WEB NEWS Reverse Merger Activity
On June 22, 2012, TEC Technology, Inc. (the “Company entered into an Agreement and Plan of Merger (the “Merger Agreement TEC Surviving Corporation Reincorporation Merger Effective Time
As a result of the Reincorporation Merger, the legal domicile of the Surviving Corporation will be Nevada. The Reincorporation Merger is being consummated to move the Company’s domicile to Nevada as described in the Company’s Definitive Information Statement on Schedule 14C, filed with the Securities and Exchange Commission on December 19, 2011, which description is incorporated by reference herein (the “Information Statement
Pursuant to the terms of the Merger Agreement, (i) the Company will merge into TEC, with TEC being the surviving corporation; (ii) from and after the Effective Time, TEC possesses all of the rights, privileges, powers, and franchises of the Company, and the Company’s debts and liabilities became the debts and liabilities of TEC; (iii) the Company’s existing Board of Directors and officers will become the Board of Directors and officers of the Surviving Corporation; and (iv) the Articles of Incorporation and Bylaws of TEC will govern the Surviving Corporation. A description of the provisions of the Articles of Incorporation and Bylaws of TEC was previously disclosed in the Information Statement. Copies of the Articles of Incorporation and Bylaws of TEC, as amended to date, are attached hereto as Exhibit 3.1 and Exhibit 3.2, respectively.
The Reincorporation Merger will not result in any change in headquarters, business, jobs, management, location of any of offices or facilities, number of employees, assets, liabilities or net worth (other than as a result of the costs incident to the Reincorporation Merger, which are immaterial). Management, including all directors and officers, remain the same in connection with the Reincorporation Merger. There are no substantive changes in the employment agreements for executive officers or in other direct or indirect interests of the current directors or executive officers as a result of the Reincorporation Merger. Following the Reincorporation Merger, the securities of the Surviving Corporation will continue to be registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act
As a result of the Reincorporation Merger, each outstanding share of the Company’s common stock, par value $0.001 per share, will be automatically converted into one share of TEC’s common stock, par value $0.001 per share. Each outstanding certificate representing shares of the Company’s common stock is deemed, without any action by the Company’s stockholders, to represent the same number of shares of TEC’s common stock.
The foregoing description of the Merger Agreement and the Reincorporation Merger is not intended to be complete and is qualified in its entirety by reference to the complete text of the Information Statement and the exhibits filed herewith, all of which are incorporated herein by reference.
Comments & Business Outlook
TEC TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
Three months
Three months
ended
ended
March 31, 2012
March 31, 2011
(Unaudited)
(Unaudited)
Revenues
$
4,371,043
$
3,425,125
Cost of goods sold
3,520,528
2,415,828
Gross profit
850,515
1,009,297
Selling and marketing expenses
(235,990
)
(207,807
)
General and administrative expenses
(379,409
)
(225,657
)
Net income from operations
235,116
575,833
Other income (expenses)
Government grant
3,639
-
Other income
754
-
Interest expense
(378,172
)
(245,913
)
Net other income (expenses)
(373,779
)
(245,913
)
Net (loss) income before provision for income taxes
(138,663
)
329,920
Provision for income taxes
(9,056
)
(49,488
)
Net (loss) income
(147,719
)
280,432
Less: loss (income) attributable to the non-controlling interest
-
-
Net (loss) income attributable to the TEC Technology, Inc. and subsidiaries
(147,719
)
280,432
Other comprehensive income (loss)
Foreign currency translation gain/ (loss)
112,334
82,086
Comprehensive (loss) income
(35,385
)
362,518
Less: other comrehensive (income) attributable to the non-controlling interest
(8,900
)
-
Comprehensive (loss)/income attributable to the TEC Technology, Inc. and subsidiaries
$
(44,285
)
$
362,518
Weighted average numbers of common shares
Basic
30,181,552
30,181,552
Diluted
30,181,552
30,181,552
(Loss)/earnings per share
Basic
$
(0.01
)
$
0.01
Diluted
$
(0.01
)
$
0.01
CFO Trail
Effective April 10, 2012, Mr. Yuhua Yang resigned as the Chief Financial Officer of TEC Technology, Inc. (the “Company”). Mr. Yang’s resignation was not because of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
On the same date, the Board of Directors of the Company appointed Dr. Peter Lim Boon-Lum as the Company’s Chief Financial Officer, effective immediately upon Mr. Yang’s resignation.
Comments & Business Outlook
TEC TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three months
Three months
Nine months
Nine months
ended
ended
ended
ended
September 30, 2011
September 30, 2010
September 30, 2011
September 30, 2010
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Revenues
$
11,364,648
$
7,285,615
$
19,559,792
$
21,892,594
Cost of goods sold
8,418,882
5,355,307
14,203,143
15,313,202
Gross profit
2,945,766
1,930,308
5,356,649
6,579,392
Selling and marketing expenses
(438,939
)
(337,423
)
(1,065,308
)
(1,127,290
)
General and administrative expenses
(378,165
)
(293,389
)
(1,271,357
)
(938,337
)
Net income from operations
2,128,662
1,299,496
3,019,984
4,513,765
Other income (expenses)
Government grant
1,421
10,798
218,408
190,215
Other income
2,123
-
2,123
13,695
Interest expense
(465,391
)
(299,865
)
(1,125,568
)
(979,425
)
Net other income (expenses)
(461,847
)
(289,067
)
(905,037
)
(775,515
)
Net income before provision for income taxes
1,666,815
1,010,429
2,114,947
3,738,250
Provision for income taxes
(257,753
)
(151,535
)
(339,043
)
(538,396
)
Net income
1,409,062
858,894
1,775,904
3,199,854
Other comprehensive income (loss)
Foreign currency translation gain (loss)
151,543
12,462
450,706
(177,290
)
Comprehensive income
$
1,560,605
$
871,356
$
2,226,610
$
3,022,564
Weighted average numbers of common shares
Basic
30,181,882
25,298,383
30,181,882
25,298,383
Diluted
30,181,882
25,298,383
30,181,882
25,298,383
Earnings per share
Basic
$
0.05
$
0.03
$
0.06
$
0.13
Diluted
$
0.05
$
0.03
$
0.06
$
0.13
The period-over-period increase in revenues resulted mainly from an increase of approximately 87.87% in revenues generated by sales of energy transmission towers as compared to the same period in 2010 which more than offset a decrease of approximately 18.79% in revenues generated by sales of communications towers. In this quarter, we benefited from our strategic efforts in expanding international markets as generated approximately $7.4 million from overseas orders for energy transmission towers.
Comments & Business Outlook
TEC TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three months
Three months
Six months
Six months
ended
ended
ended
ended
June 30, 2011
June 30, 2010
June 30, 2011
June 30, 2010
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Revenues $
4,770,019
$
9,427,220
$
8,195,144
$
14,606,979
Cost of goods sold
3,368,433
6,443,918
5,784,261
9,957,895
Gross profit
1,401,586
2,983,302
2,410,883
4,649,084
Selling and marketing expenses
(418,562
)
(486,367
)
(626,369
)
(789,867
)
General and administrative expenses
(632,421
)
(363,402
)
(893,192
)
(644,948
)
Net income from operations
350,603
2,133,533
891,322
3,214,269
Other income (expenses)
Government grant
216,987
179,417
216,987
179,417
Other income
-
13,694
13,695
Interest expense
(414,264
)
(292,217
)
(660,177
)
(679,560
)
Net other income (expenses)
(197,277
)
(99,106
)
(443,190
)
(486,448
)
Net income before provision for income taxes
153,326
2,034,427
448,132
2,727,821
Provision for income taxes
(31,802
)
(209,868
)
(81,290
)
(386,861
)
Net income
121,524
1,824,559
366,842
2,340,960
Other comprehensive income (loss)
Foreign currency translation gain (loss)
217,077
20,048
299,163
40,986
Comprehensive income $
338,601
$
1,844,607
$
666,005
$
2,381,946
Weighted average numbers of common shares
Basic
30,181,882
22,856,798
30,181,882
22,856,798
Diluted
30,181,882
22,859,798
30,181,882
22,856,798
Earnings per share
Basic
$
0.01
$
0.08
$
0.01
$
0.10
Diluted
$
0.01
$
0.08
$
0.01
$
0.10
See accompanying notes of these consolidated financial statements
Comments & Business Outlook
First Quarter Results :
Revenues were $3.4 million in the first quarter of 2011, a 33.8% decrease from $5.2 million in the first quarter of 2010;
Gross profit was $1.0 million in the first quarter of 2011, a 39.4% decrease from $1.7 million in the first quarter of 2010;
Gross margin was 29.5% compared to 32.2% in the first quarter of 2010;
Operating income was $0.6 million in the first quarter of 2011, down 47.0% from $1.1 million in the first quarter of 2010; and
Net income was $0.3 million, or $0.01 per basic and diluted share, in the first quarter of 2011, down 52.7% from $0.6 million, or $0.04 per basic and diluted share, in the first quarter of 2010
"Following a strong year of top and bottom line growth in 2010, we recorded lower sales in the first quarter of 2011, as we rejected low-margin orders in favor of higher-margin orders. In China's competitive market, we have decided to reserve production capacity and inventory for upcoming orders from overseas customers that are generally more profitable ," commented Mr. Chun Lu, TEC's Chairman and Chief Executive Officer. "We also strengthened our sales and marketing efforts and are positive about our order pipeline and revenue in the coming quarters. We remain confident that the Company will reach its goals for 2011 in a competitive market ."
"Although we recorded lower revenues in the first quarter versus a year ago, this was largely due to our decision to be more selective regarding the business we accept and we are positioning TEC for strong results and a successful 2011," concluded Mr. Lu.
Comments & Business Outlook
Three months ended
Three months ended
March 31, 2011
March 31, 2010
(Unaudited)
(Unaudited)
Revenues
$
3,425,125
$
5,176,934
Cost of goods sold
2,415,828
3,512,060
Gross profit
1,009,297
1,664,874
Selling and marketing expenses
(207,807
)
(303,334
)
General and administrative expenses
(225,657
)
(274,350
)
Net income from operations
575,833
1,087,190
Other income (expenses)
Interest expense
(245,913
)
(386,510
)
Net other income (expenses)
(245,913
)
(386,510
)
Net income before provision for income taxes
329,920
700,680
Provision for income taxes
(49,488
)
(107,531
)
Net income
280,432
593,149
Other comprehensive income (loss)
Foreign currency translation gain (loss)
82,086
(65,032
)
Comprehensive income
$
362,518
$
528,117
Weighted average numbers of common shares
Basic
30,181,882
19,194,421
Diluted
30,181,882
19,194,421
Earnings per share
Basic
$
0.01
$
0.04
Diluted
$
0.01
$
0.04
The period-over-period decrease in revenues resulted mainly from a decrease of approximately 79% in sales revenue generated by sales of energy transmission towers compared to the same period in 2010, and a decrease of approximately 63% in sales revenue generated by sales of communications towers. In the first quarter of 2011, the price of tower products in China markedly decreased due to the rising steel prices, competition, decreased demand and other factors. We also reserved capacity and inventory for anticipated orders from overseas customers which may require immediate production and delivery. As overseas orders generally tend to offer higher prices, we made a strategic decision to forego some domestic orders with comparatively lower prices in the first quarter 2011 and redeployed personnel and resources to maintain our production lines, train new employees and prepare for the anticipated overseas orders. Because our targeted overseas customers decided to postpone the production and delivery of products, our sales and revenues decreased in the three months ended March 31, 2011 as compared to the same period last year. The first quarter has historically been our slowest quarter, and management anticipates our revenues to increase in the coming quarters in 2011.
Liquidity Requirements
To date, we have financed our operations primarily through cash flows from operations, augmented by short-term bank loans and equity contributions by our stockholders. We believe that our cash on hand and cash flow from operations will
meet a portion of our present cash needs and we will require additional cash resources, including equity investment, to meet our expected capital expenditures and working capital requirements for the next 12 months
Comments & Business Outlook
TEC TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
2010
2009
Revenues $
32,241,333
$
22,380,597
Cost of goods sold
21,548,571
15,149,926
Gross profit
10,692,762
7,230,671
Selling and marketing expenses
1,393,886
299,986
General and administrative expenses
1,845,865
1,024,515
Net income from operations
7,453,011
5,906,170
Other income (expenses)
Government grant
190,758
107,011
Other income
15,469
100,085
Interest expense
(896,464
)
(479,526
)
Net other income (expenses)
(690,237
)
(272,430
)
Net income before provision for income taxes
6,762,774
5,633,740
Provision for income taxes
(1,023,711
)
(1,479,397
)
Net income
5,739,063
4,154,343
Other comprehensive gain
Foreign currency translation gain
355,141
54,900
Comprehensive income $
6,094,204
$
4,209,243
Weighted average numbers of shares outstanding:
Basic
26,519,175
19,194,421
Diluted
26,519,175
19,194,421
Earnings per share
Basic
$
0.22
$
0.22
Diluted
$
0.22
$
0.22
GeoTeam Note: Fourth Quarter 2010 vs. 2009 EPS was $0.09 vs. $0.09
Auditor trail
On May 4, 2010 , the Board of Directors of TEC Technology, Inc. in connection with the Company’s recent reverse acquisition of TEC Technology Limited, approved the dismissal of LBB & Associates Ltd., LLP as the Company’s independent auditor, effective as of May 14, 2010.
LBB reviewed the Company’s financial statements as of and for the fiscal quarters ended December 31, 2009 and March 31, 2010. During the period from January 13, 2010, through May 14, 2010, LBB did not report on any of the Company’s annual financial statements, and did not deliver any adverse opinion or disclaimer of opinion or any qualifications or modifications as to uncertainty, audit scope, or accounting principles.
Comments & Business Outlook
Summary of Third-Quarter 2010 Results
Revenues were $7.3 million in the third quarter of 2010, an 8.1% increase from $6.7 million in the third quarter of 2009;
Gross profit was $1.9 million in the third quarter of 2010, a 7.3% decrease from $2.1 million in the third quarter of 2009;
Net income was $0.9 million in the third quarter of 2010, a 33.7% decrease from $1.3 million in the third quarter of 2009;
"In the third quarter of 2010, we experienced a solid increase in revenue as compared to the same period in 2009," commented Mr. Chun Lu , TEC's Chairman and Chief Executive Officer. "Our sales initiatives and marketing efforts in the third quarter of 2010 positioned us for continued growth as we expect a favorable fourth quarter and currently have a backlog of orders through April of next year."
Business Outlook
For the fourth quarter of 2010, we project
revenue of approximately $12 million
net income of approximately $2.8 million .
Our projection for the current fiscal year is
revenue of approximately $30 million
projected net income for the current fiscal year is approximately $6.0 million .
Our diversified and multi-channel sales strategy has generated increased customer wins in both China and international emerging markets. Our backlog at the end of the third quarter of 2010 has reached to April of next year. "Looking at our current backlog and the effectiveness of our strategy to increase sales in both China and abroad in international markets, we believe our revenue and net income guidance for the remainder of this year is attainable and we are well positioned for a strong start in 2011." concluded Mr. Lu.
Comments & Business Outlook
Second-Quarter 2010 Highlights
Revenue increased 99.5% to $9.4 million in the second quarter of 2010 as compared to $4.7 million in the second quarter of 2009. Gross profit increased 72.0% to $3.0 million in the second quarter of 2010 from $1.7 million in the second quarter of 2009. Operating income increased 37.3% to $2.1 million in the second quarter of 2010 from $1.6 million in the second quarter of 2009. Net income was $1.8 million , or $0.08 per basic and diluted share , in the second quarter of 2010, a 64.5% increase from $1.1 million, or $0.06 per basic and diluted share, in the second quarter of 2009.
"In the second quarter of 2010, we experienced a revenue increase, with sales nearly doubling versus the same period in the prior year, as well as solid net-income growth. We maintained our market position in both the communication and power transmission sectors," commented Mr. Chun Lu , TEC's Chairman and Chief Executive Officer. "We will diligently execute our strategies to expand sales in all of our targeted industries and markets and continue to offer excellent quality and service for our customers."
Business Outlook
The Company expects major electrical utilities and telecommunication service providers, in both China and international emerging markets, to continue to embrace TEC's high-quality towers and drive growth for the foreseeable future. "Looking at our current sales pipeline and the good customer response to our products, we are confident that we will achieve good results on the top and bottom lines in 2010," said Mr. Lu.
Liquidity Requirements
We believe that our cash on hand and cash flow from operations will meet part of our present cash needs and we will require additional cash resources, including loans, to meet our expected capital expenditure and working capital for the next 12 months.
We will require additional working capital to support our long-term growth strategies, which includes identifying suitable targets for horizontal or vertical mergers or acquisitions so as to enhance the overall productivity and benefit from economies of scale.
Financials
December Year Full Year 2009 Full Year 2008
GAAP Revenue
$22.4 million
$8.3 million
GAAP Net Income
$4.2
$123 thousand
Tax Rate
26.3%
25.0%
Source: See
8K Filing
Reverse Merger Activity
As we suspected would happen on March 21, 2010 , Highland Ridge has completed a reverse merger with an Asian firm.
Name of company: TEC Technology
Company Snapshot:
TEC is a holding company for two PRC based operating subsidiaries which are engaged in the design, production and sale of transmission towers for telecommunications service providers and electric utilities.
Industry Snapshot:
China invests heavily in the electric transmission industry, and expects to continue doing so in the next 5-7 years. During China’s 11th 5-Year Plan, investment in electric transmission totaled over $100 billion, with about 25% of it spent on towers and related products and services . China has two large electric transmission utility companies, the State Grid Corporation of China, or State Grid, and China Southern Power Grid, or Southern Grid. State Grid and Southern Grid provide primarily long distance high voltage transmission services, and projects are organized and developed on a provincial basis. In addition, there are dozens of provincial level grid companies that supply regional and local grids.
China’s mobile communication has grown considerably in the past decade, in particular since 2008, when 3G licenses were issued to China Mobile, China Unicom, and China Telecom. As of September 2009, it is estimated that there are over 700 million mobile phone users in China , and that telecommunications service providers plan to invest over $60 billion in the next five years on infrastructure in China, with the bulk of this amount going to the towers and base station development.
The overseas market for electric transmission products and services is also growing at a rapid pace. Annual investments in the Middle East, Africa, and South America total over $15 billion a year with annual growth rate over 10% . In the overseas developing markets, wireless communication investment is also growing. For example, from 2008 to 2010, Africa expects to invest USD$3.2 billion in mobile communication infrastructure per year. We have a strong presence in India and Southeast Asia, where we currently partner with main contractors such as Huawei and ZTE to earn business in these overseas markets. However, we have independently established overseas sales centers in Africa to directly take on this fast growing market.
Post Merger Share Calculation :
10,987,131: Pre reverse merger outstanding shares
19,194,421: Newly issued shares of Common Stock
GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions: 30,181,552
Financial Snapshot:
Revenues increased from $8.3 million in fiscal year 2008 to $22.4 million in fiscal year 2009, representing a compounded growth rate of approximately 169%.
2009 Net income icrease to $4.2 million from $123 thousand.
Reverse Merger Activity
It appears Highland Ridge is preparing to complete a deal in the Chinese space .
On January 13, 2010 Highland Ridge, Inc. entered into a share purchase agreement which resulted in a change of control:
Michael Anthony, former President, Chief Executive Officer, Chief Financial Officer, and Secretary of the Company, resigned from his officer positions, and Ms. Jiaojiao Jiao was appointed as the President, Chief Executive Officer, Treasurer and Secretary of the Company effective immediately.
Ms. Jiaojiao Jiao joined JW. Junwei Financial Group as the Director of Marketing in 2005.
Source: 8K January 13, 2010
