Each one in plain English, with the numbers worked through for a shareholder.
29 Mar 2012financial restatement▼ BadMajor
Filed March 29, 2012, this says the board concluded on March 27, 2012 that the 10-Qs for the quarters ended March 31, June 30 and September 30, 2011 can no longer be relied on, and they will be restated. A $3,000,000 California Bank & Trust revolving credit line (note dated May 25, 2011, borrowed in full June 26, 2011, secured by $3,000,000 cash deposit) was left off as a liability. The warrants from the January 2011 placement should have been recorded as a derivative liability. The company's own estimates show derivative liabilities of about $3.6 to 7.6 million and net income higher by $5.6 million, $6.5 million and $9.5 million for the three quarters, which are expected figures, not final. The filing also discloses a May 31, 2011 agreement with Majestic Machinery Inc. to broker US coal trading and investments, with $3,000,000 of the loan proceeds paid in and refundable in stated cases, plus commissions of 3% on trades and 1.5% on investments. This is a second restatement after the one announced in September 2009, and the amended 10-Qs have not been filed yet.
This amendment corrects the January 7, 2011 private placement: 3,750,000 units were sold at $4.00 (not 3,375,000), with net proceeds of $13,650,500 after $1,349,500 of commissions and costs. Every other term is unchanged, including the $6.80 warrants, the 375,000 agent warrants and the 120,000 shares to Greenview. The larger unit count means somewhat more dilution than the original filing showed.
What it means for a shareholder
3.8m new shares at $4.00 to raise about $13.7m. That's 20% dilution: every existing holder's slice gets 20% smaller. If you held $1,000 of shares (250 at the issue price), your slice goes from 0.00167% to 0.00134% of the company. To keep it you'd need 63 more shares - about $252 at the issue price.
12 Jan 2011capital raising announcement● NeutralMajor
On January 7, 2011 the company sold 3,375,000 units at $4.00 each in a private placement to investors, with Euro Pacific Capital as placement agent. Each unit is one common share plus a five-year warrant for 0.5 share at $6.80, and the filing states net proceeds of $13,653,000 after $1,347,000 of commissions and costs. It also issued 375,000 warrants at $6.80 to the placement agents and 120,000 shares to Greenview Capital for consulting on the deal, so existing shareholders are diluted. The company must file a resale registration within 45 days of closing or pay penalties of 1% per 30 days up to 10%. The filing does not say what the money is for. The unit count and proceeds were corrected the next day.
What it means for a shareholder
3.4m new shares at $4.00 to raise about $13.7m. That's 18% dilution: every existing holder's slice gets 18% smaller. If you held $1,000 of shares (250 at the issue price), your slice goes from 0.00167% to 0.00137% of the company. To keep it you'd need 57 more shares - about $228 at the issue price.
On May 19, 2010 Songzai agreed to buy the Liujiaqu Coal Mine in Inner Mongolia for $30 million cash and 10,000,000 common shares. The seller also gets 30% of the mine's net profits. The share count may fall if the stock averages above $7.00 over the 10 days before closing. Closing depends on government approvals and the company obtaining financing it finds acceptable, and either side can terminate if it has not closed by September 30, 2010. The company's press release says the mine would more than double the company's size and projects over $50 million of revenue in 2011; these are management's expectations.
Songzai said on September 18, 2009 that its 2008 annual results and four quarterly reports (periods ended June 30 and September 30, 2008, March 31 and June 30, 2009) should no longer be relied on, and it will restate them. The issues are how mining rights and asset retirement obligations are amortized, and how the April 2008 reverse acquisition of the Hong Yuan and Sheng Yu mines was accounted for. No restated figures are given. The Xing An deal agreed in December 2007 is described here as an April 2008 reverse acquisition.
Songzai extended the employment of interim CFO Yvonne Zhang as full-time CFO from June 9, 2008 to June 8, 2009 at $100,000 a year. It also granted her options on 55,000 shares at $9.35 each for 5 years, exercisable immediately. This is a routine executive pay arrangement.
Songzai agreed on December 31, 2007 to buy 90% of two Heilongjiang coal mining companies, Hong Yuan and Sheng Yu (Xing An Group), for $30 million in interest-free notes plus 80,000,000 common shares. The notes are due $18 million six months after closing and $12 million at one year, or sooner if the company raises at least $30 million. The shares are held in escrow for two years as security for the sellers' indemnity obligations, and the sellers will hold the remaining 10% in trust for the company. The mines are licensed for up to 450,000 and 150,000 tons a year. Closing is conditional and not assured, and either side can terminate if it has not occurred by January 31, 2008. This is a large new acquisition beyond the Tong Gong mine.
This amendment only adds the letter from the former auditor, Jimmy C.H. Cheung & Co., to the October 2007 auditor-change filing. The rest of the text is unchanged.
Songzai dismissed its auditor Jimmy C.H. Cheung & Co. on October 19, 2007 and engaged Goldman & Parks, LLP the same day. The filing says Cheung's 2005 and 2006 reports were clean and there were no disagreements. This is another auditor change after the 2004 turnover.
13 Jan 2006security holder rights change▼ BadMajor
Songzai filed the terms of the Series A Preferred Stock issued for the coal mine deal. Each of the 400,000 shares converts into 100 common shares, has no vote except as the filing provides, and the holders must approve changes to their rights. The filing says that if converted, the preferred shares will effectively give Chairman Hong Wen Li voting control. Note that this filing describes the acquisition as 100% of Tong Gong, while the April 2005 filing described 75% plus a 25% net profits interest, and it says the company is 'obligated to issue' the shares, whereas the earlier filing said they were issued in September 2004.
Songzai says the coal mine purchase first agreed in April 2004 is now complete: a business license issued March 30, 2005 to Heilongjiang Tong Gong Coal Mining Co., Ltd. was the final step. The company issued 400,000 convertible preferred shares (convertible into 40,000,000 common) on September 23, 2004 to the sellers, including Chairman Hong Wen Li, for 75% of the mine company, and also received a 25% net profits interest from Harbin Green, which Li controls. Chairman Li now holds 46.9% on a fully converted basis, and he and his brother Hong Jun Li together hold 50.7%, a change in majority ownership; the board has not changed since September 23, 2004.
Perrella & Associates resigned as auditor around December 3, 2004, and Songzai engaged Jimmy C.H. Cheung & Co., CPA the same day. The filing says Perrella's 2003 report had no adverse opinion and there were no disagreements. This is the company's third auditor in about a year and a half.
This amendment adds the financial statements for the Yong Heng business acquired in the 2003 share exchange. For the period from September 12 to December 31, 2003, it shows sales of $29,038 and a net loss of $28,882, with total assets of $325,179 at year-end. The notes describe Yong Heng as an e-commerce business selling gift cards, and the deal was accounted for as a reverse merger.
This amendment restates the auditor-change filing, now giving January 7, 2004 as the date Perrella & Associates was engaged (the earlier filing said April 8, 2004). The rest of the text is essentially unchanged.
Songzai said it engaged Perrella & Associates as its new independent auditor, following the earlier resignation of Pickett, Chaney & McMullen. The filing says there were no disagreements with the prior auditor, whose report carried a going-concern uncertainty.
Songzai agreed to buy a non-operating coal mine near Heihe City, Heilongjiang (formerly Heihe Jinchang) from its Chairman Hong Wen Li and Songzai Metal Products, paying with 400,000 convertible preferred shares, each convertible into 100 common shares. A consultant's report estimates about 3,157,000 tons of recoverable reserves; the mine has been idle since 1998 and needs dewatering and environmental work with costs not yet determined. The deal depends on title documents and government approvals, and the seller is a related party (the Chairman). Authorized common shares would rise from 200,000,000 to 1,000,000,000.
2 Jan 2004asset acquisition disposition● NeutralMajor
The Yong Heng share exchange announced in September 2003 was completed: 67,000,000 shares were issued to Yong Heng's owners (98.4%) and Yong Heng became a subsidiary. Hong Chang became CEO, Hong Wen Li became Chairman, and Patel and Gessner stepped down. The name change and increase in authorized shares to 200,000,000 took effect; 68,103,748 shares are outstanding, trading on the OTC Bulletin Board as SGZI.
Heritage disclosed a Plan of Exchange under which the shareholders of Harbin Yong Heng (a Chinese company) would receive 67,000,000 shares, 98.4% of the company, making Yong Heng a wholly-owned subsidiary. Chairman Rohit Patel would hand back his 1,188,088 shares for cancellation in return for $450,000 paid by Yong Heng and/or its shareholders. The company would be renamed Songzai International Holding Group and authorized shares raised from 20,000,000 to 200,000,000. Existing shareholders would be left with about 1.6% of the company, and control would change.
Auditor Pickett, Chaney & McMullen told Heritage on September 10, 2003 that it would not stand for reelection for 2003; no replacement had yet been engaged. The filing says the 2002 audit report was modified as to uncertainty, and reports no disagreements with the auditor.
19 Dec 2002asset acquisition disposition● NeutralMajor
Heritage Companies (the company's name at this time) gave up its 80% stake in Blair Consulting Group, LLC by transferring it to E-Myth, LLC, which is controlled by two of its own directors, Cary Daniel and James Windmiller. E-Myth takes on Blair's liabilities and returns 93,751 Heritage shares held by Blair; both directors resigned from the board.
