UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report:
(Date of earliest event reported)
June 20, 2005
----------------------------
Purezza Group, Inc.
(Exact name of registrant as specified in charter)
Florida
(State or other Jurisdiction of Incorporation or Organization)
333-85306 65-1129912
(Commission File Number) (IRS Employer Identification
No.)
936A Beachland
Boulevard, Suite 13
Vero Beach, FL 32963
(Address of Principal Executive
Offices and zip code)
(772) 231-7544
(Registrant's telephone
number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17
CFR 240.14a-12(b))
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Information included in this Form 8-K may contain forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
This information may involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of
Purezza Group, Inc. ("Purezza") and Shanxi Puda Resources Co, Ltd. ("Puda") to
be materially different from future results, performance or achievements
expressed or implied by any forward-looking statements. Forward-looking
statements, which involve assumptions and describe the Purezza's and Puda's
future plans, strategies and expectations, are generally identifiable by use of
the words "may," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative of these words or other variations on
these words or comparable terminology. Forward-looking statements are based on
assumptions that may be incorrect, and there can be no assurance that any
projections or other expectations included in any forward-looking statements
will come to pass. Purezza's and Puda's actual results could differ materially
from those expressed or implied by the forward-looking statements as a result of
various factors. Except as required by applicable laws, Purezza undertakes no
obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.
Section 1 - Registrants' Business and Operations
Item 1.01 Entry into a Material Definitive Agreement.
Effective June 20, 2005, Purezza Group, Inc., a Florida corporation
("Purezza"), entered into an Exchange Agreement ("Exchange Agreement") with
Taiyuan Putai Business Consulting Co., Ltd. ("Putai"), a limited liability
company under the Company Law of The People's Republic of China (the "PRC"),
Shanxi Puda Resources Co, Ltd. ("Puda"), a limited liability company formed by
natural persons under the laws of the PRC, Puda Investment Holding Limited
("Puda BVI"), an International Business Company incorporated in the British
Virgin Islands, and each of the members of Puda BVI (the "Puda BVI Members").
Under the terms of the Exchange Agreement, Purezza will, at closing, acquire all
of the outstanding capital stock and ownership interests of Puda BVI (the
"Interests") from the Puda BVI Members, and the Puda BVI Members will contribute
all of their Interests in Puda BVI to Purezza. In exchange, Purezza will issue
to the Puda BVI Members 1,000,000 shares of Series A Convertible Preferred
Stock, par value $0.01 per share, of Purezza ("Preferred Shares"), which shall
be convertible into 678,500,000 shares of Purezza's common stock ("Conversion
Shares"). The issuance of the Preferred Shares and, upon conversion, the shares
of Purezza common stock underlying the Preferred Shares, to the Puda BVI Members
is intended to be exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to Section 4(2) thereof.
Puda BVI currently owns all of the registered capital of Putai, a
wholly foreign owned enterprise ("WFOE") registered under the wholly
foreign-owned enterprises laws of the PRC. Prior to the closing of the exchange
transaction, Putai and Puda will enter into an Exclusive Consulting Agreement,
("Consulting Agreement"), an Operating Agreement, ("Operating Agreement"), and a
Technology License Agreement, ("License Agreement") (collectively, theses
agreements are referred to herein as the "Restructuring Agreements"). Under the
Restructuring Agreements, Putai has agreed to advise, consult, manage and
operate Puda's business, to provide certain financial accommodations to Puda,
and to license certain technology to Puda for use in its business, in exchange
for Puda's payment of all of its Operating Cash Flow (as defined in the
Restructuring Agreements) to Putai.
Prior to closing of the exchange transaction, each of the holders of
all of the registered capital of Puda will grant Putai the exclusive right and
option to acquire all of their registered capital of Puda ("Option Agreement")
and will further authorize Putai to vote the registered capital of Puda and to
act as the representative for such holders in all matters respecting Puda's
registered capital ("Authorizations").
Upon the closing of the exchange transaction, Purezza intends to file a
Current Report on Form 8-K announcing the closing of the exchange transaction
and will include proper disclosures required under Item 1.01 with respect to
each of the Restructuring Agreements, the Option Agreement and the
Authorizations, with each of the foregoing agreements being included as Exhibits
in such Current Report.
Following completion of the exchange transaction, Puda BVI will become
a wholly-owned subsidiary of Purezza.
Purezza is presently authorized under its Articles of Incorporation to
issue 100,000,000 shares of common stock, par value $0.001 per share, and
5,000,000 shares of preferred stock, par value $0.01 per share. Of the 5,000,000
shares of preferred stock authorized, 1,100,000 shares will be designated as
Series A Convertible Preferred Stock pursuant to a certificate of designations
("Certificate of Designations"), which will be approved by Purezza's board of
directors, and filed with and accepted by, the Secretary of State of the State
of Florida prior to the closing of the exchange transaction. Currently, Purezza
has 59,000,000 shares of common stock issued and outstanding and no shares of
preferred stock issued and outstanding.
Under the terms of the Exchange Agreement, all of the outstanding
Interests of Puda BVI will be exchanged for 1,000,000 Preferred Shares of
Purezza. Each Preferred Share will be convertible into 678.5 shares of Purezza's
common stock (the "Conversion Rate"). The Preferred Shares will immediately and
automatically be converted into shares of Purezza's common stock (the "Mandatory
Conversion") upon the approval by a majority of Purezza's stockholders (voting
together on an as-converted-to-common-stock basis), following the exchange
transaction, of an increase in the number of authorized shares of Purezza's
common stock from 100,000,000 to 150,000,000, and a 1 for 10 reverse stock split
of Purezza's outstanding common stock ("Reverse Split").
The holders of shares of Series A Preferred Stock will be entitled to
vote together with the holders of the common stock, as a single class, upon all
matters submitted to holders of common stock for a vote. Each share of Series A
Preferred Stock will carry a number of votes equal to the number of shares of
common stock issuable in a Mandatory Conversion based on the then applicable
Conversion Rate. As such, immediately following the exchange transaction, the
Puda BVI Members will own 92% of the total combined voting power of all classes
of Purezza's outstanding stock entitled to vote.
Upon Mandatory Conversion of the Preferred Shares, and subject to an
adjustment of the Conversion Rate as a result of the Reverse Split, the Puda BVI
Members will, in the aggregate, receive approximately 67,850,000 shares of
Purezza's common stock, representing 92% of the outstanding shares of Purezza's
common stock immediately following the Mandatory Conversion. The existing
stockholders of Purezza will, following the Mandatory Conversion and Reverse
Split, own approximately 5,900,000 shares of Purezza's common stock,
representing 8% of the outstanding shares of common stock.
Accordingly, if the exchange transaction closed, and the Mandatory
Conversion and the Reverse Split occurred, as of the date of this Report,
Purezza's currently issued and outstanding common stock (currently 59,000,000
shares) would be converted into 5,900,000 shares of common stock and would
represent 8% of Purezza's total common stock issued and outstanding.
In connection with the Reverse Split, Purezza's board of directors may,
in its discretion, provide special treatment to certain Purezza stockholders to
preserve round lot holders (i.e., holders owning at least 100 shares) after the
Reverse Split. In the event Purezza's board determines to provide such special
treatment, Purezza stockholders holding 1,000 or fewer shares of common stock
but at least 100 shares of common stock will receive 100 shares of common stock
after the Reverse Split, and persons holding less than 100 shares of common
stock would not be affected. The terms and conditions of special treatment
afforded to Purezza stockholders to preserve round lot stockholders, if any,
including the record dates for determining which stockholders may be eligible
for such special treatment, will be established in the discretion of Purezza's
board of directors.
Effective as of the closing of the exchange transaction, the existing
officers of Purezza will resign, and the newly-appointed directors of Purezza
will consist of one member of Puda's current management, Zhao Ming (Puda's
Chairman and Chief Executive Officer), an independent director designated by
Zhao Ming, and one independent director to be designated by Keating Reverse
Merger Fund, LLC ("KRM Fund"), the current majority stockholder of Purezza. KRM
Fund and each Puda BVI Member have agreed to vote their shares of Purezza's
common stock to elect the KRM designate (the "KRM Designate") to Purezza's board
for a period of one year following the closing and to vote for such other
persons that may be designated by Zhao Ming to fill any vacant position on the
board of directors (other than KRM Designate). The size of the board will
initially be three members and may be increased by the board of directors to
five members during the one year period following closing.
Upon the closing of the exchange transaction, Purezza intends to file
a Current Report on Form 8-K announcing the closing of the exchange transaction
and will provide additional information concerning Zhao Ming and the other
directors designated as of the closing by Zhao Ming and KRM Fund as required
under Items 5.01 and 5.02 of such Current Report.
At or prior to the Closing, Purezza will also enter into a certain
financial advisory agreement with Keating Securities, LLC ("Keating
Securities"), a registered broker-dealer, under which Keating Securities will be
compensated by Purezza for its advisory services rendered to Purezza in
connection with the exchange transaction. The transaction advisory fee will be
$400,000 with the payment thereof being subject to the closing of the exchange
transaction contemplated under the Exchange Agreement.
Purezza's completion of the transactions contemplated under the
Exchange Agreement are subject to the satisfaction of certain contingencies
including, without limitation, the delivery of U.S. GAAP audited and pro forma
financial information of Puda BVI (on a consolidated basis with Putai and Puda)
acceptable to Purezza, compliance with regulatory requirements, the execution of
the Restructuring Agreements, Option Agreement and Authorizations, and the
filing with and acceptance by the Secretary of State of the State of Florida of
the Certificate of Designations. Consummation of the exchange transaction is
also conditioned upon, among other things: (i) tax counsel to Puda issuing its
opinion that the transaction will not be taxable to the Puda BVI Members
pursuant to Section 351 of the Internal Revenue Code; (ii) execution by KRM Fund
and each Puda BVI Member of voting agreements; and (iii) continued quotation of
Purezza's common stock on the NASD Over-the-Counter Electronic Bulletin Board
("OTC BB").
The directors of Purezza have approved the Exchange Agreement and the
transactions contemplated thereunder. The directors and owners of Puda, Puda BVI
and Putai have approved the Exchange Agreement and the transactions contemplated
thereunder. The parties expect the closing of the transactions under the
Exchange Agreement to occur on or about July 15, 2005. However, there can be no
assurances that the exchange transaction will be completed.
The Exchange Agreement may be terminated as follows: (i) by mutual
consent, (ii) by either party if the exchange transaction is not consummated by
July 30, 2005, (iii) by either party if the exchange transaction is prohibited
by issuance of an order, decree or ruling, and (iv) by either party if the other
is in material breach of any representation, warranty, covenant or agreement.
On September 27, 2004, in its Current Report on Form 8-K dated
September 24, 2004, Purezza reported the execution of a letter of intent to
acquire Puda.
Kevin R. Keating is the father of the principal member of Keating
Investments, LLC. Keating Investments, LLC is the managing member of KRM Fund,
which is the majority stockholder of Purezza, and Keating Securities, LLC, the
registered broker-dealer affiliate of Keating Investments, LLC. Kevin R. Keating
is not affiliated with and has no equity interest in Keating Investments, LLC,
KRM Fund or Keating Securities, LLC and disclaims any beneficial interest in the
shares of Purezza's common stock owned by KRM Fund. Similarly, Keating
Investments, LLC, KRM Fund and Keating Securities, LLC disclaim any beneficial
interest in the shares of Purezza's common stock currently owned by Kevin R.
Keating.
Business of Purezza
Purezza is currently a public "shell" company with nominal assets whose
sole business has been to identify, evaluate and investigate various companies
with the intent that, if such investigation warrants, a reverse merger
transaction could be negotiated and completed pursuant to which Purezza would
acquire a target company with an operating business with the intent of
continuing the acquired company's business as a publicly held entity.
Business of Puda
Pursuant to the Exchange Agreement, Purezza intends to acquire 100% of
the capital stock of Puda Investment Holding Limited ("Puda BVI"), an
international business company incorporated in the Territory of the British
Virgin Islands on August 19, 2004. Puda Investment was organized by Zhao Ming
and Zhao Yao, the executive officers and principal owners of Shanxi Puda
Resources Co, Ltd. ("Puda"). Zhao Ming and Zhao Yao own approximately 80% and
20%, respectively, of the capital stock of Puda BVI.
Puda BVI organized Taiyuan Putai Business Consulting Co., Ltd.
("Putai") as a limited liability company in the PRC. Putai was organized to be a
wholly foreign owned enterprise ("WFOE") and received its WFOE approval from the
PRC government on October 18, 2004.
Prior to and as a condition of the closing of the exchange transaction,
Putai and Puda will enter into an Exclusive Consulting Agreement, ("Consulting
Agreement"), an Operating Agreement, ("Operating Agreement"), and a Technology
License Agreement, ("License Agreement") (collectively, theses agreements are
referred to herein as the "Restructuring Agreements"). Under the Restructuring
Agreements, Putai has agreed to advise, consult, manage and operate Puda's
business, to provide certain financial accommodations to Puda, and to license
certain technology to Puda for use in its business, in exchange for Puda's
payment of all of its Operating Cash Flow (as defined in the Restructuring
Agreements) to Putai. Accordingly, as a result of these Restructuring
Agreements, Putai will control substantially all of the operations of Shanxi
Puda and will be entitled to receive all of the Operating Cash Flow generated by
Puda's operations.
Puda is a limited liability company under the laws of the PRC and a
domestic enterprise with exclusively domestic capital registered in Shanxi
Province in the PRC. The registered capital of Puda is owned 80% by Zhao Ming
and 20% by Zhao Yao. Puda received its business operating license on June 7,
1995 from the PRC government authorities. Puda is engaged in the business of
coal crushing, preparation and cleaning in the PRC. The principal executive
office of Puda is located at 426 Xuefu Street, Taiyuan, Shanxi Province, PRC.
Zhao Ming and Zhao Yao are the executive officers of Puda.
Puda focuses on value added coal washing processes and specializes in
providing cleaned coal for metallurgical purposes, such as steel making. In the
coal washing process, raw coal is cleaned by using Puda's water-supported
technology. The cleaned coal produced by Puda is well suited for processing into
coking coal, which is an essential raw material for steel production. Currently,
Puda is one of the largest washed coal suppliers in Shanxi Province. Shanxi
Province has the biggest coal reserves in China, and commands more than 20% of
coal production in China.
Puda has two coal washing facilities in Liulin County in
Shanxi Province in the PRC. Liulin County is renowned for the good quality of
its coal. The site has a land area of approximately 1.5 hectares, and is located
about 120 miles southwest of Taiyuan City, the capital of Shanxi Province. The
two coal washing facilities are the:
1. Shanxi Liulin Dongqiang Plant which has an annual raw coal washing
capacity of 100,000 tons. This facility is leased by Puda from a
non-related third party. The leasing agreement was entered into on
December 2, 2001 for a term of 5 years. The cost for the leased
capacity is approximately $604,000 annually with four quarterly
payments per year. However, due to the increasing demand for cleaned
coal in China in the past several years, the lessor has become
increasingly reluctant to lease the capacity out and less cooperative
with Puda.
2. Shanxi Liulin Jiucai Plant which has an annual raw coal washing
capacity of 400,000 tons. This facility is owned by Puda.
Puda specializes in coal washing, processing and preparation utilizing
a water supported jig washing technology. Puda facilities use these proprietary
coal washing processes and technologies, to be licensed from Putai, and has its
own wells as a water source for its coal washing process. Together with the
recycling of water from the coal washing system, the two plants have a
sufficient and reliable supply of water for their operations.
In China, many coal mines do not have their own coal preparation
facilities or have inadequate preparation capacities. Coal cleaning companies
such as Puda were established to meet the demand for cleaned coal. The Chinese
coal preparation industry is currently highly fragmented. Many coal washing
plants have annual processing capacity of 100,000 tons or less.
Puda is the third largest coal washing company in Shanxi Province in
terms of annual cleaned coal production. Taiyuan Coal Beneficiation Plant (a
subsidiary of Xishan Coal & Electricity Group, which is one of Puda's current
customers) is the largest coal washing company in Shanxi Province with coal
washing capacity of 1.8 million tons per year. Another major local coal washing
company in Shanxi Province is Shanxi Coking Company, which produces 1.6 million
tons of cleaned coal per year. Puda's major competitive advantage is its ability
to access some of the highest quality raw coal in China and its well-established
business relationship with local suppliers. However, with larger scale and
sales, these competitors usually have better access to capital needed for
further development.
There are also many coal preparation plants located in the northeast
China. However, due to lower quality of the raw coal in this region, these
plants are less competitive in the cleaned coal market, especially in the coking
coal market which serves the steel production industry.
High-grade cleaned coal production depends on high-grade raw coal
inputs. Puda's coal washing facilities are located in Liulin County of Shanxi
Province, where top grades of coking coal reserves exist. The coal sourced from
this area has been known as the "King of Coal" in China.
Puda is not a coal mining operation and does not own any coal mines.
Puda currently secures raw coal from a diversified pool of local Liulin County
coal mines, including Liulin Jucai Coal Industry Co. Ltd. ("Jucai"), a coal mine
that is owned separately by Zhao Ming and Zhao Yao. Jucai supplies raw coal to
both Puda and other unrelated parties. The Jucai mining operation produced
450,000 and 400,000 tons of raw coal in 2003 and 2004, respectively. Out of this
annual raw coal production, Jucai sold approximately 20% and 10% of its raw coal
production in 2003 and 2004, respectively, to Puda at prevailing market prices.
The raw coal purchased from Jucai accounted for approximately 19% and 12% of
Puda's total raw coal purchases in 2003 and 2004, respectively. None of Puda's
raw coal suppliers provided more than 15% of its total raw coal purchases in
tonnage in 2004.
Cost of transportation of raw coal from the mines to the cleaning
facilities is an important factor in the industry. By staying close to these top
grade coal reserves and coal mines, Puda has established its competitive
advantage over its competitors in China, since easier and cheaper access to high
quality raw coal is generally secured.
Most of Puda's current customers are Chinese coke producers (who then
sell their coke to major steel makers), steel mills that have their own coking
facilities, and gas companies. During 2003, Puda sold approximately 295,000 tons
of washed coal to 8 different customers, with no customers accounting for more
than 19% of total sales. During 2004, Puda sold approximately 254,000 tons of
washed coal to 9 different customers, with no customer accounting for more than
17% of total sales.
Coal washed by Shanxi is used by some of the top steel businesses in
China including Taiyuan Iron & Steel (Group) Co., Ltd., which is an iron and
steel complex producing steel plate and stainless steel; and Baotou Iron and
Steel (Group) Company, Limited, which is a production base of iron and steel.
When customers place a purchase order, they usually pay 50% to 70% of
the total purchase value as a cash down payment to Puda. Puda's customers
usually pick up cleaned coal directly from Puda's washing facilities and the
balance of the payment is generally paid upon customer pick-up. Puda acquires
new customers through direct contacts, referrals, and participating in national
industry trade shows and coal supply-demand coordination conferences.
Puda currently has approximately 139 employees. The following table
shows the breakdown of the number of employees by functional departments.
Department Job Title / Responsibility # of Employees
----------- -------------------------- --------------
Corporate President, Vice Presidents, Managers 10
Finance Finance and Accounting 7
Purchasing Purchase raw coal and maintain 16
relationship with suppliers
Sell cleaned coal, maintain
Marketing and Sales relationship with customers, and
acquire new customers 22
Transportation Short-range truck drivers (within 11
plant)
Production Produce cleaned coal 64
Quality Control Quality check on input (raw coal) 9
and output (cleaned coal)
Total 139
A brief description of the executive officers of Puda are as follows:
Zhao Ming, Chief Executive Officer and Chairman (age 34)
Zhao Ming has been the CEO and Chairman since 1995. He was one of the
co-founders of Puda. He also serves as an executive officer and is an owner of
Shanxi Liulin Jucai Coal Industry Co., a coal mine which supplies raw coal to
Puda. He had been the Vice President of Administration at the Fire Department of
Taiyuan city from 1994 to 1997. Mr. Zhao graduated from Nanjing Armed Police
Forces Command College of China in 1994 with a bachelor degree in management.
Zhao Yao, Chief Operating Officer and Director (age 46)
Zhao Yao was one the co-founders of Puda. He was named Chief Operating
Officer in 1999, and he was appointed Vice President in June 1995. He also
serves as an executive officer and is an owner of Shanxi Liulin Jucai Coal
Industry Co., a coal mine which supplies raw coal to Puda. He graduated from
University of Shanxi in Taiyuan City, Shanxi Province in 1982 with a bachelor
degree in coal study, and graduated from China's Tsinghua University in Beijing
in 1985 with a master degree in coal study. He published a coal resources
research report in a national coal industry newspaper on July 9, 1985, and
received close attention from industry experts. He is an contributor to the
Chinese Hope Project for child education, and was awarded Shanxi's Distinguished
Entrepreneur award by Shanxi provincial government in 2002.
Ms. Xia Jin, Chief Financial Officer (age 40)
Ms. Jin joined Puda in 2003 as Chief Financial Officer. She also held
financial manager positions in various entities during 2000 to 2003. She was the
Financial Accountant at a local government agency in Xinhualing of Taiyuan City,
Shanxi Province from 1991 to 1999. She served as an accountant at Xinhua
Machinery Factory from 1987 to 1991. Ms. Jin graduated from Shanxi Finance and
Economics College in China with an associate degree.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of business acquired. Financial statements of
Puda will be provided on a Current Report on Form 8-K following the closing of
the exchange transaction in the time required for the filing of such financial
statements on Form 8-K.
(b) Pro forma financial information. Pro forma financial information
will be provided on a Current Report on Form 8-K following the closing of the
exchange transaction in the time required for the filing of such financial
information on Form 8-K.
(c) Exhibits.
2.1 Exchange Agreement by and among Purezza Group, Inc.,
a Florida corporation ("Purezza"), Taiyuan Putai
Business Consulting Co., Ltd. ("Putai"), a limited
liability company under the Company Law of The
People's Republic of China (the "PRC"), Shanxi Puda
Resources Co, Ltd. ("Puda"), a limited liability
company formed by natural persons under the laws of
the PRC, Puda Investment Holding Limited, an
International Business Company incorporated in the
British Virgin Islands ("Puda BVI"), and each member
of Puda BVI dated June 20, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Purezza Group, Inc. has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Purezza Group, Inc.
Date: June 24, 2005 By:
-------------------------------
Kevin R. Keating, President
and Sole Director
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------ ----------------------
2.1 Exchange Agreement by and among Purezza Group, Inc., a Florida
corporation ("Purezza"), Taiyuan Putai Business Consulting
Co., Ltd. ("Putai"), a limited liability company under the
Company Law of The People's Republic of China (the "PRC"),
Shanxi Puda Resources Co, Ltd. ("Puda"), a limited liability
company formed by natural persons under the laws of the PRC,
Puda Investment Holding Limited, an International Business
Company incorporated in the British Virgin Islands ("Puda
BVI"), and each member of Puda dated June 20, 2005.