Jinhua Capital Corporation
TSX VENTURE : JHC

March 01, 2011 15:46 ET

Jinhua Capital Corporation Announces Signing Share Purchase Agreement

CALGARY, ALBERTA--(Marketwire - March 1, 2011) - Jinhua Capital Corporation (the "Corporation") – (TSX VENTURE:JHC) announces, further to its press release of August 26, 2010 announcing its proposed Qualifying Transaction (the "Proposed Qualifying Transaction"), that it has entered into a share purchase agreement (the "Share Purchase Agreement") dated February 28, 2011 with Hugo International Creation Limited ("HKCo"), Zhejiang Wenlan Trading Co., Ltd. ("WFOE"), Hoking Steel Structure Co., Ltd. ("Hoking"), and the shareholders of HKCo (the "HKCo Shareholders"). Pursuant to the Share Purchase Agreement, the Corporation will, by acquiring all of the issued and outstanding shares of HKCo, indirectly acquire through a series of transactions control of the business of Hoking (the "Acquisition").

HKCo and WFOE were established for the purpose of completing the Acquisition. The equity of Hoking is owned 70% by Mr. Dai Jiankang and 30% by Mr. Yao Weibing, both of Haining City, Zhejiang, the People's Republic of China. The equity of WFOE is 100% owned by HKCo. HKCo is owned 51.91% by a company controlled by Mr. Dai Jiankang, 17.96% by a company controlled by Mr. Yao Weibing and 30.13% by other shareholders, each of which own less than 10% of the issued shares of HKCo. WFOE, Hoking Dai Jiankang and Yao Weibing have entered into a series of contractual relationships by virtue of which all of the economic benefit in and control of Hoking is transferred to WFOE, notwithstanding that the registered capital of Hoking continues to be held by the Dai Jiankang and Yao Weibing.

At a special meeting of shareholders of the Corporation held October 27, 2010, the shareholders approved the consolidation of the currently issued 7,000,000 issued and outstanding common shares of the Corporation on a 2 for 1 basis (the "Consolidation"). The shareholders of the Corporation also approved the change of name of the Corporation to "Hoking Steel Inc." or such other name approved by the Corporation and Hoking and acceptable to the TSX Venture Exchange (the "Name Change") and the continuance of the Corporation into the Province of Ontario (the "Continuance"). The Consolidation, Name Change and Continuance are subject to completion of the Proposed Qualifying Transaction.

Subject to the terms and conditions of the Share Purchase Agreement, the acceptance by the TSX Venture Exchange and meeting other regulatory requirements, the Corporation has agreed to purchase all of the ordinary shares of HKCo held by the HKCo Shareholders in consideration of the Corporation issuing to the HKCo Shareholders, on a proportionate basis in accordance with the number of shares held by the HKCo Shareholders, an aggregate total of 78,750,000 post- consolidation common shares at a deemed price of $0.40 per post-consolidation common share, for a total deemed consideration of $31,500,000.

The closing of the Acquisition is conditional upon the Corporation closing an offering (the "Offering") of a minimum of 5,000,000, and a maximum of 10,000,000 common shares at a price of $0.40 per share to raise proceeds in the minimum amount of $2,000,000 and in the maximum amount of $4,000,000. The net proceeds of the Offering will be used as set forth below.

In February 2011, HKCo obtained a short term loan (the "HKCo Loan") from a Hong Kong based arm's length party. The principal amount of the HKCo Loan is US$1.5 million. The HKCo Loan bears interest at a rate of 5.35% per annum. Principal and interest are payable at maturity in August 2011. HKCo used the borrowed funds to contribute to WFOE's paid up capital, and WFOE agreed not to advance any of its paid up capital to any third party (including Hoking) until HKCo completes the Acquisition. On completion of the Acquisition, approximately $1.55 million of the net proceeds of the Offering will be used to repay the HKCo Loan, at which time all of WFOE's paid up capital contributed by HKCo and the balance of the net proceeds from the Offering, in a total amount of approximately $1.5 million in case of the Minimum Offering or $3.3 million in case of the Maximum Offering, are expected to be advanced to Hoking. Hoking plans to use the funds to expand its manufacturing shops (to build a steel pre-treatment workshop and a steel component post-treatment workshop), and to use the remaining funds to purchase new equipment (including an oil hydraulic press, a coil straightening machine production line, a precise levelling machine, travelling cranes and other electronic equipment).

It is intended that the Acquisition will constitute the Qualifying Transaction of the Corporation in accordance with Policy 2.4 of the TSX Venture Exchange. Pursuant to the policies of the TSX Venture 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. The Offering will also be made pursuant to the Prospectus. A receipt for the Prospectus will be required to be issued in order for the Acquisition and Offering to close. There can be no assurance that such a receipt will be issued.

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 completion of satisfactory due diligence, act as sponsor in connection with the Proposed Qualifying Transaction and agent of the Corporation in relation to the Offering on a commercially reasonable efforts basis. 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.

Proposed Management

Further to the Corporation's press release of August 26, 2010, it is proposed that the new board of directors, upon completion of the Qualifying Transaction, will consist of five directors, three nominees of Hoking and two nominees of the Corporation. The proposed directors and officers of the Resulting Issuer are: Dai Jiankang (President, Chief Executive Officer, Chairman of the Board and Director); Zhu Jianjie (Director); Paul Fung Yeun Law (Director); Francis N. S. Leong (Director); Johnny Y. K. Pak (Director); Jacky Tengwu Long (Chief Financial Officer); and Judith Hong Wilkin (Corporate Secretary). The proposed director and officers not previously disclosed are as follows:

Johnny Y. K. Pak is a proposed director of the Resulting Issuer. He is currently the Secretary, Chief Financial Officer and a director of the Corporation. Mr. Pak is a businessman and executive. Since 1991, Mr. Pak has been the President and part owner of Lake Louise Village Grill & Bar, in Lake Louise, Alberta. Mr. Pak held auditing, accounting and executive positions with a chartered accountants firm, a construction entity and in the garment manufacturing industry in Hong Kong before migrating to Canada over twenty years ago. As well, he is a former member of the Hong Kong Management Association.

Jacky Tengwu Long is the proposed Chief Financial Officer of the Resulting Issuer. Mr. Long has been the Chief Financial Officer of Liuyang Fireworks Limited since July 2009. Mr. Long is a chartered accountant and certified internal auditor with more than a decade of accounting and finance experience. Most recently, he was a senior auditor at Ernst & Young for their assurance practice from 2006 to 2009. Prior to joining Ernst & Young, Mr. Long was a financial service leader with GE Plastic China from 2000 to 2004 and previously was a senior staff accountant with Ciba Specialty Chemicals China. Mr. Long has a master's degree in Management and Professional Accounting from the University of Toronto. Mr. Long is acting as a consultant to Hoking.

Judith Hong Wilkin is the proposed Corporate Secretary of the Resulting Issuer. Ms. Wilkin has been a lawyer practicing securities law at the law firm of Fogler, Rubinoff LLP since 2000, except during January to May 2006 when she was a lawyer at the law firm of Freshfields Bruckhaus Deringer at its Hong Kong office. Ms Wilkin holds a Master of Law degree from York University, a Bachelor of Law degree from the University of Ottawa, a Bachelor of Arts degree from Lakehead University and a Bachelor of Education (Honours) degree from Southwest China University.

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

Completion of the Proposed Qualifying Transaction is subject to a number of conditions, including but not limited to, TSX Venture Exchange acceptance. There can be no assurance that the Proposed Qualifying Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Prospectus, any information released or received with respect to the Proposed Qualifying 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.

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, the closing of the Offering, and receipt of all necessary regulatory and third party approvals. Readers are cautioned that assumptions used in the preparation of forward-looking information may prove to be incorrect. Although the Corporation 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. The Corporation 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 the Corporation) 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. The Corporation 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 the requirements of the TSX Venture Exchange 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