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SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934
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Check the appropriate box:
/X/ Preliminary Information Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14c-5(d)(2))
/ / Definitive Information Statement
CREATIVE MASTER INTERNATIONAL, INC.
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(Name of Registrant As Specified In Its Charter)
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Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14c-5(g)
and 0-11
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(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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<C> <S>
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
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(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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CREATIVE MASTER INTERNATIONAL, INC.
CASEY INDUSTRIAL BUILDING, 8(TH) FLOOR
18 BEDFORD ROAD, TAIKOKTSUI
KOWLOON, HONG KONG
INFORMATION STATEMENT
PURSUANT TO REGULATION 14C PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
This information statement is being mailed on or about July 7, 2000 to
holders of record as of June 23, 2000 of shares of common stock, par value
$0.0001 ("Common Stock"), of Creative Master International, Inc., a Delaware
corporation (the "Company"). It is being furnished in connection with the
adoption of an amendment to the Company's Certificate of Incorporation by
written consent of the holders of a majority of the outstanding shares of Common
Stock.
On June 23, 2000, the Company's Board of Directors approved an amendment to
the Company's Certificate of Incorporation to effect a one-for-three reverse
stock split of the Company's Common Stock. On the same date, the amendment was
approved in a written consent executed by the holders of more than a majority of
the outstanding shares of Common Stock. Approval by the Board of Directors and
by the holders of a majority of the outstanding shares of Common Stock is
adequate under Delaware law to effect the amendment. The amendment will become
effective following a waiting period of 20 calendar days from the date this
information statement is mailed to stockholders. The form of the Certificate of
Amendment is attached to this information statement as Exhibit A.
This information statement is being provided for your informational purposes
only.
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WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
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OUTSTANDING STOCK AND VOTING RIGHTS
As of the record date, there were 4,999,322 shares of Common Stock
outstanding. Each share of Common Stock entitles its holder to one vote.
REASONS FOR THE REVERSE STOCK SPLIT
On February 17, 2000, the Company announced that it had entered into an
agreement in principle to acquire PacificNet.com LLC ("PNC"), a privately-held
Minnesota limited liability company founded in July 1999 that develops, markets
and supports full-service business-to-business ("B2B") e-commerce solutions for
Asian businesses and other companies that are involved in or seek to become
involved in trans-Pacific B2B trade. On May 2, 2000, the Company announced that
it had signed a definitive agreement with PNC and its owners, pursuant to which
the Company would issue to the owners of PNC 21,500,000 shares (the "Exchange
Shares") of its Common Stock in exchange for all of their outstanding membership
interests in PNC. As a result, at the closing, PNC would become a wholly-owned
subsidiary of the Company and the owners of PNC would hold in excess of 80% of
the shares of the Company's Common Stock expected to be outstanding at the
closing. The issuance of the Exchange Shares in connection with the Company's
acquisition of PNC (the "PNC Acquisition"), the change of
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the Company's name to "PacificNet.com, Inc." upon closing and an increase in the
number of the Company's authorized shares of Common Stock to permit the issuance
of the Exchange Shares were among the proposals duly approved by the Company's
stockholders at the Company's 2000 Annual Meeting of Stockholders held in Hong
Kong on June 21, 2000.
One of the conditions to the completion of the PNC Acquisition is the
approval of the Exchange Shares for listing on the Nasdaq National Market
("NNM"). Nasdaq regulations require issuers to qualify under the NNM initial
listing standards following any acquisition that results in a change of control
if there is also a change in either the business or the financial structure of
the issuer. Since the PNC Acquisition will result in the owners of PNC holding
in excess of 80% of the shares of the Company's Common Stock expected to be
outstanding at the closing, the PNC Acquisition will result in a change of
control. In addition, following the closing, the Company's primary business
focus will be PNC's B2B e-commerce services, rather than its current business of
manufacturing die-cast collectibles. Therefore, in order to obtain approval for
the listing of the Exchange Shares, the Company is required to demonstrate
compliance with the NNM initial listing standards, which are more stringent than
the NNM continued listing standards otherwise applicable to the Company.
The Company's application for NNM listing of the Exchange Shares was
submitted to Nasdaq on June 6, 2000. The application indicates that the only NNM
initial listing standard which the Company would not satisfy on a pro forma
basis at the closing of the PNC Acquisition is the $5 minimum bid price
requirement. The application requested a waiver of the $5 minimum bid price
requirement for a "grace period" through December 31, 2000. The application
stated that if the Company failed to demonstrate the ability to achieve and
sustain compliance with the $5 minimum bid price requirement during the grace
period, then the Company would consider taking additional steps to enhance its
share price, including a reverse stock split.
Following the filing of the NNM application, representatives of the Company
and PNC engaged in discussions and correspondence with Nasdaq representatives
regarding the circumstances under which Nasdaq might approve the application
prior to the Company's satisfying the $5 minimum bid price requirement. Nasdaq
representatives rejected the Company's original and subsequent proposals, which
requested grace periods to see whether the requirement would be satisfied by an
upward movement in the stock price following the closing of the PNC Acquisition.
They further informed the Company that the only circumstance under which they
would consider approving the application prior to the Company's satisfying the
$5 minimum bid price requirement would be if the Company took immediate action
to effectuate a reverse stock split that could be completed on a timely basis.
Accordingly, on June 23, 2000, the Company's Board of Directors approved an
amendment to the Company's Certificate of Incorporation to effect a
one-for-three reverse stock split of the Company's Common Stock. On the same
date, the amendment was approved in a written consent executed by the holders of
more than a majority of the outstanding shares of Common Stock. The stockholders
executing this written consent included Carl Ka Wing Tong, Clayton K. Trier,
Superego, Inc. (a company beneficially owned by Leo Sheck Pui Kwok), Acma
Investments Pte., Ltd. (a wholly-owned subsidiary of Acma Ltd.) and Acma
Strategic Holdings Limited (a company 90% of which is owned by Acma Investments
Pte., Ltd. and 10% of which is owned by Mr. Tong). Approval by the Board of
Directors and by the holders of a majority of the outstanding shares of Common
Stock is adequate under Delaware law to effect the amendment.
The amendment will become effective following a waiting period of 20
calendar days from the date this information statement is mailed to
stockholders. The form of the Certificate of Amendment is attached to this
information statement as Exhibit A. Stockholders have no right under Delaware
law or the Company's Certificate of Incorporation or by-laws to dissent from the
reverse stock split.
In the reverse stock split, each three shares of Common Stock will
automatically be converted into one share, without any action on the part of the
stockholders. The Company will pay to any
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stockholder entitled to a fractional share cash equal to the fair value of such
fractional share, as determined by the Board of Directors. Consummation of the
reverse stock split will not change the number of shares of Common Stock
authorized by the Company's Certificate of Incorporation or the par value of
each share of Common Stock. However, the aggregate par value of the issued
Common Stock will be reduced. The reverse stock split will not effect a
stockholder's percentage ownership interest in the Company or proportional
voting power, except for minor differences resulting from the payment of cash in
lieu of fractional shares.
As soon as practicable after the effective date, the Company's transfer
agent will mail an instruction letter to each holder of record of stock
certificates representing issued Common Stock outstanding on the effective date.
The instruction letter will contain instructions for stockholders to follow if
they wish to exchange their old certificates for new certificates representing
the number of whole shares of Common Stock into which the shares of Common Stock
represented by the old certificates have been converted by the reverse stock
split. It will not be necessary, however, for stockholders to exchange their old
certificates. Stockholders will not be required to pay a transfer or other fee
in connection with the exchange of certificates. Stockholders should not submit
any certificates to the Company's transfer agent until they have received the
instruction letter from the transfer agent.
The Board of Directors believes that the current per share price of the
Common Stock has had a negative effect on the marketability of existing shares
and on the amount and percentage of transaction costs paid by individual
stockholders seeking to buy or sell the Company's Common Stock. Many brokerage
firms and brokers are reluctant to recommend lower-priced stocks to their
clients. In addition, many institutional and individual investors are reluctant
to purchase lower-priced stocks. The structure of most brokerage commissions
tends to have an adverse affect on potential purchasers of lower-priced stocks
since the brokerage commission payable on buying and selling such stocks almost
always represents a higher percentage of the trade price than the commission on
a relatively higher-priced stock. These factors adversely affect not only the
liquidity of the Common Stock, but also the Company's ability to raise
additional capital through a sale of equity securities. The Board of Directors
believes that, following the PNC Acquisition and the completion of the reverse
stock split, the anticipated increase in shares outstanding and the price per
share of the Company's Common Stock is likely to stimulate added interest from
both institutional and individual investors and promote greater liquidity at
reduced transaction costs for the Company's stockholders.
Stockholders should note that the effect of the reverse stock split upon the
price of the Company's Common Stock cannot be accurately predicted. In
particular, there is no assurance that the price for shares of Common Stock
immediately after the reverse stock split will be three times the price of
shares of Common Stock immediately prior to the reverse stock split.
Furthermore, there can be no assurance that the reverse stock split will not
adversely impact the price of the Common Stock or, alternatively, that any
increase in price of the Common Stock immediately after the reverse stock split
will be sustained for a prolonged period of time. In addition, the reverse stock
split likely will have the effect of creating odd lots of stock for some
stockholders. These odd lots may be more difficult to sell or have higher
brokerage commissions associated with their sale.
The Company is currently subject to certain obligations to issue shares of
Common Stock upon the exercise of outstanding options. Under the terms of the
agreements relating to these options, the number of shares of Common Stock
issuable pursuant to these options and the per share exercise price will
automatically be adjusted for the reverse stock split.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock as
of June 27, 2000 by (i) each person known by the Company to beneficially own 5%
or more of the outstanding shares of Common Stock, (ii) each director of the
Company, (iii) each of the named executive officers, and (iv) all directors and
executive officers of the Company as a group. The table does not give effect to
the reverse stock split described above and does not reflect the issuance of the
Exchange Shares pursuant to the PNC Acquisition. The information set forth in
the table and accompanying footnotes has been furnished by the named beneficial
owners. An asterisk denotes beneficial ownership of less than 1%. Unless
otherwise indicated, the address of each person is c/o the Company at Casey Ind.
Bldg., 8(th) Floor, 18 Bedford Rd., Taikoktsui, Kowloon, Hong Kong.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
NAME AND ADDRESS (NUMBER OF SHARES)(1) PERCENT OF CLASS
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Carl Ka Wing Tong(2)........................................ 310,379 6.1%
Leo Sheck Pui Kwok(3)....................................... 603,252 12.0%
Steve Gordon(4)............................................. 8,500 *
Clayton K. Trier(4)......................................... 17,500 *
Acma Ltd. (5)............................................... 2,364,430 47.3%
17 Jurong Port Road
Singapore 619092
All directors and executive officers as group (6
persons)(6)............................................... 960,523 18.7%
</TABLE>
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(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to the shares shown. Except as indicated by
footnote and subject to community property laws where applicable, to the
Company's knowledge, the stockholders named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Includes 52,232 shares issuable upon the exercise of stock options which
will be exercisable at a price of $5.00 per share within 60 days of
June 27, 2000. Mr. Tong is a 10% shareholder of Acma Strategic Holdings
Limited. As such, Mr. Tong shares investment and voting power with respect
to the shares shown as beneficially owned by Acma Strategic Holdings Limited
(see note 5 below). Mr. Tong disclaims beneficial ownership of such shares,
however.
(3) Of the shares shown, 564,948 are held of record by Superego, Inc., a British
Virgin Islands company beneficially owned by Mr. Kwok. Includes 38,304
shares issuable to Mr. Kwok upon the exercise of stock options which will be
exercisable at a price of $5.00 per share within 60 days of June 27, 2000.
(4) Includes 7,500 shares issuable upon the exercise of currently exercisable
stock options. The exercise price of these options is $5.00 per share.
(5) The shares shown as being owned by Acma Ltd. consist of 1,838,157 shares
held of record by Acma Strategic Holdings Limited and an additional 526,273
shares held of record by Acma Investments Pte., Ltd., a wholly-owned
subsidiary of Acma Ltd. Acma Investments Pte., Ltd. is a 90% shareholder of
Acma Strategic Holdings Limited.
(6) Includes 126,428 shares issuable upon the exercise of stock options which
will be exercisable at a price of $5.00 per share within 60 days of
June 27, 2000.
Other than the PNC Acquisition described above, the Company is not aware of
any arrangements which may result in a change in control of the Company.
By Order of the Board of Directors
Shing Kam Ming
Secretary
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EXHIBIT A
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
CREATIVEMASTER INTERNATIONAL, INC.
PURSUANT TO SECTION 242 OF THE
DELAWARE GENERAL CORPORATION LAW
The undersigned, Carl Ka Wing Tong, being the President and Chief Executive
Officer, and Shing Kam Ming, being the Secretary, of Creative Master
International, Inc., a Delaware corporation (the "Company"), hereby certify as
follows:
1. The name of the Company is Creative Master International, Inc.
2. The Board of Directors of the Company, by action taken at a meeting on
June 23, 2000, unanimously adopted a resolution proposing and declaring
advisable the amendment to the fourth article of the Certificate of
Incorporation of the Company described below.
3. This Certificate of Amendment of the Certificate of Incorporation was
duly adopted by the unanimous vote of the Board of Directors of the Company.
4. By written action of more than a majority of the stockholders of the
Company entitled to vote, taken in accordance with Sections 228 and 242 of the
Delaware General Corporation Law, the necessary number of shares as required by
statute were voted in favor of the adoption of this Certificate of Amendment.
5. The amendment of the Certificate of Incorporation as hereinafter set
forth has been duly adopted in accordance with Section 242 of the Delaware
General Corporation Law.
6. The Certificate of Incorporation of the Corporation is hereby amended by
deleting in its entirety the current third full paragraph of the fourth article
and replacing it with the following:
"At 5:00 p.m. EST on July 27, 2000, and without further action on the part
of the Company or its stockholders, each three shares of the Company's
common stock, par value $0.0001 per share ("Common Stock"), then issued and
outstanding, shall become one fully paid and nonassessable share of Common
Stock. In lieu of issuing fractional shares as a result of such reverse
stock split, the Company will pay to any stockholder entitled to a
fractional share as a result of such reverse stock split cash equal to the
fair value of such fractional share, as determined by the Board of
Directors. The capital account of the Company shall not be increased or
decreased by such reverse stock split. To reflect such reverse stock split,
each certificate representing shares of Common Stock theretofore issued and
outstanding shall represent one-third the number of shares of Common Stock
issued and outstanding after such reverse stock split (subject to the
payment of cash in lieu of fractional shares, as provided above); and the
holder of record of each such certificate shall be entitled to receive a new
certificate representing a number of shares of Common Stock equal to
one-third the number of shares represented by said certificate for
theretofore issued and outstanding shares (subject to the payment of cash in
lieu of fractional shares, as provided above)."
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IN WITNESS WHEREOF, the undersigned, being the duly appointed and acting
President and Chief Executive Officer and Secretary, respectively, of the
Company, have hereunder subscribed their names to this Certificate of Amendment
and affirm that the facts stated herein are true under penalties of perjury,
this day of , 2000.
___________________________________________
Carl Ka Wing Tong
President and Chief Executive Officer
___________________________________________
Shing Kam Ming
Secretary
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