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) MAY 26, 2004
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TENGTU INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 000-29957 77-0407366
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(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
236 Avenue Road
TORONTO, ONTARIO, CANADA M5R 2J4
(Address of Principal Executive Offices) (Zip Code)
416-963-3999
(Registrant's Telephone Number, Including Area Code)
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
ADJOURNMENT OF SHAREHOLDERS MEETING
Tengtu International Corp. (the "Company") hereby provides notice that
it is adjourning the shareholders meeting scheduled for May 26, 2004 at 9:00
a.m. at The National Club, 303 Bay Street, Toronto, Ontario Canada M5H 2RI,
until June 9, 2004, at 9:00 a.m. at the same location, in order to give
shareholders the opportunity to revoke any proxies given to date and additional
time to submit proxies.
MATERIAL IMPAIRMENT OF DUE FROM RELATED PARTY
As of March 31, 2004, the Company had a total of $22,060,679 (the
"Advance") due from a related party, Beijing Tengtu China Culture and Education
Electronics Development Co., Ltd. ("Tengtu China"), its former joint venture
partner, which was owned and controlled by Fan Qi Zhang and is currently owned
and controlled by his estate. The Advance is comprised of direct advances made
by the Company to its former joint venture, Beijing Tengtu United Electronics
Development Co., Ltd. ("Tengtu United"), and undistributed profits from Tengtu
United which were to be distributed under the Tengtu United joint venture
agreement. On April 5, 2004, the Company closed its Restructuring whereby it
purchased the 43% of Tengtu United that it did not already own, in exchange for
30 million shares of the Company common stock. Prior to the Restructuring,
Tengtu China operated as Tengtu United's and the Company's agent, conducting
Tengtu United's business in China by entering into agreements, performing
services, selling products and collecting monies due.
The collectibility of the Company's receivable due from Tengtu China
has always been evaluated by the Company based on Tengtu China's ability to
collect receivables owed to it for services provided and products sold in China
(the "Tengtu China Receivables") to various levels of the Chinese Ministry of
Education. At all times prior to the closing of the Restructuring, the Company
believed Tengtu China could collect the full amount of the Tengtu China
Receivables based on 1) confirmations from Fan Qi Zhang, 2) his relationships
with Ministry of Education officials (as more fully described below) and 3)
ongoing collection of some amount of those receivables.
On October 24, 2003, Fan Qi Zhang died. Mr. Zhang had a principal role
in collecting Tengtu China's receivables because of the relationships he had
built over several years with PRC Local, Provincial and Central Ministry of
Education officials, as well as school and school district officers and
officials. Because of Mr. Zhang's death, after the Restructuring closed on April
5, 2004, Tengtu United began to actively take steps to collect the Tengtu China
Receivables and assigned some of its own staff to collect them. Based upon
attempts to collect the Tengtu China Receivables since the closing of the
Restructuring, and a preliminary evaluation of those receivables, Tengtu United
has found that most of the Tengtu China Receivables may not be collectible by
Tengtu China without Mr. Zhang. Many attempts to collect payment have been
unsuccessful. Tengtu United believes that taking more aggressive steps at
collection, such as commencing lawsuits against each of the schools, school
districts and Provincial education authorities that owe the money, would
jeopardize Tengtu United's current business and relationships with Provincial
and central government Ministries of Education. Most of the Tengtu China
Receivables were accrued by Tengtu China, which, unlike the Company's current
practice, did not require a downpayment at the time an order is placed and
additional payment at the time of installation. Tengtu United will continue its
collection efforts as it continues its evaluation of the Tengtu China
Receivables.
In view of the foregoing, the Company believes that the Advance may be
materially impaired and is likely to increase its reserve for doubtful accounts
against the Advance on its balance sheet. The amount of the increase in the
reserve will be dependent on a number of factors, including the ultimate
collectibility of Tengtu China's Receivables and the amount of money that the
Company estimates may result from the sale of 15 million shares of Company
common stock bequeathed by Mr. Zhang to "solve the funding difficulties" of
Tengtu China and other companies affiliated with it.
As described in the Company's definitive proxy statement filed with the
Securities and Exchange Commission on April 23, 2004, in a document signed on
September 30, 2003, which the Company's PRC counsel has advised is the
equivalent of a will, Mr. Zhang bequeathed 15 million of the 30 million shares
of common stock that he was to receive in the Restructuring to "solve the
funding difficulties" of the companies in the Tengtu China Group. The Company
believes the "funding difficulties" of the Tengtu China Group are, among other
things, bank debts which could not be paid through cash flow, a shortfall of
working capital and various other payables that could not be paid through cash
flow. Among other debts, Tengtu China owes approximately $8.8 million in bank
debt for monies that were borrowed to support Tengtu United operations and the
Advance.
On February 12, 2004, we entered into an agreement with Zhou Liying,
the executrix of Mr. Zhang's estate, providing that the 15 million of such
shares shall be delivered to an escrow agent selected by the Company and Zhou
Liying and that the 15 million shares be registered for resale and upon
registration sold by the escrow agent from time to time upon instructions from
the Company. The agreement provides that the proceeds are to be applied
consistently with Mr. Zhang's bequest, as confirmed by Ms. Zhou.
We have scheduled a shareholders meeting on May 26, 2004 to ratify the
registration of the 15 million shares for public re-sale, which, as set forth
above, will be adjourned until June 9, 2004. The Company is currently in the
process of assessing the amount that the sale of the 15 million shares is likely
to yield and the timing of potential sales, as well as assessing the
collectibility of the Tengtu China Receivables. Once the June 9, 2004
shareholders meeting is held and it is determined whether the registration of
the 15 million shares will be ratified, the Company will determine the amount of
the necessary increase in the reserve against the Advance.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Tengtu International Corp.
DATED: May 26, 2004 By: /s/ John Watt
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John Watt, President