Unassociated Document
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
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February
16, 2007
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Date
of Report (Date of earliest event
reported):
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CHINA
PRECISION STEEL, INC.
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(Exact
name of registrant as specified in
charter)
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Colorado
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000-23039
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14-1623047
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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8th
Floor, Teda Building, 87 Wing Lok Street
Sheung
Wan
Hong
Kong, The People’s Republic of China
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(Address
of principal executive offices)
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86-21-5994-8500
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Registrant’s
telephone number, including area
code:
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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:
o
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item
1.01. Entry
into a Material Definitive Agreement
Stock
Purchase Agreement.
On
February 16, 2007, China Precision Steel, Inc. (the “Company”) entered into a
Stock Purchase Agreement (the “Agreement”) with the investors named therein (the
“Investors” and each individually as an “Investor”) pursuant to which the
Company agreed to issue and sell in a private placement (the “Private
Placement”) up to 7,451,665 new shares (the “Securities”) of common
stock (“Common Stock”), at a price of $3.00 per share (the “Purchase Price”).
The Private Placement was made to accredited institutional and other investors
in the United States and elsewhere in reliance upon available exemptions from
the registration requirements of the Securities Act of 1933, as amended (the
“Act”), including Section 4(2) thereof and Regulation D and Regulation S
promulgated thereunder. The Securities are “restricted securities” under the Act
and may not be transferred or sold except pursuant to an effective registration
statement or in reliance upon an available exemption from the registration
requirements under the Act. On February 21, 2007, the Company received gross
proceeds of $20,805,000 upon the initial closing of the Private Placement.
A
further closing is expected on or about February 23, 2007 with
respect to the receipt of additional proceeds of $1,549,995. The Company intends
to use the proceeds from the Private Placement for expansion of its production
capacity, to repay certain of its outstanding debt and for general working
capital purposes.
The
U.S.
placement agent received 100,000 shares of Common Stock as partial compensation
for it services to the Company in connection with the Private Placement. In
addition, each of the U.S. and International placement agents received an amount
in cash equal to 5% of the gross proceeds and warrants (the “Warrants”) to
purchase an amount of Securities equal to 4.25% of the total number of shares
of
Common Stock sold in the Private Placement. The Warrants are immediately
exercisable and the holders may purchase Warrant Shares (as defined in the
Form
of Warrant) at any time until the third anniversary of the date of issue. If
the
Warrants are exercised in full at the $3.00 per share exercise price (the
“Exercise Price”), the Company would receive aggregate proceeds of approximately
$1,900,176. The Exercise Price and the number of shares of Common Stock issuable
pursuant thereto are subject to customary adjustments. The Warrants do not
contain any registration rights. The foregoing summary is qualified in its
entirety by reference to the Form of Warrant, which is attached hereto as
Exhibit 4.1 and incorporated herein by reference.
Terms
of the Agreement
The
Agreement, among other things, provides for the purchase and sale of the Common
Stock on the foregoing terms. In addition, the Purchase Agreement requires
the
Company to register the resale of the Securities with the United States
Securities and Exchange Commission (“SEC”) on an appropriate registration
statement (the “Registration Statement”). The Company is required to file the
Registration Statement within ninety (90) days after the closing of the Private
Placement and to use commercially reasonable efforts to cause the Registration
Statement to become effective no later than the one hundred and fifty (150)
days
after the closing of the Private Placement. In the event that the Registration
Statement is not filed or declared effective within the required time periods,
the Company will be required to pay to each Investor liquidated damages
equivalent to 1% of the aggregate purchase price paid by such Investor pursuant
to the Purchase Agreement for the Securities then held by such Investor for
each
30-day period until the Registration Statement is filed or declared effective,
as the case may be. Such liquidated damages may not exceed 6% of the aggregate
purchase price paid by the Investor pursuant to the Purchase
Agreement.
In
addition to customary terms and conditions, the Agreement contains a “Make-Good”
provision pursuant to which Investors may receive, on a pro-rata basis, up
to an
additional 2,000,000 shares of Common Stock (the “Make Good Shares”) if the
Company does not meet certain net income targets in respect of its year-end
financial results in each of fiscal 2007 or 2008. The Company’s financial year
ends on June 30. The Company has agreed to reserve Common Stock for the issuance
of the Make-Good Shares.
Under
the
Purchase Agreement, the Company’s officers and directors, as well as the U.S.
and International placement agents, entered into lock-up agreements with respect
to their shareholdings in the Company.
Item
3.02 Unregistered
Sales of Equity Securities.
See
disclosure under Item 1.01 of this Current Report, which is incorporated herein
by reference.
On
February 21, 2007, the Company issued 6,934,999 shares of its common stock,
par value $0.01 per share, in the Private Placement in reliance upon exemptions
from the registration requirements of the Act provided by Section 4(2) of the
Act and Regulation D and Regulation S thereunder, and in reliance on similar
exemptions under the applicable state securities laws, to certain institutional
accredited and other investors. On February 22, 2007, the Company issued an
additional 516,665 shares of its common stock to additional investors in the
Private Placement. In connection with the Private Placement, on
February 22, 2007, the Company issued warrants to the placement agents to
purchase an aggregate of 633,392 shares of Common Stock as partial
compensation for services rendered in connection with the Private Placement.
The
Company also issued 100,000 shares to the U.S. placement agent in the Private
Placement as partial compensation. The warrants and the shares issued to the
placement agents were issued in reliance upon exemptions from the registration
requirements of the Act provided by Section 4(2) of the Act and Regulation
D and
Regulation S thereunder and in reliance upon exemptions from applicable state
securities laws.
On
February 22, 2007, the Company issued 827,963 shares to certain existing
shareholders pursuant to pre-existing anti-dilution rights triggered by the
Private Placement in
reliance upon exemptions from the registration requirements of the Act provided
by Section 4(2) of the Act and Regulation D and Regulation S thereunder and
in
reliance upon exemptions from applicable state securities
laws.
On
February 22, 2007, the Company issued (i) warrants to purchase up to 666,667
shares of Common Stock to the Company’s financial advisor as partial
compensation for services rendered in connection with the Company’s
reverse merger in December 2006 with Partner Success Holdings Limited and (ii)
warrants to purchase up to 100,000 shares of Common Stock to the Company's
investor relations consultants. The
warrants issued to each of the Company’s financial advisor and investor
relations consultants were issued in reliance upon exemptions from the
registration requirements of the Act provided by Section 4(2) of the Act and
Regulation D and Regulation S thereunder and in reliance upon exemptions from
applicable state securities laws. The
warrants are attached hereto as Exhibits 4.2 and 4.3 and incorporated herein
by
reference.
Item
5.02 Departure
of Directors or Principal Officers; Election of Directors; Appointment of
Principal Officers; Compensatory Arrangements of Certain
Officers.
Debt
Reduction Agreement.
On
February 13, 2007, the Company entered into a Debt Reduction Agreement (the
“Debt Reduction Agreement”) with Partner Success Holdings Limited, a British
Virgin Islands Business Company (“PSHL”), and Wo Hing Li, the Company’s
President and Chairman (“Mr. Li”), whereby, among other things, the Company
agreed to the conversion of certain debt outstanding and payable to Mr. Li
into
shares of Common Stock upon the occurrence of certain events. The Debt Reduction
Agreement was filed with the Securities and Exchange Commission on the Company’s
Current Report dated February 13, 2007, under Item 1.01, Entry into a Material
Definitive Agreement, and incorporated herein by reference. The Company is
now
re-filing such Agreement on this Current Report under Item 5.02 insomuch as
such
Agreement may also be viewed as a compensatory arrangement with Mr. Li.
On
February 20, 2007, the parties entered into an amendment (the “Amendment”) to
such Agreement which provides, in the absence of shareholder
approval, that the conversion of the outstanding debt may not be effected
at a price below the closing bid of the Common Stock on The NASDAQ Capital
Market on the business day prior to such conversion.
The
foregoing summary is qualified in its entirety by reference to the Debt
Reduction Agreement and the Amendment thereto, which are attached hereto as
Exhibits 10.3 and 10.4 to this Current Report and incorporated herein by
reference.
Item
8.01. Other
Events
Attached
as Exhibit 8.1 and incorporated herein by reference is the Company’s Corporate
Presentation disclosed pursuant to Regulation FD.
On
February 21, 2007, the Company issued a press release relating to the Private
Placement. A copy of this release is included as Exhibit 99.1.
Item
9.01. Financial
Statement and Exhibits
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4.1
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Form
of Warrant
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4.2
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Warrant,
dated February 22, 2007, to Belmont Capital Group
Limited
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4.3
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Warrant,
dated February
22,
2007, to CCG Elite Investor Relations |
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8.1
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Corporate
Presentation, dated January 2007
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10.1
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Form
of Stock Purchase Agreement, by and among the Company and the Investors,
dated February 16, 2007
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10.2
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Form
of Limited Standstill Agreement
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10.3
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Debt
Reduction Agreement, dated February 13, 2007, by and among the
Company, Wo
Hing Li and Partner Success Holdings Limited (incorporated by reference
to
the Company’s Current Report on Form 8-K, dated February 13, 2007, Exhibit
10.1)
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10.4
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Amendment
to the Debt Reduction Agreement, dated February 20, 2007, by and
among the
Company, Wo Hing Li and Partner Success Holdings
Limited.
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99.1
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Press
Release, dated February 21,
2007
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Date:
February 22, 2007
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CHINA
PRECISION STEEL, INC.
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By:
/s/ LeadaTak Tai Li
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LeadaTak
Tai Li, Chief Financial Officer
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