|
|
|
x
|
Annual
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
|
|
¨
|
Transition
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
|
|
Nevada
|
84-1092589
|
|
|
(State
or Other Jurisdiction
|
(I.R.S.
Employer Identification No.)
|
|
|
of
Incorporation or Organization)
|
|
Canglongdao Science Park of Wuhan East Lake
Hi-Tech
Development Zone
Wuhan, Hubei, People’s Republic of
China
(Address
of Principal Executive Offices)
|
430200
(Zip
Code)
|
|
Title of Each Class
|
Name of Each Exchange on Which
Registered
|
|
Common
Stock, par value $0.0001 per share
|
The
NASDAQ Stock Market LLC
|
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
|
(Do
not check if a smaller reporting company)
|
|
Page
|
||
|
PART
III
|
||
|
Item
10.
|
Directors,
Executive Officers and Corporate Governance.
|
1
|
|
Item
11.
|
Executive
Compensation.
|
6
|
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
|
9
|
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence.
|
13
|
|
Item
14.
|
Principal
Accountant Fees and Services.
|
13
|
|
PART
IV
|
||
|
Item
15.
|
Exhibits
and Financial Statement Schedules.
|
14
|
|
|
·
|
vulnerability
of our business to general economic
downturn;
|
|
|
·
|
our
ability to obtain financing on favorable
terms;
|
|
|
·
|
our
ability to comply with the covenants and other terms of our loan
agreements with Standard Chartered Bank (China) Limited, Guangzhou
Branch;
|
|
|
·
|
establishing
our business segment relating to industrial parts and machinery
equipment;
|
|
|
·
|
operating
in the PRC generally and the potential for changes in the laws of the PRC
that affect our operations including tax
law;
|
|
|
·
|
remediating
material weaknesses in our internal control over financial
reporting;
|
|
|
·
|
our
failure to meet or timely meet contractual performance standards and
schedules;
|
|
|
·
|
our
dependence on the steel and iron
markets;
|
|
|
·
|
exposure
to product liability and defect
claims;
|
|
|
·
|
our
ability to obtain all necessary government certifications and/or licenses
to conduct our business;
|
|
|
·
|
the
cost of complying with current and future governmental regulations and the
impact of any changes in the regulations on our operations;
and
|
|
|
·
|
the
other factors referenced in this
Amendment.
|
|
Item
10.
|
Directors,
Executive Officers and Corporate
Governance.
|
|
Name
|
Age
|
Position
|
||
|
Qi
Ruilong
|
46
|
Chief
Executive Officer, President, Secretary and Director
|
||
|
Philip
Lo
|
43
|
Chief
Financial Officer and Treasurer
|
||
|
Ge
Zengke
|
55
|
General
Manager
|
||
|
Huang
Zhaoqi
|
46
|
Vice
General Manager (Turbine) and Director
|
||
|
Chen
Juntao
|
33
|
Vice
General Manager (Blower)
|
||
|
Xu
Jie
|
48
|
Chairman
of the Board
|
||
|
David
K. Karnes
|
61
|
Director
|
||
|
Brian
Lin
|
45
|
Director
|
||
|
Shi
Yu
|
39
|
Director
|
||
|
Zheng
Qingsong
|
36
|
Director
|
|
|
·
|
evaluating
employee performance;
|
|
|
·
|
preparing
information for Compensation Committee
meetings;
|
|
|
·
|
establishing
business performance targets and
objectives;
|
|
|
·
|
providing
background information regarding the Company’s strategic objectives;
and
|
|
|
·
|
recommending
salary levels and equity awards.
|
|
Name and Principal Position
|
Year
|
Salary
($)(1)
|
All Other
Compensation
($)(1)
|
Total ($)(1)
|
||||||||||
|
Xu
Jie(2)
|
2009
|
$ | 16,989 | $ | 0 | $ | 16,989 | |||||||
|
Former
Chief Executive Officer, President and Secretary
|
2008
|
15,800 | 4,000 | 19,800 | ||||||||||
|
Haiming
Liu(2)(3)
|
2009
|
$ | 131,562 | $ | 4,265 | $ | 135,827 | |||||||
|
Former
Chief Financial Officer and Treasurer
|
2008
|
86,179 | 0 | 86,179 | ||||||||||
|
(1)
|
The
amounts shown in this table were paid in RMB and were translated into U.S.
dollars at the rate of $0.14618 per RMB for 2009 and $0.14363 per RMB for
2008, which are the average 12 month exchange rates that the Company used
in its audited financial statements for such
years.
|
|
(2)
|
Mr.
Xu resigned as Chief Executive Officer, President and Secretary on April
23, 2010 and his successor is Qi Ruilong. Mr. Liu resigned as
Chief Financial Officer and Treasurer on January 11, 2010 and his
successor is Philip Lo.
|
|
(3)
|
Pursuant
to his employment agreement, Mr. Liu, our Former Chief Financial Officer
and Treasurer, received an annual base salary of 700,000 RMB
(approximately $102,326). The Company also reimbursed Mr. Liu
for his apartment rental expense, car expenses and two roundtrip domestic
airline tickets per quarter. Since Mr. Liu joined the Company
on May 4, 2008, his compensation did not exceed $100,000 for
2008.
|
|
|
·
|
Each
eligible director will receive an annual $20,000 cash
retainer.
|
|
|
·
|
Each
eligible director residing in Wuhan, China will receive a $1,000 fee for
each board or committee meeting attended. Each eligible director who
resides outside of Wuhan, China, will receive a $1,000 fee for each board
or committee meeting attended by telephone and $5,000 for each board or
committee meeting attended in
person.
|
|
|
·
|
Each
eligible director will receive the option to purchase 20,000 shares of our
common stock per year. The stock options will vest in four equal quarterly
installments over one year.
|
|
|
·
|
The
Chairman of our Audit Committee will receive an additional annual fee of
$5,000.
|
|
|
·
|
All
directors will be reimbursed for out-of-pocket expenses associated with
their service to the Company.
|
|
Name
|
Fees
Earned or
Paid in
Cash ($)
|
Option
Awards ($)
(1)(2)
|
Total ($)
|
|||||||||
|
David
K. Karnes
|
$ | 20,000 | 0 | $ | 20,000 | |||||||
|
Brian
Lin
|
25,000 | 0 | 25,000 | |||||||||
|
Shi
Yu
|
15,000 | 0 | 15,000 | |||||||||
|
Zheng
Qingsong
|
15,000 | 0 | 15,000 | |||||||||
|
(1)
|
As
of December 31, 2009, our non-management directors held the following
stock options:
|
|
Name
|
Stock Options
|
|||
|
David
K. Karnes
|
40,000 | |||
|
Brian
Lin
|
40,000 | |||
|
Shi
Yu
|
0 | |||
|
Zheng
Qingsong
|
0 | |||
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
|
|
Number of
securities to be
issued
upon exercise of
outstanding
options,
warrants and
rights
|
Weighted-
average exercise
price of
outstanding
options,
warrants and
rights
|
Number of securities
remaining available for
future issuance under
the Plan (excluding
securities reflected in
first column)
|
||||||||||
|
Equity
compensation plans previously approved by security holders
|
80,000 | $ | 7.08 | 2,920,000 | ||||||||
|
Equity
compensation plans not approved by security holders
|
—
|
—
|
—
|
|||||||||
|
Total
|
80,000 | $ | 7.08 | 2,920,000 | ||||||||
|
Name of Beneficial Owner
|
Common Stock
Beneficially Owned(1)
|
Percentage of
Common Stock
Owned (1)
|
||||||
|
Five
Percent Stockholders (other than directors and principal executive
officer):
|
||||||||
|
Adam
Benowitz and Vision Capital Advisors, LLC(2)(3)
|
2,531,485 | 9.9 | % | |||||
|
Bank
of America Corporation(2)(4)
|
2,662,742 | 9.9 | % | |||||
|
Citigroup
Inc.(2)(5)
|
2,674,929 | 9.9 | % | |||||
|
QVT
Financial, LP(2)(6)
|
1,467,589 | 5.8 | % | |||||
|
The
TCW Group, Inc.(2)(7)
|
2,871,936 | 9.9 | % | |||||
|
Directors
and Named Executive Officers:
|
||||||||
|
Qi
Ruilong
|
0 | * | ||||||
|
Philip
Lo
|
0 | * | ||||||
|
Huang
Zhaoqi
|
0 | * | ||||||
|
David
K. Karnes(8)
|
60,000 | * | ||||||
|
Brian
Lin(9)
|
50,000 | * | ||||||
|
Xu
Jie(10)
|
17,887,446 | 70.6 | % | |||||
|
Shi
Yu(11)
|
10,000 | * | ||||||
|
Zheng
Qingsong(12)
|
10,000 | * | ||||||
|
Directors
and Executive Officers as a group (10 persons)(13)
|
18,017,446 | 70.7 | % | |||||
|
(1)
|
Applicable
percentage ownership is based on 25,351,950 shares of Common Stock
outstanding as of April 29, 2010. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting or
investment power with respect to securities. Shares of Common Stock that
are currently issuable upon conversion or exercisable within 60 days of
April 29, 2010, are deemed to be beneficially owned by the person holding
such convertible securities or warrants for the purpose of computing the
percentage of ownership of such person, but are not treated as
outstanding for the purpose of computing the percentage ownership of
any other person.
|
|
(2)
|
These
holders received shares of our Series A Convertible Preferred Stock and
Series A, Series B and Series J Warrants to purchase shares of our Common
Stock in a private placement transaction on February 7, 2007. In addition,
we issued Series B Convertible Preferred Stock to certain of these holders
in connection with the exercise of Series J Warrants, which expired on
November 7, 2008. Until the preferred stock is converted or the warrants
exercised, these holders have only limited voting rights with respect to
the preferred stock and no voting rights with respect to the warrants.
Because the preferred stock and warrants are presently convertible into or
exercisable for shares of Common Stock, the holders are deemed to
beneficially own such shares of Common Stock. It is for this reason that
the percentages shown add to more than
100%.
|
|
(3)
|
Based
on a Schedule 13G and any amendments thereto filed by Adam Benowitz,
Vision Capital Advisors, LLC and its affiliates (collectively, “Vision”).
Vision owns 2,312,882 shares of Common Stock. Vision also owns
1,971,117 shares of Series A Convertible Preferred Stock and 3,004,292
shares of Series B Convertible Preferred Stock, which collectively
are convertible into 4,975,409 shares of our Common Stock. In addition,
Vision holds Series A and B Warrants, which entitle it to
purchase 1,931,330 and 1,802,575 shares of our Common Stock, respectively.
The preferred stock and warrants are not convertible or exercisable,
however, to the extent that the number of shares of Common Stock to be
issued pursuant to such conversion or exercise would exceed, when
aggregated with all other shares of Common Stock owned by Vision at such
time, the number of shares of Common Stock which would result in Vision
beneficially owning in excess of 9.9% of the then issued and outstanding
shares of our Common Stock. Vision may waive this ownership cap on 61
days’ prior notice to us. As a result of this ownership cap, Vision
beneficially owns 2,531,485 shares of our Common Stock. If Vision waived
this ownership cap, it would beneficially own 11,022,196 shares of our
Common Stock or approximately 32.4% of our outstanding Common Stock.
Vision is deemed to beneficially own these securities, although record
ownership of the securities is in the name of Vision Capital Advantage
Fund, L.P. and Vision Opportunity Master Fund, Ltd. The address of Vision
is 20 West 55th
Street, 5th
Floor, New York, New York
10019.
|
|
(4)
|
Based
on a Schedule 13G and any amendments thereto filed by Bank of America
Corporation (“Bank of America”). Bank of America owns 1,118,302 shares of
Common Stock. Bank of America also owns 1,272,779 shares of
Series A Convertible Preferred Stock and 429,185 shares of Series B
Convertible Preferred Stock, which collectively are convertible into
1,701,964 shares of our Common Stock. In addition, Bank of America holds
Series A and B Warrants, which entitle it to purchase 1,287,554 and
257,511 shares of our Common Stock, respectively. The preferred stock and
warrants are not convertible or exercisable, however, to the extent that
the number of shares of Common Stock to be issued pursuant to such
conversion or exercise would exceed, when aggregated with all other shares
of Common Stock owned by Bank of America at such time, the number of
shares of Common Stock which would result in Bank of America beneficially
owning in excess of 9.9% of the then issued and outstanding shares of our
Common Stock. Bank of America may waive this ownership cap on 61 days’
prior notice to us. As a result of this ownership cap, Bank of America
beneficially owns 2,662,742 shares of our Common Stock. If Bank of
America waived this ownership cap, it would beneficially own 4,365,331
shares of our Common Stock or approximately 15.3% of our outstanding
Common Stock. Bank of America is deemed to beneficially own these
securities, although record ownership of the securities is in the name of
Hare & Co. for Blue Ridge Investments, LLC. The address of Bank of
America is 100 North Tryon Street, Floor 25, Bank of America Corporate
Center, Charlotte, NC 28255.
|
|
(5)
|
Based
on a Schedule 13G and any amendments thereto filed by Citigroup Inc. and
its affiliates (collectively, “Citigroup”). Citigroup
beneficially owns 2,674,929 shares of Common Stock. Citigroup
owns 1,353,031 shares of Series A Convertible Preferred Stock and
2,062,232 shares of Series B Convertible Preferred Stock, which
collectively are convertible into 3,415,263 shares of our Common Stock. In
addition, Citigroup holds Series A and B Warrants, which entitle
it to purchase 1,237,339 and 1,237,339 shares of our Common Stock,
respectively. The preferred stock and warrants are not convertible or
exercisable, however, to the extent that the number of shares of Common
Stock to be issued pursuant to such conversion or exercise would exceed,
when aggregated with all other shares of Common Stock owned by Citigroup
at such time, the number of shares of Common Stock which would result in
Citigroup beneficially owning in excess of 9.9% of the then issued and
outstanding shares of our Common Stock. Citigroup may waive this ownership
cap on 61 days’ prior notice to us. As a result of this ownership cap,
Citigroup beneficially owns 2,674,929 shares of our Common Stock.
Citigroup is deemed to beneficially own these securities, although record
ownership of the securities is in the name of Old Lane Cayman Master Fund,
L.P., Old Lane US Master Fund, L.P. and Old Lane HMA Master Fund, L.P. The
address of the Old Lane entities is 500 Park Avenue, New York, New York
10036.
|
|
(6)
|
Based
on Schedule 13G and any amendments thereto filed by QVT Financial, LP and
its affiliates (“QVT”). QVT beneficially owns 1,467,589 shares of Common
Stock. QVT owns 844,765 shares of Series A Convertible
Preferred Stock, which are convertible into 844,765 shares of our Common
Stock. In addition, QVT holds Series A and B Warrants, which entitle it to
purchase 772,532 and 9,000 shares of our Common Stock, respectively. The
preferred stock and warrants are not convertible or exercisable, however,
to the extent that the number of shares of Common Stock to be issued
pursuant to such conversion or exercise would exceed, when aggregated with
all other shares of Common Stock owned by QVT at such time, the number of
shares of Common Stock which would result in QVT beneficially owning in
excess of 9.9% of the then issued and outstanding shares of our Common
Stock. QVT may waive this ownership cap on 61 days’ prior notice to us.
QVT is deemed to beneficially own these securities, although record
ownership of the securities is in the name of QVT Fund LP and Quintessence
Fund LP. The address of QVT is 1177 Avenue of the Americas, 9th
Floor, New York, New York 10036.
|
|
(7)
|
Based
on a Schedule 13G and any amendments thereto filed by The TCW Group, Inc.
and its affiliates (collectively, “TCW”). TCW beneficially owns 2,871,936
shares of Common Stock. TCW owns 563,176 shares of Series A
Convertible Preferred Stock and 858,369 shares of Series B
Convertible Preferred Stock, which collectively are convertible into
1,421,545 shares of our Common Stock. In addition, TCW holds Series A and
B Warrants, which entitle it to purchase 515,021 and 515,021 shares of our
Common Stock, respectively. The preferred stock and warrants are not
convertible or exercisable, however, to the extent that the number of
shares of Common Stock to be issued pursuant to such conversion or
exercise would exceed, when aggregated with all other shares of Common
Stock owned by TCW at such time, the number of shares of Common Stock
which would result in TCW beneficially owning in excess of 9.9% of the
then issued and outstanding shares of our Common Stock. TCW may waive this
ownership cap on 61 days’ prior notice to us. As a result of this
ownership cap, TCW beneficially owns 2,871,936 shares of our Common Stock.
If TCW waived this ownership cap, it would beneficially own approximately
10.8% of our outstanding Common Stock. TCW is deemed to beneficially own
these securities, although record ownership of the securities is in the
name of TCW Americas Development Association L.P. The address of TCW is
1251 Avenue of the Americas, Suite 4700, New York, New York
10020.
|
|
(8)
|
Includes
7,000 shares held in an IRA account, 2,000 shares held by a corporation
controlled by Mr. Karnes, and options to purchase 50,000 shares of Common
Stock that are currently exercisable or are exercisable within 60 days of
April 29, 2010.
|
|
(9)
|
Includes
options to purchase 50,000 shares of Common Stock that are currently
exercisable or are exercisable within 60 days of April 29,
2010.
|
|
(10)
|
Includes
17,887,446 shares of Common Stock held by Fame Good International Limited
(“Fame Good”). Xu Jie, our Chairman of the Board, is also the President
and Chief Executive Officer, director and controlling stockholder of Fame
Good and as a result is deemed to be the beneficial owner of the
securities held by Fame Good. Mr. Xu does not directly own any shares of
our Common Stock. Mr. Xu’s business address is Canglongdao Science Park of
Wuhan, East Lake Hi-Tech Development Zone, Wuhan, Hubei 430200, People’s
Republic of China.
|
|
(11)
|
Includes
options to purchase 10,000 shares of Common Stock that are currently
exercisable or are exercisable within 60 days of April 29,
2010.
|
|
(12)
|
Includes
options to purchase 10,000 shares of Common Stock that are currently
exercisable or are exercisable within 60 days of April 29,
2010.
|
|
(13)
|
Includes
options to purchase 120,000 shares of Common Stock that are currently
exercisable or are exercisable within 60 days of April 29,
2010.
|
|
Exhibit No.
|
Description
|
|
|
31.1*
|
Certification
of Principal Executive Officer Pursuant to Rule 13a-14(a)
|
|
|
31.2*
|
Certification
of Principal Financial Officer Pursuant to Rule 13a-14(a)
|
|
|
32.1*
|
Certifications
Pursuant to 18 U.S.C. Section
1350
|
|
WUHAN
GENERAL GROUP (CHINA), INC.
|
||
|
Date: April
30, 2010
|
By:
|
/s/ Qi Ruilong |
|
Name:
Qi Ruilong
|
||
|
Title:
President and Chief Executive
Officer
|
||