SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) December 23, 1999
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TENGTU INTERNATIONAL CORP.
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(Exact Name of Registrant as Specified in its Charter
Delaware 033-27707 77-0407366
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(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
206-5050 Kingway
Burnaby, British Columbia
Canada VH5 4H2
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Address of Principal Executive Offices) (Zip Code)
(604) 438-9827
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(Registrant's Telephone Number, Including Area Code)
ITEM 5 OTHER EVENTS
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On December 23, 1999, Tengtu International Corp., a Delaware
corporation ("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 $.01 par value common stock ("Common Stock") and a separate Common
Stock Warrant ("Warrant") for the purchase of 1,500,000 shares of Common Stock.
The purchaser of the Debenture and Warrant is Top Eagle Holdings Limited, a
British Virgin Islands company ("Top Eagle") that is wholly owned by Yugang
International Limited, a Honk Kong company engaged in the trading of audio
visual products and components, industrial equipment, automobile parts,
agricultural products, raw materials and other products in the Central and
Western parts of China.
The Debenture is due December 15, 2003 and provides for accrual of
interest beginning December 15, 2000 at a rate equal to the best lending rate of
The Hong Kong and Shanghai Banking Corporation plus two percent. The Debenture
is convertible into Tengtu's Common Stock at a conversion price of U.S.$.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.
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.
ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS
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Financial Statements
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Tengtu International Corp. and Subsidiaries
Consolidated Balance Sheet
For the Quarter Ended September 30, 1999
(UNAUDITED)
As At
Sept. 30, 1999
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 561,171
Accounts receivable, net of allowance for
doubtful accounts of $209,981 497,099
Due from related party 299,333
Prepaid expenses 47,262
Inventories 38,592
Other receivables 35,358
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Total Current Assets 1,478,815
PROPERTY AND EQUIPMENT, net 1,318,182
OTHER ASSETS 13,742
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TOTAL ASSETS $ 2,810,739
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,124,270
Due to related party consultants 1,179,549
Other liabilities 47,732
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Total Current Liabilities 3,351,551
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SHAREHOLDERS' LOAN 357,935
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MINORITY INTEREST 551,222
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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 19,477,607 shares 194,777
Additional paid in capital 8,746,659
Accumulated deficit (10,349,777)
Cumulative translation adjustment (40,844)
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(1,449,185)
Less: Treasury stock, at cost, 78,420 common shares (784)
Total Stockholders' Deficit (1,449,969)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 2,810,739
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Tengtu International Corp. and Subsidiaries
Consolidated Statements of Operations
For the Quarter Ended September30, 1999
(UNAUDITED)
Jul 1 to
Sept 30, 1999
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SALES $ 392,004
COST OF SALES 207,468
GROSS INCOME 184,536
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OPERATING EXPENSES
Research and development 0
General and administrative 424,709
Advertising 0
Selling 110,872
Depreciation and amortization 10,045
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545,626
OTHER INCOME (EXPENSE)
Interest income 402
Other income 0
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402
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LOSS BEFORE MINORITY INTERESTS $ (360,688)
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MINORITY INTERESTS IN SUBSIDIARY'S EARNINGS (LOSS)
(26,601)
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NET LOSS
$ (334,087)
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NET LOSS PER COMMON SHARE
[Basic and Diluted] $ (0.02)
WEIGHTED AVERAGE NUMBER OF SHARES 19,477,607
Tengtu International Corp. and Subsidiaries
Statement of Stockholders' Deficit
For the Quarter Ended September 30, 1999
(UNAUDITED)
Additional Cumulative Treasury Unamortized Stock-
Common Stock Paid-in Accumu- Transla- Stock Deferred holders'
------------ lated tion at
Shares Amount Capital Deficit Adjustment Cost Compensation Deficit
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Balance-June 30, 1998 19,297,107 $ 192,972 $8,725,901 $(8,352,743) $(21,385) $(784) $(50,000) $493,961
Issuance of common stock in
exchange for services at fair
value - May 21, 1999 180,500 1,805 20,758 22,563
Amortization of deferred
compensation related to stock
options issued in year ended
June 30, 1997 50,000 50,000
Translation adjustment 16,235 16,235
Net loss - year ended
June 30, 1999 (1,662,947) (1,662,947)
Balance June 30, 1999 19,477,607 194,777 8,746,659 (10,015,690) (5,150) (784) 0 (1,080,188)
Net loss - quarter ended
September 30, 1999 (334,087) (334,087)
Foreign currency adjustment
(35,694) (35,694)
Balance - Sept. 30, 1999 19,477,607 194,777 8,746,659 (10,349,777) (40,844) (784) 0 (1,449,969)
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Tengtu International Corp. and Subsidiaries
Consolidated Statements of Cash Flows
For the Quarter Ended September 30, 1999
(UNAUDITED)
Sept. 30, 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(334,087)
Adjustments to reconcile net loss
to net cash provided (used) by operating activities:
Depreciation and amortization 53,898
Minority interest in subsidiary (26,601)
Changes in operating assets and liabilities:
Decrease (Increase) in operating assets:
Accounts receivable (59,307)
Prepaid expenses (17,359)
Inventories (4,144)
Other receivables (2,617)
Due from related party 23,954
Other assets 45,698
Increase (Decrease) in operating liabilities:
Accounts payable 50,867
Due to related party consultants 120,000
Other liabilities (17,503)
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Net Cash Used by Operating Activities (167,201)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment 0
Net Cash Used by Investing Activities 0
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in shareholders' loan 357,935
Net Cash Provided by Financing Activities 357,935
EFFECT OF EXCHANGE RATE CHANGES ON CASH (35,694)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 155,040
CASH AND CASH EQUIVALENTS, beginning of year 406,131
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CASH AND CASH EQUIVALENTS, END OF YEAR $ 561,171
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Exhibits
1. Convertible Debenture and Warrant Purchase Agreement dated
December 20, 1999;
2. Investor Rights Agreement dated December 20, 1999;
3. Floating Convertible Debenture dated December 20, 1999;
4. Common Stock Warrant dared December 20, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TENGTU INTERNATIONAL CORP.
(Registrant)
Date: January 4, 1999 By: /S/ PAK KWAN CHEUNG
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Name: Pak Kwan Cheung
Title: Chairman of the Board of Directors
and Chief Executive Officer