest regions for food security in the world. There are many factors that contribute to this issue such as weather extremes, unstable government, war, hyperinflation, lack of resources and political crisis. Despite these issues, management believes there are tremendous opportunities within the farm and agricultural equipment market in Africa.
CQFI seeks to provide Chinese farm management to areas which we are currently in negotiation with Fe Corporation in West Africa and have entered into a letter of intent, who has made available for our business over 72,000 square kilometers of land for agriculture development and 124,000 square kilometers of water for fishing rights. In addition to the requirement for farm management, Fe Corporation will purchase farm machinery and equipment to implement their project of which CQFI has the ability to provide through its resource partnerships.
In addition, CQFI has recently entered into negotiation with Grupo Bermejo, a company in Argentina for importing various products such as meat, wheat and corn. Due to recent policy changes and trade restrictions being lifted with Argentina, we expect positive results in expanding both the import of food products to China as well as exportation of equipment and machinery to the farmers in Argentina.
The PRC Market Customers
The PRC has 20% of the world’s population, but only has 6% of arable land. This puts an incredible burden on the country and the government to fulfill the growing demands of China. Management believes that this will provide an excellent opportunity for our company to grow and be a major contributing factor in providing a solution to this challenging domestic problem. We are able to reach any customer who has access to the Internet and a mobile device. Our O2O initiative allows us to utilize high technology platforms such as the WeChat mobile application to reach our customers.
Additionally, we believe that the increased health awareness of consumers and the quality of living powered by the PRC’s economic growth will continue to fuel the demand for fresh organic and non-organic food products.
Competition
The markets in which we operate are competitive, rapidly evolving and subject to shifting customer demands and expectations. There are a number of companies that compete directly with our product offerings and some of our competitors have significantly more financial resources than we possess. These competitors however only use the internet and only one is national Yihaodian (yhd.com). The others Nogogo is located in southern China (nogogo.cn - Shenzhen), and Epermarket located in east China (epermarket.com - Shanghai).
We believe our competitive advantages include our unique O2O marketing and logistics platform which will reach more customers than our competitor’s conventional methods, as there are no other companies currently providing this sales and distribution method.
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Strategy
Our goal is to become a leading provider in farm food distribution and farm management equipment in China and overseas, particularly in Africa. We intend to achieve this goal by implementing the following strategies:
Maximize our existing resources to increase our profitability
· | Expanding our sales force both within the municipality and nationally through direct recruitment of sales and IT development staff |
· | In addition to our O2O sales and distribution platform we also have our own website. (www.cat9group.com) |
· | Strengthening relationship with our existing clients by offering sales promotion incentives such as discounts, and vacation travel packages through our affiliate resort and hotel partners. |
· | Continually expanding our product offerings on a regular basis. |
· | Developing further partnerships with farm machinery and equipment manufacturers. |
· | Developing a further client base of food distributors and importers throughout China. |
Initial Engagement in Africa and Argentina
CQFI seeks to provide Chinese farm management to areas which we are currently in negotiation with Fe Corporation in West Africa who has made available for our business over 6 million acres of land for agriculture development. In addition to the requirement for farm management, Fe Corporation will purchase farm machinery and equipment to implement their project of which CQFI has the ability to provide through its resource partnerships. CQFI has signed a letter of intent for this business transaction.
CQFI has recently entered into negotiation with Grupo Bermejo, a company in Argentina for importing various products such as meat, wheat and corn. Due to recent policy changes and trade restrictions being lifted with Argentina, we expect positive results in expanding both the import of food products to China as well as exportation of equipment and machinery to the farmers in Argentina.
Focus on improved efficiencies
We will continue to focus on efforts on improving the overall efficiency of O2O performance through exploring various options on new technologies and alternative platforms to benefit both our farming clients and our customers. We will address issues that arise from our farm management and equipment business, primarily; product safety, environmental protection, occupational health, compliance with requirements of import and export rules and regulations.
Suppliers
CQFI suppliers of food product suppliers are located principally within the municipality of Chongqing, China. Through distribution rights and agreements, CQFI works as the product suppliers’ representative utilizing high technology platforms such as the WeChat mobile application to offer products to end purchasers such as restaurants and food suppliers, merchants, stores and supermarkets.
Marketing, Sales and Distribution
We market our products through three primary methods: direct contact with foreign businesses, attendance at exhibitions we sponsor, sales made through on-line and offline platforms (O2O) such as WeChat, and expect to reach customers through our website. Our marketing and sales teams work closely together to maintain a consistent message to our customers of delivering high quality and farm fresh products.
Our export business is primarily comprised of farm machinery, equipment and farm management.
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PRC Government Regulations
Our products are subject to central government regulation as well as provincial government regulation in Chongqing and Sichuan Provinces. Business and product licenses must be obtained through application to the central, provincial and local governments. We have obtained our business licenses to operate domestically under the laws and regulations of the PRC. We obtained business licenses to conduct businesses, including an operating license to sell packaged foods, fruits and vegetables, fruit sugar, fruit pectin, dried fruits and vegetables, dehydrated fruits and vegetables, fruit and vegetable juice drinks, and organic food. Business, company and distributor product registrations are certified on a regular basis and comply with the laws and regulations of the PRC, provincial and local governments and industry agencies.
In accordance with PRC laws and regulations, all our suppliers are required to comply with applicable hygiene and food safety standards in relation to our production processes. Failure to pass these inspections, or the loss of or failure to renew our licenses and permits, could require us to temporarily or permanently suspend some or all of our production activities, which could disrupt our operations and adversely affect our business.
In the PRC, we will have to comply with the laws and regulations relating to the distribution of Internet content in China such as the Application of the Appropriate Internet Content Provider License and our data usage policy has to be in accordance with Regulations of The People’s Republic of China for Safety Protection of Computer Information System.
Employment Laws
We are subject to laws and regulations governing our relationship with our employees, including: wage and hour requirements, working and safety conditions, and social insurance, housing funds and other welfare that may be applicable. These include local labor laws and regulations, which may require substantial resources for compliance.
China's National Labor Law, which became effective on January 1, 1995, and China's National Labor Contract Law, which became effective on January 1, 2008, permits workers in both state and private enterprises in China to bargain collectively. The National Labor Law and the National Labor Contract Law provide for collective contracts to be developed through collaboration between the labor union (or worker representatives in the absence of a union) and management that specify such matters as working conditions, wage scales, and hours of work. The laws also permit workers and employers in all types of enterprises to sign individual contracts, which are to be drawn up in accordance with the collective contract. The National Labor Contract Law has enhanced rights for the nation's workers, including permitting open-ended labor contracts and severance payments. The legislation requires employers to provide written contracts to their workers, restricts the use of temporary labor and makes it harder for employers to lay off employees. It also requires that employees with fixed-term contracts be entitled to an indefinite-term contract after a fixed-term contract is renewed twice or the employee has worked for the employer for a consecutive ten-year period.
Foreign Currency Exchange
The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations promulgated by the State Council, as amended on August 5, 2008, or the Foreign Exchange Regulations. Under the Foreign Exchange Regulations, the RMB is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless prior approval of the PRC State Administration of Foreign Exchange, or SAFE is obtained and prior registration with the SAFE is made. Foreign-invested enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial documents and, in the case of capital account item transactions, obtaining approval from the SAFE. Capital investments by foreign-invested enterprises outside of China are also subject to limitations, which include approvals by the Ministry of Commerce ("MOFCOM"), the SAFE and the State Reform and Development Commission.
Dividend Distributions
Under applicable PRC regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reach 50% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation.
Properties
Our principal executive offices are located at: Yudong Miaoshitai #46-9, Banan District, Chongqing, China
Legal Proceedings
We are not involved in any material legal proceedings outside of the ordinary course of our business.
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RISK FACTORS
Any investment in our common stock involves a high degree of risk. Investors should carefully consider the risk described below and all of the information contained in this Current Report on Form 8-K before deciding whether to purchase our common stock. Our business, financial condition or results of operations could be materially adversely affected by these risks if any of them actually occur. Our shares of common stock are not currently listed or quoted for trading on any national securities exchange or national quotation system. If and when our common stock is traded, the trading price could decline due to any of these risks, and an investor may lose all or part of his or her investment. Some of these factors have affected our financial condition and operating results in the past or are currently affecting us. This Current Report on Form 8-K also contains forward-looking statements that involve risk and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this Current Report on Form 8-K.
RISKS RELATED TO OUR BUSINESS
Our future success depends on our ability to increase revenues from our O2O initiative and new markets such as Africa
We believe that our future success depends on our ability to significantly increase revenue from our O2O (online-offline) platform we utilize from third party providers such as WeChat, a mobile application accessible via mobile phone. We plan to grow by increasing our product output by adding new farm clients, developing new arrangements to expand our farm client's products, and enter new markets in China and internationally. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by growing companies, including:
· | Developing new methods for marketing in a rapidly changing technological world; |
· | Entering new markets in a cost effective manner; |
· | Expanding on domestic O2O sales and to increase awareness of our client's products as well as our own to capture market share; |
· | Responding to competitive pressures; |
· | Maintaining and developing relationships with customers and suppliers; and |
· | Attracting and retaining qualified management, consultants and employees. |
The success of our business is dependent upon our ability to secure food product at competitive prices, additionally the same can be said for our farm equipment business.
Our ability to generate revenue depends in large part upon our ability to secure farm sales agreements with qualified farmers at competitive prices. We also face numerous competitive forces with other firms that compete directly against us for farm sales agreements, additionally; we will face competition from other firms that will seek to implement their own O2O strategy. If our farm clients decide to utilize their own O2O strategy directly we will likely be removed from the sales chain and lose a substantial majority of our current business. Our ability to secure farm management services and equipment depends on securing competitive pricing for farm equipment as well as securing economically sensible agreements in areas which we intend to operate such as Africa and other countries. If we fail to secure any of the aforementioned, our business, financial condition and results of operations will be materially adversely affected.
We depend on a limited number of suppliers for a substantial majority of our food product.
We currently work with seven farm suppliers for various products. We are aggressively seeking out additional farm suppliers which we could engage. However, we are dependent on our seven farm suppliers for products and for the previous two years and the nine months ended September 30, 2016, these seven suppliers accounted for 100% of our total sales. If we are unable to obtain additional suppliers to meet customer demand, or develop alternative supply sources, we may be unable to satisfy customers' orders which would materially and adversely affect our revenues and our relationship with our customers. Furthermore, we are dependent on our suppliers for timely delivery of food supplies to customers. Should our suppliers fail to deliver such food products on time, and if we are unable to source these food supplies from alternative suppliers on a timely basis, our revenue and profitability would be adversely affected.
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Changes in Chinese environmental regulations and enforcement policies could subject us to additional liability and adversely affect our ability to continue certain operations.
In regards to our farm management and equipment operations, the Chinese environmental regulations continue to develop and evolve rapidly; therefore, we cannot predict the extent to which our operations may be affected by future enforcement policies as applied to existing laws, by changes to current environmental laws and regulations, or by the enactment of new environmental laws and regulations. There are numerous Chinese provincial and local laws and regulations relating to the protection of the environment and the ultimate impact of complying with such laws and regulations is not always clearly known or determinable because regulations under some of these laws have not yet been promulgated or are undergoing revision. Our business and operating results could be materially and adversely affected if we were required to increase expenditures to comply with any new environmental regulations affecting our operations. We may, in the future, receive citations or notices from governmental authorities that our operations are not in compliance with our permits or certain applicable regulations, including various transportation, environmental or land use laws and regulations. Should we receive such citations or notices, we would generally seek to work with the authorities to resolve the issues raised by such citations or notices. There can be no assurance, however, that we will always be successful in this regard, and the failure to resolve a significant issue could result in adverse consequences to us. As a result, we could incur material liabilities resulting from the costs of complying with environmental laws, environmental permits or any claims concerning noncompliance, or liability from contamination.
We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist at our facilities or at third-party sites for which we are liable. Enactment of stricter laws or regulations, stricter interpretations of existing laws and regulations or the requirement to undertake the investigation or remediation of currently unknown environmental contamination at our own or third-party sites may require us to make additional material expenditures, which would adversely affect our profitability.
We have depended on a small number of farm suppliers to provide for our sales to our O2O customers on the WeChat mobile application. If an incurable event within our relationship occurred, or a reduction in farm yields or natural disasters, or weather conditions in China within the Chongqing region from any of these customers could cause a significant decline in our sales and profitability.
Our sales are generated from representing a small number of farm suppliers. During the previous two years and the nine months ended September 30, 2016, we had seven farm suppliers that we represented that generated 100% of our total revenues, respectively. We believe that we are dependent upon a small number of farm clients that we represent for a significant majority of our sales and the loss or reduction in business from any of these farm clients could cause a significant decline in our sales and profitability.
We do not carry any business interruption or liability insurance . As a result, we may incur uninsured losses, increasing the possibility that you would lose your entire investment in our company .
We could be exposed to liabilities or other claims for which we would have no insurance protection. We do not currently maintain any business interruption insurance or any other comprehensive insurance policy. As a result, we may incur uninsured liabilities and losses as a result of the conduct of our business. Business disruption insurance is available to a limited extent in China, but we have determined that the risks of disruption, the cost of such insurance and the difficulties associated with acquiring such insurance make it impractical for us to have such insurance. Should uninsured losses occur, any purchasers of our common stock could lose their entire investment.
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Our business is affected by competition and substantial technological change.
We currently face competition from many other companies that offer farm food products that may be lower than the prices we charge. Many of these companies have substantially greater financial and other resources than us and, therefore, are able to spend more than us in areas such as product development and marketing.
Competitors may develop, use, create alternative innovative methods to sell, market and distribute farm food products that render our products or proposed products uneconomical or that may be superior to our products. In addition, farm management and equipment has its own set of risks related to competition and substantial technological changes. If our suppliers of farm management and equipment fail to deliver or we fail to secure product at favorable pricing, if our suppliers fail to create innovative products that customers demand, and we are unable to meet our end customer's demands, all of which would have a material adverse effect on us.
We have no trademarks or patents, the lack of which may make it easier for our competitors to compete against us.
We do not have any protected trademarks on our business or patents. We will be applying for international trademarks for our name CAT9 Group Inc., however, we will not be filing any patents.
Our business may be adversely affected by a global economic downturn, in addition to any uncertainties in the financial markets .
Although we believe that global financial markets have recovered from an economic downturn, we cannot make any assurances that we will not experience disruptions, or loss due to the possibility of another negative global event whereby severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability occurs Any economic downturn generally or any decrease in consumer spending in the PRC, could cause advertisers to reduce their spending on advertisements, would have a material adverse effect on our business, cash flows, financial condition and results of operations. The inability to obtain adequate financing from debt or capital sources could force us to self-fund strategic initiatives or even forego certain opportunities, which in turn could potentially harm our performance.
We will need additional capital to successfully implement our current business strategy, which may not be available to us, and if we raise additional capital, it may dilute your ownership in us.
Our continued growth is dependent upon our ability to generate increased revenue from our existing customers, obtain new customers and raise capital from outside sources. An important element of our growth strategy is expected to be the development of farm management and equipment sales to Africa and other countries. We believe that in order to continue to operate additional market share and general additional revenue, we will have to raise more capital to fund our business.
In the future, we may be unable to obtain the necessary financing for our capital requirements on a timely basis and on acceptable terms, and our failure to do so may adversely affect our financial position, competitive position, growth and profitability. Our ability to obtain acceptable financing at any time may depend on a number of factors, including: our financial condition and results of operations; the condition of the PRC economy and farm food industry, cooperative system, O2O initiative, WeChat mobile application platform in PRC, and conditions in relevant financial markets in the United States, PRC and elsewhere in the world.
Our failure to effectively manage growth could harm our business .
We have rapidly and significantly expanded our operations since our inception and will endeavor to further expand our operations in the future. Any additional significant growth in the market for our services or our entry into new markets may require and expansion of our employee base for managerial, operational, financial, sales and marketing and other purposes.
During any growth, we may face problems related to our operational and financial systems and controls, including quality control and service capacities. We would also need to continue to expand, train and manage our employee base. Continued future growth will impose significant added responsibilities upon the members of management to identify, recruit, maintain, integrate, and motivate new employees.
Aside from increased difficulties in the management of human resources, we may also encounter working capital issues, as we will need increased liquidity to hire additional employees. For effective growth management, we will be required to continue improving our operations, management, and financial systems and controls. Our failure to manage growth effectively may lead to operational and financial inefficiencies that will have a negative effect on our profitability. We cannot assure investors that we will be able to timely and effectively meet that demand and maintain the quality standards required by our existing and potential customers.
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We may pursue future growth through strategic acquisitions and alliances which may not yield anticipated benefits and may adversely affect our operating results, financial condition and existing business .
We may seek to grow in the future through strategic acquisitions in order to complement and expand our business. The success of our acquisition strategy will depend on, among other things:
· | the availability of suitable candidates; |
· | competition from other companies for the purchase of available candidates; |
· | our ability to value those candidates accurately and negotiate favorable terms for those acquisitions; |
· | the availability of funds to finance acquisitions; |
· | the ability to establish new informational, operational and financial systems to meet the needs of our business; |
· | the ability to achieve anticipated synergies, including with respect to complementary products or services; and |
· | the availability of management resources to oversee the integration and operation of the acquired businesses. |
If we are not successful in integrating acquired businesses and completing acquisitions in the future, we may be required to reevaluate our acquisition strategy. We also may incur substantial expenses and devote significant management time and resources in seeking to complete acquisitions. Acquired businesses may fail to meet our performance expectations. If we do not achieve the anticipated benefits of an acquisition as rapidly as expected, or at all, investors or analysts may not perceive the same benefits of the acquisition as we do. If these risks materialize, our stock price could be materially adversely affected.
We face risks related to natural disasters, terrorist attacks or other unpredictable events in China which could have a material adverse effect on our business and results of operations .
Our business could be materially and adversely affected by natural disasters, terrorist attacks or other events in China where all of our operations are located. For example, in early 2008, parts of China suffered a wave of strong snow storms that severely impacted public transportation systems. In May 2008, Sichuan Province in China suffered a strong earthquake measuring approximately 8.0 on the Richter scale that caused widespread damage and casualties. The May 2008 Sichuan earthquake has had a material adverse effect on the general economic conditions in the areas affected by the earthquake. The occurrence of any future disasters such as earthquakes, fires, floods, wars, terrorist attacks, computer viruses, transportation disasters or other events, or our information system or communications network breaks down or operates improperly as a result of such events, our facilities may be seriously damaged, and we may have to stop or delay operations. We may incur expenses relating to such damages, which could have a material adverse effect on our business and results of operations.
We may adopt an equity incentive plan under which we may grant securities to compensate employees and other services providers, which would result in increased share-based compensation expenses and, therefore, reduce net income.
We may adopt an equity incentive plan under which we may grant shares or options to qualified employees. Under current accounting rules, we would be required to recognize share-based compensation as compensation expense in our statement of operations, based on the fair value of equity awards on the date of the grant, and recognize the compensation expense over the period in which the recipient is required to provide service in exchange for the equity award. We have not made any such grants in the past, and accordingly our results of operations have not contained any share-based compensation charges. The additional expenses associated with share-based compensation may reduce the attractiveness of issuing stock options under an equity incentive plan that we may adopt in the future. If we grant equity compensation to attract and retain key personnel, the expenses associated with share-based compensation may adversely affect our net income. However, if we do not grant equity compensation, we may not be able to attract and retain key personnel or be forced to expend cash or other compensation instead. Furthermore, the issuance of equity awards would dilute the shareholders’ ownership interests in our company.
RISKS RELATED TO US DOING BUSINESS IN CHINA
As substantially all of our assets are located in the PRC and all of our revenues are derived from our operations in China, changes in the political and economic policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition .
Our business operations may be adversely affected by the current and future political environment in the PRC. The Chinese government exerts substantial influence and control over the manner in which we must conduct our business activities. Our ability to operate in China may be adversely affected by changes in Chinese laws and regulations, including those relating to taxation, import and export tariffs, raw materials, environmental regulations, land use rights, property and other matters. Under the current government leadership, the government of the PRC has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the government of the PRC will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.
Our operations are subject to PRC laws and regulations that are sometimes vague and uncertain. Any changes in such PRC laws and regulations, or the interpretations thereof, may have a material and adverse effect on our business .
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The PRC’s legal system is a civil law system based on written statutes. Decided legal cases do not have so much value as precedent in China as those in the common law system prevalent in the United States. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including but not limited to, governmental approvals required for conducting business and investments, laws and regulations governing the advertising industry, as well as commercial, antitrust, patent, product liability, environmental laws and regulations, consumer protection, and financial and business taxation laws and regulations.
The Chinese government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters. However, because these laws and regulations are relatively new, and because of the limited volume of published cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties.
Our PRC subsidiaries, CQFI, is considered a foreign invested enterprise under PRC laws, and as a result is required to comply with PRC laws and regulations, including laws and regulations specifically governing the activities and conduct of foreign invested enterprises. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our businesses. If the relevant authorities find us in violation of PRC laws or regulations, they would have broad discretion in dealing with such a violation, including, without limitation:
· | levying fines; |
· | revoking our business license, other licenses or authorities; |
· | requiring that we restructure our ownership or operations; and |
· | requiring that we discontinue any portion or all of our business. |
Investors may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based upon U.S. laws, including the federal securities laws or other foreign laws against us or our management .
All of our current operations are conducted in China. Moreover, all of our directors and officers are nationals and residents of China. All or substantially all of the assets of these persons are located outside the United States and in the PRC. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon these persons. In addition, uncertainty exists as to whether the courts of China would recognize or enforce judgments of U.S. courts obtained against us or such officers and/or directors predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in China against us or such persons predicated upon the securities laws of the United States or any state thereof.
Contract drafting, interpretation and enforcement in China involves significant uncertainty .
We have entered into numerous contracts governed by PRC law, many of which are material to our business. As compared with contracts in the United States, contracts governed by PRC law tend to contain less detail and are not as comprehensive in defining contracting parties’ rights and obligations. As a result, contracts in China are more vulnerable to disputes and legal challenges. In addition, contract interpretation and enforcement in China is not as developed as in the United States, and the result of any contract dispute is subject to significant uncertainties. Therefore, we cannot assure you that we will not be subject to disputes under our material contracts, and if such disputes arise, we cannot assure you that we will prevail.
Recent PRC regulations relating to acquisitions of PRC companies by foreign entities may create regulatory uncertainties that could restrict or limit our ability to operate. Our failure to obtain the prior approval of the China Securities Regulatory Commission, or the CSRC, for our planned public offering and the listing and trading of our common stock could have a material adverse effect on our business, operating results, reputation and trading price of our common stock if and when we become trading .
The PRC State Administration of Foreign Exchange, or “SAFE,” issued a public notice in November 2005, known as Circular 75, which has become null and void and has been replaced by Circular (2014) 37, issued on 14 July, 2014, concerning the use of offshore holding companies controlled by PRC residents in mergers and acquisitions in China. This circular requires that (1) a PRC resident shall register with a local branch of the SAFE before he or she establishes or controls an overseas special purpose vehicle, or SPV, for the purpose of overseas equity financing (including convertible debt financing);(2) when a PRC resident contributes the assets of or his or her equity interests in a domestic enterprise to an SPV, or engages in overseas financing after contributing assets or equity interests to an SPV, such PRC resident must register his or her interest in the SPV and any changes in such interest with a local branch of the SAFE; and (3) when the SPV undergoes a material change regarding to PRC resident, such as a change in share capital or merger or acquisition, the PRC resident shall, register such change with a local branch of the SAFE. In addition, SAFE issued updated internal implementing rules, or the Implementing Rules in relation to Circular 37. However, there exist uncertainties regarding the SAFE registration for PRC residents’ interests in overseas companies. If any PRC resident stockholder of a SPV fails to make the required SAFE registration and amended registration, the onshore PRC subsidiaries of that offshore company may be prohibited from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the offshore entity. Failure to comply with the SAFE registration and amendment requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions. Because of uncertainty in how Circular 37 will be interpreted and enforced, we cannot be sure how it will affect our business operations or future plans. For example, CQFI's ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 37 by our PRC resident beneficial holders over whom we have no control. In addition, we cannot assure you that such PRC residents will be able to complete the necessary approval and registration procedures required by the SAFE regulations. Failure by any PRC resident beneficial holder to register as required with the relevant branch of SAFE could subject these PRC resident beneficial holders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit CQFI's ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.
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On August 8, 2006, the PRC Ministry of Commerce (“MOFCOM”), joined by the State-owned Assets Supervision and Administration Commission of the State Council, the State Administration of Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission and SAFE, released a substantially amended version of the Provisions for Foreign Investors to Merge with or Acquire Domestic Enterprises (the “Revised M&A Regulations”), which took effect on September 8, 2006 and was further amended on June 22, 2009. These new rules significantly revised China’s regulatory framework governing onshore-to -offshore restructurings and foreign acquisitions of domestic enterprises. These new rules signify greater PRC government attention to cross-border merger, acquisition and other investment activities, by confirming MOFCOM as a key regulator for issues related to mergers and acquisitions in China and requiring MOFCOM approval of a broad range of merger, acquisition and investment transactions. Further, the new rules establish reporting requirements for acquisition of control by foreigners of companies in key industries, and reinforce the ability of the Chinese government to monitor and prohibit foreign control transactions in key industries.
Among other things, the Revised M&A Regulations include new provisions that purport to require that an offshore special purpose vehicle, or SPV, formed for listing purposes and controlled directly or indirectly by PRC companies or individuals must obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings. However, the application of this PRC regulation remains unclear with no consensus currently existing among the leading PRC law firms regarding the scope and applicability of the CSRC approval requirement. Our PRC counsel, Hubei Taoshi Law Firm, believes that it is uncertain whether the transaction is subject to CSRC’s approval, and in reality, many other similar companies have completed similar transactions like the share exchange and private placement contemplated under the Exchange Agreement without CSRC’s approval and our PRC legal counsel is not aware of any situation in which the CSRC has imposed a punishment or penalty in connection with any such transactions. However, if the CSRC or other PRC Government Agencies subsequently determine that CSRC approval is required for the share exchange and private placement contemplated under the Exchange Agreement, we may face material regulatory actions or other sanctions from the CSRC or other PRC Government Agencies.
If the CSRC or another PRC regulatory agency subsequently determines that CSRC approval was required for our restructuring, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our common stock.
According to the Revised M&A Regulations and other PRC rules regarding foreign exchange, an offshore company’s shares can be used as consideration for the acquisition of a domestic PRC company’s equity by foreign investors only under very limited circumstances. Prior approval from the MOFCOM must be obtained before such a share exchange can be done. If relevant PRC government authorities deem a future acquisition of a domestic PRC company’s equity by us or our offshore subsidiary using our common stock or other types of our securities as consideration to be a transaction subject to the Revised M&A Regulations, complying with the requirements of this regulation to complete such transactions could be time- consuming and any required approval processes, including obtaining approval from the MOFCOM, may delay or inhibit our ability to complete such transactions. Any delay or inability to obtain applicable approvals to complete acquisitions could affect our ability to expand our business or maintain our market share. However, the application of the Revised M&A Regulations remains unclear and it is uncertain whether a future acquisition of a domestic PRC company’s equity by our domestic PRC subsidiaries using our common stock or other types of our securities as consideration will be subject to such regulations.
Also, if later the CSRC requires that we obtain its approval, we may be unable to obtain a waiver of the CSRC approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding this CSRC approval requirement could have a material adverse effect on the trading price of our common stock. It is uncertain that CSRC is or will be curtailing or suspending overseas listings for Chinese private companies.
It is uncertain how our business operations or future strategy will be affected by the interpretations and implementation of Circular 37 and the Revised M&A Regulations. It is anticipated that application of the new rules will be subject to significant administrative interpretation, and we will need to closely monitor how MOFCOM, SAFE, CSRC and other ministries apply the rules to ensure that our domestic and offshore activities continue to comply with PRC law. Given the uncertainties regarding interpretation and application of the new rules, we may need to expend significant time and resources to maintain compliance with such rules.
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If the land use rights of our landlord are revoked, we would be forced to relocate operations .
Under Chinese law, land is owned by the state or rural collective economic organizations. The state issues to the land users the land use right certificate. Land use rights can be revoked and the land users could be forced to vacate at any time when redevelopment of the land is in the public interest. The public interest rationale is interpreted quite broadly and the process of land appropriation may be less than transparent. We do not have any land use rights and each of our facilities relies on land use rights of our landlords, and the loss of such rights would require us to identify and relocate our operations, which could have a material adverse effect on our financial conditions and results of operations.
We will not be able to complete an acquisition of prospective acquisition targets in the PRC unless their financial statements can be reconciled to U.S. generally accepted accounting principles in a timely manner .
Companies based in the PRC may not have properly kept financial books and records that may be reconciled with U.S. generally accepted accounting principles. If we attempt to acquire a significant PRC target company and/or its assets, we would be required to obtain or prepare financial statements of the target that are prepared in accordance with and reconciled to U.S. generally accepted accounting principles. Federal securities laws require that a business combination meeting certain financial significance tests require the public acquirer to prepare and file historical and/or pro forma financial statement disclosure with the SEC. These financial statements must be prepared in accordance with, or be reconciled to U.S. generally accepted accounting principles and the historical financial statements must be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. If a proposed acquisition target does not have financial statements that have been prepared in accordance with, or that can be reconciled to, U.S. generally accepted accounting principles and audited in accordance with the standards of the PCAOB, we will not be able to acquire that proposed acquisition target. These financial statement requirements may limit the pool of potential acquisition targets with which we may acquire and hinder our ability to expand our retail operations. Furthermore, if we consummate an acquisition and are unable to timely file audited financial statements and/or pro forma financial information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as Item 9.01 of Form 8-K, we will be ineligible to use the SEC’s short-form registration statement on Form S-3 to raise capital, if we are otherwise eligible to use a Form S-3. If we are ineligible to use a Form S-3, the process of raising capital may be more expensive and time consuming and the terms of any offering transaction may not be as favorable as they would have been if we were eligible to use Form S-3.
We face uncertainty from China’s Circular on Strengthening the Administration of Enterprise Income Tax on Non-Resident Enterprises’ Share Transfer Income (“Circular 698”) that was released in December 2009 with retroactive effect from January 1, 2008 .
The Chinese State Administration of Taxation (SAT) released a circular (Guoshuihan No. 698 – Circular 698) on December 10, 2009 that addresses the transfer of shares of Chinese resident companies by nonresident companies. Circular 698, which is effective retroactively to January 1, 2008, may have a significant impact on many companies that use offshore holding companies to invest in China. While, Circular 698 does not apply to shareholders who are individuals, the PRC authority has the discretion to determine whether these enterprise shareholders are treated as a resident enterprise. If such shareholders are recognized as non-resident enterprises, Circular 698 may have been applicable to the Share Exchange due to the transfer of shares of CAT9 Cayman, which Wenfa "Simon" Sun, or MeiHong "Sanya" Qian directly holds the equity interests of CQFI, the Company by such enterprise shareholders. Circular 698 provides that where a non-resident enterprise investor indirectly transfers the equity of a PRC resident enterprise, if the overseas intermediary holding company being transferred by the non-resident enterprise is established in a country/region where the effective tax rate is less than 12.5% or which does not tax the overseas income of its residents, the non-resident enterprise must submit the required documents to the PRC tax authority in charge of the PRC resident enterprise within 30 days after the equity transfer agreement is concluded. {This clause has been terminated by Bulletin (2013)72} However, there is uncertainty as to the application of Circular 698. For example, while the term "indirectly transfer" is not defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax in the country or jurisdiction and to what extent and the process of the disclosure to the tax authority in charge of that Chinese resident enterprise. We have not provided any information to the relevant PRC tax authorities regarding the share exchange transaction.
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We have sought the advice, but not an opinion, of PRC legal counsel regarding the application of and the risks associated with Circular 698. Circular 698, which provides parties with a short period of time to comply its requirements, indirectly taxes foreign companies on gains derived from the indirect sale of a Chinese company. It further provides that where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise through an abuse of form of organization and there are no reasonable commercial purposes such that the corporate income tax liability is avoided, the PRC tax authority will have the power to re-assess the nature of the equity transfer in accordance with PRC’s “substance-over-form” principle and deny the existence of the offshore holding company that is used for tax planning purposes. However, there are no formal declarations with regard to how to decide “abuse of form of organization” and “reasonable commercial purpose,” which can be utilized by us to balance if our company complies with the Circular 698.
Due to the short history of the New EIT law and lack of applicable legal precedents, it remains unclear how the PRC tax authorities will determine the PRC tax resident treatment of our holding companies, CAT9 Cayman, a company organized under the laws of the Cayman Islands (“CAT9 Cayman”) and CAT9 China Investment Limited, a company organized under the laws of Hong Kong (“CAT9 HK”). If we, CAT9 Cayman or CAT9 HK is determined to be a PRC resident enterprise by PRC tax authorities, Circular 698 will not be applicable to any direct or indirect transfer of our shareholdings in CQFI. If we, CAT9 Cayman or CAT9 HK is determined to be a non-resident enterprise by the PRC tax authorities and the direct or indirect transfer of our shareholdings in CQFI, is recognized by the tax authority in charge as the transfer of shares of Chinese resident companies by nonresident companies, we may become at risk of being taxed under Circular 698 and we may be required to expend valuable resources to comply with Circular 698 or to establish that we should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations. Because CAT9 HK, a Hong Kong company owns 100% of CQFI; CAT9 Cayman, a Cayman Islands company owns 100% of CAT9 HK; and the Company, a Delaware corporation, owns 100% of CAT9 Cayman, it is possible that Circular 698 could apply to any transfer of shares of the Company, CAT9 Cayman or CAT9 HK, as an indirect transfer of the equity of CQFI, if such transfers are not made through a public securities market or by individuals. If the PRC tax authority determines that Circular 698 applies to us, we will be obligated to make tax returns filings with the relevant PRC tax authority in accordance with PRC tax laws and regulations. Failure to do so will subject us to fines up to RMB10,000 ($1,471). Furthermore, if the PRC tax authority determines that our arrangement which resulted in the underpayment of taxes was done to evade taxation, in addition to paying all the underpaid taxes, we may be subject to further penalties including late fees, fines ranging from 50% to 500% of the underpaid taxes, and even criminal liabilities under grave circumstances.
The foreign currency exchange rate between U.S. Dollars and Renminbi could adversely affect our financial condition .
Until 1994, the Renminbi experienced a gradual but significant devaluation against most major currencies, including dollars, and there was a significant devaluation of the Renminbi on January 1, 1994 in connection with the replacement of the dual exchange rate system with a unified managed floating rate foreign exchange system. Since 1994, the value of the Renminbi relative to the U.S. dollar has remained stable and has appreciated slightly against the U.S. Dollar. Countries, including the United States, have argued that the Renminbi is artificially undervalued due to China’s current monetary policies and have pressured China to allow the Renminbi to float freely in world markets. In July 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of designated foreign currencies. While the international reaction to the Renminbi revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in further and more significant appreciation of the Renminbi against the U.S. dollar.
As we may rely on dividends and other fees paid to us by our subsidiary and affiliated consolidated entities in China, any significant revaluation of the Renminbi may materially and adversely affect our cash flows, revenues, earnings and financial position, and the amount of, and any dividends payable on, our shares in U.S. dollars. To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. In addition, since our functional and reporting currency is the U.S. dollar while the functional currency of our subsidiary and affiliated consolidated entities in China is Renminbi, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would have a positive or negative effect on our reported financial results, which may not reflect any underlying change in our business, results of operations or financial condition.
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Governmental control of currency conversion may limit our ability to utilize our revenues .
Substantially all of our revenues and expenses are denominated in Renminbi. Under PRC laws, the Renminbi is currently convertible under a company’s “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the company’s “capital account,” which includes foreign direct investment and loans, without the prior approval of SAFE. SAFE reserves the discretion to deny the conversion of RMB into foreign currencies for capital account transactions. Currently our PRC subsidiary, CQFI, may purchase foreign currencies for settlement of current account transactions, including payments of dividends to us, without the approval of SAFE. Therefore, CQFI may convert the revenues it generates in RMB into other currencies, such as U.S. Dollars, for settlement of current account transactions without having to obtain approval from SAFE. However, foreign exchange transactions by CQFI under the capital account continue to be subject to significant foreign exchange controls and require the approval of or need to register with PRC governmental authorities, including SAFE. Therefore, CQFImay not convert its sales revenues from RMB into other currencies for capital account transactions, such as to repay a loan, without first obtaining the approval of SAFE. If CQFI,borrow foreign currency loans from us or other foreign lenders, these loans must first be registered with the SAFE. If CQFI, a wholly foreign-owned enterprise, borrows foreign currency, the accumulative amount of its foreign currency loans shall not exceed the difference between the total investment and the registered capital of CQFI. If we finance CQFI, by means of additional capital contributions, these capital contributions must be approved by certain government authorities such as the Ministry of Commerce or its local counterparts. Additionally, the existing and future restrictions on currency exchange may affect the ability of our PRC subsidiary or affiliated entities to obtain foreign currencies, limit our ability to meet our foreign currency obligations, or otherwise materially and adversely affect our business.
Inflation in the PRC could negatively affect our profitability and growth .
While the PRC economy has experienced rapid growth, such growth has been uneven among various sectors of the economy and in different geographical areas of the country. Rapid economic growth can lead to growth in the money supply and rising inflation. According to the National Bureau of Statistics of China, the change in China’s Consumer Price Index increased to 8.5% in April 2008. If prices for our products and services rise at a rate that is insufficient to compensate for the rise in the costs of supplies such as raw materials, it may have an adverse effect on our profitability.
Furthermore, in order to control inflation in the past, the PRC government has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state bank lending. In January 2010, the Chinese government took steps to tighten the availability of credit including ordering banks to increase the amount of reserves they hold and to reduce or limit their lending. The implementation of such policies may impede economic growth. In October 2004, the People’s Bank of China, the PRC’s central bank, raised interest rates for the first time in nearly a decade and indicated in a statement that the measure was prompted by inflationary concerns in the Chinese economy. In April 2006, the People’s Bank of China raised the interest rate again. Repeated rises in interest rates by the central bank would likely slow economic activity in China which could, in turn, materially increase our costs and also reduce demand for our products and services.
Because our funds are held in banks which do not provide insurance, the failure of any bank in which we deposit our funds could affect our ability to continue in business .
Banks and other financial institutions in the PRC do not provide insurance for funds held on deposit. A significant portion of our assets are in the form of cash deposited with banks in the PRC, and in the event of a bank failure, we may not have access to our funds on deposit. Depending upon the amount of money we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able to access funds to pay our suppliers, employees and other creditors, we may be unable to continue in business.
Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences .
As our ultimate holding company is a Delaware corporation, we are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some that may compete with us, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may 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.
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If we make equity compensation grants to persons who are PRC citizens, they may be required to register with the State Administration of Foreign Exchange of the PRC, or SAFE. We may also face regulatory uncertainties that could restrict our ability to adopt an equity compensation plan for our directors and employees and other parties under PRC law .
On March 28, 2007, SAFE issued the “Operating Procedures for Administration of Domestic Individuals Participating in the Employee Stock Ownership Plan or Stock Option Plan of An Overseas Listed Company, also known as “Circular 78.” It is not clear whether Circular 78 covers all forms of equity compensation plans or only those which provide for the granting of stock options.
Domestic individuals who are granted shares or share options by companies listed on overseas stock exchanges based on the employee share option or share incentive plan are required to register with the State Administration of Foreign Exchange or its local counterparts. Pursuant to Circular 78, PRC individuals participating in the employee stock option plans of the overseas listed companies shall entrust their employers, including the overseas listed companies and the subsidiaries or branch offices of such offshore listed companies in China, or engage domestic agents to handle various foreign exchange matters associated with their employee stock options plans. The domestic agents or the employers shall, on behalf of the domestic individuals who have the right to exercise the employee stock options, apply annually to the State Administration of Foreign Exchange or its local offices for a quota for the conversion and/or payment of foreign currencies in connection with the domestic individuals’ exercise of the employee stock options. The foreign exchange proceeds received by the domestic individuals from sale of shares under the stock option plans granted by the overseas listed companies must be remitted into the bank accounts in China opened by their employers or PRC agents. If we adopt an equity compensation plan in the future and make option grants to our officers and directors, most of whom are PRC citizens, Circular 78 may require our officers and directors who receive option grants and are PRC citizens to register with SAFE.
We will comply with Circular 78 if we adopt an equity incentive plan. We believe that the registration and approval requirements contemplated in Circular 78 will be burdensome and time consuming. If it is determined that any of our equity compensation plans are subject to Circular 78, failure to comply with such provisions may subject our PRC subsidiary when it is deemed a domestic agent as defined under Circular 78 and participants of our incentive plan who are PRC citizens to fines and legal sanctions and may prevent us from being able to grant equity compensation to our PRC employees. If we are unable to compensate our PRC employees and directors through equity compensation, our business operations may be adversely affected.
Under the New EIT Law, we, CAT9 Cayman and CAT9 HK may be classified as “resident enterprises” of China for tax purposes, which may subject us, CAT9 Cayman and CAT9 HK to PRC income tax on taxable global income .
Under the new PRC Enterprise Income Tax Law (the “New EIT Law”) and its implementing rules, both of which became effective on January 1, 2008, enterprises are classified as resident enterprises and non-resident enterprises. An enterprise established outside of China with its “de facto management bodies” located within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese domestic enterprise for enterprise income tax purposes. The implementing rules of the New EIT Law define de facto management body as a managing body that in practice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. Due to the short history of the New EIT law and lack of applicable legal precedents, it remains unclear how the PRC tax authorities will determine the PRC tax resident treatment of a foreign company such as us, CAT9 Cayman and CAT9 HK. The Company has not sought the advice of PRC tax counsel regarding the risks associated with the New EIT Law. Because our CAT9 Cayman and CAT9 HK's members of management are located in China, we believe it is likely that we, CAT9 Cayman and CAT9 HK meet the qualifications of a “resident enterprise” and would be recognized as a Chinese “resident enterprise,” subject to the ultimate judgment of the PRC tax authority, based on the standard of “de facto management body”. “Resident enterprise” treatment would not have impacted the Company’s results since the New EIT Law’s effectiveness, as CAT9 Cayman and CAT9 HK have no taxable income and no dividends were paid by any of our subsidiaries, including CAT9 Cayman and CAT9 HK, CQFI. If the PRC tax authorities determine that we, CAT9 Cayman and CAT9 HK is a “resident enterprise” for PRC enterprise income tax purposes, a number of PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income, including interest income on the proceeds from this offering, as well as PRC enterprise income tax reporting obligations. The failure to pay such taxes will subject us to fines up to RMB10,000 ($1,471), and furthermore, if the PRC tax authority determines that our arrangement which resulted in the underpayment of taxes was done to evade taxation, in addition to paying all the underpaid taxes, we may be subject to further penalties including late fees, fines ranging from 50% to 500% of the underpaid taxes, and even criminal liabilities under grave circumstances. Second, the New EIT Law provides that dividend paid between “qualified resident enterprises” is exempted from enterprise income tax. A recent circular issued by the State Administration of Taxation on April 22, 2010, regarding the standards used to classify certain Chinese-invested enterprises controlled by Chinese enterprises or Chinese group enterprises and established outside of China as “resident enterprises” clarified that dividends and other income paid by such “resident enterprises” will be considered to be PRC source income, subject to PRC withholding tax, currently at a rate of 10%, when recognized by non-PRC shareholders. It is unclear whether the dividends that we, CAT9 Cayman and CAT9 HK receives from CQFI will constitute dividends between “qualified resident enterprises” and would therefore qualify for tax exemption, because the definition of qualified resident enterprises is unclear and the relevant PRC government authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. We are actively monitoring the possibility of “resident enterprise” treatment for the applicable tax years and are evaluating appropriate organizational changes to avoid this treatment, to the extent possible. As a result of the New EIT Law, our historical operating results will not be indicative of our operating results for future periods and the value of our common stock may be adversely affected.
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Dividends payable by us to our foreign investors and any gain on the sale of our shares may be subject to taxes under PRC tax laws .
If dividends payable to our stockholders are treated as income derived from sources within China, then the dividends that stockholders receive from us, and any gain on the sale or transfer of our shares, may be subject to taxes under PRC tax laws. We have not consulted with PRC tax counsel regarding the taxes that may be associated with dividends paid by us.
Under the New EIT Law and its implementing rules, PRC enterprise income tax at the rate of 10% is applicable to dividends payable by us to our investors that are non-resident enterprises so long as such non-resident enterprise investors do not have an establishment or place of business in China or, despite the existence of such establishment of place of business in China, the relevant income is not effectively connected with such establishment or place of business in China, to the extent that such dividends have their sources within the PRC. Similarly, any gain realized on the transfer of our shares by such investors is also subject to a 10% PRC income tax if such gain is regarded as income derived from sources within China and we are considered as a resident enterprise which is domiciled in China for tax purpose. Additionally, there is a possibility that the relevant PRC tax authorities may take the view that the purpose of us, CAT9 Cayman and CAT9 HK is holding CQFI, and the capital gain derived by our overseas shareholders or investors from the share transfer is deemed China-sourced income, in which case such capital gain may be subject to a PRC withholding tax at the rate of up to 10%. If we are required under the New EIT Law to withhold PRC income tax on our dividends payable to our foreign shareholders or investors who are non-resident enterprises, or if you are required to pay PRC income tax on the transfer or our shares under the circumstances mentioned above, the value of your investment in our shares may be materially and adversely affected.
In January, 2009, the State Administration of Taxation promulgated the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises (“Measures”), pursuant to which, the entities which have the direct obligation to make the following payment to a non-resident enterprise shall be the relevant tax withholders for such non-resident enterprise, and such payment includes: incomes from equity investment (including dividends and other return on investment), interests, rents, royalties, and incomes from assignment of property as well as other incomes subject to enterprise income tax received by non-resident enterprises in China. Further, the Measures provides that in case of equity transfer between two non-resident enterprises which occurs outside China, the non-resident enterprise which receives the equity transfer payment shall, by itself or engage an agent to, file tax declaration with the PRC tax authority located at place of the PRC company whose equity has been transferred, and the PRC company whose equity has been transferred shall assist the tax authorities to collect taxes from the relevant non-resident enterprise. However, it is unclear whether the Measures refer to the equity transfer by a non-resident enterprise which is a direct or an indirect shareholder of the said PRC Company. Given these Measures, there is a possibility that we may have an obligation to withhold income tax in respect of the dividends paid to non-resident enterprise investors. If we have such an obligation, our omission or failure to fulfill such obligation may subject us to similar penalties to those applied to a taxpayer, including fines up to RMB10,000, and in the case of being recognized as constituting evasion of taxation, other than making up for the underpaid taxes, we may be subject to further penalties including late fees, fines ranging from 50% to 500% of the underpaid taxes, and even criminal liabilities under grave circumstances.
SAFE rules and regulations may limit our ability to transfer the net proceeds from this offering to our PRC subsidiaries, which may adversely affect the business expansion of our PRC subsidiaries, and we may not be able to convert the net proceeds from this offering into Renminbi to invest in or acquire any other PRC companies .
On August 29, 2008, SAFE promulgated Circular 142, a notice regulating the conversion by a foreign -invested company of foreign currency into Renminbi by restricting how the converted Renminbi may be used. The notice requires that the registered capital of a foreign-invested company settled in Renminbi converted from foreign currencies may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the registered capital of a foreign-invested company settled in Renminbi converted from foreign currencies. The use of such Renminbi capital may not be changed without SAFE’s approval, and may not in any case be used to repay Renminbi loans if the proceeds of such loans have not been used. Violations of Circular 142 will result in severe penalties, such as heavy fines.
Any recurrence of Severe Acute Respiratory Syndrome (SARS), Avian Flu, or another widespread public health problem, such as the spread of H1N1 (“Swine”) Flu, in the PRC could adversely affect our operations .
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A renewed outbreak of SARS, Avian Flu or another widespread public health problem, such as the spread of H1N1 (“Swine”) Flu, in China, where all of our operations are located and where the substantial portion of our sales occur, could have a negative effect on our operations. Our business is dependent upon our ability to continue to market and sell advertising time and produce television programs. Such an outbreak could have an impact on our operations as a result of:
· | quarantines or closures of some of our facilities, which would severely disrupt our operations, |
· | the sickness or death of our key officers and employees, and |
· | a general slowdown in the Chinese economy. |
· | Any of the foregoing events or other unforeseen consequences of public health problems could adversely affect our operations. |
Risks Related to Our Capital Structure
There is no current trading market for our common stock, and there is no assurance of an established public trading market, which would adversely affect the ability of our investors to sell their securities in the public market.
Our common stock is not currently listed or quoted for trading on any national securities exchange or national quotation system. We intend to apply for the listing of our common stock on the Over-the-Counter Bulletin Board ("OTCBB") in the future through a qualified FINRA market maker upon effectiveness of a Form S-1 registration statement. There is no guarantee that the OTCBB, or any other securities exchange or quotation system, will permit our shares to be listed and traded. There is no guarantee that a qualified FINRA market maker will agree to sponsor us upon effectiveness of a Form S-1 registration statement.
FINRA has enacted changes that limit quotations on the OTC Bulletin Board to securities of issuers that are current in their reports filed with the Securities and Exchange Commission. The effect on the OTC Bulletin Board of these rule changes and other proposed changes cannot be determined at this time.
The market price and trading volume of shares of our common stock may be volatile.
When and if a market develops for our securities, the market price of our common stock could fluctuate significantly for many reasons, including for reasons unrelated to our specific performance, such as reports by industry analysts, investor perceptions, or negative announcements by customers, competitors or suppliers regarding their own performance, as well as general economic and industry conditions. For example, to the extent that other large companies within our industry experience declines in their share price, our share price may decline as well. In addition, when the market price of a company’s shares drops significantly, shareholders could institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.
Following the Share Exchange, the CAT9 Shareholders have significant influence over us.
The CAT9 Shareholders beneficially own or control approximately 100% of our outstanding shares as of the close of the Share Exchange and have a controlling influence in determining the outcome of any corporate transaction or other matters submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of directors, and other significant corporate actions. These stockholders may also have the power to prevent or cause a change in control. In addition, without the consent of these stockholders, we could be prevented from entering into transactions that could be beneficial to us. The interests of these stockholders may differ from the interests of our other stockholders.
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If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.
We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Any failure of these controls could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial frauds. Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial reporting. The standards that must be met for management to assess the internal control over financial reporting as effective are new and complex, and require significant documentation, testing and possible remediation to meet the detailed standards. We may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting. If we cannot assess our internal control over financial reporting as effective, investor confidence and share value may be negatively impacted.
In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.
We may not be able to achieve the benefits we expect to result from the Share Exchange.
On December 27, 2016 , we entered into the Share Exchange Agreement with CAT9 Cayman, CAT9 HK, CQFI and the CAT9 Group Inc. Shareholders, pursuant to which we agreed to acquire 100% of the issued and outstanding securities of CAT9 Cayman in exchange for shares of our common stock. On December 27, 2016, the Share Exchange closed, CAT9 Cayman became our 100%-owned subsidiary, and our sole business operations became that of CAT9 Cayman and its subsidiaries.
We may not realize the benefits that we hoped to receive as a result of the Share Exchange, which include:
· | access to the capital markets of the United States; |
· | the increased market liquidity expected to result from exchanging stock in a private company for securities of a public company that may eventually be traded; |
· | the ability to use registered securities to make acquisition of assets or businesses; |
· | increased visibility in the financial community; |
· | enhanced access to the capital markets; |
· | improved transparency of operations; and |
· | perceived credibility and enhanced corporate image of being a publicly traded company. |
There can be no assurance that any of the anticipated benefits of the Share Exchange will be realized with respect to our new business operations. In addition, the attention and effort devoted to achieving the benefits of the Share Exchange and attending to the obligations of being a public company, such as reporting requirements and securities regulations, could significantly divert management’s attention from other important issues, which could materially and adversely affect our operating results or stock price in the future.
Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses.
Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. Our management team will need to invest significant management time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.
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Our common stock may be considered a “penny stock,” and thereby be subject to additional sale and trading regulations that may make it more difficult to sell.
Our common stock, which is not currently listed or quoted for trading, may be considered to be a “penny stock” if it does not qualify for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Exchange Act, once, and if, it starts trading. Our common stock may be a “penny stock” if it meets one or more of the following conditions (i) the stock trades at a price less than $5.00 per share; (ii) it is NOT traded on a “recognized” national exchange; (iii) it is NOT quoted on a national securities exchange or even if so, has a price less than $5.00 per share; or (iv) is issued by a company that has been in business less than three (3) years with net tangible assets less than $5 million.
The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of our common stock will be subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two (2) business days before effecting any transaction in a penny stock for the investor’s account. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.
We do not foresee paying cash dividends in the foreseeable future and, as a result, our investors’ sole source of gain, if any, will depend on capital appreciation, if any.
We do not plan to declare or pay any cash dividends on our shares of common stock in the foreseeable future and currently intend to retain any future earnings for funding growth. As a result, investors should not rely on an investment in our securities if they require the investment to produce dividend income. Capital appreciation, if any, of our shares may be investors’ sole source of gain for the foreseeable future. Moreover, investors may not be able to resell their shares of our common stock at or above the price they paid for them.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The information contained in this report, including in the documents incorporated by reference into this report, includes some statement that are not purely historical and that are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements regarding our and our management’s expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition, results of operations, and the expected impact of the Share Exchange on the parties’ individual and combined financial performance. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
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The forward-looking statements contained in this report are based on current expectations and beliefs concerning future developments and the potential effects on the parties and the transaction. There can be no assurance that future developments actually affecting us will be those anticipated. These forward -looking statements involve a number of risks, uncertainties (some of which are beyond the parties’ control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, including the following:
· | Our ability to obtain new food product suppliers; |
· | Our dependence on a limited number of food product suppliers for our sales; |
· | Our ability to enter into relationships with food product suppliers to further our food product offerings; |
· | Our ability to secure and ability to offer food products at competitive prices; |
· | Our ability to adopt new technologies and platforms quickly to gain market share; |
· | Our reliance on a limited number of customers for our sales; |
· | Our ability to manage growth effectively; |
· | Our ability hire and retain qualified and knowledgeable employees and management; |
· | Our ability to raise additional capital to fund our operations; |
· | Our ability to collect on accounts receivables; |
· | Changes in the laws of the PRC that affect our operations and our corporate structure; |
· | Inflation and fluctuations in foreign currency exchange rates; |
· | Our ability to obtain all necessary government certifications, approvals, and/or licenses to conduct our business; |
· | Development of a public trading market for our securities; |
· | The cost of complying with current and future governmental regulations and the impact of any changes in the regulations on our operations; and |
· | The other factors referenced in this Current Report, including, without limitation, under the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business.” |
These risks and uncertainties, along with others, are also described above under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of the parties’ assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
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ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Year Ended December 31, 2015, compared to the Year Ended December 31, 2014
Sales Revenue
Sales revenue for the year ended December 31, 2015, was $24,150, compared to $0 for the period from June 26, 2014 (inception) through December 31, 2014. The Company recognized its first revenue in the fourth quarter of 2015.
Cost of Goods Sold
Cost of goods sold for the year ended December 31, 2015, was $12,472, compared to $0 for the period from June 26, 2014 (inception) through December 31, 2014. The Company did not begin revenue generating activity until 2015.
Operating Expenses
General and administrative expense was $8,767 for year ended December 31, 2015, compared to $10,858 for the period from June 26, 2014 (inception) through December 31, 2014, a decrease of $2,091, or 19.2%.
Net Income (Loss)
Net income for the year ended December 31, 2015, was $2,911, compared to a net loss of $10,858 for the period from June 26, 2014 (inception) through December 31, 2014. The change from a net loss to net income in the current year is the result of the revenue earned in the current year.
Results of Operations for the Three Months Ended September 30, 2016, compared to the Three Months Ended September 30, 2015
Sales Revenue
Sales revenue for the three months ended September 30, 2016, was $13,741, compared to $0 for the three months ended September 30, 2015. The Company recognized its first revenue in the fourth quarter of 2015.
Cost of Goods Sold
Cost of goods sold for the three months ended September 30, 2016, was $3,772, compared to $0 for the three months ended September 30, 2015. The Company recognized its first revenue in the fourth quarter of 2015.
Operating Expenses
General and administrative expense for the three months ended September 30, 2016, was $11,808, compared to $171 for the three months ended September 30, 2015.
Net Loss
Net loss for the three months ended September 30, 2016, was $2,109, compared to $171 for the three months ended September 30, 2015. The increase in net loss can be attributed to the increase in general and administrative expense during the quarter.
Results of Operations for the Nine Months Ended September 30, 2016, compared to the Nine Months Ended September 30, 2015
Sales Revenue
Sales revenue for the nine months ended September 30, 2016, was $51,759, compared to $0 for the nine months ended September 30, 2015. The Company recognized its first revenue in the fourth quarter of 2015.
Cost of Goods Sold
Cost of goods sold for the nine months ended September 30, 2016, was $18,195, compared to $0 for the nine months ended September 30, 2015. The Company recognized its first revenue in the fourth quarter of 2015.
Operating Expenses
General and administrative expense for the nine months ended September 30, 2016, was $34,922, compared to $7,359 for the nine months ended September 30, 2015.
Net Loss
Net loss for the nine months ended September 30, 2016, was $1,171, compared to $7,359 for the nine months ended September 30, 2015. The decrease in net loss can be attributed to the increase in revenue in the current period.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The purpose of this section is to discuss the financial condition, changes in financial condition and results of operations of the company. This includes discussion of (i) liquidity (ii) capital resources (iii) results of operations and (iv) off-balance sheet arrangements, plus any other information that would be necessary to an understanding of the company’s financial condition, changes in financial condition and results of operations. References in this section to “we”, “us”, “our” or the “Company” are to the consolidated business of CAT9 Cayman Limited (“CAT9 Cayman") CAT9 Investment China Limited (“CAT9 HK”), and Chongqing Field Industrial Company Ltd (“CQFI”).
Forward Looking Statements
The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this report. This report contains forward-looking statements. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,” “continue” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You are cautioned not to place undue reliance on these forward-looking statements because these forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. Thus, our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in: economic conditions generally and the automotive modified plastics market specifically, legislative or regulatory changes that affect our business, including changes in regulation, the availability of working capital, the introduction of competing products, and other risk factors described herein. These risks and uncertainties, together with the other risks described from time-to-time in reports and documents that we filed with the SEC should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Indeed, it is likely that some of our assumptions will prove to be incorrect. Our actual results and financial position will vary from those projected or implied in the forward-looking statements and the variances may be material. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Overview
Our operating subsidiary, Chongqing Field Industrial Company Ltd., (CQFI) through our strategic alliance and distribution rights and agreements in the PRC , CQFI engages high technology platforms such as the WeChat mobile application that connects rural farming communities with industrial purchasers of fresh fruits, vegetables and meats, including primarily organic and non-organic from both domestically grown and imported stock, primarily to restaurants and food related businesses such as restaurants and food suppliers, merchants, stores and supermarkets . We also engage in marketing and sales of (1) fresh fruits, vegetables meats (including primarily organic and non-organic from both domestically grown and imported (2) Acquisition of land for the planting of Acer Truncatum trees and harvesting of Acer Truncatum seeds to produce edible oil, (3) providing Hi-Tech cooperative farm management services in the PRC and overseas and (4) farm machinery such as tractors, cultivation, seeding, irrigation, fertilization and harvesting equipment.As of the date of this Report, CQFI employs a staff of 15 people and is located in Chongqing Municipality at Yudong Miaoshitai #46-9, Banan District, Chongqing, China.
CQFI provides a robust offering from food product suppliers within the municipality of Chongqing, China. Through distribution rights and agreements, CQFI works as the product supplier’s representative utilizing high technology platforms such as the WeChat mobile application to offer products to end purchasers such as restaurants and food suppliers, merchants, stores and supermarkets.
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Food Product Suppliers represented by CQFI
Chongqing BananMaotang Sugar Wine Business | Sugar & Wine |
Chongqing Nianrui Food Co., Ltd ChongQingHongGaoLei Agriculture Co.,Ltd ChongQingFenGuMeiDi beekeeper Co., Ltd ShanDong Donkey-hide gelatin Co.Ltd ChongQingZhenJiu Food Co.,Ltd Xingguo Red Land Ecological Agriculture Development Co., Ltd
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Sausage Meats Dried Bamboo Honey Gelatin Agricultural Products (fruits/vegetables) Acer Truncatum
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Recently the company has entered into the business of growing, harvesting and the production of edible oil with the acquisition of Acer Truncatum Plantations via two agreements which provide a total of 1400 Mu (230 Acres) of land in Yunnan Province, China. These two agreements are filed within this Current Report on Form 8-K as exhibits. Acer Truncatum trees produce seed oilcontaining nervonic acid, which can be used in cooking applications.
CQFI also seeks to establish 1,000,000 mu (about 164,737 acres) of organic agricultural industry base, producing more than 200 varieties of organic food, actively encouraging 200,000 farmers working specifically in organic agriculture. The company plans to support 100 agricultural machinery companies, 1000 agricultural cooperatives, 5000 large agricultural farmers, to promote economy through modern planting and harvesting machinery. CQFI will work together with farmers to establish agricultural cooperatives, to help students, laid-off workers and veterans to establish micro-enterprises, in order to development both urban and rural areas so that, suppressed land and rural property can be activated. CQFI expects this initiative to begin developing in Q1 2016.
Our funds are kept in financial institutions located in the PRC, which do not provide insurance for amounts on deposit. Moreover, we are subject to the regulations of the PRC, which restrict the transfer of cash from the PRC, except under certain specific circumstances. Accordingly, such funds may not be readily available to us to satisfy obligations which have been incurred outside the PRC.
We generally finance our operations through operating profit and borrowings from our directors. As of the date of this Current Report, we have not experienced any difficulties due to a shortage of capital, we have not experienced any difficulty in raising funds through loans from banks and financial institutions, and we have not experienced any liquidity problems in settling our payables in the normal course of business and repaying our loans when they come due. We are unaware of any trends, demands, commitments events or uncertainties that will result or be likely to result in material changes in our liquidity.
We believe that the level of financial resources is a significant factor for our future development and accordingly, we may determine from time to time to raise capital through private debt or equity financing to strengthen our financial position, to expand our facilities and to provide us with additional flexibility to take advantage of business opportunities. No assurances can be given that we will be successful in raising such additional capital on terms acceptable to us.
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Recent Events
Share Exchange
On December 27, 2016, CAT9 Group Inc., (formerly ANDES 4 Inc.) entered into a Share Exchange Agreement (the "Exchange Agreement") with CAT9 Cayman Limited, a company organized under the law of the Cayman Islands ("CAT9 Cayman"); CAT9 Investment China Limited, a company organized under the laws of Hong Kong ("CAT9 HK"); and its wholly-owned subsidiary, Chongqing Field Industrial Company Ltd, a company organized under the laws of the People's Republic of China. Pursuant to the Exchange Agreement, CAT9 Group Inc. agreed to issue an aggregate of 19,000,000 shares of its common stock to the CAT9 Cayman shareholders in exchange for all of the issued and outstanding securities of CAT9 Cayman. The Share Exchange closed on December 27, 2016 .
Immediately prior to the Share Exchange, we cancelled and retired 9,000,000 shares of our issued and outstanding common stock, (the “Cancelled Shares”), reducing our issued and outstanding shares to 1,000,000 shares of common stock. A cash amount of $1 was paid to Wenfa “Simon” Sun and Meihong “Sanya” Qian, our majority shareholders and owners of the Cancelled Shares, as consideration for cancelling the Cancelled Shares in connection with the Share Exchange. We issued a total of 19,000,000 shares of common stock pursuant to the Share Exchange and as a result of the cancellation of the Cancelled Shares and the Share Exchange; we had 20,000,000 shares of common stock issued and outstanding following the Share Exchange.
Upon the closing of the Share Exchange, CAT9 Group Inc. issued an aggregate of 19,000,000 shares of its common stock to the CAT9 Cayman shareholders in exchange for all of the issued and outstanding securities of CAT9 Cayman. Prior to the closing of the Share Exchange, stockholders of CAT9 Group Inc. canceled an aggregate of 9,000,000 shares held by them such that there were 1,000,000 shares of common stock outstanding immediately prior to the Share Exchange. Immediately after the closing of the Share Exchange, we had 20,000,000 shares of common stock, no shares of preferred stock, no options, and no warrants issued and outstanding
The transactions contemplated by the Share Exchange Agreement were intended to be a "tax-free" reorganization pursuant to the provisions of Sections 351 and/or 368(a) of the Internal Revenue Code of 1986, as amended.
A copy of the Share Exchange Agreement is filed as Exhibit 2.1, and a copy of the Subsidiaries is filed as Exhibit 21.1 to this
Current Report on Form 8-K.
Critical Accounting Policies, Estimates and Assumptions
Accounting Principles
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance with Generally accepted accounting principles in the United States (“U.S. GAAP”), which requires us to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenues and expenditures, to disclose contingent assets and liabilities on the date of the financial statements, and to disclose the reported amounts of revenues and expenses incurred during the financial reporting period. The most significant estimates and assumptions include revenues recognition, valuation of inventories and provisions for income taxes. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe critical accounting policies as disclosed in this report reflect the more significant judgments and estimates used in preparation of our financial statements. We believe there have been no material changes to our critical accounting policies and estimates.
The following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our consolidated financial statements:
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Accounts Receivable
Accounts receivable are recognized and carried at original invoiced amount less an allowance for uncollectible accounts, asneeded.
The allowance on uncollectible accounts receivable reflects management’s best estimate of probable losses determined principally on the basis of historical experience. The allowance for uncollectible accounts receivable is determined primarily on the basis of management’s best estimate of probable losses, including specific allowances for known troubled accounts. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for uncollectible accounts receivable. When facts subsequently become available to indicate that the amount provided as the allowance was incorrect, an adjustment which is classified as a change in estimate is made.
Inventories
Inventories are stated at the lower of cost or market. Cost is principally determined using the first-in, first-out method (FIFO); market value is based upon estimated replacement costs.
Revenue recognition
We follow paragraph ASC 605-10-S99-1, Revenue Recognition, for revenue recognition. We will recognize revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Fixed Assets
Fixed assets are carried at the lower of cost or net realizable value. Normal maintenance and repairs are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in operations. Depreciation is computed using the straight-line method over the estimated useful life of the asset of ten years.
Value added taxes
We are subject to value added tax (“VAT”). The applicable VAT rate is different based on the different structure of business under Chinese tax law. Some of our transactions are levied at a VAT tax rate of 17% for products sold in the PRC. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Some of transactions are levied at a VAT tax rate of 7%, such as shipping services and other transportation services.
Foreign currency translation
Our reporting currency is the U.S. dollar. Our functional currencies are local currencies, primarily the Chinese Yuan (Renminbi) and Hong Kong dollar. Transactions denominated in foreign currencies are translated into U.S. dollar at exchange rate in effect on the date of the transactions. The financial statements are translated into U.S. dollars using period-end rates of exchange for assets and liabilities and average rates of exchange for the period for revenues and expenses. Exchange gains or losses on transaction are included in earnings.
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Fair Value of Financial Instruments
The carrying amounts of cash and current liabilities approximate fair value because of the short-term maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. We do not hold or issue financial instruments for trading purposes, and we do not use derivative instruments.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:
· | Level 1: Quoted prices in active markets for identical assets or liabilities. |
· | Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability. |
· | Level 3: Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions. |
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Income Taxes
We follow ASC 740-10-30, Income Taxes-Initial Measurement, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income the period that includes the enactment date.
We adopted ASC 740-10-25, Accounting for Uncertainty in Income Taxes . ASC 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10-25, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods and requires increased disclosures. We had no material adjustments to our liabilities for unrecognized income tax benefits according to the provisions of ASC 740-10-25.
Recently issued accounting pronouncements
We have reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on our results of operations, financial position, and cash flows. Based on that review, these pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.
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Financial Statements for the Nine Months Ended September 30, 2016 and 2015
CHONGQING FIELD INDUSTRIAL CO., LTD
INDEX TO FINANCIAL STATEMENTS
September 30, 2016
Condensed Balance Sheets as of September 30, 2016 (unaudited) and December 31, 2015 34
Condensed Statements of Operations for the three and nine months ended September 30, 2016
and 2015 (unaudited) 35
Condensed Statements of Cash Flows the three and nine months ended September 30, 2016 and
2015 (unaudited) 36
Notes to the Condensed Financial Statements (unaudited) 37
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CHONGQING FIELD INDUSTRIAL CO., LTD BALANCE SHEETS |
||||||||
September 30, 2016 |
December 31, 2015 |
|||||||
ASSETS | (Unaudited) | |||||||
Current assets: | ||||||||
Cash | $ | 63,262 | $ | 2 | ||||
Accounts receivable | - | 23,825 | ||||||
Other receivables | 10,008 | - | ||||||
Advances to suppliers | 375,885 | 417,046 | ||||||
Inventory | 1,553 | 2,773 | ||||||
Total current assets | 450,708 | 443,646 | ||||||
Total assets | $ | 450,708 | $ | 443,646 | ||||
LIABILITIES AND MEMBERS’ CAPITAL | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,129 | $ | 15,437 | ||||
Other payables, related party | 16,193 | 9,545 | ||||||
Other payables | 27,091 | - | ||||||
Total current liabilities | 44,413 | 24,982 | ||||||
Total liabilities | 44,413 | 24,982 | ||||||
Members’ capital: | ||||||||
Members’ capital | 414,742 | 426,158 | ||||||
Accumulated deficit | (9,118) | (7,947) | ||||||
Accumulated other comprehensive income | 671 | 453 | ||||||
Total members’ capital | 406,295 | 418,664 | ||||||
Total liabilities and members’ capital | $ | 450,708 | $ | 443,646 |
The accompanying notes are an integral part of these unaudited financial statements.
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CHONGQING FIELD INDUSTRIAL CO., LTD STATEMENTS OF OPERATIONS (Unaudited) |
||||||||||||||||||||
For the three months ended September 30, |
For the nine months ended September 30, |
|||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Revenue | $ | 13,471 | $ | - | $ | 51,759 | $ | - | ||||||||||||
Cost of revenue | 3,772 | - | 18,195 | - | ||||||||||||||||
Gross Margin | 9,699 | - | 33,564 | - | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||
General and administrative | 11,808 | 171 | 34,922 | 7,359 | ||||||||||||||||
Total operating expenses | 11,808 | 171 | 34,922 | 7,359 | ||||||||||||||||
Loss from operations | (2,109) | (171) | (1,358) | (7,359) | ||||||||||||||||
Other income: | ||||||||||||||||||||
Other income | - | - | 187 | - | ||||||||||||||||
Total other income | - | - | 187 | - | ||||||||||||||||
Loss before income taxes | (2,109) | (171) | (1,171) | (7,359) | ||||||||||||||||
Provision for income taxes | - | - | - | - | ||||||||||||||||
Net loss | $ | (2,109) | $ | (171) | $ | (1,171) | $ | (7,359) | ||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||
Foreign currency translation adjustment | - | - | 218 | 567 | ||||||||||||||||
Comprehensive income (loss) | $ | (2,109) | $ | (171) | $ | (953) | $ | 6,792 | ||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
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CHONGQING FIELD INDUSTRIAL CO., LTD STATEMENTS OF CASH FLOWS (Unaudited) |
||||||||
For the nine months ended September 30, |
||||||||
2016 | 2015 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,171) | $ | (7,359) | ||||
Adjustments to reconcile net loss to net | ||||||||
cash used in operating activities: | ||||||||
Foreign currency translation adjustment | 218 | 567 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts Receivable | 23,825 | - | ||||||
Other assets | 31,153 | (426,504) | ||||||
Inventory | 1,220 | - | ||||||
Accounts payable and accrued liabilities | 3,500 | - | ||||||
Net cash provided by (used in) operating activities | 58,745 | (433,296) | ||||||
Cash flows from investing activities: | - | - | ||||||
Cash flows from financing activities: | ||||||||
Contributed capital | (11,416) | 185,030 | ||||||
Loans from related parties | 15,937 | 759,171 | ||||||
Repayment of related party loans | (6) | (510,910) | ||||||
Net cash provided by financing activities | 4,515 | 433,291 | ||||||
Net change in cash | 63,260 | (5) | ||||||
Cash, beginning of period | 2 | 6 | ||||||
Cash, end of period | $ | 63,262 | $ | 1 | ||||
SUPPLEMENTAL DISCLOSURES: | ||||||||
Cash paid for interest | $ | - | $ | - | ||||
Cash paid for taxes | $ | - | $ | - |
The accompanying notes are an integral part of these unaudited financial statements.
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CHONGQING FIELD INDUSTRIAL CO., LTD
NOTES TO FINANCIAL STATEMENTS
September 30, 2016
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Chongqing Field Industrial Company Ltd is located in Chongqing, PRC and was incorporated under the laws of the PRC on June 26, 2014. Since its inception, Chongqing Field Industrial Company Ltd has operated through strategic alliance and distribution rights agreements in the PRC, the Company is engaged in the marketing and sales of (1) fresh fruits, vegetables meats (including primarily organic and non-organic from both domestically grown and imported (2) Acquisition of land for the planting of Acer Truncatum trees and harvesting of Acer Truncatum seeds to produce edible oil, (3) providing Hi-Tech cooperative farm management services in the PRC and overseas and (4) farm machinery such as tractors, cultivation, seeding, irrigation, fertilization and harvesting equipment.
NOTE 2 - GOING CONCERN
The accompanying condensed unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’s ability to raise additional capital through debt and/or equity financing is unknown. The obtainment of additional financing and the successful development of the Company’s contemplated plan of operations are necessary for the Company to continue. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. However; management believes that the Company will generate sufficient cash flows to fund its operations and to meet its obligations on timely basis for the next twelve months. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. The accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending December 31, 2016. These unaudited condensed financial statements should be read in conjunction with the financial statements and related notes for the year ended December 31, 2015.
The Company's functional currency is the Chinese Renminbi (“RMB”); however, the accompanying financial statements have been translated and presented in the United States Dollars (“USD”).
Translation Adjustment
For the periods presented, the accounts of the Company were maintained, and its financial statements were expressed, in RMB. Such financial statements were translated into USD in accordance with the Foreign Currency Matters Topic of the Codification (ASC 830), with the RMB as the functional currency. According to the Codification, all assets and liabilities were translated at the current exchange rate at respective balance sheets dates, members’ capital are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the Comprehensive Income Topic of the Codification (ASC 220), as a component of shareholders’ equity. Transaction gains and losses are reflected in the income statement.
Comprehensive Income
The Company uses SFAS 130 “Reporting Comprehensive Income” (ASC Topic 220). Comprehensive income is comprised of net income and all changes to the statements of members’ capital, except those due to investments by members, changes in paid-in capital and distributions to members. Comprehensive income for the three and nine months ended September 30, 2016 and 2015 is included in net income and foreign currency translation adjustments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.
Recently issued accounting pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
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NOTE 4 – ADVANCES TO SUPPLIERS
As of the year ended December 31, 2015, the Company entered into contracts with two suppliers to acquire machinery deliverable on December 31, 2016. The company advanced the suppliers $417,046 to secure these purchases and which represented approximately fifty percent of the contact amounts. During 2016 one of the suppliers refunded the Company part of the deposit, accordingly, the deposit balance as of September 30, 2016 totaled $375,885.
NOTE 5 - RELATED PARTY TRANSACTIONS
During the normal course of business, affiliated companies, members, and/or officers may advance the Company funds to pay for certain operating expenses. All advances are unsecured, non-interest bearing and due on demand.
As of September 30, 2016 and December 31, 2015 the Company was indebted to related parties that advanced loans to the Company without any formal repayment terms. As of September 30, 2016 and December 31, 2015 the Company owed the aforementioned related parties $16,193 and $9,545, respectively.
NOTE 6 – ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance of related after-tax components comprising accumulated other comprehensive income included in members’ capital were as follows:
September 30, 2016 | December 31, 2015 | |||
Accumulated other comprehensive income, beginning of period | $ | 453 | $ | (9) |
Change in cumulative translation adjustment | 218 | 462 | ||
Accumulated other comprehensive income, end of period | $ | 671 | $ | 453 |
NOTE 7 – COMMITMENTS
On April 14, 2015, the Company issued a purchase order to Chongqing Fangbaiyuan Trading Co., Ltd. Per the terms of the purchase order half was paid in advance with the balance due upon delivery, scheduled for December 31, 2016. As of September 30, 2016, $227,547 is due upon delivery.
On April 21, 2015, the Company issued a purchase order to Chongqing Qinuo Trading Co., Ltd. Per the terms of the purchase order half was paid in advance with the balance due upon delivery, scheduled for December 31, 2016. As of September 30, 2016, $158,685 is due upon delivery.
NOTE 8 – SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.
Inflation
We believe that inflation has had a negligible effect on operations over the past two fiscal years. However, overall commodity inflation is an ongoing concern for our business and has been a considerable operational and financial focus for us. Further, as production increases, commodity inflationary pressures may increase, both in the plastic manufacturing industry and in the broader economy. We continue to monitor commodity costs and work with our suppliers and customers to manage changes in commodity costs.
Off-Balance Sheet Arrangements
We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions of foreign currency forward contracts. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.
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Quantitative and Qualitative Disclosures about Market Risk
Interest Rates Risk
Our exposure to interest rate risk for changes in interest rates relates primarily to the interest-bearing bank loans and interest income generated by the bank deposits. We have not used any derivative financial instruments in our investment portfolio or for cash management purposes. Interest- earning instruments carry a degree of interest rate risk. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates. However, our future interest expense or interest income may expect to be increased due to changes in interest rates in the PRC.
Foreign Exchange Rates Risk
We do not hold any derivative instruments and do not engage in any hedging activities. Because most of our purchases and sales are made in RMB, any exchange rate change affecting the value of the RMB relative to the U.S. dollar could have an effect on our financial results as reported in U.S. dollars. If the RMB were to depreciate against the U.S. dollar, amounts reported in U.S. dollars would be correspondingly reduced. If the RMB were to appreciate against the U.S. dollar, amounts reported in U.S. dollars would be correspondingly increased.
Country Risk
The substantial portion of our assets and operations are located and conducted in China. While the PRC economy has experienced significant growth in the past twenty years, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall economy of China, but may also have a negative effect on us. For example, our operating results and financial condition may be adversely affected by government control over capital investments or changes in tax regulations applicable to us. If there are any changes in any policies by the Chinese government and our business is negatively affected as a result, then our financial results, including our ability to generate revenues and profits, will also be negatively affected.
Seasonality
We experience slower sales during Chinese New Year, which occurs in February of each year.
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ITEM 3.02 | UNREGISTERED SALES OF EQUITY SECURITIES. |
The Company filed a report on Form 8-K on May 4, 2016. As stated within Item 1.01 of the report and pursuant to the Employment Agreements ratified and approved by the Board of Directors, on May 2, 2016, the Company issued 10,000,000 shares of its restricted common stock pursuant to Section 4(2) of the Securities Act of 1933 at par value, $0.0001 per share for a total of 10,000,000 shares of common stock as follows:
6,000,000 Wenfa "Simon" Sun
4,000,000 MeiHong "Sanya" Qian
The securities were offered and issued in reliance upon an exemption from registration pursuant to Regulation S of the Securities Act. We complied with the conditions of Rule 903 as promulgated under the Securities Act including, but not limited to, the following: (i) each recipient of the shares is a non-U.S. resident and has not offered or sold their shares in accordance with the provisions of Regulation S; (ii) an appropriate legend was affixed to the securities issued in accordance with Regulation S; (iii) each recipient of the shares has represented that it was not acquiring the securities for the account or benefit of a U.S. person; and (iv) each recipient of the shares agreed to resell the securities only in accordance with the provisions of Regulation S, pursuant to a registration statement under the Securities Act, or pursuant to an available exemption from registration. We will refuse to register any transfer of the shares not made in accordance with Regulation S, after registration, or under an exemption.
On December 27, 2016 , pursuant to the terms of the Share Exchange Agreement, entered into by and between CAT9 Group Inc., (formerly ANDES 4 Inc.) , CAT9 Cayman, CAT9 Investment China Limited, and Chongqing Field Industrial Company Ltd (as described in Item 2.01 above), CAT9 Group issued 19,000,000 shares of its common stock to the CQFI Shareholders in exchange for all of the issued and outstanding securities of CAT9 Cayman. All of the securities were offered and issued in reliance upon an exemption from registration pursuant to Regulation S of the Securities Act. We complied with the conditions of Rule 903 as promulgated under the Securities Act including, but not limited to, the following: (i) each recipient of the shares is a non-U.S. resident and has not offered or sold their shares in accordance with the provisions of Regulation S; (ii) an appropriate legend was affixed to the securities issued in accordance with Regulation S; (iii) each recipient of the shares has represented that it was not acquiring the securities for the account or benefit of a U.S. person; and (iv) each recipient of the shares agreed to resell the securities only in accordance with the provisions of Regulation S, pursuant to a registration statement under the Securities Act, or pursuant to an available exemption from registration. We will refuse to register any transfer of the shares not made in accordance with Regulation S, after registration, or under an exemption.
This current report is not an offer of securities for sale. Any securities sold in the private placement have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States unless registered under the Securities Act of 1933, as amended, or pursuant to an exemption from such registration.
DESCRIPTION OF SECURITIES - POST-SHARE EXCHANGE
Common Stock
We are authorized to issue 100,000,000 shares of common stock, $0.0001 par value per share. Prior to the Share Exchange CAT9 Group Stockholders held an aggregate of 10,000,000 shares and an aggregate of 9,000,000 shares were cancelled in conjunction with the closing of the Share Exchange. There are currently 20,000,000 shares of common stock issued and outstanding. Each outstanding share of common stock is entitled to one vote, either in person or by proxy, on all matters that may be voted upon by their holders at meetings of the stockholders.
Holders of our common stock:
· | have equal ratable rights to dividends from funds legally available therefore, if declared by our Board of Directors; |
· | are entitled to share ratably in all of the Company’s assets available for distribution to holders of common stock upon our liquidation, dissolution or winding up; |
· | do not have preemptive, subscription or conversion rights or redemption or sinking fund provisions; and |
· | are entitled to one non-cumulative vote per share on all matters on which stockholders may vote at all meetings of our stockholders. |
The holders of shares of our common stock do not have cumulative voting rights, which means that the holders of more than fifty percent (50%) of outstanding shares voting for the election of directors can elect all of our directors if they so choose and, in such event, the holders of the remaining shares will not be able to elect any of our directors. Accordingly, upon the closing of the Share Exchange, these stockholders are in a position to control all of our affairs.
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Preferred Stock
We may issue up to 5,000,000 shares of our preferred stock, par value $0.0001 per share, from time to time. As of the date of this Current Report on Form 8-K, no shares of preferred stock have been issued.
Our Board of Directors, without further approval of our stockholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights, liquidation preferences and other rights and restrictions relating to any series. Issuances of shares of preferred stock, while providing flexibility in connection with possible financings, acquisitions and other corporate purposes, could, among other things, adversely affect the voting power of the holders of our common stock and prior series of preferred stock then outstanding.
MARKET PRICE OF AND DIVIDENDS ON THE COMPANY’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our common stock is not currently listed or quoted for trading on any national securities exchange or national quotation system. We intend to apply for the listing of our common stock on the Over-the-Counter Bulletin Board ("OTCBB") in the future through a qualified FINRA market maker upon effectiveness of a Form S-1 registration statement. There is no guarantee that the OTCBB, or any other securities exchange or quotation system, will permit our shares to be listed and traded. There is no guarantee that a qualified FINRA market maker will agree to sponsor us upon effectiveness of a Form S-1 registration statement.
FINRA has enacted changes that limit quotations on the OTC Bulletin Board to securities of issuers that are current in their reports filed with the Securities and Exchange Commission. The effect on the OTC Bulletin Board of these rule changes and other proposed changes cannot be determined at this time . If and when our common stock is listed or quoted for trading, the price of our common stock will likely fluctuate in the future. The stock market in general has experienced extreme stock price fluctuations in the past few years. In some cases, these fluctuations have been unrelated to the operating performance of the affected companies. Many companies have experienced dramatic volatility in the market prices of their common stock. We believe that a number of factors, both within and outside our control, could cause the price of our common stock to fluctuate, perhaps substantially. Factors such as the following could have a significant adverse impact on the market price of our common stock:
· | Our financial position and results of operations; |
· | Our ability to obtain additional financing and, if available, the terms and conditions of the financing; |
· | Announcements of innovations or new products by us or our competitors; |
· | Federal and state regulatory actions and the impact of such requirements on our business; |
· | The development of litigation against us; |
· | Changes in estimates of our performance by any securities analysts; |
· | The issuance of new equity securities pursuant to a future offering or acquisition; |
· | Competitive developments, including announcements by competitors of new products or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; |
· | Period-to-period fluctuations in our operating results; |
· | Investor perceptions of us; |
· | General economic and other national conditions; and |
· | Changes in Chinese government regulations. |
Stockholders of Record
As of December 27, 2016, there were two stockholders of record of our common stock.
Dividends
The Company has not paid dividends and does not foresee paying dividends in the near future.
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DELAWARE ANTI-TAKEOVER LAW AND CHARTER AND BYLAW PROVISIONS
We are subject to Section 203 of the Delaware General Corporation Law. This provision generally prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three (3) years following the date the stockholder became an interested stockholder, unless:
· | prior to such date, the Board of Directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; |
· | upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned by persons who are directors and also officers and by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or |
· | on or subsequent to such date, the business combination is approved by the Board of Directors and authorized at an annual meeting or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66% of the outstanding voting stock that is not owned by the interested stockholder. |
· | Section 203 defines a business combination to include: |
· | any merger or consolidation involving the corporation and the interested stockholder; |
· | any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; |
· | subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; |
· | any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or |
· | the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. |
In general, Section 203 defines an “interested stockholder” as any entity or person beneficially owning 15% or more of the outstanding voting stock of a corporation, or an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of a corporation at any time within three years prior to the time of determination of interested stockholder status; and any entity or person affiliated with or controlling or controlled by such entity or person.
Our certificate of incorporation and bylaws contain provisions that could have the effect of discouraging potential acquisition proposals or making a tender offer or delaying or preventing a change in control of our company, including changes a stockholder might consider favorable. In particular, our certificate of incorporation and bylaws, as applicable, among other things, will:
· | provide our board of directors with the ability to alter its bylaws without stockholder approval; |
· | provide for an advance notice procedure with regard to the election of directors and other business to be brought before a meeting of stockholders; |
· | provide that vacancies on our board of directors may be filled by a majority of directors in office, although less than a quorum. |
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Such provisions may have the effect of discouraging a third-party from acquiring us, even if doing so would be beneficial to our stockholders. These provisions are intended to enhance the likelihood of continuity and stability in the composition of our board of directors and in the policies formulated by them, and to discourage some types of transactions that may involve an actual or threatened change in control of our company. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage some tactics that may be used in proxy fights. We believe that the benefits of increased protection of its potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure our company outweigh the disadvantages of discouraging such proposals because, among other things, negotiation of such proposals could result in an improvement of their terms.
However, these provisions could have the effect of discouraging others from making tender offers for our shares that could result from actual or rumored takeover attempts. These provisions also may have the effect of preventing changes in our management.
ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT.
OVERVIEW
CAT9 Group Inc. (Formerly, ANDES 4 Inc., or the “Company”, or "Issuer", or “CAT9”) was incorporated in the State of Delaware on January 26, 2015 and was originally organized as a "blank check" shell company to investigate and acquire a target company or business seeking the perceived advantages of being a publicly held corporation.
On July 31, 2015, the sole officer and director of the Company entered into a Share Purchase Agreement (the “SPA”) pursuant to which he entered into an agreement to sell an aggregate of 10,000,000 shares of his shares of the Company’s common stock to Chongqing Field Industrial Company Ltd. (“CQFI”) at an aggregate purchase price of $40,000. These shares represent 100% of the Company’s issued and outstanding common stock. Effective upon the closing date of the Share Purchase Agreement, August 12, 2015, the sole officer and director of the Company executed the agreement and owned no shares of the Company’s stock and CQFI was the majority stockholder of the Company.
On May 2, 2016, CAT9 Group Inc. entered into Employee Agreements with Wenfa "Simon" Sun, its President, Chief Executive Officer, and Chairman of the Board of Directors, and MeiHong "Sanya" Qian, its Chief Financial Officer and Secretary. Pursuant to the Employment Agreement, the Company issued 6,000,000 shares of restricted common stock to Wenfa "Simon" Sun, and 4,000,000 shares of restricted common stock to MeiHong "Sanya" Qian. Both individuals have served in their respective positions for the Company since August 12, 2015. Prior to May 2, 2016, the Company had 10,000,000 shares issued and outstanding, and as of May 2, 2016, the Company had 20,000,000 shares issued and outstanding.
On May 3, 2016, the sole shareholder of the Company, CQFI consented to redemption of its 10,000,000 shares held in the Issuer. The Company redeemed an aggregate of 10,000,000 from CQFI of the then 10,000,000 shares of outstanding stock at a redemption price of $0.0001 per share for an aggregate redemption price of $1,000 . As a result of this action by CQFI, management of the Company now control 100% of the issued and outstanding shares. As of May 4, 2016, the Company had 10,000,000 shares issued and outstanding.
With the redemption and subsequent issuance of the 10,000,000 shares of restricted common stock, the Company effected a change in its control and the new majority shareholders are the current members of management of the Company.
On December 27, 2016 , CAT9 closed a share exchange transaction, described below, pursuant to which CAT9 became the 100% parent of CAT9 Cayman, assumed the operations of CAT9 Cayman and its subsidiaries, including CAT9 Investment China, and Chongqing Field Industrial Company Ltd.
CAT9 Cayman is a holding company incorporated in August20, 2015, under the laws of the Cayman Islands. CAT9 Investment China Limited was incorporated in September 10, 2015, under the laws of Hong Kong. CAT9 Investment China is a window for the group to handle the business operations outside of China.
Chongqing Field Industrial Company Ltd is located in Chongqing, PRC and was incorporated under the laws of the PRC on June, 26, 2014. Since its inception, Chongqing Field Industrial Company Ltd has operated through strategic alliance and distribution rights agreements in the PRC, the Company is engaged in the marketing and sales of (1) fresh fruits, vegetables meats (including primarily organic and non-organic from both domestically grown and imported (2) farm machinery such as tractors, cultivation, seeding, irrigation, fertilization and harvesting equipment;; (3) providing Hi-Tech cooperative farm management services in the PRC and overseas and (4) offering rural tourism in the PRC in agricultural areas.
On December 27, 2016, CAT9 Group Inc., (formerly ANDES 4 Inc.) entered into a Share Exchange Agreement (the "Exchange Agreement") with CAT9 Cayman Limited, a company organized under the law of the Cayman Islands ("CAT9 Cayman"); CAT9 Investment China Limited, a company organized under the laws of Hong Kong ("CAT9 HK"); and its wholly-owned subsidiary, Chongqing Field Industrial Company Ltd, a company organized under the laws of the People's Republic of China. Pursuant to the Exchange Agreement, CAT9 Group Inc. agreed to issue an aggregate of 19,000,000 shares of its common stock to the CAT9 Cayman shareholders in exchange for all of the issued and outstanding securities of CAT9 Cayman. The Share Exchange closed on December 27, 2016 .
Immediately prior to the Share Exchange, we cancelled and retired 9,000,000 shares of our issued and outstanding common stock, (the “Cancelled Shares”), reducing our issued and outstanding shares to 1,000,000 shares of common stock. A cash amount of $1 was paid to Wenfa “Simon” Sun and Meihong “Sanya” Qian, our majority shareholders and owners of the Cancelled Shares, as consideration for cancelling the Cancelled Shares in connection with the Share Exchange. We issued a total of 19,000,000 shares of common stock pursuant to the Share Exchange and as a result of the cancellation of the Cancelled Shares and the Share Exchange; we had 20,000,000 shares of common stock issued and outstanding following the Share Exchange.
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Upon the closing of the Share Exchange, CAT9 Group Inc. issued an aggregate of 19,000,000 shares of its common stock to the CAT9 Cayman shareholders in exchange for all of the issued and outstanding securities of CAT9 Cayman. Prior to the closing of the Share Exchange, stockholders of CAT9 Group Inc. canceled an aggregate of 9,000,000 shares held by them such that there were 1,000,000 shares of common stock outstanding immediately prior to the Share Exchange. Immediately after the closing of the Share Exchange, we had 20,000,000 shares of common stock, no shares of preferred stock, no options, and no warrants issued and outstanding
The transactions contemplated by the Share Exchange Agreement were intended to be a "tax-free" reorganization pursuant to the provisions of Sections 351 and/or 368(a) of the Internal Revenue Code of 1986, as amended.
A copy of the Share Exchange Agreement is filed as Exhibit 2.1, and a copy of the Subsidiaries is filed as Exhibit 21.1 to this
Current Report on Form 8-K.
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Neither the Company, its property, nor any of its directors or officers is a party to any pending legal proceeding, nor have they been subject to a bankruptcy petition filed against them. None of its officers or directors has been convicted in, nor is subject to, any criminal proceeding.
The names and ages of the directors and executive officers of the Company and their positions with the Company are as follows:
Name | Age | Position | ||
Wenfa "Simon" Sun | 41 | President, Chief Executive Officer, and Chairman of the Board of Directors | ||
MeiHong "Sanya" Qian | 49 | Chief Financial Officer and Secretary | ||
Liu Shanhu | 43 | Independent Director |
Wenfa “Simon” Sun, Age 41, President, Chief Executive Officer, Chairman of the Board of Directors
Mr. Sun holds a degree in International Finance from the Politics and Law University in Shanghai. Post-graduation Mr. Sun started as an intern with Shanghai Sports foundation in 2005. Putting his academic skills to practical application gained valuable experience in domestic and international finance policies and regulations. In 2007 joined the Yantai Charitable Association where he used his experience and resources to raise funds for this notable charity. Mr. Sun realizing the potential in both the domestic and international market for new technology in the Agriculture sector purchased Chongqing Steyer Agriculture Company. As President, he collaborated in a team effort and listed the Company's shares on the Shanghai Stock Exchange.
MeiHong “Sanya” Qian, Age 49, Chief Financial Officer, Secretary
Ms. Qian holds a degree in Business Administration in English from Chongqing Educational University and has twenty years experience in the real estate development sector starting in 1992 as Deputy Manager of Chongqing YingDan real Estate Ltd. In 2002 forming her own real estate and consulting firm Gold Clicks2 Real Estate Consulting Ltd., as President and General Manager. During Ms. Qian’s tenure in the real estate development industry she developed 138 projects in China’s largest municipality, Chongqing, and 16 projects in medium size cities earning her China’s distinguished “Top Ten Outstanding Marketing Planner” award in 2007. As a post graduate student in economics and finance from South West Economics and Finance University in Chengdu along with her proven track record in market research, feasibility studies and international trade, Ms. Qian’s vision has turned to the current domestic and global market demand for food and was appointed General Manager of Chongqing Steyer Agriculture Company Ltd. in 2015. She collaborated in a team effort to help list the Company's shares on the Shanghai Stock Exchange.
Liu Shanhu, Age 43, Independent Director
Liu Shanhu holds a degree of economics in Beijing University. He started work as an office clerk for Foreign Affairs Office of Hainan Province on September of 1993. In December 1994 he became the producer, director and reporter for CCTV until 2004. During this period, he became the General Producer of full-length documentary, Melbourne's soul. From 2004 to 2014, he started Shanghai Shanhu enterprise planning co., LTD and was the chairman of board. During this period, he started to be the co-founders of the book, Wind Gap. He has ten years’ experience of media industry, and seven years’ experience of professional management. He has been appointed as a special researcher of international humanities in academy of social science in 1994. He specializes in effective team building, brand operating, and marketing.
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Family Relationships
There are no family relationships among any of the officers and directors.
Involvement in Certain Legal Proceedings
There have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of the Company during the past ten years.
The Company is not aware of any legal proceedings in which any director, nominee, officer or affiliate of the Company, any owner of record or beneficially of more than five percent of any class of voting securities of the Company, or any associate of any such director, nominee, officer, affiliate of the Company, or security holder is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.
Board of Directors and Committees
Our Board of Directors does not maintain a separate audit, nominating or compensation committee. Functions customarily performed by such committees are performed by the Board of Directors as a whole. We are not required to maintain such committees under the rules applicable to companies that do not have securities listed or quoted on a national securities exchange or national quotation system. We intend to create board committees, including an independent audit committee, in the near future.
Director Independence
As of the date of this Current Report on Form 8-K. , we have one independent director on our Board of Directors.
Financial Experience of Management and Preparation of Financial Statements
We maintain our books and records in accordance with Chinese GAAP on the accrual basis. Chinese GAAP is similar to international GAAP. The basic accounting principles and practice of Chinese GAAP are similar to U.S. GAAP. We hire knowledge and reputable third-party consultants to covert our books and records from Chinese GAAP to U.S. GAAP. We provide our books and records to the consultants who make the appropriate adjustments in the working papers prepared for the auditor. All adjustments are approved by management and reviewed and/or audited by our auditor. Our consultants provide their services to us pursuant to a consulting agreement between us and the consulting team.
We do not currently maintain an audit committee or have an audit committee financial expert. We intend to form an audit committee and appoint an audit committee financial expert.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Summary Compensation Table
The following table provides information regarding the compensation of our named executive officers for the year ended December 31, 2015.
Name and Principal Position | Year | Salary |
Option
Awards (1) |
Non-Equity
Incentive Plan Compensation (2) |
Other
Compensation |
Total | ||||||||||||||||
Wenfa "Simon" Sun | ||||||||||||||||||||||
President and Chief Executive Officer, Chairman of the Board of Directors | 2015 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||
MeiHong "Sanya" Qian | ||||||||||||||||||||||
Chief Financial Officer and Secretary | 2015 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
Liu Shanhu | |||||||||||||||||||||
Independent Director | 2015 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
Grants of Plan-Based Awards in 2015
There were no option grants in 2015.
Outstanding Equity Awards at 2015 Fiscal Year End
There were no outstanding equity awards in 2015.
Option Exercises and Stock Vested in Fiscal 2015
There were no option exercises or stock vested in 2015.
Pension Benefits
There were no pension benefit plans in effect in 2015.
Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
There were no non-qualified defined contributions or other nonqualified deferred compensation plans in effect in 2015.
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Employment Agreements
We have employment agreements with the following persons and terms:
As disclosed on Form 8-K, on May 2, 2016, CAT9 Group Inc. entered into Employee Agreements with Wenfa "Simon" Sun, its President, Chief Executive Officer, and Chairman of the Board of Directors, and MeiHong "Sanya" Qian, its Chief Financial Officer and Secretary. Pursuant to the Employment Agreement, the Company issued 6,000,000 shares of restricted common stock to Wenfa "Simon" Sun, and 4,000,000 shares of restricted common stock to MeiHong "Sanya" Qian.
Additionally, both Wenfa "Simon" Sun and MeiHong "Sanya" Qian will begin to earn a monthly salary upon the execution of this share exchange transaction as outlined in this Current Report on Form 8-K.
Mr. Wenfa "Simon" Sun, our Chief Executive Officer, will be paid a monthly salary of RMB75,000.00 ($12,000.00 USD) pursuant to
a four-year agreement that expires on June 30, 2020; and
Ms. Qian MeiHong, our Chief Financial Officer and Secretary, will be paid a monthly salary of RMB70,000.00 ($11,000 USD) pursuant to a four-year agreement that expires on June 30, 2020.
Director Compensation
No director was compensated earned during the fiscal year ended December 31, 2015 by members of our board of directors. We do not currently have an established policy to provide compensation to members of our Board of Directors for their services in that capacity. We intend to develop such a policy in the near future.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CAT9 Group Inc. and Subsidiaries
CAT9 Cayman , CAT9 HK, and CQFI, which are either directly or indirectly wholly-owned subsidiaries of the Company, each have interlocking executive and director positions with us and with each other.
Share Exchange
On December 27, 2016 , CAT9 Group Inc., (formerly ANDES 4 Inc.) entered into a Share Exchange Agreement (the "Exchange Agreement") with CAT9 Cayman Limited, a company organized under the laws of the Cayman Islands ("CAT9 Cayman"); CAT9 Investment China Limited, a company organized under the laws of Hong Kong ("CAT9 HK"); and its wholly-owned subsidiary, Chongqing Field Industrial Company Ltd, a company organized under the laws of the People's Republic of China. Pursuant to the Exchange Agreement, CAT9 Group Inc. agreed to issue an aggregate of 19,000,000 shares of its common stock to the CAT9 Cayman shareholders in exchange for all of the issued and outstanding securities of CAT9 Cayman. The Share Exchange closed on December 27, 2016 .
Immediately prior to the Share Exchange, we cancelled and retired 9,000,000 shares of our issued and outstanding common stock, (the “Cancelled Shares”), reducing our issued and outstanding shares to 1,000,000 shares of common stock. A cash amount of $1 was paid to Wenfa “Simon” Sun and Meihong “Sanya” Qian, our majority shareholders and owners of the Cancelled Shares, as consideration for cancelling the Cancelled Shares in connection with the Share Exchange. We issued a total of 19,000,000 shares of common stock pursuant to the Share Exchange and as a result of the cancellation of the Cancelled Shares and the Share Exchange; we had 20,000,000 shares of common stock issued and outstanding following the Share Exchange.
Upon the closing of the Share Exchange, CAT9 Group Inc. issued an aggregate of 19,000,000 shares of its common stock to the CAT9 Cayman shareholders in exchange for all of the issued and outstanding securities of CAT9 Cayman. Prior to the closing of the Share Exchange, stockholders of CAT9 Group Inc. canceled an aggregate of 9,000,000 shares held by them such that there were 1,000,000 shares of common stock outstanding immediately prior to the Share Exchange. Immediately after the closing of the Share Exchange, we had 20,000,000 shares of common stock, no shares of preferred stock, no options, and no warrants issued and outstanding
The transactions contemplated by the Share Exchange Agreement were intended to be a "tax-free" reorganization pursuant to the provisions of Sections 351 and/or 368(a) of the Internal Revenue Code of 1986, as amended.
A copy of the Share Exchange Agreement is filed as Exhibit 2.1, and a copy of the Subsidiaries is filed as Exhibit 21.1 to this
Current Report on Form 8-K.
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Related Party Loans
Due to related party consists of the following:
September 30, 2015 | December 31, 2015 | ||||||||
Due to Bradford Bean | $ | 3,242.85 | $10,828.93 | ||||||
$ | 3,242.85 | $10,828.93 | |||||||
Borrowings from the directors were non-interest bearing, unsecured and have no set repayment date.
Policy for Approval of Related Party Transactions
We do not currently have a formal related party approval policy for review and approval of transactions required to be disclosed pursuant to Item 404 (a) of Regulation S-K. We expect our board to adopt such a policy in the near future.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Under Section 145 of the General Corporation Law of the State of Delaware, we can indemnify its directors and officers against liabilities they may incur in such capacities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Our Certificate of Incorporation provides for the indemnification, to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as amended from time to time, of officers, directors, employees and agents of the Company. We may, prior to the final disposition of any proceeding, pay expenses incurred by an officer or director upon receipt of an undertaking by or on behalf of that director or executive officer to repay those amounts if it should be determined ultimately that he or she is not entitled to be indemnified under the bylaws or otherwise. We shall indemnify any officer, director, employee or agent upon a determination that such individual has met the applicable standards of conduct specified in Section 145. In the case of an officer or director, the determination shall be made by (a) a majority vote of directors who are not parties to such proceeding, even though less than a quorum; (b) a committee of such directors designated by majority vote of such directors, even though less than a quorum; (c) if there are no such directors, independent legal counsel in a written opinion or (d) the stockholders.
Our certificate of incorporation provides that, pursuant to Delaware law, our directors shall not be liable for monetary damages for breach of the directors’ fiduciary duty of care to us and our stockholders. This provision in the certificate of incorporation does not eliminate the duty of care, and in appropriate circumstances equitable remedies such as injunctive or other forms of no monetary relief will remain available under Delaware law. In addition, each director will continue to be subject to liability for breach of the director’s duty of loyalty to us or our stockholders, for acts or omissions not in good faith or involving intentional misconduct or knowing violations of the law, for actions leading to improper personal benefit to the director, and for payment of dividends or approval of stock repurchases or redemptions that are unlawful under Delaware law. The provision also does not affect a director’s responsibilities under any other law, such as the federal securities laws or state or federal environmental laws.
We have been advised that in the opinion of the Securities and Exchange Commission, insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by its director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
We may enter into indemnification agreements with each of our directors and officers that are, in some cases, broader than the specific indemnification provisions permitted by Delaware law, and that may provide additional procedural protection. As of the date of the Share Exchange, we have not entered into any indemnification agreements with our directors or officers, but may choose to do so in the future. Such indemnification agreements may require us, among other things, to:
· | indemnify officers and directors against certain liabilities that may arise because of their status as officers or directors; |
· | advance expenses, as incurred, to officers and directors in connection with a legal proceeding, subject to limited exceptions; or; |
· | obtain directors’ and officers’ insurance. |
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At present, there is no pending litigation or proceeding involving any of our directors, officers or employees in which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT FOLLOWING THE SHARE EXCHANGE
Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage of ownership of that person, shares of common stock subject to options and warrants held by that person that are currently exercisable or become exercisable within sixty (60) days of the closing of the Share Exchange on December 27, 2016 are deemed outstanding even if they have not actually been exercised. Those shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
Immediately prior to the Share Exchange, we cancelled and retired 9,000,000 shares of our issued and outstanding common stock, (the “Cancelled Shares”), reducing our issued and outstanding shares to 1,000,000 shares of common stock. A cash amount of $1 was paid to Wenfa “Simon” Sun and Meihong “Sanya” Qian, our majority shareholders and owners of the Cancelled Shares, as consideration for cancelling the Cancelled Shares in connection with the Share Exchange. We issued a total of 19,000,000 shares of common stock pursuant to the Share Exchange and as a result of the cancellation of the Cancelled Shares and the Share Exchange; we had 20,000,000 shares of common stock issued and outstanding following the Share Exchange.
Upon the closing of the Share Exchange, CAT9 Group Inc. issued an aggregate of 19,000,000 shares of its common stock to the CAT9 Cayman shareholders in exchange for all of the issued and outstanding securities of CAT9 Cayman. Prior to the closing of the Share Exchange, stockholders of CAT9 Group Inc. canceled an aggregate of 9,000,000 shares held by them such that there were 1,000,000 shares of common stock outstanding immediately prior to the Share Exchange. Immediately after the closing of the Share Exchange, we had 20,000,000 shares of common stock, no shares of preferred stock, no options, and no warrants issued and outstanding
The following table sets forth certain information with respect to beneficial ownership of our common stock immediately after the closing of the Share Exchange based on issued and outstanding shares of common stock, by:
· | Each person known to be the beneficial owner of 5% or more of our outstanding common stock; |
· | Each named executive officer; |
· | Each director; and |
· | All of the executive officers and directors as a group. |
Unless otherwise indicated, the persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the stockholder’s name, subject to community property laws, where applicable. Unless otherwise indicated, the address of each stockholder listed in the table is c/o Chongqing Field Industrial Company Ltd, Yudong Miaoshitai #46-9, Banan District in Chongqing, The People's Republic of China.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of the date of this prospectus regarding the beneficial ownership of the Company’s common stock by each of its executive officers and directors, individually and as a group and by each person who beneficially owns in excess of five percent of the common stock after giving effect to any exercise of warrants or options held by that person.
|
|||||||||
Name | Title | Beneficially Owned Post Share Exchange | Percent of Class |
Wenfa "Simon" Sun | President, CEO, Chairman of the Board of Directors | 12,000,000 | 60% | ||||||||
MeiHong "Sanya" Qian | Chief Financial Officer and Secretary | 8,000,000 | 40% | ||||||||
All Directors and Officers as a Group, 2 persons | - | 100% |
ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS.
At the consummation of the Share Exchange, CAT9 Group Inc.'s board of directors immediately prior to the Share Exchange, which consisted of Wenfa "Simon" Sun and MeiHong "Sanya" Qian. Both individuals were also elected to their same positions in the post-Share Exchange entity as they served with CAT9 Group Inc. prior to the Share Exchange.
For complete information regarding our new officers and directors, refer to “Executive Officers, Directors and Key Employees” under Item 5.01, above.
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR.
On September 1, 2015, the Company filed its Amendment to Articles of Incorporation Name Change on Form 8-K. The Company amended its name from ANDES 4 Inc., to CAT9 Group Inc. with the State of Delaware.
ITEM 5.06 CHANGE IN SHELL COMPANY STATUS.
Prior to the closing of the Share Exchange, CAT9 Group Inc. was a “shell company” as defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act. As described in Item 2.01 above, which is incorporated by reference into this Item 5.06, CAT9 Group Inc. ceased being a shell company upon completion of the Share Exchange on December 27, 2016 .
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
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CHONGQING FIELD INDUSTRIAL CO., LTD
INDEX TO FINANCIAL STATEMENTS
DECEMBER 31, 2015
Report of Independent Registered Public Accounting Firm 52
Balance Sheets as of December 31, 2015 and 2014 53
Statements of Operations for the year ended December 31, 2015 and from June 26, 2014
(date of inception) through December 31, 2014 54
Statement of Members’ Capital from June 26, 2014 (date of inception) through
December 31, 2015 55
Statements of Cash Flows for the year ended December 31, 2015 and from June 26, 2014
(date of inception) through December 31, 2014 56
Notes to the financial statements 57
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Members of ChongQing Field Industrial Ltd.
We have audited the accompanying balance sheets of ChongQing Field Industrial Ltd. as of December 31 , 2015 and 2014, and the related statements of operations, members ' capital and cash flows for the year ended December 31, 2015 and for the period from June 26 , 2014 (inception) through December 31 , 2014 . ChongQing F i eld Industrial Ltd.'s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. We were not engaged to examine management's assertion about the effectiveness of ChongQing Field Industrial Ltd .' s internal control over financial reporting as of December 31, 2015.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board ( United States) . Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances , but not for the purpose of expressing an opinion on the effectiveness of the company ' s internal control over financial reporting . Accordingly, we express no such opinion . An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management , as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion .
In our opinion , the financial statements referred to above present fairly , in all material respects, the financial position of ChongQing Field Industrial Ltd. as of December 31 , 2015 and 2014 , and the resu lt s of its operations and its cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States ofAmerica.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern . As discussed in Note 2 to the financial statements,the Company has suffered recurring losses from operations , negative cash flows from operations, and has entered into contracts exceeding their working capital that raise substantial doubt about its ability to continue as a going concern. Management's plan in r egard to these matters are also described in Note 2 . The financial statements do not include any adjustments that might resu l t from the outcome of this uncertainty.
Pembroke Pines December 14, 2016
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CHONGQING FIELD INDUSTRIAL CO., LTD BALANCE SHEETS |
||||||||
December 31, 2015 |
December 31, 2014 |
|||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 2 | $ | 6 | ||||
Accounts receivable | 23,825 | - | ||||||
Other receivables, related party | - | 256,932 | ||||||
Advances to suppliers | 417,046 | - | ||||||
Inventory | 2,773 | - | ||||||
Total current assets | 443,646 | 256,938 | ||||||
Total assets | $ | 443,646 | $ | 256,938 | ||||
LIABILITIES AND MEMBERS’ CAPITAL | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 15,437 | $ | - | ||||
Other payables, related party | 9,545 | 17,011 | ||||||
Total current liabilities | 24,982 | 17,011 | ||||||
Total liabilities | 24,982 | 17,011 | ||||||
Members’ Capital: | ||||||||
Members’ capital | 426,158 | 250,794 | ||||||
Accumulated deficit | (7,947) | (10,858) | ||||||
Accumulated other comprehensive income (loss) | 453 | (9) | ||||||
Total members’ capital | 418,664 | 239,927 | ||||||
Total liabilities and members’ capital | $ | 443,646 | $ | 256,938 |
The accompanying notes are an integral part of these financial statements.
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CHONGQING FIELD INDUSTRIAL CO., LTD STATEMENTS OF OPERATIONS |
||||||||
For the Year Ended December 31, 2015 | From June 26, 2014 (inception) through December 31, 2014 | |||||||
Revenue | $ | 24,150 | $ | - | ||||
Cost of revenue | 12,472 | - | ||||||
Gross Margin | 11,678 | - | ||||||
Operating expenses: | ||||||||
General and administrative | 8,767 | 10,858 | ||||||
Total operating expenses | 8,767 | 10,858 | ||||||
Income (loss) from operations | 2,911 | (10,858) | ||||||
Income (loss) before income taxes | 2,911 | (10,858) | ||||||
Provision for income taxes | - | - | ||||||
Net income (loss) | $ | 2,911 | $ | (10,858) | ||||
Other comprehensive income (loss): | ||||||||
Foreign currency translation adjustment | 462 | (9) | ||||||
Comprehensive income (loss) | $ | 3,373 | $ | (10,867) | ||||
The accompanying notes are an integral part of these financial statements
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CHONGQING FIELD INDUSTRIAL CO., LTD MEMBERS’ CAPITAL |
||||||||
Paid in Capital | Accumulated Deficit | Other comprehensive income | Total | |||||
Balance, June 26, 2014 (inception) | $ | - | $ | - | $ | - | $ | - |
Contributed capital | 250,794 | - | - | 250,794 | ||||
Net loss for the year ended December 31, 2014 | - | (10,858) | (9) | (10,867) | ||||
Balance, December 31, 2014 | 250,794 | (10,858) | (9) | 239,927 | ||||
Contributed capital | 175,364 | - | - | 175,364 | ||||
Foreign currency translation adjustment | - | - | 462 | 462 | ||||
Net income for the year ended December 31, 2015 | - | 2,911 | - | 2,911 | ||||
Balance, December 31, 2015 | $ | 426,158 | $ | (7,947) | $ | 453 | $ | 418,664 |
The accompanying notes are an integral part of these financial statements
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CHONGQING FIELD INDUSTRIAL CO., LTD STATEMENTS OF CASH FLOWS |
||||||||
For the Year Ended December 31, 2015 | From June 26, 2014 (inception) through December 31, 2014 | |||||||
Cash flows from operating activities: | ||||||||
Net Income (loss) | $ | 2,911 | $ | (10,858) | ||||
Adjustments to reconcile net income (loss) to net | ||||||||
cash used in operating activities: | ||||||||
Foreign currency translation adjustment | 462 | (9) | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts Receivable | (23,825) | - | ||||||
Other assets | (417,045) | - | ||||||
Inventory | (2,773) | - | ||||||
Accounts payable and accrued liabilities | 15,437 | - | ||||||
Net cash used in operating activities | (424,833) | (10,867) | ||||||
Cash flows from investing activities: | - | - | ||||||
Cash flows from financing activities: | ||||||||
Contributed capital | 175,364 | 250,794 | ||||||
Loans from related parties | 749,290 | 139,321 | ||||||
Repayment of related party loans | (499,825) | (379,242) | ||||||
Net cash provided by financing activities | 424,829 | 10,873 | ||||||
Net change in cash | (4) | 6 | ||||||
Cash, beginning of year | 6 | - | ||||||
Cash, end of year | $ | 2 | $ | 6 | ||||
SUPPLEMENTAL DISCLOSURES: | ||||||||
Cash paid for interest | $ | - | $ | - | ||||
Cash paid for taxes | $ | - | $ | - |
The accompanying notes are an integral part of these financial statements.
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CHONGQING FIELD INDUSTRIAL CO., LTD
NOTES TO FINANCIAL STATEMENTS
December 31, 2015
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Chongqing Field Industrial Company Ltd is located in Chongqing, PRC and was incorporated under the laws of the PRC on June 26, 2014. Since its inception, Chongqing Field Industrial Company Ltd has operated through strategic alliance and distribution rights agreements in the PRC, the Company is engaged in the marketing and sales of (1) fresh fruits, vegetables meats (including primarily organic and non-organic from both domestically grown and imported, (2) acquisition of land for the planting of Acer Truncatum trees and harvesting of Acer Truncatum seeds to produce edible oil, (3) providing Hi-Tech cooperative farm management services in the PRC and overseas and (4) farm machinery such as tractors, cultivation, seeding, irrigation, fertilization and harvesting equipment.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’s ability to raise additional capital through debt and/or equity financing is unknown. The obtainment of additional financing and the successful development of the Company’s contemplated plan of operations are necessary for the Company to continue. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. However; management believes that the Company will generate sufficient cash flows to fund its operations and to meet its obligations on timely basis for the next twelve months. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Company's functional currency is the Chinese Renminbi (“RMB”); however, the accompanying financial statements have been translated and presented in the United States Dollars (“USD”).
Translation Adjustment
For the years ended December 31, 2015 and 2014, the accounts of the Company were maintained, and its financial statements were expressed, in RMB. Such financial statements were translated into USD in accordance with the Foreign Currency Matters Topic of the Codification (ASC 830), with the RMB as the functional currency. According to the Codification, all assets and liabilities were translated at the current exchange rate at respective balance sheets dates, members’ capitalare translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the Comprehensive Income Topic of the Codification (ASC 220), as a component of members’ capital. Transaction gains and losses are reflected in the income statement.
Comprehensive Income
The Company uses SFAS 130 “Reporting Comprehensive Income” (ASC Topic 220). Comprehensive income is comprised of net income and all changes to the statements of members’ capital, except those due to investments by members, changes in paid-in capital and distributions to members. Comprehensive income for the years ended December 31, 2015 and 2014 is included net income and foreign currency translation adjustments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid instruments with original maturities of three months or less.
Revenue recognition
The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
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Accounts receivable
Accounts receivable are recorded net of allowance for doubtful accounts. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. Periodically, management assesses customer credit history and relationships as well as performs accounts receivable aging analysis. Accounts are considered past due after three months. As of December 31, 2015, and 2014, no allowance was deemed necessary since sales were comparatively recent and there were no sales in 2014.
Inventories
Inventories are valued at the lower of cost or market. Management compares the cost of inventories with the market value and allowance is made for writing down their inventories to market value, if lower.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3: Pricing inputs that are generally observable inputs and not corroborated by market data.
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2015.
The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis as of December 31, 2015 and 2014.
Income taxes
The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
Recently issued accounting pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
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NOTE 4 - RELATED PARTY TRANSACTIONS
During the normal course of business, affiliated companies, members, and/or officers may advance the Company funds to pay for certain operating expenses. All advances are unsecured, non-interest bearing and due on demand.
During the year ended December 31, 2014, Meihong Qian, CFO, loaned the Company $119,639, of which $376,571 was repaid resulting in a receivable to the Company as of December 31, 2014 of $256,322. During 2015 Ms. Qian loaned the Company an additional $736,267, $485,073 of which was repaid, for a balance due as of December 31, 2015 of $8,109 after adjusting for currency translation.
During the year ended December 31, 2014, Xiaolan Wang, Vice President, loaned the Company $9,911, of which $2,671 was repaid. During 2015 Ms. Wang loaned the Company an additional $92, $14,752 of which was repaid, for a debit balance as of December 31, 2015 of ($7,808) after adjusting for currency translation.
During the year ended December 31, 2014, Hua Yang, former Vice Manager, loaned the Company $9,771, for a balance due as of December 31, 2015 of $9,244 after adjusting for currency translation.
NOTE 5 - MEMBERS’ CAPITAL
During the years ended December 31, 2015 and 2014, Meihong Qian, CFO, contributed capital of $175,364 and $97,705, respectively.
During the years ended December 31, 2015 and 2014, Hua Yang, former Vice Manager, contributed capital of $0 and $153,089, respectively.
NOTE 6 – INCOME TAXES
The Company operates in more than one jurisdiction with the main operations conducted in PRC and no activities in The United States. These are complex regulatory environments subject to different interpretations by the taxpayer and the respective governmental taxing authorities. The Company evaluates its tax positions and establishes liabilities, if required.
Pursuant to the PRC Income Tax Laws, the Enterprise Income Tax (“EIT”), as from January 1, 2008 onwards, the EIT is at a statutory rate of 25%.
Net deferred tax assets consist of the following components as of December 31:
12/31/2015 | 12/31/2014 | ||||||
Unused tax loss brought forward | $ | (10,858) | $ | - | |||
Income (loss) for the year | 2,911 | (10,858) | |||||
Expenses not deductible for tax | - | - | |||||
Total net operating loss carry forwards | $ | (7,947) | $ | (10,858) | |||
Effective tax rate | 25% | 25% | |||||
Unrecognized deferred tax asset carried forward | $ | 1,987 | $ | 2,715 | |||
Less: valuation allowances | (1,987) | (2,715) | |||||
Deferred income tax benefit, net of valuation allowance | $ | - | $ | - |
The Company has not recognized a deferred tax asset in respect of PRC tax loss in these financial statements as it is not more-likely-than-not that the future taxable profit against which loss can be utilized will be available to the entities operating in PRC. Accordingly, a 100% valuation allowance has been made.
Uncertain Tax Positions
Interest associated with unrecognized tax benefits are classified as income tax and penalties in selling, general and administrative expenses in the statements of operations. For the years ended December 31, 2015 and 2014, the Company had no related interest and penalties expenses. Currently, the Company is not subject to examination by major tax jurisdictions, but the tax authority in PRC has the right to examine the Company’s tax position in all past years.
Statutory Reserve
In accordance with the laws and regulations of the PRC, a wholly-owned Foreign Invested Enterprise’s income, after the payment of the PRC income taxes, shall be allocated to the statutory reserves. The allocation is 10 percent of the net income and the cumulative allocations are not to exceed 50 percent of the registered capital. However, the laws do not prohibit enterprises allocate net income to this reserve after the limit of 50 per cent of registered capital has been reached. These reserves are not transferable to the Company in the form of cash dividends, loans or advances. These reserves are therefore not available for distribution except in liquidation. As of December 31, 2015 and 2014, the Company has not allocated to these non-distributable reserve funds due to loss sustained in the years ended December 31, 2015 and 2014.
Balance of related after-tax components comprising accumulated other comprehensive income included in members’ capital as of December 31, 2015 and 2014 were as follows:
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NOTE 7 – ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance of related after-tax components comprising accumulated other comprehensive income included members’ capital were as follows at December 31:
2015 | 2014 | |||
Accumulated other comprehensive income, beginning of period | $ | (9) | $ | - |
Change in cumulative translation adjustment | 462 | (9) | ||
Accumulated other comprehensive income, end of period | $ | 453 | $ | (9) |
NOTE 8 – COMMITMENTS
On April 14, 2015, the Company issued a purchase order to Chongqing Fangbaiyuan Trading Co., Ltd. Per the terms of the purchase order half was paid in advance with the balance due upon delivery, scheduled for December 31, 2016. As of December 31, 2015, $227,547 is due upon delivery.
On April 21, 2015, the Company issued a purchase order to Chongqing Qinuo Trading Co., Ltd. Per the terms of the purchase order half was paid in advance with the balance due upon delivery, scheduled for December 31, 2016. As of December 31, 2015, $158,685 is due upon delivery.
NOTE 8 – SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were available to be issued, December 14, 2016 and through the date of the filing, and has determined that it does not have any material subsequent events to disclose in these financial statements.
Pro Forma Financial Information
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give effect to the following transaction:
On December 27, 2016, CAT9 Group Inc., (formerly ANDES 4 Inc.) entered into a Share Exchange Agreement (the "Exchange Agreement") with CAT9 Cayman Limited, a company organized under the law of the Cayman Islands ("CAT9 Cayman"); CAT9 Investment China Limited, a company organized under the laws of Hong Kong ("CAT9 HK"); and its wholly-owned subsidiary, Chongqing Field Industrial Company Ltd, a company organized under the laws of the People's Republic of China. Pursuant to the Exchange Agreement, CAT9 Group Inc. agreed to issue an aggregate of 19,000,000 shares of its common stock to the CAT9 Cayman shareholders in exchange for all of the issued and outstanding securities of CAT9 Cayman. The Share Exchange closed on December 27, 2016 .
Immediately prior to the Share Exchange, we cancelled and retired 9,000,000 shares of our issued and outstanding common stock, (the “Cancelled Shares”), reducing our issued and outstanding shares to 1,000,000 shares of common stock. A cash amount of $1 was paid to Wenfa “Simon” Sun and Meihong “Sanya” Qian, our majority shareholders and owners of the Cancelled Shares, as consideration for cancelling the Cancelled Shares in connection with the Share Exchange. We issued a total of 19,000,000 shares of common stock pursuant to the Share Exchange and as a result of the cancellation of the Cancelled Shares and the Share Exchange; we had 20,000,000 shares of common stock issued and outstanding following the Share Exchange.
Upon the closing of the Share Exchange, CAT9 Group Inc. issued an aggregate of 19,000,000 shares of its common stock to the CAT9 Cayman shareholders in exchange for all of the issued and outstanding securities of CAT9 Cayman. Prior to the closing of the Share Exchange, stockholders of CAT9 Group Inc. canceled an aggregate of 9,000,000 shares held by them such that there were 1,000,000 shares of common stock outstanding immediately prior to the Share Exchange. Immediately after the closing of the Share Exchange, we had 20,000,000 shares of common stock, no shares of preferred stock, no options, and no warrants issued and outstanding.
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CAT9 Group Inc. Unaudited Pro Forma Condensed Combined Balance Sheets as of September 30, 2016 |
Chongqing Field Industrial Company Ltd | CAT9 Group Inc. | Pro Forma Adjustments | Pro Forma Combined | |||||||
Assets | ||||||||||
Current Assets: | ||||||||||
Cash | $ | 63,262 | $ | - | $ | - | $ | 63,262 | ||
Other receivables | 10,008 | - | - | 10,008 | ||||||
Advances to suppliers | 375,885 | - | - | 375,885 | ||||||
Inventory | 1,553 | - | - | 1,553 | ||||||
Total Current Assets | 450,708 | - | - | 450,708 | ||||||
Total Assets | $ | 450,708 | $ | - | $ | - | $ | 450,708 | ||
Liabilities and Stockholders’ Equity (Deficit) | ||||||||||
Current Liabilities: | ||||||||||
Accounts payable | 1,129 | - | - | 1,129 | ||||||
Due to a related party | 16,193 | 15,507 | - | 31,700 | ||||||
Other payables | 27,091 | - | - | 27,091 | ||||||
Total Liabilities | 44,413 | 15,507 | - | 59,920 | ||||||
Stockholders’ Equity (Deficit): | ||||||||||
Common stock, $0.0001 par value, 100,000,000 shares authorized, 10,000,000 | ||||||||||
shares issued and outstanding | - | 1,000 | - | 1,000 | ||||||
Additional paid in capital | - | 29,014 | (45,521) | (16,507) | ||||||
Members’ capital | 414,742 | - | 414,742 | |||||||
Accumulated deficit | (9,118) | (45,521) | 45,521 | (9,118) | ||||||
Accumulated other comprehensive income | 671 | - | - | 671 | ||||||
Total Stockholders’ Equity (Deficit) | 406,295 | (15,507) | - | 390,788 | ||||||
Total Liabilities and Stockholders’ Equity (Deficit) | $ | 450,708 | $ | - | $ | - | $ | 450,708 |
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CAT9 Group Inc. Unaudited Pro Forma Condensed Combined Balance Sheets as of December 31, 2015 |
||||||||||
Chongqing Field Industrial Company Ltd | CAT9 Group Inc. | Pro Forma Adjustments | Pro Forma Combined | |||||||
Assets | ||||||||||
Current Assets: | ||||||||||
Cash | $ | 2 | $ | - | $ | - | $ | 2 | ||
Accounts receivables | 23,825 | - | - | 23,825 | ||||||
Advances to suppliers | 417,046 | - | - | 417,046 | ||||||
Inventory | 2,773 | - | - | 2,773 | ||||||
Total Current Assets | 443,646 | - | - | 443,646 | ||||||
Total Assets | $ | 443,646 | $ | - | $ | - | $ | 443,646 | ||
Liabilities and Stockholders’ Equity (Deficit) | ||||||||||
Current Liabilities: | ||||||||||
Accounts payable | 15,437 | - | - | 15,437 | ||||||
Due to a related party | 9,545 | 15,507 | - | 25,052 | ||||||
Total Liabilities | 24,982 | 15,507 | - | 40,489 | ||||||
Stockholders’ Equity (Deficit): | ||||||||||
Common stock, $0.0001 par value, 100,000,000 shares authorized, 10,000,000 | ||||||||||
shares issued and outstanding | - | 1,000 | - | 1,000 | ||||||
Additional paid in capital | - | 17,714 | (34,221) | (16,507) | ||||||
Members’ capital | 426,158 | - | 426,158 | |||||||
Accumulated deficit | (7,947) | (34,221) | 34,221 | (7,947) | ||||||
Accumulated other comprehensive income | 453 | - | - | 453 | ||||||
Total Stockholders’ Equity (Deficit) | 418,664 | (15,507) | - | 403,157 | ||||||
Total Liabilities and Stockholders’ Equity (Deficit) | $ | 443,646 | $ | - | $ | - | $ | 443,646 |
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(d) | Exhibits. |
Exhibit No. | Exhibit Description | |
2.1 | Share Exchange Agreement dated December 27, 2016, by and among the Registrant, CAT9 Cayman Holdings,; CAT9 Investment China Limited, and Chongqing Field Industrial Company Ltd. | |
3.1 | Certificate of Incorporation (incorporated by reference from Exhibit 3.1 to the Registration Statement on Form 10 (File No. 000-55365) filed with the Securities and Exchange Commission on February 6, 2015). | |
3.2 | Bylaws (incorporated by reference from Exhibit 3.2 to the Registration Statement on Form 10 (File No. 000-55365) filed with the Securities and Exchange Commission on February 6, 2015). | |
3.3 | Amendment to Certificate of Incorporation (incorporated by reference from Exhibit 3.3 on Form 8-K filed with the Securities and Exchange Commission on September 1, 2015). | |
3.4
10.1 |
Certificate of Approval, Agreement of Merger
Wenfa "Simon" Sun Employment Agreement |
|
10.2 |
MeiHong "Sanya" Qian Employment Agreement |
|
21.1 | List of Sibsidiaries | |
23.2 | Consent of Independent Auditor |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CAT9 Group Inc.
By: /s/ Wenfa “Simon” Sun
Name: Wenfa “Simon” Sun
Title: President, Chief Executive Officer, and Chairman of the Board of Directors
By: /s/ MeiHong “Sanya” Qian
Name: MeiHong “Sanya” Qian
Title: Chief Financial Officer and Secretary
Dated: December 27, 2016
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SHARE EXCHANGE AGREEMENT
This SHARE EXCHANGE AGREEMENT, effective as of the 27 th day of December, 2016 (the “ Agreement ”), by and among CAT9 Group, Inc., a Delaware corporation (the “ Company ”); CAT9 Holdings Limited, an exempted company incorporated with limited liability under the laws of the Cayman Islands (“ CAT 9 Cayman ”); CAT9 Investment China Limited, a company organized under the laws of Hong Kong and a wholly-owned subsidiary of CAT9 Cayman (“ CAT9 HK ”); and its wholly-owned subsidiary, Chongqing Field Industrial Company Ltd., (“CQFI”) a company organized under the laws of the People’s Republic of China, and each of the Persons listed on Schedule I hereto who are shareholders of the Company and has executed a counterpart signature page to this Agreement (each, a “ Shareholder ” and collectively, the “ Shareholders ”). Each of the parties to this Agreement is individually referred to herein as a “ Party ” and collectively as the “ Parties .”
RECITALS
WHEREAS, the Shareholders collectively own all of the issued and outstanding shares of the capital of CAT9 Cayman Limited, which is the 100% parent company of CAT9 Investment China Limited, which is the 100% parent of Chongqing Field Industrial Company Ltd;
WHEREAS, the Company desires to acquire from the Shareholders and the Shareholders desire to sell to the Company, all of the issued and outstanding capital shares of CAT9 Cayman Limited, in exchange for the issuance by the Company of an aggregate of 19,000,000 shares (the “ Company Shares ”) of the Company’s common stock, $0.0001 par value per share (the “ Common Stock ”), to the Shareholders on the terms and conditions set forth herein (the “ Share Exchange ”);
WHEREAS, the Parties intend, by executing this Agreement, to implement a tax-deferred exchange of property governed by Section 351 of the United States Internal Revenue Code of 1986, as amended (the “ Code ”).
AGREEMENT
NOW, THEREFORE, in consideration, of the promises and of the mutual representations, warranties and agreements set forth herein, the Parties hereto agree as follows:
ARTICLE 1.
THE SHARE EXCHANGE
1.1 The Share Exchange . Subject to the terms and conditions of this Agreement, on the Closing Date (as hereinafter defined):
(a) the Company shall issue and deliver to the Shareholders the number of authorized but unissued shares of Company Common Stock set forth opposite her and/or her designees’ names set forth on Schedule I hereto or pursuant to separate instructions to be delivered prior to Closing, and
(b) the Shareholders agree to deliver to the Company duly endorsed certificates representing their respective Shares.
1.2 Time and Place of Closing . The closing of the Share Exchange (the “ Closing ”) shall take place at the offices of Hubei Taoshi Law Firm at No. 533 Luoyu Road, Wuchang District, Wuhan, Hubei,P.R.C. or at such place and time as mutually agreed upon by the Parties hereto. The date upon which the Closing occurs is defined as the “ Closing Date .”
1.3 Effective Time . The Share Exchange shall become effective (the “ Effective Time ”) at such time as all of the conditions to set forth in Article 7 hereof have been satisfied or waived by the Parties hereto.
1.4 Tax Consequences . It is intended by the Parties hereto that for United States income tax purposes, the contribution and transfer of the Shareholder’s Shares by the Shareholders to the Company in exchange for the Company Shares constitutes a “tax-free” contribution and/or reorganization pursuant to the provisions of Sections 351 and/or 368(a) of the Code.
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ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parties that now and/or as of the Closing:
2.1 Due Organization and Qualification; Due Authorization .
(a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to own, lease and operate its respective business and properties and to carry on its business in the places and in the manner as presently conducted or proposed to be conducted. The Company is in good standing as a foreign corporation in each jurisdiction in which the properties owned, leased or operated, or the business conducted, by it requires such qualification except for any such failure, which when taken together with all other failures, is not likely to have a material adverse effect on the business of the Company.
(b) The Company does not own, directly or indirectly, any capital stock, equity or interest in any corporation, firm, partnership, joint venture or other entity.
(c) The Company has all requisite corporate power and authority to execute and deliver this Agreement, and to consummate the transactions contemplated hereby and thereby. The Company has taken all corporate action necessary for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, and this Agreement constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be affected by bankruptcy, insolvency, moratoria or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought, equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.
2.2 No Conflicts or Defaults . The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby do not and shall not (a) contravene the Certificate of Incorporation or By-laws of the Company or (b) with or without the giving of notice or the passage of time (i) violate, conflict with, or result in a breach of, or a default or loss of rights under, any material covenant, agreement, mortgage, indenture, lease, instrument, permit or license to which the Company is a party or by which the Company is bound, or any judgment, order or decree, or any law, rule or regulation to which the Company is subject, (ii) result in the creation of, or give any party the right to create, any lien, charge, encumbrance or any other right or adverse interest (the “ Liens ”) upon any of the assets of the Company, (iii) terminate or give any party the right to terminate, amend, abandon or refuse to perform, any material agreement, arrangement or commitment to which the Company is a party or by which the Company’s assets are bound, or (iv) accelerate or modify, or give any party the right to accelerate or modify, the time within which, or the terms under which, the Company is to perform any duties or obligations or receive any rights or benefits under any material agreement, arrangement or commitment to which it is a party.
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2.3 Capitalization . The authorized capital stock of the Company immediately prior to giving effect to the transactions contemplated hereby consists of 100,000,000 shares of which 100,000,000 have been designated as Company Common Stock and 5,000,000 shares have been designated as preferred stock, $0.0001 par value per share (the “ Preferred Stock ”). As of the date hereof, there are 10,000,000 shares of Company Common Stock issued and outstanding, no shares of Preferred Stock outstanding, and no warrants. All of the outstanding shares of Company Common Stock are, and the Company Shares when issued in accordance with the terms hereof will be, duly authorized, validly issued, fully paid and non-assessable, and have not been or, with respect to the Company Shares will not be, issued in violation of any preemptive right of stockholders. Other than as set forth on Item 2.3 to the Disclosure Schedule to this Agreement, there is no outstanding voting trust agreement or other contract, agreement, arrangement, option, warrant, call, commitment or other right of any character obligating or entitling the Company to issue, sell, redeem or repurchase any of its securities, and there is no outstanding security of any kind convertible into or exchangeable for Company Common Stock. The Company has not granted registration rights to any person.
2.4 Financial Statements . The Company has provided the Parties copies of its (i) balance sheet, as of September 30, 2016, and the related statements of operations, changes in stockholder’s equity (deficit) and cash flows for the year ended December 31, 2015, and the period from January 26, 2015, (inception) to September 30, 2016, including the notes thereto, as reviewed by De Leon & Co. independent registered public accounting firm and (ii) balance sheet of the Company as of September 30, 2016 and the related statements of operations, and cash flows for the nine (9)-month period then ended (the “ Financial Statements ”). The Financial Statements, together with the notes thereto, have been prepared in accordance with United States generally accepted accounting principles applied on a basis consistent throughout all periods presented. The Financial Statements present fairly the financial position of the Company as of the dates and for the periods indicated. The books of account and other financial records of the Company have been maintained in accordance with good business practices.
Additionally, the Parties have provided the Company copies of the (i) balance sheet of the Company as of September 30, 2016, and the related statements of operations, changes in stockholders’ equity (deficit) and cash flows for the year ended December 31, 2014, December 31, 2015 and the period from June 26, 2014 (inception) to September 30, 2016, including the notes thereto, as audited by De Leon & Co. independent registered public accounting firm and (ii) balance sheet of the Company as of September 30, 2016 and the related statements of operations, and cash flows for the nine (9)-month period then ended (the “ Financial Statements ”). The Financial Statements, together with the notes thereto, have been prepared in accordance with United States generally accepted accounting principles applied on a basis consistent throughout all periods presented. The Financial Statements present fairly the financial position of the Company as of the dates and for the periods indicated. The books of account and other financial records of the Company have been maintained in accordance with good business practices.
2.5 No Assets or Liabilities . As of the Closing, the Company shall have no more than $100,000 in liabilities. Except for the foregoing or as set forth on the Financial Statements, the Company does not have any (a) assets of any kind or (b) liabilities or obligations, whether secured or unsecured, accrued, determined, absolute or contingent, asserted or unasserted or otherwise.
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2.6 Taxes . The Company has filed all United States federal, state, county and local returns and reports which were required to be filed on or prior to the date hereof in respect of all income, withholding, franchise, payroll, excise, property, sales, use, value-added or other taxes or levies, imposts, duties, license and registration fees, charges, assessments or withholdings of any nature whatsoever (together, the “ Taxes ”), and has paid all Taxes (and any related penalties, fines and interest) which have become due pursuant to such returns or reports or pursuant to any assessment which has become payable, or, to the extent its liability for any Taxes (and any related penalties, fines and interest) has not been fully discharged, the same have been properly reflected as a liability on the books and records of the Company and adequate reserves therefore have been established.
2.7 Indebtedness; Contracts; No Defaults . Other than as set forth in Item 2.7 of the Disclosure Schedule or as described in the Financial Statements, the Company has no material instruments, agreements, indentures, mortgages, guarantees, notes, commitments, accommodations, letters of credit or other arrangements or understandings, whether written or oral, to which the Company is a party.
2.8 Real Property . The Company does not own or lease any real property.
2.9 Compliance with Law . The Company is in compliance with all applicable federal, state, local and foreign laws and regulations relating to the protection of the environment and human health. There are no claims, notices, actions, suits, hearings, investigations, inquiries or proceedings pending or, to the knowledge of the Company, threatened against the Company that are based on or related to any environmental matters or the failure to have any required environmental permits, and there are no past or present conditions that the Company has reason to believe are likely to give rise to any material liability or other obligations of the Company under any environmental laws.
2.10 Permits and Licenses . The Company has all certificates of occupancy, rights, permits, certificates, licenses, franchises, approvals and other authorizations as are reasonably necessary to conduct its respective business and to own, lease, use, operate and occupy its assets, at the places and in the manner now conducted and operated, except those the absence of which would not materially adversely affect its respective business.
2.11 Litigation . There is no claim, dispute, action, suit, proceeding or investigation pending or, to the knowledge of the Company, threatened, against or affecting the business of the Company, or challenging the validity or propriety of the transactions contemplated by this Agreement, at law or in equity or admiralty or before any federal, state, local, foreign or other governmental authority, board, agency, commission or instrumentality, nor to the knowledge of the Company, has any such claim, dispute, action, suit, proceeding or investigation been pending or threatened, during the twelve (12) month period preceding the date hereof. There is no outstanding judgment, order, writ, ruling, injunction, stipulation or decree of any court, arbitrator or federal, state, local, foreign or other governmental authority, board, agency, commission or instrumentality, against or materially affecting the business of the Company. The Company has not received any written or verbal inquiry from any federal, state, local, foreign or other governmental authority, board, agency, commission or instrumentality concerning the possible violation of any law, rule or regulation or any matter disclosed in respect of its business.
2.12 Insurance . The Company does not currently maintain any form of insurance.
2.13 Patents, Trademarks and Intellectual Property Rights . The Company does not own or possess any patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, Internet web site(s) or proprietary rights of any nature.
2.14 Securities Law Compliance . The Company has complied with all of the applicable requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the Securities Act of 1933, as amended (the “ Securities Act ”), and has complied with all applicable blue sky laws.
2.15 Conflicts of Interest . The Company acknowledges that it is aware and understands the facts and circumstances of the Conflicts of Interest, as defined in Section 3.8 that may, individually and in the aggregate, create a conflict of interest. The Company hereby waives each and all of the Conflicts of Interest, in addition to any other conflicts of interest that may exist or arise by virtue of the Conflicts of Interest and acknowledges that it has carefully read this Agreement, that it is consistent with the terms previously negotiated by the Parties, and understands that it is free at any time to obtain independent counsel for further guidance.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE CAT9 ENTITIES
Each of the CAT9 Entities, jointly and severally, represents and warrants to the Company that now and/or as of the Closing:
3.1 Due Organization and Qualification; Due Authorization .
(a) Each of the CAT9Entities is a corporation or company duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as applicable, with full corporate or company power, as applicable, and authority to own, lease and operate its business and properties and to carry on its business in the places and in the manner as presently conducted or proposed to be conducted. Each of the CAT9Entities is in good standing as a foreign corporation or company, as applicable, in each jurisdiction in which the properties owned, leased or operated, or the business conducted, by it requires such qualification except for any such failure, which when taken together with all other failures, is not likely to have a material adverse effect on the business of each of the CAT9Entities.
(b) CAT9 Cayman Limited does not have any subsidiaries other than those set forth in Item 3.1(b) of the Disclosure Schedule (the “ Subsidiaries ”) and fully disclosed on Exhibit 21.1 with this Current Report on Form 8-K, andCAT9 Cayman Limited does not own, directly or indirectly, any capital stock, equity or interest in any corporation, firm, partnership, joint venture or other entity. Other than as set forth in Item 3.1(b) of the Disclosure Schedule, each Subsidiary is wholly owned by CAT9 Cayman Limited, free and clear of all liens, and there is no contract, agreement, arrangement, option, warrant, call, commitment or other right of any character obligating or entitling CAT9 Cayman Limited to issue, sell, redeem or repurchase any of its securities, and there is no outstanding security of any kind convertible into or exchangeable for securities of CAT9 Cayman Limited or any of the Subsidiaries.
Subsidiary Name | Country | |
CAT9 Holdings Limited (“CAT9 Cayman”) | Cayman Islands | |
CAT9 Investment China Limited (“CAT9 HK”) (1) | Hong Kong | |
Chongqing Field Industrial Company Ltd. (CQFI) (2) | People’s Republic of China | |
(1) This company is a wholly-owned subsidiary of CAT9 Holdings Limited.
(2) This company is a wholly-owned subsidiary of CAT9 HK.
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(c) Each of the CAT9 Entities has all requisite power and authority to execute and deliver this Agreement, and to consummate the transactions contemplated hereby and thereby. Each of the CAT9 Entities has taken all corporate action necessary for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, and this Agreement constitutes the valid and binding obligation of each of the CAT9 Entities, enforceable against each of the CAT9 Entities in accordance with its terms, except as may be affected by bankruptcy, insolvency, moratoria or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.
3.2 No Conflicts or Defaults . The execution and delivery of this Agreement by each of the CAT9 Entities and the consummation of the transactions contemplated hereby do not and shall not (a) contravene the governing documents of any of the CAT9 Entities or its Subsidiaries, or (b) with or without the giving of notice or the passage of time, (i) violate, conflict with, or result in a breach of, or a default or loss of rights under, any material covenant, agreement, mortgage, indenture, lease, instrument, permit or license to which any of the CAT9 Entities or by which any of the CAT9 Entities or any of their respective assets are bound, or any judgment, order or decree, or any law, rule or regulation to which their assets are subject, (ii) result in the creation of, or give any party the right to create, any lien upon any of the assets of any of the CAT9 Entities, (iii) terminate or give any party the right to terminate, amend, abandon or refuse to perform any material agreement, arrangement or commitment to which any of the CAT9 Entities is a party or by which any of the CAT9Entities or any of their respective assets are bound, or (iv) accelerate or modify, or give any party the right to accelerate or modify, the time within which, or the terms under which any of the CAT9Entities is to perform any duties or obligations or receive any rights or benefits under any material agreement, arrangement or commitment to which it is a party.
3.3 Capitalization . The authorized capital stock of CAT9 Cayman Limited immediately prior to giving effect to the transactions contemplated hereby consists of 50,000 ordinary shares, US$1.00 par value per share, of which, as of the date hereof, there were Ten Thousand (10,000) shares issued and outstanding. Except as set forth herein, all of the outstanding shares of CAT9 Cayman Limited are duly authorized, validly issued, fully paid and non-assessable, and have not been or, with respect to the CAT9 Shares, will not be transferred in violation of any rights of third parties. The CAT9 Shares are not subject to any preemptive or subscription right, any voting trust agreement or other contract, agreement, arrangement, option, warrant, call, commitment or other right of any character obligating or entitling CAT9 Cayman Limited to issue, sell, redeem or repurchase any of its securities that will survive Closing and there is no outstanding security of any kind convertible into or exchangeable for common shares. All of the CAT9 Shares are owned of record and beneficially by the Shareholder and free and clear of any liens, claims, encumbrances, or restrictions of any kind.
3.4 Taxes . Each of the CAT9 Entities has filed all returns and reports which were required to be filed on or prior to the date hereof, and has paid all Taxes (and any related penalties, fines and interest) which have become due pursuant to such returns or reports or pursuant to any assessment which has become payable, or, to the extent its liability for any Taxes (and any related penalties, fines and interest) has not been fully discharged, the same have been properly reflected as a liability on the books and records of the CAT9 Entities and adequate reserves therefore have been established. All such returns and reports filed on or prior to the date hereof have been properly prepared and are true, correct (and to the extent such returns reflect judgments made by any of the CAT9 Entities such judgments were reasonable under the circumstances) and complete in all material respects. No extension for the filing of any such return or report is currently in effect. No tax return or tax return liability of any of the CAT9 Entities has been audited or, presently under audit. All taxes and any penalties, fines and interest which have been asserted to be payable as a result of any audits have been paid. None of the CAT9Entities has given or been requested to give waivers of any statute of limitations relating to the payment of any Taxes (or any related penalties, fines and interest). There are no claims pending for past due Taxes. All payments for withholding taxes, unemployment insurance and other amounts required to be paid for periods prior to the date hereof to any governmental authority in respect of employment obligations of each of the CAT9Entities have been paid or shall be paid prior to the Closing and have been duly provided for on the books and records of each of the CAT9Entities and in the financial statements of CAT9 Cayman Limited.
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3.5 Indebtedness; Contracts; No Defaults . Other than as set forth in Item 3.5 of the Disclosure Schedule, none of the CAT9 Entities have any material instruments, agreements, indentures, mortgages, guarantees, notes, commitments, accommodations, letters of credit or other arrangements or understandings, whether written or oral, to which any of the CAT9 Entities is a party.
3.6 Compliance with Law . Except as specified in Item 3.6 of the Disclosure Schedule, each of the CAT9Entities is conducting its respective businesses in material compliance with all applicable law, ordinance, rule, regulation, court or administrative order, decree or process, or any requirement of insurance carriers material to its business. Except as specified in Item 3.6 of the Disclosure Schedule, none of the CAT9 Entities has received any notice of violation or claimed violation of any such law, ordinance, rule, regulation, order, decree, process or requirement.
3.7 Litigation .
(a) There is no claim, dispute, action, suit, proceeding or investigation pending or threatened, against or affecting any of the CAT9 Entities or challenging the validity or propriety of the transactions contemplated by this Agreement, at law or in equity or admiralty or before any federal, state, local, foreign or other governmental authority, board, agency, commission or instrumentality, has any such claim, dispute, action, suit, proceeding or investigation been pending or threatened, during the twelve (12) month period preceding the date hereof, except as specified in Item 3.7 of the Disclosure Schedule;
(b) there is no outstanding judgment, order, writ, ruling, injunction, stipulation or decree of any court, arbitrator or federal, state, local, foreign or other governmental authority, board, agency, commission or instrumentality, against or materially affecting any of the CAT9 Entities; and
(c) none of the CAT9 Entities has received any written or verbal inquiry from any federal, state, local, foreign or other governmental authority, board, agency, commission or instrumentality concerning the possible violation of any law, rule or regulation or any matter disclosed in respect of its business.
3.8 Conflict of Interest .
(a) | None. |
ARTICLE 4.
REPRESENTATION AND WARRANTIES OF THE SHAREHOLDER
Each of the Shareholders severally hereby represents and warrants to the Company that now and/or as of the Closing:
4.1 Title to Shares . Each of the Shareholders is the legal and beneficial owner of the CAT9 Shares to be transferred to the Company by such Shareholders as set forth opposite each Shareholder’s name in Schedule II hereto, and upon consummation of the Share Exchange contemplated herein, the Company will acquire from each of the Shareholders good and marketable title to the CAT9 Shares, free and clear of all liens excepting only such restrictions hereunder upon future transfers by the Company, if any, as may be imposed by applicable law. The information set forth on Schedule II with respect to each Shareholder is accurate and complete.
4.2 Due Authorization . Each of the Shareholders has all requisite power and authority to execute and deliver this Agreement, and to consummate the transactions contemplated hereby and thereby. This Agreement constitutes the valid and binding obligation of each of the Shareholders, enforceable against each Shareholder in accordance with its terms, except as may be affected by bankruptcy, insolvency, moratoria or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.
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4.3 Purchase for Investment .
(a) Each Shareholder is acquiring the Company Shares for investment for such Shareholder’s own account and not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and each Shareholder has no present intention of selling, granting any participation in, or otherwise distributing the same. Each Shareholder further represents that he, she or it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Company Shares.
(b) Each Shareholder understands that the Company Shares are not registered under the Securities Act on the ground that the sale and the issuance of securities hereunder is exempt from registration under the Securities Act pursuant to Section 4(2) thereof, and that the Company’s reliance on such exemption is predicated on such Shareholder’s representations set forth herein.
4.4 Investment Experience . Each Shareholder acknowledges that he, she or it can bear the economic risk of its investment, and has such knowledge and experience in financial and business matters that he, she or it is capable of evaluating the merits and risks of the investment in the Company Shares.
4.5 Information . Each Shareholder has carefully reviewed such information as he, she or it deemed necessary to evaluate an investment in the Company Shares. To the full satisfaction of each Shareholder, he, she or it has been furnished all materials that he, she or it has requested relating to the Company and the issuance of the Company Shares hereunder, and each Shareholder has been afforded the opportunity to ask questions of representatives of the Company to obtain any information necessary to verify the accuracy of any representations or information made or given to him, her or it. Notwithstanding the foregoing, nothing herein shall derogate from or otherwise modify the representations and warranties of the Company set forth in this Agreement, on which each Shareholder has relied in making an exchange of the CAT9 Shares for the Company Shares.
4.6 Restricted Securities . Each Shareholder understands that the Company Shares may not be sold, transferred, or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Company Shares or any available exemption from registration under the Securities Act, the Company Shares must be held indefinitely. Each Shareholder is aware that the Company Shares may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the conditions of that Rule are met. Among the conditions for use of Rule 144 may be the availability of current information to the public about the Company.
4.7 Exempt Issuance . Each Shareholder acknowledges that he, she or it must assure the Company that the offer and sale of the Company Shares to such Shareholder qualifies for an exemption from the registration requirements imposed by the Securities Act and from applicable securities laws of any state of the United States. Each Shareholder agrees that he, she or it meets the criteria established in one or both of subsections (a) or (b), below.
(a) Accredited Investor, Section 4(2) of the Securities Act and/or Rule 506 of Regulation D . The Shareholder qualifies as an “accredited investor,” as that term is defined in Rule 501 of Regulation D, promulgated under the Securities Act.
(b) Offshore Investor, Rule 903 of Regulation S . The Shareholder is not a U.S. Person, as defined in Rule 901 of Regulation S, promulgated under the Securities Act, and the Shareholder represents and warrants to the Company that:
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(i) The Shareholder is not acquiring the Company Shares as a result of, and such Shareholder covenants that it will not engage in, any “directed selling efforts” (as defined in Regulation S under the Securities Act) in the United States in respect of the Company Shares, which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of any of the Company Shares;
(ii) The Shareholder is not acquiring the Company Shares for the account or benefit of, directly or indirectly, any U.S. Person;
(iii) The Shareholder is an individual who is a resident of the People’s Republic of China, the Cayman Islands, and Hong Kong;
(iv) the offer and the sale of the Company Shares to such Shareholder as contemplated in this Agreement complies with or is exempt from the applicable securities legislation of the People’s Republic of China, the Cayman Islands, and Hong Kong;
(v) the Shareholder is outside the United States when receiving and executing this Agreement and that the Shareholder will be outside the United States when acquiring the Company Shares,
(vi) and the Shareholder covenants with the Company that:
(A) offers and sales of any of the Company Shares prior to the expiration of a period of six (6) months after the date of original issuance of the Company Shares (the six (6) month period hereinafter referred to as the “ Distribution Compliance Period ”) shall only be made in compliance with the safe harbor provisions set forth in Regulation S, pursuant to the registration provisions of the Securities Act or an exemption therefrom, and that all offers and sales after the Distribution Compliance Period shall be made only in compliance with the registration provisions of the Securities Act or an exemption therefrom and in each case only in accordance with applicable state securities laws; and
(B) The Shareholder will not engage in hedging transactions with respect to the Company Shares until after the expiration of the Distribution Compliance Period.
4.8 Conflict of Interest . Each Shareholder acknowledges that he, she or it is aware and understands the facts and circumstances of the Conflicts of Interest, as defined in Section 3.8 that may, individually and in the aggregate, create a conflict of interest. Each Shareholder hereby waives each and all of the Conflicts of Interest, in addition to any other conflicts of interest that may exist or arise by virtue of the Conflicts of Interest and acknowledges that he, she or it has carefully read this Agreement, that it is consistent with the terms previously negotiated by the Parties, and understands that he, he or it is free at any time to obtain independent counsel for further guidance.
ARTICLE 5.
COVENANTS
5.1 Further Assurances . Each of the Parties shall use its reasonable commercial efforts to proceed promptly with the transactions contemplated herein, to fulfill the conditions precedent for such Party’s benefit or to cause the same to be fulfilled and to execute such further documents and other papers and perform such further acts as may be reasonably required or desirable to carry out the provisions of this Agreement and to consummate the transactions contemplated herein.
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ARTICLE 6.
DELIVERIES
6.1 Items to be delivered to the Shareholders prior to or at Closing by the Company .
(a) Certificate of Incorporation and amendments thereto, By-laws and amendments thereto, and certificate of good standing of the Company in Delaware;
(b) all applicable schedules hereto;
(c) all minutes and resolutions of board of director and stockholder meetings in possession of the Company;
(d) stockholder list;
(e) all financial statements and all tax returns in possession of the Company;
(f) resolution from the Company’s Board of Directors appointing the designees of the Shareholders to the Company’s Board of Directors;
(g) resolution from the Company’s Board of Directors, and if applicable, stockholder resolutions approving this transaction and authorizing the issuances of the shares hereto;
(h) letters of resignation from the Company’s current officers and directors to be effective upon Closing and after the appointments described in this section; and
(i) any other document reasonably requested by the Shareholders that they deems necessary for the consummation of this transaction.
6.2 Items to be delivered to the Company prior to or at Closing by CAT9 Cayman Limited and the Shareholders .
(a) all applicable schedules hereto;
(b) instructions from the Shareholders appointing their designees to the Company’s Board of Directors;
(c) share certificates and duly executed instruments of transfer and bought and sold notes from the Shareholders transferring the CAT9 Shares to the Company;
(d) resolutions from the Board of Directors of CAT9 Cayman Limited and, if applicable, shareholder resolutions approving the transactions contemplated hereby
(e) any other document reasonably requested by the Company that it deems necessary for the consummation of this transaction.
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ARTICLE 7.
CONDITIONS PRECEDENT
7.1 Conditions Precedent to Closing . The obligations of the Parties under this Agreement shall be and are subject to fulfillment, prior to or at the Closing, of each of the following conditions:
(a) Each of the representations and warranties of the Parties contained herein shall be true and correct at the time of the Closing Date as if such representations and warranties were made at such time except for changes permitted or contemplated by this Agreement;
(b) The Parties shall have performed or complied with all agreements, terms and conditions required by this Agreement to be performed or complied with by them prior to or at the time of the Closing;
7.2 Conditions to Obligations of the Shareholder . The obligations of the Shareholders shall be subject to fulfillment, prior to or at the Closing, of each of the following conditions:
(a) The Company shall have received all of the regulatory, stockholder and other third party consents, permits, approvals and authorizations necessary to consummate the transactions contemplated by this Agreement;
(b) The Company shall have complied with Rule 14(f)(1) of the Exchange Act, if required; and
7.3 Conditions to Obligations of the Company . The obligations of the Company shall be subject to fulfillment, prior to or at the Closing, of each of the following conditions:
(a) The CAT9 Parties shall have received all of the regulatory, shareholder and other third party consents, permits, approvals and authorizations necessary to consummate the transactions contemplated by this Agreement;
(b) The Shareholders shall have delivered to the Company the share certificates and duly executed instruments of transfer and bought and sold notes from the Shareholders transferring the CAT9 Shares to the Company; and
ARTICLE 8.
TERMINATION
8.1 Termination . This Agreement may be terminated at any time before or at Closing by:
(a) The mutual agreement of the Parties;
(b) Any Party if:
(i) Any provision of this Agreement applicable to a Party shall be materially untrue or fail to be accomplished; or
(ii) Any legal proceeding shall have been instituted or shall be imminently threatening to delay, restrain or prevent the consummation of this Agreement; or
(c) The Company at any time on or after December 27, 2016.
Upon termination of this Agreement for any reason, in accordance with the terms and conditions set forth in this paragraph, each said Party shall bear all costs and expenses as each Party has incurred.
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ARTICLE 9.
COVENANTS SUBSEQUENT TO CLOSING
9.1 Transfer Agent Fees and Costs . The Company agrees to pay, on a timely basis, all amounts invoiced to the Company by its transfer agent on a timely basis.
ARTICLE 10.
MISCELLANEOUS
10.1 Survival of Representations, Warranties and Agreements . Each of the Parties hereto is executing and carrying out the provisions of this Agreement in reliance upon the representations, warranties and covenants and agreements contained in this Agreement or at the closing of the transactions herein provided for and not upon any investigation which it might have made or any representations, warranty, agreement, promise or information, written or oral, made by the other Party or any other person other than as specifically set forth herein. Except as specifically set forth in this Agreement, representations and warranties and statements made by a Party to in this Agreement or in any document or certificate delivered pursuant hereto shall not survive the Closing Date, and no claims made by virtue of such representations, warranties, agreements and covenants shall be made or commenced by any Party hereto from and after the Closing Date.
10.2 Access to Books and Records . During the course of this transaction through Closing, each Party agrees to make available for inspection all corporate books, records and assets, and otherwise afford to each other and their respective representatives, reasonable access to all documentation and other information concerning the business, financial and legal conditions of each other for the purpose of conducting a due diligence investigation thereof. Such due diligence investigation shall be for the purpose of satisfying each Party as to the business, financial and legal condition of each other for the purpose of determining the desirability of consummating the proposed transaction. The Parties further agree to keep confidential and not use for their own benefit, except in accordance with this Agreement any information or documentation obtained in connection with any such investigation.
10.3 Further Assurances . If, at any time after the Closing, the Parties shall consider or be advised that any further deeds, assignments or assurances in law or that any other things are necessary, desirable or proper to complete the Share Exchange in accordance with the terms of this Agreement or to vest, perfect or confirm, of record or otherwise, the title to any property or rights of the Parties hereto, the Parties agree that their proper officers and directors shall execute and deliver all such proper deeds, assignments and assurances in law and do all things necessary, desirable or proper to vest, perfect or confirm title to such property or rights and otherwise to carry out the purpose of this Agreement, and that the proper officers and directors of the Parties are fully authorized to take any and all such action.
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10.4 Notice . All communications, notices, requests, consents or demands given or required under this Agreement shall be in writing and shall be deemed to have been duly given when delivered to, or received by, prepaid registered or certified mail or recognized overnight courier addressed to, or upon receipt of a facsimile sent to, the Party for whom intended, as follows, or to such other address or facsimile number as may be furnished by such Party by notice in the manner provided herein:
Attention:
If to the CAT9 Parties:
CAT9 Holdings Limited, (CAT9 Cayman)
Ground Floor, Harbour Centre, 42 North Church Street, P.O. Box 1569, George Town, Grand Cayman KY1-1110, Cayman Islands
With a copy to:
Hubei Taoshi Law Firm
No. 533 Luoyu Road, Wuchang District, Wuhan, Hubei, P.R.C
If to the Company:
CAT9 Group, Inc.
Yudong Miaoshitai #46-9, Banan District, Chongqing, China , 401320
10.5 Entire Agreement . This Agreement, the Disclosure Schedule and any instruments and agreements to be executed pursuant to this Agreement, sets forth the entire understanding of the Parties hereto with respect to its subject matter, merges and supersedes all prior and contemporaneous understandings with respect to its subject matter and may not be waived or modified, in whole or in part, except by a writing signed by each of the Parties hereto. No waiver of any provision of this Agreement in any instance shall be deemed to be a waiver of the same or any other provision in any other instance. Failure of any Party to enforce any provision of this Agreement shall not be construed as a waiver of its rights under such provision.
10.6 Successors and Assigns . This Agreement shall be binding upon, enforceable against and inure to the benefit of, the Parties and designees hereto and their respective heirs, administrators, executors, personal representatives, successors and assigns, and nothing herein is intended to confer any right, remedy or benefit upon any other person. This Agreement may not be assigned by any Party hereto except with the prior written consent of the other Parties, which consent shall not be unreasonably withheld.
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10.7 Governing Law . This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of Delaware are applicable to agreements made and fully to be performed in such state, without giving effect to conflicts of law principles.
10.8 Counterparts . This Agreement may be executed in multiple counterparts, which may be facsimiles, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
10.9 Construction . Headings contained in this Agreement are for convenience only and shall not be used in the interpretation of this Agreement. References herein to Articles, Sections and Exhibits are to the articles, sections and exhibits, respectively, of this Agreement. The Disclosure Schedule is hereby incorporated herein by reference and made a part of this Agreement. As used herein, the singular includes the plural, and the masculine, feminine and neuter gender each includes the others where the context so indicates.
10.10 Severability . If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, this Agreement shall be interpreted and enforceable as if such provision were severed or limited, but only to the extent necessary to render such provision and this Agreement enforceable.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date first set forth above.
CAT9 GROUP, INC. | |
By: | /s/ Wenfa “Simon” Sun |
Name: | Wenfa “Simon” Sun |
Title: | President, Chief Executive Officer, and Chairman of the Board of Directors |
By: |
/s/ Meihong “Sanya” Qian |
Name: | Meihong “Sanya” Qian |
Title: | Chief Financial Officer, and Director |
CAT9 HOLDINGS LIMITED (CAT9 CAYMAN) | |
By: | /s/ Wenfa “Simon” Sun |
Name: | Wenfa “Simon” Sun |
Title: | Director |
By: | /s/ Meihong “Sanya” Qian |
Name: | Meihong “Sanya” Qian |
Title: |
Director
|
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CAT9 INVESTMENT CHINA LIMITED | |
By: | /s/ Wenfa “Simon” Sun |
Name: | Wenfa “Simon” Sun |
Title: |
Director
|
By: | /s/ Meihong “Sanya” Qian |
Name: | Meihong “Sanya” Qian |
Title: | Director |
CHONGQING FIELD INDUSTRIAL COMPANY LIMITED | |
By: | /s/ Wenfa “Simon” Sun |
Name: | Wenfa “Simon” Sun |
Title: |
Director
|
By: | /s/ Meihong “Sanya” Qian |
Name: | Meihong “Sanya” Qian |
Title: | Director |
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Signature Page to Share Exchange Agreement – CAT9
CAT9 GROUP INC.
SHAREHOLDERS’ SIGNATURE PAGE TO
SHARE EXCHANGE AGREEMENT
Among CAT9 Group, Inc.,
CAT9 Holdings Limited (CAT9 Cayman),
CAT9 Investment China Limited,
Chongqing Field Industrial Company Limited
The undersigned Shareholder hereby executes and delivers the Share Exchange Agreement (the “ Agreement ”) to which this Signature Page is attached, which, together with all counterparts of the Agreement and Signature Pages of the other parties named in said Agreement, shall constitute one and the same document in accordance with the terms of the Agreement.
/s/ Wenfa “Simon” Sun | |
(Signature) | |
CAT9 Group, Inc. | |
(Type or print name) | |
(Type or print name as it should appear on certificate, if different) | |
Address: | |
Telephone: | |
Facsimile: |
No. of CAT9 GROUP Inc. Shares Held: 600,000
/s/ Meihong “Sanya” Qian |
|
(Signature) | |
CAT9 Group, Inc. | |
(Type or print name) | |
(Type or print name as it should appear on certificate, if different) | |
Address: | |
Telephone: | |
Facsimile: |
No. of CAT9 GROUP Inc. Shares Held: 400,000
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Signature Page to Share Exchange Agreement – CAT9 Cayman Limited
CAT9 HOLDINGS LIMITED
SHAREHOLDERS’ SIGNATURE PAGE TO
SHARE EXCHANGE AGREEMENT
Among CAT9 Group, Inc.
CAT9 Holdings Limited (CAT9 Cayman),
CAT9 Investment China Limited,
Chongqing Field Industrial Company Limited
The undersigned Shareholder hereby executes and delivers the Share Exchange Agreement (the “ Agreement ”) to which this Signature Page is attached, which, together with all counterparts of the Agreement and Signature Pages of the other parties named in said Agreement, shall constitute one and the same document in accordance with the terms of the Agreement.
/s/ Wenfa “Simon” Sun | |
(Signature) | |
CAT9 Cayman Limited. (CAT9 Cayman) | |
(Type or print name) | |
(Type or print name as it should appear on certificate, if different) | |
Address: | |
Telephone: | |
Facsimile: |
No. of CAT9 GROUP Inc. Shares Held: 600,000
No. of CAT9 Holdings Limited Shares Held: 5,000
/s/ Meihong “Sanya” Qian | |
(Signature) | |
CAT9 Holdings Limited. (CAT9 Cayman) | |
(Type or print name) | |
(Type or print name as it should appear on certificate, if different) | |
Address: | |
Telephone: | |
Facsimile: |
No. of CAT9 GROUP Inc. Shares Held: 400,000
No. of CAT9 Holdings Limited Shares Held: 5,000
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Signature Page to Share Exchange Agreement – CAT9 INVESTMENT CHINA LIMITED
CAT9 INVESTMENT CHINA LIMITED
SHAREHOLDERS’ SIGNATURE PAGE TO
SHARE EXCHANGE AGREEMENT
Among CAT9 Group, Inc.
CAT9 Holdings Limited (CAT9 Cayman),
CAT9 Investment China Limited,
Chongqing Field Industrial Company Limited
The undersigned Shareholder hereby executes and delivers the Share Exchange Agreement (the “ Agreement ”) to which this Signature Page is attached, which, together with all counterparts of the Agreement and Signature Pages of the other parties named in said Agreement, shall constitute one and the same document in accordance with the terms of the Agreement.
/s/ Wenfa “Simon” Sun | |
(Signature) | |
CAT9 Investment China Limited. | |
(Type or print name) | |
(Type or print name as it should appear on certificate, if different) | |
Address: | |
Telephone: | |
Facsimile: |
No. of CAT9 Investment China Limited Shares Held: 6,000
/s/ Meihong “Sanya” Qian | |
(Signature) | |
CAT9 Investment China Limited. | |
(Type or print name) | |
(Type or print name as it should appear on certificate, if different) | |
Address: | |
Telephone: | |
Facsimile: |
No. of CAT9 Investment China Limited Shares Held: 4,000
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Signature Page to Share Exchange Agreement – CHONGQING FIELD INDUSTRIAL COMPANY LIMITED
CHONGQING FIELD INDUSTRIAL COMPANY LIMITED
SHAREHOLDERS’ SIGNATURE PAGE TO
SHARE EXCHANGE AGREEMENT
Among CAT9 Group, Inc.
CAT9 Holdings Limited (CAT9 Cayman),
CAT9 Investment China Limited,
Chongqing Field Industrial Company Limited
The undersigned Shareholder hereby executes and delivers the Share Exchange Agreement (the “ Agreement ”) to which this Signature Page is attached, which, together with all counterparts of the Agreement and Signature Pages of the other parties named in said Agreement, shall constitute one and the same document in accordance with the terms of the Agreement.
/s/ Wenfa “Simon” Sun | |
(Signature) | |
CAT9 Holdings Limited. (CAT9 Cayman) | |
(Type or print name) | |
(Type or print name as it should appear on certificate, if different) | |
Address: | |
Telephone: | |
Facsimile: |
Percentage of Chongqing Field Industrial Company Limited Shares Held: 93%
/s/ Meihong “Sanya” Qian | |
(Signature) | |
CAT9 Holdings Limited (CAT9 Cayman) | |
(Type or print name) | |
(Type or print name as it should appear on certificate, if different) | |
Address: | |
Telephone: | |
Facsimile: |
Percentage of Chongqing Field Industrial Company Limited Shares Held: 7%
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SCHEDULE I
SHAREHOLDERS OF THE COMPANY
Name | Number of Company Shares | |||
Wenfa “Simon” Sun | 600,000 | |||
Meihong “Sanya” Qian | 400,000 | |||
TOTAL | 1,000,000 | |||
iii
SCHEDULE II
CAT9 HOLDINGS LIMITED (CAT9 CAYMAN) SHARES TO BE TRANSFERRED TO COMPANY
Name | Number of CAT9 Cayman Limited Shares | |||
Wenfa “Simon” Sun | 5,000 | |||
Meihong “Sanya” Qian | 5,000 | |||
TOTAL | 10,000 | |||
iv
SCHEDULE III
SHARES TO BE ISSUED TO THE SHAREHOLDERS
Wenfa “Simon” Sun 11,400,000
Meihong “Sanya” Qian 7,600,000
CURRENT STOCKHOLDERS OF THE COMPANY
Wenfa “Simon” Sun 12,000,000
Meihong “Sanya” Qian 8,000,000
v
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BY-LAWS
OF
ANDES 4 INC.
ARTICLE I - OFFICES
Section 1. The registered office of the corporation in the State of Delaware shall be at 16192 Coastal Highway, in the city of Lewes, County of Sussex, Delaware, 19958.
The registered agent in charge thereof shall be Harvard Business Services, Inc.
Section 2. The corporation may also have offices at such other places as the Board of Directors may from time to time appoint or the business of the corporation may require.
ARTICLE II - SEAL
Section 1. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words “Corporate Seal, Delaware”.
ARTICLE III - STOCKHOLDERS’ MEETINGS
Section 1. Meetings of stockholders shall be held at the registered office of the corporation in this state or at such place, either within or without this state, as may be selected from time to time by the Board of Directors.
Section 2. ANNUAL MEETINGS: The annual meeting of the stockholders shall be held on such date as is determined by the Board of Directors for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting.
Section 3. ELECTION OF DIRECTORS: Elections of the directors of the corporation shall be by written ballot.
Section 4. SPECIAL MEETINGS: The President, or the Board of Directors may call special meetings of the stockholders at any time, or stockholders entitled to cast at least one-fifth of the votes, which all stockholders are entitled to cast at the particular meeting. At any time, upon written request of any person or persons who have duly called a special meeting, it shall be the duty of the Secretary to fix the date of the meeting, to be held not more than sixty days after receipt of the request, and to give due notice thereof. If the Secretary shall neglect or refuse to fix the date of the meeting and give notice thereof, the person or persons calling the meeting may do so. Business transacted at all special meetings shall be confined to the objects stated in the call and matters germane thereto, unless all stockholders entitled to vote are present and consent.
Written notice of a special meeting of stockholders stating the time and place and object thereof, shall be given to each stockholder entitled to vote thereat at least ten days before such meeting, unless a greater period of notice is required by statute in a particular case.
Section 5. QUORUM: A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If a majority of the outstanding shares entitled to vote is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
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Section 6. PROXIES: Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. All proxies shall be filed with the Secretary of the meeting before being voted upon.
Section 7. NOTICE OF MEETINGS: Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by law, written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting.
Section 8. CONSENT IN LIEU OF MEETINGS: Any action required to be taken at any annual or special meeting of stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
Section 9. LIST OF STOCKHOLDERS: The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. No share of stock upon which any installment is due and unpaid shall be voted at any meeting. The list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
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ARTICLE IV - DIRECTORS
Section 1. The business and affairs of this corporation shall be managed by its Board of Directors, no less than one in number or such other minimum number as is required by law. The directors need not be residents of this state or stockholders in the corporation. They shall be elected by the stockholders of the corporation or in the case of a vacancy by remaining directors, and each director shall be elected for the term of one year, and until his successor shall be elected and shall qualify or until his earlier resignation or removal.
Section 2. REGULAR MEETINGS: Regular meetings of the Board shall be held without notice other than this by-law immediately after, and at the same place as, the annual meeting of stockholders. The directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution.
Section 3. SPECIAL MEETINGS: the President or any director upon two-day notice may call special Meetings of the Board. The person or persons authorized to call special meetings of the directors may fix the place for holding any special meeting of the directors called by them.
Section 4. QUORUM: A majority of the total number of directors shall constitute a quorum for the transaction of business.
Section 5. CONSENT IN LIEU OF MEETING: Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. The Board of Directors may hold its meetings, and have an office or offices, outside of this state.
Section 6. CONFERENCE TELEPHONE: One or more directors may participate in a meeting of the Board, of a committee of the Board or of the stockholders, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other; participation in this manner shall constitute presence in person at such meeting.
Section 7. COMPENSATION: Directors as such, shall not receive any stated salary for their services, but by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board provided, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor.
Section 8. RESIGNATION AND REMOVAL: Any director may resign at any time by giving notice to another Board member, the President or the Secretary of the corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board or by such officer, and the acceptance of such resignation shall not be necessary to make it effective. Any director may be removed with or without cause at any time by the affirmative vote of shareholders holding of record in the aggregate at least a majority of the outstanding shares of the corporation at a special meeting of the shareholders called for that purpose, and may be removed for cause by action of the Board.
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ARTICLE V - OFFICERS
Section 1. The executive officers of the corporation shall be chosen by the directors and shall be a President, Secretary and Treasurer. The Board of Directors may also choose a Chairman, one or more Vice Presidents and such other officers as it shall deem necessary. The same person may hold any number of offices.
Section 2. SALARIES: Salaries of all officers and agents of the corporation shall be fixed by the Board of Directors.
Section 3. TERM OF OFFICE: The officers of the corporation shall hold office for one year and until their successors are chosen and have qualified. The Board of Directors may remove any officer or agent elected or appointed by the Board whenever in its judgment the best interest of the corporation will be served thereby.
Section 4. PRESIDENT: The President shall be the chief executive officer of the corporation; he shall preside at all meetings of the stockholders and directors; he shall have general and active management of the business of the corporation, shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the corporation. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation. He shall be EX-OFFICIO a member of all committees, and shall have the general power and duties of supervision and management usually vested in the office of President of a corporation.
Section 5. SECRETARY: The Secretary shall attend all sessions of the Board and all meetings of the stockholders and act as clerk thereof, and record all the votes of the corporation and the minutes of all its transactions in a book to be kept for that purpose, and shall perform like duties for all committees of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, and under whose supervision he shall be. He shall keep in safe custody the corporate seal of the corporation, and when authorized by the Board, affix the same to any instrument requiring it.
Section 6. TREASURER: The Treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall keep the moneys of the corporation in a separate account to the credit of the corporation. He shall disburse the funds of the corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the corporation.
ARTICLE VI - VACANCIES
Section 1. The Board of Directors shall fill any vacancy occurring in any office of the corporation by death, resignation, and removal or otherwise. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of these By-Laws.
Section 2. RESIGNATIONS EFFECTIVE AT FUTURE DATE: When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.
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ARTICLE VII - CORPORATE RECORDS
Section 1. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, a power of attorney or such other writing, which authorizes the attorney or other agent to so act on behalf of the stockholder, shall accompany the demand under oath. The demand under oath shall be directed to the corporation at its registered office in this state or at its principal place of business.
ARTICLE VIII - STOCK CERTIFICATES, DIVIDENDS, ETC.
Section 1. The stock certificates of the corporation shall be numbered and registered in the share ledger and transfer books of the corporation as they are issued. They shall bear the corporate seal and shall be signed by the president.
Section 2. TRANSFERS: Transfers of shares shall be made on the books of the corporation upon surrender of the certificates therefor, endorsed by the person named in the certificate or by attorney, lawfully constituted in writing. No transfer shall be made which is inconsistent with law.
Section 3. LOST CERTIFICATE: The corporation may issue a new certificate of stock in the place of any certificate theretofore signed by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
Section 4. RECORD DATE: In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed:
(a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
(b) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed.
(c) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
(d) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
Section 5. DIVIDENDS: The Board of Directors may declare and pay dividends upon the outstanding shares of the corporation, from time to time and to such extent as they deem advisable, in the manner and upon the terms and conditions provided by statute and the Certificate of Incorporation.
Section 6. RESERVES: Before payment of any dividend there may be set aside out of the net profits of the corporation such sum or sums as the directors, from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interests of the corporation, and the directors may abolish any such reserve in the manner in which it was created.
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ARTICLE IX - MISCELLANEOUS PROVISIONS
Section 1. CHECKS: such officer or officers shall sign all checks or demands for money and notes of the corporation as the Board of Directors may from time to time designate.
Section 2. FISCAL YEAR: The fiscal year shall begin on the first day of January.
Section 3. NOTICE: Whenever written notice is required to be given to any person, it may be given to such person, either personally or by sending a copy thereof through the mail, or by telegram, charges prepaid, to his address appearing on the books of the corporation, or supplied by him to the corporation for the purpose of notice. If the notice is sent by mail or by telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office for transmission to such person. Such notice shall specify the place, day and hour of the meeting and, in the case of a special meeting of stockholders, the general nature of the business to be transacted.
Section 4. WAIVER OF NOTICE: Whenever any written notice is required by statute, or by the Certificate or the By-Laws of this corporation a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Except in the case of a special meeting of stockholders, neither the business to be transacted at nor the purpose of the meeting need be specified in the waiver of notice of such meeting. Attendance of a person either in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened.
Section 5. DISALLOWED COMPENSATION: Any payments made to an officer or employee of the corporation such as a salary, commission, bonus, interest, rent, travel or entertainment expense incurred by him, which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service, shall be reimbursed by such officer or employee to the corporation to the full extent of such disallowance. It shall be the duty of the directors, as a Board, to enforce payment of each such amount disallowed. In lieu of payment by the officer or employee, subject to the determination of the directors, proportionate amounts may be withheld from his future compensation payments until the amount owed to the corporation has been recovered.
Section 6. RESIGNATIONS: Any director or other officer may resign at any time, such resignation to be in writing and to take effect from the time of its receipt by the corporation, unless some time be fixed in the resignation and then from that date. The acceptance of a resignation shall not be required to make it effective.
ARTICLE X - ANNUAL STATEMENT
Section 1. The President and the Board of Directors shall present at each annual meeting a full and complete statement of the business and affairs of the corporation for the preceding year. Such statement shall be prepared and presented in whatever manner the Board of Directors shall deem advisable and need not be verified by a Certified Public Accountant.
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ARTICLE XI - INDEMNIFICATION AND INSURANCE:
Section 1. (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition: provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers.
(b) RIGHT OF CLAIMANT TO BRING SUIT: If a claim under paragraph (a) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard or conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard or conduct.
(c) Notwithstanding any limitation to the contrary contained in sub-paragraphs (a) and 8 (b) of this section, the corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
(d) INSURANCE: The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.
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ARTICLE XII - AMENDMENTS
Section 1. These By-Laws may be amended or repealed by the vote of directors.
The above By-Laws are certified to have been adopted by the Board of Directors of the Corporation on the 26th day of January, 2015.
ANDES 4 INC. | |
/s/ Richard Chiang | |
Richard Chiang
Secretary |
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Exhibit 3.4
Officers’ Certificate / Stock
CAT9 Holdings Limited
Certificate of Approval
Agreement of Merger
The undersigned certify that:
1. They are the president and the secretary, respectively, of CAT9 Holdings Limited , a Cayman Islands registered corporation.
2. The principal terms of the Agreement of Merger in the form attached were duly approved by the board of directors and by the shareholders of the corporation by a vote that equaled or exceeded the vote required.
3. The shareholder approval was by the holders of 100% of the outstanding shares of the corporation.
4. There is only one class of shares and the number of shares outstanding entitled to vote on the merger is Common.
We further declare under penalty of perjury under the laws of the Cayman Islands that the matters set forth in this certificate are true and correct of our own knowledge.
Date: December 27, 2016
CAT9 Holdings Limited
/s/ Wenfa “Simon” Sun
(Signature of Director)
Wenfa “Simon” Sun , Director
/s/ Meihong “Sanya” Qian
(Signature of Director)
Meihong “Sanya” Qian Director
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Officers’ Certificate / Stock
CAT9 GROUP Inc.
Certificate of Approval
Agreement of Merger
The undersigned certify that:
1. They are the president and the secretary, respectively, of CAT9 Group Inc. , a Delaware corporation.
2. The principal terms of the Agreement of Merger in the form attached were duly approved by the board of directors and by the shareholders of the corporation by a vote that equaled or exceeded the vote required.
3. The shareholder approval was by the holders of 100% of the outstanding shares of the corporation.
4. There is only one class of shares and the number of shares outstanding entitled to vote on the merger is Common.
We further declare under penalty of perjury under the laws of the State of Delaware that the matters set forth in this certificate are true and correct of our own knowledge.
Date: December 27, 2016
CAT9 Group Inc.
/s/ Wenfa “Simon” Sun
(Signature of President)
Wenfa “Simon” Sun , President and CEO
/s/ Meihong “Sanya” Qian
(Signature of Chief Financial Officer and Secretary)
Meihong “Sanya” Qian, Chief Financial Officer and Secretary
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Certificate of Ownership
CAT9 Group Inc.
The undersigned certify that:
1. They are the president and the secretary , respectively, of CAT9 Group Inc. , a Delaware corporation.
2. This corporation owns 100% of the outstanding shares of CAT9 Holdings Limited, a Cayman Islands corporation.
3. The board of directors of this corporation duly adopted the following resolution: RESOLVED, that this corporation merge CAT9 Holdings Limited , its wholly-owned subsidiary corporation, into CAT9 Group Inc. whereby it assumes all the obligations of CAT9 Holdings Limited, pursuant to Cayman Islands law.
We further declare under penalty of perjury under the laws of the Cayman Islands that the matters set forth in this certificate are true and correct of our own knowledge.
Date: December 27, 2016
CAT9 Group Inc.
/s/ Wenfa “Simon” Sun
(Signature of President)
Wenfa “Simon” Sun , President and CEO
/s/ Meihong “Sanya” Qian
(Signature of Chief Financial Officer and Secretary)
Meihong “Sanya” Qian, Chief Financial Officer and Secretary
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EXHIBIT 21.1
Subsidiaries of the Registrant
Subsidiary Name | Country | |
CAT9 Holdings Limited (“CAT9 Cayman”) | Cayman Islands | |
CAT9 Investment China Limited (“CAT9 HK”) (1) | Hong Kong | |
Chongqing Field Industrial Company Ltd. (CQFI) (2) | People’s Republic of China | |
(1) This company is a wholly-owned subsidiary of CAT9 Holdings Limited.
(2) This company is a wholly-owned subsidiary of CAT9 HK.
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