Filed
by the Registrant x
|
|
Filed
by a Party other than the Registrant ¨
|
|
Check
the appropriate box:
|
|
o Preliminary
Proxy Statement
|
¨ Confidential,
for Use of the Commission Only (as permitted by
|
x Definitive
Proxy Statement
|
Rule
14a-6(e)(2))
|
¨ Definitive
Additional Materials
|
|
¨ Soliciting
Material Pursuant to §240.14a-12
|
ALYST
ACQUISITION CORP.
|
(Name
of Registrant as Specified In Its Charter)
|
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
|
¨
|
No
fee required.
|
o
|
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
|
(a)
|
Title
of each class of securities to which transaction
applies:
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|
(b)
|
Aggregate
number of securities to which transaction
applies:
|
|
||
(c)
|
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): Pursuant to Rule 0-11(c)(1)
and 0-11(c)(4) under the Exchange Act as
follows:
|
(d)
|
Proposed
maximum aggregate value of
transaction:
|
(e)
|
Total
fee paid:
|
x
|
Fee
paid previously with preliminary
materials.
|
o
|
Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its
filing.
|
(a)
|
Amount
Previously Paid:
|
(b)
|
Form,
Schedule or Registration Statement
No.:
|
(c)
|
Filing
Party:
|
(d)
|
Date
Filed:
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(a)
|
The
redomestication of Alyst from the State of Delaware to the British Virgin
Islands by merging Alyst with and into China Networks International
Holdings Ltd. (‘‘CN Holdings’’), its wholly-owned British Virgin Islands
subsidiary (the ‘‘Redomestication Merger’’), in conjunction with the
acquisition of China Networks Media, Ltd. (“China Networks Media”), a
private British Virgin Islands company with limited liability, as set out
in paragraph (b) below. This proposal is called the ‘‘Redomestication
Proposal” and is conditioned upon approval of the Business Combination
Proposal discussed in paragraph (b)
below.
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|
(b)
|
The
proposed merger of China Networks Merger Co., Ltd., a wholly-owned British
Virgin Islands subsidiary of CN Holdings (“China Networks Merger Co.”),
with and into China Networks Media, resulting in China Networks Media
becoming a wholly-owned subsidiary of CN Holdings (the ‘‘Business
Combination’’), and the related transactions contemplated by the Agreement
and Plan of Merger, dated August 13, 2008, by and among Alyst, China
Networks Media, CN Holdings, China Networks Merger Co., Ltd., Mr. Li
Shuangqing, Kerry Propper and MediaInv Ltd. (the ‘‘Merger Agreement’’).
This proposal is called the ‘‘Business Combination Proposal” and is
conditioned upon approval of the Redomestication Proposal discussed in
paragraph (a) above.
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|
(c)
|
The
2008 Omnibus Securities and Incentive Plan pursuant to which directors,
officers, employees and consultants of CN Holdings or its subsidiaries may
be granted options to purchase up to 2,500,000 million ordinary shares of
CN Holdings. This proposal is called the “Share Incentive Plan
Proposal.”
|
|
(d)
|
Any
adjournment or postponement of the Special Meeting for the purpose of
soliciting additional proxies in the event Alyst does not receive the
requisite stockholder vote for approval of the Redomestication Proposal
and the Business Combination Proposal. This proposal is called the
‘‘Adjournment and
Postponement.’’
|
Dated: May 29, 2009
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|
By
Order of the Board of Directors,
|
|
/s/ Robert A. Schriesheim | |
Robert
A. Schriesheim
|
|
Chairman
|
/s/ Robert A.
Schriesheim
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|
Robert
A. Schriesheim
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|
Chairman
of the Board of Directors of
|
|
Alyst
Acquisition Corp.
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Page
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|
SUMMARY
|
1
|
RISK
FACTORS
|
11
|
SELECTED
SUMMARY HISTORICAL FINANCIAL INFORMATION
|
27
|
PRO
FORMA FINANCIAL INFORMATION
|
31 |
COMPARATIVE
PER SHARE DATA
|
43
|
PRICE RANGE OF SECURITIES AND DIVIDENDS |
44
|
THE
ALYST SPECIAL MEETING
|
46
|
THE
BUSINESS COMBINATION PROPOSAL
|
51
|
MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
|
67
|
THE
REDOMESTICATION PROPOSAL
|
75
|
THE
SHARE INCENTIVE PLAN PROPOSAL
|
85
|
PROPOSAL
TO ADJOURN OR POSTPONE THE SPECIAL MEETING FOR THE PURPOSE OF
SOLICITING ADDITIONAL PROXIES
|
89
|
INFORMATION
ABOUT CHINA NETWORKS MEDIA
|
90
|
CHINA
NETWORKS MEDIA’S
MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
103
|
INFORMATION
ABOUT ALYST
|
125
|
ALYST
MANAGEMENT’S DISCUSSION
AND ANALYSIS OR PLAN OF OPERATION
|
127
|
DIRECTORS
AND MANAGEMENT
|
129
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
135
|
BENEFICIAL
OWNERSHIP OF SECURITIES
|
137
|
SHARES
ELIGIBLE FOR FUTURE SALE
|
142
|
DESCRIPTION
OF ALYST’S SECURITIES
|
143
|
DESCRIPTION
OF CN HOLDINGS’ SECURITIES
FOLLOWING THE BUSINESS COMBINATION
|
146
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TRANSFER
AGENT AND REGISTRAR
|
148
|
STOCKHOLDER
PROPOSALS
|
148
|
LEGAL
MATTERS
|
148
|
EXPERTS
|
148
|
DELIVERY
OF DOCUMENTS TO STOCKHOLDERS
|
149
|
WHERE
YOU CAN FIND MORE INFORMATION
|
150
|
INDEX
TO FINANCIAL STATEMENTS
|
F-1
|
|
·
|
The
parties to the Merger Agreement are Alyst, China Networks Media, CN
Holdings, China Networks Merger Co., Mr. Li Shuangqing, MediaInv Ltd., and
Kerry Propper. See the section entitled “The Business Combination
Proposal.”
|
|
·
|
Alyst
will merge with and into CN Holdings, Alyst’s
wholly-owned subsidiary incorporated in the British Virgin Islands, or
BVI, resulting in CN Holdings as the surviving corporation, for the
purpose of redomesticating Alyst from the State of Delaware to the BVI as
part of the acquisition of China Networks Media in the Business
Combination. See the section entitled “The Redomestication Proposal.”
|
|
·
|
In
connection with the Redomestication Merger, all of Alyst’s issued and
outstanding securities immediately prior to the Redomestication Merger
will be converted into securities of CN Holdings as set forth in the
Merger Agreement. See the section entitled “The Business Combination
Proposal – Terms of the Merger Agreement – Basic Deal
Terms.”
|
|
·
|
China
Networks Merger Co., a company incorporated in the BVI and a wholly-owned
subsidiary of CN Holdings, will merge with and into China Networks Media,
whereupon China Networks Media will be the surviving entity and the
wholly-owned subsidiary of CN Holdings. See the section entitled “The
Business Combination Proposal.”
|
|
·
|
In
connection with the Business Combination, each ordinary share of China
Networks Media issued and outstanding prior to the business combination
will be converted automatically into one ordinary share of CN Holdings and
each class A preferred share of China Networks Media outstanding
immediately prior to the business combination will be converted into one
ordinary share of CN Holdings. See the section entitled “The Business
Combination Proposal – Terms of the Merger Agreement – Basic Deal
Terms.”
|
·
|
The
current market value of the aggregate maximum merger consideration payable
to China Networks Media in the Business Combination is approximately
$137,764,000 based upon the closing price of Alyst’s common
stock on the NYSE Amex on May 26, 2009 of $7.80 per
share. CN Holdings will issue to China Networks Media’s
shareholders aggregate merger consideration of (i) 2,880,000 CN Holdings
ordinary shares (with a current market value of $22,464,000), (ii) an
aggregate of $17,000,000 in cash, (iii) deferred cash payments of up to
$6,000,000 and deferred share payments of up to 9,000,000 ordinary shares
of CN Holdings, in each case subject to the achievement of specified
financial milestones set forth in the Merger Agreement, and (iv)
$22,110,000 of proceeds from the exercise of CN Holdings
warrants. The deferred cash and deferred stock consideration
will be payable as follows: (x) $3,000,000 cash and 2,850,000 shares of
stock upon China Networks Media achieving pro forma net income for fiscal
year 2009 of greater than $20,000,000; (y) $3,000,000 cash and 3,075,000
shares of stock upon China Networks Media achieving pro forma
net income for fiscal year 2010 of greater than $30,000,000; and (z)
3,075,000 shares of stock upon China Networks Media achieving pro forma
net income for fiscal year 2011 of greater than $40,000,000. The
pro forma net income of China Networks Media is calculated by determining
the net income of China Networks Media in accordance with U.S. generally
accepted accounting principles (“GAAP”), but excluding (i) equity-based
compensation charges, (ii) extraordinary one-time charges, and (iii)
charges related to the Business Combination or impairment of goodwill; and
including the net income generated by acquired businesses or persons only
to the extent that such acquisitions are accretive on a net income per
share basis. In addition, if acquisitions are included in the
calculation of pro forma net income for any year, the calculation will
assume that all such acquisitions occurred on the first day of such
year.
|
|
·
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China
Networks Media is a venture provider of broadcast television services in
the People’s Republic
of China, or PRC, operating in partnership with a local state-owned
enterprise authorized by the PRC government to control the distribution of
broadcast TV services. See the section entitled “Information about China
Networks Media.”
|
|
·
|
The
closing of the acquisition of China Networks Media is subject to the
satisfaction by each party of various conditions prior to closing. See the
section entitled “The Business Combination Proposal – Terms of the
Merger Agreement – Closing
Conditions.”
|
|
·
|
The
Business Combination will not be consummated unless the Redomestication
Proposal is approved, and the Redomestication Merger will not be
consummated unless the Business Combination Proposal is approved. See the
section entitled “The Alyst Special Meeting – Vote
Required.”
|
|
·
|
Stockholders
are also being asked to approve the 2008 Omnibus Securities and
Incentive Plan pursuant to which directors, officers, employees and
consultants of the surviving corporation, CN Holdings, or its subsidiaries
may be granted options to purchase up to 2,500,000 ordinary shares of CN
Holdings. See the section entitled “The Share
Incentive Plan Proposal.”
|
Q.
What is being voted on?
|
A.
You are being asked to vote on four proposals:
|
|
· The merger of Alyst
with and into its wholly-owned British Virgin Islands (“BVI”) subsidiary,
CN Holdings, for the purpose of redomesticating Alyst to the BVI and
increasing the authorized share capital to accommodate the Business
Combination. This proposal is called the ‘‘Redomestication Merger
Proposal.’’
|
||
· The proposed merger
of CN Holdings’ wholly-owned subsidiary, China Networks Merger Co., with
and into China Networks Media, resulting in China Networks Media becoming
a wholly-owned subsidiary of CN Holdings. This proposal is called the
‘‘Business Combination Proposal.’’
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||
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||
· The approval of the
2008 Omnibus Securities and Incentive Plan pursuant to which directors,
officers, employees and consultants of the surviving corporation, CN
Holdings, or its subsidiaries may be granted up to 2.5 million ordinary
shares of CN Holdings. This proposal is called the “Share Incentive Plan
Proposal.”
|
||
· The approval of any
adjournment or postponement of the Special Meeting for the purpose of
soliciting additional proxies. This proposal is called the ‘‘Adjournment
and Postponement Proposal.’’
|
||
Q.
Why are stockholders of Alyst being asked to approve actions that will be
taken by CN Holdings?
|
A.
Alyst stockholders are being asked to approve the entry into the Business
Combination by CN Holdings. The Memorandum and Articles of Association of
CN Holdings will include protective provisions identical in substance to
those contained in Alyst’s amended and restated certificate of
incorporation at the time of its IPO, although CN Holdings will have a
perpetual, rather than limited, existence and its authorized share capital
will increase to 75 million ordinary shares (compared to 30 million common
and 1 million preferred shares for Alyst). As a result, immediately
following the completion of the Redomestication Merger, the constitutional
documents of CN Holdings will require that the majority of the shares
issued in Alyst’s IPO approve its Business Combination with China Networks
Media, as well as the Share Incentive Plan Proposal. Since the laws of the
BVI also require the affirmative vote of a majority of the shares of China
Networks Media and China Network Merger Co., the shareholders of each such
corporation will be approving such actions by written consent, effective
upon receipt of corresponding approval of Alyst’s stockholders. Such
action by written consent, together with the approval by Alyst’s
stockholders at the Special Meeting, will be effective under BVI law and
CN Holdings’ amended constitutional documents.
|
|
Q.
Who is entitled to vote?
|
A.
Holders of Alyst’s outstanding common stock as of the close of business on
May 29, 2009, (the “Record Date”) are entitled to vote on all proposals at
the Special Meeting by proxy or in person.
|
|
Q.
What vote is required to approve the Redomestication Merger
Proposal?
|
A.
Approval of the Redomestication Merger Proposal will require the
affirmative vote of a majority of the outstanding shares of Alyst’s common
stock as of the Record Date, provided there is a quorum and that the
Business Combination is also approved.
|
|
Q.
What vote is required to approve the Business Combination
Proposal?
|
A.
The approval of the Business Combination requires the affirmative vote of
a majority of the outstanding shares of common stock present in person or
by proxy and entitled to vote at the Special Meeting, including the
affirmative vote of a majority of the shares of common stock issued in the
IPO present, in person or by proxy and entitled to vote at the Special
Meeting, provided that there is a quorum. Alyst’s initial stockholders
have agreed to vote their 1,750,000 shares acquired prior to the IPO and
as part of the insider units sold simultaneously with the consummation of
the IPO in accordance with the holders of a majority of the public shares
voting in person or by proxy at the meeting. Any other shares that may be
acquired by Alyst’s initial stockholders prior to the record date may be
voted in any manner that they choose. Alyst’s initial stockholders have
not acquired any additional shares of common stock entitled to vote beyond
their initial shares.
If
the stockholders approve the Business Combination, the Business
Combination will only proceed if holders of less than 30% of the shares of
common stock sold in Alyst’s IPO exercise their conversion rights and vote
against the Business Combination. If the holders of 2,413,320 or more
shares purchased in Alyst’s IPO vote against the Business Combination and
demand that Alyst convert their shares into their pro rata portion of the
trust account established at the time of the IPO (as described below),
Alyst will not be permitted to consummate the Business Combination
pursuant to its amended and restated certificate of
incorporation.
|
Q.
What vote is required to approve the Share Incentive Plan Proposal?
|
A.
Approval of the Share Incentive Plan Proposal will require the affirmative
vote of a majority of the outstanding shares of Alyst’s common stock
represented in person or by proxy and entitled to vote at the Special
Meeting, provided there is a quorum. Approval of this Proposal is not a
condition to approval of the Business Combination Proposal or
Redomestication Proposal.
|
|
Q.
What vote is required to adopt the proposal to adjourn or postpone the
Special Meeting for the purpose of soliciting additional
proxies?
|
A.
Approval of the Adjournment and Postponement Proposal will require the
affirmative vote of holders of a majority of the shares of Alyst’s common
stock represented in person or by proxy and entitled to vote at the
Special Meeting, provided there is a quorum.
|
|
Q.
Do Alyst stockholders have appraisal rights under Delaware
law?
|
A.
The Alyst stockholders do not have appraisal rights under Delaware
corporate law in connection with either the Redomestication Merger or the
Business Combination.
|
|
Q.
How will the Redomestication Merger be accomplished?
|
A.
Alyst will merge into CN Holdings, Alyst’s wholly - owned subsidiary that
is incorporated as a BVI company. As a result of the Redomestication
Merger, each currently issued outstanding security of Alyst will
automatically convert into one corresponding security of CN Holdings. This
procedure will result in your becoming a securityholder in CN Holdings
instead of Alyst.
|
|
Q.
What happens post-Business Combination to the funds deposited in the trust
account?
|
A.
Alyst stockholders exercising conversion rights will receive their pro
rata portion of the trust account. The balance of the funds in the trust
account will be released to CN Holdings and will be utilized to pay to the
former shareholders of China Networks Media the cash portion of the merger
consideration in the amount of $17 million, and any remaining funds will
be retained by CN Holdings to make payments aggregating $13.6 million to
the PRC TV Stations (as defined below under “The Companies”) and
approximately $2 million in transaction expenses and commissions due on
closing and for operating capital subsequent to the closing of the
Business Combination.
|
|
Q.
What happens if the Business Combination and Redomestication Merger are
not consummated?
|
A.
If Alyst does not redomesticate and acquire China Networks Media in the
Business Combination, Alyst may seek an alternative business combination.
However, under its amended and restated certificate of
incorporation, if Alyst does not acquire at least majority control of
a target business by June 29, 2009, Alyst must dissolve and distribute to
its public stockholders the amount in the trust account plus any remaining
net assets. Following dissolution, Alyst would no longer exist as a
corporation.
In
any liquidation, the funds held in the trust account, plus any interest
earned thereon (net of taxes payable), together with any remaining
out-of-trust net assets, will be distributed pro rata to Alyst’s common
stockholders who hold shares issued in Alyst’s IPO (other than the initial
stockholders, each of whom has waived any right to any liquidation
distribution with respect to them). See the risk factor on page 26 of
this proxy statement/prospectus relating to risks associated with the
dissolution of Alyst.
|
|
Q.
If Alyst uses funds in the trust account to purchase, directly or
indirectly, shares of common stock sold in the IPO, do I have any
legal remedies?
|
A.
You should be aware that Alyst’s IPO prospectus did not specifically
disclose that funds in its trust account might be used, directly or
indirectly, to purchase common stock issued in the IPO from holders
thereof who intend to vote against the Business Combination Proposal and
convert their common stock into a pro rata share of the trust account (as
Alyst may contemplate doing). However, the IPO prospectus states that
Alyst may use funds from the trust account to, among other things, enter
into arrangements with third parties, or otherwise use available working
capital, as may be necessary to effectuate a business combination.
Nonetheless, if trust funds are used to purchase common stock, a holder of
common stock at the time of the consummation of the Business Combination
who purchased such shares in the IPO might assert a securities law claim
against Alyst for rescission (under which a successful claimant has the
right to receive the total amount paid for his or her securities pursuant
to an allegedly deficient prospectus, plus interest and less any income
earned on the securities, in exchange for surrender of the securities) or
damages (compensation for loss on an investment caused by alleged material
misrepresentations or omissions in the sale of a security). If successful
(with respect to which there can be no assurance), such a claim may
entitle the stockholder to up to $8.00 per share, based on the initial
offering price of the IPO units comprised of stock and warrants, less any
amount received from sale of the original warrants purchased with them,
plus interest from the date of Alyst’s IPO (which, in the case of holders
of common stock issued in the IPO, may be more than the pro rata share of
the trust account to which they are entitled on conversion or
liquidation). See “The Business Combination Proposal – Rescission
Rights.”
|
Q.
Do Alyst stockholders have conversion rights?
|
A.
If you hold shares of common stock issued in Alyst’s IPO, then you have
the right to vote against the Business Combination Proposal and demand
that Alyst convert these shares into a pro rata portion of the trust
account in which a substantial portion of the net proceeds of Alyst’s IPO
are held. These rights to vote against the Business Combination and demand
conversion of the shares into a pro rata portion of the trust account are
sometimes referred to herein as conversion rights. Holders of warrants
issued by Alyst do not have any conversion rights. Pursuant to the
arrangements established at the time of Alyst’s IPO, shareholders of Alyst
representing 30% less one share of the outstanding shares issued in
Alyst’s IPO may exercise conversion rights in the event they vote against
the Business Combination.
|
|
SIMPLY
VOTING AGAINST THE BUSINESS COMBINATION OR CHECKING THE ‘‘EXERCISE
CONVERSION RIGHTS’’ BOX ON A PROXY CARD DOES NOT PERFECT YOUR CONVERSION
RIGHTS – YOU MUST ALSO SEND ALYST THE WRITTEN DEMAND LETTER DESCRIBED
UNDER “THE ALYST SPECIAL MEETING – CONVERSION
RIGHTS.”
|
||
Q.
Will the Alyst stockholders be taxed as a result of the Redomestication
Merger?
|
A. It
is anticipated that Alyst stockholders or warrant holders generally should
not recognize gain or loss as a result of the Redomestication Merger for
U.S. federal income tax purposes. We urge you to consult your own tax
advisors with regard to the particular tax consequences to you of the
Redomestication Merger.
|
|
Q.
Will Alyst be taxed on the Redomestication Merger?
|
A.
It is anticipated that for U.S. federal income tax purposes, as to each of
its assets, Alyst will recognize gain (but not loss) realized as a result
of the Redomestication Merger in an amount equal to the excess (if any) of
the fair market value of such asset over such asset’s adjusted tax basis
at the effective time of the Redomestication Merger. Any U.S. federal
income tax liability incurred by Alyst as a result of the recognition of
such gain should become a liability of CN Holdings by reason of the
Redomestication Merger.
|
|
Q.
If I am not going to attend the Special Meeting in person, should I return
my proxy card instead?
|
A.
Yes. After carefully reading and considering the information in this proxy
statement/prospectus, please fill out and sign your proxy card. Then
return it in the return envelope as soon as possible, so that your shares
may be represented at the Special Meeting. You may also vote by telephone,
as explained on the proxy card. A properly executed proxy will be counted
for the purpose of determining the existence of a
quorum.
|
|
Q.
If I have conversion rights, how do I exercise them?
|
A.
If you wish to exercise your conversion rights, you must vote against the
Business Combination Proposal in person, by submitting a proxy card, or by
telephone, and at the same time send a written demand that Alyst convert
your shares for cash. In addition, prior to the Special Meeting, you must
deliver your shares to the transfer agent in the manner described below.
If, notwithstanding your vote, the Business Combination is completed, then
you will be entitled to receive a pro rata portion of the trust account,
including any interest earned thereon through the record date. You will be
entitled to convert each share of common stock that you hold for
approximately $7.88. If you exercise your conversion rights, then you will
be converting your shares of Alyst common stock for cash and will no
longer own these shares. You will be entitled to receive cash for these
shares only if you tender your stock certificate to our transfer agent,
Continental Stock Transfer & Trust Company, at any time prior to the
conclusion of the vote on the Business Combination. Alternatively, you may
deliver your shares to the transfer agent electronically prior to the
Special Meeting, at a nominal cost, using the Depository Trust Company’s
DWAC System. If you do not make a written demand to exercise your
conversion rights prior to the Special Meeting (or if you do not vote
against the Business Combination Proposal and tender your shares to the
transfer agent prior to the vote), you will lose your conversion rights,
and that loss cannot be remedied.
|
Q.
How do I withdraw my request for conversion?
|
A.
You may withdraw a request for conversion of your shares any time prior to
the date of the Special Meeting by requesting that the transfer agent
return your share certificate(s) either physically or
electronically.
|
|
Q.
What will happen if I abstain from voting or fail to instruct my broker to
vote?
|
A.
An abstention or the failure to instruct your broker how to vote (also
known as a broker non-vote) is not considered a vote cast at the meeting
with respect to the Business Combination Proposal. Therefore your vote
will have no effect on the vote relating to the Business Combination, and
you will not be able to convert your shares into a pro rata
portion of the trust account. An abstention or failure to vote will have
the effect of voting against the Redomestication Merger Proposal and the
Share Incentive Plan Proposal.
|
|
Q.
If
my shares are held in “street name,” will my broker automatically vote
them for me?
|
A.
No. Your broker can vote your shares only if you provide instructions on
how to vote. You should instruct your broker to vote your
shares. Your broker can tell you how to provide these
instructions.
|
|
|
||
Q.
How do I change my vote?
|
A.
You may send a later-dated, signed proxy card to Alyst’s secretary no
later than 9:00 a.m. on June 23, 2009, prior to the commencement of
the Special Meeting, or attend the Special Meeting in person and vote. You
also may revoke your proxy no later than June 22, 2009 by sending a notice
of revocation to Michael Weksel, Alyst Acquisition Corp., 233 E. 69th
Street, #6J, New York, New York 10021.
|
|
Q.
Do I need to turn in my old certificates?
|
A.
If you wish to exercise your conversion rights, you must tender your
shares to the transfer agent prior to the Special Meeting. If
the Business Combination Proposal is approved and you hold your securities
in Alyst in certificate form, as opposed to holding them through your
broker, you do not need to exchange them for certificates issued by CN
Holdings. Your current certificates will represent your rights in CN
Holdings. You may exchange them by contacting the transfer agent,
Continental Stock Transfer & Trust Company, Reorganization Department,
and following their requirements for reissuance.
|
|
Q.
Who can help answer my questions?
|
A.
If you have questions, you may write or call Alyst Acquisition Corp., at
233 E. 69th Street, #6J, New York, New York 10021, (646) 290-6104,
Attention: Michael Weksel or Morrow & Co., LLC,
470 West Avenue, 3rd Floor, Stamford, CT 06902, toll-free (800)
662-5200.
|
|
Q.
When and where will the Special Meeting be held?
|
A.
The meeting will be held at 9:30 a.m. Eastern time on June 23, 2009 at 340
Madison Avenue, 2nd Floor, New York, New York.
|
|
·
|
If the proposed Business
Combination is not completed, and Alyst is unable to complete another
acquisition by June 29, 2009, Alyst will be required to liquidate. Upon
liquidation, the shares of common stock owned by Alyst’s directors will be
worthless because the shares will no longer have any value and the
directors are not entitled to liquidation distributions from Alyst. In
addition, the possibility that Alyst’s officers and directors will be
required to perform their obligations under the indemnity agreements
referred to below will be substantially
increased.
|
|
·
|
In connection with Alyst’s IPO,
Alyst’s current officers and directors agreed to indemnify Alyst for debts
and obligations to vendors that are owed money by Alyst for services
rendered or products sold to Alyst, but only to the extent necessary to
ensure that certain liabilities do not reduce funds in the trust account.
If the Business Combination is consummated, Alyst’s officers and directors
will not have to perform such obligations. If the Business Combination is
not consummated, however, Alyst’s officers and directors could potentially
be liable for any claims against the trust account by vendors who did not
sign waivers.
|
|
·
|
All rights of Alyst’s officers
and directors to be indemnified by Alyst, and of Alyst’s directors to be
exculpated from monetary liability with respect to prior acts or
omissions, will continue after the Business Combination pursuant to
provisions in CN Holdings’ Amended and Restated Memorandum and Articles of
Association, forms of which are attached hereto as Annexes D and E,
respectively. However, if the Business Combination is not approved and
Alyst subsequently liquidates, its ability to perform its obligations
under those provisions will be substantially impaired since it will cease
to exist. If the Business Combination is ultimately completed, CN
Holdings’ ability to perform such obligations will be substantially
enhanced.
|
|
·
|
It is anticipated that China
Networks Media’s current Chief Executive Officer, Li Shuangqing, will
enter into an employment agreement with CN Holdings as a condition to the
consummation of the Merger Agreement, although such condition may be
waived by the parties. The employment agreement must be approved by a
majority of the independent directors of CN Holdings’ Board of
Directors.
|
|
·
|
Under the Share Incentive Plan,
as proposed, directors of CN Holdings’ Board of Directors may be granted
options to purchase shares of CN Holdings. Under the Merger
Agreement, Alyst is entitled to appoint three directors to the post-merger
CN Holdings’ Board of Directors, who will be entitled to receive shares or
option grants under the
Plan.
|
|
·
|
It is expected that Michael
Weksel will serve as a director of CN Holdings if the Business
Combination is consummated.
|
|
·
|
Michael Weksel entered into an
employment agreement in January 2009 with China Networks Media to serve as
its Chief Financial Officer, a role that is expected to continue if the
Business Combination is consummated. The employment agreement
provides that Mr. Weksel may continue in his current obligations to Alyst
until such time as the Business Combination is consummated or Alyst is
dissolved. Mr. Weksel receives no salary from Alyst, but for
the period prior to the earlier of the consummation of the Business
Combination or June 29, 2009 (the “Initial Term”), is entitled to receive
from China Networks Media, a base salary equal to $180,000 per
annum. Such base salary will increase to $360,000 after the
Initial Term. Mr. Weksel is also entitled to receive a bonus of
$360,000 if China Networks Media achieves the net income targets for 2009
and 2010 set out in the Merger Agreement. In addition, if the
Merger Agreement is consummated, Mr. Weksel will receive a 7-year
non-qualified option under the Share Incentive Plan for the purchase of
500,000 ordinary shares of CN Holdings, subject to certain adjustments,
50,000 of which shall vest immediately upon issuance of the
option. The balance of the entitlement under the option shall
vest over a 36-month period.
|
|
·
|
Warrants to purchase Alyst common
stock held by Alyst’s directors and officers are exercisable 90 days
after consummation of the Business Combination. Based upon the
closing price of Alyst’s common stock on May 26, 2009 of $7.80, if
all warrants held by Alyst’s directors and officers were exercised for
common stock at a price of $5 per share the market value of
such shares of common stock would be approximately $14,196,000 at an
aggregate cost of
$9,100,000.
|
|
·
|
Michael Weksel has entered into a
Put-Call Option Agreement with Alyst pursuant to which (i) Alyst has the
right to purchase from Mr. Weksel up to 559,794 of Alyst’s publicly traded
warrants (the “Warrants”) at a price of $0.0446 per warrant (the “Exercise
Price”) at any time through August 31, 2009 and (ii) Mr. Weksel has the
right at any time after June 29, 2009 and before August 31, 2009 to sell
such warrants to Alyst at the Exercise Price. The Warrants were
purchased by Mr. Weksel in open market transactions at a price equal to
the Exercise Price in order to enhance Alyst’s ability to enter
into arrangements with stockholders or third parties to facilitate
consummation of the Business Combination without altering Alyst’s existing
capital structure. If the Business Combination is not consummated and
Alyst is forced to liquidate, the Warrants would have no value in the open
market.
|
|
·
|
radio,
|
|
·
|
newspapers,
|
|
·
|
magazines,
|
|
·
|
the
Internet,
|
|
·
|
indoor
or outdoor flat panel displays,
|
|
·
|
billboards
and
|
|
·
|
public
transport advertising.
|
|
·
|
develop
new customers or new business from existing
customers;
|
|
·
|
expand
the technical sophistication of the products it
offers;
|
|
·
|
respond
effectively to competitive pressures;
and
|
|
·
|
attract
and retain qualified management and
employees.
|
|
·
|
China
Networks Media has no track record in obtaining advertisement resources
from other regional television
networks;
|
|
·
|
There
is expected to be intense competition from advertising companies that are
already well-established in those
markets;
|
|
·
|
China
Networks Media may not be able to accurately assess and adjust to the
consumer tastes, preferences and demands in the relevant regional markets;
and
|
|
·
|
It
may not be possible to generate enough revenue to offset
costs.
|
|
·
|
investors’
perception of, and demand for, its
securities;
|
|
·
|
prevailing
conditions in the global financial and capital markets in
which it will seek to raise funds;
|
|
·
|
the
future results of operations, financial condition and cash flows of China
Networks Media;
|
|
·
|
PRC
governmental regulation of foreign investment in advertising companies in
China;
|
|
·
|
PRC
governmental policies relating to foreign exchange;
and
|
|
·
|
economic,
political and other conditions in
China.
|
|
·
|
fines,
|
|
·
|
confiscation
of advertising fees,
|
|
·
|
orders
to cease disseminating the advertisements
and
|
|
·
|
orders
to publish public announcements to correct the misleading
information.
|
|
·
|
may
be subject to liability for infringement activities or may be prohibited
from using such intellectual
property,
|
|
·
|
may
incur licensing fees or be forced to develop
alternatives.
|
|
·
|
may
incur significant expenses, and
|
|
·
|
may
be forced to divert management’s time and other resources from its
business and operations to defend against these third-party infringement
claims, regardless of their merits.
|
|
·
|
take
appropriate remedial action,
|
|
·
|
confiscate
any illegal income and
|
|
·
|
impose
a fine in the event of a contravention of the new
regulation.
|
|
·
|
the
desirability of time slots it offers on the relevant PRC TV
Stations,
|
|
·
|
the
extent of television network coverage
provided,
|
|
·
|
the
service packages and pricing structure offered
and
|
|
·
|
the
client’s
perception of the effectiveness and quality of its
services.
|
|
·
|
ANT
may not be able to take control of Hetong upon the occurrence of certain
events, such as the imposition of statutory liens, judgments, court
orders, death or incapacity.
|
|
·
|
If
the PRC government proposes new laws or amends current laws that are
detrimental to the contractual agreements with Hetong, such changes may
effectively eliminate China Networks Media’s
control over the Hetong and its ability to consolidate the JV Tech Cos and
the JV Ad Cos.
|
|
·
|
If
the shareholders of Hetong fail to perform as required under those
contractual agreements, ANT will have to rely on the PRC legal system to
enforce those agreements and there is no guarantee that it will be
successful in an enforcement
action.
|
|
·
|
levying
fines;
|
|
·
|
confiscating
income; and/or
|
|
·
|
requiring
a restructuring of ownership or operations.
|
|
·
|
levying
fines,
|
|
·
|
confiscating
its income,
|
|
·
|
revoking
the business licenses or operating licenses of its PRC affiliates and PRC
TV Stations,
|
|
·
|
requiring
China Networks Media to restructure the relevant ownership structure or
operations, and
|
|
·
|
requiring
it to discontinue all or any portion of its
operations.
|
|
·
|
Such
company would be subject to PRC enterprise income tax at a rate of 25
percent (the “EIT”)
on its worldwide income;
|
|
·
|
Such
company would be liable for the EIT on dividends it receives from
subsidiaries unless such company is a “qualifying resident enterprise” and
the dividend it receives is attributable to direct investment in another
“qualifying resident enterprise” that is paying the dividend (it is
unclear whether CN Holdings or China Networks Media would qualify as a
“qualifying resident enterprise” in light of uncertainties of
interpretation and lack of official
guidance);
|
|
·
|
Such
company may be required to withhold a 10 percent PRC withholding tax on
dividends it pays to non-resident enterprise shareholders (subject to
possible reduction under an applicable income tax treaty); and
|
|
·
|
Gains
derived by non-resident enterprise shareholders upon disposition of shares
of such company may be subject to a 10 percent PRC withholding tax
(subject to possible reduction under an applicable income tax treaty).
|
|
·
|
the
U.S. court issuing the judgment had jurisdiction in the matter and the
company either submitted to such jurisdiction or was resident or carrying
on business within such jurisdiction and was duly served with
process;
|
|
·
|
the
judgment given by the U.S. court was not in respect of penalties, taxes,
fines or similar fiscal or revenue obligations of the
company;
|
|
·
|
in
obtaining judgment there was no fraud on the part of the person in whose
favor judgment was given or on the part of the
court;
|
|
·
|
recognition
or enforcement of the judgment in the BVI would not be contrary to public
policy; and
|
|
·
|
the
proceedings pursuant to which judgment was obtained were not contrary to
natural justice.
|
|
·
|
an
act complained of which is outside the scope of the authorized business or
is illegal or not capable of ratification by the
majority,
|
|
·
|
acts
that constitute fraud on the minority where the wrongdoers control the
company,
|
|
·
|
acts
that infringe on the personal rights of the shareholders, such as the
right to vote, and
|
|
·
|
where
the company has not complied with provisions requiring approval of a
special or extraordinary majority of shareholders, which are more limited
than the rights afforded minority stockholders under the laws of many
states in the United States.
|
|
·
|
actual
or anticipated fluctuations in quarterly and annual results;
|
|
·
|
limited
operating history;
|
|
·
|
mergers
and strategic alliances in the television industry in
China;
|
|
·
|
market
conditions in the industry;
|
|
·
|
changes
in U.S. or Chinese government
regulation;
|
|
·
|
fluctuations
in CN Holdings’ revenues and earnings and those of its
competitors;
|
|
·
|
shortfalls
in CN Holdings’ operating results from levels forecasted by securities
analysts;
|
|
·
|
announcements
covering CN Holdings or its competitors; and
|
|
·
|
the
general state of the financial and capital markets.
|
|
·
|
To
exercise the warrants and pay the exercise price for such warrants at a
time when it may be disadvantageous for the holders to do
so;
|
|
·
|
To
sell the warrants at the then current market price when they might
otherwise wish to hold the warrants; or
|
|
·
|
To
accept the nominal redemption price which, at the time the warrants are
called for redemption, is likely to be substantially less than the market
value of the warrants.
|
For the nine
months ended
March 31, 2009
|
For the three
months ended
March 31, 2009
|
For the year ended
June 30, 2008
|
For the period
from August 16,
2006 (inception)
through March 31,
2009
|
For the period
from August 16,
2006 (inception)
through June 30,
2008
|
||||||||||||||||
Statement
of Operations Data:
|
||||||||||||||||||||
Revenue
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Formation
and operating costs
|
537,452 | 234,477 | 319,003 | 861,303 | 323,851 | |||||||||||||||
Loss
from operations
|
(537,452 | ) | (234,477 | ) | (319,003 | ) | (861,303 | ) | (323,851 | ) | ||||||||||
Interest
income, net
|
601,144 | 119,927 | 2,426,933 | 3,029,613 | 2,428,469 | |||||||||||||||
Income
(loss) before provision for income taxes
|
63,692 | (114,550 | ) | 2,107,930 | 2,168,310 | 2,104,618 | ||||||||||||||
Benefit
(provision) for income taxes
|
(38,848 | ) | 41,443 | (951,394 | ) | (990,846 | ) | (951,998 | ) | |||||||||||
Net
income (loss)
|
$ | 24,844 | $ | (73,107 | ) | $ | 1,156,536 | $ | 1,177,464 | $ | 1,152,620 | |||||||||
Accretion
of trust income related to common stock subject to possible conversion
|
(33,872 | ) | (25,044 | ) | - | (33,872 | ) | - | ||||||||||||
Net
income (loss) attributable to common stockholders
|
$ | (9,028 | ) | $ | (98,151 | ) | $ | 1,156,536 | $ | 1,143,592 | $ | 1,152,620 | ||||||||
Basic
and diluted net income (loss) per share
|
$ | (0.00 | ) | $ | (0.01 | ) | $ | 0.16 | ||||||||||||
Weighted
average number of shares outstanding excluding shares subject to possible
conversion - basic and fully diluted
|
7,381,081 | 7,381,081 | 7,319,371 |
As of
March 31,
2009
|
As
of
June
30, 2008
|
||||||
Balance
Sheet Data:
|
|||||||
Total
assets
|
$ |
65,146,211
|
$ | 64,838,909 | |||
Total
Liabilities
|
$ |
741,483
|
$ | 459,025 | |||
Common Stock
Subject to Possible Conversion
|
$ |
18,980,148
|
$ | 18,946,276 | |||
Total
Stockholders’
equity
|
$ |
45,424,580
|
$ | 45,433,608 |
Year
ended
December 31,
2008
|
Year
ended
December
31,
2007
|
Year
ended
December
31,
2006
|
Year
ended
December
31,
2005
|
|||||||||||||
Statements
of Operations Data:
|
||||||||||||||||
Revenue
|
$ | 13,129,328 | $ | 17,715,149 | $ | 14,861,899 | $ | 14,406,251 | ||||||||
Cost
of Revenue
|
(3,564,532 | ) | (3,572,541 | ) | (3,467,815 | ) | (1,925,034 | ) | ||||||||
Gross
Profit
|
9,564,796 | 14,142,608 | 11,394,084 | 12,481,217 | ||||||||||||
Other
Income
|
- | 28,802 | 102,261 | 10,337 | ||||||||||||
Selling,
General and Administrative Expenses
|
2,468,316 | (1,712,931 | ) | (1,607,264 | ) | (1,376,299 | ) | |||||||||
Income
Before Income Taxes
|
7,096,480 | 12,458,479 | 9,889,081 | 11,115,255 | ||||||||||||
Income
Taxes
|
- | - | - | - | ||||||||||||
Net
Income
|
$ | 7,096,480 | $ | 12,458,479 | 9,889,081 | $ | 11,115,255 |
As
of
|
||||||||||||||||
December
31,
2008
|
December
31,
2007
|
December
31,
2006
|
December
31,
2005
|
|||||||||||||
|
||||||||||||||||
Balance
Sheet Data:
|
||||||||||||||||
Total
Assets
|
$ | 2,627,223 | $ | 3,670,398 | $ | 2,428, 815 | $ | 2,282,025 | ||||||||
Total
Liabilities
|
$ | 1,711,540 | $ | 2,995,317 | $ | 2,177,276 | $ | 2,141,950 | ||||||||
Total
Equity
|
$ | 915,633 | $ | 675,081 | $ | 251,539 | $ | 140,075 |
For
the three months ended
March
31, 2009 (Unaudited) |
Year
ended December
31, 2008 |
For the period from March 30, 2007 (inception) |
||||||||||
Income Statement
Data:
|
||||||||||||
Net Revenue
|
$ | 4,962,683 | $ | 4,344,012 | $ | - | ||||||
Cost of
revenue
|
965,839 | 950,257 | - | |||||||||
Operating
expenses
|
1,266,553 | 3,264,683 | 31,220 | |||||||||
Income (loss) from
operations
|
2,730,291 | 129,072 | (31,220 | ) | ||||||||
Other income (expense) | ||||||||||||
Other
expense
|
(29,243 | ) | (5,723 | ) | - | |||||||
Interest
expense
|
(1,701,109 | ) | (3,027,511 | ) | - | |||||||
Interest
income
|
14,587 | 132,180 | - | |||||||||
Gain on Extinguishment of
debt
|
1,328,861 | - | - | |||||||||
(386,904 | ) | (2,901,054 | ) | - | ||||||||
Income Tax
|
829,150 | 637,691 | - | |||||||||
Net income
(loss)
|
1,514,238 | (3,409,673 | ) | (31,220 | ) | |||||||
Net income attributable to the
non-controlling interest
|
(1,416,164 | ) | (1,127,391 | ) | - | |||||||
Net income (loss) attributable to
shareholders
|
$ | 98,074 | $ | (4,537,064 | ) | $ | (31,220 | ) |
As of | ||||||||||||
March
31, 2009 (Unaudited) |
December
31, 2008
|
December 31, 2007
|
||||||||||
Balance Sheet
Data:
|
|
|||||||||||
Total
assets
|
$ | 48,486,220 | $ | 46,269,332 | $ | 36,731 | ||||||
Total
liabilities
|
$ | 45,567,686 | $ | 45,697,690 | $ | 66,951 | ||||||
Noncontrolling
Interest
|
$ | 3,492,052 | $ | 1,257,807 | $ | - | ||||||
Total stockholders’ equity
(deficit)
|
$ | (573,518 | ) | $ | (686,165 | ) | $ | (30,220 | ) |
China
Networks Media LTD. (Carve - out)
|
||||||||||||||||
A
|
B
|
C
|
A+B-C
|
|||||||||||||
Six months
ended June 30,
2008
|
Year ended
December 31,
2007
|
Six months
ended June 30,
2007
|
Year ended
June 30, 2008
|
|||||||||||||
Historical
|
Historical
|
Historical
|
Derived
|
|||||||||||||
Revenues
|
$ | 8,772,248 | $ | 18,987,149 | $ | 9,664,794 | $ | 18,094,603 | ||||||||
Cost
or revenue
|
3,037,439 | 4,844,541 | 1,948,853 | 5,933,127 | ||||||||||||
General
and administrative
|
1,032,904 | 1,712,931 | 818,524 | 1,927,311 | ||||||||||||
Operating
income (loss)
|
4,701,905 | 12,429,677 | 6,897,417 | 10,234,165 | ||||||||||||
Other
income
|
- | 28,802 | - | 28,802 | ||||||||||||
NET
INCOME
|
4,701,905 | 12,458,479 | 6,897,417 | 10,262,967 |
China
Networks Media LTD. (CN BVI Company)
|
||||||||||||||||
A
|
B
|
C
|
A+B-C
|
|||||||||||||
Twelve
months ended December 31, 2008
|
Six
months ended June 30, 2008
|
Three
months ended March 31, 2009
|
Nine
months ended March 31, 2009
|
|||||||||||||
Historical
|
Historical
|
Historical
|
Derived
|
|||||||||||||
Revenue,
net
|
$ | 4,344,012 | $ | - | $ | 4,962,683 | $ | 9,306,695 | ||||||||
Cost
of revenue and amortization
|
950,257 | - | 965,839 | 1,916,096 | ||||||||||||
General
and administrative expense
|
3,264,683 | 96,932 | 1,266,553 | 4,434,304 | ||||||||||||
Operating
income (loss)
|
129,072 | (96,932 | ) | 2,730,291 | 2,956,295 | |||||||||||
Other
income (expense)
|
- | |||||||||||||||
Other
expense
|
(5,723 | ) | - | (29,243 | ) | (34,966 | ) | |||||||||
Interest
expense
|
(3,027,511 | ) | - | (1,701,109 | ) | (4,728,620 | ) | |||||||||
Interest
income
|
132,180 | - | 14,587 | 146,767 | ||||||||||||
(2,901,054 | ) | - | (1,715,765 | ) | (4,616,819 | ) | ||||||||||
- | ||||||||||||||||
Net
income (loss) before non-controlling interest
|
(2,771,982 | ) | (96,932 | ) | 1,014,526 | (1,660,524 | ) | |||||||||
Non-controlling
interest
|
(1,127,391 | ) | - | (1,416,164 | ) | (2,543,555 | ) | |||||||||
Net
income (loss) before income taxes
|
(3,899,373 | ) | (96,932 | ) | (401,638 | ) | (4,204,079 | ) | ||||||||
Provision
for income taxes
|
637,691 | - | 829,150 | 1,466,841 | ||||||||||||
NET
INCOME (LOSS)
|
$ | (4,537,064 | ) | $ | (96,932 | ) | $ | (1,230,788 | ) | $ | (5,670,920 | ) |
China
Networks Media LTD. (Carve out)
|
||||||||||||||||
A
|
B
|
A-B
|
|
|||||||||||||
Twelve
months ended December 31, 2008
|
Six
months ended June 30, 2008
|
Six
months ended December 31, 2008
|
|
|||||||||||||
Historical
|
Historical
|
Derived
|
||||||||||||||
Revenue,
net
|
$ | 12,802,713 | $ | 7,911,771 | $ | 4,890,942 | ||||||||||
Cost
of revenue and amortization
|
3,237,917 | 2,176,962 | 1,060,955 | |||||||||||||
General
and administrative expense
|
2,468,316 | 1,032,904 | 1,435,412 | |||||||||||||
Net
income (loss) before non-controlling interest
|
7,096,480 | 4,701,905 | 2,394,575 | |||||||||||||
Non-controlling
interest
|
(3,548,240 | ) | (2,350,953 | ) | (1,197,288 | ) | ||||||||||
NET
INCOME
|
$ | 3,548,240 | $ | 2,350,952 | $ | 1,197,287 |
Total
Purchase Price and Consideration:
|
||||
Cash
– CN Network Preferred Shareholders
|
$ | 7,000,000 | ||
Cash
– CN Network Common Shareholders
|
10,000,000 | |||
980,000
shares of Alyst/CN Holdings common stock ($7.86 per share) issuable to CN
Network Preferred Shareholders
|
7,708,000 | |||
1,900,000
shares of Alyst/CN Holdings common stock ($7.86 per share) issuable to CN
Network Common Shareholders
|
14,943,000 | |||
Consideration
to selling stockholders on closing
|
39,651,000 | |||
Acquisition
and closing costs
|
2,902,000 | |||
Total
Purchase Price
|
42,553,000 | |||
Assumption of Bridge Loan Indebtedness (including allocation to preferred stock) | 27,991,000 | |||
Total
Purchase Price, including assumption of indebtedness
|
$ | 70,544,000 |
Total
|
Year
1
|
Year
2
|
Year
3
|
|||||||||||||
Cash
|
$ | 6,000,000 | $ | 3,000,000 | $ | 3,000,000 | $ | — | ||||||||
Issuance
of shares to CN Network holders
|
70,783,000 | 22,415,000 | 24,184,000 | 24,184,000 | ||||||||||||
Amount
|
$ | 76,783,000 | $ | 25,415,000 | $ | 27,184,000 | $ | 24,184,000 | ||||||||
Shares
of common stock
|
9,000,000 | 2,850,000 | 3,075,000 | 3,075,000 |
Alyst
Acquisition Corp./China |
China
Networks Media, LTD.
(CN |
Pro
Forma Adjustments–no conversion |
Notes
|
Pro
Forma Combined-no |
ProFormaAdjustments- maximum allowable
conversion |
Notes
|
Pro
Forma Combined-Conversion
|
|||||||||||||||||||||||||||||||||
Assets
|
|
Dr
|
Cr
|
|
Dr
|
Cr
|
||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Current
assets:
|
||||||||||||||||||||||||||||||||||||||||
Cash
and cash equivalents
|
$ | 716,618 | $ | 12,941,200 | $ | 63,518,925 | $ | 22,633,980 |
1,
3, 4, 5, 7
|
$ | 54,542,763 | $ | - | $ | 18,980,148 |
8
|
$ | 35,562,615 | ||||||||||||||||||||||
Cash
held in trust account, interest available
|
- | - | - | - | ||||||||||||||||||||||||||||||||||||
for
working capital and taxes
|
251,733 | - | - | 251,733 |
1
|
- | - | |||||||||||||||||||||||||||||||||
Accounts
receivable, net
|
- | 1,447,037 | - | - | 1,447,037 | - | - | 1,447,037 | ||||||||||||||||||||||||||||||||
Receivable
from television stations
|
- | 906,531 | - | - | 906,531 | - | - | 906,531 | ||||||||||||||||||||||||||||||||
Other
receivables and prepaid expenses
|
13,807 | 749,734 | - | - | 763,541 | - | - | 763,541 | ||||||||||||||||||||||||||||||||
Loan
receivable from related party
|
- | 1,311,111 | - | - | 1,311,111 | - | - | 1,311,111 | ||||||||||||||||||||||||||||||||
Total
current assets
|
982,158 | 17,355,613 | 63,518,925 | 22,885,713 | 58,970,983 | - | 18,980,148 | 39,990,835 | ||||||||||||||||||||||||||||||||
Trust
Account:
|
||||||||||||||||||||||||||||||||||||||||
Cash
held in trust account, restricted
|
63,267,192 | - | - | 63,267,192 | - | - | - | - | ||||||||||||||||||||||||||||||||
Property
and equipment, net
|
- | 132,988 | - | - | 132,988 | - | - | 132,988 | ||||||||||||||||||||||||||||||||
Intangible
assets - Program and Contractual rights
|
- | 27,307,154 | - | - | 27,307,154 | - | - | 27,307,154 | ||||||||||||||||||||||||||||||||
Film
library and program inventory
|
- | 2,543,579 | - | - | 2,543,579 | - | - | 2,543,579 | ||||||||||||||||||||||||||||||||
Goodwill
|
- | - | 42,552,861 | - |
5,7
|
42,552,861 | - | - | 42,552,861 | |||||||||||||||||||||||||||||||
Deferred
target acquisition and financing costs
|
896,861 | 1,146,886 | - | 896,861 |
5
|
1,146,886 | - | - | 1,146,886 | |||||||||||||||||||||||||||||||
Total
assets
|
$ | 65,146,211 | $ | 48,486,220 | $ | 106,071,786 | $ | 87,049,766 | $ | 132,654,451 | $ | - | $ | 18,980,148 | $ | 113,674,303 |
Alyst
Acquisition
Corp./China
Networks
International
Holdings LTD. |
China
Networks
Media,
LTD and
Subsidiaries
|
Pro
Forma Adjustments - no
conversion
|
Notes
|
Pro
Forma
Combined-no
conversion
|
Pro
Forma Adjustments -
maximum
allowable
conversion
|
Notes
|
Pro
Forma
Combined
-
Maximum
allowable
conversion
|
|||||||||||||||||||||||||||||||||
Liabilities
and Stockholders' Equity
(Deficit)
|
Dr
|
Cr
|
Dr
|
Cr
|
||||||||||||||||||||||||||||||||||||
Current
liabilities:
|
||||||||||||||||||||||||||||||||||||||||
Accounts
payable
|
- | 598,694 | - | - | $ | 598,694 | $ | 598,694 | ||||||||||||||||||||||||||||||||
Due
to television stations
|
- | 15,210,862 | - | - | 15,210,862 | - | - | 15,210,862 | ||||||||||||||||||||||||||||||||
Customer
deposits
|
- | 292,047 | - | - | 292,047 | - | - | 292,047 | ||||||||||||||||||||||||||||||||
Accrued
and other expenses
|
741,483 | 3,261,760 | 960,000 | - |
4
|
3,043,243 | - | - | 3,043,243 | |||||||||||||||||||||||||||||||
Accrued
interest
|
- | 1,791,468 | - | - | 1,791,468 | - | - | 1,791,468 | ||||||||||||||||||||||||||||||||
Due
to related party
|
- | 503,442 | - | - | 503,442 | - | - | 503,442 | ||||||||||||||||||||||||||||||||
Notes payable, net | - | 23,231,039 | - | - | 23,231,039 | - | - | 23,231,039 | ||||||||||||||||||||||||||||||||
Total
current liabilities
|
741,483 | 44,889,312 | 960,000 | - | 44,670,795 | - | - | 44,670,795 | ||||||||||||||||||||||||||||||||
Deferred
tax liabilities
|
- | 678,374 | - | - | 678,374 | - | - | 678,374 | ||||||||||||||||||||||||||||||||
Common
stock, subject to possible conversion,
|
||||||||||||||||||||||||||||||||||||||||
shares
at conversion value
|
18,980,148 | - | 18,980,148 | - |
2
|
- | 18,980,148 | 18,980,148 |
8,9
|
- | ||||||||||||||||||||||||||||||
Total
liabilities
|
19,721,631 | 45,567,686 | 19,940,148 | - | 45,349,169 | 18,980,148 | 18,980,148 | 45,349,169 | ||||||||||||||||||||||||||||||||
Non-Controlling Interest | - | 3,492,052 | - | - | 3,492,052 | - | - | 3,492,052 | ||||||||||||||||||||||||||||||||
Stockholders’
equity:
|
||||||||||||||||||||||||||||||||||||||||
Preferred
stock
|
- | 490 | 490 | - | - | - | - | - | ||||||||||||||||||||||||||||||||
Common
stock
|
738 | 950 | 950 | 529 |
2,5
|
1,267 | 241 | - |
8
|
1,026 | ||||||||||||||||||||||||||||||
Additional
paid-in capital
|
44,246,378 | 3,951,599 | 2,668,980 | 41,632,059 |
2,3,5
|
87,161,056 | 18,979,907 | - |
9
|
68,181,149 | ||||||||||||||||||||||||||||||
Retained
earnings (deficit)
|
1,177,464 | (4,470,210 | ) | - | - | (3,292,746 | ) | - | - | (3,292,746 | ) | |||||||||||||||||||||||||||||
Accumulated
other comprehensive income
|
- | (56,347 | ) | - | - | (56,347 | ) | - | - | (56,347 | ) | |||||||||||||||||||||||||||||
Total
stockholders’
equity
|
45,424,580 | (573,518 | ) | 2,670,420 | 41,632,588 | 83,813,230 | 18,980,148 | - | 64,833,082 | |||||||||||||||||||||||||||||||
Total
liabilities and stockholders’equity
|
$ | 65,146,211 | $ | 48,486,220 | $ | 22,610,568 | $ | 41,632,588 | $ | 132,654,451 | $ | 37,960,296 | $ | 18,980,148 | $ | 113,674,303 |
Note
1
|
To
reflect release of cash held in trust
|
|||||
Increase
|
Cash
and cash equivalents
|
$ | 63,518,925 | |||
Decrease
|
Cash
held in trust account, interest available for working capital and taxes
|
(251,733 | ) | |||
Decrease
|
Cash
held in trust account- restricted
|
(63,267,192 | ) | |||
Note
2
|
To
record reversal of conversion liability upon consummation of merger
|
|||||
Decrease
|
Common
stock subject to conversion
|
$ | 18,980,148 | |||
Increase
|
Par
Value
|
(241 | ) | |||
Increase
|
Additional
Paid-in Capital (“APIC”)
|
(18,979,907 | ) | |||
Note
3
|
To
record additional underwriters compensation payable upon consummation of
merger
|
|||||
Decrease
|
APIC-3.277%
underwriters commission
|
$ | 2,108,980 | |||
Decrease
|
APIC-non-accountable
expense allowance
|
560,000 | ||||
Decrease
|
Cash
|
(2,668,980 | ) | |||
Note
4
|
To
record contractual payment of bridge loan placement fee for CN Network on
consummation of merger
|
|||||
Decrease
|
Accrued
expenses
|
$ | 960,000 | |||
Decrease
|
Cash
|
(960,000 | ) | |||
Note
5
|
To
record Purchase Price consideration to be paid and incurred on closing:
|
|||||
Increase
|
Goodwill
|
$ | 40,547,861 | |||
Decrease
|
Cash
|
(17,000,000 | ) | |||
Increase
|
Common
Stock - CN Holdings
|
(288 | ) | |||
Decrease
|
Preferred Stock - China Networks Media Ltd. | 490 | ||||
Decrease
|
Common Stock - China Networks Media Ltd. | 950 | ||||
Increase
|
APIC
|
(22,652,152 | ) | |||
Decrease
|
Deferred
target acquisition costs
|
(896,861 | ) | |||
Note
6
|
Not
Used
|
|||||
Note
7
|
To
record estimated contractual additional deal costs to be incurred in
the period from November 1, 2008 to the merger closing date
|
|||||
Decrease
|
Goodwill
|
2,005,000 | ||||
Decrease
|
Cash
|
(2,005,000 | ) | |||
(a)
|
These
estimated additional deal costs include legal and accounting - $1,000,000;
investment banking fees - $880,000; and printing and other - $125,000.
|
|||||
Assuming
maximum conversion:
|
||||||
Note
8
|
To
reinstate the conversion liability – full redemption assumption
|
|||||
Decrease
|
Par
Value
|
$ | 241 | |||
Decrease
|
APIC
|
18,979,907 | ||||
Increase
|
Common
stock subject to redemption
|
(18,980,148 | ) | |||
Note
9
|
To
reflect cash payment in satisfaction of redemption liability
|
|||||
Increase
|
Common
stock subject to redemption
|
$ | 18,980,148 | |||
Decrease
|
Cash
|
(18,980,148 | ) |
Alyst Acquisition
Corp./China
Networks
International
Holdings LTD.
|
China Networks
Media, LTD. (CN
BVI Company)
|
China Networks
Media, LTD.
(Carve-Out)
|
Pro Forma Adjustments - no
conversion
|
Notes
|
Pro Forma
Combined-no
conversion
|
Pro Forma Adjustments -
maximum
allowable conversion
|
Notes
|
Pro Forma
Combined -
Maximum allowable
conversion
|
||||||||||||||||||||||||||||||||||||
Dr
|
Cr
|
Dr
|
Cr
|
|||||||||||||||||||||||||||||||||||||||||
Revenue,
net
|
$ | - | $ | 9,306,695 | $ | 4,890,942 | $ | - | $ | - | $ | 14,197,637 | $ | - | $ | - | $ | 14,197,637 | ||||||||||||||||||||||||||
Cost
or revenue
|
- | 1,916,096 | 1,060,955 | - | - | 2,977,051 | - | - | 2,977,051 | |||||||||||||||||||||||||||||||||||
General
and administrative - including transaction costs
|
537,452 | 4,434,304 | 1,435,412 | - | 14,281 |
F
|
6,392,887 | - | - | 6,392,887 | ||||||||||||||||||||||||||||||||||
Operating
income (loss)
|
(537,452 | ) | 2,956,295 | 2,394,575 | - | 14,281 | 4,827,699 | - | - | 4,827,699 | ||||||||||||||||||||||||||||||||||
Other
income (expense):
|
||||||||||||||||||||||||||||||||||||||||||||
Interest
income
|
567,272 | 146,767 | - | 179,000 | - |
C
|
535,039 | 170,000 | - |
E
|
365,039 | |||||||||||||||||||||||||||||||||
Interest
(expense)
|
- | (4,728,620 | ) | - | - | - | (4,728,620 | ) | - | (4,728,620 | ) | |||||||||||||||||||||||||||||||||
Other
|
- | (34,966 | ) | - | - | - | (34,966 | ) | - | - | (34,966 | ) | ||||||||||||||||||||||||||||||||
Total
other income (expense), net
|
567,272 | (4,616,819 | ) | - | (179,000 | ) | - | (4,228,547 | ) | 170,000 | - | (4,398,547 | ) | |||||||||||||||||||||||||||||||
Income
(loss) before noncontrolling interest
|
29,820 | (1,660,524 | ) | 2,394,575 | (179,000 | ) | 14,281 | 599,152 | (170,000 | ) | - | 429,152 | ||||||||||||||||||||||||||||||||
Non-controlling
interest
|
- | (2,543,555 | ) | (1,197,288 | ) | - | 387,517 |
G
|
(3,353,326 | ) | - | - | (3,740,843 | ) | ||||||||||||||||||||||||||||||
Net
income (loss) before income taxes
|
29,820 | (4,204,079 | ) | 1,197,287 | (179,000 | ) | 401,798 | (2,754,174 | ) | (170,000 | ) | - | (2,924,174 | ) | ||||||||||||||||||||||||||||||
Benefit
(provision) for income taxes
|
(38,848 | ) | (1,466,841 | ) | - | 599,000 | 38,848 |
B,F
|
(2,065,841 | ) | - | - | (2,065,841 | ) | ||||||||||||||||||||||||||||||
NET
INCOME (LOSS)
|
$ | (9,028 | ) | $ | (5,670,920 | ) | $ | 1,197,287 | $ | (778,000 | ) | $ | 440,646 | $ | (4,820,015 | ) | $ | (170,000 | ) | $ | - | $ | (4,990,015 | ) | ||||||||||||||||||||
Pro
forma weighted average common shares outstanding:
|
||||||||||||||||||||||||||||||||||||||||||||
Basic
|
7,381,081 | 5,293,319 |
H
|
12,674,400 | 2,413,319 |
I
|
10,261,081 | |||||||||||||||||||||||||||||||||||||
Diluted
|
7,381,081 | 8,447,243 |
H
|
15,828,324 | 2,413,319 |
I
|
13,415,005 | |||||||||||||||||||||||||||||||||||||
Pro
forma income per common share:
|
||||||||||||||||||||||||||||||||||||||||||||
Basic
|
$ | (0.38 | ) | $ | (0.49 | ) | ||||||||||||||||||||||||||||||||||||||
Diluted
|
$ | (0.30 | ) | $ | (0.37 | ) | ||||||||||||||||||||||||||||||||||||||
Pro
forma book value per common share
|
$ | 6.61 | $ | 6.32 |
Alyst Acquisition
Corp.
|
China Networks
Media, LTD. (CN
BVI Company)
|
China Networks
Media, LTD.
(Carve-Out)
|
Pro Forma Adjustments - no conversion
|
Notes
|
Pro Forma
Combined-no
conversion
|
Pro Forma Adjustments - maximum
allowable conversion
|
Notes
|
Pro Forma
Combined -
Maximum allowable
conversion
|
||||||||||||||||||||||||||||||||||||
Dr
|
Cr
|
Dr
|
Cr
|
|||||||||||||||||||||||||||||||||||||||||
Revenues,
net
|
$ | - | $ | - | $ | 18,094,603 | $ | - | $ | - | $ | 18,094,603 | $ | - | $ | - | $ | 18,094,603 | ||||||||||||||||||||||||||
Cost
or revenue
|
5,933,127 | 896,000 | - |
A
|
6,829,127 | - | - | 6,829,127 | ||||||||||||||||||||||||||||||||||||
General
and administrative and amortization
|
319,003 | 128,152 | 1,927,311 | - | 52,175 |
F
|
2,322,291 | - | - | 2,322,291 | ||||||||||||||||||||||||||||||||||
Operating
income (loss)
|
(319,003 | ) | (128,152 | ) | 10,234,165 | (896,000 | ) | 52,175 | 8,943,185 | - | - | 8,943,185 | ||||||||||||||||||||||||||||||||
Other
income (expense):
|
||||||||||||||||||||||||||||||||||||||||||||
Interest
income
|
2,426,933 | - | - | 766,000 | - |
C
|
1,660,933 | 728,000 | - |
E
|
932,933 | |||||||||||||||||||||||||||||||||
Interest
(expense)
|
- | - | - | 3,535,000 | - |
C
|
(3,535,000 | ) | - | - | (3,535,000 | ) | ||||||||||||||||||||||||||||||||
Other
|
- | - | 28,802 | - | - | 28,802 | - | - | 28,802 | |||||||||||||||||||||||||||||||||||
Total
other income (expense), net
|
2,426,933 | - | 28,802 | (4,301,000 | ) | - | (1,845,265 | ) | (728,000 | ) | - | (2,573,265 | ) | |||||||||||||||||||||||||||||||
Income
(loss) before non-controlling interest
|
2,107,930 | (128,152 | ) | 10,262,967 | 5,197,000 | 52,175 |
|
7,097,920 | 728,000 | - | 6,369,920 | |||||||||||||||||||||||||||||||||
Non-controlling
interest
|
- | - | - | 3,848,000 | - |
D
|
(3,848,000 | ) | - | - | (3,848,000 | ) | ||||||||||||||||||||||||||||||||
Net
income (loss) before income taxes
|
2,107,930 | (128,152 | ) | 10,262,967 | (9,045,000 | ) | 52,175 | 3,249,920 | (728,000 | ) | - | 2,521,920 | ||||||||||||||||||||||||||||||||
Benefit
(provision) for income taxes
|
(951,394 | ) | - | - | 2,566,000 | 951,394 |
F
|
(2,566,000 | ) | - | - | (2,566,000 | ) | |||||||||||||||||||||||||||||||
NET
INCOME (LOSS)
|
$ | 1,156,536 | $ | (128,152 | ) | $ | 10,262,967 | $ | (11,611,000 | ) | $ | 1,003,569 | $ | 683,920 | $ | (728,000 | ) | $ | - | $ | (44,080 | ) | ||||||||||||||||||||||
Pro
forma weighted average common shares outstanding:
|
||||||||||||||||||||||||||||||||||||||||||||
Basic
|
7,381,081 | 5,293,319 |
H
|
12,674,400 | 2,413,319 |
I
|
10,261,081 | |||||||||||||||||||||||||||||||||||||
Diluted
|
7,381,081 | 8,607,653 |
H
|
15,988,734 | 2,413,319 |
I
|
13,575,415 | |||||||||||||||||||||||||||||||||||||
Pro
forma income per common share:
|
||||||||||||||||||||||||||||||||||||||||||||
Basic
|
$ | 0.05 | $ | (0.00 | ) | |||||||||||||||||||||||||||||||||||||||
Diluted
|
$ | 0.04 | $ | (0.00 | ) |
Nine months ended
March 31, 2009
|
Year ended
June 30, 2008
|
|||||||||
Note
A
|
To
record amortization - contract rights
|
— | $ | 896,600 | ||||||
Note B |
To
record estimated PRC income tax provision on
carve-outs
|
|||||||||
Expense
|
Income Tax Expense | $ | 599,000 | $ | 2,566,000 | |||||
Note
C
|
To
adjust interest income for impact on application towards merger
|
|||||||||
Expense
|
Interest
Income *
|
$ | 179,000 | $ | 766,000 | |||||
Expense
|
Interest Expense
and loan cost amortization **
|
— | $ | 3,535,000 | ||||||
Note
D
|
To
reflect Non-controlling interest expense associated
with carved out entities on earnings of merger
|
|||||||||
Expense
|
Non
controlling interest expense ***
|
$ | $ | 3,848,000 | ||||||
Note
F
|
To
eliminate income tax provision assuming status BVI entity
|
|||||||||
Income
|
General
and Administrative
|
$ | (14,281 | ) | $ | (52,175 | ) | |||
Income
|
Income
Tax Provision
|
$ | (38,848 | ) | $ | (951,394 | ) |
A | B | C |
A+B+C=D
|
E | ||||||||||||||||
China
Networks Media LTD. (CN BVI Company and non-joint venture
entities)
|
CN
Joint Ventures (Ad Cos. and Tech Cos.) Actual results 9 mos ended
3.31.09
|
Trustee
company Actual results 9 mos ended 3.31.09
|
Consolidated
China Networks Media, LTD. 9 mos ended 3.31.09
|
Carve-out
results of Kunming and Yellow River TV Stations Advertising Centers 7.1.08
– 12.31.08
|
||||||||||||||||
Income
(loss) before non-controlling interest
|
$ | (5,786,866 | ) | $ | 4,312,075 | $ | (185,733 | ) | $ | (1,660,524 | ) | $ | 2,394,575 | |||||||
Percentage
of Non-Controlling interest
|
0 | % | 50 | % | 0 | % | 50 | % | ||||||||||||
Non-controlling
interest – proforma basis
|
$ | 0 | $ | (2,156,038 | ) | $ | 0 | $ | (2,156,038 | ) | $ | (1,197,288 | ) | |||||||
Non-controlling
interest – historical basis
|
$ | 0 | $ | (2,543,555 | ) | $ | 0 | $ | (2,543,555 | ) | $ | (1,197,288 | ) | |||||||
Note
G – Proforma reduction of non-controlling interest
|
$ | 387,517 | $ | 0 | $ | 387,517 | $ | 0 |
Assuming
full conversions:
|
||||||||||
Nine months
ended
March
31, 2009
|
Year
ended
June
30, 2008
|
|||||||||
Note
E
|
To
adjust impact on interest income for conversion liability assuming full
conversion
|
|||||||||
Expense
|
Interest
income
|
$ | 170,000 | $ | 728,000 |
Nine months
ended
March 31,
2009
|
Year
ended
June 30,
2008
|
||||||||||||
|
|||||||||||||
*
|
Reduction
of interest income on trust account
for the period per Alyst historical financial
statements
|
||||||||||||
Interest income on trust account
for the period per Alyst historical financial
statements
|
$ | 567,272 | $ | 2,426,933 | |||||||||
Cash assumed to be expended on
Business Combination -
|
|||||||||||||
Contractual payment to sellers -
assumed at beginning of period
|
$ | 17,000,000 | |||||||||||
Bridge Loan Payment -
fees on closing
|
960,000 | ||||||||||||
Closing costs and
fees
|
2,005,000 | ||||||||||||
$ | 19,965,000 | ||||||||||||
Approximate trust account
balance
|
$ | 63,267,000 | |||||||||||
% of total trust account allocated
to Business Combination
|
31.60 | % | |||||||||||
Estimated
reduction to interest income resulting
from payment of purchase price
|
$ | 179,000 | $ | 766,000 |
**
|
Assumed interest expense and loan
costs, if Bridge Loan was consummated at beginning of earliest period,
July 1, 2007
|
||||||||||||||||
Interest
rate
|
10 | % | |||||||||||||||
Loan
|
$ | 27,990,200 | |||||||||||||||
Per annum interest (including
estimate of accretion of debt discount)
|
2,799,000 | ||||||||||||||||
Debt Issuance costs assuming
closing of Business Combination
|
$ | 2,613,765 | |||||||||||||||
Amount allocated to preferred
shares and charged to Additional paid-in capital
|
(406,902 | ) | |||||||||||||||
Deferred loan costs to be
amortized to expense
|
$ | 2,206,863 | |||||||||||||||
Contractual life of loan in
years
|
3 | ||||||||||||||||
Annual estimated
amortization
|
736,000 | ||||||||||||||||
Interest
expense and financing cost
|
(a)
|
$ | 3,535,000 | ||||||||||||||
(a) No adjustment required -
actual amounts included in historical results of
operations.
|
|||||||||||||||||
Note D - details of
calculation:
|
|||||||||||||||||
***
|
Calculation of Non controlling
interest expense
|
||||||||||||||||
China Networks
Media, LTD (Carve out) Operating income before non controlling
interest expense
|
$ | 10,262,967 | |||||||||||||||
Less:
PRC Enterprise income
tax expense at 25%
|
(2,566,000 | ) | |||||||||||||||
Net income pre non controlling
interest
|
$ | 7,696,967 | |||||||||||||||
Non
controlling interest associated with joint
ventures at 50%
|
(a)
|
$ | 3,848,000 | ||||||||||||||
(a) No adjustment required -
actual amounts included in historical results of
operations.
|
Without Contingent Consideration
|
With Contingent Consideration
|
|||||||||||||||
Basic
|
Diluted
|
Basic
|
Diluted
|
|||||||||||||
Shares
outstanding, June 30, 2008
|
9,794,400 | 9,794,400 | 9,794,400 | 9,794,400 | ||||||||||||
Less
conversion shares as a liability
|
(2,413,319 | ) | (2,413,319 | ) | (2,413,319 | ) | (2,413,319 | ) | ||||||||
Shares
assumed outstanding on maximum conversion
|
7,381,081 | 7,381,081 | 7,381,081 | 7,381,081 | ||||||||||||
Conversion
shares add-back assuming no conversion
|
2,413,319 | 2,413,319 | 2,413,319 | 2,413,319 | ||||||||||||
Shares
issued - merger consideration on closing
|
2,880,000 | 2,880,000 | 2,880,000 | 2,880,000 | ||||||||||||
Fully
diluted - before contingent consideration
|
12,674,400 | 12,674,400 | 12,674,400 | 12,674,400 | ||||||||||||
Dilutive
shares issuable based upon the application of the treasury stock method
with respect to dilutive Alyst warrants outstanding
|
3,314,334 | 3,314,334 | ||||||||||||||
Shares
issued - purchase price - contingent consideration
|
9,000,000 | 9,000,000 | ||||||||||||||
Assuming
no conversion
|
12,674,400 | 15,988,734 | 21,674,400 | 24,988,734 | ||||||||||||
Note
Reference
|
H
|
H
|
||||||||||||||
Less
conversion shares - assuming maximum conversion
|
(2,413,319 | ) | (2,413,319 | ) | (2,413,319 | ) | (2,413,319 | ) | ||||||||
Shares
outstanding assuming maximum conversion, June 30, 2008
|
10,261,081 | 13,575,415 | 19,261,081 | 22,575,415 | ||||||||||||
Note
Reference
|
I
|
I
|
Without Contingent Consideration
|
With Contingent Consideration
|
|||||||||||||||
Basic
|
Diluted
|
Basic
|
Diluted
|
|||||||||||||
Shares
outstanding, March 31, 2009
|
9,794,400 | 9,794,400 | 9,794,400 | 9,794,400 | ||||||||||||
Less
conversion shares as a liability
|
(2,413,319 | ) | (2,413,319 | ) | (2,413,319 | ) | (2,413,319 | ) | ||||||||
Shares
assumed outstanding on maximum conversion
|
7,381,081 | 7,381,081 | 7,381,081 | 7,381,081 | ||||||||||||
Conversion
shares add-back assuming no conversion
|
2,413,319 | 2,413,319 | 2,413,319 | 2,413,319 | ||||||||||||
Shares
issued - merger consideration on closing
|
2,880,000 | 2,880,000 | 2,880,000 | 2,880,000 | ||||||||||||
Fully
diluted - before
contingent consideration
|
12,674,400 | 12,674,400 | 12,674,400 | 12,674,400 | ||||||||||||
Dilutive
shares issuable based upon the application of the treasury stock method
with respect to dilutive Alyst warrants outstanding
|
3,442,265 | 3,442,265 | ||||||||||||||
Shares
issued - purchase price - contingent consideration
|
9,000,000 | 9,000,000 | ||||||||||||||
Assuming
no conversion
|
12,674,400 | 16,116,665 | 21,674,400 | 25,116,665 | ||||||||||||
Note
Reference
|
H
|
H
|
||||||||||||||
Less
conversion shares - assuming maximum conversion
|
(2,413,319 | ) | (2,413,319 | ) | (2,413,319 | ) | (2,413,319 | ) | ||||||||
Shares
outstanding assuming maximum conversion, March 31,
2009
|
10,261,081 | 13,703,346 | 19,261,081 | 22,703,346 | ||||||||||||
Note
Reference
|
I
|
I
|
Alyst
|
China
Networks
Media
|
Combined
Company
|
||||||||||
(in
thousands, except per share data)
|
||||||||||||
Number
of ordinary shares outstanding upon consummation of the merger:
|
||||||||||||
Assuming
no conversions (1)
|
12,674 | |||||||||||
Assuming
conversion of 30% less one share (2)
|
10,261 | |||||||||||
Earnings
(loss) per share - historical nine months ended March 31,
2009
|
||||||||||||
Basic
|
$ | (0.01 | ) | $ | (0.35 | ) | ||||||
Diluted
|
$ | (0.01 | ) | $ | (0.27 | ) | ||||||
Earnings
(loss) per share - pro forma nine months ended March 31,
2009
|
||||||||||||
Assuming
no conversion (1)
|
||||||||||||
Basic
|
$ | (0.38 | ) | |||||||||
Diluted
|
$ | (0.30 | ) | |||||||||
Assuming
conversion of 30% less one share (2)
|
||||||||||||
Basic
|
$ | (0.49 | ) | |||||||||
Diluted
|
$ | (0.37 | ) | |||||||||
Earnings
(loss) per share - historical year ended June 30, 2008
|
||||||||||||
Basic
|
$ | 0.16 | $ | 0.99 | ||||||||
Diluted
|
$ | 0.16 | $ | 0.76 | ||||||||
Earnings
(loss) per share - pro forma year ended June 30, 2008
|
||||||||||||
Assuming
no conversion (1)
|
||||||||||||
Basic
|
$ | 0.05 | ||||||||||
Diluted
|
$ | 0.04 | ||||||||||
Assuming
conversion of 30% less one share (2)
|
||||||||||||
Basic
|
$ | (0.00 | ) | |||||||||
Diluted
|
$ | (0.00 | ) | |||||||||
Book
value - historical March 31, 2009
|
$ | 45,425 | $ | (574 | ) | |||||||
Book
value - pro forma March 31, 2009
|
||||||||||||
Assuming
no conversion (1)
|
$ | 83,813 | ||||||||||
Assuming
conversion of 30% less one share (2)
|
$ | 64,833 | ||||||||||
Book
value per share - historical March 31, 2009
|
$ | 3.58 | $ | (0.05 | ) | |||||||
Book
value per share - pro forma March 31, 2009
|
||||||||||||
Assuming
no conversion (1)
|
$ | 6.61 | ||||||||||
Assuming
conversion of 30% less one share (2)
|
$ | 6.32 |
(1)
|
Assumes
that no Alyst stockholders seek conversion of their Alyst stock into pro
rata shares of the trust account.
|
(2)
|
Assumes
that 2,413,319 shares of Alyst common stock were converted into their
pro rata share of the trust account.
|
Common Stock
|
Warrants
|
Units
|
||||||||||||||||||||||
High
|
Low
|
High
|
Low
|
High
|
Low
|
|||||||||||||||||||
(US$)
|
||||||||||||||||||||||||
2007
|
||||||||||||||||||||||||
Second
Quarter*
|
– | - | - | - | 8.03 | 8.03 | ||||||||||||||||||
Third
Quarter*
|
7.35 | 7.20 | 0.90 | 0.72 | 8.17 | 7.77 | ||||||||||||||||||
Fourth
Quarter
|
7.30 | 7.20 | 0.76 | 0.52 | 8.00 | 7.68 | ||||||||||||||||||
2008
|
||||||||||||||||||||||||
First
Quarter
|
7.43 | 7.22 | 0.73 | 0.25 | 7.90 | 7.45 | ||||||||||||||||||
Second
Quarter
|
7.53 | 7.27 | 0.60 | 0.25 | 7.93 | 7.48 | ||||||||||||||||||
Third
Quarter
|
7.70 | 7.30 | 1.07 | 0.29 | 8.80 | 7.57 | ||||||||||||||||||
Fourth
Quarter
|
7.55 |
7.
00
|
0.45 | 0.01 | 7.60 | 6.91 | ||||||||||||||||||
2009 | ||||||||||||||||||||||||
First
Quarter
|
7.73 | 7.45 |
0.12
|
0.02 | 7.65 | 7.35 | ||||||||||||||||||
Second
Quarter
(through May 26)
|
7.81 | 7.68 | 0.08 | 0.01 | 7.76 | 7.63 |
*
|
The
stock prices from the Second Quarter of 2007 begin on the dates which
Alyst’s
securities first commenced trading.
|
|
(a)
|
The
redomestication of Alyst from the State of Delaware to the British Virgin
Islands by merging Alyst with and into China Networks International
Holdings Ltd. (“CN Holdings”), its wholly-owned British Virgin Islands
subsidiary (the “Redomestication Merger”), in conjunction with the
acquisition of China Networks Media, Ltd. (“China Networks Media”), a
private limited liability British Virgin Islands company, as set out in
paragraph (b) below. In connection with the Redomestication Merger, Alyst
will change its name to China Networks International Holdings Ltd. and
adopt the Amended and Restated Memorandum and Articles of Association of
CN Holdings, which will contain provisions equivalent in substance to
Alyst’s amended and restated certificate of incorporation and by-laws,
respectively. However, the CN Holdings Amended and Restated Memorandum and
Articles of Association will provide for a perpetual existence. This
proposal is called the “Redomestication Proposal” and is conditioned only
upon approval of the Business Combination Proposal discussed in paragraph
(b) below:
|
|
(b)
|
The
proposed merger of China Networks Merger Co., Ltd., a wholly-owned British
Virgin Islands subsidiary of CN Holdings (“China Networks Merger Co.”),
with and into China Networks Media, resulting in China Networks Media
becoming a wholly-owned subsidiary of CN Holdings (the “Business
Combination”), and the related transactions contemplated by the Agreement
and Plan of Merger, dated August 13, 2008, by and among Alyst, China
Networks Media, CN Holdings, China Networks Merger Co., Ltd., Mr. Li
Shuangqing, Kerry Propper and MediaInv Ltd. (the “Merger Agreement”).
Pursuant to the Merger Agreement, CN Holdings will pay China Networks
Media’s shareholders aggregate merger consideration of (i) 2,880,000 CN
Holdings ordinary shares, (ii) an aggregate of $17,000,000 in cash, (iii)
deferred cash payments of up to $6,000,000 and deferred share payments of
up to 9,000,000 ordinary shares of CN Holdings, in each case subject to
the achievement of specified financial milestones set forth in the Merger
Agreement, and (iv) $22,110,000 of proceeds from the exercise of CN
Holdings warrants. If all merger consideration, including the deferred
portion, is issued to China Networks Media, the market value thereof
(based upon the closing price of Alyst’s common stock on the NYSE
Amex on May 26, 2009, of $7.80 per share) would be approximately
$137,764,000. This proposal is called the “Business Combination Proposal”
and is conditioned only upon approval of the Redomestication Proposal
discussed in paragraph (a) above;
and
|
|
(c)
|
The
proposed 2008 Omnibus Securities and Incentive Plan (the “Share Incentive
Plan”) pursuant to which directors, officers. employees and consultants of
CN Holdings or its subsidiaries may be granted options to purchase up to
2,500,000 million ordinary shares of CN Holdings. This proposal is called
the ‘‘Share Incentive Plan Proposal” and is not a condition to the
Redomestication Proposal or the Business Combination Proposal;
and
|
|
(d)
|
Any
adjournment or postponement of the Special Meeting for the purpose of
soliciting additional proxies in the event Alyst does not receive the
requisite stockholder vote for approval of the Redomestication Proposal
and the Business Combination Proposal – this proposal is called the
‘‘Adjournment and Postponement
Proposal.’’
|
|
·
|
Vote
against the Business Combination Proposal in person, by submitting a proxy
card, or by telephone;
|
·
|
Check
the “Exercise Conversion Rights” box on the proxy card or affirmatively
confirm your exercise of conversion rights if voting by telephone or in
person;
|
|
·
|
Contemporaneous
with a vote against the Business Combination Proposal, send a written
demand to Alyst (Attn: William Weksel) at 233 E. 69th Street, #6J, New
York, NY 10021, which demand must
state:
|
|
a)
|
The
name and address of the
stockholder;
|
|
b)
|
That
the stockholder has voted against the Business Combination Proposal;
|
|
c)
|
That
the stockholder demands conversion of the stockholder’s shares into cash;
and
|
|
d)
|
The
address for delivery of the check for the aggregate conversion payment to
be received by the stockholder if the shares are converted for cash.
|
|
·
|
Prior
to the Special Meeting, deliver your shares to the transfer agent or Alyst
in the manner described below.
|
|
·
|
If
you sent in a proxy, by sending another proxy card with a later
date;
|
|
·
|
If
you voted by telephone, by calling the same number and following the
instructions;
|
|
·
|
Notifying
Alyst in writing before the Special Meeting that you have revoked your
proxy; or
|
|
·
|
Attending
the Special Meeting, revoking your proxy and voting in
person.
|
|
·
|
Strong
organic growth potential
|
|
·
|
Attractive
purchase price
|
|
·
|
Growing
market for targets’
goods/services
|
|
·
|
Scalable
business model
|
|
·
|
Potential
for add-on acquisitions
|
|
·
|
Strong
competitive position in industry
|
|
·
|
Experienced
management team
|
|
·
|
Diversified
customer and supplier base
|
Year
|
2008
|
2009
|
2010
|
2011
|
||||||||||||
Net
Income
|
$ | 12,500,000 | $ | 20,000,000 | $ | 30,000,000 | $ | 40,000,000 | ||||||||
Equity
Payment
(Shares
of Common Stock)
|
300,000 | 2,550,000 | 3,075,000 | 3,075,000 |
|
·
|
If
the Business Combination is not approved and Alyst is therefore required
to liquidate, the securities owned by Alyst’s officers and directors will
be worthless because they will not be entitled to receive any of the
assets held in the trust account. In addition, the possibility that the
members of the Board of Directors will be required to perform their
obligations under the indemnity agreements referred to below will be
substantially
increased.
|
·
|
In
connection with the IPO, Alyst’s current officers and directors agreed to
indemnify Alyst for debts and obligations to vendors that are owed money
by Alyst for services rendered or products sold to Alyst, but only to the
extent necessary to ensure that certain liabilities do not reduce funds in
the trust account. If the Business Combination is consummated, Alyst’s
officers and directors will not have to perform such obligations. As of
April 30, 2009, Alyst believes that the maximum amount of the indemnity
obligation of Alyst’s officers and directors is small or non-existent
because the total amounts owed to vendors for which Alyst has not received
a waiver of such vendor’s right to sue the trust account is less than the
amount of funds available to Alyst outside the trust account to pay such
liabilities. If the Business Combination is not consummated, Alyst
anticipates the obligations would total approximately $550,000. Alyst
believes it has sufficient funds outside of the trust account to pay these
obligations and to reimburse directors and officers for all expenses
incurred by them. All vendors agreed to the waiver other than Alyst’s
legal counsel and accountants. If the Business Combination is not
consummated, China Networks Media will be responsible for its own expenses
incurred in connection with the Business
Combination.
|
|
·
|
Warrants
to purchase Alyst common stock held by Alyst’s directors and officers are
potentially exercisable upon consummation of the Business Combination.
Based upon the closing price of Alyst’s common stock on May 26, 2009 of
$7.80, if all warrants held by Alyst’s directors and officers were
exercised for common stock at a price of $5 per share the market value of
such shares of common stock would be approximately $14,196,000 at an
aggregate cost of
$9,100,000.
|
·
|
Michael
Weksel has entered into a Put-Call Option Agreement with Alyst pursuant to
which (i) Alyst has the right to purchase from Mr. Weksel up to 559,794 of
Alyst’s publicly traded warrants (the “Warrants”) at a price of $0.0446
per warrant (the “Exercise Price”) at any time through August 31, 2009 and
(ii) Mr. Weksel has the right at any time after June 29, 2009 and before
August 31, 2009 to sell such warrants to Alyst at the Exercise
Price. The Warrants were purchased by Mr. Weksel in open market
transactions at a price equal to the Exercise Price in order to enhance
Alyst’s ability to enter into arrangements with stockholders or third
parties to facilitate consummation of the Business Combination without
altering Alyst’s existing capital structure. If the Business Combination
is not consummated and Alyst is forced to liquidate, the Warrants would
have no value in the open
market.
|
|
·
|
All
rights specified in Alyst’s amended and restated certificate of
incorporation relating to the right of directors and officers to be
indemnified by Alyst, and of Alyst’s directors and officers to be
exculpated from monetary liability with respect to prior acts or
omissions, will continue after the Business Combination to the extent
permitted by British Virgin Islands law. If the Business Combination is
not approved and Alyst liquidates, it will not be able to perform its
obligations under those provisions. If the Business Combination is
ultimately completed, the combined company’s ability to perform such
obligations will probably be substantially
enhanced.
|
·
|
Michael
Weksel entered into an employment agreement in January 2009 with China
Networks Media to serve as its Chief Financial Officer, a role that is
expected to continue if the Business Combination is
consummated. The employment agreement provides that Mr. Weksel
may continue in his current obligations to Alyst until such time as the
Business Combination is consummated or Alyst is dissolved. Mr.
Weksel receives no salary from Alyst, but for the period prior to the
earlier of the consummation of the Business Combination or June 29, 2009
(the “Initial Term”), is entitled to receive from China Networks Media, a
base salary equal to $180,000 per annum. Such base salary will
increase to $360,000 after the Initial Term. Mr. Weksel is also
entitled to receive a bonus of $360,000 if China Networks Media achieves
the net income targets for 2009 and 2010 set out in the Merger
Agreement. In addition, if the Merger Agreement is consummated,
Mr. Weksel will receive a 7-year non-qualified option under the Share
Incentive Plan for the purchase of 500,000 ordinary shares of CN Holdings,
subject to certain adjustments, 50,000 of which shall vest immediately
upon issuance of the option. The balance of the entitlement
under the option shall vest over a 36-month
period.
|
|
·
|
Under
the Share Incentive Plan, as proposed, directors of CN Holdings’ Board of
Directors may be granted options to purchase shares of CN
Holdings. Under the Merger Agreement, Alyst is entitled to
appoint three directors to the post-merger CN Holdings’ Board of
Directors, who will be entitled to receive shares or option grants under
the Plan.
|
|
·
|
Alyst’s
financial, legal and other advisors have rendered services for which they
have not waived their right to payment and may not be paid if the Business
Combination is not approved, and certain of them may have the opportunity
to provide additional services to Alyst in the future. Alyst considers,
however, that as of April 30, 2009 it has sufficient working capital
outside of the trust to pay accrued expenses to such advisors, and expects
to have sufficient working capital for additional amounts incurred in the
event the Business Combination is not consummated. As any recovery of such
fees and expenses by these advisors may be difficult in the event the
Business Combination is not approved, these advisors may be viewed as
having an interest in the outcome of such vote, despite the fact that such
recovery is not contingent on the outcome of the Alyst shareholder
vote.
|
|
·
|
The
following table lists the securities owned by the members of Alyst’s
current management team and Board of Directors and the amount of potential
gain that each of them would realize if the Business Combination is
consummated, based on the closing price of Alyst’s common stock on
the NYSE Amex on May 26, 2009 of $7.80. Except as noted below,
if a Business Combination is not consummated, the securities held by these
individuals would be valueless since they would not be entitled to
participate in distributions from the trust
account.
|
Securities in which named
individual has a
pecuniary interest
|
Market
Value of such
securities as of
May
26, 2009
($)
|
Aggregate Initial
Purchase Price of
Securities ($)
|
Potential Gain on
Securities
as of May 26,
2009
|
|||||||||||||||||||||||||
Name
|
Shares
|
Units
|
Shares
|
Units
|
Shares
|
Units
|
($)
|
|||||||||||||||||||||
Dr.
William Weksel
|
590,000 | (1) |
0
|
4,602,000 |
0
|
1,370,179 |
0
|
3,231,821 | ||||||||||||||||||||
Robert
A. Schriesheim
|
590,000 | (1) |
0
|
4,602,000 |
0
|
1,370,179 |
0
|
3,231,821 | ||||||||||||||||||||
Robert
H. Davies
|
590,000 | (1)(2) |
0
|
4,602,000 |
0
|
1,370,179 |
0
|
3,231,821 | ||||||||||||||||||||
Michael
E. Weksel
|
1,149,794 | (1)(3)(4) |
0
|
8,968,393 |
0
|
4,194,115 |
0
|
4,774,278 | ||||||||||||||||||||
Paul
Levy
|
317,500 | (1) |
0
|
2,476,500 |
0
|
1,366,286 |
0
|
1,110,214 | ||||||||||||||||||||
Matthew
Botwin
|
30,000 |
0
|
234,000 |
0
|
429 |
0
|
233,571 |
1.
|
Includes
227,500 shares of common stock issuable upon exercise of warrants at $5
per share held by this individual that are not currently exercisable, but
will become exercisable if the Business Combination is
consummated.
|
2.
|
Includes
10,000 shares of common stock held by the 2006 Robert H. Davies Delaware
Trust f/b/o Alexander B. Davies, a trust established for the benefit of
Mr. Davies’ son.
|
3.
|
Includes
12,500 shares of common stock held by the Carina Heart Weksel Irrevocable
Trust, a trust established for the benefit of Mr. Weksel’s
daughter.
|
4.
|
Includes 559,794
shares of common stock issuable upon exercise of warrants purchased in the
open market and subject to a Put-Call Option Agreement with Alyst at an
exercise price of $0.0446.
|
(Amounts
in RMB)
|
2007
|
2008
|
2009
|
2010
|
2011
|
|||||||||||||||
Total
Sales
|
204,879,821 | 235,985,949 | 271,817,862 | 313,094,004 | 360,642,122 | |||||||||||||||
Net
Earnings
|
136,722,186 | 161,223,226 | 189,368,905 | 221,615,505 | 258,429,156 |
(Amounts
in RMB)
|
2008
Pro Forma Projected
|
2008
Actual
|
||||||
Total
Sales
|
235,985,949 | 29,770,470 | ||||||
Net
Earnings
|
161,223,226 | (31,514,285 | ) |
No
Conversion
|
Maximum
Conversion
|
|||||||||||||||||||||||
# of Shares
|
# of Warrants
|
% of Ownership
|
# of Shares
|
# of Warrants
|
% of Ownership
|
|||||||||||||||||||
Alyst
initial stockholders(1)
|
1,750,000
|
2,379,794
|
12.8
|
%
|
1,750,000
|
2,379,794
|
13.9
|
%
|
||||||||||||||||
Alyst
former public stockholders(2)
|
8,044,400
|
7,484,606
|
48.3
|
%
|
5,631,081
|
7,484,606
|
44.1
|
%
|
||||||||||||||||
Underwriters
purchase option – 300,000 units
|
600,000
|
1.9
|
%
|
600,000
|
2.0
|
%
|
||||||||||||||||||
Former
shareholders of China Networks Media (3)
|
11,880,000
|
37.0
|
%
|
11,880,000
|
40.0
|
%
|
||||||||||||||||||
Total
Ownership
|
21,674,400
|
10,464,400
|
100.0
|
%
|
19,261,081
|
10,464,400
|
100.0
|
%
|
||||||||||||||||
Directors
and officers of CN Holdings(4)
|
837,500
|
227,500
|
3.3
|
%
|
837,500
|
227,500
|
3.5
|
%
|
|
(i)
|
Agreements
between Alyst and certain holders of publicly-held common stock
pursuant to which Alyst would agree to purchase such common stock from
such holders immediately after the closing of the Business Combination for
the price and fees specified in the arrangements. The effect of any such
agreements on Alyst’s financial statements would be to decrease cash and
reduce stockholders’ equity as a result of an increase in treasury
stock.
|
|
(ii)
|
Agreements
with third parties to be identified pursuant to which the third parties
would purchase publicly-held common stock during the period beginning on
the date that the registration statement, of which this proxy
statement/prospectus is a part, is declared effective. Such arrangements
would also provide for Alyst, immediately after the closing of the
Business Combination, to purchase from the third parties all of the common
stock purchased by them for the price and fees specified in the
arrangements. The effect of any agreements on Alyst’s financial statements
pursuant to these arrangements, to the extent that Alyst makes purchases
of its common stock from these third parties, would also be to decrease
cash and reduce stockholders’ equity as a result of an increase in
treasury stock.
|
|
(iii)
|
Agreements
with third parties pursuant to which Alyst would borrow funds to make
purchases of publicly-held common stock for its own account. Alyst would
repay such borrowings with funds transferred to it from Alyst’s
trust account upon closing of the Business Combination. The effect of
these forms of agreements would be to incur a preclosing liability for the
borrowings from these third parties and to reduce stockholders’ equity by
the purchase of treasury stock. Upon the closing, and repayment of these
borrowings, the indebtedness would be eliminated and cash would be reduced
by an equal amount, plus any associated transaction
costs.
|
|
(a)
|
Alyst’s
stockholders’
approval of the Redomestication Merger and the Business Combination, with
public stockholders of less than 30% of the shares of common stock issued
in Alyst’s IPO, which is equivalent to 2,413,319 shares of common
stock, electing to have their common stock converted for cash in the trust
account;
|
|
(b)
|
approval
of the Merger Agreement and the Business Combination by the affirmative
vote of a majority of the votes of the shares entitled to vote, held by
the shareholders of the ordinary shares of China Networks Media, voting
together with the shareholders of class A preferred stock of China
Networks Media, voting on an as-converted basis;
|
|
(c)
|
the
material accuracy of Alyst and China Networks Media’s respective
representations and warranties and the material performance of Alyst and
China Networks Media’s respective obligations under the Merger
Agreement;
|
|
(d)
|
delivery
of various documents in connection with the consummation of the
Redomestication Merger and the Business Combination, including (i) an
executed employment agreement of Li Shuangqing, (ii) a lock-up agreement
executed by Mr. Li Shuangqing, Kerry Propper, MediaInv and each
significant shareholder of China Networks Media, and (iii) a registration
rights agreement in favor of the holders of China Networks Media's Class A
preferred shareholders, each of which agreement may be waived as a
condition to closing, and customary certificates and other agreements
necessary to effect the Redomestication Merger and Business Combination;
|
|
(e)
|
the
absence of legal requirements or orders limiting or restricting the
conduct or operation of business, and the absence of pending or threatened
legal action or proceedings involving any challenge to, or seeking damages
or other relief in connection with, any of the transactions contemplated
by the Merger Agreement, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with the transactions
contemplated by the Merger
Agreement;
|
|
(f)
|
no
material adverse effect shall have occurred or any change that has a
material adverse effect;
|
|
(g)
|
all
parties have timely obtained all approvals, waivers and consents from any
governmental authority, including under BVI and PRC laws, that are
necessary to consummate the transactions contemplated by the Merger
Agreement;
|
|
(h)
|
Alyst’s
common stock will be quoted on a recognized U.S. stock exchange
and there will be no action or proceeding pending or threatened against
Alyst, which would prohibit or terminate the quotation of its common
stock;
|
|
(i)
|
Alyst
shall be in compliance with all of Alyst’s reporting requirements under
the Securities Exchange Act of 1934, as amended, and have timely filed all
reports under the Exchange Act for the twelve months prior;
and
|
|
(j)
|
Alyst’s
aggregate deferred business and operating expenses should not exceed
$1,000,000, exclusive of legal fees, unless Alyst has prior approval from
China Networks Media.
|
|
·
|
mutual
consent of China Networks Media and
Alyst;
|
|
·
|
either
China Networks Media or Alyst, if the Merger Agreement and the approval of
the Redomestication Merger and Business Combination are not approved, or
holders of more than 30% of Alyst’s common stock issued in the IPO
exercise their right to convert their common stock for cash from the trust
account;
|
|
·
|
either
China Networks Media or Alyst, if without fault of the terminating party,
the closing of the Business Combination does not occur on or before June
29, 2009;
|
|
·
|
Alyst,
if China Networks Media breaches any of its representations, warranties or
obligations and such breach is not cured within 10 business days of
receipt by China Networks Media of written notice of such
breach;
|
|
·
|
by
China Networks Media, if Alyst breaches any of its representations,
warranties or obligations and such breach is not cured within 10 business
days of receipt by Alyst of written notice of such breach;
or
|
|
·
|
either
China Networks Media or Alyst, if any permanent injunction or other order
of a court prevents the consummation of the Redomestication Merger or the
Business Combination, or the failure to obtain the required vote of
Alyst’s stockholders at the Special Meeting.
|
|
·
|
an
individual citizen or resident of the United
States;
|
|
·
|
a
corporation (or other entity treated as a corporation) that is created or
organized (or treated as created or organized) in or under the laws of the
United States, any state thereof or the District of
Columbia;
|
|
·
|
an
estate whose income is includible in gross income for U.S. federal income
tax purposes regardless of its source;
or
|
|
·
|
a
trust if (i) a U.S. court can exercise primary supervision over the
trust’s administration and one or more U.S. persons are authorized to
control all substantial decisions of the trust, or (ii) it has a valid
election in effect under applicable U.S. Treasury regulations to be
treated as a U.S. person.
|
|
·
|
financial
institutions or ‘‘financial services entities;’’
|
|
·
|
broker-dealers;
|
|
·
|
taxpayers
who have elected mark-to-market
accounting;
|
|
·
|
tax-exempt
entities;
|
|
·
|
governments
or agencies or instrumentalities
thereof;
|
|
·
|
insurance
companies;
|
|
·
|
regulated
investment companies;
|
|
·
|
real
estate investment trusts;
|
|
·
|
certain
expatriates or former long-term residents of the United
States;
|
|
·
|
persons
that actually or constructively own 10% or more of our voting
shares;
|
|
·
|
persons
that hold our common stock or warrants as part of a straddle, constructive
sale, hedging, conversion or other integrated transaction;
or
|
|
·
|
persons
whose functional currency is not the U.S.
dollar.
|
|
·
|
any
gain recognized by the U.S. Holder on the sale or other disposition of its
ordinary shares or warrants; and
|
|
·
|
any
excess distribution made to the U.S. Holder (generally, any distributions
to such U.S. Holder during a taxable year that are greater than 125% of
the average annual distributions received by such U.S. Holder in respect
of the ordinary shares of CN Holdings during the three preceding taxable
years or, if shorter, such U.S. Holder’s holding period for the ordinary
shares).
|
|
·
|
the
U.S. Holder’s gain or excess distribution will be allocated ratably over
the U.S. Holder’s holding period for the ordinary shares or
warrants;
|
|
·
|
the
amount allocated to the taxable year in which the U.S. Holder recognized
the gain or excess distribution will be taxed as ordinary
income;
|
|
·
|
the
amount allocated to each prior year, with certain exceptions, will be
taxed at the highest tax rate in effect for that year and applicable to
the U.S. Holder; and
|
|
·
|
the
interest charge generally applicable to underpayments of tax will be
imposed in respect of the tax attributable to each such
year.
|
|
·
|
fails
to provide an accurate taxpayer identification
number;
|
|
·
|
is
notified by the IRS that backup withholding is required;
or
|
|
·
|
in
certain circumstances, fails to comply with applicable certification
requirements.
|
Provision
|
Alyst
|
CN
Holdings
|
||
Authorized
Capital/Shares
|
31,000,000
shares, of which 30,000,000 are shares of common stock, $.0001 par value
per share, and 1,000,000 are shares, of preferred stock, par value $.0001
per share
|
75,000,000
shares, of which 74,000,000 are ordinary shares, with $.0001 par value per
share, and 1,000,000 are preferred shares of $.0001 par value per share
|
||
Par
Value
|
Stated
in U.S. dollars
|
Same
as Alyst
|
||
Changes
in capital generally require stockholder approval
|
Changes
in the number of shares the company may issue, pursuant to the
Charter Documents, may be made by resolution of shareholders or
resolution of directors
|
|||
Preferred
Shares
|
Directors
may fix the designations, powers, preferences, rights, qualifications,
limitations and restrictions by resolution
|
Same
as Alyst, but preferred shares must be authorized in the Charter Documents
and the rights attaching to such shares set out in the Memorandum of
Association
|
||
Registered
Shares
|
Shares
of capital stock of Alyst to be registered shares
|
Same
as Alyst
|
||
Purpose
of Corporation
|
To
engage in any lawful act not prohibited by law
|
To
carry on or undertake any business activity irrespective of corporate
benefit and not prohibited by law
|
||
Amended
and Restated Certificate of Incorporation/Amended
and Restated Memorandum and Articles of Association
|
Requires
stockholder vote and, except in limited circumstances, by the board of
directors
|
Requires
vote of the shareholders or, as permitted by the Act and the Charter
Documents, by resolution of the board of directors only where such
amendment is required to provide for the rights conferred by preferred
shares on their holders pursuant to the Charter Documents
|
||
Registered
Office
|
c/o
National Corporate Research, Ltd.
615
DuPont Highway
Dover,
Delaware 19901
|
Maples
Corporate Services (BVI) Limited of Kingston Chambers, P.O. Box 173, Road
Town, Tortola, British Virgin Islands
|
Provision
|
Alyst
|
CN
Holdings
|
||
Transfer
Agent
|
Continental
Stock Transfer & Trust Company
|
Same
as Alyst
|
||
Voting
Rights
|
Common
stock: one share, one vote on all matters before the holders of the common
stock
|
Ordinary
shares: one share, one vote on all matters before the holders of the
ordinary shares
|
||
Other
classes of equity may have voting rights as assigned to them by the board
of directors or as approved by stockholders
|
||||
Directors
elected by plurality, all other matters either by majority of issued and
outstanding or majority of those present and entitled to vote as specified
by law
|
Directors
elected by plurality as provided in Charter Documents; all other matters
by a majority of those shares present and entitled to vote
|
|||
Redemption
of Equity
|
Shares
may be repurchased or otherwise acquired, provided the capital of the
company will not be impaired by the Redomestication Merger and the
Business Combination
|
Shares
may be repurchased or otherwise acquired, provided the company will remain
solvent after the Redomestication Merger and the Business Combination
|
||
Company
may hold or sell treasury shares
|
Same
as Alyst
|
|||
Stockholder
consent
|
Permitted
as required for a vote at a meeting
|
Same
as Alyst
|
||
Notice
Requirements for Stockholder Nominations and Other Proposals
|
In
general, to bring a matter before an annual meeting or to nominate a
candidate for director, a stockholder must give notice of the proposed
matter or nomination not less than 60 days and not more than 90 days prior
to public disclosure of the date of annual meeting
|
The
Charter Documents do not contain an express right for shareholders to
bring a matter before an annual meeting or nominate a director candidate
|
||
In
the event that less than 70 days notice or prior public disclosure of the
date of the meeting is given or made to stockholder, to be timely, the
notice must be received by the company no later than the close of business
on the 10th day following the day on which such notice of the date of the
meeting was mailed or public disclosure was made, whichever first occurs
|
|
|||
Meetings
of Stockholders –
Presence
|
In
person or by proxy or other appropriate electronic means
|
In
person or by proxy or by telephone or other electronic means and all
shareholders can hear one another
|
||
Meeting
of Stockholder –
Notice
|
Not
less than 10 days or more than 60 days
|
Not
less than seven days; no maximum limit
|
Provision
|
Alyst
|
CN
Holdings
|
||
Meeting
of Stockholders –
Call
of Meeting
|
Regular
and annual meetings shall be called by the directors. Special meetings may
be called only by majority of board of directors, chief executive officer
or by a majority of the issued and outstanding capital stock entitled to
vote
|
Meetings
may be called by the directors or by shareholders holding 30% of the
outstanding votes. The articles require an annual meeting of the members
for the election of directors to be called by the directors
|
||
Meetings
on short notice may be called upon waiver or presence of all the members
holding shares entitled to vote or 90% of the total number of shares
entitled to vote agree to short notice
|
||||
Meeting
of Stockholders –
Place
|
Within
or without Delaware
|
Within
or outside the BVI as the directors consider necessary or desirable
|
||
Meeting
of Stockholders –
Quorum
|
Majority
of the capital stock issued and outstanding and entitled to vote at
meeting. Meeting may be adjourned for up to 30 days without additional
notice to stockholders.
|
Not
less than 50% of the votes of the shares entitled to vote. Adjournment to
the next business day at the same time and the same place if quorum is not
present.
|
||
Meeting
of Stockholders –
Record
Date
|
As
fixed by the directors, no more than 60 days and no less than 10 days
before the meeting. If not fixed, the day before notice of meeting is
given
|
As
fixed by the directors, may be the date on which notice of the meeting is
given to the shareholders or such later date as specified in the notice,
being a date not earlier than the date of the notice.
|
||
Directors
– Election
|
By
the stockholders as entitled by their terms, including the holders of
common stock
|
By
the shareholders, including the holders of ordinary shares, or by the
directors who have the power to appoint additional directors and the
filling of any vacancy in that connection.
|
||
Directors
– Term
|
Staggered
board of three classes; for terms of three years
|
Initially,
same as Alyst; after a business combination, the staggered board may be
altered by directors or shareholders for designated terms
|
||
Directors
– Removal
|
By
the stockholders for cause
|
By
resolution of shareholders, passed by a majority vote or by resolution of
directors passed by majority vote, in either case with or without cause.
|
||
Directors
– Vacancy
|
May
be filled by majority of remaining directors (unless they are the result
of the action of stockholders) and newly created vacancies may be filled
by majority of remaining directors
|
Same
as Alyst
|
Provision
|
Alyst
|
CN
Holdings
|
||
Directors
– Number
|
Unless
established by the amended and restated certificate of incorporation, as
determined by board of directors, but not less than one
|
There is
no minimum or maximum number of directors
|
||
Directors
– Quorum and Vote Requirements
|
A
majority of the entire board. The affirmative vote of a majority of
directors present at a meeting at which there is a quorum constitutes
action by the board of directors
|
Not
less than one-third of the total number of directors (with a minimum of 2)
present in person or by alternate, except if there is only one
director, then a quorum will be one director, and a sole director passes
resolution by written consent. A resolution is passed at a meeting by the
affirmative vote of a majority of the directors or consented to in writing
by all directors
|
||
Directors
– Managing Director
|
Not
applicable
|
Not
applicable
|
||
Directors
– Powers
|
All
powers to govern the corporation not reserved to the stockholders
|
Same
as Alyst
|
||
Directors
– Committees
|
Directors
may establish one or more committees with the authority that the board
determines
|
Directors
may establish one or more committees with the authority that the board
determines, subject to certain restrictions under the Act
|
||
Directors
– Consent Action
|
Directors
may take action by written consent of all directors, in addition to action
by meeting
|
Same
as Alyst
|
||
Director
– Alternates
|
Not
permitted
|
Directors
may, by written instrument, appoint an alternate who need not be a
director, who may attend meetings in the absence of the director and vote
in the place of the directors
|
||
Directors
– Appoint Officers
|
Directors
appoint the officers of the corporation, subject to the by-laws, with such
powers as they determine
|
Same
as Alyst, subject to the Charter Documents and certain restrictions under
the Act
|
||
Director
– Limitation of Liability
|
Directors
liability is limited, except for (i) breach of loyalty, (ii) act not in
good faith or which involves international misconduct or a knowing
violation of law, (iii) willful violation of law in respect of payment of
dividend or converting shares, or (iv) actions in which director receives
improper benefit
|
Duty
to act honestly and in good faith with a view to the best interests of the
company and exercise care, diligence and skill that a reasonable director
would exercise in the same circumstances, taking the factual circumstances
into account. No provisions in the memorandum, articles or agreement may
relieve a director from the duty to act in accordance with the memorandum
or articles or from personal liability arising from the management of the
business or affairs of the company. Further, a director who vacates office
remains liable in respect of acts or omissions that occurred while he was
a director.
|
Provision
|
Alyst
|
CN
Holdings
|
||
Director
– Indemnification Insurance
|
Company
may purchase insurance in relation to any person who is or was a director
or officer of the company
|
Same
as Alyst
|
||
Amendments
to Organizational Documents
|
Amendments
must be approved by the board of directors and by a majority of the
outstanding stock entitled to vote on the amendment, and if applicable, by
a majority of the outstanding stock of each class or series entitled to
vote on the amendment as a class or series. By-laws may be amended by the
stockholders entitled to vote at any meeting or, if so provided by the
amended and restated certificate of incorporation, by the board of
directors
|
Amendments
to the Charter Documents, with certain restrictions, may be made by
resolution of the shareholders or by the resolution of the board of
directors
|
||
Sale
of Assets
|
The
sale of all or substantially all the assets of the company requires
stockholder approval
|
The
sale of more than 50% of the assets of the company requires shareholder
approval, other than in the regular course of business
|
||
Dissenters’ Rights
|
Provision
is made under Delaware corporate law to dissent and obtain fair value of
shares in connection with certain corporate actions that require
stockholder approval or consent
|
Provision
is made under the Act to dissent and obtain fair value of shares in
connection with certain corporate actions that require shareholder
approval or consent
|
|
·
|
The
rules requiring the filing with the SEC of quarterly reports on Form 10-Q
or current reports on Form 8-K;
|
|
·
|
The
sections of the Exchange Act regulating the solicitation of proxies,
consents or authorizations with respect to a security registered under
such Act;
|
|
·
|
Provisions
of Regulation FD aimed at preventing issuers from making selective
disclosures of material information; and
|
|
·
|
The
sections of the Securities Exchange Act requiring insiders to file public
reports of their stock ownership and trading activities and establishing
insider liability for profits realized from any “short swing” trading
transactions (i.e., a purchase and sale, or a sale and purchase, of the
issuer’s equity securities within less than six
months).
|
2005
|
2006
|
2007
|
2008E
|
2009E
|
2010E
|
|||||||||||||||||||
Advertising
Spending: ($ million)
|
||||||||||||||||||||||||
TV
|
4,670 | 5,311 | 6,187 | 7,826 | 8,452 | 9,128 | ||||||||||||||||||
Newspapers
& Magazines
|
3,693 | 4,426 | 5,152 | 6,094 | 6,385 | 7,343 | ||||||||||||||||||
Radio
|
511 | 752 | 876 | 1,074 | 1,181 | 1,287 | ||||||||||||||||||
Outdoor
|
1,655 | 1,890 | 2,202 | 2,678 | 3,348 | 3,850 | ||||||||||||||||||
Internet
|
535 | 927 | 1,606 | 2,618 | 3,553 | 4,598 | ||||||||||||||||||
Cinema
|
20 | 22 | 26 | 29 | 32 | 37 | ||||||||||||||||||
Total
|
11,084 | 13,327 | 16,049 | 20,319 | 22,951 | 26,243 |
|
·
|
According
to the PRC National Statistics Bureau, household consumption grew by a
5-year CAGR of 10.2%, reaching RMB 8.0 trillion in 2006. This underlying
dramatic expansion in consumption is expected to continue to drive growth
in the advertising industry.
|
|
·
|
Notwithstanding
this rapid recent growth, advertising spending per capita and spending as
percentage of gross domestic product in China are still much lower than
other countries, representing significant opportunity for further growth.
|
|
·
|
Advantageous
joint-venture relationship structure
|
|
·
|
Network
business model
|
|
·
|
China
Networks Media’s opportunity to grow and scale the business and embark on
more partnerships
|
|
·
|
Seasoned
Management
|
|
·
|
Improve
core business profitability in the Local JV Cos
|
|
·
|
Expanded
offering across the network of partner stations
|
|
·
|
Expand the
network to include more TV station partners
|
|
·
|
Central
Level (2) – The central level has two channels, CCTV and CETV, which
broadcast 16 channels nationally.
|
|
·
|
Province
Level (76) – The province level has 27 province stations with
satellite channels that can be rebroadcast in other
regions. The province level also includes 45 education TV
stations and the 4 major municipalities – Beijing, Shanghai, Tianjin and
Chongqing – that have satellite channels.
|
|
·
|
City
Level (264) – At the city level, most of the channels are broadcast only
in the city areas. However, some, such as Shenzhen and Harbin,
provide a broader provincial footprint and/or have satellite
channels.
|
Ranking
|
Channel
|
Rating
(%)
|
Share
(%)
|
|||
1
|
Yunnan
TV City Channel (TV2)
|
1.24
|
10.3
|
|||
2
|
CCTV
General Channel
|
1
|
8.3
|
|||
3
|
CCTV-6
|
0.65
|
5.4
|
|||
4
|
Kunming
TV General Channel
|
0.63
|
5.2
|
|||
5
|
CCTV-8
|
0.61
|
5.1
|
|||
6
|
CCTV-3
|
0.59
|
4.9
|
|||
7
|
Yunnan
TV Movies Channel (TV5)
|
0.56
|
4.7
|
|||
8
|
CCTV-5
|
0.37
|
3.1
|
|||
9
|
Kunming
TV Movies Channel
|
0.37
|
3.1
|
|||
10
|
CCTV-2
|
0.35
|
2.9
|
Channel
|
Source
|
Percentage
(%) of revenue
|
||||
General
Channel
|
Advertising
Agency
|
94.32%
|
||||
Direct
Client
|
5.68%
|
|||||
Living
Channel
|
Advertising
Agency
|
86.59%
|
||||
Direct
Client
|
13.41%
|
|||||
Entertainment
Channel
|
Advertising
Agency
|
98.86%
|
||||
Direct
Client
|
1.14%
|
|||||
Economic
Channel
|
Advertising
Agency
|
26.06%
|
||||
Direct
Client
|
73.94%
|
|||||
Movies
Channel
|
Advertising
Agency
|
90.04%
|
||||
Direct
Client
|
9.96%
|
|||||
News
Channel
|
Advertising
Agency
|
61.30%
|
||||
Direct
Client
|
38.70%
|
Channel
|
Broadcasting time of program
(Daily)
|
Broadcasting time of advertisement
(Daily)
|
||
General
Channel
|
21
hrs 2 minutes
|
5
hrs 43 minutes
|
||
Living
Channel
|
19
hrs 59 minutes
|
4
hrs 50 minutes
|
||
Entertainment
Channel
|
19
hrs 58 minutes
|
3
hrs 12 minutes
|
||
Economic
Channel
|
19
hrs 20 minutes
|
3
hrs 19 minutes
|
||
Movies
Channel
|
24
hrs
|
4
hrs 44 minutes
|
||
News
Channel
|
22
hrs 31 minutes
|
3
hrs 45 minutes
|
Channel
|
Source
|
Percentage (%) of revenue
|
||||
Minsheng
TV Channel
|
Advertising
Agency
|
58.38%
|
||||
Direct
Client
|
41.62%
|
|||||
Arts
and Entertainment Radio Station
|
Advertising
Agency
|
27.66%
|
||||
Direct
Client
|
72.34%
|
Channel
|
Broadcasting time of program
(daily)
|
Broadcasting time of advertising
(daily)
|
||
Minsheng
TV Channel
|
20
hours 10 minutes
|
4
hours 13 minutes
|
||
Arts
and Entertainment Radio
|
24
hours
|
3
hours 50 minutes
|
Customer
|
Contribution to
Consolidated
Net Revenue
|
Percent of
Consolidated
Net Revenue
|
||||||
Kunming
Fengyun Advertisement Ltd
|
$ | 3,130,020 | 22.0 | % | ||||
Yunnan
Hua Nian Advertisement Ltd
|
$ | 2,330,169 | 16.4 | % |
|
·
|
The
shareholders of Hetong have jointly granted ANT an exclusive and
irrevocable option to purchase all or part of their equity interests in
Hetong at any time; this option may only be terminated by mutual consent
or at the direction of ANT;
|
|
·
|
Without
ANT’s consent, the shareholders of Hetong may not (i) transfer or pledge
their equity interests in Hetong, (ii) receive any dividends, loan
interest or other benefits from Hetong, or (iii) make any material
adjustment or change to Hetong’s business or
operations;
|
|
·
|
The
shareholders of Hetong agreed to (i) accept the policies and guidelines
furnished by ANT with respect to the hiring and dismissal of employees, or
the operational management and financial system of Hetong, and (ii)
appoint the candidates recommended by ANT as directors of Hetong;
|
|
·
|
Each
shareholder of Hetong has appointed ANT’s designee as their
attorneys-in-fact to exercise all its voting rights as shareholders of
Hetong. This power of attorney is effective until 2037;
and
|
|
·
|
Each
shareholder of Hetong has pledged all of its respective equity interests
in Hetong to Guangwang Tonghe Technology Consulting (Beijing) Co. Ltd.
(“WFOE”), a wholly-owned subsidiary of ANT in the PRC to secure the
payment obligations of Hetong under certain contractual arrangements
between Hetong and WFOE. This pledge is effective until the later of the
(i) date on which the last surviving of the Exclusive Service Agreements,
the Loan Agreement and the Equity Option Agreement terminates and (ii)
date on which all outstanding Secured Obligations are paid in full or
otherwise satisfied. Each of these agreements are subject to customary
termination provisions; however, the WFOE may terminate the Exclusive
Services Agreement at any time upon 30 days’ notice to
Hetong.
|
|
·
|
Radio
and TV advertisements shall be clearly differentiated from other TV
programs and should not be broadcasted in the form of news report. Current
events and political news programs shall not carry the names of any
enterprises or products. Advertisements with addresses, telephone numbers
or contact information shall not be broadcasted during special reports on
individuals or enterprises.
|
|
·
|
Radio
stations and TV stations shall examine the content of the advertisements
and the qualifications of the enterprises involved and shall only
broadcast the advertisements that have been so examined.
|
|
·
|
Radio
and TV advertisements on each channel must not exceed 20% of the total of
each channel’s
daily program time and must not exceed 15% of each channel’s
program time per hour (i.e. nine minutes per hour) between 11:00 a.m. -
1:00 p.m. for radio programs and between 7:00 p.m. - 9:00 p.m. for TV
programs.
|
|
·
|
Advertisements
shall not be broadcasted in a way that would affect completion of the
programs. Except for the period between 7:00 p.m. - 9:00 p.m.,
advertisements can only be broadcasted once and for a maximum period of
2.5 minutes during the airing of any movie or TV drama.
|
|
·
|
The
broadcast of advertisements related to tobacco are prohibited by radio
stations and TV stations. Advertisements relating to alcohol are strictly
controlled in accordance with relevant PRC laws, rules and regulations.
The number of alcohol advertisements cannot exceed 12 segments for each TV
channel per day or exceed two segments between 7:00 p.m. - 9:00 p.m.
|
|
·
|
Sale of advertising time-slots. Through
the JV Tech Cos, China Networks Media will derive a substantial majority
of its revenue from selling advertising time slots to advertising agencies
and advertisers. Advertising agencies account for more than 60% of total
customers, and such percentage is expected to increase gradually in the
future. Advertising customers typically pay a deposit before
the relevant advertisements are broadcast, and the balance is paid monthly
or immediately after broadcast. Certain key customers with good track
records of payment are allowed to make payments two months after
broadcast. Revenues are recognized when advertisements are actually
broadcast.
|
|
·
|
Sale of program-related advertising
services. A small portion of revenues are generated from
advertising opportunities relating to programs produced by the PRC TV
Stations themselves. These include, without limitation, program
sponsorship ‘sting’
slots, in-program product placements and other ‘soft’
advertising opportunities, as well as revenue from value-added services,
such as short message service, messages relating to program content. These
represented approximately 2.9 %, 6.9%, 6.3%, and 5.6%, of our total gross
revenues for the years ended 2005, 2006, 2007 and 2008, respectively.
|
|
·
|
China
Networks Media for the year ended December 31, 2008 compared to the year
ended December 31, 2007;
|
|
·
|
Kunming
Television Station – Advertising Center and Yellow River Television
Station – Advertising Center for the year ended December 31, 2008 as
compared to the year ended December 31, 2007;
|
|
·
|
Kunming
Television Station – Advertising Center and Yellow River Television
Station – Advertising Center for the year ended December 31, 2007
compared to the year ended December 31, 2006; and
|
|
·
|
Kunming
Television Station – Advertising Center and Yellow River Television
Station – Advertising Center for the year ended December 31, 2006
compared to the year ended December 31, 2005.
|
Leasehold
improvement
|
3
years
|
Furniture,
fixtures and equipment
|
5
years
|
Computer
software
|
1
year
|
For
the three months ended
|
||||||||
March31,
|
March
31,
|
|||||||
2009
|
2008
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
NET
REVENUE
|
4,962,684 | - | ||||||
COST
OF REVENUE
|
965,839 | - | ||||||
Gross
profit
|
3,996,844 | - | ||||||
OPERATING
EXPENSES
|
||||||||
Selling
expense
|
33,681 | - | ||||||
General
and administrative expense
|
1,232,872 | 66,944 | ||||||
1,266,553 | 66,944 | |||||||
INCOME
(LOSS) FROM OPERATIONS
|
2,730,291 | (66,944 | ) | |||||
OTHER
INCOME (EXPENSE)
|
||||||||
Other
expense
|
(29,243 | ) | - | |||||
Interest
expense
|
(1,701,109 | ) | - | |||||
Interest
income
|
14,587 | - | ||||||
Gain
on extinguishment of debt
|
1,328,861 | - | ||||||
(386,903 | ) | - | ||||||
INCOME
(LOSS) BEFORE INCOME TAX
|
2,343,388 | (66,944 | ) | |||||
INCOME
TAX
|
829,150 | - | ||||||
NET
INCOME
|
1,514,238 | (66,944 | ) | |||||
Less:
Net income attributable to the non-controlling interest
|
(1,416,164 | ) | - | |||||
NET
INCOME (LOSS) ATTRIBUTABLE TO SHAREHOLDERS
|
98,074 | (66,944 | ) | |||||
OTHER
COMPREHENSIVE INCOME (LOSS)
|
||||||||
Foreign
currency translation adjustment
|
14,573 | - | ||||||
COMPREHENSIVE
INCOME (LOSS)
|
$ | 112,647 | $ | (66,944 | ) | |||
Basic
earnings per common share
|
$ | 0.05 | $ | (66.94 | ) | |||
Diluted
earnings per common share
|
$ | 0.03 | $ | (66.94 | ) | |||
Weighted
average shares outstanding
|
1,900,000 | 1,000 |
A | B |
A+B=C
|
||||||||||
For
the three months ended March 31, 2009
|
||||||||||||
JV
Tech Cos, JV Ad Cos, and Trustee company
|
CN
Media BVI, ANT, and WFOE
|
China
Networks Media, Ltd.
|
||||||||||
Net
income (loss) before non-controlling interest
|
$ | 2,358,376 | $ | (844,138 | ) | $ | 1,514,238 | |||||
Percentage
of non-controlling interest
|
60 | %* | 0 | % | ||||||||
Net
income attributable to the non-controlling interest
|
$ | (1,416,164 | ) | $ | 0 | $ | (1,416,164 | ) |
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
NET
REVENUE
|
4,344,012 | - | ||||||
COST
OF REVENUE
|
950,257 | - | ||||||
Gross
profit
|
3,393,755 | - | ||||||
OPERATING
EXPENSES
|
||||||||
Selling
expense
|
41,637 | |||||||
General
and administrative expense
|
3,223,046 | 31,220 | ||||||
3,264,683 | 31,220 | |||||||
INCOME
(LOSS) FROM OPERATIONS
|
129,072 | (31,220 | ) | |||||
OTHER
INCOME (EXPENSE)
|
||||||||
Other
expense
|
(5,723 | ) | ||||||
Interest
expense
|
(3,027,511 | ) | ||||||
Interest
income
|
132,180 | |||||||
(2,901,054 | ) | - | ||||||
NET
LOSS BEFORE INCOME TAX
|
(2,771,982 | ) | (31,220 | ) | ||||
INCOME
TAX
|
637,691 | - | ||||||
NET
LOSS BEFORE NON-CONTROLLING INTEREST
|
(3,409,673 | ) | (31,220 | ) | ||||
NON-CONTROLLING
INTEREST
|
(1,127,391 | ) | - | |||||
NET
LOSS
|
$ | (4,537,064 | ) | $ | (31,220 | ) | ||
OTHER
COMPREHENSIVE LOSS
|
||||||||
Foreign
currency translation adjustment
|
(70,920 | ) | - | |||||
COMPREHENSIVE
LOSS
|
$ | (4,607,984 | ) | $ | (31,220 | ) |
Year ended
December 31,
2008
|
Year ended
December 31,
2007
|
|||||||
USD
(Audited)
|
USD
(Restated)
|
|||||||
Revenue
|
$ | 13,129,328 | $ | 17,715,149 | ||||
Cost
of Revenue
|
(3,564,532 | ) | (3,572,541 | ) | ||||
Gross
Profit
|
9,564,796 | 14,142,608 | ||||||
Other
Income
|
- | 28,802 | ||||||
Selling,
General and Administrative Expenses
|
(2,468,316 | ) | (1,712,931 | ) | ||||
Income
before Income Taxes
|
7,096,480 | 12,458,479 | ||||||
Income
Taxes
|
- | - | ||||||
Net
Income
|
$ | 7,096,480 | $ | 12,458,479 |
A | B |
A+B=C
|
||||||||||
For
the three months ended March 31, 2009
|
||||||||||||
JV
Tech Cos, JV Ad Cos, and Trustee company
|
CN
Media BVI, ANT, and WFOE
|
China
Networks Media, Ltd.
|
||||||||||
Net
income (loss) before non-controlling interest
|
$ | 2,358,376 | $ | (844,138 | ) | $ | 1,514,238 | |||||
Percentage
of non-controlling interest
|
60 | %* | 0 | % | ||||||||
Net
income attributable to the non-controlling interest
|
$ | (1,416,164 | ) | $ | 0 | $ | (1,416,164 | ) |
|
§
|
Approximately $4
million (RMB27,000,000) of the second payment for the paid-in capital to
the Taiyuan JV,
of which approximately $1.3 million (RMB 9,000,000) was paid on January 6,
2009, and the remaining balance of approximately $2.6 million (RMB
18,000,000) is due in equal installments by June 30, 2009 and October 31,
2009;
|
|
§
|
Approximately
$11 million (RMB 75,000,000) of the second payment for the paid-in capital
to the Kunming JV which is due by September 30, 2009;
|
|
§
|
$19.11
million due immediately following exercise of Alyst’s warrants pursuant to
the Merger Agreement;
|
|
§
|
$14
million related to the equity bridge financing, plus accrued interest, are
due 18 months from the issuance of the promissory notes and the
remaining $14 million related to the equity bridge financing, plus accrued
interest, are due 36 months from the issuance of the promissory
notes. Interest
on the bridge financing accrues at an annual rate of
10%.
|
§
|
$3
million due by December 31, 2009 and $3 million due by December 31, 2010
pursuant to the Merger Agreement upon achievement by China Networks Media
of $20 million of Pro Forma Net Income and $30 million of Pro Forma Net
Income in 2009 and 2010, respectively.
|
Year
|
Renminbi
Average (1)
|
|||
2004
|
8.2768
|
|||
2005
|
8.1826
|
|||
2006
|
7.9579
|
|||
2007
|
7.6172
|
|||
2008
|
6.9623
|
1.
|
Determined
by averaging the rates on the last business day of each month during the
relevant period.
|
Renminbi
Average
|
||||||||
Month
Ended
|
High
|
Low
|
||||||
July
31, 2008
|
6.864
|
6.813
|
||||||
August
31, 2008
|
6.867
|
6.833
|
||||||
September
30, 2008
|
6.846
|
6.801
|
||||||
October
31, 2008
|
6.844
|
6.748
|
||||||
November
30, 2008
|
6.834
|
6.803
|
||||||
December
31, 2008
|
6.881
|
6.805
|
||||||
January
31, 2009
|
6.840
|
6.836
|
||||||
February
28, 2009
|
6.839
|
6.834
|
||||||
March
31, 2009
|
6.840
|
6.830
|
||||||
April 30, 2009 |
6.846
|
6.835
|
Quarter
ended
September 30,
2007
|
Quarter
ended
December 31,
2007
|
Quarter
ended
March 31,
2008
|
Quarter
ended
June 30,
2008
|
Quarter
ended
September 30,
2008
|
Quarter
ended
December
31,
2008
|
Quarter
ended
March
31,
2009
|
||||||||||||||||||||||
Revenue
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|||||||||||||||||||||
Loss
from operations
|
(41,765
|
)
|
(41,599
|
)
|
(139,154
|
)
|
(96,485
|
)
|
(135,553
|
)
|
(103,891
|
)
|
(234,477
|
)
|
||||||||||||||
Interest
income
|
762,841
|
744,043
|
555,785
|
364,264
|
347,520
|
133,697
|
119,927
|
|||||||||||||||||||||
Income
(loss) before provision for income taxes
|
721,076
|
702,444
|
416,631
|
267,779
|
211,967
|
29,806
|
(114,550
|
)
|
||||||||||||||||||||
Provision
(benefit) for income taxes
|
260,875
|
530,000
|
41,421
|
119,098
|
96,021
|
47,802
|
(41,443
|
)
|
||||||||||||||||||||
Net
Income (loss)
|
460,201
|
172,444
|
375,210
|
148,681
|
115,946
|
(17,996
|
)
|
(73,107
|
)
|
|||||||||||||||||||
Weighted
average shares outstanding (basic and diluted)
|
7,133,561
|
7,381,081
|
7,381,081
|
7,381,081
|
7,381,081
|
7,381,081
|
7,381,081
|
|||||||||||||||||||||
Basic
and diluted net income per share
|
$
|
.06
|
$
|
.02
|
$
|
.05
|
$
|
.02
|
$
|
.02
|
$
|
(.00
|
)
|
$
|
(.01
|
)
|
Name
|
Age
|
Position
|
||
Li
Shuangqing
|
55
|
Chief
Executive Officer and Chairman
|
||
Michael
E. Weksel
|
44
|
Chief
Financial Officer and Director
|
||
Jian Ping Huang |
48
|
Director | ||
May Huang |
41
|
Director | ||
Kerry Propper |
34
|
Director | ||
George Kaufman |
33
|
Director | ||
Donald Quinby |
34
|
Director |
|
·
|
reviewing
and discussing with management and the independent auditor the annual
audited financial statements, and recommending to the board whether the
audited financial statements should be included in the Form 10-K;
|
|
·
|
discussing
with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation
of financial statements;
|
|
·
|
discussing
with management major risk assessment and risk management
policies;
|
|
·
|
monitoring
the independence of the independent
auditor;
|
|
·
|
verifying
the rotation of the lead (or coordinating) audit partner having primary
responsibility for the audit and the audit partner responsible for
reviewing the audit as required by
law;
|
|
·
|
reviewing
and approving all related-party
transactions;
|
|
·
|
inquiring
and discussing with management compliance with applicable laws and
regulations;
|
|
·
|
pre-approving
all audit services and permitted non-audit services to be performed
by Alyst’s
independent auditor, including the fees and terms of the services to be
performed;
|
|
·
|
appointing
or replacing the independent
auditor;
|
|
·
|
determining
the compensation and oversight of the work of the independent auditor
(including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purpose of
preparing or issuing an audit report or related work;
and
|
|
·
|
establishing
procedures for the receipt, retention and treatment of complaints received
by Alyst regarding accounting, internal accounting controls or reports
which raise material issues regarding our financial statements or
accounting policies.
|
|
·
|
should
have demonstrated notable or significant achievements in business,
education or public service;
|
|
·
|
should
possess the requisite intelligence, education and experience to make a
significant contribution to the board of directors and bring a range of
skills, diverse perspectives and backgrounds to its deliberations;
and
|
|
·
|
should
have the highest ethical standards, a strong sense of professionalism and
intense dedication to serving the interests of the
stockholders.
|
Name
|
Number of
Shares |
Purchase
Price |
Relationship to Alyst
|
||||||
Robert
A. Schriesheim
|
362,500 | $ | 5,178.57 |
Chairman
of the Board
|
|||||
Dr.
William Weksel(1)
|
362,500 | $ | 5,178.57 |
Chief
Executive Officer and Director
|
|||||
Robert
H. Davies(2)
|
362,500 | $ | 5,178.57 |
Chief
Strategist
|
|||||
Michael
E. Weksel(3)
|
362,500 | $ | 5,178.57 |
Chief
Financial Officer
|
|||||
Paul
Levy
|
90,000 | $ | 1,285.71 |
Director
|
|||||
Ira
Hollenberg IRA
|
60,000 | $ | 857.14 |
Stockholder
|
|||||
Silverman
Realty Group, Inc.
Profit
Sharing Plan (LCPSP)
|
60,000 | $ | 857.14 |
Stockholder
|
|||||
Matthew
Botwin
|
30,000 | $ | 428.57 |
Director
|
|||||
Norbert
W. Strauss
|
20,000 | $ | 285.72 |
Stockholder
|
|||||
David
Strauss
|
20,000 | $ | 285.72 |
Stockholder
|
|||||
Jonathan
Strauss
|
20,000 | $ | 285.72 |
Stockholder
|
(1)
|
Dr.
William Weksel is the father of Michael E. Weksel.
|
(2)
|
In
June 2007, Robert H. Davies transferred 10,000 shares of common stock to
the 2006 Robert H. Davies Delaware Trust f/b/o Alexander B. Davies, a
trust established for the benefit of Mr. Davies’ son, for approximately
$0.14 per share.
|
(3)
|
In
January 2007, Michael E. Weksel transferred 12,500 shares of common stock
to the Carina Heart Weksel Irrevocable Trust, a trust established for the
benefit of Mr. Weksel’s daughter, for approximately $0.014 per share. Does
not include 559,794 warrants purchased in open market transactions and
subject to a Put-Call Option Agreement with Alyst at an exercise price at
$0.0446 per warrant, representing a total market value of approximately
$25,000.
|
Name
and Address of Beneficial Holder (1)
|
Amount
of
Beneficial
Ownership
|
Amount
of
Warrants
|
Percentage
of
Common
Stock
|
|||||||||
Del
Mar Master Fund, Ltd. (2)
|
1,374,000 | 14.0 | % | |||||||||
Bulldog Investors (3) | 1,304,500 | 13.3 | % | |||||||||
HBK
Investments L.P. (4)
|
916,402 | 9.4 | % | |||||||||
QVT
Financial LP (5)
|
840,772 | 8.6 | % | |||||||||
Polar
Securities Inc. (6)
|
778,100 | 7.9 | % | |||||||||
Millenco
LLC (7)
|
515,250 | 515,250 | 10.0 | % | ||||||||
Pacific
Assets Management, LLC (8)
|
495,400 | 5.1 | % | |||||||||
Robert
A. Schriesheim
|
362,500 | 3.7 | % | |||||||||
Robert
H. Davies (9)
|
362,500 | 3.7 | % | |||||||||
Michael
E. Weksel (10)
|
362,500 | 3.7 | % | |||||||||
Dr.
William Weksel
|
362,500 | 3.7 | % | |||||||||
Paul
Levy
|
90,000 | * | ||||||||||
Matthew
Botwin
|
30,000 | * | ||||||||||
All
directors and executive officers as a group (six individuals) (12)
|
1,570,000 | 16.0 | % |
(1)
|
Unless
otherwise indicated, the business address of each of the individuals is
233 East 69th Street, #6J, New York, New York 10021.
|
(2)
|
Represents
1,374,000 shares of common stock held by Del Mar Master Fund, Ltd (the
“Master Fund”). Del Mar Asset Management, LP serves as the investment
manager of the Master Fund. Del Mar Management, LLC (the “GP”) serves as
the general partner of the Master Fund. Mr. David Freelove is the managing
member of the GP. The power to vote and dispose of the shares held by the
Master Fund is shared among the above named persons. The business address
for Mr. Freelove and each of the entities is 711 Fifth Avenue, New York,
New York 10022. The foregoing information was derived from a Schedule 13G
filed with the Securities and Exchange Commission on March 27,
2009.
|
(3)
|
Represents
1,304,500 shares of common stock held by Bulldog Investors, of which
Bulldog Investors has the sole power to vote or direct the vote of 935,780
shares and the power to dispose or direct the disposition of 1,304,500
shares. Messrs. Phillip Goldstein and Andrew Dakos are
principals of Bulldog Investors. The business address of
Bulldog Investors is Park 80 West, Plaza Two, Saddle Brook, NJ
07663. The foregoing information was derived from a Schedule
13G filed with the Securities and Exchange Commission on May 26,
2009.
|
(4)
|
Represents
916,402 shares of common stock over which HBK Investments L.P., HBK
Services LLC (“Services”), HBK Partners 11 L.P., HBK Management LLC and
HBK Master Fund L.P. each have shared voting and dispositive power. HBK
Investments L.P. has delegated discretion to vote and dispose of the
securities to Services. Services may, from time to time, delegate
discretion to vote and dispose of certain of the securities to HBK New
York LLC, HBK Virginia LLC, HBK Europe Management LLP and/or HBK Hong Kong
Ltd. (collectively, the “Subadvisors”). Each of Services and the
Subadvisors is under common control with HBK Investments L.P. The business
address for each entity is 300 Crescent Court, Suite 700, Dallas, Texas
75201, except HBK New York LLC which has a business address of 350 Park
Avenue, 20th Floor, New York, New York 10021. The foregoing information
was derived from a Schedule 13G/A filed with the Securities and Exchange
Commission on January 26,
2009.
|
(5)
|
Represents
673,861 shares of common stock held by QVT Fund LP (the “Fund”), 75,558
shares of common stock held by Quintessence Fund L.P. (“Quintessence) and
91,283 shares of common stock held in a separate discretionary account
managed for Deutsche Bank AG (the “Separate Account”). This amount
excludes shares issuable upon the exercise of warrants that are not
currently exercisable and will not become exercisable within 60 days. QVT
Financial LP has voting and dispositive power with respect to all such
shares and QVT Financial GP LLC is the general partner of QVT Financial
LP. The business address of QVT Financial LP, QVT Financial GP LLC and QVT
Associates GP LLC is 1177 Avenue of the Americas, 9th Floor, New York, New
York 10036. The business address of QVT Fund LP is Walkers SPV, Walkers
House, Mary Street, George Town, Grand Cayman, KY1 9001 Cayman Islands.
The foregoing information is derived from a Schedule 13G/A filed with the
Securities and Exchange Commission on January 28,
2009.
|
(6)
|
Represents
(i) 609,100 shares of common stock held by North Pole Capital Master Fund
(“North Pole”) and (ii) 169,000 shares of common stock held in certain
discretionary accounts (“Accounts”). Polar Securities Inc. (“Polar
Securities”) serves as the investment manager for North Pole and the
Accounts. The business address for North Pole and Polar Securities is 372
Bay Street, 21st Floor, Toronto, Ontario M5H 2W9, Canada. The foregoing
information is derived from a Schedule 13G/A filed with the Securities and
Exchange Commission on February 17,
2009.
|
(7)
|
Represents
515,250 units held by Millenco LLC. Each unit consists of one share of
common stock and one warrant to purchase one share of common stock. The
warrants are not exercisable and will not become exercisable until the
completion of a business combination. Millennium Management LLC is the
manager of Millenco LLC and Israel A. Englander is the managing member of
Millennium Management LLC. Each may be deemed to have shared voting
control and investment discretion over the securities. The business
address of Mr. Englander and each of the entities is 666 Fifth Avenue, New
York, New York 10103. The foregoing information is derived from a Schedule
13G filed with the Securities and Exchange Commission on December 17,
2007.
|
(8)
|
Represents
495,400 shares of common stock over which Pacific Assets Management, LLC
(“PAM”) has shared voting power. PAM is an investment adviser whose
clients have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the stock. PAM is the
investment adviser to the JMG Triton Offshore Fund, Ltd. (“JMG Fund”).
Pacific Capital Management, Inc. (“PCM”) is a member of PAM. Jonathan M.
Glaser, Daniel Albert David and Roger Richter are control persons of PAM
and PCM. The business address for PAM, PCM, Mr. David and Mr. Richter is
100 Drakes Landing, Suite 207, Greenbrae, California 94904. The principal
business office of the JMG Fund is Ogier Fiduciary Services (BVI) Ltd.,
Nemours Chambers, P.O. Box 3170, Road Town, Tortola, British Virgin
Islands VG1110. The business address of Mr. Glaser is 11601 Wilshire
Boulevard, Suite 2180, Los Angeles, California 90025. The foregoing
information was derived from a Schedule 13G/A filed with the Securities
and Exchange Commission on February 17,
2009.
|
(9)
|
Includes
10,000 shares of common stock held by the 2006 Robert H. Davies Delaware
Trust, a trust established for the benefit of Mr. Davies’
son.
|
(10)
|
Includes
12,500 shares of common stock held by the Carina Heart Weksel Irrevocable
Trust, a trust established for the benefit of Mr. Weksel’s daughter, of
which Mr. Weksel and his wife are the sole trustees. Does not
include 559,974 common stock warrants subject to a Put-Call Option
Agreement with Alyst described in this proxy statement/prospectus.
|
|
·
|
one
year after the consummation of a business
combination;
|
|
·
|
Alyst’s
liquidation; and
|
|
·
|
the
consummation of a liquidation, merger, stock exchange or other similar
transaction which results in all of our stockholders having the right to
exchange their shares of common stock for cash, securities or other
property subsequent to our consummating a business combination with a
target business.
|
Owner
|
Number of
Ordinary
Shares
|
Number of
Class A
Preferred
Shares
|
Beneficial
Ownership
Percentage
of Ordinary
Shares
|
Beneficial
Ownership
Percentage Assuming
Exercise of all
Outstanding
Derivative
Securities
|
||||||||||||
Kerry
Propper
|
475,000 | 0 | 25 | % | 16.49 | % | ||||||||||
MediaInv
Ltd.
|
1,425,000 | 0 | 75 | % | 49.48 | % | ||||||||||
South
Ferry #2 LP
|
0 | 176,750 | 0 | % | 6.14 | % | ||||||||||
Aaron
Wolfson
|
0 | 17,500 | 0 | % | 0.61 | % | ||||||||||
Eliezer
Levitin
|
0 | 12,250 | 0 | % | 0.43 | % | ||||||||||
Globis
Capital Partners, L.P.
|
0 | 52,500 | 0 | % | 1.82 | % | ||||||||||
Globis
Overseas Fund Ltd.
|
0 | 8,750 | 0 | % | 0.30 | % | ||||||||||
Globis
International Investments LLC
|
0 | 17,500 | 0 | % | 0.61 | % | ||||||||||
Atlas
Master Fund, Ltd.
|
0 | 105,000 | 0 | % | 3.65 | % | ||||||||||
BDS
Capital Fund I, LLC
|
0 | 43,750 | 0 | % | 1.52 | % | ||||||||||
Platinum
Partners Value Arbitrage, LP
|
0 | 175,000 | 0 | % | 6.08 | % | ||||||||||
Nicole
Kubin
|
0 | 8,750 | 0 | % | 0.30 | % | ||||||||||
Alpha
Capital Anstalt
|
0 | 35,000 | 0 | % | 1.22 | % | ||||||||||
AME
Capital Group
|
0 | 8,750 | 0 | % | 0.30 | % | ||||||||||
Camel
Company
|
0 | 8,750 | 0 | % | 0.30 | % | ||||||||||
Leon
Meyers
|
0 | 105,000 | 0 | % | 3.64 | % | ||||||||||
MLR
Capital Offshore Master Fund Ltd.
|
0 | 35,000 | 0 | % | 1.22 | % | ||||||||||
KATA,
Ltd.
|
0 | 35,000 | 0 | % | 1.22 | % | ||||||||||
Chardan
SPAC Asset Management LLC
|
0 | 52,500 | 0 | % | 1.82 | % | ||||||||||
XEL
Inc.
|
0 | 8,750 | 0 | % | 0.30 | % | ||||||||||
Brio
Capital L.P.
|
0 | 8,750 | 0 | % | 0.30 | % | ||||||||||
Beechwood
Capital Group L.L.C.
|
0 | 26,250 | 0 | % | 0.91 | % | ||||||||||
Diamond
Street Equities LLC
|
0 | 8,750 | 0 | % | 0.30 | % | ||||||||||
Ezra
Birnbaum
|
0 | 8,750 | 0 | % | 0.30 | % | ||||||||||
China
Private Equity Partners Co. Ltd.
|
0 | 8,750 | 0 | % | 0.30 | % | ||||||||||
Bantry
Bay Ventures, LLC
|
0 | 8,750 | 0 | % | 0.30 | % | ||||||||||
Moshe
Rosenfeld
|
0 | 3,500 | 0 | % | 0.12 | % |
Name
and Address of Beneficial Holder (1)
|
Amount
of
Beneficial
Ownership
|
Percentage
of
Common
Stock
|
||||||
MediaInv
Ltd.
|
1,425,000 | 11.2 | % | |||||
Del
Mar Master Fund, Ltd. (2)
|
1,374,000 | 10.8 | % | |||||
Bulldog Investors (3) | 1,304,500 | 10.3 | % | |||||
Millenco
LLC (4)
|
1,030,500 | 7.8 | % | |||||
Former
Class A Preferred Shareholders of China Networks Media (5)
|
980,000 | 7.7 | % | |||||
HBK
Investments L.P. (6)
|
916,402 | 7.2 | % | |||||
QVT
Financial LP (7)
|
840,772 | 6.6 | % | |||||
Polar
Securities Inc. (8)
|
778,100 | 6.1 | % | |||||
Kerry
Propper
|
475,000 | 3.7 | % | |||||
Michael
E. Weksel (9)
|
362,500 | 2.9 | % | |||||
Li
Shuangqing
|
— | — | ||||||
All
directors and executive officers as a group (7
persons) (10)
|
837,500 | 6.6 | % |
|
·
|
Enhance
the likelihood of continuity and stability in the Board of
Directors;
|
|
·
|
Discourage
some types of transactions that may involve an actual or threatened change
in control;
|
|
·
|
Discourage
certain tactics that may be used in proxy
fights;
|
|
·
|
Ensure
that the Board of Directors will have sufficient time to act in what it
believes to be in the best interests of the company and its stockholders;
and
|
|
·
|
Encourage
persons seeking to acquire control to consult first with the Board to
negotiate the terms of any proposed business combination or
offer.
|
Pages
|
|
Condensed
Consolidated Balance Sheets at March 31, 2009 (Unaudited) and
June 30, 2008
|
F-2 |
Condensed
Consolidated Statements of Operations (Unaudited) for the three
months ended March 31, 2009 and 2008, for the nine months
ended March 31, 2009 and 2008, and for the period from August 16,
2006 (inception) through March 31, 2009
|
F-3 |
Condensed
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for
the period from August 16, 2006 (inception) through March 31,
2009
|
F-4 |
Condensed
Consolidated Statements of Cash Flows (Unaudited) for the nine months
ended March 31, 2009 and 2008, and for the period from August 16,
2006 (inception) through March 31, 2009
|
F-5 |
Notes
to Unaudited Condensed Financial Statements
|
F-6 |
March
31, 2009
|
June
30, 2008
|
|||||||
Unaudited
|
||||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ | 716,618 | $ | 419,058 | ||||
Cash
held in trust account, interest and dividends available for working
capital and taxes (including prepaid income taxes of $172,979 and $256,481
as of March 31, 2009 and June 30, 2008, respectively)
|
251,733 | 749,337 | ||||||
Prepaid
expenses
|
13,807 | 43,476 | ||||||
Total
current assets
|
982,158 | 1,211,871 | ||||||
Trust
account, restricted
|
||||||||
Cash
held in trust account, restricted
|
63,267,192 | 63,154,286 | ||||||
Other
assets
|
||||||||
Deferred
acquisition costs
|
896,861 | 472,752 | ||||||
Total
assets
|
$ | 65,146,211 | $ | 64,838,909 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued expenses
|
$ | 741,483 | $ | 459,025 | ||||
Common
stock subject to possible conversion, 2,413,319 shares at conversion
value
|
18,980,148 | 18,946,276 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders’
equity
|
||||||||
Preferred
stock, $.0001 par value, authorized 1,000,000 shares; none issued or
outstanding
|
— | — | ||||||
Common
stock, $.0001 par value, authorized 30,000,000 shares; issued and
outstanding 9,794,400 shares (less 2,413,319 shares subject to possible
conversion)
|
738 | 738 | ||||||
Additional
paid-in capital
|
44,246,378 | 44,280,250 | ||||||
Income
accumulated during the development stage
|
1,177,464 | 1,152,620 | ||||||
Total
stockholders’ equity
|
45,424,580 | 45,433,608 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 65,146,211 | $ | 64,838,909 |
For
the
three
months
ended
March
31,
2009
|
For
the
three
months
ended
March
31, 2008
|
For
the
nine
months
ended
March
31,
2009
|
For
the
nine
months
ended
March
31,
2008
|
For
the period
from
August
16, 2006
(inception)
through
March
31,
2009
|
||||||||||||||||
Revenue
|
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Formation
and operating costs
|
234,477 | 139,154 | 537,452 | 221,567 | 861,303 | |||||||||||||||
Loss
from operations
|
(234,477 | ) | (139,154 | ) | (537,452 | ) | (221,567 | ) | (861,303 | ) | ||||||||||
Interest
and dividend income
|
119,927 | 555,785 | 601,144 | 2,061,716 | 3,029,613 | |||||||||||||||
(Loss)
income before provision for income taxes
|
(114,550 | ) | 416,631 | 63,692 | 1,840,109 | 2,168,310 | ||||||||||||||
Benefit
(Provision) for income taxes
|
41,443 | (41,421 | ) | (38,848 | ) | (832,296 | ) | (990,846 | ) | |||||||||||
Net
(loss) income
|
$ | (73,107 | ) | $ | 375,210 | $ | 24,844 | $ | 1,007,853 | $ | 1,177,464 | |||||||||
Accretion
of trust account income relating to common stock subject to possible
conversion
|
(25,044 | ) | — | (33,872 | ) | — | (33,872 | ) | ||||||||||||
Net
(loss) income attributable to other common stockholders
|
$ | (98,151 | ) | $ | 375,210 | $ | (9,028 | ) | $ | 1,007,853 | $ | 1,143,592 | ||||||||
Weighted
average number of common shares outstanding excluding shares subject to
possible conversion- basic and diluted
|
7,381,081 | 7,318,884 | 7,381,081 | 7,299,966 | ||||||||||||||||
Basic
and diluted net (loss) income per share attributable to other common
stockholders
|
$ | (0.01 | ) | $ | 0.05 | $ | (0.00 | ) | $ | 0.14 |
Common
Stock
|
Additional
paid-
|
Income
(deficit)
accumulated
during
the
development
|
Total
stockholders’
|
|||||||||||||||||
Shares
|
Amount
|
in
capital
|
stage
|
equity
|
||||||||||||||||
Balance
at August 16, 2006 (inception)
|
— | $ | — | $ | — | $ | — | $ | — | |||||||||||
Common
shares issued at inception at $0.014 per share
|
1,750,000 | 175 | 24,825 | — | 25,000 | |||||||||||||||
Net
loss for the period from August 16, 2006 (inception) through June 30,
2007
|
— | — | — | (3,916 | ) | (3,916 | ) | |||||||||||||
Balance
at June 30, 2007
|
1,750,000 | 175 | 24,825 | (3,916 | ) | 21,084 | ||||||||||||||
Sale
of 8,044,400 units, net of underwriters’ discount and offering expenses of
$2,973,036 (includes 2,413,319 shares subject to possible
conversion)
|
8,044,400 | 804 | 61,381,360 | — | 61,382,164 | |||||||||||||||
Proceeds
subject to possible conversion of 2,413,319 shares
|
— | (241 | ) | (18,946,035 | ) | — | (18,946,276 | ) | ||||||||||||
Proceeds
from issuance of insiders’ warrants
|
— | — | 1,820,000 | — | 1,820,000 | |||||||||||||||
Proceeds
from issuance of underwriters’ purchase option
|
— | — | 100 | — | 100 | |||||||||||||||
Net
income for the year ended June 30, 2008
|
— | — | — | 1,156,536 | 1,156,536 | |||||||||||||||
Balance
at June 30, 2008
|
9,794,400 | 738 | 44,280,250 | 1,152,620 | 45,433,608 | |||||||||||||||
Accretion
of trust account income relating to common stock subject to possible
conversion
|
— | — | (33,872 | ) | — | (33,872 | ) | |||||||||||||
Net
income for the nine months ended March 31, 2009
|
— | — | — | 24,844 | 24,844 | |||||||||||||||
Balance
at March 31, 2009 (unaudited)
|
9,794,400 | $ | 738 | $ | 44,246,378 | $ | 1,177,464 | $ | 45,424,580 |
For
the nine months
ended
March
31, 2009
|
For
the nine months
ended
March
31, 2008
|
For
the period from
August
16, 2006
(inception)
through
March
31, 2009
|
||||||||||
Cash
flows from operating activities
|
||||||||||||
Net
income
|
$ | 24,844 | $ | 1,007,853 | $ | 1,177,464 | ||||||
Adjustment
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||
Change
in operating assets and liabilities:
|
||||||||||||
Prepaid
taxes
|
— | (290,926 | ) | — | ||||||||
Income
tax payable
|
— | 12,347 | — | |||||||||
Prepaid
expenses
|
29,669 | (44,670 | ) | (13,807 | ) | |||||||
Accounts
payable and accrued expenses
|
282,458 | 115,458 | 741,483 | |||||||||
Net
cash provided by operating activities
|
336,971 | 800,062 | 1,905,140 | |||||||||
Cash
flows from investing activities
|
||||||||||||
Cash
held in trust
account, restricted
|
(112,906 | ) | (63,154,286 | ) | (63,267,192 | ) | ||||||
Cash
held in trust account, interest and dividends available for working
capital and taxes
|
497,604 | (130,979 | ) | (251,733 | ) | |||||||
Deferred
acquisition costs
|
(424,109 | ) | (51,965 | ) | (896,861 | ) | ||||||
Net
cash used in investing activities
|
(39,411 | ) | (63,337,230 | ) | (64,415,786 | ) | ||||||
Cash
flows from financing activities
|
||||||||||||
Proceeds
from issuance of common stock to initial stockholders
|
— | — | 25,000 | |||||||||
Proceeds
from notes payable to stockholders
|
— | — | 150,000 | |||||||||
Gross
proceeds from initial public offering
|
— | 64,355,200 | 64,355,200 | |||||||||
Proceeds
from issuance of insiders’ warrants
|
— | 1,820,000 | 1,820,000 | |||||||||
Proceeds
from issuance of underwriters’ purchase option
|
— | 100 | 100 | |||||||||
Payment
of notes payable to stockholders
|
— | (150,000 | ) | (150,000 | ) | |||||||
Payment
of offering costs
|
— | (2,865,439 | ) | (2,973,036 | ) | |||||||
Net
cash provided by financing activities
|
— | 63,159,861 | 63,227,264 | |||||||||
Net
increase in cash
|
297,560 | 622,693 | 716,618 | |||||||||
Cash
at beginning of period
|
419,058 | 65,487 | — | |||||||||
Cash
at end of period
|
$ | 716,618 | $ | 688,180 | $ | 716,618 | ||||||
Supplemental
Disclosure of cash flow information:
|
||||||||||||
Cash
paid during period for:
|
||||||||||||
Interest
|
$ | — | $ | 951 | $ | 951 | ||||||
Income
taxes
|
— | 1,110,875 | 1,291,112 |
NOTE
1.
|
INTERIM
FINANCIAL INFORMATION, ORGANIZATION, BUSINESS OPERATIONS, SIGNIFICANT
ACCOUNTING POLICIES AND GOING CONCERN
CONSIDERATION
|
NOTE
1.
|
INTERIM
FINANCIAL INFORMATION, ORGANIZATION, BUSINESS OPERATIONS, SIGNIFICANT
ACCOUNTING POLICIES AND GOING CONCERN CONSIDERATION
(CONTINUED)
|
NOTE
1.
|
INTERIM
FINANCIAL INFORMATION, ORGANIZATION, BUSINESS OPERATIONS, SIGNIFICANT
ACCOUNTING POLICIES AND GOING CONCERN CONSIDERATION
(CONTINUED)
|
Page
|
||
Report
of Independent Registered Public Accounting Firm
|
F-11
|
|
Balance
Sheet at June 30, 2008
|
F-12
|
|
Statements
of Operations for the fiscal year ended June 30, 2008, and for the periods
from August 16, 2006 (inception) through June 30, 2007 and June 30, 2008
|
F-13
|
|
Statements
of Changes in Stockholders’ Equity for the period from August 16, 2006
(inception) through June 30, 2008
|
F-14
|
|
Statements
of Cash Flows for the fiscal year ended June 30, 2008, and for the periods
from August 16, 2006 (inception) through June 30, 2007 and June 30, 2008
|
F-15
|
|
Notes
to Financial Statements
|
|
F-16
|
June
30,
|
||||
2008
|
||||
ASSETS
|
||||
Current
Assets:
|
||||
Cash
and cash equivalents
|
$ | 419,058 | ||
Cash
held in trust account, interest available for working capital and taxes
(totaling $749,337):
|
||||
Cash
held in trust account
|
492,856 | |||
Income
taxes refund receivable
|
256,481 | |||
Prepaid
expenses
|
43,476 | |||
Deferred
target acquisition costs
|
472,752 | |||
Total
current assets
|
1,684,623 | |||
Cash
held in trust account, restricted
|
63,154,286 | |||
Total
assets
|
$ | 64,838,909 | ||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||
Current
Liabilities -accrued expenses
|
$ | 459,025 | ||
Common
stock subject to possible conversion, 2,413,319 shares at conversion value
|
18,946,276 | |||
Commitments
and contingencies
|
||||
Stockholders’
equity
|
||||
Preferred
stock, $.0001 par value, authorized 1,000,000 shares; none issued or
outstanding
|
— | |||
Common
stock, $.0001 par value, authorized 30,000,000 shares; issued and
outstanding 9,794,400 shares (less 2,413,319 shares subject to possible
conversion)
|
738 | |||
Additional
paid-in capital
|
44,280,250 | |||
Earnings
accumulated during the development stage
|
1,152,620 | |||
Total
stockholders’ equity
|
45,433,608 | |||
Total
liabilities and stockholders’ equity
|
$ | 64,838,909 |
For the year
ended
June 30, 2008
|
For the period
from
August 16, 2006
(inception)
through
June 30,2007
|
For the period
from
August 16, 2006
(inception)
through
June 30,2008
|
||||||||||
Revenue
|
$ | — | $ | — | $ | — | ||||||
Formation
and operating costs
|
319,003 | 4,848 | 323,851 | |||||||||
Loss
from operations
|
(319,003 | ) | (4,848 | ) | (323,851 | ) | ||||||
Interest
income, net
|
2,426,933 | 1,536 | 2,428,469 | |||||||||
Income
(loss) before provision for income taxes
|
2,107,930 | (3,312 | ) | 2,104,618 | ||||||||
Provision
for income taxes
|
951,394 | 604 | 951,998 | |||||||||
Net
income (loss)
|
$ | 1,156,536 | $ | (3,916 | ) | $ | 1,152,620 | |||||
Weighted
average number of common shares outstanding excluding shares subject to
possible conversion- basic and diluted
|
7,319,371 | 1,750,000 | ||||||||||
Basic
and diluted net income (loss) per share
|
$ | 0.16 | $ | (0.00 | ) |
Common Stock
|
Additional
|
(Deficit)
earnings
accumulated
during the
development
|
Total
stockholders’
|
|||||||||||||||||
Shares
|
Amount
|
paid-in capital
|
Stage
|
equity
|
||||||||||||||||
Balance
at August 16, 2006 (inception)
|
— | $ | — | $ | — | $ | — | $ | — | |||||||||||
Common
shares issued at inception at $0.014 per share
|
1,750,000 | 175 | 24,825 | — | 25,000 | |||||||||||||||
Net
loss from August 16, 2006 (inception) through June 30,
2007
|
— | — | — | (3,916 | ) | (3,916 | ) | |||||||||||||
Balance
at June 30, 2007
|
1,750,000 | 175 | 24,825 | (3,916 | ) | 21,084 | ||||||||||||||
Sale
of 8,044,400 units, net of underwriters’ discount and offering expenses
of $2,973,036 (includes 2,413,319 shares subject to
possible conversion)
|
8,044,400 | 804 | 61,381,360 | — | 61,382,164 | |||||||||||||||
Proceeds
subject to possible conversion of 2,413,319
shares
|
— | (241 | ) | (18,946,035 | ) | — | (18,946,276 | ) | ||||||||||||
Proceeds
from issuance of insiders’ warrants
|
— | — | 1,820,000 | — |
1,820,000
|
|||||||||||||||
Proceeds
from issuance of underwriters’ purchase option
|
— | — | 100 | — | 100 | |||||||||||||||
Net
income for year ended June 30, 2008
|
— | — | — | 1,156,536 | 1,156,536 | |||||||||||||||
Balance
at June 30, 2008
|
9,794,400 | $ | 738 | $ | 44,280,250 | $ | 1,152,620 | $ | 45,433,608 |
For the year
ended
June 30, 2008
|
For the period
from
August 16, 2006
(inception)
through
June 30, 2007
|
For the period
from
August 16, 2006
(inception)
through
June 30, 2008
|
||||||||||
Cash
flows from operating activities
|
$ | 1,156,536 | $ | (3,916 | ) | $ | 1,152,620 | |||||
Net
income (loss)
|
||||||||||||
Adjustment
to reconcile net income (loss) to net cash provided by (used in) operating
activities:
|
||||||||||||
Change
in operating assets and liabilities:
|
||||||||||||
Prepaid
expenses
|
(43,476 | ) | — | (43,476 | ) | |||||||
Accrued
expenses
|
457,025 | 2,000 | 459,025 | |||||||||
Net
cash provided by (used in) operating activities
|
1,570,085 | (1,916 | ) | 1,568,169 | ||||||||
Cash
flows from investing activities
|
||||||||||||
Cash
held in trust account restricted
|
(63,154,286 | ) | — | (63,154,286 | ) | |||||||
Cash
held in trust account, interest available for working capital and
taxes
|
(749,337 | ) | — | (749,337 | ) | |||||||
Deferred
target acquisition costs
|
(472,752 | ) | — | (472,752 | ) | |||||||
Net
cash used in investing activities
|
(64,376,375 | ) | — | (64,376,375 | ) | |||||||
Cash
flows from financing activities
|
||||||||||||
Proceeds
from issuance of common stock to initial stockholders
|
— | 25,000 | 25,000 | |||||||||
Proceeds
from notes payable to stockholders
|
— | 150,000 | 150,000 | |||||||||
Gross
proceeds from IPO
|
64,355,200 | — | 64,355,200 | |||||||||
Proceeds
from issuance of insiders’ warrants
|
1,820,000 | — | 1,820,000 | |||||||||
Proceeds
from issuance of underwriters’ purchase option
|
100 | — | 100 | |||||||||
Payment
of notes payable to stockholders
|
(150,000 | ) | — | (150,000 | ) | |||||||
Payment
of offering costs
|
(2,865,439 | ) | (107,597 | ) | (2,973,036 | ) | ||||||
Net
cash provided by financing activities
|
63,159,861 | 67,403 | 63,227,264 | |||||||||
Net
increase in cash
|
353,571 | 65,487 | 419,058 | |||||||||
Cash
at beginning of period
|
65,487 | — | — | |||||||||
Cash
at end of period
|
$ | 419,058 | $ | 65,487 | $ | 419,058 | ||||||
Supplemental
disclosures of non-cash transactions:
|
||||||||||||
Cash
paid during period for:
|
||||||||||||
Interest
|
$ | 951 | $ | — | $ | 951 | ||||||
Taxes
|
$ | 1,207,875 | $ | 604 | $ | 1,208,479 | ||||||
Accrual
for deferred offering costs:
|
||||||||||||
Deferred
offering costs
|
$ | — | $ | 20,123 | $ | — | ||||||
Accrued
offering costs
|
$ | — | $ | (20,123 | ) | $ | — |
For the year
ended
June 30,2008
|
For the period
from
August 16, 2006
(inception)
through
June 30, 2007
|
For the period
from
August 16, 2006
(inception)
through
June 30, 2008
|
||||||||||
Current:
|
||||||||||||
Federal
|
$ | 597,899 | $ | — | $ | 597,899 | ||||||
State
and Local
|
353,495 | 604 | 354,099 | |||||||||
Deferred:
|
||||||||||||
Federal
|
— | — | — | |||||||||
State
and Local
|
— | — | — | |||||||||
Total
provision for income taxes
|
$ | 951,394 | $ | 604 | $ | 951,998 |
For the year
ended
June 30, 2008
|
For the period
from
august 16, 2006
(inception)
through
June 30, 2007
|
For the period
from
august 16, 2006
(inception)
through
June 30, 2008
|
||||||||||
Tax
provision at statutory rate
|
34 | % | 34 | % | 34 | % | ||||||
State
and local taxes (net of federal tax benefit)
|
11 | — | 11 | |||||||||
Losses
not providing benefits
|
— | (34 | ) | — | ||||||||
45 | % | 0 | % | 45 | % |
Page
|
|
Consolidated
Balance Sheets
|
F28
|
Consolidated
Statements of Operations and Comprehensive Income(Loss)
|
F29
|
Consolidated
Statements of Changes in Equity
|
F30
|
Consolidated
Statements of Cash Flows
|
F31
|
Notes
to Consolidated Financial Statements
|
F32
|
March
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
|
$ | 12,941,200 | $ | 12,213,131 | ||||
Accounts
receivable
|
1,447,037 | 1,881,961 | ||||||
Other
receivables and prepaid expenses
|
749,734 | 271,776 | ||||||
Other
receivables from TV Stations
|
906,531 | 535,631 | ||||||
Loan
receivable from related parties
|
1,311,111 | 311,111 | ||||||
Total
current assets
|
17,355,613 | 15,213,610 | ||||||
PROPERTY
& EQUIPMENT, NET
|
132,988 | 95,741 | ||||||
PROGRAM
RIGHTS, NET
|
135,434 | 180,352 | ||||||
PROGRAM
INVENTORY
|
2,408,145 | 1,566,285 | ||||||
DEFERRED
FINANCING COSTS
|
1,146,886 | 1,614,357 | ||||||
INTANGIBLE
ASSETS, NET
|
27,307,154 | 27,598,987 | ||||||
TOTAL
ASSETS
|
$ | 48,486,220 | $ | 46,269,332 | ||||
LIABILITIES
AND EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$ | 598,694 | $ | 421,701 | ||||
Customer
deposits
|
292,047 | 312,446 | ||||||
Accrued
interest
|
1,791,468 | 1,267,334 | ||||||
Other
payable
|
555,247 | 13,204 | ||||||
Other
payable to TV Stations
|
15,210,862 | 16,110,516 | ||||||
Accrued
liabilities
|
2,706,513 | 2,121,751 | ||||||
Due
to related parties
|
503,442 | 329,280 | ||||||
Notes
payable, net
|
23,231,039 | 24,808,730 | ||||||
Total
current liabilities
|
44,889,312 | 45,384,962 | ||||||
DEFERRED
TAX LIABILITIES
|
678,374 | 312,728 | ||||||
TOTAL
LIABILITIES
|
45,567,686 | 45,697,690 | ||||||
EQUITY
|
||||||||
Class
A Convertible Preferred Shares, net of issuance costs ($0.0005 par value;
1,050,000 shares authorized, 980,000 shares issued and outstanding at
March 31, 2009 and December 31, 2008; liquidation preference of
$9,800)
|
490 | 490 | ||||||
Common
stock at $0.0005 par value; 1,900,000 shares authorized, issued and
outstanding at March 31, 2009 and December 31, 2008
|
950 | 950 | ||||||
Additional
paid-in capital
|
3,951,599 | 3,951,599 | ||||||
Accumulated
deficit
|
(4,470,210 | ) | (4,568,284 | ) | ||||
Accumulated
other comprehensive loss
|
(56,347 | ) | (70,920 | ) | ||||
Total
shareholders' deficit
|
(573,518 | ) | (686,165 | ) | ||||
Non-controlling
interest
|
3,492,052 | 1,257,807 | ||||||
Total
equity
|
2,918,534 | 571,642 | ||||||
TOTAL
LIABILITIES AND EQUITY
|
$ | 48,486,220 | $ | 46,269,332 |
For
the three months ended
|
||||||||
March
31,
2009
|
March
31,
2008
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
NET
REVENUE
|
4,962,684
|
-
|
||||||
COST
OF REVENUE
|
965,839
|
-
|
||||||
Gross
profit
|
3,996,844
|
-
|
||||||
OPERATING
EXPENSES
|
||||||||
Selling
expense
|
33,681
|
-
|
||||||
General
and administrative expense
|
1,232,872
|
66,944
|
||||||
1,266,553
|
66,944
|
|||||||
INCOME
(LOSS) FROM OPERATIONS
|
2,730,291
|
(66,944
|
)
|
|||||
OTHER
INCOME (EXPENSE)
|
||||||||
Other
expense
|
(29,243
|
)
|
-
|
|||||
Interest
expense
|
(1,701,109
|
)
|
-
|
|||||
Interest
income
|
14,587
|
-
|
||||||
Gain
on extinguishment of debt
|
1,328,861
|
-
|
||||||
(386,903
|
)
|
-
|
||||||
INCOME
(LOSS) BEFORE INCOME TAX
|
2,343,388
|
(66,944
|
)
|
|||||
INCOME
TAX
|
829,150
|
-
|
||||||
NET
INCOME
|
1,514,238
|
(66,944
|
)
|
|||||
Less:
Net income attributable to the non-controlling interest
|
(1,416,164
|
)
|
-
|
|||||
NET
INCOME (LOSS) ATTRIBUTABLE TO SHAREHOLDERS
|
$ |
98,074
|
$ |
(66,944
|
)
|
|||
OTHER
COMPREHENSIVE INCOME (LOSS)
|
||||||||
Foreign
currency translation adjustment
|
14,573
|
-
|
||||||
COMPREHENSIVE
INCOME (LOSS)
|
$
|
112,647
|
$
|
(66,944
|
)
|
|||
Basic
earnings per common share
|
$
|
0.05
|
$
|
(66.94
|
)
|
|||
Diluted
earnings per common share
|
$
|
0.03
|
$
|
(66.94
|
)
|
|||
Weighted
average shares outstanding
|
1,900,000
|
1,000
|
Accumulated
|
||||||||||||||||||||||||||||||||||||
Other
|
||||||||||||||||||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Additional
|
Accumulated
|
Comprehensive
|
Non-controlling
|
|||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Paid-in
capital
|
Deficit
|
loss
|
Interest
|
Total
|
||||||||||||||||||||||||||||
BALACE
AT MARCH 30, 2007 (INCEPTION)
|
- | $ | - | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||
Issuance
of common stock
|
- | - | 1,000 | 1,000 | - | - | - | 1,000 | ||||||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | (31,220 | ) | - | (31,220 | ) | ||||||||||||||||||||||||||
BALANCE
AT DECEMBER 31, 2007
|
- | $ | - | 1,000 | $ | 1,000 | $ | - | $ | (31,220 | ) | $ | - | $ | $ | (30,220 | ) | |||||||||||||||||||
Cancellation
of shares due to change of share capital structure
|
- | - | (1,000 | ) | (1,000 | ) | 1,000 | - | - | - | ||||||||||||||||||||||||||
Issuance
of shares due to change of share capital structure
|
- | - | 1,900,000 | 950 | (950 | ) | - | - | - | |||||||||||||||||||||||||||
Issuance
of preferred stock, net of issuance cost of $406,902
|
980,000 | 490 | - | - | 3,951,549 | - | - | 3,952,039 | ||||||||||||||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | - | - | - | (70,920 | ) | (70,920 | ) | ||||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | (4,537,064 | ) | - | 1,257,807 | (3,279,257 | ) | |||||||||||||||||||||||||
BALANCE
AT DECEMBER 31, 2008
|
980,000 | $ | 490 | 1,900,000 | $ | 950 | $ | 3,951,599 | $ | (4,568,284 | ) | $ | (70,920 | ) | $ | 1,257,807 | $ | 571,642 | ||||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | - | - | - | 14,573 | - | 14,573 | |||||||||||||||||||||||||||
Additional
contribution from non-controlling
interest
|
- | - | - | - | - | - | - | 818,081 | 818,081 | |||||||||||||||||||||||||||
Net
income
|
- | - | - | - | - | 98,074 | - | 1,416,164 | 1,514,238 | |||||||||||||||||||||||||||
BALANCE
AT March 31, 2009 (unaudited)
|
980,000 | $ | 490 | 1,900,000 | $ | 950 | $ | 3,951,599 | $ | (4,470,210 | ) | $ | (56,347 | ) | $ | 3,492,052 | $ | 2,918,534 |
For
the three months
ended
March 31,
2009
|
For
the three months
ended
March 31, 2008
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
income (loss)
|
$ | 1,514,238 | $ | (66,944 | ) | |||
Adjustments
to reconcile net income (loss) from operations to net cash provided by
(used in) operating activities
|
||||||||
Depreciation
and amorization
|
381,193 | - | ||||||
Amortization
of debt discount and deferred financing cost
|
1,022,872 | - | ||||||
Provision
for deferred income tax
|
365,646 | - | ||||||
Gain
on extinguishment of debt
|
(1,328,861 | ) | - | |||||
Increase
(decrease) in assets and liabilities
|
||||||||
Accounts
receivable
|
434,924 | - | ||||||
Program
inventory
|
(841,860 | ) | - | |||||
Other
receivable -TV Stations
|
(370,900 | ) | - | |||||
Other
receivable and prepaid expense
|
(477,958 | ) | - | |||||
Accounts
payable
|
176,993 | - | ||||||
Customer
deposits
|
(20,399 | ) | - | |||||
Accrued
liabilities
|
584,762 | 23,602 | ||||||
Other
payable
|
542,043 | - | ||||||
Accrual
interest
|
678,236 | - | ||||||
Other
payable - TV Stations
|
(899,654 | ) | - | |||||
Net
cash provided by (used in) operating activities
|
1,761,275 | (43,342 | ) | |||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Loan
receivable from related parties
|
(1,000,000 | ) | - | |||||
Purchase
of property and equipment
|
(49,524 | ) | - | |||||
Net
cash used in investing activities
|
(1,049,524 | ) | - | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Due
to related parties
|
174,162 | 54,500 | ||||||
Extinguishment
of promissary notes
|
(958,333 | ) | - | |||||
Capital
contribution from non-controlling interest
|
818,081 | - | ||||||
Net
cash provided by financing activities
|
33,910 | 54,500 | ||||||
EXCHANGE
RATE EFFECT ON CASH
|
(17,592 | ) | - | |||||
NET
INCREASE IN CASH
|
745,661 | 11,158 | ||||||
CASH
- BEGINNING OF PERIOD
|
12,213,131 | 28,670 | ||||||
CASH
- END OF PERIOD
|
$ | 12,941,200 | $ | 39,828 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$ | - | $ | - | ||||
Income
taxes
|
$ | 24,320 | $ | - | ||||
Deferred
financing costs included in accrued liabilities
|
$ | 960,000 | $ |
Leasehold
improvement
|
3
years
|
Furniture,
fixtures and equipment
|
5
years
|
Computer
software
|
1
year
|
March 31, 2009
|
December 31, 2008
|
|||||||
(unaudited)
|
||||||||
Prepaid
program inventory
|
$ | 637,044 | $ | 201,599 | ||||
Deposits
|
33,622 | 33,580 | ||||||
Prepaid
expenses
|
51,028 | 22,609 | ||||||
Due
from staff
|
28,040 | 13,988 | ||||||
$ | 749,734 | $ | 271,776 |
March 31, 2009
|
December 31, 2008
|
|||||||
(unaudited)
|
||||||||
At
cost:
|
||||||||
Leasehold
improvements
|
$ | 59,038 | $ | 57,326 | ||||
Furniture,
fixtures and equipment
|
74,684 | 36,018 | ||||||
Computer
software
|
9,264 | 2,797 | ||||||
Total
|
$ | 142,986 | $ | 96,141 | ||||
Less:
accumulated depreciation
|
(9,998 | ) | (400 | ) | ||||
Net
book value
|
$ | 132,988 | $ | 95,741 |
March 31, 2009
|
December 31, 2008
|
|||||||
(unaudited)
|
||||||||
Program
rights
|
$ | 180,579 | $ | 180,352 | ||||
Less:
accumulated amortization
|
(45,145 | ) | - | |||||
$ | 135,434 | $ | 180,352 | |||||
Intangible
assets
|
$ | 28,304,872 | $ | 28,269,358 | ||||
Less:
accumulated amortization
|
(997,718 | ) | (670,371 | ) | ||||
$ | 27,307,154 | $ | 27,598,987 |
March 31, 2009
|
December 31, 2008
|
|||||||
(unaudited)
|
||||||||
Deposits
from advertising agencies
|
$ | 555,101 | $ | 8,754 | ||||
Others
|
146 | 4,450 | ||||||
$ | 555,247 | $ | 13,204 |
March 31, 2009
|
December 31, 2008
|
|||||||
(unaudited)
|
||||||||
Other
payable to PRC TV Stations for purchase of intangible assets under the
Asset Transfer Agreement
|
$ | 13,585,369 | $ | 14,881,387 | ||||
Others
payable to Kunming Television Station
|
1,482,962 | 1,187,459 | ||||||
Other
payable to China Yellow River Television Station
|
142,531 | 41,670 | ||||||
$ | 15,210,862 | $ | 16,110,516 |
March 31, 2009
|
December 31, 2008
|
|||||||
(unaudited)
|
||||||||
Placement
fee payable
|
$ | 960,000 | $ | 960,000 | ||||
Income
tax payable
|
764,568 | 324,871 | ||||||
Business
and other taxes payable
|
387,457 | 306,376 | ||||||
Accrued
expenses
|
583,898 | 458,021 | ||||||
Accrued
salary
|
10,590 | 72,483 | ||||||
$ | 2,706,513 | $ | 2,121,751 |
March 31, 2009
|
December 31, 2008
|
|||||||
(unaudited)
|
||||||||
Notes
payable
|
$ | 25,491,249 | $ | 27,990,200 | ||||
Less:
Unamortized discount
|
(2,260,210 | ) | (3,181,470 | ) | ||||
$ | 23,231,039 | $ | 24,808,730 |
Three
months ended
|
||||||||
March 31, 2009
|
March 31, 2008
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Current
tax
|
$ | 463,950 | $ | - | ||||
Deferred
tax
|
365,200 | - | ||||||
$ | 829,150 | $ | - |
Three
months ended
|
||||||||
March 31, 2009
|
March 31, 2008
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Expected
income tax at PRC statutory rate 25%
|
$ | 585,847 | $ | - | ||||
Add:
Parent company’s expenses not subject to PRC tax
|
206,393 | - | ||||||
Add:
Losses at subsidiaries
|
36,899 | - | ||||||
Permanent
difference
|
11 | - | ||||||
Income
tax expense
|
$ | 829,150 | $ | - |
March 31, 2009
|
December 31, 2008
|
|||||||
(unaudited)
|
||||||||
Deferred
tax assets – foreign NOL
|
$ | 94,762 | $ | 57,863 | ||||
Deferred
tax assets – intangible assets
|
31,858 | 31,818 | ||||||
Total
deferred tax assets
|
126,620 | 89,681 | ||||||
Less:
valuation allowance
|
(126,620 | ) | (89,681 | ) | ||||
Net
deferred tax assets
|
$ | - | $ | - | ||||
Deferred
tax liabilities – intangible assets and
|
||||||||
Program
inventory
|
$ | 678,374 | $ | 312,728 | ||||
Net
deferred tax liabilities
|
$ | 678,374 | $ | 312,728 |
Three
months ended
|
||||||||
March 31, 2009
|
March 31, 2008
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Kunming
Fengyun Advertising Ltd.
|
23.2 | % | 0 | % | ||||
Yunnan
Hua Nian Advertising Ltd.
|
15.3 | % | 0 | % | ||||
Qunyi
Media Group
|
14.4 | % | 0 | % |
Remainder
of 2009
|
$ | 176,488 | ||
2010
|
182,748 | |||
2011
|
101,140 | |||
2012
|
49,317 | |||
2013
|
24,009 | |||
Thereafter
|
16,576 | |||
$ | 550,278 |
Page
|
||||
Report of Independent Registered Public Accounting Firm |
F-48
|
|||
Consolidated
Balance Sheets
|
F-49
|
|||
Consolidated
Statements of Operations and Comprehensive Loss
|
F-50
|
|||
Consolidated
Statements of Shareholders’ Deficit
|
F-51
|
|||
Consolidated
Statements of Cash Flows
|
F-52
|
|||
Notes
to Consolidated Financial Statements
|
F-53
|
December 31,
2008
|
December 31,
2007
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
|
$ | 12,213,131 | $ | 28,670 | ||||
Accounts
receivable
|
2,079,139 | — | ||||||
Deferred
transaction costs
|
— | 8,061 | ||||||
Other
receivables and prepaid expense
|
271,776 | — | ||||||
Other
receivables from TV Stations
|
338,453 | — | ||||||
Loan
receivable from related parties
|
311,111 | — | ||||||
Total
current assets
|
15,213,610 | 36,731 | ||||||
PROPERTY
& EQUIPMENT, NET
|
95,741 | — | ||||||
PROGRAM
RIGHTS, NET
|
180,352 | — | ||||||
PROGRAM
INVENTORY
|
1,566,285 | — | ||||||
DEFERRED
FINANCING COSTS
|
1,614,357 | — | ||||||
INTANGIBLE
ASSETS, NET
|
27,598,987 | — | ||||||
TOTAL
ASSETS
|
$ | 46,269,332 | $ | 36,731 | ||||
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$ | 421,701 | $ | — | ||||
Customer
deposits
|
312,446 | — | ||||||
Accrued
interest
|
1,267,334 | — | ||||||
Other
payable
|
13,204 | — | ||||||
Other
payable to TV Stations
|
16,110,516 | — | ||||||
Accrued
liabilities
|
2,121,751 | — | ||||||
Due
to related parties
|
329,280 | 66,951 | ||||||
Notes
payable, net
|
24,808,730 | — | ||||||
Total
current liabilities
|
45,384,962 | 66,951 | ||||||
DEFERRED
TAX LIABILITIES
|
312,728 | — | ||||||
TOTAL
LIABILITIES
|
45,697,690 | 66,951 | ||||||
NON-CONTROLLING
INTEREST
|
1,257,807 | — | ||||||
SHAREHOLDERS'
DEFICIT
|
||||||||
Class
A Convertible Preferred Shares, net of issuance costs ($0.0005 par value;
1,050,000 shares authorized, 980,000 shares issued and outstanding at
December 31, 2008; liquidation preference of $9,800)
|
490 | |||||||
Common
stock at $0.0005 par value; 1,900,000 shares authorized, issued and
outstanding at December 31, 2008
|
950 | 1,000 | ||||||
Additional
paid-in capital
|
3,951,599 | — | ||||||
Accumulated
deficit
|
(4,568,284 | ) | (31,220 | ) | ||||
Accumulated
other comprehensive loss
|
(70,920 | ) | — | |||||
TOTAL
SHAREHOLDERS' DEFICIT
|
(686,165 | ) | (30,220 | ) | ||||
TOTAL
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
$ | 46,269,332 | $ | 36,731 |
For the
year ended December 31,
2008
|
Period from
March 30, 2007 (Inception) to December 31,
2007
|
|||||||
NET
REVENUE
|
$ | 4,344,012 | — | |||||
COST
OF REVENUE
|
950,257 | — | ||||||
Gross
profit
|
3,393,755 | — | ||||||
OPERATING
EXPENSES
|
||||||||
Selling
expense
|
41,637 | |||||||
General
and administrative expense
|
3,223,046 | 31,220 | ||||||
3,264,683 | 31,220 | |||||||
INCOME
(LOSS) FROM OPERATIONS
|
129,072 | (31,220 | ) | |||||
OTHER
INCOME (EXPENSE)
|
||||||||
Other
expense
|
(5,723 | ) | — | |||||
Interest
expense
|
(3,027,511 | ) | — | |||||
Interest
income
|
132,180 | — | ||||||
(2,901,054 | ) | — | ||||||
NET
LOSS BEFORE INCOME TAX
|
(2,771,982 | ) | (31,220 | ) | ||||
INCOME
TAX
|
637,691 | — | ||||||
NET
LOSS BEFORE NON-CONTROLLING INTEREST
|
(3,409,673 | ) | (31,220 | ) | ||||
NON-CONTROLLING
INTEREST
|
(1,127,391 | ) | — | |||||
NET
LOSS
|
$ | (4,537,064 | ) | (31,220 | ) | |||
OTHER
COMPREHENSIVE LOSS
|
||||||||
Foreign
currency translation adjustment
|
(70,920 | ) | — | |||||
COMPREHENSIVE
LOSS
|
$ | (4,607,984 | ) | (31,220 | ) | |||
Basic
and diluted loss per common share
|
$ | (4.09 | ) | (31.00 | ) | |||
Weighted
average shares outstanding
|
1,108,767 | 1,000 |
Preferred
Stock
|
Common
Stock
|
Additional
|
Accumulated
|
Accummulated
Other
Comprehensive
|
||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Paid-in
capital
|
Deficit
|
loss
|
Total
|
|||||||||||||||||||||||||
BALACE AT MARCH 30, 2007 (INCEPTION)
|
— | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
Issuance of common stock
|
— | — | 1,000 | 1,000 | — | — | — | 1,000 | ||||||||||||||||||||||||
Net loss
|
— | — | — | — | — | (31,220 | ) | — | (31,220 | ) | ||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2007
|
— | $ | — | $ | 1,000 | $ | 1,000 | $ | — | $ | (31,220 | ) | $ | — | $ | (30,220 | ) | |||||||||||||||
Cancellation of shares due to change of
share capital structure
|
— | — | (1,000 | ) | (1,000 | ) | 1,000 | — | — | — | ||||||||||||||||||||||
Issuance of shares due to change of
share capital structure
|
— | — | 1,900,000 | 950 | (950 | ) | — | — | — | |||||||||||||||||||||||
Issuance of preferred stock, net of
issuance cost of $406,902
|
980,000 | 490 | — | — | 3,951,549 | — | — | 3,952,039 | ||||||||||||||||||||||||
Foreign currency translation adjustment
|
— | — | — | — | — | — | (70,920 | ) | (70,920 | ) | ||||||||||||||||||||||
Net loss
|
— | — | — | — | — | (4,537,064 | ) | — | (4,537,064 | ) | ||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2008
|
980,000 | $ | 490 | $ | 1,900,000 | $ | 950 | $ | 3,951,599 | $ | (4,568,284 | ) | $ | (70,920 | ) | $ | (686,165 | ) |
For the year ended
December 31,
2008
|
Period
from
March
30, 2007
(Inception)
to
December
31, 2007
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
loss
|
$ | (4,537,064 | ) | $ | (31,220 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating activities
|
||||||||
Depreciation
and amortization
|
670,867 | — | ||||||
Amortization
of debt discount and deferred financing cost
|
1,760,177 | — | ||||||
Net
loss attributable to non-controlling interest
|
1,127,391 | — | ||||||
Provision
for deferred income tax
|
312,773 | — | ||||||
Increase
(decrease) in assets and liabilities
|
||||||||
Deferred
transaction cost
|
8,061 | — | ||||||
Accounts
receivable
|
(2,079,436 | ) | — | |||||
Program
inventory
|
(1,566,509 | ) | — | |||||
Other
receivable -TV Stations
|
(338,502 | ) | — | |||||
Other
receivable and prepaid expense
|
(271,737 | ) | — | |||||
Accounts
payable
|
421,761 | — | ||||||
Customer
deposits
|
312,491 | — | ||||||
Accrued
liabilities
|
1,161,851 | — | ||||||
Other
payable
|
13,205 | — | ||||||
Accrual
interest
|
1,267,334 | — | ||||||
Other
payable - TV Stations
|
1,229,305 | — | ||||||
Net
cash used in operating activities
|
(508,032 | ) | (31,220 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Loan
receivable
|
(311,111 | ) | — | |||||
Purchase
of program rights and contractual relationship
|
(13,572,380 | ) | — | |||||
Purchase
of property and equipment
|
(96,154 | ) | — | |||||
Net
cash used in investing activities
|
(13,979,645 | ) | — | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Due
to related parties
|
261,324 | 66,951 | ||||||
Gross
proceeds from bridge loan financing
|
28,000,000 | — | ||||||
Direct
issuance costs for bridge debt and equity offering
|
(1,653,765 | ) | — | |||||
Deferred
transaction costs
|
— | (8,061 | ) | |||||
Capital
contribution from non-controlling interest
|
130,447 | |||||||
Proceeds
from issuance of common stock
|
— | 1,000 | ||||||
Net
cash provided by financing activities
|
26,738,006 | 59,890 | ||||||
EXCHANGE
RATE EFFECT ON CASH
|
(65,868 | ) | — | |||||
NET
INCREASE IN CASH
|
12,250,329 | 28,670 | ||||||
CASH
- BEGINNING OF YEAR
|
28,670 | — | ||||||
CASH
- END OF YEAR
|
$ | 12,213,131 | $ | 28,670 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
||||||||
Cash
paid during the year for:
|
||||||||
Interest
|
$ | — | $ | — | ||||
Income
taxes
|
$ | — | $ | — | ||||
Deferred
financing costs included in accrued liabilities
|
$ | 960,000 | $ | — |
Leasehold
improvements
|
3
years
|
Furniture,
fixtures and equipment
|
5
years
|
Computer
software
|
1
year
|
December
31,
2008
|
December
31,
2007
|
|||||||
Prepaid
program inventory
|
$ | 201,599 | $ | — | ||||
Deposits
|
33,580 | — | ||||||
Prepaid
expenses
|
22,609 | — | ||||||
Due
from staff
|
13,988 | — | ||||||
$ | 271,776 | $ | — |
2008
|
2007
|
|||||||
At
cost:
|
||||||||
Leasehold
improvements
|
$ | 57,326 | $ | — | ||||
Furniture,
fixtures and equipment
|
36,018 | — | ||||||
Computer
software
|
2,797 | — | ||||||
Total
|
$ | 96,141 | $ | — | ||||
Less:
accumulated depreciation
|
(400 | ) | — | |||||
Net
book value
|
$ | 95,741 | $ | — |
2008
|
2007
|
|||||||
Program
rights
|
$ | 180,352 | $ | — | ||||
Intangible
assets
|
$ | 28,269,358 | $ | — | ||||
Less:
accumulated amortization
|
(670,371 | ) | ||||||
$ | 27,598,987 | $ | — |
2008
|
2007
|
|||||||
Deposits
from advertising agencies
|
$ | 8,754 | $ | — | ||||
Others
|
4,450 | — | ||||||
$ | 13,204 | $ | — |
2008
|
2007
|
|||||||
Other
payable to PRC TV Stations for purchase of program rights under the Asset
Transfer Agreements
|
$ | 14,881,387 | $ | — | ||||
Other
payable to Kunming Television Station
|
1,187,459 | — | ||||||
Other
payable to China Yellow River Television Station
|
41,670 | — | ||||||
$ | 16,110,516 | $ | — |
2008
|
2007
|
|||||||
Placement
fee payable
|
$ | 960,000 | $ | — | ||||
Income
tax payable
|
324,871 | — | ||||||
Business
and other taxes payable
|
306,376 | |||||||
Accrued
expenses
|
458,021 | — | ||||||
Accrued
salary
|
72,483 |
December
31,
2008
|
December
31,
2007
|
|||||||
Notes
payable
|
$ | 27,990,200 | $ | — | ||||
Less:
Unamortized discount
|
(3,181,470 | ) | — | |||||
Notes
payable, net
|
$ | 24,808,730 | $ | — |
December
31,
2008
|
December
31,
2007
|
|||||||
Current
|
$ | 324,963 | $ | — | ||||
Deferred
tax
|
312,728 | — | ||||||
$ | 637,691 | $ | — |
December
31,
2008
|
December
31,
2007
|
|||||||
Expected
income tax benefit at PRC statutory rate 25%
|
$ | (692,996 | ) | $ | — | |||
Less:
Parent Company's expenses not subject to PRC tax
|
1,280,729 | — | ||||||
Less:
Losses at subsidiaries
|
57,863 | — | ||||||
Permanent
difference
|
(7,906 | ) | ||||||
Income
tax expense
|
$ | 637,691 | $ | — |
December
31,
2008
|
December
31,
2007
|
|||||||
Deferred
tax assets - foreign NOL
|
$ | 57,863 | $ | — | ||||
Deferred
tax assets - intangible assets
|
31,818 | — | ||||||
Total
deferred tax assets
|
89,681 | — | ||||||
Less:
valuation allowance
|
(89,681 | ) | — | |||||
Net
deferred tax assets
|
$ | — | $ | — | ||||
Deferred
tax liability - intangible assets and program inventory
|
$ | (312,728 | ) | $ | — | |||
Net
deferred tax liability
|
$ | (312,728 | ) | $ | — |
December
31,
2008
|
December
31,
2007
|
|||||||
Kunming
Fengyun Advertisement Ltd.
|
26.3 | % | 0 | % | ||||
Yunnan
Hua Nian Advertisement Ltd.
|
16.6 | % | 0 | % | ||||
Qunyi
Media Group
|
10.5 | % | 0 | % | ||||
Yunnan
Communications Radio and Television Advertisement Ltd.
|
10.5 | % | 0 | % |
December
31,
|
2008
|
|||
2009
|
$ | 307,142 | ||
2010
|
238,907 | |||
2011
|
148,733 | |||
2012
|
49,255 | |||
2013
|
23,979 | |||
Thereafter
|
32,492 | |||
$ | 800,508 |
Pages
|
|
Report
of Independent Registered Public Accounting Firm
|
F-69
|
Combined
Balance Sheets
|
F-70
|
Combined
Statements of Operations
|
F-71
|
Combined
Statements of Equity
|
F-72
|
Combined
Statements of Cash Flows
|
F-73
|
Notes
to Combined Financial Statements
|
F-74
- F-83
|
December
31, 2008
|
December
31, 2007
|
|||||||
USD
|
USD
|
|||||||
(Audited)
|
(Restated)
|
|||||||
ASSETS
|
||||||||
Current
Assets: -
|
||||||||
Cash
|
$ | - | $ | 116,055 | ||||
Accounts
Receivable, net
|
2,588,077 | 1,677,703 | ||||||
Receivable
from Television Stations
|
- | 1,858,956 | ||||||
Other
Receivables
|
39,146 | 17,684 | ||||||
Total
Current Assets
|
2,627,223 | 3,670,398 | ||||||
TOTAL
ASSETS
|
$ | 2,627,223 | $ | 3,670,398 | ||||
LIABILITIES AND
EQUITY
|
||||||||
Current
Liabilities: -
|
||||||||
Accrued
Expenses
|
$ | 530,391 | $ | 410,376 | ||||
Due
to Television Stations
|
323,081 | - | ||||||
Customer
Deposits
|
858,068 | 2,584,941 | ||||||
TOTAL
LIABILITIES
|
1,711,540 | 2,995,317 | ||||||
TOTAL
EQUITY
|
915,683 | 675,081 | ||||||
TOTAL
LIABILITIES AND EQUITY
|
$ | 2,627,223 | $ | 3,670,398 |
Year
ended
|
Year
ended
|
|||||||
December
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
USD
|
USD
|
|||||||
(Audited)
|
(Restated)
|
|||||||
Revenue
|
$ | 13,129,328 | $ | 17,715,149 | ||||
Cost
of Revenue
|
(3,564,532 | ) | (3,572,541 | ) | ||||
Gross
Profit
|
9,564,796 | 14,142,608 | ||||||
Other
Income
|
- | 28,802 | ||||||
Selling,
General and
|
||||||||
Administrative
Expenses
|
(2,468,316 | ) | (1,712,931 | ) | ||||
Income
before Income Taxes
|
7,096,480 | 12,458,479 | ||||||
Income
Taxes
|
- | - | ||||||
Net
Income
|
$ | 7,096,480 | $ | 12,458,479 |
Unit
equity excluding accumulated other comprehensive income
|
Accumulated
other comprehensive income
|
Total
equity
|
||||||||||
USD
|
USD
|
USD
|
||||||||||
Balance,
December 31, 2006 (Restated)
|
- | 251,539 | 251,539 | |||||||||
Net
income
|
12,458,479 | - | 12,458,479 | |||||||||
Distribution
to Television Stations
|
(12,458,479 | ) | - | (12,458,479 | ) | |||||||
Foreign
Currency Translation Adjustment
|
- | 423,542 | 423,542 | |||||||||
Balance,
December 31, 2007 (Restated)
|
- | 675,081 | 675,081 | |||||||||
Net
income
|
7,096,480 | - | 7,096,480 | |||||||||
Distribution
to Television Stations
|
(7,096,480 | ) | (7,096,480 | ) | ||||||||
Foreign
Currency Translation Adjustment
|
- | 240,602 | 240,602 | |||||||||
Balance,
December 31, 2008
|
- | 915,683 | 915,683 |
Year
ended
|
Year
ended
|
|||||||
December
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
USD
|
USD
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 7,096,480 | $ | 12,458,479 | ||||
Changes
in assets and liabilities:
|
||||||||
Accounts
receivable, net
|
(910,374 | ) | 300,611 | |||||
Receivable
from Television Station
|
1,858,956 | (1,858,956 | ) | |||||
Other
Receivables
|
(21,462 | ) | (17,684 | ) | ||||
Accounts
Payable
|
- | (24,257 | ) | |||||
Accrued
expenses
|
120,015 | 356,229 | ||||||
Due
to Television Station
|
323,081 | (27,089 | ) | |||||
Customer
Deposits
|
(1,726,873 | ) | 513,158 | |||||
Net
cash provided
by operating activities
|
6,739,823 | 11,700,491 | ||||||
Cash
flows from financing activities:
|
||||||||
Distribution
to Television Stations
|
(7,096,480 | ) | (12,458,479 | ) | ||||
Net
cash used in financing activities
|
(7,096,480 | ) | (12,458,479 | ) | ||||
Effect
of foreign exchange rate changes
|
240,602 | 423,542 | ||||||
Net
decrease in cash
|
(116,055 | ) | (334,446 | ) | ||||
Cash,
beginning of period
|
116,055 | 450,501 | ||||||
Cash,
end of period
|
$ | - | $ | 116,055 | ||||
Supplemental
disclosures of cash flow and non-cash information:
|
||||||||
Interest
paid
|
$ | - | $ | - | ||||
Income
tax paid
|
$ | - | $ | - |
Kunming
Fengyun Advertising Company
|
||||||||
(昆明風雲廣告公司)
|
$ | 3,130,020 | 23.84 | % | ||||
Yunnan
Huanian Advertising Company
|
||||||||
(雲南華年廣告公司)
|
2,330,169 | 17.74 | % | |||||
$ | 5,460,189 | 41.88 | % |
Pages
|
|
Report
of Independent Registered Public Accounting Firm
|
F-86
|
|
|
Combined
Balance Sheets
|
F-87
|
Combined
Statements of Operations
|
F-88
|
Combined
Statements of Equity
|
F-89
|
Combined
Statements of Cash Flows
|
F-90
|
Notes
to Combined Financial Statements
|
F-91
- F-100
|
UHY
Vocation HK CPA Limited
|
Certified
Public Accountants
|
Hong
Kong, 22 JAN 2009
|
THE
PEOPLE'S REPUBLIC OF CHINA
|
December
31, 2007
|
December
31, 2006
|
December
31, 2005
|
||||||||||
USD
|
USD
|
USD
|
||||||||||
(Restated)
|
(Restated)
|
|||||||||||
ASSETS
|
||||||||||||
Current
Assets: -
|
||||||||||||
Cash
|
$ | 116,055 | $ | 450,501 | $ | 493,544 | ||||||
Accounts
Receivable, net
|
1,677,703 | 1,978,314 | 1,788,481 | |||||||||
Receivable
from Television Stations
|
1,858,956 | - | - | |||||||||
Other
Receivables
|
17,684 | - | - | |||||||||
Total
Current Assets
|
3,670,398 | 2,428,815 | 2,282,025 | |||||||||
TOTAL
ASSETS
|
$ | 3,670,398 | $ | 2,428,815 | $ | 2,282,025 | ||||||
LIABILITIES AND
EQUITY
|
||||||||||||
Current
Liabilities: -
|
||||||||||||
Accounts
Payable
|
$ | - | $ | 24,257 | $ | 23,691 | ||||||
Accrued
Expenses
|
410,376 | 54,147 | 60,524 | |||||||||
Due
to Television Stations
|
- | 27,089 | 1,165,403 | |||||||||
Customer
Deposits
|
2,584,941 | 2,071,783 | 892,332 | |||||||||
TOTAL
LIABILITIES
|
2,995,317 | 2,177,276 | 2,141,950 | |||||||||
TOTAL
EQUITY
|
675,081 | 251,539 | 140,075 | |||||||||
TOTAL
LIABILITIES AND EQUITY
|
$ | 3,670,398 | $ | 2,428,815 | $ | 2,282,025 |
Year
ended
|
Year
ended
|
Year
ended
|
||||||||||
December
31,
|
December
31,
|
December
31,
|
||||||||||
2007
|
2006
|
2005
|
||||||||||
USD
|
USD
|
USD
|
||||||||||
(Restated)
|
(Restated)
|
|||||||||||
Revenue
|
$ | 17,715,149 | $ | 14,861,899 | $ | 14,406,251 | ||||||
Cost
of Revenue
|
(3,572,541 | ) | (3,467,815 | ) | (1,925,034 | ) | ||||||
Gross
Profit
|
14,142,608 | 11,394,084 | 12,481,217 | |||||||||
Other
Income
|
28,802 | 102,261 | 10,337 | |||||||||
Selling,
General and
|
||||||||||||
Administrative
Expenses
|
(1,712,931 | ) | (1,607,264 | ) | (1,376,299 | ) | ||||||
Income
before Income Taxes
|
12,458,479 | 9,889,081 | 11,115,255 | |||||||||
Income
Taxes
|
- | - | - | |||||||||
Net
Income
|
$ | 12,458,479 | $ | 9,889,081 | $ | 11,115,255 |
Unit
equity excluding accumulated other comprehensive income
|
Accumulated
other comprehensive income
|
Total Equity | ||||||||||
USD
|
USD
|
USD
|
||||||||||
Balance,
December 31, 2004
|
- | - | - | |||||||||
Net
income
|
11,115,255 | - | 11,115,255 | |||||||||
Distribution
to Television Stations
|
(11,115,255 | ) | - | (11,115,255 | ) | |||||||
Foreign
Currency Translation Adjustment
|
- | 140,075 | 140,075 | |||||||||
Balance,
December 31, 2005
|
- | 140,075 | 140,075 | |||||||||
Net
income
|
9,889,081 | - | 9,889,081 | |||||||||
Distribution
to Television Stations
|
(9,889,081 | ) | (9,889,081 | ) | ||||||||
Foreign
Currency Translation Adjustment
|
- | 111,464 | 111,464 | |||||||||
Balance,
December 31, 2006 (Restated)
|
- | 251,539 | 251,539 | |||||||||
Net
income
|
12,458,479 | - | 12,458,479 | |||||||||
Distribution
to Television Stations
|
(12,458,479 | ) | (12,458,479 | ) | ||||||||
Foreign
Currency Translation Adjustment
|
- | 423,542 | 423,542 | |||||||||
Balance,
December 31, 2007 (Restated)
|
- | 675,081 | 675,081 |
Year
ended
|
Year
ended
|
Year
ended
|
||||||||||
December
31,
|
December
31,
|
December
31,
|
||||||||||
2007
|
2006
|
2005
|
||||||||||
USD
|
USD
|
USD
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income
|
$ | 12,458,479 | $ | 9,889,081 | $ | 11,115,255 | ||||||
Changes
in assets and liabilities:
|
||||||||||||
Accounts
receivable, net
|
300,611 | (189,833 | ) | (1,743,722 | ) | |||||||
Receivable
from Television Station
|
(1,858,956 | ) | - | - | ||||||||
Other
Receivables
|
(17,684 | ) | - | - | ||||||||
Accounts
payable
|
(24,257 | ) | 566 | 690,459 | ||||||||
Accrued
expenses
|
356,229 | (6,377 | ) | 59,883 | ||||||||
Due
to Television Station
|
(27,089 | ) | (1,138,314 | ) | 751,765 | |||||||
Customer
Deposits
|
513,158 | 1,179,451 | 542,571 | |||||||||
Net
cash provided
|
||||||||||||
by
operating activities
|
11,700,491 | 9,734,574 | 11,416,211 | |||||||||
Cash
flows from financing activities:
|
||||||||||||
Distribution
to Television Stations
|
(12,458,479 | ) | (9,889,081 | ) | (11,115,255 | ) | ||||||
Net
cash used in financing activities
|
(12,458,479 | ) | (9,889,081 | ) | (11,115,255 | ) | ||||||
Effect
of foreign exchange rate changes
|
423,542 | 111,464 | 140,075 | |||||||||
Net
(decrease)/increase in cash
|
(334,446 | ) | (43,043 | ) | 441,031 | |||||||
Cash,
beginning of period
|
450,501 | 493,544 | 52,513 | |||||||||
Cash,
end of period
|
$ | 116,055 | $ | 450,501 | $ | 493,544 | ||||||
Supplemental
disclosures of cash flow and non-cash information:
|
||||||||||||
Interest
paid
|
$ | - | $ | - | $ | - | ||||||
Income
tax paid
|
$ | - | $ | - | $ | - |
(a)
|
Cash
|
(b)
|
Use
of Estimates
|
(c)
|
Concentrations
of Credit Risk
|
(d)
|
Receivables
|
(e)
|
Income
Tax
|
(f)
|
Revenue
Recognition
|
(g)
|
Cost
of Revenue
|
(h)
|
Selling,
General and Administrative Expenses
|
(i)
|
Foreign
Currency Translation
|
(j)
|
Business
Tax
|
(k)
|
Recent
Accounting Pronouncements
|
(k)
|
Recent
Accounting Pronouncements
(……/cont'd)
|
(k)
|
Recent
Accounting Pronouncements
(……/cont'd)
|
(l)
|
Reclassification
|
(m)
|
Agency
Commission
|
Page
|
||
THE
REDOMESTICATION MERGER
|
2
|
|
1.1
|
The
Redomestication Merger
|
2
|
1.2
|
Effective
Time
|
2
|
1.3
|
Effect
of the Redomestication Merger
|
2
|
1.4
|
Memorandum
and Articles of Association
|
2
|
1.5
|
Directors
and Officers of the China Networks Surviving Corporation
|
3
|
1.6
|
Effect
on Capital Stock
|
3
|
1.7
|
Surrender
of Certificates
|
4
|
1.8
|
Lost,
Stolen or Destroyed Certificates
|
4
|
1.9
|
Status
of Redomestication Merger for Tax Purposes
|
5
|
1.10
|
Taking
of Necessary Action; Further Action
|
5
|
ARTICLE II
|
THE
BUSINESS COMBINATION
|
5
|
2.1
|
Business
Combination
|
5
|
2.2
|
Closing;
Effective Time
|
5
|
2.3
|
Effect
of the Business Combination
|
6
|
2.4
|
[Intentionally
Omitted]
|
6
|
2.5
|
Memorandum
and Articles of Association
|
6
|
2.6
|
Directors
of China Networks II Surviving Corporation
|
6
|
2.7
|
Effect
on Capital Stock
|
6
|
2.8
|
Surrender
of Certificates
|
10
|
2.9
|
Lost,
Stolen or Destroyed Certificates
|
11
|
2.10
|
Status
of Business Combination for Tax Purposes
|
11
|
2.11
|
Taking
of Necessary Action; Further Action
|
11
|
2.12
|
Withholding
Rights
|
11
|
2.13
|
Shares
Subject to Appraisal Rights
|
11
|
2.14
|
Restriction
on Disposal of Shares
|
12
|
2.15
|
Payment
Procedures
|
13
|
ARTICLE III
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
14
|
3.1
|
Organization,
Standing and Power; Framework Agreements
|
14
|
3.2
|
Subsidiaries
|
15
|
3.3
|
Capital
Structure
|
15
|
3.4
|
Authority
|
16
|
3.5
|
No
Conflict
|
16
|
3.6
|
Consents
and Approvals
|
16
|
3.7
|
Financial
Statements
|
17
|
3.8
|
Absence
of Certain Changes
|
17
|
3.9
|
Absence
of Undisclosed Liabilities
|
17
|
Page
|
||
3.10
|
Litigation
|
17
|
3.11
|
Restrictions
on Business Activities
|
18
|
3.12
|
Governmental
Authorization
|
18
|
3.13
|
Title
to Property
|
18
|
3.14
|
Intellectual
Property
|
18
|
3.15
|
Taxes
|
19
|
3.16
|
Employee
Benefit Plans
|
20
|
3.17
|
Labor
Matters
|
20
|
3.18
|
Interested
Party Transactions
|
20
|
3.19
|
Insurance
|
20
|
3.20
|
Material
Company Contracts
|
20
|
3.21
|
Compliance
With Laws
|
22
|
3.22
|
Foreign
Corrupt Practices Act
|
22
|
3.23
|
Money
Laundering Laws
|
23
|
3.24
|
Governmental
Inquiry
|
23
|
3.25
|
Minute
Books
|
23
|
3.26
|
Real
Property
|
23
|
3.27
|
Brokers’
and Finders’ Fees
|
23
|
3.28
|
Vote
Required
|
23
|
3.29
|
Board
Approval
|
23
|
3.30
|
Representations
Complete
|
23
|
ARTICLE IV
|
REPRESENTATIONS
AND WARRANTIES OF PARENT, MERGER SUB I AND MERGER SUB II
|
24
|
4.1
|
Organization,
Standing and Power
|
24
|
4.2
|
Capital
Structure
|
25
|
4.3
|
Authority
|
26
|
4.4
|
No
Conflict
|
27
|
4.5
|
Consents
and Approval
|
27
|
4.6
|
SEC
Documents; Financial Statements
|
28
|
4.7
|
Sarbanes-Oxley
Act of 2002
|
28
|
4.8
|
Absence
of Certain Changes
|
29
|
4.9
|
Absence
of Undisclosed Liabilities
|
29
|
4.10
|
Litigation
|
30
|
4.11
|
Restrictions
on Business Activities
|
30
|
4.12
|
No
Interest in Property
|
30
|
4.13
|
Employee
Benefit Plans
|
30
|
4.14
|
Labor
Matters
|
30
|
4.15
|
Interested
Party Transactions
|
30
|
4.16
|
Insurance
|
30
|
4.17
|
Compliance
With Laws
|
30
|
4.18
|
Brokers’
and Finders’ Fees
|
31
|
Page
|
||
4.19
|
Minute
Books
|
31
|
4.20
|
Vote
Required
|
31
|
4.21
|
Board
Approval
|
31
|
4.22
|
ASE
Quotation
|
31
|
4.23
|
Trust
Account Funds
|
31
|
4.24
|
Representations
Complete
|
32
|
ARTICLE V
|
CONDUCT
PRIOR TO THE BUSINESS COMBINATION EFFECTIVE TIME
|
32
|
5.1
|
Conduct
of Business
|
32
|
5.2
|
Restrictions
on Conduct of Business
|
32
|
5.3
|
Joint
Ventures and Framework Agreements
|
34
|
ARTICLE VI
|
COVENANTS
|
35
|
6.1
|
Merger
Proxy/Prospectus; Special Meeting
|
35
|
6.2
|
Form
8-K
|
36
|
6.3
|
Action
of Company’s Shareholders
|
36
|
6.4
|
Employment
Agreements
|
36
|
6.5
|
Registration
Rights Agreement
|
37
|
6.6
|
Fiscal
Year
|
37
|
ARTICLE VII
|
ADDITIONAL
AGREEMENTS
|
37
|
7.1
|
No
Claim Against Trust Account
|
37
|
7.2
|
Access
to Information
|
37
|
7.3
|
Confidential
Information; Non-Solicitation or Negotiation
|
38
|
7.4
|
Public
Disclosure
|
40
|
7.5
|
Consents;
Cooperation
|
40
|
7.6
|
Legal
Requirements
|
41
|
7.7
|
Blue
Sky Laws
|
41
|
7.8
|
Indemnification
|
41
|
7.9
|
Best
Efforts and Further Assurances
|
42
|
ARTICLE VIII
|
CONDITIONS
TO THE BUSINESS COMBINATION
|
42
|
8.1
|
Conditions
Precedent to the Obligation of the Parent to Consummate the Business
Combination
|
42
|
8.2
|
Conditions
Precedent to the Obligation of the Company to Consummate the Business
Combination
|
46
|
Page
|
||
ARTICLE IX
|
POST-CLOSING
COVENANTS
|
49
|
9.1
|
Mandatory
Registration of Closing Shares
|
49
|
9.2
|
Registration
of Performance Shares
|
49
|
9.3
|
D&O
Insurance
|
49
|
ARTICLE X
|
INDEMNIFICATION;
REMEDIES
|
50
|
10.1
|
Survival
|
50
|
10.2
|
Indemnification
by the Principal Shareholders
|
50
|
10.3
|
Limitations
on Amount
|
51
|
10.4
|
Determining
Damages
|
51
|
ARTICLE XI
|
TERMINATION,
AMENDMENT AND WAIVER
|
51
|
11.1
|
Termination
|
51
|
11.2
|
Effect
of Termination
|
53
|
11.3
|
Expenses
and Termination Fees
|
53
|
11.4
|
Amendment
|
54
|
11.5
|
Extension;
Waiver
|
54
|
ARTICLE XII
|
GENERAL
PROVISIONS
|
54
|
12.1
|
Notices
|
54
|
12.2
|
Interpretation/Definitions
|
56
|
12.3
|
Counterparts
|
56
|
12.4
|
Entire
Agreement; Nonassignability; Parties in Interest
|
56
|
12.5
|
Severability
|
57
|
12.6
|
Remedies
Cumulative; Specific Performance
|
57
|
Governing
Law
|
57
|
|
12.8
|
Rules
of Construction
|
57
|
ALYST
ACQUISITION CORP.
|
|
By:
|
/s/ Michael E. Weksel
|
Name: Michael
E. Weksel
|
|
Title: Chief
Operating Officer and
|
|
Chief
Financial Officer
|
|
CHINA
NETWORKS INTERNATIONAL HOLDINGS LTD.
|
|
By:
|
/s/ Michael E. Weksel
|
Name: Michael
E. Weksel
|
|
Title: Sole
Director
|
|
CHINA
NETWORKS MERGER CO. LTD.
|
|
By:
|
/s/ Michael E. Weksel
|
Name: Michael
E. Weksel
|
|
Title: Sole
Director
|
CHINA
NETWORKS MEDIA, LTD..
|
|
By:
|
/s/ Li Shuangqing
|
Name:
Li Shuangqing
|
|
Title: CEO
and Co-Chairman
|
|
MEDIAINV
LTD.
|
|
By:
|
/s/C.C.N. Ng
|
Name: C.C.N.
Ng
|
|
Title: Director
|
|
KERRY
PROPPER
|
|
/s/ Kerry Propper
|
|
Name:
Kerry Propper
|
|
LI
SHUANGQING
|
|
/s/ Li Shuangqing
|
|
Name:
Li Shuangqing
|
ALYST
ACQUISITION CORP.
|
|
By:
|
/s/ William Weksel
|
Name: William
Weksel
|
|
Title: Chief
Executive Officer
|
|
CHINA
NETWORKS HOLDINGS
INTERNATIONAL
LTD.
|
|
By:
|
/s/ Michael E. Weksel
|
Name: Michael
E. Weksel
|
|
Title: Sole
Director
|
|
CHINA
NETWORKS MERGER CO. LTD.
|
|
By:
|
/s/ Michael E. Weksel
|
Name: Michael
E. Weksel
|
|
Title: Sole
Director
|
CHINA
NETWORKS MEDIA, LTD..
|
|
By:
|
/s/ Li Shuangqing
|
Name:
Li Shuangqing
|
|
Title: CEO
and Co-Chairman
|
|
MEDIAINV
LTD.
|
|
By:
|
/s/ C.C.N. Ng
|
Name: C.C.N.
Ng
|
|
Title: Director
|
|
KERRY
PROPPER
|
|
/s/ Kerry Propper
|
|
Name:
Kerry Propper
|
|
LI
SHUANGQING
|
|
/s/ Li Shuangqing
|
|
Name:
Li Shuangqing
|
ALYST
ACQUISITION CORP.
|
||
By:
|
/s/ Michael E. Weksel | |
Name: Michael
E. Weksel
|
||
Title: Sole
Director
|
CHINA
NETWORKS HOLDINGSINTERNATIONAL LTD.
|
||
By:
|
/s/ Michael E. Weksel | |
Name: Michael
E. Weksel
|
||
Title: Sole
Director
|
||
CHINA
NETWORKS MERGER CO. LTD.
|
||
By: | /s/ Michael E. Weksel | |
Name: Michael
E. Weksel
|
||
Title: Sole
Director
|
CHINA
NETWORKS MEDIA, LTD..
|
||
By: | /s/ Li Shuangqing | |
Name:
Li Shuangqing
|
||
Title: CEO
and Co-Chairman
|
||
MEDIAINV
LTD.
|
||
By: | ||
Name: C.C.N.
Ng
|
||
Title: Director
|
||
KERRY
PROPPER
|
||
/s/ Kerry Propper | ||
Name:
Kerry Propper
|
||
LI
SHUANGQING
|
||
/s/ Li Shuangqing | ||
Name:
Li
Shuangqing
|
1
|
Company
Name
|
1.1
|
The
name of the Company is China Networks International Holdings
Ltd.
|
1.2
|
The
directors or members may from time to time change the Company's name by
Resolution of Directors or Resolution of Members. The directors
shall give notice of such resolution to the registered agent of the
Company, for the registered agent to file an application for change of
name with the Registrar, and any such change will take effect from the
date of the certificate of change of name issued by the
Registrar.
|
1.3
|
A
change of name of the Company shall constitute an amendment of the
Memorandum and Articles and in the event of a resolution being passed to
change the name of the Company, the provisions below in respect of
amendments to the Memorandum and Articles must be complied
with.
|
2
|
Company
Limited by Shares, Liability of
Members
|
2.1
|
The
Company is a company limited by
shares.
|
2.2
|
The
liability of each member is limited to the amount from time to time unpaid
on that member's shares.
|
3
|
Registered
Office
|
3.1
|
The
first registered office of the Company will be situated at Kingston
Chambers, PO Box 173, Road Town, Tortola, British Virgin
Islands.
|
3.2
|
The
directors or members may from time to time change the Company's registered
office by Resolution of Directors or Resolution of Members, provided that
the Company's registered office shall at all times be the office of the
registered agent. The directors shall give notice of such
resolution to the registered agent of the Company, for the registered
agent to file with the Registrar a notice of change of registered office,
and any such change of registered office will take effect from the date of
the registration by the Registrar of such
notice.
|
4
|
Registered
Agent
|
4.1
|
The
first registered agent of the Company will be Maples Finance BVI Limited
of Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin
Islands.
|
4.2
|
The
directors or members may from time to time change the Company's registered
agent by Resolution of Directors or Resolution of Members. The
directors shall give notice of such resolution to the registered agent of
the Company (meaning the existing registered agent), for the registered
agent to file with the Registrar a notice of change of registered agent,
and any such change of registered agent will take effect from the date of
the registration by the Registrar of such
notice.
|
4.3
|
If
the existing registered agent does not file such notice on instruction by
the directors, the directors shall procure that a notice of change of
registered agent is filed with the Registrar by a legal practitioner in
the British Virgin Islands acting on behalf of the Company, and any such
change of registered agent will take effect from the date of the
registration by the Registrar of such
notice.
|
5
|
General
Objects and Powers
|
5.1
|
Subject
to the following provisions of this Memorandum, the objects for which the
Company is established are unrestricted and the Company shall have full
power and authority to carry out any object not prohibited by the Act or any other law of the British Virgin
Islands.
|
5.2
|
The
Company has no power to:
|
(a)
|
carry
on banking or trust business, unless it is licensed to do so under the
Banks and Trust Companies Act,
1990;
|
(b)
|
carry
on business as an insurance or as a reinsurance company, insurance agent
or insurance broker, unless it is licensed or authorised to do so under
the Insurance Act, 1994;
|
(c)
|
carry
on the business of company management unless it is licensed to do so under
the Companies Management Act,
1990;
|
(d)
|
carry
on the business of providing the registered office or the registered agent
for companies incorporated in the British Virgin Islands unless it is
licensed to do so under the Banks and Trust Companies Act, 1990;
or
|
(e)
|
carry
on the business as a mutual fund, mutual fund manager or mutual fund
administrator unless it is licensed to do so under the Mutual Funds Act,
1996.
|
5.3
|
Without
limiting the foregoing, the powers of the Company include the power to do
the following:
|
(a)
|
grant
options over unissued shares in the Company and treasury
shares;
|
(b)
|
issue
securities that are convertible into
shares;
|
(c)
|
give
financial assistance to any person in connection with the acquisition of
the Company's own shares;
|
(d)
|
issue
debt obligations of every kind and grant options, warrants and rights to
acquire debt obligations;
|
(e)
|
guarantee
a liability or obligation of any person and secure any of its obligations
by mortgage, pledge or other charge, of any of its assets for that
purpose; and
|
(f)
|
protect
the assets of the Company for the benefit of the Company, its creditors
and its members and, at the discretion of the directors, for any person
having a direct or indirect interest in the
Company.
|
6
|
Maximum
Number of Authorised Shares
|
6.1
|
The
Company is authorised to issue a maximum of 75,000,000 shares of one class
with a par value of US$0.0001 each divided into the following classes of
shares:
|
(a)
|
74,000,000
ordinary shares of US$0.0001 par value each;
and
|
(b)
|
1,000,000
preferred shares of US$0.0001 par value
each.
|
6.2
|
The
directors or members may from time to time by Resolution of Directors or
Resolution of Members increase the maximum number of shares the Company is
authorised to issue, by amendment to the Memorandum in accordance with the
provisions below.
|
7
|
Rights
Conferred by Shares
|
7.1
|
Each
share in the Company confers on the
holder:
|
(a)
|
the
right to one vote on any Resolution of
Members;
|
(b)
|
the
right to an equal share in any dividend paid by the Company in accordance
with the Act; and
|
(c)
|
the
right to an equal share in the distribution of the surplus assets of the
Company.
|
7.2
|
If at any time the Company is authorised to issue
shares of more than one class the rights attached to any class
(unless otherwise provided by the terms of issue of the shares of that
class) may, whether or not the Company is being wound up, be varied only
with the consent in writing of the holders of not less than three-fourths
of the issued shares of that class and the holders of not less than
three-fourths of the issued shares of any other class of shares which may
be affected by such variation.
|
7.3
|
The rights conferred upon the holders of the
shares of any class issued with preferred or other rights shall not,
unless otherwise expressly provided by the terms of issue of the shares of
that class, be deemed to be varied by the creation or issue of further
shares ranking pari passu
therewith.
|
7.4
|
The
directors may, subject to the Act, by amending this Memorandum and/or the
Articles, determine the designations, powers, preferences and relative,
participation, optional and other rights, if any, and the qualifications,
limitations and restrictions thereof, if any, including, without
limitation, dividend rights, conversion rights, redemption privileges,
voting powers and liquidation preferences that any Preferred Share issued
by the Company confers on the
holder.
|
8
|
Registered
Shares Only
|
|
Shares
in the Company may only be issued as registered shares and the Company is
not authorised to issue bearer shares. Registered shares may
not be exchanged for bearer shares or converted to bearer
shares.
|
9
|
Amendments
to the Memorandum and Articles
|
9.1
|
Subject
to the provisions of the Act, the directors or members may from time to
time amend the Memorandum or Articles by Resolution of Directors or
Resolution of Members. The directors shall give notice of such
resolution to the registered agent of the Company, for the registered
agent to file with the Registrar a notice of the amendment to the
Memorandum or Articles, or a restated memorandum and articles of
association incorporating the amendment(s) made, and any such amendment to
the Memorandum or Articles will take effect from the date of the
registration by the Registrar of the notice of amendment or restated
memorandum and articles of association incorporating the amendment(s)
made.
|
9.2
|
The
directors shall not have the power to amend the Memorandum or
Articles:
|
(a)
|
to
restrict the rights or powers of the members to amend the Memorandum or
Articles;
|
(b)
|
to
change the percentage of members required to pass a resolution to amend
the Memorandum or Articles;
or
|
(c)
|
in
circumstances where the Memorandum or Articles cannot be amended by the
members.
|
(d)
|
A
change of registered office or registered agent shall not constitute an
amendment of the Memorandum or
Articles.
|
(e)
|
An
amendment to the Memorandum or Articles which would have the effect of
varying the rights of the holders of a class of shares may only be made in
accordance with the provisions of the Memorandum and Articles relating to
the variation of class
rights.
|
10
|
Definitions
and Interpretation
|
10.1
|
In
this memorandum of association and the attached articles of
association:
|
"Act"
|
means
the BVI Business Companies Act, 2004;
|
"Articles"
|
means
the Company's articles of association as attached to this
Memorandum, and "Article" shall be construed
accordingly;
|
"Memorandum"
|
means
this, the Company's memorandum of association;
|
"Registrar"
|
means
the Registrar of Corporate Affairs appointed under the
Act;
|
"Resolution of
Directors"
|
means
a resolution by the majority of the directors of the Company passed either
at a meeting of directors, or by way of a Written Resolution, in either
case in accordance with the provisions of the Articles;
|
"Resolution of
Members"
|
means
a resolution by the members holding a majority of the voting rights in
respect of such resolution passed either at a meeting of members, or by
way of a Written Resolution, in either case in accordance with the
provisions of the Articles; and
|
"Written
Resolution"
|
means
a resolution of members or directors (as applicable) consented to in
writing or by telex, telegram, cable or other written electronic
communication, without the need for any notice. A Written
Resolution may consist of several documents, including written electronic
communications, in like form each signed or assented to by one or more
members or directors (including directors' alternates) (as
applicable). A Written Resolution shall be passed if so
consented by a majority of those members or directors (including
directors' alternates) (as applicable) entitled to vote on the
resolution.
|
10.2
|
In
the Memorandum and Articles:
|
(a)
|
words
and expressions defined in the Act shall have the same meaning and, unless
otherwise required by the context, the singular shall include the plural
and vice versa, the masculine shall include the feminine and the neuter
and references to persons shall include corporations and all entities
capable of having a legal
existence;
|
(b)
|
reference
to a provision of law is a reference to that provision as extended,
applied, amended or re-enacted and includes any subordinate
legislation;
|
(c)
|
the
headings are for convenience only and shall not affect the construction of
the Memorandum or Articles;
|
(d)
|
reference
to a thing being "written" or "in writing" includes all
forms of writing, including all electronic records which satisfy the
requirements of the Electronic Transactions Act,
2001;
|
(e)
|
reference
to a thing being "signed" or to a person's
"signature" shall
include reference to an electronic signature which satisfies the
requirements of the Electronic Transactions Act, 2001, and reference to
the Company's "seal" shall include
reference to an electronic seal which satisfies the requirements of the
Electronic Transactions Act,
2001.
|
1
|
Share
Certificates
|
1.1
|
Every
person whose name is entered as a member in the share register, being the
holder of registered shares, shall without payment be entitled to a share
certificate in the following
circumstances:
|
(a)
|
on
the issuance of such shares to such
member;
|
(b)
|
on
the transfer of such shares to such
member;
|
(c)
|
on
a re-designation or conversion of such shares with the effect that the
certificate previously issued no longer properly describes such shares;
and
|
(d)
|
at
the discretion of the directors (who may levy a reasonable charge), on
notice to the Company of a change of name of the
member.
|
1.2
|
Such
certificate shall be signed by a director or under the common seal of the
Company (which the registered agent of the Company is authorised to affix
to such certificate) with or without the signature of any director or
officer of the Company specifying the share or shares held and the par
value thereof (if the Company is authorised at the relevant time to issue
shares with a par value), provided that in respect of shares held jointly
by several persons, the Company shall not be bound to issue more than one
certificate and delivery of a certificate for a share to one of several
joint holders shall be sufficient delivery to
all
|
1.3
|
If
a certificate is worn out or lost it may, subject to the prior written
consent of any mortgagee or chargee whose interest has been noted on the
register of members, be renewed on production of the worn out certificate,
or on satisfactory proof of its loss together with such indemnity as the
directors may reasonably require. Any member receiving a share
certificate shall indemnify and hold the Company and its officers harmless
from any loss or liability which it or they may incur by reason of
wrongful or fraudulent use or representation made by any person by virtue
of the possession of such a
certificate.
|
2
|
Issue of Shares
|
2.1
|
Subject to the provisions of these Articles, the
unissued shares of the Company (whether forming part of the original or
any increased authorised shares) shall be at the disposal of the
directors who may offer, allot, grant options over or
otherwise dispose of them to such persons at such times and for such
consideration, being not less than the par value (if any) of the shares
being disposed of, and upon such terms and conditions as the directors may
determine. Such
consideration may take any form acceptable to the directors, including
money, a promissory note, or other written obligation to contribute money
or property, real property, personal
property (including goodwill and know-how), services rendered or a
contract for future services. Before issuing shares for a consideration
other than money, the directors shall pass a Resolution of Directors
stating:
|
(a)
|
the
amount to be credited for the issue of the
shares;
|
(b)
|
their
determination of the reasonable present cash value of the non-money
consideration for the issue; and
|
(c)
|
that,
in their opinion, the present cash value of the non-money consideration
for the issue is not less than the amount to be credited for the issue of
the shares.
|
2.2
|
Subject to the provisions of the Act in this
regard, shares may be issued on the terms that they are redeemable, or at
the option of the Company be liable to be redeemed on such terms and in
such manner as the directors before or at the time of the issue of such
shares may determine. At any
time after the consummation of a Business Combination (as defined in these
Articles), the directors may issue options, warrants or convertible
securities or securities of similar nature conferring the right upon the
holders thereof to subscribe for, purchase or receive any class of shares
or securities in the Company on such terms as it may from time to time
determine. Notwithstanding the foregoing, the directors may
issue options, warrants or convertible securities in connection with the
Company’s initial public offering.
|
2.3
|
The
Company may issue bonus shares, partly paid shares and nil paid
shares.
|
2.4
|
The directors may redeem any share issued by the
Company at a premium.
|
2.5
|
Except
as otherwise expressly provided in the resolution or resolutions providing
for the establishment of any class or series of preferred shares, no vote
of the holders of preferred shares or of the holders of ordinary shares
shall be a prerequisite to the issuance of any shares of any class or
series of the preferred shares authorized by and complying with the
conditions in the Memorandum or these
Articles.
|
2.6
|
Except as required by the Act, and
notwithstanding that a share certificate may refer to a member holding
shares "as trustee" or similar expression,
no person shall be recognised by the Company as holding any share upon any
trust, and the Company shall not be bound by or be compelled in any way to
recognise (even when having notice thereof) any equitable, contingent,
future or partial interest in any share or any interest in any fractional
part of a share or (except as provided by these Articles or by the Act)
any other rights in respect of any share except any absolute right to
the entirety thereof by the registered
holder.
|
3
|
Forfeiture
of Shares
|
3.1
|
The
Company may, at any time after the due date for payment, serve on a member
who has not paid in full for shares registered in the name of that member,
a written notice of call ("Notice of Call")
specifying a date for payment to be made. The Notice of Call
shall name a further date not earlier than the expiration of 14 days from
the date of service of the Notice of Call on or before which the payment
required by the Notice of Call is to be made and shall contain a statement
that in the event of non-payment at or before the time named in the Notice
of Call the shares, or any of them, in respect of which payment is not
made will be liable to be
forfeited.
|
3.2
|
Where
a written Notice of Call has been issued under the foregoing Article and
the requirements of the Notice of Call have not been complied with, the
directors may, at any time before tender of payment, forfeit and cancel
the shares to which the Notice of Call relates. The Company is
under no obligation to refund any moneys to the member whose shares have
been cancelled pursuant to this Article and that member shall be
discharged from any further obligation to the
Company.
|
4
|
Transfer
of Shares
|
4.1
|
Shares
in the Company shall be transferred by a written instrument of transfer
signed by the transferor and containing the name and address of the
transferee. The instrument of transfer shall also be signed by
the transferee if registration as a holder of the shares imposes a
liability to the Company on the transferee. The instrument of
transfer of a registered share shall be sent to the Company for
registration.
|
4.2
|
Subject
to the Memorandum of Association, these Articles and to Section 54(5) of
the Act, the Company shall, on receipt of an instrument of transfer, enter
the name of the transferee of the share in the register of members unless
the directors resolve to refuse or delay the registration of the transfer
for reasons that shall be specified in the resolution. Where
the directors pass such a resolution, the Company shall send to the
transferor and the transferee a notice of the refusal or
delay. Notwithstanding anything contained in the
Memorandum or Articles, the directors shall not decline to register any
transfer of shares, nor may they suspend registration thereof where such
transfer is:
|
(a)
|
to
any mortgagee or chargee whose interest has been noted on the register of
members;
|
(b)
|
by
any such mortgagee or chargee, pursuant to the power of sale under its
security; or
|
(c)
|
by
any such mortgagee or chargee in accordance with the terms of the relevant
security document.
|
4.3
|
The
transfer of a registered share is effective when the name of the
transferee is entered in the register of
members.
|
5
|
Mortgages
of Shares and Charges over Shares
|
5.1
|
Members
may mortgage or create a charge or other form of security over their
shares.
|
5.2
|
The
directors shall, at the written request of a member who has mortgaged or
created a charge over his shares, enter in the register of members of the
Company:
|
(a)
|
a
statement that such shares are mortgaged or
charged;
|
(b)
|
the
name of the mortgagee or chargee (where such information has been stated
by the member); and
|
(c)
|
the
date on which the statement and name are entered in the register of
members.
|
6
|
Transmission
of Shares
|
6.1
|
Subject
to Sections 52(2) and 53 of the Act, the executor or administrator of a
deceased member, the guardian of an incompetent member or the trustee of a
bankrupt member shall be the only person recognised by the Company as
having any title to his share, save that and only in the event of death,
incompetence or bankruptcy of any member or members of the Company as a
consequence of which the Company no longer has any directors or members,
then upon the production of any documentation which is reasonable evidence
of the applicant being entitled to:
|
(a)
|
a
grant of probate of the deceased's will, or grant of letters of
administration of the deceased's estate, or confirmation of the
appointment as executor or administrator (as the case may be, or analogous
position in the relevant jurisdiction), of a deceased member's
estate;
|
(b)
|
the
appointment of a guardian (or analogous position in the relevant
jurisdiction) of an incompetent
member;
|
(c)
|
the
appointment as trustee (or analogous position in the relevant
jurisdiction) of a bankrupt member;
or
|
(d)
|
upon
production of any other reasonable evidence of the applicant's beneficial
ownership of, or entitlement to the
shares,
|
to
the Company's registered agent in the British Virgin Islands together with
(if so requested by the registered agent) a notarised copy of the share
certificate(s) of the deceased, incompetent or bankrupt member, an
indemnity in favour of the registered agent and/or appropriate legal
advice in respect of any document issued by a foreign court, then the
administrator, executor, guardian or trustee in bankruptcy (as the case
may be) notwithstanding that their name has not been entered in the share
register of the Company, may by written resolution of the applicant,
endorsed with written approval by the registered agent, be appointed a
director of the Company and/or entered in the share register as the legal
and/or beneficial owner of the
shares.
|
6.2
|
Without
limiting the foregoing, the production to the Company of any document
which is reasonable evidence of:
|
(a)
|
a
grant of probate of the will, or grant of letters of administration of the
estate, or confirmation of the appointment as executor (or analogous
position in the relevant jurisdiction), of a deceased
member;
|
(b)
|
the
appointment of a guardian (or analogous position in the relevant
jurisdiction) of an incompetent
member;
|
(c)
|
the
trustee (or analogous position in the relevant jurisdiction) of a bankrupt
member; or
|
(d)
|
the
applicant's legal and/or beneficial ownership of the
shares,
|
|
shall
be accepted by the Company even if the deceased, incompetent member or
bankrupt member is resident and/or domiciled outside the British Virgin
Islands if the document is issued by a foreign court which had competent
jurisdiction in the matter. For the purposes of establishing
whether or not a foreign court had competent jurisdiction in such a matter
the directors may obtain appropriate legal advice. The
directors may also require an indemnity to be given by the executor,
administrator, guardian, trustee in bankruptcy or the
applicant.
|
6.3
|
Any
person becoming entitled by operation of law or otherwise to a share or
shares in consequence of the death, incompetence or bankruptcy of any
member may be registered as a member upon such evidence being produced as
may reasonably be required by the directors. An application by
any such person to be registered as a member shall for all purposes be
deemed to be a transfer of shares of the deceased, incompetent or bankrupt
member and the directors shall treat it as
such.
|
6.4
|
Any
person who has become entitled to a share or shares in consequence of the
death, incompetence or bankruptcy of any member may, instead of being
registered himself, request in writing that some person to be named by him
be registered as the transferee of such share or shares and such request
shall likewise be treated as if it were a
transfer.
|
6.5
|
What
amounts to incompetence on the part of a person is a matter to be
determined by the court having regard to all the relevant evidence and the
circumstances of the case.
|
7
|
Acquisition
of Own Shares
|
7.1
|
Subject
to Article 27 of these Articles, the directors may, on behalf of the
Company, purchase, redeem or otherwise acquire any of the Company's own
shares for such consideration as the directors consider fit, and either
cancel or hold such shares as treasury shares. Shares may be
purchased or otherwise acquired in exchange for newly issued shares in the
Company.
|
7.2
|
The
directors shall not, unless permitted pursuant to the Act, purchase,
redeem or otherwise acquire any of the Company's own shares unless
immediately after such purchase, redemption or other
acquisition:
|
(a)
|
the
value of the Company's assets exceeds it liabilities;
and
|
(b)
|
the
Company is able to pay its debts as they fall
due.
|
7.3
|
Sections
60 and 61 of the Act shall not apply to the
Company.
|
8
|
Treasury
Shares
|
8.1
|
Shares
may only be held as treasury shares by the Company to the extent that the
number of treasury shares does not exceed 50% of the shares of that class
previously issued by the Company, excluding shares that have been
cancelled.
|
8.2
|
The
directors may dispose of any shares held as treasury shares on such terms
and conditions as they may from time to time
determine.
|
9
|
Notice
of Meetings of Members
|
9.1
|
The
directors may convene meetings of the members of the Company at such times
and in such manner and places (within or outside the British Virgin
Islands) as the directors consider necessary or desirable, and they shall
convene such a meeting upon the written request of members entitled to
exercise at least thirty (30) percent of the voting rights in respect of
the matter for which the meeting is requested. Meetings of members shall
take place at least annually (the “Annual
Meeting”).
|
9.2
|
Not
less than seven (7) days' notice specifying at least the place, the day
and the hour of the meeting and general nature of the business to be
conducted shall be given in the manner hereinafter mentioned to such
persons whose names on the date the notice is given appear as members in
the share register of the Company and are entitled to vote at the
meeting. Notwithstanding the foregoing, a meeting of members
held in contravention of the requirement to give notice is valid if
members holding a ninety (90) percent majority
of:
|
(a)
|
the
total voting rights on all the matters to be considered at the meeting;
or
|
(b)
|
the
votes of each class or series of shares where members are entitled to vote
thereon as a class or series together with an absolute majority of the
remaining votes,
|
9.3
|
The
inadvertent failure of the directors to give notice of a meeting to a
member or the fact that a member has not received a notice that has been
properly given, shall not invalidate the
meeting.
|
10
|
Proceedings
at Meetings of Members
|
10.1
|
No
business shall be transacted at any meeting of members unless a quorum of
members is present at the time when the meeting proceeds to
business. A quorum shall consist of the holder or holders
present in person or by proxy entitled to exercise at least fifty (50)
percent of the voting rights of the shares of each class or series of
shares entitled to vote as a class or series thereon and the same
proportion of the votes of the remaining shares entitled to vote
thereon.
|
10.2
|
A
member of the Company shall be deemed to be present at a meeting of
members if:
|
(a)
|
he
or his proxy participates by telephone or other electronic means;
and
|
(b)
|
all
members and proxies participating in the meeting are able to hear each
other.
|
10.3
|
If,
within half an hour from the time appointed for the meeting, a quorum is
not present, the meeting shall be
dissolved.
|
10.4
|
A
member may attend a meeting of members personally or be represented by a
proxy who may speak and vote on behalf of the
member.
|
10.5
|
The
instrument appointing a proxy shall be produced at the place appointed for
the meeting before the time for holding the meeting at which the person
named in such instrument proposes to vote. An instrument
appointing a proxy shall be in such form as the Chairman of the meeting
shall accept as properly evidencing the wishes of the member appointing
the proxy, but must be in writing under the hand of the appointer unless
the appointer is a corporation or other form of legal entity (other than
one or more individuals holding as joint owner) in which case the
instrument appointing a proxy shall be in writing under the hand of an
individual duly authorised by such corporation or legal entity to execute
the same.
|
10.6
|
At
every meeting the members present shall choose someone of their number to
be the chairman (the "Chairman"). If
the members are unable to choose a Chairman for any reason, then the
person representing the greatest number of voting shares present at the
meeting shall preside as Chairman.
|
10.7
|
The
Chairman may, with the consent of the meeting, adjourn any meeting from
time to time, and from place to place, but no business shall be transacted
at any adjourned meeting other than the business left unfinished at the
meeting from which the adjournment took
place.
|
10.8
|
At
any meeting a resolution put to the vote of the meeting shall be decided
on a show of hands by a simple majority of those members (or their duly
appointed proxies) entitled to vote and voting on the resolution, unless a
poll is (before or on the declaration of the result of the show of hands)
demanded:
|
(a)
|
by
the Chairman; or
|
(b)
|
by
any member present in person or by proxy and holding not less than one
tenth of the total voting shares issued by the Company and having the
right to vote on such resolution.
|
10.9
|
Unless
a poll be so demanded, a declaration by the Chairman that a resolution
has, on a show of hands been carried, and an entry to that effect in the
book containing the minutes of the proceedings
of the Company, shall be sufficient evidence of the fact, without proof of
the number or proportion of the votes recorded in favour of or against
such resolution.
|
10.10
|
If
a poll is duly demanded it shall be taken in such manner as the Chairman
directs, and the result of the poll shall be deemed to be the resolution
of the meeting at which the poll
was demanded. The demand for a poll may be withdrawn, at the
discretion of the Chairman.
|
10.11
|
On
a poll, every holder of a voting share present in person or by proxy shall
have one vote for every voting share of which he is the holder which
confers the right to a vote on the
resolution.
|
10.12
|
In
the case of an equality of votes, whether on a show of hands or on a poll, the
Chairman of
the meeting at which the show of hands takes place, or at which the poll
is demanded, shall be entitled to a second or casting
vote.
|
10.13
|
Subject
to the Memorandum or these Articles, an action that may be taken by
members of the Company at a meeting of members may also be taken by
Written Resolution.
|
10.14
|
If
a committee is appointed for any member who is of unsound mind, that
member may vote by such committee.
|
11
|
Jointly
Held Shares
|
11.1
|
Where
shares are registered in the names of joint
owners:
|
(a)
|
each
registered owner may be present in person or by proxy at a meeting of
members and may speak as a member;
|
(b)
|
if
only one of them is present in person or by proxy, he may vote on behalf
of all of them; and
|
(c)
|
if
two or more are present in person or by proxy, they must vote as
one. If more than one joint owner votes in person or by proxy
at any meeting of members or by Written Resolution, the vote of the joint
owner whose name appears first among such voting joint holders in the
share register shall alone be
counted.
|
12
|
Corporations
Acting by Representatives at
Meetings
|
|
Any
corporation or other form of corporate legal entity which is a member of
the Company may by resolution of its directors or other governing body
authorise such person as it thinks fit to act as its representative at any
meeting of the members or any class of members of the Company, and the
person so authorised shall be entitled to exercise the same powers on
behalf of the corporation which he represents as that corporation could
exercise if it were an individual member of the
Company.
|
13
|
Appointment
and Removal of Directors
|
13.1
|
The
first director or directors shall be appointed by the registered agent of
the Company. Thereafter, the directors shall be appointed as
follows:
|
(a)
|
subject
to the provisions of Article 27, any existing director(s) shall be
designated as a Class C Director for a term expiring at the Company's
third Annual Meeting of Members. The Class C director shall then appoint
additional Class A, Class B and Class C directors, as necessary. The
directors in Class A shall be elected for a term expiring at the first
Annual Meeting of Members, the directors in Class B shall be elected for a
term expiring at the second Annual Meeting of Members and the directors in
Class C shall be elected for a term expiring at the third Annual Meeting
of Members. Commencing at the first Annual Meeting of Members, and at each
annual meeting thereafter, directors elected to succeed those directors
whose terms expire shall be elected for a term of office to expire at the
third succeeding annual meeting of members after their election. Except as
the Act may otherwise require, in the interim between annual meetings of
members or special meetings of members called for the election of
directors and/or the removal of one or more directors and the filling of
any vacancy in that connection, newly created directorships and any
vacancies in the Board of Directors, including unfilled vacancies
resulting from the removal of directors for cause, may be filled by the
vote of a majority of the remaining directors then in office, although
less than a quorum, or by the sole remaining
director;
|
(b)
|
all
directors shall hold office until the expiration of their respective terms
of office and until their successors shall have been elected and
qualified. A director elected to fill a vacancy resulting from the death,
resignation or removal of a director shall serve for the remainder of the
full term of the director whose death, resignation or removal shall have
created such vacancy and until his successor shall have been elected and
qualified; and
|
(c)
|
following
the consummation of a Business Combination, the directors shall be
appointed and removed by resolution of directors or resolution of members
for such terms as the directors or members may so
determine. Sections 114(2) and 114(3) of the Act shall not
apply to the Company.
|
13.2
|
Except
as the Act may otherwise require, newly created directorships and any
vacancies in the board of directors, including unfilled vacancies
resulting from the removal of directors for cause, may be filled by the
vote of a majority of the remaining directors then in office, although
less than a quorum (as defined in these Articles), or by the sole
remaining director.
|
13.3
|
A
director elected to fill a vacancy resulting from the death, resignation
or removal of a director shall serve for the remainder of the full term of
the director whose death, resignation or removal shall have created such
vacancy and until his successor shall have been elected and
qualified.
|
13.4
|
A
person shall not be appointed as a director of the Company unless he has
consented in writing to be a
director.
|
13.5
|
Each
director holds office until:
|
(a)
|
his
disqualification to act as a director under Section 111 of the Act (on
which his office as director shall be automatically terminated if he has
not resigned in accordance with section 115(2) of the
Act);
|
(b)
|
his
death;
|
(c)
|
his
resignation; or
|
(d)
|
the
effective date of his removal by Resolution of Directors or Resolution of
Members.
|
13.6
|
The
following are disqualified for appointment as the director of the
Company:
|
(a)
|
an
individual who is under 18 years of
age;
|
(b)
|
a
person who is a disqualified person within the meaning of section 260(4)
of the Insolvency Act, 2003;
|
(c)
|
a
person who is a restricted person within the meaning of section 409 of the
Insolvency Act, 2003; and
|
(d)
|
an
undischarged bankrupt.
|
13.7
|
A
director shall not require a share qualification, but nevertheless shall
be entitled to attend and speak at any meeting of the directors and
meeting of the members and at any separate meeting of the holders of any
class of shares in the Company.
|
13.8
|
The
remuneration of directors (whether by way of salary, commission,
participation in profits or otherwise) in respect of services rendered or
to be rendered in any capacity to the Company (including to any company in
which the Company may be interested) shall be fixed by Resolution of
Directors or Resolution of Members. The directors may also be
paid such travelling, hotel and other expenses properly incurred by them
in attending and returning from meetings of the directors, or any
committee of the directors or meetings of the members, or in connection
with the business of the Company as shall be approved by Resolution of
Directors or Resolution of Members.
|
14
|
Alternate
and Reserve Directors
|
14.1
|
A
director, by written instrument deposited at the registered office of the
Company, may from time to time appoint another director or another person
to be his alternate. Every such alternate shall be entitled to
be given notice of meetings of the directors and to attend and vote as a
director at any such meeting at which the director appointing him is not
personally present (and to vote on a Written Resolution) and generally at
such meeting (or in connection with such Written Resolution) to have and
exercise all the powers, rights, duties and authorities of the director
appointing him. Every such alternate shall be deemed to be an
officer of the Company and shall not be deemed to be an agent of the
director appointing him. Unless stated otherwise in the notice
of the appointment of the alternate, if undue delay or difficulty would be
occasioned by giving notice to a director of a resolution of which his
approval is sought in accordance with these Articles his alternate (if
any) shall be entitled to signify approval of the same on behalf of that
director. The remuneration of an alternate shall be payable out
of the remuneration payable to the director appointing him, as agreed
between such alternate and the director appointing him. A
director, by writing under his hand deposited at the registered office of
the Company, may at any time vary or revoke the appointment of an
alternate appointed by him. If a director shall die or cease to
hold the office of director, the appointment of his alternate shall
thereupon cease and terminate.
|
14.2
|
Where
the Company has only one member with voting rights who is an individual
and that member is also the sole director of the Company (the "sole member/director"),
that sole member/director may, by instrument in writing, nominate a person
who is not disqualified from being a director of the Company under section
111(1) of the Act as a reserve director of the Company to act in the place
of the sole director in the event of his death.A person shall not be
nominated as a reserve director unless he has consented in writing to be
nominated as a reserve director. The nomination of a person as a reserve
director of the Company ceases to have effect
if:
|
(a)
|
before
the death of the sole member/director who nominated
him:
|
(i)
|
he
resigns as reserve director, or
|
(ii)
|
the
sole member/director revokes the nomination in writing;
or
|
(b)
|
the
sole member/director who nominated him ceases to be the sole
member/director of the company for any reason other than his
death.
|
15
|
Duties
of Directors and Conflicts of
Interests
|
15.1
|
A
director of the Company, in exercising his powers or performing his
duties, shall
act honestly and in good faith and in what the director believes to be in
the best interests of the Company.
|
15.2
|
Notwithstanding
the foregoing Article, if the Company is a wholly-owned subsidiary, a
director of the Company may, when exercising powers or performing duties
as a director, act in a manner which he believes is in the best interests
of that Company’s holding company (as defined in the Act) even though it
may not be in the best interests of the
Company.
|
15.3
|
A
director shall exercise his powers as a director for a proper purpose and
shall not act, or agree to the Company acting, in a manner that
contravenes the Act or the Memorandum or
Articles.
|
15.4
|
A
director, when exercising powers or performing duties as a director, shall
exercise the care, diligence, and skill that a reasonable director would
exercise in the same circumstances taking into account, but
without limitation:
|
(a)
|
the
nature of the Company;
|
(b)
|
the
nature of the decision; and
|
(c)
|
the
position of the director and the nature of the responsibilities undertaken
by him.
|
15.5
|
A
director of the Company, when exercising his powers or performing his
duties as a director, is entitled to rely upon the register of members and
upon books, records, financial statements and other information prepared
or supplied, and on professional or expert advice given,
by:
|
(a)
|
an
employee of the Company whom the director believes on reasonable grounds
to be reliable and competent in relation to the matters
concerned;
|
(b)
|
a
professional adviser or expert in relation to matters which the director
believes on reasonable grounds to be within the person’s professional or
expert competence; and
|
(c)
|
any
other director, or committee of directors upon which the director did not
serve, in relation to matters within the director’s or committee’s
designated authority,
|
(d)
|
acts
in good faith;
|
(e)
|
makes
proper inquiry where the need for the inquiry is indicated by the
circumstances; and
|
(f)
|
has
no knowledge that his reliance on the register of members or the books,
records, financial statements and other information or expert advice is
not warranted.
|
15.6
|
A
director may hold any other office or position of profit under the Company
(except that of auditor) in conjunction with his office of director, and
may act in a professional capacity to the Company on such terms as to
remuneration and otherwise as the directors shall
approve.
|
15.7
|
A
director may be or become a director or officer of, or otherwise be
interested in any company promoted by the Company, or in which the Company
may be interested, as a member or otherwise and no such director shall be
accountable for any remuneration or other benefits received by him as
director or officer or from his interest in such other
company. The directors may also exercise the voting powers
conferred by the shares in any other company held or owned by the Company
in such manner in all respects as they think fit, including the exercise
thereof in favour of any resolutions appointing them, or of their number,
directors or officers of such other company, or voting or providing for
the payment of remuneration to the directors or officers of such other
company. A director may vote in favour of the exercise of such
voting rights in the manner aforesaid notwithstanding that he may be, or
be about to become, a director or officer of such other company, and as
such in any other manner is, or may be, interested in the exercise of such
voting rights in the manner
aforesaid.
|
15.8
|
No
director shall be disqualified by his office from contracting with the
Company either as a buyer, seller or otherwise, nor shall any such
contract or arrangement entered into by or on behalf of the Company in
which any director shall be in any way interested be voided, nor shall any
director so contracting or being so interested be liable to account to the
Company for any profit realised by any such contract or arrangement, by
reason of such director holding that office or by reason of the fiduciary
relationship thereby established, provided such director shall,
immediately after becoming aware of the fact that he is interested in a
transaction entered into or to be entered into by the Company, disclose
such interest to the board of directors. For the purposes of
this Article:
|
(a)
|
A
director of the Company is not required to make such a disclosure
if:
|
(i)
|
the
transaction or proposed transaction is between the director and the
Company; and
|
(ii)
|
the
transaction or proposed transaction is or is to be entered into in the
ordinary course of the Company's business and on usual terms and
conditions.
|
(b)
|
A
disclosure to the board to the effect that a director is a member,
director, officer or trustee of another named company or other person and
is to be regarded as interested in any transaction which may, after the
date of the entry or disclosure, be entered into with that company or
person, is a sufficient disclosure of interest in relation to that
transaction. Such a disclosure is not made to the board unless
it is made or brought to the attention of every director on the
board.
|
(c)
|
Subject
to Section 125(1) of the Act, the failure by a director to comply with
this Article does not affect the validity of a transaction entered into by
the director or the Company.
|
15.9
|
A
director of the Company who is interested in a transaction entered into or
to be entered into by the Company
may:
|
(a)
|
vote
on a matter relating to the
transaction;
|
(b)
|
attend
a meeting of directors at which a matter relating to the transaction
arises and be included among the directors present at the meeting for the
purposes of a quorum; and
|
(c)
|
sign
a document on behalf of the Company, or do any other thing in his capacity
as a director, that relates to the
transaction.
|
16
|
Powers
of Directors
|
16.1
|
The
business of the Company shall be managed by the directors who may pay all
expenses incurred preliminary to and in connection with the formation and
registration of the Company, and may exercise all such powers of the
Company necessary for managing and for directing and supervising, the
business and affairs of the Company as are not by the Act or by the
Memorandum or these Articles required to be exercised by the members,
subject to any delegation of such powers as may be authorised by these
Articles and permitted by the Act and to such requirements as may be
prescribed by Resolution of the Members, but no requirement made by
Resolution of the Members shall prevail if it be inconsistent with these
Articles nor shall such requirement invalidate any prior act of the
directors which would have been valid if such requirement had not been
made.
|
16.2
|
If
the number of directors shall have been fixed at two or more persons and
by reason of vacancies having occurred in the board of directors there
shall be only one continuing director, he shall be authorised to act alone
only for the purpose of appointing another
director.
|
17
|
Delegation
by the Board to Directors, Committees, Officers, Attorneys and
Agents
|
17.1
|
The
board of directors may entrust to and confer upon any director or officer
any of the powers exercisable by it upon such terms and conditions and
with such restrictions as it thinks fit, and either collaterally with, or
to the exclusion of, its own powers, and may from time to time revoke,
withdraw, alter or vary all or any of such powers. Subject to
the provisions of Section 110 of the Act, the directors may delegate any
of their powers to committees consisting of such member or members of
their body as they think fit. Any committees so formed shall in
the exercise of powers so delegated conform to any regulations that may be
imposed on it by the directors or the provisions of the
Act.
|
17.2
|
The
directors have no power to delegate the following powers to a committee of
directors:
|
(a)
|
to
amend the Memorandum or Articles;
|
(b)
|
to
designate committees of directors;
|
(c)
|
to
delegate powers to a committee of directors; (This and the preceding
sub-Article do not prevent a committee of directors, where authorised by
the directors, from appointing a sub-committee and delegating powers
exercisable by the committee to the
sub-committee);
|
(d)
|
to
appoint or remove directors;
|
(e)
|
to
appoint or remove an agent;
|
(f)
|
to
approve a plan or merger, consolidation or
arrangement;
|
(g)
|
to
make a declaration of solvency for the purposes of section 198(1)(a) of
the Act or approve a liquidation plan;
or
|
(h)
|
to
make a determination under section 57(1) of the Act that the Company will,
immediately after a proposed distribution, satisfy the solvency
test.
|
17.3
|
Where
the directors of the Company delegate their powers to a committee of
directors, they remain responsible for the exercise of that power by the
committee, unless they believed on reasonable grounds that at all times
before the exercise of the power that the committee would exercise the
power in conformity with the duties imposed on directors of the Company by
the Act.
|
17.4
|
The
directors of the Company may, by Resolution of Directors, appoint officers
of the Company at such times as shall be considered necessary or
expedient. The officers shall perform such duties as shall be
prescribed at the time of their appointment subject to any modifications
in such duties as may be prescribed by the directors
thereafter.
|
17.5
|
Any
person may hold more than one office and no officer need be a director or
member of the Company. The officers shall remain in office
until removed from office by the directors, whether or not a successor is
appointed.
|
17.6
|
Any
officer who is a body corporate may appoint any person as its duly
authorised representative for the purpose of representing it and of
transacting any of the business of the
officers.
|
17.7
|
The
directors may from time to time by power of attorney appoint any company,
firm or person or body of persons to be the attorney or attorneys of the
Company for such purposes and with such powers, authorities and
discretions (not exceeding those vested in or exercisable by the directors
under these Articles) and for such period and subject to such conditions
as the directors think fit.
|
17.8
|
The
directors may appoint any person, including a person who is a director, to
be an agent of the company. An agent of the Company has such
powers and authority of the directors, including the power and authority
to affix the common seal of the Company, as are set forth in the
Resolution of Directors appointing the agent, except that no agent has any
power or authority with respect to the
following:
|
(a)
|
to
amend the Memorandum or Articles;
|
(b)
|
to
change the registered office or registered
agent;
|
(c)
|
to
designate committees of directors;
|
(d)
|
to
delegate powers to a committee of
directors;
|
(e)
|
to
appoint or remove directors;
|
(f)
|
to
appoint or remove an agent;
|
(g)
|
to
fix emoluments of directors;
|
(h)
|
to
approve a plan of merger, consolidation or
arrangement;
|
(i)
|
to
make a declaration of solvency for the purposes of section 198(1)(a) of
the Act or to approve a liquidation
plan;
|
(j)
|
to
make a determination under section 57(1) of the Act that the Company will,
immediately after a proposed distribution, satisfy the solvency test as
stipulated in Section 56 of the Act;
or
|
(k)
|
to
authorise the Company to continue as a company incorporated under the laws
of a jurisdiction outside the British Virgin
Islands.
|
17.9
|
Where
the directors appoint any person to be an agent of the Company, they may
authorise the agent to appoint one or more substitutes or delegates to
exercise some or all of the powers conferred on the agent by the
Company.
|
17.10
|
The
directors may at any time remove an agent and may revoke or vary a power
conferred on him.
|
18
|
Proceedings
of Directors
|
18.1
|
The
directors may meet together for the dispatch of business, adjourn and
otherwise regulate their meetings as they think fit. The
meetings of the board of directors and any committee thereof shall be held
at such place or places (within or outside the British Virgin Islands) as
the directors shall decide.
|
18.2
|
A
director may at any time summon a meeting of the directors. A
director shall be given not less than three (3) business days' (being full
business days in the place of the director's residence) notice of a
meeting of the directors, save that a meeting of directors held on less
notice is valid if a majority of the directors entitled to vote at the
meeting have waived the notice of the meeting; and, for this purpose, the
presence of a director at the meeting shall be deemed to constitute waiver
on his part (unless he objects in writing before or at the
meeting).
|
18.3
|
The
inadvertent failure to give notice of a meeting to a director, or the fact
that a director has not received the notice shall not invalidate the
meeting.
|
18.4
|
Any
director who is a body corporate may appoint any person its duly
authorised representative for the purpose of representing it at meetings
of the directors and of transacting any of the business of the
directors.
|
18.5
|
A
meeting of the directors is duly constituted for all purposes if at the
commencement of the meeting there are present in person or by alternate
not less than one-third of the total number of directors with a minimum of
two (2).
|
18.6
|
If
within half an hour from the time appointed for the meeting a quorum is
not present, the meeting shall be
dissolved.
|
18.7
|
A
director of the Company shall be deemed to be present at a meeting of the
board if:
|
(a)
|
he
or his alternate participates by telephone or other electronic means;
and
|
(b)
|
all
directors and alternates participating in the meeting are able to hear
each other.
|
18.8
|
The
directors may elect a chairman (the "Chairman of the Board")
of their meeting and determine the period for which he is to hold
office. If no such Chairman of the Board is elected, or if at
any meeting the Chairman of the Board is not present at the time appointed
for holding the meeting, the directors present may choose one of their
number to be Chairman of the Board for the meeting. If the
directors are unable to choose a Chairman of the Board, for any reason,
then the longest serving director present at the meeting shall preside as
the Chairman of the Board.
|
18.9
|
Questions
arising at any meeting of directors shall be decided by a majority of
votes. In case of an equality in votes the Chairman of the
Board shall have a second or casting
vote.
|
18.10
|
A
resolution approved by a majority of the directors for the time being
entitled to receive notice of a meeting of the directors or of a committee
of the directors and taking the form of a Written Resolution shall be as
valid and effectual as if it had been passed at a meeting of the directors
or of such committee duly convened and held, without the need for any
notice.
|
18.11
|
If
the Company shall have only one director, the foregoing provisions for
meetings of the directors shall not apply but such sole director shall
have full power to represent and act for the Company in all matters and in
lieu of minutes of a meeting shall record in writing and sign a note of
memorandum of all matters requiring a resolution of the
directors. Such note or memorandum shall constitute sufficient
evidence of such resolution for all
purposes.
|
19
|
Indemnification
and Insurance
|
19.1
|
Subject
to the provisions of the Act and the subsequent provisions of this
Article, the Company may indemnify against all expenses, including legal
fees, and against all judgments, fines and amounts paid in settlement and
reasonably incurred in connection with legal, administrative or
investigative proceedings any person
who:
|
(a)
|
is
or was a party or is threatened to be made a party to any threatened,
pending or completed proceedings, whether civil, criminal, administrative
or investigative, by reason of the fact that the person is or was a
director of the
Company; or
|
(b)
|
is
or was, at the request of the Company, serving as a director of, or in any
other capacity is or was acting for, another company or a partnership,
joint venture, trust or other
enterprise.
|
19.2
|
This
Article applies only to a person who has acted honestly and in good faith
and in what he believed to be the best interests of the Company and, in
the case of criminal proceedings, the person had no reasonable cause to
believe that his conduct was unlawful. The Company shall not indemnify a
person who has not so acted, and any indemnity given to such a person is
void and of no effect. A director acts in the best interests of the
Company if he acts in the best interests
of:
|
(a)
|
the
Company’s holding company; or
|
(b)
|
a
shareholder or shareholders of the
Company;
|
19.3
|
The
termination of any proceedings by any judgement, order, settlement,
conviction or the entering of a nolle prosequi does
not, by itself, create a presumption that the person did not act honestly
and in good faith and with a view to the best interests of the Company or
that the person had reasonable cause to believe that his conduct was
unlawful.
|
19.4
|
Expenses,
including legal fees, incurred by a director in defending any legal,
administrative or investigative proceedings may be paid by the Company in
advance of the final disposition of such proceedings upon receipt of an
undertaking by or on behalf of the director to repay the amount if it
shall ultimately be determined that the director is not entitled to be
indemnified by the Company in accordance with this
Article.
|
19.5
|
Expenses,
including legal fees, incurred by a former director in defending any
legal, administrative or investigative proceedings may be paid by the
Company in advance of the final disposition of such proceedings upon
receipt of an undertaking by or on behalf of the former director to repay
the amount if it shall ultimately be determined that the former director
is not entitled to be indemnified by the Company in accordance with this
Article and upon such other terms and conditions, if any, as the Company
deems appropriate.
|
19.6
|
The
indemnification and advancement of expenses provided by, or granted
pursuant to, this Article is not exclusive of any other rights to which
the person seeking indemnification or advancement of expenses may be
entitled under any agreement, resolution of members, resolution of
disinterested directors or otherwise, both as to acting in the person’s
official capacity and as to acting in another capacity while serving as a
director of the Company.
|
19.7
|
The
Company may purchase and maintain insurance in relation to any person who
is or was a director of the Company, or who at the request of the Company
is or was serving as a director of, or in any other capacity is or was
acting for, another body corporate or a partnership, joint venture, trust
or other enterprise, against any liability asserted against the person and
incurred by the person in that capacity, whether or not the Company has or
would have had the power to indemnify the person against the liability
under the foregoing Article.
|
20
|
Company
Seal and Entry into Contracts and
Deeds
|
20.1
|
The
directors shall provide for the safe custody of the common seal of the
Company. The common seal when affixed to any instrument (save
for a share certificate in accordance with these Articles) shall be
witnessed by a director or officer of the Company or any other person so
authorised from time to time by the
directors.
|
20.2
|
A
contract may be entered into by the Company as
follows:
|
(a)
|
a
contract that, if entered into by an individual, would be required by law
to be in writing and under seal, may be entered into by or on behalf of
the Company in writing under the common seal of the Company, or executed
by or on behalf of the Company by a director or an authorised agent of the
Company, and may be varied or discharged in the same
manner;
|
(b)
|
a
contract that, if entered into by an individual, would be required by law
to be in writing and signed, may be entered into by or on behalf of the
Company in writing and signed by a person acting under the express or
implied authority of the company, and may be varied or discharged in the
same manner; and
|
(c)
|
a
contract that, if entered into by an individual, would be valid although
entered into orally, and not reduced to writing, may be entered into
orally by or on behalf of the Company by a person acting under the express
or implied authority of the Company, and may be varied or discharged in
the same manner.
|
20.3
|
Notwithstanding
the foregoing Article, an instrument is validly executed by the Company as
a deed, or an instrument under seal, if it is
either:
|
(a)
|
sealed
with the common seal of the Company and witnessed by a director of the
Company and/or such other person who is authorised by the Memorandum or
Articles to witness the application of the Company’s seal;
or
|
(b)
|
expressed
to be, or is expressed to be executed as, or otherwise makes clear on its
face that it is intended to be, a deed and it is signed by a director
and/or by a person acting under the express or implied authority of the
Company.
|
21
|
Distributions
|
21.1
|
Subject
to the provisions of the Act, the directors of a Company may, by
Resolution of Directors, authorise a distribution by the Company at a
time, and of an amount, and to any members they think fit if they are
satisfied, on reasonable grounds that, immediately after the distribution,
the value of the Company's assets will exceed the Company's liabilities
and the Company is able to pay its debts as they fall
due.
|
21.2
|
No
distribution shall be paid on those shares which are held by the Company
as treasury shares at the date of declaration of the
distribution.
|
21.3
|
The
directors may, before recommending any distribution, set aside out of the
profits of the Company such sums as they think proper as a reserve or
reserves which shall, at their discretion, either be employed in the
business of the Company or be invested in such investments as the
directors may from time to time think
fit.
|
21.4
|
If
several persons are registered as joint holders of any share, any of them
may give effectual receipt for any distribution or other monies payable on
or in respect of the share.
|
21.5
|
Notice
of any distribution that may have been declared shall be given to each
member in manner hereinafter mentioned and all distributions unclaimed for
three years after having been declared may be forfeited by the directors
for the benefit of the Company.
|
21.6
|
No
distribution shall bear interest against the
Company.
|
22
|
Company
Records
|
22.1
|
The
Company shall keep records that:
|
(a)
|
are
sufficient to show and explain the Company's transactions;
and
|
(b)
|
will,
at any time, enable the financial position of the Company to be determined
with reasonable accuracy.
|
22.2
|
The
Company shall keep the following records at the office of its registered
agent or at such other place or places, within or outside the British
Virgin Islands, as the directors may
determine:
|
(a)
|
minutes
of all meetings and all resolutions of members and of classes of members;
and
|
(b)
|
minutes
of all meetings and all resolutions of directors and committees of
directors.
|
|
Where
any such records are kept at a place other than at the office of the
Company’s registered agent, the Company shall provide the registered agent
with a written record of the physical address of the place or places at
which the records are kept. Where the place at which any such
records is changed, the Company shall provide the registered agent with
the physical address of the new location of the records within fourteen
days of the change of location.
|
22.3
|
The
Company shall keep a register to be known as a register of directors
containing the names and addresses of the persons who are directors of the
Company, the date on which each person whose name is entered in the
register was appointed as a director of the Company, the date on which
each person named as a director ceased to be a director of the Company,
and such other information as may be prescribed from time to time by
law.
|
22.4
|
The
Company shall maintain an accurate and complete register of members
showing the full names and addresses of all persons holding registered
shares in the Company, the number of each class and series of registered
shares held by such person, the date on which the name of each member was
entered in the register of members and where applicable, the date such
person ceased to hold any registered shares in the
Company.
|
22.5
|
The
Company shall keep the following at the office of its registered
agent:
|
(a)
|
the
Memorandum and Articles of the
Company;
|
(b)
|
the
register of members maintained in accordance with these Articles or a copy
of the register of members;
|
(c)
|
the
register of directors maintained in accordance with these Articles or a
copy of the register of directors;
|
(d)
|
copies
of all notices and other documents filed by the Company in the previous
ten years;
|
(e)
|
a
copy of the register of charges kept by the Company pursuant to Section
162(1) of the Act; and
|
(f)
|
an
imprint of the common seal.
|
22.6
|
Where
the Company keeps a copy of the register of members or the register of
directors at the office of its registered agent, it
shall:
|
(a)
|
within
15 days of any change in the register, notify the registered agent,
in writing, of the change;
and
|
(b)
|
provide
the registered agent with a written record of the physical
address of the place or places at which the original register of members
or the original register of directors is
kept.
|
(c)
|
Where the place at which the original register of
members or the original register of directors is changed, the Company
shall provide the registered agent with the physical address of the new
location of the records within 14 days of the change of
location.
|
22.7
|
The
records, documents and registers required by these Articles shall be open
to the inspection of the directors at all
times.
|
22.8
|
The
directors shall from time to time determine whether and to what extent and
at what times and places and under what conditions the records, documents
and registers of the Company or any of them shall be open to the
inspection of members not being directors, and no member (not being a
director) shall have any right to inspect any records, documents or
registers of the Company except as conferred by the Act or authorised by a
Resolution of Directors.
|
23
|
Audit
|
23.1
|
The
directors may by a Resolution of Directors call for the accounts of the
Company to be examined by an auditor or auditors to be appointed by them
at such remuneration as may from time to time be
agreed.
|
23.2
|
The
auditor may be a member of the Company but no director or officer shall be
eligible during his continuance in
office.
|
23.3
|
Every
auditor of the Company shall have a right of access at all times to the
books of accounts of the Company, and shall be entitled to require from
the officers of the Company such information and explanations as he thinks
necessary for the performance of his
duties.
|
23.4
|
The
report of the auditor shall be annexed to the accounts upon which he
reports, and the auditor shall be entitled to receive notice of, and to
attend, any meeting at which the Company's audited profit and loss account
and/or balance sheet is to be
presented.
|
24
|
Notices
|
24.1
|
Any
notice, information or written statement required to be given to members
shall be served by mail (air-mail service if available) addressed to each
member at the address shown in the share
register.
|
24.2
|
All
notices directed to be given to the members shall, with respect to any
registered shares to which persons are jointly entitled, be given to
whichever of such persons is named first in the share register, and notice
so given shall be sufficient notice to all the holders of such
shares.
|
24.3
|
Any
notice, if served by post, shall be deemed to have been served within ten
days of posting, and in proving such service it shall be sufficient to
prove that the letter containing the notice was properly addressed and
mailed with the postage prepaid.
|
25
|
Continuation
|
|
The
Company may, by a Resolution of Directors or by a Resolution of Members,
continue as a company incorporated under the laws of a jurisdiction
outside the British Virgin Islands in the manner provided under those
laws.
|
26
|
Winding
Up
|
26.1
|
The
Company may be voluntarily liquidated under Part XII of the Act if it has
no liabilities and it is able to pay its debts as they become
due. A liquidator may, subject to the terms of the Act, be
appointed by a Resolution of Directors or by a Resolution of
Members.
|
26.2
|
If
the Company shall be wound up, the liquidator may, in accordance with a
Resolution of Members, divide amongst the members in specie or in kind the
whole or any part of the assets of the Company (whether they shall consist
of property of the same kind or not) and may for such purpose set such
value as he deems fair upon any such property to be divided as aforesaid
and may determine how such division shall be carried out as between the
members or different classes of members. The liquidator may
vest the whole or any part of such assets in trustees upon such trust for
the benefit of the contributors as the liquidator shall think fit, but so
that no member shall be compelled to accept any shares or other securities
whereon there is any liability.
|
27
|
Business
Combination
|
27.1
|
The
following provisions 27.2 through 27.5 and Article 13.1(a) and (b) shall
terminate upon the consummation of any "Business Combination," and may not
be amended during the "Target Business Acquisition Period." A
"Business Combination" shall mean the acquisition by the Company, whether
by merger, share capital exchange, asset or share acquisition or other
similar type of transaction, of an operating business ("Target Business").
The "Target Business Acquisition Period" shall mean the period commencing
from the effectiveness of the registration statement filed in connection
with the initial public offering ("IPO") of the Company’s parent
corporation, Alyst Acquisition Corporation, a Delaware corporation
(“Alyst”) up to and including the first to occur of (a) a Business
Combination; or (b) the Termination Date (defined
below).
|
27.2
|
Prior
to the consummation of any Business Combination, the Company shall submit
such Business Combination to its shareholders for approval regardless of
whether the Business Combination is of a type which normally would require
such shareholder approval under the Act. In the event that a majority of
the IPO Shares (defined below) cast at the meeting to approve the Business
Combination are voted for the approval of such Business Combination, the
Company shall be authorized to consummate the Business Combination;
provided that the Company shall not consummate any Business Combination if
the holders of 30% or more of the IPO Shares exercise their redemption
rights described in Article 27.3
below.
|
27.3
|
In
the event that a Business Combination is approved in accordance with the
above Article 27.2 and is consummated by the Company, any shareholder of
the Company holding Ordinary Shares in the IPO ("IPO Shares") who voted
against the Business Combination may, contemporaneously with such vote,
demand that the Company redeem his IPO Shares into cash. If so demanded,
the Company shall, promptly after consummation of the Business
Combination, redeem such shares into cash at a per share redemption price
equal to the quotient determined by dividing (i) the amount in the Trust
Fund (as defined below), inclusive of any interest thereon, calculated as
of two business days prior to the consummation of the Business
Combination, by (ii) the total number of IPO Shares. "Trust Fund" shall
mean the trust account established by Alyst at the consummation of Alyst's
IPO and into which a certain amount of the net proceeds of the IPO are
deposited.
|
27.4
|
In
the event that the Company does not consummate a Business Combination by
29 June 2009 (the "Termination Date"), the officers of the Company shall
take all such action necessary to liquidate and dissolve the Company as
soon as reasonably practicable. In the event that the Company is so
wound-up and subsequently liquidated, only the holders of IPO Shares shall
be entitled to receive pro rata liquidating distributions and the Company
shall pay no liquidating distributions with respect to any other shares of
the Company.
|
27.5
|
A
holder of IPO Shares shall be entitled to receive distributions from the
Trust Fund only in the event of a liquidation of the Company or in the
event he demands redemption of his shares in accordance with Article 27.3
above. In no other circumstances shall a holder of IPO Shares have any
right or interest of any kind in or to the Trust
Fund.
|
|
(Sgd.)
Clinton Hempel
|
_______________________
|
Authorised
Signatory
|
Page
|
|||
ARTICLE
I
|
PURPOSE
|
1
|
|
|
|||
ARTICLE
II
|
DEFINITIONS
|
1
|
|
|
|||
ARTICLE
III
|
EFFECTIVE
DATE OF PLAN
|
6
|
|
|
|||
ARTICLE
IV
|
ADMINISTRATION
|
6
|
|
Section
4.1
|
Composition
of Committee
|
6
|
|
Section
4.2
|
Powers
|
6
|
|
Section
4.3
|
Additional
Powers
|
6
|
|
Section
4.4
|
Committee
Action
|
7
|
|
|
|||
ARTICLE
V
|
SHARES
SUBJECT TO PLAN AND LIMITATIONS THEREON
|
7
|
|
Section
5.1
|
Shares
Grant and Award Limits
|
7
|
|
Section
5.2
|
Shares
Offered
|
7
|
|
Section
5.3
|
Lock-Up
Agreement
|
8
|
|
|
|||
ARTICLE
VI
|
ELIGIBILITY
FOR AWARDS; TERMINATION OF EMPLOYMENT, DIRECTOR STATUS OR CONSULTANT
STATUS
|
8
|
|
Section
6.1
|
Eligibility
|
8
|
|
Section
6.2
|
Termination
of Employment or Director Status
|
8
|
|
Section
6.3
|
Termination
of Consultant Status
|
9
|
|
Section
6.4
|
Special
Termination Rule
|
10
|
|
Section
6.5
|
Termination
for Cause
|
10
|
|
|
|||
ARTICLE
VII
|
OPTIONS
|
10
|
|
Section
7.1
|
Option
Period
|
10
|
|
Section
7.2
|
Limitations
on Exercise of Option
|
10
|
|
Section
7.3
|
Special
Limitations on Incentive Share Options
|
11
|
|
Section
7.4
|
Option
Agreement
|
11
|
|
Section
7.5
|
Option
Price and Payment
|
12
|
|
Section
7.6
|
Shareholder
Rights and Privileges
|
12
|
|
Section
7.7
|
Options
and Rights in Substitution for Share Options Granted by Other
Corporations
|
12
|
|
|
|||
ARTICLE
VIII
|
RESTRICTED
SHARE AWARDS
|
12
|
|
Section
8.1
|
Restriction
Period to be Established by Committee
|
12
|
|
Section
8.2
|
Other
Terms and Conditions
|
12
|
|
Section
8.3
|
Payment
for Restricted Shares
|
13
|
|
Section
8.4
|
Restricted
Share Award Agreements
|
13
|
|
|
|||
ARTICLE
IX
|
UNRESTRICTED
SHARE AWARDS
|
13
|
Page
|
|||
ARTICLE
X
|
PERFORMANCE
UNIT AWARDS
|
13
|
|
Section
10.1
|
Terms
and Conditions
|
13
|
|
Section
10.2
|
Payments
|
14
|
|
|
|||
ARTICLE
XI
|
PERFORMANCE
SHARE AWARDS
|
14
|
|
Section
11.1
|
Terms
and Conditions
|
14
|
|
Section
11.2
|
Shareholder
Rights and Privileges
|
14
|
|
|
|||
ARTICLE
XII
|
DISTRIBUTION
EQUIVALENT RIGHTS
|
14
|
|
Section
12.1
|
Terms
and Conditions
|
14
|
|
Section
12.2
|
Interest
Equivalents
|
14
|
|
|
|||
ARTICLE
XIII
|
SHARE
APPRECIATION RIGHTS
|
14
|
|
Section
13.1
|
Terms
and Conditions
|
15
|
|
Section
13.2
|
Tandem
Share Appreciation Rights
|
15
|
|
|
|||
ARTICLE
XIV
|
RECAPITALIZATION
OR REORGANIZATION
|
16
|
|
Section
14.1
|
Adjustments
to Ordinary Shares
|
16
|
|
Section
14.2
|
Recapitalization
|
16
|
|
Section
14.3
|
Other
Events
|
16
|
|
Section
14.4
|
Powers
Not Affected
|
16
|
|
Section
14.5
|
No
Adjustment for Certain Awards
|
17
|
|
|
|||
ARTICLE
XV
|
AMENDMENT
AND TERMINATION OF PLAN
|
17
|
|
|
|||
ARTICLE
XVI
|
SPECIAL
RULES
|
17
|
|
Section
16.1
|
Right
of First Refusal
|
17
|
|
Section
16.2
|
Call
Option
|
17
|
|
|
|||
ARTICLE
XVII
|
MISCELLANEOUS
|
18
|
|
Section
17.1
|
No
Right to Award
|
18
|
|
Section
17.2
|
No
Rights Conferred
|
18
|
|
Section
17.3
|
Other
Laws; Withholding
|
18
|
|
Section
17.4
|
No
Restriction on Corporate Action
|
18
|
|
Section
17.5
|
Restrictions
on Transfer
|
19
|
|
Section
17.6
|
Beneficiary
Designations
|
19
|
|
Section
17.7
|
Rule
16b-3
|
19
|
|
Section
17.8
|
Section
162(m)
|
19
|
|
Section
17.9
|
Section
409A
|
20
|
|
Section
17.10
|
Other
Plans
|
20
|
|
Section
17.11
|
Limits
of Liability
|
20
|
|
Section
17.12
|
Governing
Law
|
20
|
Page
|
|||
|
|||
Section
17.13
|
Severability
of Provisions
|
20
|
|
Section
17.14
|
No
Funding
|
20
|
|
Section
17.15
|
Headings
|
20
|
|
Section
17.16
|
Terms
of Award Agreements
|
20
|
1.
|
Regulations
on the Foreign Exchange System of The People’s Republic of China, issued
by the State Council in 2008.
|
2.
|
Measures
for Administration of Individual Foreign Exchange, issued by the People’s
Bank of China in 2006.
|
3.
|
Detailed
Rules of the Measures for Administration of Individual Foreign Exchange,
issued by the State Administration of Foreign Exchange
(SAFE), in 2007.
|
4.
|
Notice
of the State Administration of Foreign Exchange on Relevant Issues
concerning Foreign Exchange Administration for Domestic Residents to
Engage in Financing and in Return Investment via Overseas Special Purpose
Companies (Circular 75) and its Operation Rules (Circular 106) issued by
the SAFE in 2005 and 2007.
|
5.
|
Operating
Rules on the Foreign Exchange Administration of the Involvement of
Domestic Individuals in the Employee Stock Ownership Plans and Share
Option Schemes of Overseas Listed Companies (Circular 78), issued by the
SAFE in 2007.
|
6.
|
Other
applicable regulations which issued or will be issued by the PRC
government authorities within the Term of this
Plan.
|
1.
|
To
approve the redomestication of Alyst from the State of Delaware to the
British Virgin Islands by merging Alyst with and into China Networks
International Holdings Ltd. (‘‘CN Holdings’’), its wholly-owned British
Virgin Islands subsidiary (the ‘‘Redomestication Merger’’). The
Redomestication Merger will not be consummated unless the Business
Combination proposal set forth in paragraph 2 below is also
approved.
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
2.
|
To
approve the proposed merger of China Networks Merger Co., Ltd., a
wholly-owned British Virgin Islands subsidiary of CN Holdings (“China
Networks Merger Co.”) with and into China Networks Media, Ltd. (“China
Networks Media”), a private limited liability British Virgin Islands
company, becoming a wholly-owned subsidiary of CN Holdings (the ‘‘Business
Combination’’). The Business Combination will not take place unless the
Redomestication Merger proposal set forth in paragraph 1 above is also
approved.
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
3.
|
To
adopt the proposed incentive stock option plan pursuant to which
directors, officers, employees and consultants of CN Holdings or its
subsidiaries may be granted options to purchase up to 2,500,000 million
ordinary shares of CN Holdings.
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
4.
|
To
approve any adjournment or postponement of the Special Meeting for the
purpose of soliciting additional proxies in the event Alyst does not
receive the requisite stockholder vote for approval of the Redomestication
Proposal and the Business Combination Proposal.
|
FOR
o
|
AGAINST
o
|
ABSTAIN
o
|