Jinhua Capital Corporation
TSX VENTURE : JHC

August 26, 2010 11:35 ET

Jinhua Capital Corporation Announces Proposed Qualifying Transaction

CALGARY, ALBERTA--(Marketwire - Aug. 26, 2010) - Jinhua Capital Corporation (the "Corporation") (TSX VENTURE:JHC), a capital pool company, announces that it has entered into a letter agreement ("Letter Agreement") dated August 24, 2010 with Hoking Steel Structure Co., Ltd. ("Hoking") with respect to the proposed acquisition of the right to acquire, through a series of transactions (the "Reorganization"), indirect ownership through a target company (the "Target") of 100% of the issued and outstanding shares of, or economic benefit in or control over Hoking.

About Hoking:

Hoking is a limited liability company established in the Haining City of Zhejiang Province in the People's Republic of China (the "PRC") on August 13, 1997. Hoking integrates design, manufacture, erection and technical consultation for various steel structure projects. Its products are used in commercial and residential buildings and for infrastructure projects, including large-span, high gantry steel structure industrial plants, multiple-storey high-rise buildings, power facilities, communication tower equipment, municipal bridges, lifting machines, large equipment and fittings, stadiums, exhibition halls, air terminals at airports, garages and landscape facilities.

Hoking is owned 70% by Mr. Dai Jiankang and 30% by Mr. Yao Weibing, both of HaiNing City, Zhejiang, PRC.

The unaudited financial statements of Hoking for the period ended March 31, 2010, indicated that Hoking has total assets of $66,355,063, total liabilities of $43,767,531 and net shareholder's equity of $22,587,532.

Terms of the Proposed Transaction:

The Letter Agreement provides that the currently issued and outstanding 7,000,000 Common Shares of the Corporation will be consolidated on a 2 for 1 basis (the "Consolidation").

The Letter Agreement contemplates that the Corporation will, subject to acceptance by the TSX Venture Exchange (the "Exchange") and meeting other regulatory requirements, issue an aggregate total of 78,750,000 post-consolidation Common Shares and convertible preferred shares ("Convertible Shares") of the Corporation at a deemed price of Cdn.$0.40 in exchange for all of the issued and outstanding shares of the Target (the "Acquisition"). The split between the Common Shares and Convertible Shares will be determined on the basis that the public float will not be less than 20% of the total issued Common Shares of the Corporation, which would result in a total of 32,500,000 postconsolidation Common Shares and 46,250,000 Convertible Shares if the Minimum Offering, hereinafter referred to, is achieved and if the Maximum Offering, hereinafter referred to, is achieved, the number of post-consolidation Common Shares would be increased by 20,000,000 shares and the number of Convertible Shares would be decreased by 20,000,000 shares. Each Convertible Share is convertible into a Common Share of the Corporation, for no additional consideration, at any time as long as the public float is not less than 20% of the total issued Common Shares of the Corporation.

It is intended that the Acquisition will constitute the Qualifying Transaction of the Corporation in accordance with Policy 2.4 of the Exchange. Pursuant to the policies of the Exchange, as the Corporation is a capital pool company that is a reporting issuer in Ontario and is acquiring a significant asset not located in Canada or the United States, the Corporation will be preparing and filing a prospectus (the 'Prospectus") in connection with the Acquisition. A receipt for the Prospectus will be required to be issued in order for the Acquisition to close. There can be no assurance that such a receipt will be issued.

The Letter Agreement also contemplates that the Corporation will raise, concurrently with the closing of the Acquisition, a minimum of Cdn.$2,000,000 (the "Minimum Offering") and a maximum of Cdn.$4,000,000 (the "Maximum Offering") (the Minimum Offering and the Maximum Offering together called the "Offering") by the issuance of post-consolidation Common Shares at a price of $0.40 per Common Share pursuant to the Prospectus. The Corporation has entered into an engagement letter with PI Financial Corp. ("PI") pursuant to which PI will, subject to entering into a formal agreement and subject to completion of satisfactory due diligence, act as sponsor in connection with the Qualifying Transaction and agent of the Corporation in relation to the Offering on a commercially reasonable efforts basis. PI will be paid a cash commission equal to 10% of the gross proceeds of the Offering and will be issued compensation options in a number equal to 10% of the number of Common Shares sold pursuant to the Offering, each of which compensation option will entitle PI to purchase one Common Share at a price of $0.40 at anytime within two years from the closing of the Offering. The proceeds of the Offering will be used for expanding manufacturing facilities and/or acquiring additional equipment.

The agreement by PI to act as sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.

Upon closing of the Qualifying Transaction, it is proposed that options to purchase post-consolidation Common Shares of the Corporation at an exercise price of $0.40 per share will be granted to directors, officers, employees and/or consultants.

Completion of the Acquisition is subject to, among other things, the following conditions precedent:

  1. completion of due diligence by the Corporation and Hoking;
  2. the entering into of a formal agreement by all required parties;
  3. completion of the Reorganization;
  4. receipt of shareholder approval of the Consolidation;
  5. receipt of all third party approvals, if required;
  6. issuance of a receipt for the Prospectus;
  7. completion of the Minimum Offering; and
  8. acceptance by the Exchange.

The proposed Qualifying Transaction will be at arm's length, and accordingly, will not require approval by the majority of the minority shareholders of the Corporation; however, detailed information on the Qualifying Transaction, Hoking and Resulting Issuer will be included in the Prospectus to be filed on SEDAR.

The Corporation has agreed to hold a shareholders' meeting for the purpose of approving the Consolidation, a change of name of the Corporation to "Hoking Steel Inc." or such other name approved by the Corporation and Hoking and acceptable to the Exchange and the continuance of the Corporation into the Province of Ontario.

Proposed Management:

It is proposed that upon completion of the Qualifying Transaction, a new board of directors will be appointed or elected. The new board will consist of at least five directors, four of whom are to be nominees of Hoking and one of whom to be the nominee of the Corporation. The nominee of the Corporation is Francis N.S. Leong, the current President, Chief Executive Officer and a director of the Corporation. The following are the proposed directors and officers of the Resulting Issuer:

President, Chief Executive Officer, Chairman of the Board and Director

Dai Jiankang, Executive Director and Chairman of Hoking, established Hoking in August, 1997. Mr. Dai has more than 20 years' experience in steel structure manufacturing and has extensive knowledge and understanding of the Chinese steel structure industry. Mr. Dai is also the director of the China Steel Construction Society. Mr. Dai received an EMBA (Executive Master's degree in Business Administration) from Zhejiang University in 2006. In recognition of Mr. Dai's contribution to the development of steel structure manufacturing, he was selected as Excellent Manager in the Zhejiang steel structure manufacturing industry in 2007.

Director

Zhu Jianjie joined Hoking in July, 2008 as the Executive Director and General Manager. Mr. Zhu graduated in 1987 from the machinery manufacture and processing equipment specialty of Zhejiang College of Technology, with a bachelor's degree. Before joining Hoking, Mr. Zhu held the post of general manager in Haining Hongxiang Commercial Concrete Co., Ltd., a producer of concrete used in the construction industry, Zhejiang Hongxiang Sports Culture Development (Group) Co., Ltd., a sports and culture investment and event organizing company, and Zhejiang Hongxiang Thermal Insulation Technology Co., Ltd., a research and development and producing company specializing in insulation materials for the construction industry. Mr. Zhu was titled "Haining Municipal Top 10 Model Youth" in 2002.

Director

Paul Fung Yeun Law joined Hoking in June, 2009 as an independent director. Mr. Law is the Chief Financial Officer of Boyuan Construction Group, Inc., a construction company listed on the Toronto Stock Exchange, since March, 2009. He is also the executive director of Zhilian Investment International Co., Ltd., a financial consulting company, since 2001. Before joining Zhilian Investment International Co., Ltd., he held the posts of vice-president in U.S. Prudential Securities, CFO and general manager in Australia Bank, CFO in Standard Chartered Bank and vice-president in Citibank. He has more than 20 years' experience in investment banking sector. Mr. Law is a member of Hong Kong Society of Accountants, member of Canadian Society of Accountants, and member of Hong Kong Securities Institute. He obtained a chemical engineering bachelor's degree and capital market associate degree from McGill University, Canada in 1983, obtained an MBA degree from the University of British Columbia, Canada in 1985 and obtained a Chartered Accountant qualification from the Institute of Chartered Accountants of British Columbia, Canada in 1987.

Director

Lai, Ming Wai joined Hoking in July, 2009 as an independent director. As the former vice-president of Bank of America, Mr. Lai has more than 20 years' experience in commercial banking, investment banking and direct investments. In the 16 years of working for the Bank of America, Mr. Lai took charge of enterprise financing, credit management, investment consultation, market development and branch management. Mr. Lai was also the first president of the Shanghai Branch and Guangzhou Branch of the Bank of America. After leaving the Bank of America, Mr. Lai became senior executive of several Chinese or foreign financial institutions, Hong Kong listed companies and investment companies, in charge of enterprise financing, direct investments and acquisitions and mergers. Mr. Lai graduated from the management and economy specialty of the University of Hong Kong.

Interim Chief Financial Officer, Secretary and Director

Francis N. S. Leong is currently the President, Chief Executive Officer, and a Director of the Corporation. Mr. Leong received a Bachelor of Commerce degree from the National Chengchi University in Taipei, Taiwan in 1968 and a Master of Public Administration from Brigham Young University in Provo, Utah, USA in 1975. He is a career public administrator. Since October, 2003, he has been the principal of Sungai River Inc., an international financial consulting company. Prior to Mr. Leong's retirement in August, 2003, he was City Treasurer of The City of Calgary. Mr. Leong previously served as a director on the boards of Grand Power Logistics Group Inc., a logistics company listed on the TSX Venture Exchange; Silver Foxx Capital Corp. (now called Silvore Fox Minerals Corp.), a mineral exploration company (a previous CPC company) listed on the TSX Venture Exchange; and Tiex Inc., a mineral exploration company (a previous CPC company) listed on the TSX Venture Exchange and Enmax Corporation, a gas/electrical utility company owned by The City of Calgary. Mr. Leong currently serves as a director of Boyuan Construction Group, Inc., a residential and commercial construction company listed on the Toronto Stock Exchange; China Industrial Waste Management Inc., an industrial waste treatment and landfill company quoted on the OTCBB; Andatee China Marine Fuel Services Corporation, a marine fuel production and supplier to fishing boats company quoted on Nasdaq; and China Infrastructure Construction Corporation, a ready mix cement company quoted on the OTCBB.

Hoking is currently conducting a search for a permanent Chief Financial Officer. Additional information about directors and officers of the Resulting Issuer, when available, will be provided in an updated press release.

Trading in the shares of the Corporation will be halted until such time as the Qualifying Transaction is completed and the Offering is closed.

Upon completion of the Qualifying Transaction, the Corporation will be classified as an Industrial Issuer on the Exchange.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

"This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available."

Statements in this press release contain forward-looking information within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "contemplates", "intends", "plan", "expect", "project", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. In particular, forward-looking information in this press release includes, without limitation, statements with respect to: completion of the Acquisition; receipt of all necessary shareholder, regulatory and third party approvals, if applicable; and the composition of the board of directors and management of the Resulting Issuer. Readers are cautioned that assumptions used in the preparation of forward-looking information may prove to be incorrect. Although Jinhua believes that the expectations reflected in the forward-looking information is reasonable, there can be no assurance that such expectations will prove to be correct. Jinhua cannot guarantee future results, level of activity, or performance of achievements. Consequently, there is no representation that the actual results achieved will be the same, in whole or in part, as those set out in the forward-looking information.

Forward-looking information is based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors (many of which are beyond the control of Jinhua) that could cause actual events or results to differ materially from those anticipated in the forward-looking information. Some of the risks and other factors could cause results to differ materially from those expressed in the forward-looking information include, but are not limited to: foreign operations; general economic conditions in China, Canada and globally; the risks associated with the steel structure industry; and exchange rate changes. Industry related risks could include, but are not limited to: operations with foreign entities; delays or changes in plans; competition for, among other things, capital, acquisitions, skilled personnel and supplies; governmental regulation of the technology industry; technical problems; the uncertainty of estimates and projections of costs and expenses; unanticipated operating events or performance which can reduce productivity; the need to obtain required approvals from regulatory authorities; stock market volatility; liabilities inherent in technology operations; access to capital; and other factors. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking information contained in this news release is expressly qualified by this cautionary statement. Jinhua undertakes no obligation to update or revise any forward-looking statements to conform such information to actual results or to changes in its expectations except as otherwise required by Exchange Requirements and applicable securities legislation. Readers are cautioned not to place undue reliance on forward-looking information.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (as that term is defined in the Policies of the TSX Venture Exchange) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

Contact Information

  • Jinhua Capital Corporation
    Francis Leong
    President and Chief Executive Officer
    (403) 861-5618