Filed
Pursuant to Rule 424(b)(3)
Registration
No. 333-130380
PROSPECTUS
PUDA
COAL, INC.
1,666,000
shares of Common Stock
This
prospectus relates to the offer for sale of up to 1,666,000 shares of our common
stock by certain existing holders of the securities, referred to as Selling
Security Holders throughout this document. Each of the Selling
Security Holders will receive all of the net proceeds from the sale of shares by
that holder. We will not receive any of the proceeds of this
offering.
The
common stock is traded on the NYSE Amex and quoted under the symbol “PUDA.” On
May 12, 2010, the last reported bid price was $9.86. Except under
certain circumstances, the Selling Security Holders may sell the shares in one
or more transactions from time to time on our trading market at market prices
prevailing at the time of sale or in private transactions at privately
negotiated prices determined at the time of sale.
Investing
in our stock involves substantial risks. See “Risk Factors” beginning on page
2.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The date
of this Prospectus is May 12, 2010
TABLE
OF CONTENTS
PROSPECTUS
SUMMARY
|
1
|
RISK
FACTORS
|
2
|
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
|
12
|
USE
OF PROCEEDS
|
14
|
DETERMINATION
OF OFFERING PRICE
|
14
|
DILUTION
|
14
|
SELLING
SECURITY HOLDERS
|
15
|
PLAN
OF DISTRIBUTION
|
18
|
DESCRIPTION
OF SECURITIES TO BE REGISTERED
|
20
|
LEGAL
MATTERS
|
20
|
EXPERTS
|
20
|
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
|
20
|
DISCLOSURE
OF COMMISSION POSITION ON THE INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
|
21
|
You
should rely only on the information contained in this prospectus. We and the
Selling Security Holders have not authorized anyone to provide you with
different information. No offer of these securities is being made in any
state where the offer is not permitted. You should not assume that the
information contained in this prospectus is accurate as of any date other than
the date on the front of this prospectus.
PROSPECTUS
SUMMARY
This
summary highlights information found elsewhere in this Prospectus. Accordingly,
it does not contain all of the information which may be important to you.
Prospective purchasers should read the following summary carefully in
conjunction with the more detailed information appearing elsewhere in this
Prospectus concerning the Company and the Securities being offered, including
our financial statements and related notes and the information under “Risk
Factors.” As used herein, references to “we,” “us”, “our”, “Company” and “Puda”
refer to Puda Coal, Inc. and its subsidiaries.
THE
COMPANY
Puda
Coal, Inc. (“Puda” or the “Company”) is a supplier of high-grade metallurgical
coking coal to the industrial sector in the People’s Republic of China. Its
processed coking coal is primarily purchased by coke and steel producers for the
purpose of making the coke required for the steel manufacturing process. Its
operations are conducted exclusively by an entity in China, Shanxi Puda Coal
Group Co., Ltd. (“Shanxi Coal”), which it controls through 90% indirect equity
ownership.
Puda
cleans raw coking coal sourced from third-party coal mines primarily located in
Liulin County, Shanxi Province, and markets the cleaned, high quality coking
coal to coke and steel makers in its geographic market. Its current primary
geographic markets include Shanxi Province, Inner Mongolia Autonomous Region,
Hebei Province, Beijing and Tianjin, China.
The
Company focuses on value-added coal washing processes and specializes in
providing high quality, cleaned coking coal, which is the quality level required
to produce steel. The demand for the form of high quality coking coal which the
Company produces is primarily driven by China’s industrial expansion and
advancement, which depends on the availability of large amounts of steel for
building infrastructure. The Company currently purchases raw coal from a
diversified pool of local coal mines in Shanxi Province.
The
central area of Shanxi Province, where Puda’s three coal washing plants are
located, is known for its high quality coking coal reserves. The Company is
strategically located in proximity to some of the highest quality coking coal
reserves suitable for steel making. Puda’s three coal washing plants are located
in Liulin County, Zhongyang County and Lingshi County, all of which are within
approximately 150 miles of the Company’s executive offices in Taiyuan City.
Puda’s accumulated coal washing capacity is about 3.5 million MT per year. As a
large-volume supplier, the Company expects to continue to enjoy certain
advantages as it believes that its primary customers will continue to focus on
suppliers that can deliver large volume, consistently high-quality coking coal.
The Company also expects to be well positioned to serve the demand for steel
production in China - mostly, coking companies that supply the steel mills and
steel mills with their own coking facilities. These customers are mostly located
in Shanxi Province, Inner Mongolia Autonomous Region, Hebei Province, Beijing
and Tianjin, all of which are accessible by railroad which is the most cost
effective method for coal transport.
Puda has
three coal washing plants: Shanxi Liulin Jucai Plant, located in Liulin County,
about 2 miles away from Jucai Coal, has an annual cleaning capacity of 1.1
million MT; Shanxi Zhongyang Ruixu Plant, located in Zhongyang County, has an
annual clean coal washing capacity of 1.2 million MT; Lingshi Dongqiang Plant,
located in Lingshi County, has an annual coal washing capacity of 1.2 million
MT. In year 2008, the Company produced about 2.3 million MT cleaned coal, which
is 66% of the 3.5 million MT annual production capacity.
To
diversify its source of revenue and increase its gross margin, the board of
directors of Puda has approved a change in its business strategy to permit Puda
to enter into coal mining business, which can be operated separately from, or
synergistically with, its coal washing business. The Company is taking advantage
of the policy initiatives of the Chinese government and has found suitable coal
mines to acquire.
On May
14, 2009, the Company entered into an agreement to purchase 18% ownership in
Shanxi Jianhe Coal Industry Limited Company for an aggregate purchase price of
RMB 100 million (approximately $14.6 million). Pursuant to the agreement, the
Company has pre-paid 60% of the purchase price. The transaction was closed on
December 3, 2009. According to the agreement, Shanxi Coal, will be paid
dividends semiannually based on its 18% ownership in Jianhe Coal and aggregate
dividend to be declared will be no less than 80% of the net profits of Jianhe
Coal. In addition, Shanxi Coal has first priority in the right to purchase other
shares of Jianhe Coal within the 24-month period following execution of the
agreement.
On
September 28, 2009, the Shanxi provincial government appointed Shanxi Coal as
the consolidator for eight coal mines in Yucheng City, Pinglu County. Shanxi
Coal will consolidate the eight coal mines into five, increasing their total
annual capacity from approximately 1.6 million to 3.6 million metric tons. On December 11, 2009, Shanxi Coal entered into a Mining
Right and Mining Assets Transfer Agreement (the “Da Wa Agreement”) with Pinglu
County Da Wa Coal Industry Co., Ltd. (“Da Wa Coal”), pursuant to which Shanxi
Coal will purchase from Da Wa Coal all its tangible assets and coal mining
rights with respect to a coal mine located in Pinglu County, Yuncheng City,
Shanxi Province of China. As consideration, Shanxi Coal will pay Da Wa Coal an
aggregate purchase price of RMB 190 million (approximately $27.8 million) in
cash, of which RMB 46.6 million ($6.8 million) is for the tangible assets and
RMB 143.4 million ($21.0 million) is for the mining rights and compensation to
Da Wa Coal. On December 11, 2009, Shanxi Coal also entered into a Mining Rights
and Mining Assets Transfer Agreement (the “Guanyao Agreement”) with Pinglu
County Guanyao Coal Industry Co., Ltd. (“Guanyao Coal”), pursuant to which,
Shanxi Coal will purchase from Guanyao Coal all its tangible assets and coal
mining rights with respect to a coal mine located in Pinglu County, Yuncheng
City and Yuanqu County, Shanxi Province of China. As consideration, Shanxi Coal
will pay Guanyao Coal an aggregate purchase price of RMB 94.80 million
(approximately $13.9 million) in cash, of which RMB 37.6 million ($5.5 million)
is for the tangible assets and RMB 57.2 million ($8.4 million) is for the mining
rights and compensation of Guanyao Coal.
Puda
Coal, Inc. was incorporated on August 9, 2001 under the laws of Florida, and was
subsequently reincorporated on July 30, 2009 under the laws of Delaware. Its
principal executive office is located at 426 Xuefu Street, Taiyuan City, Shanxi
Province, China. The Company’s telephone number is +86 (351) 2281302 and our
facsimile number is +86 (351) 7034404.
RECENT
DEVELOPMENTS
No
material recent development has occurred since the filing of our last Annual
Report on Form 10-K for the year ended December 31, 2009 that has not been
described in a report on Form 10-Q or Form 8-K.
RISK
FACTORS
We
are subject to a number of risks, including those enumerated below. An
investment in our common stock is speculative and involves a high degree of
risk. You should carefully consider the following important risks and
uncertainties in connection with any investment in our common stock. If any of
the following risks actually occur, our business, financial condition or results
of operations, and cash flows would likely suffer significantly. In any of those
cases, the value of our common stock could decline significantly, and you may
lose all or part of your investment.
Risks
Relating to Our Business
We
are primarily a holding company and depend on distributions from our
subsidiaries to meet our financial obligations.
Our
company has an offshore holding structure commonly used by foreign investors
with operations in China. We are a corporation which owns BVI, and BVI owns
Putai. Our operations are conducted exclusively through Shanxi Coal, in which we
own 90% of the equity interest indirectly. The operations of Shanxi Coal are our
sole source of revenues. We have no operations independent of those of Putai and
its subsidiaries. As a result, we are dependent upon the performance of Putai
and its subsidiaries and will be subject to the financial, business and other
factors affecting such subsidiaries as well as general economic and financial
conditions. As substantially all of our operations are conducted through our
subsidiaries, we are dependent on the cash flow of our subsidiaries to meet our
obligations.
Because
virtually all of our assets are held by our operating subsidiaries, the claims
of our shareholders will be structurally subordinate to all existing and future
liabilities and obligations, and trade payables of such subsidiaries. In the
event of a bankruptcy, liquidation or reorganization of the Company, our assets
and those of our subsidiaries’ will be available to satisfy the claims of our
shareholders only after all of Putai and its subsidiaries’ liabilities and
obligations have been paid in full.
If
we do not successfully execute our strategy of growth through coal mine
acquisitions, our future performance, particularly our profit margins, could be
adversely affected.
We have
adopted a business strategy to enter into coal mining business, including
acquisitions of coal mines. If we are unable to obtain or manage these external
growth opportunities successfully, we will not be able to grow our business in
the way that we currently expect. The availability of high quality coal mines is
limited and we are not certain that we will be able to identify suitable
candidates or complete transactions on terms that are acceptable to us. In order
to pursue such opportunities, we may require significant additional financing,
which may not be available to us on favorable terms, if at all. The availability
of such financing is further limited by the current global economic downturn. In
addition, even if we are able to successfully identify and complete
acquisitions, we may not be able to integrate them or take full advantage of
them and therefore may not realize the benefits that we expect. If we are
unsuccessful in our external growth strategy, we may not be able to grow our
business significantly and we may incur asset impairment charges as a result of
acquisitions that are not successful.
Our
future operating results have been and may continue to be affected by
fluctuations in raw material prices. We may not be able to pass on cost
increases to customers.
Our
operating profits have been and may continue to be negatively affected by
fluctuations in the price of raw coking coal. We are subject to short-term coal
price volatility and have purchased and may continue to have to purchase raw
coking coal at higher prices. In the past, we were unable to pass the cost
increase of raw coal on to customers and may not be able to do so in the future
either. This has adversely affected and may continue to adversely affect our
gross margins and profitability. Our sales agreements with customers generally
contain provisions that permit the parties to adjust the contract price of the
cleaned coking coal upward or downward at specified times. For example, we may
adjust these contract prices because of increases or decreases in the price of
raw coal from our mining suppliers, general inflation or deflation, or changes
in the cost of producing raw or cleaned coking coal caused by such things as
changes in taxes, fees, royalties or the laws regulating the mining, production,
sale or use of coal. However, if we fail to agree on a price with our customer
under these provisions, many agreements permit customers to terminate the
contract or refuse to buy all of the quantities contracted for. Market prices
for raw coking coal fluctuate in most regions in China. From the beginning of
2008 the price of raw coking coal rose significantly and the price arrived to
historically highest level in October 2008, and then decreased afterwards. In
2009, the raw coal prices remained at a relatively higher level due to shortage
in supply because many coal mines were temporarily shut down by the Shanxi
provincial government during the processing of coal mine consolidation. We were
not able to fully pass these cost increases on to our customers and may not be
able to do so with any future increases in the cost of raw materials. Top
quality raw coking coal is critical to our maintaining operating efficiencies
and delivering cleaned coal to our customers which meets their specifications.
Since top quality raw coking coal is more limited in supply, its price tends to
be more volatile. A general rise in coking coal prices also may adversely affect
the price of, and demand for, coke and products made with coke such as pig iron,
steel and concrete. This may in turn lead to a fall in demand for our
products.
The
demand for our product is cyclical and is affected by industrial economic
conditions. Downturns in the economy may reduce demand for our product and our
revenues could decline.
Because
we do not export our product out of China, our business and operating results
are primarily dependent upon China’s domestic demand for cleaned coking coal.
However, because the domestic demand for coal in China is impacted by the
international demand for coal, we are also susceptible to fluctuations in the
international markets. The domestic and international coking coal markets are
cyclical and exhibit fluctuation in supply and demand from year to year and are
subject to numerous factors beyond our control, including, but not limited to,
the economic conditions in China, the global economic conditions and
fluctuations in industries with high demand for coal, such as the steel and
power industries. A significant decline in demand or excess supply for cleaned
coking coal may have a material adverse effect on our business and results of
operations.
In
addition, nearly all of our sales are concentrated in the central and northern
area of China. Accordingly, we are susceptible to fluctuations in business
caused by adverse economic conditions in those regions. Difficult economic
conditions in other geographic areas into which we may expand may also adversely
affect our business, operations and finances.
If
any of our coal sales agreements terminates or expires, our revenues and
operating profits could suffer.
A
substantial portion of our sales are made under coal sales agreements, which are
important to the stability and profitability of our coal washing operations. It
is common business practice in China that coal purchase and sale agreements are
signed for one year terms, with annual renewals. This practice makes it
difficult for us to forecast long-term purchase and sale quantities and can
negatively affect our ability to manage inventory. These agreements may expire
or be terminated. Cleaned coal sales agreements also typically contain force
majeure provisions allowing temporary suspension of performance by us or the
customer during the duration of specified events beyond the control of the
affected party. Moreover, even if sales agreements are in force, buyers are
generally not obligated to take the quantities specified in the
contracts.
Increases
in transportation costs could make our operations less competitive and result in
the loss of customers.
Coal
producers and processors depend upon rail, barge, trucking, overland conveyor
and other systems to deliver coal to markets. While our customers typically
arrange and pay for transportation of cleaned coking coal from our facilities to
the point of use, any disruption of these transportation services because of
weather-related problems, strikes, lock-outs or other events could temporarily
impair our ability to supply coal to customers and thus could adversely affect
our results of operations. For example, the high volume of raw coal shipped from
all Shanxi Province mines could create temporary congestion on the rail systems
servicing that region. If transportation for our cleaned coking coal becomes
unavailable or uneconomic for our customers, our ability to sell cleaned coking
coal could suffer. Transportation costs can represent a significant portion of
the total cost of cleaned coal. Since our customers typically pay that cost, it
is a critical factor in a distant customer’s purchasing decision. If
transportation costs from our facilities to the customer’s are not competitive,
the customer may elect to purchase from another company. Moreover, certain coal
sales agreements permit the customer to terminate the contract if the cost of
transportation increases by specified amounts in any given 12-month
period.
We
may not be able to meet quality specifications required by our customers and as
a result could incur economic penalties or cancelled agreements which would
reduce our sales and profitability.
Most of
our coal sales agreements contain provisions requiring us to deliver coking coal
meeting quality thresholds for certain characteristics such as BTUs, sulfur
content, ash content, grindability and ash fusion temperature. If we are not
able to meet these specifications, because, for example, we are not able to
source coal of the proper quality, we may incur economic penalties, including
price adjustments, the rejection of deliveries or termination of the
contracts.
Our
business is highly competitive and increased competition could reduce our sales,
earnings and profitability.
The coal
crushing, washing and processing business is highly competitive in China and we
face substantial competition in connection with the marketing and sale of our
products. Most of our competitors are well established, have greater financial,
marketing, personnel and other resources, have been in business for longer
periods of time than we have, and have products that have gained wide customer
acceptance in the marketplace. The greater financial resources of our
competitors will permit them to implement extensive marketing and promotional
programs. We could fail to expand our market share, and could fail to maintain
our current share.
Increased
competition could also result in overcapacity in the Chinese coal industry in
general. The coal industry in China has experienced overcapacity in the past.
During the mid-1970s and early 1980s, a growing coal market and increased demand
for coal in China attracted new investors to the coal industry, spurred the
development of new mines and resulted in added production capacity throughout
the industry, all of which led to increased competition and lower processed coal
prices. Similarly, an increase in future processed coal prices could encourage
the development of expanded capacity by new or existing coal processors. Any
overcapacity could reduce processed coal prices in the future and our
profitability would be impaired.
We
depend on key persons and the loss of any key person could adversely affect our
operations.
We and
our operating company, Shanxi Coal are highly dependent on the marketing ability
and credit of Ming Zhao, our Chairman, and the loss of his service and support
would have a material and adverse impact on our operations. We are also
dependent upon our relationship with Ming Zhao and his brother, Yao Zhao’s other
controlled businesses. None of our companies have applied for key-man life
insurance on the lives of our executives. If we were to lose the services of
Ming Zhao, our ability to operate would be impaired.
Significant
assets are subject to a lien held by a company controlled by the Zhaos and their
family. If we default on the payment of the obligations secured by the lien we
could lose title to assets which are necessary for the operation of our
business.
We
financed the acquisition of the Shanxi Liulin Jucai Plant and the Zhongyang
Plant through Resources Group, an entity owned 80% by Ming Zhao, 10% by Yao
Zhao, 5% by Xue Ning, Ming Zhao’s wife, and 5% by Xue Yue, a second-generation
cousin of Xue Ning, for an aggregate cost of $13 million paid through a 6%
secured Facilities Loan amortized over 10 years. The note is secured by the
assets purchased. If we default on the loan, the security could be enforced and
title to the assets could be lost, having a significant negative impact on our
ability to produce our products.
Since the
Zhaos are equity owners of Resources Group they may have a conflict of interest
with the Company. If the lien is enforced after a default, the secured assets
would be transferred to an entity which is owned by them. Ming Zhao and Yao Zhao
may have, or may develop in the future, conflicts of interest with us. As the
equity owners of 10% of the registered capital of Shanxi Coal, they might
personally profit if Shanxi Coal’s benefits of operation are not directed to us.
In addition, the loan used to finance our recent facility expansions are held by
Resources Group, a company which is owned by the Zhaos and their family. It
could be in their economic interest to cause us to default on the payment of the
loan with Resources Group since Resources Group could acquire the assets which
are subject to the lien as a result of enforcement of the lien after a default.
With their combined ownership of us (as of April 15, 2010, 38.68% and 9.66% of our outstanding common
stock), they can largely control the actions which we take. Ming Zhao is our
Chairman of the board of directors. In addition, the Zhao brothers also control
the mine, Jucai, of which is one of our suppliers. By limiting or eliminating
our supply, they could adversely impact our production and revenue, which in
turn could cause us to default on our loan to Resources Group. See also the risk
below, “Our principal stockholders have significant control over the company and
may have conflicts of interest with the company.”
We
do not have any registered patents or other intellectual property and we may not
be able to maintain the confidentiality of our processes.
We have
no patents covering our cleaning processes and we rely on the confidentiality of
our cleaning processes in producing a competitive product. The confidentiality
of our know-how may not be maintained and we may lose any meaningful competitive
advantage which might arise through our proprietary processes.
The
current credit and financial market conditions have a negative impact on global
business environment and may exacerbate certain risks affecting our
business.
The
financial markets are currently experiencing a downturn around the world. Many
of our customers and suppliers may encounter much uncertainty and risks due to
the weakened business environment and credit availability. As a result, these
customers and suppliers may be unable to satisfy their contract obligations, may
delay payment, or may not repay our credit advance to them, which could
negatively affect our business and financial performance.
Terrorist
attacks or military conflict could result in disruption of our
business.
Terrorist
attacks and threats, escalation of military activity in response to such attacks
or acts of war may negatively affect our business, financial condition and
results of operations. Our business is affected by general economic conditions,
fluctuations in consumer confidence and spending, and market liquidity, which
can decline as a result of numerous factors outside of our control, such as
terrorist attacks and acts of war. Future terrorist attacks, rumors or threats
of war, actual conflicts involving China or its allies, or military or trade
disruptions affecting our customers may materially adversely affect our
operations. As a result, there could be delays or losses in transportation and
deliveries of processed coal to our customers, decreased sales of coal and
extensions of time for payment of accounts receivable from customers. Strategic
targets such as energy-related assets may be at greater risk of terrorist
attacks than other targets. In addition, disruption or significant increases in
energy prices could result in government-imposed price controls. Any, or a
combination, of these occurrences could have a material adverse effect on Shanxi
Coal’s business, financial condition and results of operations.
Risks
Relating to Doing Business in China
Our
Chinese operations pose certain risks because of the evolving state of the
Chinese economy, political, and legislative and regulatory systems. Changes in
the interpretations of existing laws and the enactment of new laws may
negatively impact our business and results of operation.
Substantially
all of our business operations are conducted in China. Accordingly, our results
of operations, financial condition and prospects are subject to economic,
political and legal developments in China. China’s economy differs from the
economies of most developed countries in many respects, including its levels of
government involvement, level of development, growth rate, control of foreign
exchange and allocation of resources. Doing business in China involves various
risks including internal and international political risks, evolving national
economic policies as well as financial accounting standards, expropriation and
the potential for a reversal in economic conditions. Since the late 1970s, the
Chinese government has been reforming its economic system. These policies and
measures may from time to time be modified or revised. While the Chinese economy
has experienced significant growth in the past 20 years, growth has been uneven
across different regions and among various economic sectors of China.
Furthermore, while the Chinese government has implemented various measures to
encourage economic development and guide the allocation of resources, some of
these measures may also have a negative effect on us. For example, our financial
condition and results of operations may be adversely affected by government
control over capital investments or changes in tax regulations that are
applicable to us. Also, since early 2004, the Chinese government has implemented
certain measures to control the pace of economic growth including certain levels
of price controls on raw coking coal. Such controls could cause our margins to
be decreased. In addition, such measures may cause a decrease in the level of
economic activity in China, which in turn could adversely affect our results of
operations and financial condition. Adverse changes in economic policies of the
Chinese government or in the laws and regulations, if any, could have a material
and adverse effect on the overall economic growth of China, and could adversely
affect our business operations.
There are
substantial uncertainties regarding the application of Chinese laws, especially
with respect to existing and future foreign investments in China. The
interpretation and application of existing Chinese laws, regulations and
policies, and the stated positions of the Chinese authorities may change and
possible new laws, regulations or policies will impact our business and
operations. For example, due to the uncertainties surrounding the interpretation
of the transfer pricing rules relating to related party transactions in China,
it is possible that tax authorities in China may challenge the transfer prices
that we have used for related party transactions among our entities in China in
the future. Because of the evolving nature of the law, it will be difficult for
us to manage and plan for changes that may arise. Our business is and will
continue to be subject central, provincial, local and municipal regulation and
licensing in China. Compliance with such regulations and licensing can be
expected to be a time-consuming, expensive process. Compliance with foreign
country laws and regulations affecting foreign investment, business operations,
currency exchange, repatriation of profits, and taxation, will increase the risk
of investing in our stock.
We
may have to incur unanticipated costs because of the unpredictability of the
Chinese legal system.
The
Chinese legal system has many uncertainties. The Chinese legal system is based
on written statutes. Prior court decisions may be cited for reference but have
limited precedential value. Since 1979, Chinese legislation and regulations have
enhanced the protections afforded to various forms of foreign investments in
China. However, China has not developed a fully integrated legal system and
recently-enacted laws and regulations may not sufficiently cover all aspects of
economic activities in China. In particular, because these laws and regulations
are relatively new, and because of the limited volume of published decisions and
their nonbinding nature, the interpretation and enforcement of these laws and
regulations involve uncertainties. In addition, the Chinese legal system is
based in part on government policies and internal rules (some of which are not
published on a timely basis or at all) that may have a retroactive effect. As a
result, we may not be aware of our violation of these policies and rules until
some time after the violation. In addition, any litigation in China may be
protracted and result in substantial costs and diversion of resources and
management attention.
Our
industry is heavily regulated and we may not be able to remain in compliance
with all such regulations and we may be required to incur substantial costs in
complying with such regulation.
We are
subject to extensive regulation by China’s Mining Ministry, and by other
provincial, county and local authorities in jurisdictions in which our products
are processed or sold, regarding the processing, storage, and distribution of
our product. Our processing facilities are subject to periodic inspection by
national, province, county and local authorities. We may not be able to comply
with current laws and regulations, or any future laws and regulations. To the
extent that new regulations are adopted, we will be required to adjust our
activities in order to comply with such regulations. We may be required to incur
substantial costs in order to comply. Our failure to comply with applicable laws
and regulations could subject us to civil remedies, including fines,
injunctions, recalls or seizures, as well as potential criminal sanctions, which
could have a material and adverse effect on our business, operations and
finances. Changes in applicable laws and regulations may also have a negative
impact on our sales. Certain of our contracts with customers permit the
customers to terminate the contract in the event of changes in regulations
affecting the industry that increase the price of coal beyond specified
limits.
The
government regulation of our coal processing operations imposes additional costs
on us, and future regulations could increase those costs or limit our ability to
crush, clean and process coking coal. China’s central, provincial and local
authorities regulate the coal mining industry with respect to matters such as
employee health and safety, permitting and licensing requirements, air quality
standards, water pollution, plant and wildlife protection, reclamation and
restoration of mining properties after mining is completed, the discharge of
materials into the environment, surface subsidence from underground mining and
the effects that mining has on groundwater quality and availability. We are
required to prepare and present to China’s central, provincial and local
authorities data pertaining to the effect or impact that any proposed processing
of coal may have upon the environment. The costs, liabilities and requirements
associated with these regulations may be costly and time-consuming and may delay
commencement, expansion or continuation of our coal processing operations. The
possibility exists that new legislation and/or regulations and orders may be
adopted that may materially and adversely affect our operations, our cost
structure and/or our customers’ ability to use coal. New legislation or
administrative regulations (or judicial interpretations of existing laws and
regulations), including proposals related to the protection of the environment
that would further regulate and tax the coal industry, may also require us and
our customers to change operations significantly or incur increased costs.
Certain sales agreements contain provisions that allow a purchaser to terminate
its contract if legislation is passed that either restricts the use or type of
coal permissible at the purchaser’s plant or results in specified increases in
the cost of coal or its use. These factors and legislation, if enacted, could
have a material adverse effect on our financial condition and results of
operations.
It
will be difficult for any shareholder of our company to commence a legal action
against our executives. Other than the stock of our subsidiaries, we have no
assets in the United States.
We
conduct substantially all of our operations through our control of Shanxi Coal.
Shanxi Coal and substantially all of Shanxi Coal’s assets are located in Shanxi
Province, China. Other than our stock in our direct subsidiary, Puda Investments
Holding Limited, an International Business Company incorporated in the British
Virgin Islands, we have no assets in the United States. In addition, all of our
executive officers reside within China. As a result, it may not be possible to
effect service of process within the United States or elsewhere outside of China
upon our senior executive officers, including with respect to matters arising
under U.S. federal securities laws or applicable state securities laws.
Moreover, our Chinese counsel has advised us that China does not have treaties
with the United States or many other countries providing for the reciprocal
recognition and enforcement of judgments of courts.
Restrictions
on Chinese currency may limit our ability to obtain operating capital and could
restrict our ability to move funds out of China and to pay
dividends.
The
Chinese currency, “Renminbi”, or “RMB”, is not a freely convertible currency,
which could limit our ability to obtain sufficient foreign currency to support
Shanxi Coal’s business operations in the future and could impair the ability of
Shanxi Coal to pay dividends or other distributions to Puda. We rely on the
Chinese government’s foreign currency conversion policies, which may change at
any time, in regard to our currency exchange needs. Shanxi Coal receives all of
its revenues in Renminbi, which is not freely convertible into other foreign
currencies. Under our current structure, our income is derived from payments
from Shanxi Coal through Putai and BVI. In China, the government has control
over Renminbi reserves through, among other things, direct regulation of the
conversion of Renminbi into other foreign currencies and restrictions on foreign
imports. Although foreign currencies which are required for “current account”
transactions can be bought freely at authorized Chinese banks, the proper
procedural requirements prescribed by Chinese law must be met. Current account
items, including profit distributions, interest payments and expenditures from
trade-related transactions, can be made in foreign currencies without prior
approval from the Chinese State Administration of Foreign Exchange by complying
with certain procedural requirements. However, approval from appropriate
government authorities is required where RMB is to be converted into foreign
currency and remitted out of China to pay capital expenses such as the repayment
of bank loans denominated in foreign currencies. At the same time, Chinese
companies are also required to sell their foreign exchange earnings to
authorized Chinese banks and the purchase of foreign currencies for capital
account transactions still requires prior approval of the Chinese government.
This type of heavy regulation by the Chinese government of foreign currency
exchange restricts certain of our business operations and a change in any of
these government policies, or any other, could further negatively impact our
operations.
In order
to pay dividends, a conversion of Renminbi into U.S. dollar is required. Under
current Chinese law, the conversion of Renminbi into foreign currency generally
requires government consent. Government authorities may impose restrictions that
could have a negative impact in the future on the conversion process and upon
the ability of Shanxi Coal to meet its cash needs, and to pay dividends to Puda.
However, Putai is presently classified as a wholly-owned foreign enterprise, or
WFOE, in China that has verifiable foreign investment in China, funding having
been made through an official Chinese banking channel. Because Putai qualifies
for treatment as a WFOE, it can convert Renminbi, declare dividends and its
funds can be repatriated to Puda in the United States under current laws and
regulations in China, subject to limitations and restrictions imposed by Chinese
laws, such as the SAFE notices issued by the State Administration of Foreign
Exchange. However, the Chinese laws governing foreign currency exchange are
evolving, and changes in such laws or their interpretation or application may
adversely affect the ability to convert Renminbi, declare dividends and
repatriate funds to the United States. Because our cash flow is dependent on
dividend distributions from our subsidiaries in China, we may be restricted from
distributing dividends to stockholders if we do not receive distributions of
dividends from our subsidiaries.
We
are subject to currency fluctuations from our Chinese operations and
fluctuations in the exchange rate may negatively affect our expenses and results
of operations, as well as the value of our assets and liabilities.
Effective
July 21, 2005, The People’s Bank of China announced that the Renminbi exchange
rate regime is reformed by moving from a fixed rate of exchange based upon the
U.S. dollar to a managed floating exchange rate regime based upon market supply
and demand of a basket of currencies. As of July 26, 2005, the exchange rate
against the Renminbi was adjusted to 8.11 Renminbi per U.S. dollar from 8.28
Renminbi per U.S. dollar, which represents an adjustment of approximately two
percent. As of December 31, 2009, the last trading day in 2009, Renminbi
appreciated to approximately 6.8259 Renminbi per U.S. dollar. It is expected
that the revaluation of the Renminbi and the exchange rate of the Renminbi may
continue to change in the future. Fluctuations in the exchange rate between the
Chinese RMB and the United States dollar could adversely affect our operating
results. Results of Shanxi Coal’s operations are translated at average exchange
rates into United States dollar for purposes of reporting results. As a result,
fluctuations in exchange rates may adversely affect our expenses and results of
operations as well as the value of our assets and liabilities. Fluctuations may
adversely affect the comparability of period-to-period results. We do not use
hedging techniques to eliminate the effects of currency fluctuations. Thus,
exchange rate fluctuations could have a material adverse impact on our operating
results and stock prices.
Because
our operations are located in China, information about our operations are not
readily available from independent third-party sources.
Because
our sole operating company, Shanxi Coal, is based in China, shareholders may
have greater difficulty in obtaining information about Shanxi Coal on a timely
basis than would shareholders of an entirely U.S.-based company. Shanxi Coal’s
operations will continue to be conducted in China and shareholders may have
difficulty in obtaining information about Shanxi Coal from sources other than
Shanxi Coal itself. Information available from newspapers, trade journals, or
local, regional or national regulatory agencies such as issuance of construction
permits and contract awards for development projects will not be readily
available to shareholders. Shareholders will be dependent upon Shanxi Coal’s
management for reports of Shanxi Coal’s progress, development, activities and
expenditure of proceeds.
Climate
change poses both regulatory and physical risks that could adversely impact our
business, financial position, results of operations and liquidity.
Climate
change could have a potential economic impact on us and climate change
mitigation programs and regulations could increase our costs. Energy costs could
be higher as a result of climate change regulations. Our costs could increase if
utility companies pass on their costs, such as those associated with carbon
taxes, emission cap and trade programs, or renewable portfolio standards. In
addition, climate change may increase the frequency or intensity of natural
disasters. As such, we cannot assure you that climate change will not adversely
impact our business, financial position, results of operations and
liquidity.
Risks Associated with Our Common
Stock
Our
stock price has been extremely volatile and may continue to fluctuate
significantly, which may make it more difficult for you to resell shares when
you want at prices you find attractive.
The
trading price of our common stock has been and may continue to be subject to
significant daily fluctuations. For example, during the three months ended
December 31, 2009, the closing sale prices of our ordinary shares on the NYSE
Amex ranged from $5.16 to $8.46 per share. Our stock price may fluctuate in
response to a number of events and factors, such as quarterly variations in
operating results, announcements of material customer agreements or acquisition,
the operating and stock price performance of other companies that investors may
deem comparable, new government restrictions or regulations and news reports
relating to trends in our markets. In addition, the stock market in general, and
the market prices for China-related companies recently have experienced extreme
volatility that often has been unrelated to the operating performance of such
companies. These broad market and industry fluctuations may adversely affect the
price of our common stock, regardless of our operating performance.
Our
principal stockholders have the ability to exert significant control in matters
requiring stockholder vote and could delay, deter or prevent a change in control
of our company.
As of
April 15, 2010, Ming Zhao and Yao Zhao own in total approximately 48.34% of the
Company’s outstanding shares, and upon the exercise of all of the outstanding
warrants, they will own in total approximately 45.11% of our outstanding stock
and, acting together, will be able to exert a significant degree of influence
over our management and affairs and all actions requiring stockholder approval,
such as the election of directors and approval of significant corporate
transactions. In addition, corporate law provides that certain actions may be
taken by consent action of stockholders holding a majority of the outstanding
shares. In the event that the requisite approval of stockholders is obtained by
consent action, without any meeting of stockholders, dissenting or
non-participating stockholders generally would be bound by such vote. Through
their concentration of voting power, the Zhao brothers could delay, deter or
prevent a change in control of our company or other business combinations that
might otherwise be beneficial to our other stockholders. Accordingly, this
concentration of ownership may harm the market price of our common stock. In
addition, the interest of the Zhao brothers may not always coincide with the
interest of the Company’s other stockholders. In deciding how to vote on such
matters, the Zhao brothers may be influenced by interests that conflict with
yours. You should not buy our common stock unless you are willing to entrust all
aspects of operational control to Puda’s current management team.
Our
principal stockholders have significant control over the company and may have
conflicts of interest with the company.
Ming Zhao
and Yao Zhao may have, or may develop in the future, conflicts of interest with
us. First, the loan used to finance our recent facility expansions are held by
Resources Group, a company which is owned by the Zhaos. It could be in their
economic interest to cause us to default on the payment of the loan with
Resources Group since Resources Group could acquire the assets which are subject
to the lien as a result of enforcement of the lien after a default. With their
combined ownership of us (48.34%, and 45.11% after the warrant exercise), they
can control the actions which we take. Ming Zhao is our Chairman of the board of
directors. Second, the Zhao brothers control the mine which is one of our raw
coal suppliers. We currently secure raw coal from local Liulin County coal
mines, including Jucai Coal, a coal mine that is 75% owned by Yao Zhao, Mr. Ming
Zhao’s brother and a manager of the coal washing plants of Shanxi Coal. By
limiting or eliminating our supply, the Zhao brothers, who control our coal mine
supplies, could adversely impact our production and revenue, which in turn could
cause us to default on our loan to Resources Group. In addition, the Zhao
brothers may declare dividends out of Shanxi Coal, in which they own 10% of the
direct equity interest even though it would be in the interests of Puda for
Shanxi Coal, to reinvest its profits into the business.
The
conversion of outstanding derivative securities could cause your ownership in
the company to be diluted and may decrease the value of your
investment.
Outstanding
derivative securities and current and future obligations to issue Puda’s
securities to various parties may dilute the value of your investment. In
November 2005, we issued warrants with 5 years term to certain investors. For as
long as the warrants are outstanding, the holders thereof will have an
opportunity to profit from a rise in the market price of our common stock
without assuming the risks of ownership. This may have an adverse effect on the
terms upon which we can obtain additional capital. It should be expected that
the holders of such derivative securities would exercise or convert them at a
time when we would be able to obtain equity capital on terms more favorable than
the exercise or conversion prices provided by the warrants or options. There are
no preemptive rights in connection with Puda’s common stock.
Our
stock prices could decrease if a substantial number of shares are sold under
Rule 144.
A
substantial number of Puda’s outstanding shares of common stock are “restricted
securities” within the meaning of Rule 144 under the Securities Act. As
restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemption from registration under the Act and as required under applicable state
securities laws. Under Rule 144, non-affiliates may sell restricted securities
without volume limitations or other requirements after having held the
securities for six months. If a substantial number of shares of our stock are
sold under the amended Rule 144 or other exemption, it could cause the price our
stock to go down.
We
do not intend to pay dividends in the foreseeable future.
In 2005,
Shanxi Coal, our 90% subsidiary, declared dividends of $1,715,470, payable to
Ming Zhao (80%) and Yao Zhao (20%), of which $543,470 was paid in 2005 and
$1,172,000 was paid in October 17, 2008. In September 2008, Shanxi Coal declared
RMB 8 million ($1,170,754) dividend to its shareholders, which has not been paid
as of the date of this prospectus. No dividend was declared in 2006, 2007, 2008
or 2009. We do not intend to pay any dividends in the foreseeable future. We do
not plan on making any cash contributions in the manner of a dividend or
otherwise. Our board of directors presently intends to follow a policy of
retaining earnings, if any.
The
Company has the right to issue additional common stock and preferred stock
without the consent of shareholders. This would have the effect of diluting your
ownership in the company and could decrease the value of your
stock.
There are
additional authorized but unissued shares of our common stock that may be later
issued by our board of directors for any purpose without the consent or vote of
the stockholders that would dilute a stockholder’s percentage ownership of the
company.
In
addition, our articles of incorporation authorize the issuance of shares of
preferred stock, the rights, preferences, designations and limitations of which
may be set by the board of directors. While no preferred stock is currently
outstanding or subject to be issued, the articles of incorporation have
authorized issuance of up to 5,000,000 shares of preferred stock in the
discretion of the board of directors. Such preferred stock may be issued upon
filing of amended Articles of Incorporation and the payment of required fees; no
further shareholder action is required. If issued, the rights, preferences,
designations and limitations of such preferred stock would be set by the board
of directors and could operate to the disadvantage of the outstanding common
stock. Such terms could include, among others, preferences as to dividends and
distributions on liquidation.
We
may be subject to regulatory scrutiny and sustain a loss of public confidence if
we are unable to satisfy regulatory requirements relating to our internal
controls over financial reporting and/or we have material internal control
weaknesses which may result in material financial reporting errors.
Section
404 of the Sarbanes Oxley Act of 2002 requires us to perform an evaluation of
our internal controls over financial reporting beginning with our Annual Report
filed for a fiscal year ending on or after December 15, 2007 and have our
independent registered public accounting firm attest to such evaluation for
fiscal years ending on or after June 15, 2010. Compliance with these
requirements can be expensive and time consuming. While we believe that we met
and will continue to be able to meet the applicable deadlines, no assurance can
be given that we will meet the required deadlines in future years. If we fail to
timely complete this evaluation, or if our auditors cannot timely attest to our
evaluation when we are required to have such attestation, we may be subject to
regulatory scrutiny and a loss of public confidence in our internal
controls.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements include the plans
and objectives of management for the future growth of the Company and its
subsidiaries, including plans and objectives related to the consummation of
acquisitions and future private and public issuances of Puda’s equity and debt
securities. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. Assumptions relating
to the foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of Puda. Although Puda believes that the assumptions
underlying the forward-looking statements are reasonable at the time they were
made, there can be no assurance that the forward-looking statements included in
this Prospectus and the underlying assumptions will prove to be accurate. In
light of the significant uncertainties inherent in the forward-looking
statements included in this Prospectus, the inclusion of such information should
not be regarded as a representation by Puda or any other person that the
objectives and plans of Puda will be achieved.
The words
“we,” “us”, “our” and “Puda” refer to Puda Coal, Inc. and its subsidiaries. The
words or phrases “would be,” “will allow,” “intends to,” “will likely result,”
“are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” and
similar expressions are intended to identify forward-looking statements. Actual
results could differ materially from those contained in the forward-looking
statements as a result of a number of risks and uncertainties, including but not
limited to:
|
·
|
our dependence on distributions
from our subsidiaries to meet our financial
obligations
|
|
·
|
our successful execution of our
strategy of growth through coal mine
acquisitions
|
|
·
|
fluctuations in raw material
prices, which we may not be able to pass on cost increases to
customers
|
|
·
|
downturns in the economy that may
reduce demand for our
product
|
|
·
|
the continuing performance and
renewal of Shanxi Coal’s coal sales
agreements
|
|
·
|
increases in transportation
costs
|
|
·
|
our ability to meet quality
specifications required by our
customers
|
|
·
|
increased competition that could
reduce our sales, earnings and
profitability
|
|
·
|
our dependence on key persons,
the loss of any of whom could adversely affect our
operations
|
|
·
|
our ability to pay off the
obligations secured by the lien held by a company controlled by the Zhaos
to which our assets are
subject
|
|
·
|
the evolving state of the Chinese
economy, political, legislative and regulatory systems, including any
changes in the interpretations of existing laws and the enactment of new
laws
|
|
·
|
unanticipated costs because of
the unpredictability of the Chinese legal
system
|
|
·
|
our ability to remain in
compliance with all applicable
regulations
|
|
·
|
the ability of our shareholders
to commence a legal action against our company as we have no assets in the
United States and our directors and officers who are not located in
China
|
|
·
|
our ability to obtain operating
capital, move funds out of China and pay dividends in light of China’s
currency restrictions
|
|
·
|
currency fluctuations from our
Chinese operations and fluctuations in the exchange
rate
|
|
·
|
the possibility that information
about our operations are not readily available from independent
third-party sources because our operations are all in
China
|
|
·
|
regulatory and physical risks
posed by climate changes
|
|
·
|
the volatility and fluctuation in
our stock price
|
|
·
|
our principal stockholders’
ability to exert significant control in matters requiring stockholder vote
and to delay, deter or prevent a change in control of our
company
|
|
·
|
our principal stockholders’
significant control over the company and conflicts of interest with the
company
|
|
·
|
the dilution of your ownership in
the company and the decrease of the value of your investment as a result
of additional equity issuance or conversion of outstanding derivative
securities
|
|
·
|
the downward impact on our stock
price decrease if a substantial number of shares are sold under Rule
144
|
|
·
|
our intention not to pay
dividends in the foreseeable
future
|
|
·
|
our ability to satisfy regulatory
requirements relating to our internal controls over financial
reporting
|
|
·
|
other risk factors discussed in
our filings with the SEC
|
The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating
to the foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of Puda. Although Puda believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this Prospectus will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by Puda or any other person that the
objectives and plans of Puda or any other forward-looking statements will be
achieved.
Actual
results could differ materially from those projected in the forward-looking
statements as a result of a number of risks and uncertainties, including but not
limited to: (a) limited amount of resources devoted to expanding our business
plan; (b) our failure to implement our business plan within the time period we
originally planned to accomplish; and (c) other risks that are discussed in this
Prospectus and incorporated herein by reference or included in our previous
filings with the SEC. We have included important factors in the
cautionary statements included in this prospectus, particularly in the “Risk
Factors” section, that could cause actual results or events to differ materially
from the forward-looking statements that we make.
You
should read this prospectus and the documents that we have filed as exhibits to
the Registration Statement, of which this prospectus is a part, completely and
with the understanding that our actual future results may be materially
different from what we expect. The forward-looking statements
included in this prospectus are made only as of the date of this
prospectus. We do not assume any obligation or have any intent to
update any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
The
Registration Statement of which this prospectus is a part also contains
estimates and other statistical data made by independent parties and by us
relating to market size and expected growth and other industry
data. These data involve a number of assumptions and limitations, and
you are cautioned not to give undue weight to such estimates. We have
not independently verified the statistical and other industry data generated by
independent parties and contained in the Registration Statement. In
addition, projections, assumptions and estimates of our future performance and
the future performance of the industry in which we operate are necessarily
subject to a high degree of uncertainty and risk due to a variety of factors,
including those described in “Risk Factors” and elsewhere in this
prospectus. These and other factors could cause results to differ
materially from those expressed in the estimates made by the independent parties
and by us.
USE
OF PROCEEDS
Each of
the Selling Security Holders will receive all of the net proceeds from the sale
of shares by that holder. We will not receive any of the net proceeds
from the sale of the shares. The Selling Security Holders will pay
any underwriting discounts and commissions and expenses incurred by the Selling
Security Holders for brokerage, accounting, tax or legal services or any other
expenses incurred by the Selling Security Holders in offering or selling their
shares. We will bear all other costs, fees and expenses incurred in
effecting the registration of the shares covered by this prospectus, including,
without limitation, blue sky registration and filing fees, and fees and expenses
of our counsel and accountants.
A portion
of the shares covered by this prospectus are, prior to their sale under this
prospectus, issuable upon exercise of common stock purchase
warrants. Upon the exercise of warrants by payments of cash, we will
receive the exercise price of the warrants, $4.20 per share.
As of
December 31, 2009, our convertible notes with a principal payment of $10,260,000
was converted into 2,931,429 shares of common stock, $2,115,000 was redeemed
upon maturity, and the remaining $125,000 will be paid off upon the receipt of
the original notes from the investors.
DETERMINATION
OF OFFERING PRICE
The
securities may be sold in one or more transactions at prevailing market prices
at the time of the sale on the over-the counter bulletin board or at privately
negotiated prices determined at the time of sale.
DILUTION
We are
not selling any of the shares of common stock in this offering. All
of the shares sold in this offering will be held by the Selling Security Holders
at the time of the sale, so that no dilution will result from the sale of the
shares.
SELLING
SECURITY HOLDERS
We are
registering for sale by the Selling Security Holders (a) 1,343,278 shares of
common stock that will be issued upon the exercise of warrants at $4.20 per
share, (b) 62,069 shares of common stock that will be issued upon the exercise
of warrants at $4.20 per share that were issued to the placement agent, its
employees and other persons acting on behalf of the placement agent, and (c)
260,553 shares of common stock that have been issued upon conversion of notes
and exercise of warrants. As of the date of this Registration
Statement, all convertible notes are due and are no longer outstanding. The
warrants were issued to the Selling Security Holders in a private placement
which closed November 18, 2005. The warrants were issued in
transactions exempt from the registration requirements of the Securities Act
under Section 4(2) of the Securities Act to persons reasonably believed to be
“accredited investors” as defined in Regulation D under the Securities Act and
under Regulation S of the Securities Act to persons who were not “U.S. persons”
as defined in Regulation S. Pursuant to the terms of the subscription
agreement under which the notes and related warrants were issued, we agreed to
file the Registration Statement of which this prospectus is a part in order to
permit those investors to sell the shares underlying the notes and
warrants. Pursuant to Rule 416 under the Securities Act, this
Registration Statement also purports to register such indeterminate number of
shares of common stock as may become issuable by reason of stock splits, stock
dividends, anti-dilution adjustments and similar transactions in accordance with
the provisions of the warrants.
Selling
Security Holder Table
The table
below lists the Selling Security Holders and other information regarding the
beneficial ownership of the shares of common stock by each of the Selling
Security Holders. The table lists the number of shares of common
stock beneficially owned by each Selling Security Holder as of April 15, 2010,
with sub-columns for (a) the share of common stock issuable upon exercise of all
the warrants (assuming 100% exercise), (b) the shares of common stock, excluding
the shares of common stock delivered by the Company in December 2006 and July
2008 for failure to make the resale registration statement effective according
to the time frame agreed upon with the investors in the subscription agreement
(the “Penalty Shares”) and (c) the Penalty Shares, respectively. The
column labeled (e) lists the shares of common stock being offered pursuant to
this prospectus by each of the Selling Security Holders. The column
labeled (f) lists the number of shares that will be beneficially owned by the
Selling Security Holders assuming all of the shares offered pursuant to this
prospectus are sold and that shares beneficially owned by them, but not
offered hereby, are not sold. The Selling Security Holder Table and
the footnotes to the table are prepared based on the Company’s transfer agent’s
records as of April 15, 2010 and the completed selling security holder
questionnaires the Company has previously received. None of the
Selling Security Holders listed in the table will hold 1% or more of our
outstanding common stock after the offering.
The
inclusion of any securities in the following table does not constitute an
admission of beneficial ownership by the persons named below. Except as
indicated in the footnotes to the table, no Selling Security Holder has had any
material relationship with us or our predecessors or affiliates during the last
three years.
Name of Selling Security Holder
|
|
(a)
Common
Stock
Issuable
Upon
Warrant
Exercise
|
|
|
(b)
Common
Stock
(excluding
penalty
shares)
|
|
|
(c)
Penalty
Shares
|
|
|
(d) Total
|
|
|
(e) Number
of Shares
of
Common
Stock
Being
Offered
|
|
|
(f) Shares
of
Common
Stock
Owned
After the
Offering
(1)
|
|
Anasazi
Partners III Offshore, Ltd.**(11) (Christopher P. Baker
(2))
|
|
|
57,143 |
|
|
|
0 |
|
|
|
0 |
|
|
|
57,143 |
|
|
|
57,143 |
|
|
|
0 |
|
Anasazi
Partners III, LLC ** (11) (Christopher P. Baker (2))
|
|
|
85,715 |
|
|
|
0 |
|
|
|
0 |
|
|
|
85,715 |
|
|
|
85,715 |
|
|
|
0 |
|
Baker,
Adrienne ** (11)
|
|
|
7,143 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,143 |
|
|
|
7,143 |
|
|
|
0 |
|
Baker,
Christopher ** (11)
|
|
|
57,143 |
|
|
|
0 |
|
|
|
0 |
|
|
|
57,143 |
|
|
|
57,143 |
|
|
|
0 |
|
Barish,
Michael
|
|
|
28,572 |
|
|
|
0 |
|
|
|
4,327 |
|
|
|
32,899 |
|
|
|
28,572 |
|
|
|
4,327 |
|
Barletta,
Joseph & Karen
|
|
|
7,143 |
|
|
|
0 |
|
|
|
1,082 |
|
|
|
8,225 |
|
|
|
7,143 |
|
|
|
1,082 |
|
Baum,
David M.
|
|
|
5,643 |
|
|
|
15,000 |
|
|
|
0 |
|
|
|
20,643 |
|
|
|
20,643 |
|
|
|
0 |
|
Beeman
Insurance Agency Inc. (Dean S. Kachudis (2))
|
|
|
7,143 |
|
|
|
4,472 |
|
|
|
0 |
|
|
|
11,615 |
|
|
|
11,615 |
|
|
|
0 |
|
Chilcott,
John
|
|
|
14,286 |
|
|
|
0 |
|
|
|
802 |
|
|
|
15,088 |
|
|
|
14,286 |
|
|
|
802 |
|
Cimarolo
Partners, LLC ** (11) (Christopher P. Baker (2))
|
|
|
28,572 |
|
|
|
0 |
|
|
|
0 |
|
|
|
28,572 |
|
|
|
28,572 |
|
|
|
0 |
|
Conn,
Michael
|
|
|
0 |
|
|
|
7,143 |
|
|
|
166 |
|
|
|
7,309 |
|
|
|
7,143 |
|
|
|
166 |
|
Crestview
Capital Master, LLC * (11) (Stewart Flink, Robert Hoyt, Daniel Warsh
(2)(4))
|
|
|
0 |
|
|
|
2 |
|
|
|
0 |
|
|
|
2 |
|
|
|
2 |
|
|
|
0 |
|
F.
Berdon Co. L.P. ** (11) (Fredierick Berdon (2))
|
|
|
30,001 |
|
|
|
12,300 |
|
|
|
827 |
|
|
|
43,128 |
|
|
|
42,301 |
|
|
|
827 |
|
Flynn,
Jason
|
|
|
7,143 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,143 |
|
|
|
7,143 |
|
|
|
0 |
|
Fuller,
James H.
|
|
|
7,143 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,143 |
|
|
|
7,143 |
|
|
|
0 |
|
Gerdz
Investments Limited Partnership, RLLLP (Robert Zappa (2))
|
|
|
7,143 |
|
|
|
0 |
|
|
|
1,082 |
|
|
|
8,225 |
|
|
|
7,143 |
|
|
|
1,082 |
|
Grose,
D. Austin
|
|
|
14,286 |
|
|
|
3,407 |
|
|
|
1,893 |
|
|
|
19,586 |
|
|
|
17,693 |
|
|
|
1,893 |
|
H.L.
Severance Inc., Pension Plan & Trust (H. Leigh Severance
(2)(5))
|
|
|
14,286 |
|
|
|
0 |
|
|
|
1,778 |
|
|
|
16,064 |
|
|
|
14,286 |
|
|
|
1,778 |
|
H.L.
Severance Inc., Profit Sharing Plan & Trust (H. Leigh Severance
(2)(6))
|
|
|
21,429 |
|
|
|
0 |
|
|
|
2,603 |
|
|
|
24,032 |
|
|
|
21,429 |
|
|
|
2,603 |
|
Hodel,
Ann
|
|
|
0 |
|
|
|
7,143 |
|
|
|
567 |
|
|
|
7,710 |
|
|
|
7,143 |
|
|
|
567 |
|
Hollman,
Mark & Stacia (7)
|
|
|
0 |
|
|
|
7,143 |
|
|
|
0 |
|
|
|
7,143 |
|
|
|
7,143 |
|
|
|
0 |
|
Hollman,
Scott
|
|
|
14,286 |
|
|
|
0 |
|
|
|
0 |
|
|
|
14,286 |
|
|
|
14,286 |
|
|
|
0 |
|
Hudson
Bay Fund, LP (Sander Gerber (12))
|
|
|
32,760 |
|
|
|
0 |
|
|
|
0 |
|
|
|
32,760 |
|
|
|
32,760 |
|
|
|
0 |
|
Hudson
Bay Overseas Fund, Ltd (Sander Gerber (12))
|
|
|
57,240 |
|
|
|
0 |
|
|
|
0 |
|
|
|
57,240 |
|
|
|
57,240 |
|
|
|
0 |
|
Johnson,
Bruce ** (11)
|
|
|
21,429 |
|
|
|
0 |
|
|
|
0 |
|
|
|
21,429 |
|
|
|
21,429 |
|
|
|
0 |
|
Kahn,
Sheldon & Liron, Sarah (8)
|
|
|
0 |
|
|
|
57,143 |
|
|
|
0 |
|
|
|
57,143 |
|
|
|
57,143 |
|
|
|
0 |
|
Micek
II, John Revocable Trust Dated 03/27/03 (John Micek (2))
|
|
|
21,429 |
|
|
|
0 |
|
|
|
0 |
|
|
|
21,429 |
|
|
|
21,429 |
|
|
|
0 |
|
Micek
III, John
|
|
|
28,572 |
|
|
|
0 |
|
|
|
3,665 |
|
|
|
32,237 |
|
|
|
28,572 |
|
|
|
3,665 |
|
Micek,
Maurice & Jennifer JTWROS (8)
|
|
|
0 |
|
|
|
21,429 |
|
|
|
0 |
|
|
|
21,429 |
|
|
|
21,429 |
|
|
|
0 |
|
Micek,
Maurice Custodian for Andrew Micek (Maurice Micek (2))
|
|
|
0 |
|
|
|
7,143 |
|
|
|
0 |
|
|
|
7,143 |
|
|
|
7,143 |
|
|
|
0 |
|
Micek,
Benjamin
|
|
|
0 |
|
|
|
7,143 |
|
|
|
0 |
|
|
|
7,143 |
|
|
|
7,143 |
|
|
|
0 |
|
Midsouth
Investor Fund LP ** (11) (Lyman O. Heidtke (2))
|
|
|
28,572 |
|
|
|
0 |
|
|
|
0 |
|
|
|
28,572 |
|
|
|
28,572 |
|
|
|
0 |
|
Option
Opportunities Corporation
|
|
|
42,858 |
|
|
|
0 |
|
|
|
0 |
|
|
|
42,858 |
|
|
|
42,858 |
|
|
|
0 |
|
OTA
LLC * (11) (Ira M. Leventhal (2))
|
|
|
28,572 |
|
|
|
0 |
|
|
|
0 |
|
|
|
28,572 |
|
|
|
28,572 |
|
|
|
0 |
|
Parsley,
Rod
|
|
|
0 |
|
|
|
4,643 |
|
|
|
1,082 |
|
|
|
5,725 |
|
|
|
4,643 |
|
|
|
1,082 |
|
Professional
Offshore Opportunity Fund Ltd (Howard Boyer and Marc Swickle
(2))
|
|
|
210,001 |
|
|
|
0 |
|
|
|
0 |
|
|
|
210,001 |
|
|
|
210,001 |
|
|
|
0 |
|
Professional
Traders Fund, LLC (Howard Boyer and Marc Swickle(2))
|
|
|
28,572 |
|
|
|
0 |
|
|
|
0 |
|
|
|
28,572 |
|
|
|
28,572 |
|
|
|
0 |
|
Purvis,
Steve
|
|
|
14,286 |
|
|
|
0 |
|
|
|
2,164 |
|
|
|
16,450 |
|
|
|
14,286 |
|
|
|
2,164 |
|
Sandor
Capital Master Fund, L. P.** (John Lemak (2))
|
|
|
142,858 |
|
|
|
0 |
|
|
|
0 |
|
|
|
142,858 |
|
|
|
142,858 |
|
|
|
0 |
|
Severance,
H. Leigh
|
|
|
35,715 |
|
|
|
0 |
|
|
|
0 |
|
|
|
35,715 |
|
|
|
35,715 |
|
|
|
0 |
|
Silicon
Prairie Partners, L. P. (John Micek (2))
|
|
|
42,858 |
|
|
|
0 |
|
|
|
0 |
|
|
|
42,858 |
|
|
|
42,858 |
|
|
|
0 |
|
Silver
Rock Fund I Limited
|
|
|
0 |
|
|
|
71,429 |
|
|
|
0 |
|
|
|
71,429 |
|
|
|
71,429 |
|
|
|
0 |
|
Silver
Rock I Limited (Rima Salam (2))
|
|
|
0 |
|
|
|
4,006 |
|
|
|
0 |
|
|
|
4,006 |
|
|
|
4,006 |
|
|
|
0 |
|
Stowell,
Kurt
|
|
|
477 |
|
|
|
0 |
|
|
|
0 |
|
|
|
477 |
|
|
|
477 |
|
|
|
0 |
|
Thompson,
Jack
|
|
|
21,429 |
|
|
|
0 |
|
|
|
0 |
|
|
|
21,429 |
|
|
|
21,429 |
|
|
|
0 |
|
Ungar,
Jonathan
|
|
|
28,572 |
|
|
|
0 |
|
|
|
1,603 |
|
|
|
30,175 |
|
|
|
28,572 |
|
|
|
1,603 |
|
Vicis
Capital Master Fund (John Succo, Sky Lucas and Shad Stastny
(2))
|
|
|
142,858 |
|
|
|
0 |
|
|
|
21,629 |
|
|
|
164,487 |
|
|
|
142,858 |
|
|
|
21,629 |
|
Whalehaven
Capital Fund Limited (9) (Arthur Jones, Trevor Williams, Macro Weisfeld,
Michael Fwkelskin (2))
|
|
|
0 |
|
|
|
5,035 |
|
|
|
0 |
|
|
|
5,035 |
|
|
|
5,035 |
|
|
|
0 |
|
White
Sand Investor Group, LP (10) (Elliott Donnelley, Owen Donnelley and
Marshall Donnelley (2))
|
|
|
|
|
|
|
14,286 |
|
|
|
2,164 |
|
|
|
16,450 |
|
|
|
14,286 |
|
|
|
2,164 |
|
Wrolstad,
Christopher * (11)
|
|
|
0 |
|
|
|
7,143 |
|
|
|
985 |
|
|
|
8,128 |
|
|
|
7,143 |
|
|
|
985 |
|
Zelinger,
Steven & Gordon, Lisa (8)
|
|
|
0 |
|
|
|
4,643 |
|
|
|
916 |
|
|
|
5,559 |
|
|
|
4,643 |
|
|
|
916 |
|
Henricks,
Steve** (3)
|
|
|
48,215 |
|
|
|
0 |
|
|
|
0 |
|
|
|
48,215 |
|
|
|
48,215 |
|
|
|
0 |
|
Rogers,
Kyle ** (3)
|
|
|
2,500 |
|
|
|
0 |
|
|
|
0 |
|
|
|
2,500 |
|
|
|
2,500 |
|
|
|
0 |
|
Troccoli,
Carmelo ** (3)
|
|
|
336 |
|
|
|
0 |
|
|
|
0 |
|
|
|
336 |
|
|
|
336 |
|
|
|
0 |
|
Legend
Merchant Group, Inc. * (3) (John H. Shaw III (2))
|
|
|
3,875 |
|
|
|
0 |
|
|
|
0 |
|
|
|
3,875 |
|
|
|
3,875 |
|
|
|
0 |
|
Garisch
Financial Inc. (Frederic M. Schweiger (2))
|
|
|
7,143 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,143 |
|
|
|
7,143 |
|
|
|
0 |
|
TOTAL
|
|
|
1,405,347 |
|
|
|
260,653 |
|
|
|
49,335 |
|
|
|
1,715,335 |
|
|
|
1,666,000 |
|
|
|
49,335 |
|
*
|
Denotes a
broker-dealer.
|
**
|
Denotes an affiliate of a
broker-dealer.
|
(1)
|
Assumes that all of the shares
offered hereby are sold and that shares owned before the offering but not
offered hereby are not sold.
|
(2)
|
Individual(s) who has sole or
shared power to vote, sell, transfer or otherwise dispose of the
securities.
|
(3)
|
Selling Security Holder is an
underwriter of this offering. The Company has no material relationship
with such Selling Security Holder. The underwriter has no
arrangement under which the underwriter may purchase additional shares in
connection with this offering. At the time of acquisition of
the securities, the Selling Security Holder had no understanding, directly
or indirectly, with any person to distribute the securities being offered
hereunder.
|
(4)
|
Managing Partners of Crestview
Capital Partners, LLC.
|
(5)
|
Trustee of the H.L. Severance
Inc., Pension Plan &
Trust.
|
(6)
|
Trustee of the H.L. Severance
Inc., Profit Sharing Plan &
Trust.
|
(7)
|
Tenants by the
Entirety.
|
(9)
|
Arthur Jones, Trevor Williams,
Macro Weisfeld and Michael Fwkelskin are the persons who have the power to
vote, sell, transfer or otherwise dispose of the securities but disclaim
beneficial ownership
thereof.
|
(10)
|
Elliott Donnelley, Owen Donnelley
and Marshall Donnelley, officers of the White Sand Investment Corporation,
General Partner of White Sand Investor Group, LP have the power to vote,
sell, transfer or otherwise dispose of the
securities.
|
(11)
|
Selling Security Holder
represented and warranted that the securities were purchased in the
ordinary course of business, and at the time of purchase, had no
agreements or understandings, directly or indirectly, with any party to
distribute the securities.
|
(12)
|
Sander
Gerber, Managing Partner of Hudson Bay Capital Management, L. P., the
investment manager of Hudson Bay Fund LP and Hudson Bay Overseas Fund Ltd,
has voting and investment power over the securities but disclaims
beneficial ownership thereof.
|
PLAN
OF DISTRIBUTION
We are
registering shares of common stock to permit the resale of such common stock by
the Selling Security Holders from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by
the Selling Security Holders of the securities. We will bear all fees and
expenses incident to our obligation to register the shares of common stock.
The
Selling Security Holders may sell all or a portion of the securities
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the
securities are sold through underwriters or broker-dealers, the Selling Security
Holders will be responsible for underwriting discounts or commissions or agent’s
commissions. The securities may be sold in one or more transactions
at prevailing market prices at the time of the sale on the stock exchange or at
privately negotiated prices determined at the time of sale. These
sales may be effected in transactions, which may involve crosses or block
transactions,
|
·
|
on any national securities
exchange or quotation service on which the securities may be listed or
quoted at the time of sale;
|
|
·
|
in the over-the-counter market;
|
|
·
|
in transactions otherwise than on
these exchanges or systems or in the over-the-counter market;
|
|
·
|
through the writing of options,
whether such options are listed on an options exchange or otherwise;
|
|
·
|
in ordinary brokerage
transactions and transactions in which the broker-dealer solicits
purchasers;
|
|
·
|
through block trades in which the
broker-dealer will attempt to sell the securities as agent but may
position and resell a portion of the block as principal to facilitate the
transaction;
|
|
·
|
through purchases by a
broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
·
|
in an exchange distribution in
accordance with the rules of the applicable exchange;
|
|
·
|
in
privately negotiated transactions;
|
|
·
|
pursuant
to Rule 144 under the Securities Act;
|
|
·
|
involving
broker-dealers that may agree with the Selling Security Holders to sell a
specified number of such securities at a stipulated price per security;
|
|
·
|
through
a combination of any such methods of sale; and
|
|
·
|
through
any other method permitted pursuant to applicable law.
|
If the
Selling Security Holders effect such transactions by selling the shares of
common stock to or through underwriters, broker-dealers or agents, such
underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the Selling Security Holders or
commissions from purchasers of the shares of common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved). The
Selling Security Holders may loan or pledge securities to broker-dealers that in
turn may sell such securities.
The
Selling Security Holders may pledge or grant a security interest in some or all
of the warrants or shares of common stock owned by them and, if they default in
the performance of their secured obligations, the pledgees or secured parties
may offer and sell shares of common stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act, by amending, if necessary, the list
of Selling Security Holders to include the pledgee, transferee or other
successors in interest as Selling Security Holders under this
prospectus. The Selling Security Holders also may transfer and donate
the warrants or shares of common stock in other circumstances in which case the
transferees, donees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.
Any
Selling Security Holder who is identified as broker-dealer participating in the
distribution of the shares of common stock is an “underwriter” within the
meaning of the Securities Act for the purposes of this offering, unless such
Selling Security Holder received the shares as compensation for investment
banking services, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. Any Selling Security Holder
who is identified as an affiliate of a broker-dealer participating in the
distribution of the shares of common stock is also an underwriter for the
purposes of this offering, unless such Selling Security Holder purchased the
shares in the ordinary course of business and at the time of purchase had no
understanding, directly or indirectly, with any party to distribute the
shares. At the time a particular offering of the securities is made,
a prospectus supplement, if required, will be distributed which will set forth
the aggregate amount of securities being offered and the terms of the offering,
including the name or names of any broker-dealers or agents, any discounts,
commissions and other terms constituting compensation from the Selling Security
Holders and any discounts, commissions or concessions allowed or reallowed or
paid to broker-dealers.
Under the
securities laws of some states, the securities may be sold in such states only
through registered or licensed brokers or dealers. In addition, in some states
the warrants and shares of common stock may not be sold unless such warrants or
shares of common stock have been registered or qualified for sale in such state
or an exemption from registration or qualification is available and is complied
with.
The
Selling Security Holders may choose not to sell any or may choose to sell less
than all of the shares of common stock registered pursuant to the shelf
registration statement, of which this prospectus forms a part.
The
Selling Security Holders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and the rules and regulations thereunder,
including, without limitation, Regulation M of the Exchange Act, which may
restrict certain activities of, and limit the timing of purchases and sales of
any of our shares of common stock by the Selling Security Holders and any other
person participating in a distribution of the shares. Furthermore,
under Regulation M, persons engaged in a distribution of the shares are
prohibited from simultaneously engaging in market making and certain other
activities with respect to shares for a specified period of time prior to the
commencement of such distributions subject to specified exceptions or
exemptions. All of the foregoing may affect the marketability of the
shares of common stock and the ability of any person or entity to engage in
market-making activities with respect to shares of our common stock.
We will
pay all expenses of the registration of the shares of common stock pursuant to
the registration rights in the subscription agreements entered into in
connection with our private placement of the convertible notes and warrants in
November 2005, estimated to be $583,000 in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or “blue sky” laws; provided, however, that a Selling Security
Holder will pay all underwriting discounts and selling commissions, if
any. We will indemnify the Selling Security Holders against
liabilities, including some liabilities under the Securities Act, in accordance
with the subscription agreement, or the Selling Security Holders will be
entitled to contribution from us. We may be indemnified by the
Selling Security Holders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information furnished to us
by the Selling Security Holder specifically for use in this prospectus, in
accordance with the related subscription agreement, or we may be entitled to
contribution.
Once sold
under the shelf registration statement, of which this prospectus forms a part,
the shares of common stock will be freely tradable in the hands of persons other
than our affiliates.
DESCRIPTION
OF SECURITIES TO BE REGISTERED
As of the
date of this prospectus, our authorized capital stock consisted of 150,000,000
shares of common stock, par value $0.001 per share, and 5,000,000 shares of
preferred stock, par value $0.01 per share. As of April 15, 2010, an
aggregate of 19,631,880 shares of common stock were outstanding. On a fully
diluted basis, assuming the exercise of all of the outstanding warrants, we will
have 21,037,227 shares of common stock issued and outstanding. There
are no shares of preferred stock outstanding.
Common
Stock
Subject
to preferences that may apply to shares of preferred stock outstanding at the
time, holders of outstanding shares of common stock are entitled to receive
dividends out of assets legally available therefor at times and in amounts as
our board of directors may determine. Each stockholder is entitled to
one vote for each share of common stock held on all matters submitted to a vote
of the stockholders. Cumulative voting is not provided for in our amended
articles of incorporation, which means that the majority of the shares voted can
elect all of the directors then standing for election. The common
stock is not entitled to preemptive rights and is not subject to conversion or
redemption. Upon the occurrence of a liquidation, dissolution or
winding-up, the holders of shares of common stock are entitled to share ratably
in all assets remaining after payment of liabilities and satisfaction of
preferential rights of any outstanding preferred stock. There are no
sinking fund provisions applicable to the common stock. The
outstanding shares of common stock are, and the shares of common stock to be
issued upon exercise of the warrants will be fully paid and
non-assessable.
LEGAL
MATTERS
The
validity of the securities offered by this prospectus was passed upon for us by
Broad and Cassel, Miami, Florida and Goodwin Procter LLP, New York, New
York.
EXPERTS
Our
audited financial statements as of December 31, 2009, 2008 and 2007 have been
included in reliance upon the reports of Moore Stephens, and upon the authority
of said firm as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus is part of a Registration Statement on Form S-3 that we filed with
the Securities and Exchange Commission. Certain information in the Registration
Statement has been omitted from this prospectus in accordance with the rules of
the SEC. We file the annual, quarterly and special reports, proxy statements and
other information with the SEC. You can inspect and copy the Registration
Statement as well as the reports, proxy statements and other information we have
filed with the SEC at the public reference room maintained by the SEC at 100 F
Street, N.E., Washington, D.C., 20549. You can call the SEC at 1-800-732-0330
for further information about the Public Reference Room. We are also required to
file electronic versions of these documents with the SEC, which may be accessed
from the SEC’s World Wide Web site at http://www.sec/gov. We maintain a website
at www.pudacoalinc.com. Our website and the information contained therein or
connected thereto are not intended to be incorporated into this Registration
Statement.
The SEC
allows us to “incorporate by reference” certain of our publicly-filed documents
into this prospectus, which means that information included in those documents
is considered part of this prospectus. Information that we file with
the SEC subsequent to the date of this prospectus will automatically update and
supersede this information. We incorporate by reference the documents
listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act of 1934 for so long as this Registration
Statement remains effective.
Incorporation
of Certain Information by Reference
The
following documents filed with the SEC are incorporated by reference in this
prospectus:
|
1.
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Our Annual Report on Form 10-K
for the fiscal year ended December 31,
2009.
|
|
2.
|
Our Quarterly Reports on Form
10-Q for fiscal quarters ended March 31, 2009, June 30, 2009 and September
30, 2009.
|
|
3.
|
Our Current Reports on Form 8-K,
filed with the SEC on March 12, March 18, May 15, July 8, August 5, August
14, September 16, September 22, November 12, December 7 and December 17,
2009 and February 12, February 18, February 24, March 5 and March 29,
2010.
|
|
4.
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The description of our common
stock set forth in our Registration Statement on Form 8-A filed with the
SEC on September 16, 2009.
|
We will
furnish without charge to you, on written or oral request, a copy of any or all
of the documents incorporated by reference herein, other than exhibits to such
documents. You should direct any requests for documents to Qiong
(Laby) Wu, Chief Financial Officer, 426 Xuefu Street, Taiyuan, Shanxi Province,
The People’s Republic of China 030006, telephone: 011 86 351 228
1302.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Section
145 of the Delaware General Corporation Law (the “DGCL”) allows for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the “Securities Act”). Article
VII of our bylaws authorizes indemnification of our directors, officers,
employees and other agents to the extent and under the circumstances permitted
by the DGCL.
We have
also entered into agreements with our directors and certain officers that will
require us, among other things, to indemnify them against certain liabilities
that may arise by reason of their status or service as directors or officers to
the fullest extent not prohibited by law. We maintain liability
insurance for the benefit of its directors and certain of our
officers.
The above
discussion of the DGCL and of our bylaws and indemnification agreements is not
intended to be exhaustive and is qualified in its entirety by such statutes,
certificate of incorporation, bylaws and indemnification
agreements.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by us of expenses incurred or paid by a director, officer or
controlling person of ours in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
PUDA
COAL, INC.
PROSPECTUS
May
12, 2010