Form 8-K Home System Group

Events or Changes Between Quarterly Reports

What is Form 8-K?
  • Accession No.: 0001437749-10-002276 Act: 34 File No.: 000-49770 Film No.: 10960377
  • CIK: 0001172319
  • Submitted: 2010-07-20
  • Period of Report: 2010-07-15

8-K HTML

hsysgrp_8k-071510.htm



UNITED STATES
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): July 15, 2010
 
HOME SYSTEM GROUP
(Exact name of registrant as specified in its charter)

Nevada
000-49770
43-1954776
(State or other jurisdiction of
(Commission File Number)
(IRS Employer Identification No.)
incorporation or organization)
   

Oceanic Industry Park
Sha Gang Highway, Gang Kou Town, Zhongshan City
Guangdong Province, P.R. China
(Address of principal executive offices)

347-624-5699
(Registrant’s telephone number, including area code)
 
N/A
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
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Item 1.01
Entry into a Material Definitive Agreement.

On July 15, 2010, Home System Group (the “Company”) through its wholly-owned subsidiaries, Zhongshan City Weihe Appliances Co., Ltd. (“Weihe”), a company organized under the laws of the People’s Republic of China (“PRC”), and Asia Forever Investment Limited (“Asia Forever”), a company organized under the laws of the Hong Kong Special Administrative Region, entered into an Equity Ownership Transfer Agreement (the “Acquisition Agreement”) with Jiangmen City Jinxinglong Electrical Appliance Co., Ltd. (“Jinxinglong”) and all the shareholders of Jinxinglong (the “Sellers”), pursuant to which Wehei and Asia Forever have agreed to acquire and Sellers have agreed to sell 100% of the Sellers’ equity interest in Jinxinglong.

Pursuant to the terms of the Acquisition Agreement, Weihe and Asia Forever will acquire, for cash consideration of $15,000,000 (“Acquisition Price”), 70% and 30%, respectively, of all outstanding equity interest in Jinxinglong.

The total consideration for the acquisition of Jinxinglong will be paid to the Sellers in five payments as follows:

 
·
5% of the Acquisition Price within 5 business days of the full execution of the Acquisition Agreement.
 
·
15% of the Acquisition Price within 5 business days of the completion of the registration of the transfer of 70% of the outstanding equity interest in Jinxinglong to Weihe and transfer of 30% of the outstanding equity interest in Jinxinglong to Asian Forever with the applicable regulatory government departments in the People’s Republic of China.
 
·
20% of the Acquisition Price within 5 business days of the completion of the May 31, 2010 financial audit of Jinxinglong.
 
·
30% of the Acquisition Price upon the completion of the audit of Jinxinglong’s financial statements for the fiscal year 2010.
 
·
30% of the Acquisition Price by December 31, 2011.

In the event the audit results of the financial statements of Jinxinglong show that its actual net income for the twelve months ended May 31, 2010 is less than $2,500,000, the Acquisition Price to be paid by Weihe and Asia Forever shall be adjusted proportionally.

A copy of the Acquisition Agreement is filed as an exhibit to this Current Report on Form 8-K.  The summary of the Acquisition Agreement set forth above is qualified by reference to such exhibit.

Item 8.01
Other Events.

On July 20, 2010, the Company issued a press release announcing the entry into the Acquisition Agreement.  A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information contained herein and in the accompanying exhibits is being furnished pursuant to “Item 8.01 Other Events.”  The information contained herein and in the accompanying exhibits shall not be incorporated by reference into any of our filings, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing.  The information in this report, including the exhibits hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act. 

Item 9.01
Financial Statements and Exhibits.

(d) Exhibits
 
Exhibit No.
 
Description
10.1
 
Form of Equity Ownership Transfer Agreement
99.1
 
Press Release of Home System Group, July 20, 2010

 
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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.
 
   
HOME SYSTEM GROUP
       
       
Date: July 20, 2010
 
By:
/s/ Yu Lei
     
Yu Lei
Chief Executive Officer
       
 

 
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EXHIBIT INDEX

Exhibit No.
 
Description
10.1
 
Form of Equity Ownership Transfer Agreement
99.1
 
Press Release of Home System Group, July 20, 2010
 
 
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EX-10.1 HTML

ex10-1.htm

EXHIBIT 10.1
 
Zhongshan City Weihe Appliances Co., Ltd. and Jiangmen City Jinxinglong Electrical Appliance Co., Ltd. Equity Ownership Transfer Agreement

Party A: Zhongshan City Weihe Appliances Co., Ltd.
 
Party B: Jiangmen City Jinxinglong Electrical Appliance Co., Ltd.
 
Party C: All Shareholders of Jiangmen City Jinxinglong Electrical Appliance Co., Ltd.
 
Party D: Asia Forever Investment Limited
 
Basic Information about All Parties in the Agreement
 
1.  Zhongshan City Weihe Appliances Co., Ltd (in the agreement referred as “Party A”, “acquirer” or “Weihe Electronics Appliances”) is a registered and legitimate existence of the limited liability company in Zhongshan City of Guangdong Province. It is mainly engaged in household decorative fans, energy saving lighting and other product development, production and sales. The ultimate shareholder of Zhongshan City Weihe Appliances is a public company “Home System Group”, which is incorporated as a Nevada corporation. Home System Group is currently listed on OTCBB and the ticker is HSYT.
 
2.  Jiangmen City Jinxinglong Electrical Appliance Co., Ltd. (in the agreement referred as “Party B”, “Jinxinlong Electronics Appliances” or “target company”) is a registered and legitimate existence of the limited liability company in Jiangmen City of Guangdong Province. It is mainly engaged in home appliance development, production, marketing and sales.
 
3.  Party C is all of the shareholders of Jiangmen City Jinxinglong Electrical Appliance Co., Ltd.(in the agreement referred as “Party C”, “Shareholders of Jinxinglong Electronics Appliances” or “shareholders of Target Company”). Party C holds 100% shares of Jinxinglong Electronics Appliances Co. Ltd. Among them, Jiangmen City Xinhui region Jinhua Metal Surface Decoration Co., Ltd holds 70% shares of Party B; Hongkong Jinhua Electricity Product Co., Ltd holds 30% shares of Party B.
 
4.  Asia Forever Investment Limited (in the agreement referred as “Party D” or “Rongya Asia Forever”) is a registered and legitimate existence of the limited liability company under the laws of Hongkong.
 
According to Party A and Party B respective advantages in product manufacture and marketing, in order to lead better cooperation, enhance cooperation and efficiency and improve market competitiveness, all parties reached the following agreement. All parties should follow the agreement in future cooperation.

 
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Article I Acquisition Mode
 
1.1 Party C agrees to transfer 100% of its shares held (in the agreement referred as “target shares”) in Jinxinglong Electronics Appliances to Party A and Party D with total price $ 15,000,000 (in the agreement referred as “target share price”). After the process of target share transfer, Party A will possess 70% of the shares of Party B and Party D will possess 30% the shares of Party B.
 
1.2 Party C confirms that Party B’s revenue and net income were approximately $ 20,000,000 and $ 2,500,000, respectively for the twelve months ended May 31, 2010.
 
1.3 Party B’s revenue and net income should be based on the audit report under US GAAP by PCAOB registered accounting firm which is hired by Party A and Party D. If the audit results show that Party B's actual net income is less than $2,500,000, Party A’s final acquisition price should be adjusted by the percentage of the difference. (If the audit results show that Party B's actual net income is more than $2,500,000, the acquisition price will be maintained unchanged.)
 
Article II Payment Method
 
2.1 First Installment: 5% of the target share price will be paid to Party C by Party A and Party D within 5 business days upon agreement effective date.
 
2.2 Second Installment: 15% of the target share price will be paid to Party C by Party A and Party D within 5 business days after completion of transfer of business registration process of target shares.
 
2.3 Third Installment: 20% of the target share price will be paid to Party C by Party A and Party D within 5 business days upon the completion of financial audit of Jinxinglong.
 
2.4 Fourth Installment: 30% of the target share price will be paid to Party C by Party A and Party D within 5 business days upon the completion of audit on financials of fiscal year 2010 of Jinxinglong.
 
2.5 Final Installment: final 30% of the target share price will be paid to Party C by Party A and Party D by December 31, 2011.
 
Article III Covenants
 
3.1 Party C Covenants
 
1.  
Party C guarantee that all documents are signed voluntarily and therefore acquire by legal authorization. And all documents signed do not against following documents: constitution of Party B; Any important contract which involved Party B or Party C; Any relevant law and administrative regulation.
 
2.  
Party C has the complete right of possession and the complete right of treatment of the target share.
 
3.  
The Company shall not, and (as applicable) shall not permit any of its Subsidiaries to:
 
 
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(1) Incur, assume or pre-pay any indebtedness for borrowed money or enter into any agreement to incur, assume or pre-pay any indebtedness for borrowed money.
 
(2) Establish any property mortgage; encumber guarantees or any of third-party interests or provide security for others.
 
(3) Make or forgive any loans, advances or capital contributions to, guarantees for the benefit of, or investments in, any party, other than loans between or among the Company and any of its Subsidiaries.
 
(4) Change any of the material policies, practices or procedures in the contract is not allow unless agreement has been made between parties.
 
(5) Make any substantive changes within the management team and employees that may cause significant impact on the company.
 
(6) Conduct any abnormal business purposes or enter into any substantive contract or capital commitments.
 
(7) Declare, set aside or pay any dividends on (whether in cash, stock or property), or make any other distributions in respect of any of its capital stock. 

(8 ) Change company’s basic business.

(9) Make any substantive purchases of any type of non-cash assets.
 
(10) Make any substantive changing company’s investment plan, or
 
(11) Make any other possible behaviors or actions might cause above-mentioned items.
 
4. After the effective date of the contract, any type of debt that is found or occurred before the agreement, and has not been notify to Party A and Party D prior to the agreement, Party C will be responsible for the debt.
 
5. Party B and its subsidiary (if) do not have any incomplete lawsuit or any other legal action. If any incomplete lawsuit or legal action hasn’t been notified to the Party A and Party D before the agreement has been made, Party C is fully responsible for it.
 
3.2 Party A and Party D Covenants
 
1. Party A and Party D is a legally established and validly existing limited company, with all the necessary capacity to provide civil rights and power and perform all obligations of this agreement and responsibility.
 
2. The signing of this agreement and have been or will be fulfilled with all the necessary authorization without violating the constitution of Party A and Party D.
 
 
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Article 4 Liability for Breach of Covenant
 
4.1 All parties are prohibited by cheating, intimidating or any other illegal behavior. Party who conduct such behaviors will be held responsibility and shall compensate the losses of other parties.
 
4.2 Party A and Party D shall pay the overdue loans over the same period by the bank rate of interest if they are not able to pay the target share price on time.
 
Article 5 Law Applicability and Effect of the agreement
 
5.1 The Agreement applies to the laws of Guangdong Province, People's Republic of China.
 
5.2 This Agreement will be immediate effect after sealed and signed by all parties.
 

 
(Below of the agreement is blank.)
 
 
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(This page is signing page)
 
Party A:

 
 
Party B:
 

 
Party C:
 

 
Party D:

 
 
The agreement signing date: July 15th, 2010
 
The agreement signing location: Zhongshan City, Guangdong Province, China
 
 
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EX-99.1 HTML

ex99-1.htm

EXHIBIT 99.1 
 
Home System Announces an Agreement to Acquire
Jiangmen City Jinxinglong Electrical Appliance Co., Ltd.
 
NEW YORK & GUANGDONG, China--(BUSINESS WIRE)--Home System Group (OTCBB: HSYT; "Home System" or the "Company"), a Chinese-based manufacturer of a variety of household appliances sold by large retailers, today announced an agreement to acquire 100% of the ownership interest of Jiangmen City Jinxinglong Electrical Appliance Co., Ltd. (“Jinxinglong”) for an aggregate purchase price of $15 million or six times the net income of Jinxinglong for the twelve-month period ended May 31, 2010. The total consideration for the acquisition of Jinxinglong will be paid in five installments with the final installment expected to be paid by the end of 2011.

Founded in September 2002, Jinxinglong specializes in the manufacturing and distribution of various industrial ceiling fans, decorative ceiling fans, table and floor fans and related accessories. Compared to the fans Home System currently produces, Jinxinglong focuses on fans with a lower price point, which are also mainly sold in the North American market. For the twelve months period ended May 31, 2010, Jinxinglong had revenue of approximately $20 million and net income of $2.5 million.

Pursuant to the terms of the agreement, the acquisition is subject to various standard closing conditions, including satisfactory completion of the due diligence and financial audit on Jinxinglong.

Mr. Yu, the Chief Executive Officer of Home System Group, commented on this acquisition: “Adding Jinxinglong to Home System Group enables the Company to broaden its product line and thus to accelerate the growth of Home System’s fans segment. Furthermore, this acquisition will allow Home System to integrate both groups’ technology and resources, expand our production capacity, reduce raw material costs by combining our procurement activities and result in a higher marketshare in the fan segment.”

About Home System Group

Home System Group is primarily engaged in the production of stainless steel gas grills and ovens, ceiling and table fans, and decorative lamps, LEDs and energy-saving lamps. Its products are sold through distributors and direct to retailers located in North America, Europe, Australia, Africa, Southeast Asia and China. For more information, please visit: http://www.homesystemgroup.com.

FORWARD-LOOKING STATEMENTS:

This release contains "forward-looking statements" for purposes of the Securities and Exchange Commission's "safe harbor" provisions under the Private Securities Litigation Reform Act of 1995 and Rule 3b-6 under the Securities Exchange Act of 1934. These forward-looking statements are subject to various risks and uncertainties that could cause Home System Group's actual results to differ materially from those currently anticipated, including the risk factors identified in Home System Group's filings with the Securities and Exchange Commission.
 
Contact:
 
Home System Group
Eva Wang, 347-624-5699