- Current report filing (8-K)
18 Oktober 2010 - 11:04PM
Edgar (US Regulatory)
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): October 18,
2010 (August 16, 2010)
CHINA TMK BATTERY SYSTEMS INC.
(Exact name of registrant as specified in its
charter)
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Nevada
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333-139660
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98-0506246
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(State or other jurisdiction of
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(Commission File Number)
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(IRS Employer Identification No.)
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incorporation or organization)
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Sanjun Industrial Park
No. 2 Huawang Rd., Dalang
Street
Bao'an District, Shenzhen 518109
People's Republic of
China
(Address of principal executive offices)
(86) 755 28109908
(Registrant's telephone number,
including area code)
(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):
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[ ]
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Written communications pursuant to Rule 425
under the Securities Act (17 CFR 230.425)
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[ ]
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Soliciting material pursuant to Rule 14a-12
under the Exchange Act (17 CFR 240.14a-12)
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[ ]
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Pre-commencement communications pursuant to
Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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[ ]
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Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 4.02
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Non-Reliance on Previously Issued Financial Statements or a
Related Audit Report or Completed Interim Review.
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On August 16, 2010, the board of directors of China TMK Battery
Systems Inc. (the “Company”), after consultation with and upon recommendation
from management of the Company, determined that the Company’s previously issued
unaudited financial statements for the quarter ended March 31, 2010 included in
its Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on May 24, 2010 (the “Original Filing”) should no longer be relied
upon and that disclosure should be made and action should be taken to prevent
future reliance.
The Company has restated its financial statements for the
quarter ended March 31, 2010 due to issues raised by its independent
accountants, MaloneBailey, LLP ("MaloneBailey"), regarding the accounting
treatment of certain reset provisions in warrants to purchase 3,401,320 shares
of the Company’s common stock (the “Warrants”), previously issued to investors
in a February 10, 2010 private placement (the “Private Placement”).
The Warrants issued in the Private Placement
include an anti-dilution provision for adjustment if the Company issues or sells
any shares of common stock or securities convertible into common stock for a
consideration per share of common stock less than the then current exercise
price, which is currently $1.60 per share for private placement investors and
$1.25 per share for Hudson Securities, Inc. and SHP Securities LLC.
Because of the reset provision, the Warrants are not considered to be
indexed to the Company’s stock and therefore the Warrants were determined to be
derivative liability under ASC 815-15 and ASC 815-20. The question was raised in
light of EITF 07-5, “Determining Whether an Instrument (or Embedded Feature) Is
Indexed to an Entity’s Own Stock” (FASB ASC 815-15) (“ASC 815”) effective as of
January 1, 2009, which outlines new guidance for being indexed to an entity’s
own stock and the resulting liability or equity classification based on that
conclusion. Reset provisions reduce the exercise price of a warrant or
convertible instrument if a company either issues new warrants or convertible
instruments that have a lower exercise price.
The board of directors of the Company has performed a complete
assessment of the Warrants and has concluded that they are within the scope of
EITF 07-5 due to the reset provisions included in the terms of the agreements.
Accordingly, EITF 07-5 should have been adopted as of January 1, 2009 by
classifying the Warrants as liability measured at fair value with changes in
fair value recognized in earnings each reporting and recording a
cumulative-effect adjustment to the opening balance of retained earnings. The
Company has calculated the fair value of the Warrants at the date of adoption,
as well as at the March 31, 2010 reporting period, utilizing the Multinomial
Lattice models. Based on its calculations and assessment of the materiality, the
Company concluded that its financial statements for the quarter ended March 31,
2010 included in the Original Filing required restatement and that the Original
Filing should be amended.
In addition, the weighted average number of common shares
outstanding is being restated to correct a clerical error.
The Company has discussed the foregoing matters with
MaloneBailey, has restated the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2010, and is filing an amendment to the Original Filing
on or about the date of this Current Report on Form 8-K. The restated financial
information for the quarter ended March 31, 2010, has also been incorporated in
the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010,
and the Company’s amended Registration Statement on Form S-1, filed with the
Commission on August 23, 2010 (File No. 333-166749).
Except as described above, no additions or modifications will
be made to reflect facts or events occurring subsequent to the date of the
Original Filing.
The impact of the error on the March 31, 2010 financial
statements is reflected in the following tables:
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Originally
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Filed
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Adjustment
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Restated
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March 31, 2010
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Derivative liability
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$
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-
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2,943,977
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$
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2,943,977
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Total Liabilities
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21,906,078
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2,943,977
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24,850,055
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Stockholders' Equity
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Additional paid-in capital
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11,737,406
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(1,218,744
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)
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10,518,662
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Retained earnings (unrestricted)
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11,817,894
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(1,725,233
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)
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10,092,661
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Total stockholders' equity
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23,622,079
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(2,943,977
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)
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20,678,102
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Total Liabilities & Stockholders' Equity
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$
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45,528,157
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$
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45,528,157
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Originally
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Filed
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Adjustment
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Restated
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Three Months Ended March 31, 2010
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Other income (expenses):
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Change
in fair value of embedded derivative
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-
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(1,725,233
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(1,725,233
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Total
other expenses
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(302,288
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(1,725,233
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(2,027,521
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Income before income taxes
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616,041
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(1,725,233
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(1,109,192
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)
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Net income
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$
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257,866
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(1,725,233
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$
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(1,467,367
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Comprehensive income
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$
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290,084
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(1,725,233
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$
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(1,435,149
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Weighted average shares outstanding
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Basic
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26,472,055
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3,734,056
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30,206,111
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Diluted
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26,849,979
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4,460,335
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31,310,314
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Earnings per share - Basic
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$
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0.01
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(0.06
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(0.05
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Earnings per share - Diluted
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$
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0.01
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(0.06
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(0.05
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Originally
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Filed
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Adjustment
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Restated
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Three Months Ended March 31, 2010
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Cash Flows From Operating Activities
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Net
income
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$
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257,866
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$
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(1,725,233
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$
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(1,467,367
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Adjustments to reconcile net income to net
cash
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provided by operating activities:
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Change in fair value of embedded derivative
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-
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1,725,233
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1,725,233
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Net cash used in (provided by)
operating
activities
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(1,147,250
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(1,147,250
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Net cash used in investing activities
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(5,874,237
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(5,874,237
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Net cash provided by financing
activities
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6,970,904
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6,970,904
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Effect of exchange rate changes on cash
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154,354
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154,354
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Net increase (decrease) in cash and
cash
equivalents
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103,771
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103,771
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Cash and cash equivalents, beginning of
period
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185,590
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185,590
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Cash and cash equivalents, end of
period
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$
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289,361
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$
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289,361
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Item 9.01.
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Financial Statements and Exhibits.
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(c)
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Exhibits
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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.
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Dated: October 18, 2010
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CHINA TMK BATTERY SYSTEMS INC.
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By:
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/s/ Henian Wu
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Henian Wu
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Chairman
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