SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934
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TENGTU INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
Delaware 77-0407366
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
Suite 3825
First Canadian Place, 100 King Street West
Toronto, Ontario, Canada M5X 1E3
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (416) 368-8400
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered Each class is to be so registered
Tengtu International Corp. Nasdaq OTC Bulletin Board
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common stock $.01 par value per share
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Securities to be registered pursuant to Section 12(g) of the Act:
Tengtu International Corp. $.01 par value common stock
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(Title of class)
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------- -------------------------------------------
In January, 2000, the Company and Comadex Industries, Ltd.
("Comadex")entered into a consulting agreement for the employment of Pak Cheung
as the Company's Chairman and CEO. Pursuant to the agreement, Comadex received
3,000,000 shares of the Company's $.01 par value per share common stock as
compensation for past services rendered since 1996, a period of time during
which services had been rendered without compensation. The issuance of 3,000,000
shares, pursuant to the agreement, is effective as of October 15, 1999.
The issuance of shares to Comadex was not reflected in the Company's
interim financial statements filed as part of its Form 10. Therefore, the
Company hereby amends its previous Form 10 filing with the following revised
interim unaudited financial statements for the period ended December 31, 1999.
<PAGE>
<TABLE>
<CAPTION>
TENGTU INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
FOR THE QUARTER ENDED DECEMBER 31, 1999
(UNAUDITED)
ASSETS
As At As At As At
Dec 31, 1999 Sept 30,1999 June 30, 1999
------------ ------------ -------------
CURRENT ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 1,592,330 $ 315,822 $ 115,552
Accounts receivable, net of
allowance for doubtful accounts
of $209,112 69,726 69,424 50,625
Due from related party 294,063 289,080 323,287
Prepaid expenses 37,627 47,262 29,903
Inventories 38,517 38,592 34,448
Other receivables 27,011 26,131 13,346
------------ ------------ ------------
Total Current Assets 2,059,274 786,311 567,161
PROPERTY AND EQUIPMENT, net 1,072,005 1,125,491 1,205,760
INVESTMENTS - at equity 0 84,640 80,147
OTHER ASSETS 13,144 13,144 58,844
------------ ------------ ------------
TOTAL ASSETS $ 3,144,423 2,009,586 1,911,912
============ ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,822,767 1,892,892 1,880,185
Due to related party consultants 1,299,549 1,179,549 1,059,549
Other liabilities 47,732 47,732 47,930
------------ ------------ ------------
Total Current Liabilities 3,170,048 3,120,173 2,987,664
------------ ------------ ------------
SHAREHOLDERS' LOAN 361,455 357,935 0
CONVERTIBLE DEBENTURE 1,500,000 0 0
Less:Discount on Convertible Debenture (346,154)
------------ ------------ ------------
1,153,846 0 0
------------ ------------ ------------
STOCKHOLDERS' DEFICIT
Preferred stock, par value $.01
per share;authorized 10,000,000
shares; issued -0- shares;
Common stock, par value $.01
per share; authorized 100,000,000
shares; issued 20,557,607 shares; 205,577 194,777 194,777
Additional paid in capital 10,349,546 9,347,158 9,220,096
Paid in capital-convertible debenture 1,153,846 0 0
Paid in capital-warrant 346,154 0 0
Accumulated deficit (13,563,906) (10,976,558) (10,483,089)
Cumulative translation adjustment (31,359) (33,115) (6,752)
------------ ------------ ------------
(1,540,142) (1,467,738) (1,074,968)
Less: Treasury stock, at cost,
78,420 common shares (784) (784) (784)
------------ ------------ ------------
Total Stockholders' Deficit (1,540,926) (1,468,522) (1,075,752)
------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 3,144,423 2,009,586 1,911,912
============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
TENGTU INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED DECEMBER 31, 1999
(UNAUDITED)
Quarter Ended Quarter Ended
Year to Date Dec 31 Sept 30
1999 1999 1999
-------- ----------- --------
<S> <C> <C> <C>
SALES $ 163,225 95,724 67,501
COST OF SALES 195,320 121,025 74,295
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GROSS INCOME (LOSS) (32,095) (25,301) (6,794)
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OPERATING EXPENSES
Research and development 0 0 0
General and administrative 1,773,752 1,302,436 471,316
Advertising 0 0 0
Selling 29,646 12,819 16,827
Depreciation and amortization 7,445 4,018 3,427
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1,810,843 1,319,273 491,570
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OTHER INCOME (EXPENSE)
Equity earnings in investee (84,640) (89,133) 4,493
Interest income 607 205 402
Other income 0 0 0
Interest expense-
convertible debenture (1,153,846) (1,153,846) 0
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(1,237,879) (1,242,774) 4,895
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NET LOSS $ (3,080,817) (2,587,348) (493,469)
===========================================
NET LOSS PER COMMON SHARE $ (0.16) (0.13) (0.03)
WEIGHTED AVERAGE NUMBER OF SHARES 19,545,922 19,614,237 19,477,607
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
TENGTU INTERNATIONAL CORP. AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE QUARTER ENDED DECEMBER 31, 1999
COMMON STOCK ADDITIONAL PAID-IN PAID-IN
------------ PAID-IN CAPITAL CAPITAL COMPREHENSIVE ACCUMULATED
SHARES AMOUNT CAPITAL CONV DEB WARRANT INCOME(LOSS) DEFICIT
------ ------ ------- ---------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance-June 30, 1998 19,297,107 $ 192,972 $9,394,651 0 0 $(8,596,690)
Issuance of common stock
related to deferred
Compensation 180,500 1,805 8,258
Amortization of deferred
compensation related to
stock options and common
stock for services
Other Comprehensive income:
Foreign currency adjustment 2,583
Comprehensive Income:
Net loss (1,886,399)
Comprehensive Income (1,886,399)
---------- -------- --------- ---------- ---------- ----------- -----------
(1,883,816)
===========
Balance-June 30, 1999 19,477,607 194,777 9,402,909 0 0 (10,483,089)
Amortization of deferred
compensation related to
stock options and common
stock for services
Issuance of common stock
options for services- at
fair value 53,625
Other Comprehensive Income:
Foreign currency adjustment (26,363)
Comprehensive Income:
Net loss quarter ended
Sept 30, 1999 (493,469)
Comprehensive Income (493.469)
-----------
---------- -------- --------- ---------- ---------- (519,832) -----------
===========
Balance - Sept 30, 1999 19,477,607 $ 194,777 $9,456,534 0 0 (10,976,558)
Other Comprehensive Income:
Foreign currency adjustment 1,756
Issuance of common stock 1,080,000 10,800 178,950
Paid-in Capital-Conv Deb 1,153,846
Paid-in Capital-Warrant 346,154
Amortization of deferred
compensation related to
stock options and common
stock for services
Compensation related to
shares to be issued for
services at fair market
value 750,000
Comprehensive Income
Net loss-quarter ended
Dec 31, 1999 (2,587,348)
Comprehensive Income (2,587,348)
----------
(2,585,592)
---------- --------- ----------- ---------- ---------- =========== ------------
Balance - Dec 31, 1999 20,557,607 $ 205,577 $10,385,484 1,153,846 346,154 $(13,563,906)
========== ========= =========== ========= ========== ============
4
<PAGE>
COMMON
STOCK TREASURY UNAMORTIZED STOCK-
COMPREHENSIVE STOCK AT DEFERRED HOLDERS'
INCOME(LOSS) COST COMPENSATION DEFICIT
------------ ---------- ------------ -------
<S> <C> <C> <C> <C>
Balance-June 30, 1998 (9,335) $ (784) $(476,563) $ 504,251
Issuance of common stock
Related to deferred
compensation 10,063
Amortization of deferred
compensation related to
stock options and common
stock for services 293,750 293,750
Other Comprehensive income:
Foreign currency adjustment 2,583 2,583
Comprehensive Income:
Net loss (1,886,399)
Comprehensive Income
---------- ---------- ---------- -------------
Balance-June 30, 1999 (6,752) (784) (182,813) (1,075,752)
Aortization of deferred
compensation related to
stock options and common
stock for services 73,437 73,437
Issuance of common stock
options for services- at
fair value 53,625
Other Comprehensive Income:
Foreign currency adjustment (26,363) (26,363)
Comprehensive Income:
Net loss quarter ended
Sept 30, 1999 (493,469)
Comprehensive Income
---------- ---------- ---------- -------------
Balance - Sept 30, 1999 (33,115) $ (784) $ (109,376) $(1,468,522)
Other Comprehensive
Income; Foreign currency
adjustment 1,756 1,756
Issuance of common stock 189,750
Paid -in Capital-Conv Deb 1,153,846
Paid-in Capital-Warrant 346,154
Amortization of deferred
compensation related to
stock options and common
stock for services 73,438 73,438
Compensation related to
shares to be issued for
services at fair market
value 750,000
Comprehensive Income:
Net loss-quarter ended
Dec 31, 1999 (2,587,348)
Comprehensive Income
---------- ---------- ---------- -------------
Balance-Dec 31, 1999 (31,359) $ (784) (35,938) (1,540,926)
========== ========== ========== =============
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
TENGTU INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED DECEMBER 31, 1999
(UNAUDITED)
Year to Date Dec 31 Sept 30
1999 1999 1999
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net Loss $(3,080,817) $(2,587,348) $ (493,469)
Adjustments to reconcile net loss to
net cash used by operating activities
Depreciation and amortization 114,999 55,015 59,984
Noncash compensation expense on
shares issued or to be issued
for services 1,086,625 1,013,188 73,437
Noncash compensation expense on
granting of stock options 53,625 0 53,625
Noncash paid-in capital -
convertible debenture 1,153,846 1,153,846 0
Investment-at equity 80,147 84,640 (4,493)
Changes in operating assets
and liabilities
Decrease(Increase)
on operating assets:
Accounts receivable (19,101) (302) (18,799)
Prepaid Expenses (7,724) 9,635 (17,359)
Inventories (4,069) 75 (4,144)
Other receivables (13,665) (880) (12,785)
Due from related party 29,224 (4,983) 34,207
Other assets 45,700 0 45,700
Increase (Decrease) on operating liabilities:
Accounts payable (57,418) (70,125) 12,707
Due to related party consultants 240,000 120,000 120,000
Other liabilities (198) 0 (198)
----------- ----------- -----------
Net Cash Used by Operating Activities (378,826) (227,239) (151,587)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment 16,502 (8,771) (7,731)
Disposal of Property and Equipment 35,258 7,242 28,016
----------- ----------- -----------
Net cash Used by Investing Activities 18,756 (1,529) 20,285
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in shareholders' loan 361,455 3,520 357,935
Increase in convertible debenture 1,153,846 1,153,846 0
Paid in capital-warrant 346,154 346,154 0
----------- ----------- -----------
Net Cash Provided by Financing Activities 1,861,455 1,503,520 357,935
----------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (24,607) 1,756 (26,363)
----------- ----------- -----------
INCREASE(DECREASE) IN CASH
AND CASH EQUIVALENTS 1,476,778 1,276,508 200,270
CASH AND CASH EQUIVALENTS,
beginning of quarter 115,552 315,822 115,552
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of quarter $ 1,592,330 1,592,330 315,822
=========== =========== ===========
NON CASH INVESTING AND FINANCING ACTIVITIES
The Company issued common stock valued at $189,750 in exchange for services for
the quarter ended December, 1999.
The Company issued a convertible debenture at $1,500,000 with a discount of
$346,154 for the quarter ended December 31, 1999. The interest amortized on
convertible debenture of $1,153,846 was also expensed.
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE>
NOTES
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of the Company for the six month period ended December 31, 1999 have been
prepared in accordance with generally accepted accounting principles for interim
financial statements and include all adjustment (consisting of normal recurring
adjustments) that the Company considers necessary for a fair presentation of the
operating results and cash flows for those periods. These condensed consolidated
financial statements and notes thereto should be read in conjunction with the
audited consolidated financial statements for the fiscal year ended June 30,
1999 on pages F-1 through F-15 of the Company's Form 10 filing. Statements of
operations and cash flows for the six months ended December 31, 1998 cannot be
provided. The Company has only recently gained the capability of producing
quarterly financial statements, filing its first Form 10-Q for the fiscal
quarter ended December 31, 1999. Prior to that time, because of financial
reporting problems in China, and the differing fiscal years of the Company's
Chinese subsidiaries and joint venture from the Company, interim financial
statements were not produced.
1. Principles of Consolidation
In accordance with Accounting Research Bulletin 51, in the case of the
Company's Tengtu United joint venture and Edsoft Platforms (Canada), Ltd. and
Edsoft Platforms (H.K.) Limited subsidiaries, the Company has charged to income
the losses applicable to the minority interests as the losses were in excess of
the minorities' interests in the equity capital of the joint venture and
subsidiaries. In the case of its joint venture subsidiary, the Company and the
minority interest holder agreed that the contribution of software and hardware
by the minority interest to the joint venture had no fair market value at the
time of the contribution. The joint venture, therefore, assigned a $0 value of
these assets. The minority also contributed a contract to the joint venture that
gives the joint venture the right to provide the Chinese public school system
with certain educational materials, including software and textbooks. A value of
$0 was assigned to the contract by the joint venture as it could not create a
reliable model of revenue streams or cash flows associated with the contract at
the time of the contribution.
2. $1.5 million Convertible Debenture and Warrant
On December 23, 1999, Tengtu received an investment of U.S.$1,500,000
in exchange for a four year Floating Convertible Debenture ("Debenture")
convertible into shares of Tengtu's $.01 par value common stock ("Common Stock")
and a separate Common Stock Warrant ("Warrant") for the purchase of 1,500,000
shares of Common Stock. The purchaser of the Debenture and Warrant is Top Eagle
Holdings Limited, a British Virgin Islands company ("Top Eagle").
The Debenture is due December 15, 2003 and provides for accrual of
interest beginning December 15, 2000 at a rate equal to the best lending rate of
The Hong Kong and Shanghai Banking Corporation plus two percent. The Debenture
is convertible into Tengtu's Common Stock at a conversion price of U.S.$.50
during the first year, U.S.$1.00 during the second year, U.S.$2.00 during the
third year and U.S.$4.00 on any date thereafter. The unpaid balance of principal
and interest outstanding at maturity, if any, may be converted by the holder
into Tengtu Common Stock at the then existing market price minus twenty percent.
The Warrant gives the holder the right to purchase 1,500,000 shares of
Tengtu Common Stock at U.S.$1.00 per share during the first year, U.S.$2.00 per
share during the second year and U.S.$4.00 thereafter. The Warrant shall become
void three years after issuance.
7
<PAGE>
In connection with the purchase of the Debenture and Warrant, Tengtu
and Top Eagle entered into an Investor Rights Agreement which provides that on
or before June 15, 2000, Top Eagle may purchase additional convertible
debentures for up to U.S.$3.5 million and receive additional warrants on
substantially the same terms. The Investor Rights Agreement also provides the
holder(s) of the Debenture, Warrant and or the shares issued upon conversion or
exercise thereof, with registration and certain other rights.
The effective interest rate of the debenture is 8.5%.
Because the no portion of the price paid by Top Eagle was for the
Warrants, the Warrants were assigned a value by the Company and the Debenture
was discounted by that amount. The interim financial statements reflect entries
of $346,154 for a discount to the Debenture and paid in capital for the Warrant.
This value was assigned as follows. On the date that the Debenture and Warrant
were sold to Top Eagle, the Company's stock was trading at $1.60 per share and
the Warrant was exercisable at $1.00. Therefore, the Warrant had a value between
$.00 and $.60 per share. The Company chose to value the Warrant at $.30 per
share. The gross amount of the Debenture and Warrant were therefore $1.5 million
(Debenture) plus $450,000 (Warrant - $.30 x 1,500,000) for a total of $1.95
million.
Of the $1.95 million, the Warrant represents 23.08% ($450,000/$1.95
million). The discount to the Debenture was calculated by multiplying the
percentage of the total represented by the Warrant (23.08%) by the total
proceeds received from the sale ($1.5 million). The discount to the Debenture
was therefore equal to $346,154 and the Debenture was discounted to $1,153,846
($1.5 million - $346,154).
On the date the Debenture was issued, the conversion price was $.50 and
the market price was $1.60. The conversion feature was valued at the full
adjusted amount of the Debenture, after valuation of the Warrant, of $1,153,846.
Appropriate adjusting entries were made in the balance sheet, income statement,
statement of shareholders deficit and statement of cash flows in accordance with
EITF 98-5.
3. Issuances of Shares
During the six month period ended December 31, 1999, the Company issued
1,080,000 shares of its common stock as follows. All issuances were either based
on market value at the time of issuance or were the result of the exercise of
options previously issued.
SHAREHOLDER NO. OF SHARES SHARE PRICE TOTAL PROCEEDS
----------- ------------- ----------- --------------
Zhang Fan Qi (Director) 750,000 $.200 $150,000
Hecht & Steckman, P.C. 150,000 .125 18,750
(legal counsel)
Hecht & Steckman, P.C. 60,000 .100 6,000
The Cavior Organization 120,000 .125 15,000
(P.R. Firm)
-------------
1,080,000
4. Commitment to Issue Shares/Subsequent Events
In January, 2000, the Company and Comadex Industries, Ltd. entered into
a consulting agreement for the employment of Pak Cheung as the Company's
Chairman and CEO. Pursuant to that agreement, if Pak Cheung is able to raise
$3,000,000 or more in capital for the Company or a 50% or more owned joint
venture or subsidiary, Comadex shall receive an option to purchase 1,000,000
shares of Tengtu stock at the closing price on the day the capital is received
by Tengtu.
5. Subsequent Events/Agreement with Microsoft China
Pursuant to a cooperation agreement with Microsoft China, Tengtu United
began delivery of a bundled package of software to the Chinese K-12 schools. The
average retail price charged to the schools is $2,500. Sales made through
distributors are at a discount from retail.
6. H.K.$2,000,000 Loan to Edsoft Platforms (Canada) Ltd.
8
<PAGE>
In July, 1999, Goodwill Technologies Ltd. loaned Edsoft Platforms
(Canada) Ltd. H.K.$2,000,000 ($U.S.261,000) in exchange for a debenture
convertible into Tengtu's common stock if the loan is not repaid in three years.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
TENGTU INTERNATIONAL CORP.
--------------------------
(Registrant)
Date: July 13, 2000
By:/s/ PAK KWAN CHEUNG
-------------------
Pak Kwan Cheung, Chairman of the Board of Directors
and Chief Executive Officer
