Kaiyue International Inc.
TSX VENTURE : KYU.P

December 03, 2010 12:00 ET

Kaiyue International Inc. Announces Proposed Qualifying Transaction With China Easy-Pay Technology Inc. and Private Placement

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 3, 2010) -

NOT FOR DISSEMINATION IN THE UNITED STATES OR THROUGH U.S. NEWSWIRES

Kaiyue International Inc. (TSX VENTURE:KYU.P) (the "Corporation" or "Kaiyue") is pleased to announce that it has entered into an agreement ("Agreement") effective December 3, 2010 with China Easy-Pay Technology Inc. ("China Easy-Pay") and its sole shareholder Soar High Group Limited ("Soar High"), to purchase all of the issued and outstanding shares of China Easy-Pay (the "Acquisition").

The Acquisition, if completed, will constitute the Corporation's Qualifying Transaction ("QT") under TSX Venture Exchange (the "Exchange") Corporate Finance Manual Policy 2.4. – Capital Pool Companies. China Easy-Pay and Soar High are at arm's length to the Corporation, as such, the Corporation anticipates that the Acquisition will not be subject to approval of the shareholders of the Corporation.

China Easy-Pay

The following is a summary of China Easy-Pay's existing business.

China Easy-Pay was incorporated on September 29, 2010 under the laws of the British Virgin Islands. China Easy-Pay is wholly-owned by Soar High, which is also a corporation incorporated under the laws of the British Virgin Islands. Soar High is controlled as to 78.57% by William Fu, a resident of Hong Kong, and as to 21.43% by Bok Wong, a resident of Canada.

China Easy-Pay owns 100% of Dragon Smart Technology Limited ("Dragon Smart"), a corporation incorporated under the laws of Hong Kong on January 5, 2010. Dragon Smart in turn owns 100% of Guanzhou Huahong Network Technology Company Limited ("Huahong"), a corporation incorporated under the laws of the People's Republic of China on July 25, 2005, and which is the operating subsidiary for China Easy-Pay.

Huahong is a close strategic partner of China Mobile Guangdong (a subsidiary of China Mobile Limited, the largest mobile communications operator in China), and has an established, profitable and growing business, processing payments for prepaid (or pay-as-you-go) mobile phone accounts for China Mobile customers in Guandong Province. Currently, Huahong offers two products – its legacy Electronic Top-up Voucher and its Wireless Top-up service – that challenge the traditional plastic prepaid calling card.

Electronic Top-up Voucher

Electronic Top-up Vouchers allow mobile users to add, or 'top-up' calling credits by buying a tangible paper voucher and inputting the encoded data printed on the voucher into their mobile phones to activate the top-up process.

Consumers purchase Electronic Top-up Vouchers from the dealers, which either print off paper vouchers as per requested amounts or sells preprinted vouchers in standard denominations. Consumers then add calling credit to their mobile phone accounts by calling the China Mobile hotline or by registering their voucher online, using an activation code concealed underneath the top, protective layer of the double-layered paper slip.

Wireless Top-up Service

Unlike the Electronic Top-up Voucher, the Wireless Top-up service does not involve the purchase of a physical voucher. Instead, mobile accounts are topped-up digitally.

Consumers can place top-up orders at participating stores and Point of Sales ("POS") terminals within Huahong's network of independent dealers. Huahong's collaboration with banks and inter-bank networks enables direct linkage between dealers' bank accounts, Huahong's bank account and China Mobile's bank accounts, which enables withdrawal of credit from the dealers' bank accounts upon purchase of top-up credits at physical stores or POS. Upon settlement of payment, Huahong's server will receive top-up orders from the dealers and send out top-up signals to China Mobile's BOSS server to activate calling credit. As the activation completes, Huahong will send a text message to the consumers notifying them of the completion of the top-up process.

Selected Financial Statement Information

The following table presents selected financial information stated in Chinese RMB on the financial condition and results of operations for Huahong. Such information is derived from the unaudited financial statements of Huahong for the years ended March 31, 2010, 2009, and 2008. The unaudited financial statements were prepared in accordance with Canadian generally accepted accounting principles.

Balance Sheets March 31, 2010
Unaudited
(RMB)
March 31, 2009
Unaudited
(RMB)
March 31, 2008
Unaudited
(RMB)
Current Assets 24,149,360 29,620,122 18,930,083
Property and Equipment 3,867,362 7,488,957 11,581,021
Total Assets 28,016,722 37,109,079 30,511,104
Current Liabilities 10,546,176 11,597,865 15,012,647
Total Shareholders' Equity 17,470,546 25,511,214 15,498,457
Total Liabilities and Shareholders' Equity 28,016,722 37,109,079 30,511,104
Statements of Operations
Year Ended
March 31, 2010
Unaudited(RMB)
Year Ended
March 31, 2009
Unaudited(RMB)
Year Ended
March 31, 2008
Unaudited(RMB)
Total Revenues 110,608,019 92,450,564 30,265,791
Cost of Goods Sold 82,662,345 73,737,764 24,878,792
Operating Expenses 9,459,942 7,161,322 4,829,628
Operating Income 18,485,732 11,551,478 557,371
Net Income 16,255,312 10,012,757 3,699,116

Proposed Acquisition

Under the terms of the Agreement, the Corporation will issue 14,758,000 common shares ("Acquisition Securities") to acquire 100% of the issued and outstanding shares of China Easy-Pay, which shall represent 51% of the total issued and outstanding shares of the resulting issuer immediately following the closing of the Acquisition. In the event that the Private Placement (as defined below) or any unforeseeable event shall result in 14,758,000 common shares of the Corporation constituting more or less than 51% of the total issued and outstanding shares of the resulting issuer immediately following the closing of the Acquisition, then the number of common shares of the Corporation issuable shall be adjusted so that the Acquisition Securities issuable to the Vendor shall constitute 51% of the total issued and outstanding shares of the resulting issuer immediately following closing of the Acquisition.

Upon the completion of the Acquisition, China Easy-Pay will become a wholly owned subsidiary of the Corporation, and the Corporation will carry on its business through China Easy-Pay and Huahong, and will be renamed "China Easy-Pay Inc.".

Proposed Private Placement

The Corporation will also complete a non-brokered private placement of common shares to raise approximately $1,500,000, at a price of $0.15 per share (the "Private Placement"). Completion of the Private Placement will not be conditional upon completion of the Acquisition or the QT, and the Corporation may, subject to Exchange approval, complete the Private Placement without completing the Acquisition or QT.

It is expected that Hilda Sung, the President and CEO of the Corporation, will subscribe for a significant portion of the Private Placement. The Corporation will, to the extent required, obtain shareholder approval for the issuance of the shares to Hilda Sung in accordance with Exchange requirements and applicable securities laws.

The proceeds of the Private Placement will be added to the Corporation's working capital to be used towards the completion of a QT in accordance with the rules of the Exchange.

Directors, Officers and other Insiders

Subject to completion of the Acquisition, the directors and officers of the resulting issuer will be reconstituted and will be comprised of five (5) directors. Soar High will be entitled to nominate two (2) out of the five (5) directors of the resulting issuer and Kaiyue will be entitled to nominate one (1) out of the five (5) directors, which Kaiyue nominee will be a member of the resulting issuer's Audit Committee and Chair of the Nominating Committee. The remaining two (2) out of the five (5) directors of the resulting issuer will be independent directors mutually agreed upon by Soar High and Kaiyue.

Sponsorship

Mackie Research Capital Corporation ("Mackie"), subject to completion of satisfactory due diligence, agreed to act as the sponsor in connection with the QT. An agreement to sponsor should not be construed as any assurance with respect to the merits of the QT or the likelihood of completion.

The Company will pay Mackie a $75,000 sponsorship fee, plus applicable taxes, plus all reasonable out-of-pocket expenses of Mackie and fees of legal counsel to Mackie up to US$70,000 plus any taxes and disbursements of legal counsel to Mackie.

About Kaiyue International Inc.

Kaiyue International Inc. is a capital pool company (CPC) within the meaning of the policies of the TSX Venture Exchange. The Corporation does not have any operations and has no assets other than cash. The Corporation's business is to identify and evaluate businesses and assets with a view to completing a "Qualifying Transaction" under the Exchange's CPC policies.

Forward Looking Information

This news release contains forward-looking statements with respect to the Acquisition, the QT, and matters concerning the business, operations, strategy and financial performance of the Corporation, China Easy-Pay and its subsidiaries and affiliates. These statements generally can be identified by use of forward looking word such as "may", "will", "expect", "estimate", "anticipate", "intends", "believe", or "continue" or the negative thereof or similar variations. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, risks associated with the completion of the QT and matters relating thereto, risks of the delisting of the Corporation from the Exchange due to its failure to complete a QT within the time period set in the policies of the Exchange, risks associated with the marketing and sale of securities, the need for additional financing, reliance on key personnel, the potential for conflicts of interest among certain officers or directors with certain other projects, as well the volatility of the Corporation's common share price and volume.

In addition, forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: the ability of the Corporation to obtain necessary financing to complete the QT or to satisfy the requirements of the Exchange with respect to the Acquisition or the Private Placement. The completion of the Acquisition and/or the Private Placement and the future business, operations and performance of the resulting entity discussed herein could differ materially from those expressed or implied by such statements. 

Additional important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, as well as risks related to: China Easy-Pay's business such as failure of the business strategy, stable supply prices, demand and market prices for its products, government licensing, potential exposure to tax under Canadian income tax, regulations of the People's Republic of China ("PRC") relating to offshore special purpose companies, recent PRC regulations relating to cross-border mergers and acquisitions, product liability, environmental protection, currency exchange rates and conflicts of interest; China Easy-Pay's operations, such as additional financing requirements and access to capital, reliance on key and qualified personnel, insurance, competition, intellectual property and reliable supply chains; and doing business in the PRC such as tax, repatriation of profit and currency conversion, acquisition and appropriation of land use rights, foreign investment, permits and business licenses, employment contracts, government intervention, shareholders' rights and enforcement of judgments and a developing legal system.

The Corporation cautions that the foregoing list of material factors is not exhaustive. When considering the Corporation's forward-looking statements and information to make decisions, investors and others should carefully review the foregoing factors and other uncertainties and potential events. 

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS NEWS RELEASE REPRESENTS THE EXPECTATIONS OF THE CORPORATION AS OF THE DATE OF THIS NEWS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE CORPORATION MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE LAWS.

General

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

Trading in the Corporation's common shares has been halted by the Exchange and is expected to remain halted until after the Exchange accepts and confirms the completion of the QT.

ON BEHALF OF THE BOARD OF DIRECTORS OF KAIYUE INTERNATIONAL INC.

Hilda Sung, President & CEO

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 news release.

Contact Information

  • Kaiyue International Inc.
    Hilda Sung
    President and Chief Executive Officer
    011-86-138-0223-2278