Q-TECH HOLDINGS<0109> - Announcement & Resumption
The Stock Exchange of Hong Kong Limited takes no responsibility for
the contents of this announcement, makes no representation as to its
accuracy or completeness and expressly disclaims any liability
whatsoever for any loss howsoever arising from or in reliance upon
the whole or any part of the contents of this announcement.
Q-TECH HOLDINGS LIMITED
(incorporated in Bermuda with limited liability)
PROPOSED RIGHTS ISSUE,
GRANT OF GENERAL MANDATES TO ISSUE SHARES AND REPURCHASE SHARES,
INCREASE IN AUTHORISED SHARE CAPITAL
AND RESUMPTION IN TRADING
Financial Advisers to the Company
Emperor Capital Limited Kingston Corporate Finance Limited
Underwriters
First Securities (HK) Ltd.
Kingsway SW Securities Limited
Yuanta Brokerage Company Limited
Young Champion Securities Limited
Amsteel Securities (H.K.) Limited
Kingston Securities Limited
First Sign Securities Limited
PROPOSED RIGHTS ISSUE
The Company proposes to raise approximately $126.83 million before
expenses by issuing 12,682,950,000 Rights Shares at a price of $0.01
per Rights Share.
The Company will provisionally allot 12,682,950,000 Rights Shares in
nil-paid form in the proportion of ten Rights Shares for every Share
held by Qualifying Shareholders on the Record Date. The Rights Issue
is not available to Overseas Shareholders.
The Rights Issue is subject to the conditions set out below under
the section headed "Conditions of the Rights Issue". In particular,
the Rights Issue is conditional, amongst other things, on approval
by the Independent Shareholders at the SGM with Mr. Chan undertaking
to take up his entitlement as mentioned below. The Rights Issue is
fully underwritten by the Underwriters.
The estimated net proceeds of the Rights Issue is about $121 million
of which approximately $8 million will be applied to reduce the bank
borrowings of the Group, approximately $50 million for the expansion
and operation of the trading business of the Group and the balance
of approximately $63 million will be used as general working capital
of the Group. The Directors believe that the Rights Issue will allow
all Shareholders (excluding Overseas Shareholders) the opportunity
to participate in the growth of the Group. The Directors consider
that the Rights Issue is in the best interests of the Company and
the Shareholders.
Mr. Chan has given an irrevocable undertaking in favour of the
Company and the Underwriters to accept and subscribe in full his
entitlements to 804,289,680 Rights Shares that will be provisionally
allotted to him pursuant to the Rights Issue. In accordance with the
Listing Rules, Mr. Chan will abstain from voting on the resolution
to approve the Rights Issue at the SGM. An independent board
committee comprising the independent non-executive Directors, Mr.
Lau Kit Hung and Mr. Kong Chung Yau, has been appointed to advise
the Independent Shareholders on the terms of the Rights Issue. An
independent financial adviser will be appointed to advise the
independent board committee on the terms of the Rights Issue.
The Company is expecting to send a circular containing details of
the Rights Issue, a letter from the independent financial adviser
advising the independent board committee on the Rights Issue, a
letter from the independent board committee to the Independent
Shareholders on the Rights Issue and a notice convening the SGM to
consider, among other matters, the Rights Issue, to Shareholders on
or about 19th January , 2000 and subject to the Rights Issue being
approved at the SGM, to send the prospectus, provisional allotment
letter and form of application for excess Rights Shares to all
Qualifying Shareholders on or about 8th February, 2000 .
WARNING OF THE RISKS OF DEALING IN SHARES AND RIGHTS SHARES
Existing Shares will be dealt in on an ex-rights basis from 26th
January, 2000 . Rights Shares will be dealt in their nil-paid form
from 10th February, 2000 to 18th February, 2000 (both dates
inclusive). If the Underwriters terminate the Underwriting Agreement
(see "Termination of the Underwriting Agreement" below) or the
conditions of the Rights Issue (see "Conditions of the Rights Issue"
below) are not fulfilled, the Rights Issue will not proceed.
Any dealings in Shares or Rights Shares in their nil-paid form
between 10th February, 2000 to 18th February, 2000 is accordingly at
the investors' own risk.
If in any doubt, investors should consider obtaining professional
advice.
To qualify for the Rights Issue, any transfer of Shares must be
lodged for registration with the Company's branch share registrars
in Hong Kong, Tengis Limited at Room 1601, Hutchison House, 10
Harcourt Road, Central, Hong Kong, by 4:00 p.m. on 27th January,
2000 .
RESUMPTION
The trading of the Shares has been suspended at the request of the
Company since 10:00 a.m. on 23rd July, 1999. The Company has made an
application to the Stock Exchange for the resumption of the trading
of Shares at 10:00 a.m. on 3rd January , 2000.
PROPOSED RIGHTS ISSUE
Issue Statistics
Basis of the Rights Issue: ten Rights Shares for every Share held
on the Record Date
Number of existing Shares in issue: 1,268,295,000 Shares (as at
30th December, 1999)
Number of Rights Shares: 12,682,950,000 Rights Shares
Outstanding share options granted: Nil
Qualifying Shareholders
The Company will send provisional allotment letters and forms of
application for excess Rights Shares to Qualifying Shareholders only.
A Qualifying Shareholder must:
1. be registered as a member of the Company on the Record Date;
and
2. have an address in Hong Kong which appears on the register
of members of the Company on the Record Date.
In order to be registered as members of the Company on the Record
Date, Shareholders must lodge any transfers of Shares (together with
the relevant share certificates) with the Company's branch share
registrars in Hong Kong by 4:00 p.m. on 27th January, 2000.
The branch share registrars of the Company in Hong Kong is:
Tengis Limited
Room 1601, Hutchison House
10 Harcourt Road, Central
Hong Kong
The register of members of the Company will be closed from 28th
January, 2000 to 8th February, 2000, both dates inclusive. No
transfers of Shares will be registered during this period.
Basis of the Rights Issue
The Company will provisionally allot ten Rights Shares, in nil-paid
form, for every Share held by the Qualifying Shareholders on the
Record Date payable in full on acceptance. Based on the
1,268,295,000 Shares in issue as at the date hereof, 12,682,950,000
Rights Shares will be issued under the Rights Issue.
Subscription Price
$0.01 per Rights Share, payable in full upon acceptance.
The Subscription Price represents:
1. a discount of approximately 81.48 % to the closing price of
$0.054 per Share as quoted on the Stock Exchange on 22nd July, 1999,
being the last trading day immediately before the suspension of the
trading of the Shares;
2. a discount of approximately 84.37 % to the average closing
price of $0.064 per Share for the 10 trading days up to and
including 22nd July, 1999, being the last trading day immediately
before the suspension of the trading of the Shares;
3. a discount of approximately 28.57 % to the theoretical
ex-rights price per Share of $0.014 based on the closing price of
$0.054 per Share as quoted on the Stock Exchange on 22nd July, 1999,
being the last trading day immediately before the suspension of the
trading of the Shares;
4. a premium of approximately $0.019 over the audited net asset
deficit per Share of $0.009 based on the audited consolidated
balance sheet of the Company as at 30th June, 1999.
The Subscription Price was agreed after arm's length negotiation
among the Company, Mr. Chan and the Underwriters. The Directors are
of the view that the Subscription Price which represents the par
value of the Share and a premium of approximately $0.019 over the
audited net asset deficit per Share of $0.009 based on the audited
consolidated balance sheet of the Company as at 30th June, 1999 is
fair and reasonable so far as the Company is concerned and is in the
interest of the Company and the Shareholders as a whole.
Expected timetable
Year 2000
Despatch of circular with notice of the SGM Wednesday, 19th
January
Last day of dealings in Shares on a cum-rights basis Tuesday,
25th January
Commencement of dealings in Shares on an ex-rights basis
Wednesday, 26th January
Latest time for lodging transfer of Shares in order to
qualify for the Rights Issue 4:00 p.m. Thursday, 27th January
Register of members close Friday, 28th January
Latest time for lodging proxy forms for the SGM
10:00 a.m. Sunday, 6th February
Record Date for the Rights Issue Tuesday, 8th February
Expected date of the SGM. 10:00 a.m Tuesday, 8th February
Despatch of Rights Issue prospectus, provisional allotment letters
and forms of application for excess Rights Shares.
Tuesday, 8th February
Register of members re-open. Wednesday, 9th February
First day of dealings in nil-paid Rights Shares .
Thursday, 10th February
Latest time for splitting nil-paid Rights Shares
Tuesday, 15th February
Last day of dealings in nil-paid Rights Shares
Friday, 18th February
Latest time for payment and acceptance of Rights Shares
Wednesday, 23rd February
Latest time for the Rights Issue to become unconditional
Monday, 28th February
Announcement of results of the Rights Issue
Tuesday, 29th February
Despatch of refund cheques in respect of unsuccessful or
partially unsuccessful applications for excess Rights Shares
Wednesday, 1st March
Despatch of certificates for Rights Shares Wednesday, 1st March
Dealings in fully paid Rights Shares commence Friday, 3rd March
Warning of the Risks in Trading of Shares
Existing Shares will be dealt in on an ex-rights basis from 26th
January, 2000. Rights Shares will be dealt in their nil-paid form
from 10th February, 2000 to 18th February, 2000 (both dates
inclusive). If First Securities (HK) Ltd., on behalf of the
Underwriters terminates the Underwriting Agreement (see "Termination
of the Underwriting Agreement" below) or the conditions of the
Rights Issue (see "Conditions of the Rights Issue" below) are not
fulfilled, the Rights Issue will not proceed.
Any dealings in Shares or Rights Shares in their nil-paid form
between 10th February, 2000 to 18th February, 2000 is accordingly at
the investors' own risk.
If in any doubt, investors should consider obtaining professional
advice.
Status of the Rights Shares
The Rights Shares (when fully paid) will rank pari passu in all
respects with the existing Shares in issue on the date of issue of
the Rights Shares. Holders of the Rights Shares (when fully paid)
will be entitled to receive all future dividends and distributions
which are declared, made or paid after the date of allotment and
issue of the Rights Shares.
Share Certificates
Subject to the fulfillment of the conditions of the Rights Issue,
share certificates for all fully-paid Rights Shares are expected to
be posted by 1st March, 2000 to those Shareholders who accepted or
applied and paid for the Rights Shares.
Rights of Overseas Shareholders
The Rights Issue prospectus, the provisional allotment letters and
forms of application for excess Rights Shares will not be registered
under the applicable securities or equivalent legislation of any
jurisdictions other than Hong Kong and Bermuda. The Directors have
exercised the discretion given to them under the bye-laws of the
Company not to issue such Rights Shares where in their opinion the
issue would or might, in the absence of compliance with registration
or other special formalities in other territories, be unlawful or
impracticable. Accordingly, no provisional allotment of Rights
Shares will be made to Overseas Shareholders. The Company will send
a Rights Issue prospectus to Overseas Shareholders for their
information only. The Company will not send provisional allotment
letters or forms of application for excess Rights Shares to Overseas
Shareholders.
If a premium (net of expenses) can be obtained, the Company will
sell each Overseas Shareholder provisional allotment of Rights
Shares once dealings in the nil-paid Rights Shares start. The
proceeds of each sale, less expenses, which amount to $100 or more
will be paid by cheque to the relevant Overseas Shareholder in Hong
Kong dollars as soon as practicable. The Company will retain
individual amount of less than $100 for its own benefit.
Fractional Entitlements
Any fractional entitlement to the Rights Shares will not be allotted
to the Shareholders but will be aggregated and sold and retained for
the benefit of the Company.
Application for excess Rights Shares
Qualifying Shareholders may apply (using forms of application for
excess Rights Shares) for any unsold entitlement of the Overseas
Shareholders and any Rights Shares provisionally allotted but not
accepted. The Directors will allocate excess Rights Shares at their
sole discretion, on a fair and equitable basis.
Application for listing
The Company will apply to the Listing Committee of the Stock
Exchange for the listing of, and permission to deal in, the Rights
Shares in both their nil-paid and fully-paid forms. Dealings in the
Rights Shares (in both nil-paid and fully paid forms) will be
subject to the payment of stamp duty in Hong Kong.
Underwriting Agreement dated 29th December, 1999
Underwriters:
Percentage of
Rights Shares underwritten Rights Shares underwritten
First Securities (HK) Ltd. 5,578,660,320 46.9
Kingsway SW Securities Limited 2,000,000,000 16.8
Yuanta Brokerage Company Limited 2,000,000,000 16.8
Young Champion Securities Limited 1,000,000,000 8.4
Amsteel Securities (H.K.) Limited 500,000,000 4.2
Kingston Securities Limited 500,000,000 4.2
First Sign Securities Limited 300,000,000 2.5
The Underwriters have confirmed to the Company that all Rights
Shares underwritten have been sub-underwritten by sub-underwriters.
The Underwriters and the sub-underwriters do not have any
shareholding in the Company prior to the Rights Issue and are
independent third parties not connected with the Company, directors,
chief executives or substantial shareholders of the Company or any
of its subsidiaries or any of their respective associates as defined
in the Listing Rules. Assuming none of the Independent Shareholders
has taken up any of their entitlement under the Rights Issue, none
of the sub-underwriters or Underwriters will be interested in 35% or
more of the enlarged share capital of the Company as enlarged by the
Rights Issue. The Directors are not aware of any of the
sub-underwriters or Underwriters who will become substantial
shareholder of the Company if none of the Independent Shareholders
take up any of their entitlement under the Rights Issue.
Number of Rights Shares
Underwritten: 11,878,660,320 Rights Shares which represents
approximately 93.66% of all Rights Shares (Note*)
Commission: 2.5 % of the total Subscription Price of the Rights
Shares underwritten by the Underwriters.
Note: Excluding the 804,289,680 Rights Shares (6.34% of all Rights
Shares) provisionally allotted to Mr. Chan under the Rights Issue
which will be taken up pursuant to his undertaking to the Company
and the Underwriters.
Undertaking from Mr. Chan
As at the date hereof, Mr. Chan, the chairman of the Company, is the
beneficial owner of 80,428,968 Shares, which represents
approximately 6.34% of the existing issued share capital of the
Company. Mr. Chan has given an irrevocable undertaking in favour of
the Company and the Underwriters to accept and subscribe in full his
entitlements to 804,289,680 Rights Shares that will be provisionally
allotted to him pursuant to the Rights Issue. As at the date hereof,
Mr. Lam To Ming, the beneficial owner of 271,961,250 Shares, which
represents approximately 21.44% of the existing issued share capital
of the Company and a substantial shareholder of the Company has
orally expressed his intention to accept and subscribe his
entitlement under the Rights Issue but has not provided a written
undertaking to the Company to that effect. Save as his shareholding
in the Company, Mr. Lam To Ming has no management presence and
relationship with the Company. Mr. Lam To Ming is the former
chairman and a director of the Company. He resigned as a director of
the Company on 28th June, 1999. As at the date of this announcement,
the Directors are not aware of any substantial shareholder other
than Mr. Lam To Ming.
(for the existing shareholding structure of the Company, please refer to
the press announcement today.)
Termination of the Underwriting Agreement
It should be noted that the Underwriting Agreement contains
provisions granting the Underwriters the right, which may be
exercised at any time prior to 4:00 p.m. on the third business day
immediately after the last day for acceptance of the Rights Issue,
in the reasonable opinion of First Securities (HK) Ltd. on behalf of
the Underwriters:
(a) the success of the Rights Issue would be materially and
adversely affected by:
(i) the introduction of any new regulation or any change in
existing law or regulation (or the judicial interpretation thereof)
or other occurrence of any nature whatsoever which may in the
reasonable opinion of First Securities (HK) Ltd. materially and
adversely affect the business or the financial or trading position
or prospects of the Group as a whole; or
(ii) the occurrence of any local, national or international event
or change, whether or not forming part of a series of events or
changes occurring or continuing before, and/or after the date
hereof, of a political, military, financial, economic or other
nature (whether or not ejusdem generis with any of the foregoing),
or in the nature of any local, national or international outbreak or
escalation of hostilities or armed conflict, or affecting local
securities markets which may, in the reasonable opinion of First
Securities (HK) Ltd. materially and adversely affect the business or
the financial or trading position or prospects of the Group as a
whole; or
(iii) any material adverse change in the business or in the
financial or trading position of the Group as a whole; or
(b) any material adverse change in market conditions (including,
without limitation, a change in fiscal or monetary policy or foreign
exchange or currency markets, suspension or restriction of trading
in securities) occurs which in the reasonable opinion of First
Securities (HK) Ltd. makes it inexpedient or inadvisable to proceed
with the Rights Issue; or
(c) the circular or the prospectus of the Rights Issue when
published contain information (either as to business prospects or
the condition of the Group or as to its compliance with any laws or
the Listing Rules or any applicable regulations) which has not prior
to the date hereof been publicly announced or published by the
Company and which may in the reasonable opinion of First Securities
(HK) Ltd. is material to the Group as a whole and is likely to
affect materially and adversely the success of the Rights Issue or
might cause a prudent investor not to accept the Rights Shares
provisionally allotted to it;
First Securities (HK) Ltd. on behalf of the Underwriters may
terminate the Underwriting Agreement and the Rights Issue will not
proceed.
Conditions of the Rights Issue
The Rights Issue is conditional upon, amongst other things, the
following conditions being fulfilled on or before 4:00 p.m. on 28th
February, 2000:
1. the approval of the Rights Issue by the Independent
Shareholders at the SGM;
2. the approval of the increase in authorised share capital of
the Company from $100,000,000 to $200,000,000 by the Shareholders at
the SGM;
3. the Listing Committee of the Stock Exchange granting the
listing of, and permission to deal in, the Rights Shares in their
nil-paid and fully paid forms;
4. the obtaining of the necessary permission of the Bermuda
Monetary Authority for the issue of the Rights Shares;
5. the registration with the Registrar of Companies in Hong
Kong one copy of the prospectus, the provisional allotment letter
and form of application for excess Rights Shares in compliance with
the Companies Ordinance of Hong Kong;
6. the filing of the prospectus, the provisional allotment
letter and form of application for excess Rights Shares with the
Registrar of Companies in Bermuda in accordance with the Companies
Act 1981 of Bermuda;
7. the resumption of the trading of the Shares on the Stock
Exchange with effect from the date of publication of this
announcement;
8. the trading of the Shares on the Stock Exchange not being
suspended for a period of more than five consecutive trading days
immediately prior and up to the latest time for termination of the
Underwriting Agreement.
Use of Proceeds of the Rights Issue
The estimated net proceeds of the Rights Issue is about $121 million
of which approximately $8 million will be applied to reduce the bank
borrowings of the Group, approximately $50 million for the expansion
and operation of the trading business of the Group and the balance
of approximately $63 million will be used as general working capital
of the Group. In order to expand the trading business of the Group,
the $50 million will be applied as follows: 1) approximately $20
million will be pledged to banks and financial institutions for
trade facilities, 2) approximately $15 million will be paid to the
suppliers of the Company as purchase deposit and the balance will be
for purchases of trading goods. For the balance of approximately $63
million, the Directors have no specific plan and intend to use the
proceeds as general working capital. The Directors will review from
time to time and make appropriate investment should such
opportunities arise.
As shown in the audited consolidated results for the year ended 30th
June, 1999 announced on 26th November, 1999, the Group recorded a
turnover of approximately $232.4 million and loss of approximately
$188.3 million. To strengthen the financial position of the Company,
the Directors propose the Rights Issue to raise funds to reduce the
bank borrowings and provide working capital to the Company.
The Directors believe that it is in the best interests of the
Company and its Shareholders to enlarge the capital base of the
Company through the Rights Issue, as the enlarged capital base will
support the continuing development of the Group's existing business
activities. The Rights Issue will allow all Shareholders (other than
the Overseas Shareholders) to participate in the growth of the Group.
For the six months ended 31st December, 1998, the Group was
principally engaged in the distribution of brand name color
television sets, air conditioners, laser disc and video compact disc
players and other electrical products for the PRC market. For the
six months ended 30th June, 1999, the Group was principally engaged
in the trading of computer mainboards, computer keyboards, computer
monitors and computer accessories. The Directors believe that the
Company has not conducted any illegal parallel trading and no
license agreement has been breached by the Company before. Further
to the announcement of the Company dated 13th July, 1999, and in
view of the increasing competition among suppliers of electrical
products in the PRC, the Group started the trading of computer
mainboards, computer monitors, computer keyboards and computer
accessories in around May, 1999. Such products were sourced by the
Company through the business associates of the Directors. To capture
the initial positive response from the above trading, the Directors
diversified the Group's business into trading of high quality
electronic products from primarily trading of audio visual products.
The Directors have also strengthened the credit control of the sales
and average credit period was approximately 60 days. Periodic review
on outstanding receivables was carried out by the Directors and the
Company will engage an accounting firm to handle the daily
accounting workload. As at 30th September, 1999, no overdue
receivables have been recorded. It has been the policy of the
Company to avoid any illegal parallel trading. The Directors believe
that the diversification of the Group's business is in the interest
of the Company and the Shareholders
FINANCIAL POSITION OF THE GROUP
The trading of the Shares has been suspended at the request of the
Company on 23rd July, 1999. The Directors wish to update the
Shareholders on the current financial position of the Company.
Based on the audited consolidated financial statements of the Group
as at 30th June, 1999, the Group had net current liabilities and
deficiency in assets of approximately $18 million and $11.6 million
respectively. Upon completion of the Rights Issue, the pro forma net
assets value of the Group will increase to approximately of $110
million. The Group also incurred a net loss attributable to the
Shareholders of approximately $188.3 million for the year ended 30th
June, 1999. For the 3 months ended 30th September, 1999, the
turnover and the unaudited consolidated loss of the Company based on
the unaudited consolidated management accounts was approximately
$19.67 million and $1.5 million respectively. Such turnover was
contributed substantially by the trading of computer mainboards,
computer keyboards, computer monitors, computer accessories and
electronic components.
For the year ended 30th June, 1999, certain bankers of the Group
have suspended all of the banking facilities previously granted the
Group. In addition, deposits pledged by the Group of approximately
$70,786,000 were fully utilized by the bankers for setting off
overdraft balances and certain trust receipt loans overdue. Based on
the audited consolidated financial statements of the Group as at
30th June, 1999, the Company had amounts of approximately $8.54
million overdue to certain bankers which represented the
crystallization of liability arising from corporate guarantees
executed by the Company in favour of South Boss for banking
facilities granted. South Boss was formerly the major subsidiary of
the Company. The Group is currently under negotiations with the
bankers to reschedule the Group's bank indebtedness and to seek
their ongoing support to the Group. Shareholders and investors are
advised to refer to the annual report of the Company for the year
ended 30th June, 1999 for further details of the financial
information of the Group.
The Directors announced in the announcement for the financial
results of the Group for the year ended 30th June, 1999 that the net
loss on the disposal of South Boss and provision for bad and
doubtful debts of the Company amounting to approximately $185
million has been made in the audited consolidated accounts of the
Company for the year ended 30th June, 1999. Such amount represented
the gain on disposal of South Boss of approximately $36 million, the
crystallization of liability in relation to the corporate guarantee
executed by the Company in favour of South Boss of approximately $8
million, provision for amounts due from South Boss of approximately
$61 million and the provision for bad and doubtful debts of the
Group of approximately $152 million. Pursuant to the sale and
purchase agreement in relation to South Boss, the purchaser has
undertaken that it would undertake action to pursue the debtors of
South Boss and apply the proceeds of the recovered amount first, in
towards paying the reasonable costs of recovery, secondly, towards
payment due to the Group, and any balances to the creditors of South
Boss. As at the date of this announcement, the Company has not
received any repayment from the purchaser of South Boss.
Based on the management accounts for the 3 months ended 30th
September, 1999, the Group has unaudited deficiency in assets of
approximately $13.12 million and outstanding borrowings of
approximately $8 million as at 30th September, 1999 which was arisen
from the crystallization of liability in relation to the corporate
guarantee executed by the Company in favour of South Boss. Save as
the abovementioned outstanding borrowings of approximately $8
million, the Company has no other outstanding borrowings or
contingent liability as at 30th September, 1999.
In August, 1999, the Company appointed Messrs. W. S. Wong & Co.
('W.S. Wong'), certified public accountants, as an independent
adviser to investigate and review the long outstanding trade debts
of the Group. Full provisions of such has been made in the results
of the Group for the year ended 30th June, 1999. As at the date of
this announcement, no progress on the investigation has been made as
the liquidator of South boss failed to provide the information and
materials requested by W.S. Wong. Such information and materials
have been handed over to the purchaser of South Boss and the Company
has no knowledge of the location of the information and materials
after the disposal of South Boss. In view of the situation, the
Company has filed a proof of debt to the liquidator of South Boss in
the amount of approximately $61 million which represent the amount
due from South Boss to the Group. To save unnecessary legal cost to
pursue for matter, the Directors do not propose to take further
action in relation to the investigation.
Upon completion of the Rights Issue, the net asset value of the
Group will be approximately $110 million. The Directors are of the
view that the Company has a sufficient level of operation and have
tangible assets of sufficient value to warrant the continued listing
of the Shares.
Use of Proceeds of the Jan Rights Issue
The Directors announced the Jan Rights Issue on 21st January, 1999.
The net proceeds of the Jan Rights Issue which has completed on 31st
March, 1999 amounted to approximately $35 million and were applied
as follows:
Repayment of banks and suppliers borrowings $17.1 million
Security deposit for trade facilities $3.7 million
Payment for a long term investment $8.6 million
General working capital $5.7 million
To secure better credit terms, the Company deposited $3.7 million to
a supplier which specialize in the manufacturing and trading audio
visual products and electrical products for trade facilities. The
supplier was interested in approximately 9.6% of the issued share
capital of the Company as at the date of the deposit. As at the date
of this announcement, the Directors cannot ascertain the exact
shareholding of the supplier in the Company. Assuming the supplier
has not disposed any Shares after the deposit, the shareholding of
the supplier in the Company is approximately 7.4 %. Save as the
shareholding of the supplier in the Company, the supplier is an
independent third party not connected with the Company, directors,
chief executives or substantial shareholders of the Company or any
of its subsidiaries or any of their respective associates as defined
in the Listing Rules. The refund of security deposit for trade
facilities was conditional on purchases from the supplier of not
less than $123 million for the year ending 31st March, 2000. In view
of the unfavourable market environment, no purchase has been made by
the Company from the supplier as at the date of this announcement.
If the minimum purchases of $123 million cannot be met on or before
31st March, 2000, such deposit will be forfeited by the supplier. In
view of the situation, the Company has written off 50% of the
deposit which has been reflected in the result of the Group for the
year ended 30th June, 1999 and for the three months ended 30th
September, 1999. The balance of the 50% deposit will be fully
amortised in the accounts of the Company for the six months ending
31st March, 2000.
As detailed in the annual report of the Company for the year ended
30th June, 1999, the long term investment was in relation to an
internet content provider and internet related business. The
consideration of $8.6 million was paid to Global Eagle Investments
Limited, an independent third party, for the acquisition of 49%
interest in the issued share capital of Sincere Wisdom Investment
Limited, a company incorporated in the British Virgin Islands in
April, 1999. At the request of Global Eagle Investments Limited
which has to obtain business registration and/or all necessary
government approvals, the $8.6 million was paid as refundable
deposit prior to completion. The consideration paid is refundable
without interest, subject to the completion of the acquisition
agreement on or before 31st March, 2000. Global Eagle Investments
Limited beneficially owns the balance of 51% interest in Sincere
Wisdom Investment Limited. The completion of the acquisition is
conditional upon Sincere Wisdom Investment limited is able to
incorporate a wholly owned subsidiary in the PRC and the subsidiary
to obtain a business registration and/or all necessary government
approvals, from the appropriate government bureaus and/or
authorities to operate as an internet content provider and engage in
other internet related business. The long-stop date of the
acquisition agreement of Sincere Wisdom Investment Limited is 31st
March, 2000 and the acquisition agreement is still pending for
completion. In view of the slowdown of the market for electronics
and electrical products, the investment was made to diversify for
the long term prospect of the Group . The Directors are of the view
that internet will gain broad acceptance as a new business medium in
the 21st century and on-line advertising and e-commerce will
experience significant growth. It is the goal of the Directors to
explore such opportunity through the introduction of the content
provider. Save as the daily operating expenses, the Directors do not
expect that there will be any further capital commitment to Sincere
Wisdom Investment Limited.
The Directors intended that approximately $20 million will be
applied to reduce the borrowings of the Group and approximately $15
million will be applied as general working capital in the Jan Rights
Issue announcement and circular. The Directors are of the view that
the use of proceeds of the Jan Rights Issue are in line with the
description in the Jan Rights Issue announcement and circular.
Future Prospects
Upon the completion of the Rights Issue, the Directors propose to
appoint further Director to the board of the Company and strengthen
the management team of the trading operation. It is intended that
the following person will be appointed as a Director:
Mr. Wong Shu Wing ('Mr. Wong'), aged 37, is the general manager of
Sunwave Holdings Limited. Sunwave Holdings Limited is a member of
Sunway group which specializes in the trading of integrated
circuits, computer peripherals and telecommunication products. Mr.
Wong has over 18 years' experience in the trading of electronic and
electrical products. Mr. Wong will be responsible for the sales
development of the Company.
With the extensive network, connection and experience of Mr. Wong,
the Directors believe the Company will benefit from the appointment
of Mr. Wong who will further expand the trading business of the
Company to telecommunication products and other electronic and
electrical products.
In addition to the appointment of new executive Director, the
Directors also propose to recruit further experienced staff and pave
for the diversification of business into the trading of high quality
electronic products with modern and advanced designs covered by
authorized distribution rights and information technology industry.
To capitalise on the recent rapid growth of the hi-tech industry and
to diversify the earning base of the Company, the Directors will
also review the business environment of the hi-tech industry from
time to time and make appropriate investment should such
opportunities arise. Further announcement will be made if and when
appropriate.
GRANT OF GENERAL MANDATES AND INCREASE IN AUTHORISED SHARE CAPITAL
In connection with the enlarged share capital as a result of the
Rights Issue, the Directors will also seek the approval of
Shareholders for a general mandate to Directors to repurchase Shares
and to issue further Shares not exceeding 10 per cent and 20 percent
respectively of the share capital as enlarged by the Rights Issue.
The Directors also proposes to increase the authorised share capital
of the Company from $100,000,000 to $200,000,000. The Directors have
no immediate plan to issue new Shares other than the Rights Shares
but consider the increase in authorised share capital to be in the
interest of the Company as such increase will provide for further
flexibility and accommodate the future growth of the Group. .
GENERAL
An independent board committee comprising the independent
non-executive Directors, Mr. Lau Kit Hung and Mr. Kong Chung Yau,
will be formed to advise the Independent Shareholders in relation to
the Rights Issue. An independent financial adviser will be appointed
to advise the independent board committee as to whether the terms of
the Rights Issue are fair and reasonable and in the interest so far
as the Independent Shareholders are concerned.
A circular containing, among other things, further details of the
Rights Issue, the notice of the SGM, the recommendation of the
independent financial adviser and the letter of the independent
board committee will be despatched to Shareholders as soon as
practicable.
Shareholders and investors are reminded to exercise extreme caution
in the trading of the Shares.
RESUMPTION
The trading of the Shares has been suspended at the request of the
Company since 10:00 a.m. on 23rd July, 1999. The Company has made an
application to the Stock Exchange for the resumption of the trading
of Shares from 10:00 a.m. on 3rd January, 2000.
TERMS USED IN THIS ANNOUNCEMENT
"Company" Q-Tech Holdings Limited, an exempted company incorporated
in Bermuda with limited liability, the Shares of which are listed on
the Stock Exchange
"Directors" directors of the Company
"Group" the Company and its subsidiaries
"Hong Kong" the Hong Kong Special Administrative Region of the PRC
"Independent Shareholders other than Mr. Chan and his associates
(as defined in the Listing Rules)
Shareholders"
"Jan Rights Issue" the rights issue of the Company proposed by
the Directors in January, 1999
"Listing Rules" the Rules Governing the Listing of Securities on
the Stock Exchange
"Mr. Chan" Mr. Chan Tak Hung, the chairman of the Company and
the beneficial owner of 80,428,968 Shares which represents
approximately 6.34% of the existing issued share capital of the
Company
"Overseas Shareholders whose names appear on the register of
Shareholders" members of the Company as at the close of the business on
the Record Date and whose addresses as shown on such
register are outside Hong Kong
"PRC" People's Republic of China which for the purpose of this
announcement, excludes Hong Kong
"Qualifying Shareholders other than the Overseas Shareholders
Shareholders"
"Record Date" 8th February, 2000, the record date by reference to
which entitlements to the Rights Issue will be determined
"Rights Issue" the proposed issue by way of rights of
12,682,950,000 Rights Shares at a price of $0.01 per Rights Share on
the basis of ten Rights Shares for every Share held on the Record
Date
"Rights Shares" 12,682,950,000 Shares to be issued pursuant to
the Rights Issue
"SGM" the special general meeting of the Company to be held on or
about 8th February, 2000
"Share(s)" ordinary share(s) of $0.01 each in the share capital
of the Company
"Shareholder(s)" holder(s) of the Shares
"South Boss" South Boss Resources Limited, a former subsidiary of
the Company
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"Subscription Price" subscription price of $0.01 per Rights Share
"Underwriters" First Securities (HK) Ltd., Kingsway SW
Securities Limited, Yuanta Brokerage Company Limited, Young Champion
Securities Limited, Amsteel Securities (H.K.) Limited, Kingston
Securities Limited, First Sign Securities Limited
"Underwriting the underwriting agreement in relation to the
Rights Issue dated 29th December, 1999 made between the Company,
Agreement" Mr. Chan and the Underwriters
"$" Hong Kong dollars
By Order of the Board
Q-Tech Holdings Limited
Chan Tak Hung
Chairman
Hong Kong, 30th December, 1999
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