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 1934
Date of Report: March 30, 2005
PacificNet Inc.
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(Exact name of registrant as specified in charter)
Delaware
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(State or other jurisdiction of incorporation)
000-24985 92-2118007
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(Commission File Number) (IRS Employer Identification No.)
Room 601, New Bright Building, 11 Sheung Yuet Road, Kowloon Bay, Kowloon,
Hong Kong
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: : 011-852-2876-2900
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17
CFR 240.14a-12(b))
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO MATERIAL DEFINITIVE AGREEMENT
On March 30, 2005, the Registrant, through its wholly-owned subsidiary
PacificNet Strategic Investment Holdings Limited ("PacificNet Holdings"),
entered into a definitive agreement to obtain a controlling interest in
GuangZhou 3G Information Technology Co., Ltd. ("GuangZhou 3G"), through the
purchase of a 51% interest in GuangZhou 3G's parent company, Pacific 3G
Information and Technology Limited, a British Virgin Islands Company ("3G-BVI").
GuangZhou 3G is the wholly-owned subsidiary of 3G-BVI. GuangZhou 3G is in the
business of providing value-added telecom services (VAS) and information
services, internet and mobile entertainment application development, mobile game
software design and development, mobile customer relationship management (CRM)
services for China's telecom operators, mobile marketing and promotion services,
management and consulting services, mobile internet information technology,
mobile payment and mobile point of sale (POS) solutions, mobile consumer
analytics, mobile data-mining, internet e-commerce, mobile applications based on
WAP, KJava, IVR, MS, MFLASH, short messaging services (SMS), multimedia
messaging services (MMS), outsourced game development, and other mobile VAS in
the People's Republic of China, and operates the following internet and mobile
gaming website: www.vs366.com.
PacificNet Holdings agreed to purchase 23,050 shares (the "Sale
Shares") of 3G-BVI from Asiafame International Limited, Stargain International
Limited and Trilogic Investments Limited, with principle place of business
located in the People's Republic of China (the "Sellers"), and directly
subscribed to 3G-BVI to purchase 5,000 shares (the "Subscribed Shares"). The
closing of the transactions is subject to the completion of customary closing
conditions, including the completion of business and financial due diligence,
and is expected to occur on or prior to April 30, 2005.
The total consideration paid for the Sale Shares was payable as
follows:
(i) USD$1,183,000 payable to the Sellers in cash within 30 days after
the closing of the transaction;
(ii) USD$4,182,000, by delivery of 522,750 shares of common stock, par
value $0.0001 per share (the "Common Stock") of the Registrant (the "Registrant
Shares") to the Sellers. The Registrant Shares are to be held in an escrow
account with an Escrow Agent designated by PacificNet Holdings. The first
installment of the Registrant Shares in the amount of 130,050 will be released
45 days after the closing of the transaction. The remaining installments will be
released in equal installments of 98,175 shares within 30 days after the end of
each quarter, including the quarter ended March 31, 2005, provided that
Guangzhou 3G attains certain net income milestones by the end of each quarter.
The Sellers will be entitled to receive all of the Registrant Shares if
Guangzhou 3G has achieved cumulative net income for the year ended December 31,
2005 of not less than USD$2,000,000. The Sellers appointed Tony Tong and Victor
Tong as proxy for the Sellers for a period of 10 years with full power to vote
the Registrant Shares at all meetings of stockholders of the Registrant.
(iii) issuance of warrants to purchase up to 100,000 shares of the
Registrant's Common Stock. The exercise price of the warrants is the 5-Day
Volume Weighted Average Price of the Registrant's Common Stock prior to March
30, 2005. The warrant is exercisable for a period of 3 years.
PacificNet Holdings subscribed to 3G-BVI to purchase an additional
5,000 shares. The total purchase price for the Subscribed Shares is USD$500,000,
payable within 45 days after the delivery of (i) stock powers transferring the
Sale Shares to PacificNet Holdings; (ii) stock certificates for the Sale Shares
and the Subscribed Shares; (iii) an executed Subscription Agreement for the
Subscribed Shares; and (iv) minutes of the Board of Directors and shareholders
of Guangzhou 3G and 3G-BVI approving the transaction.
In connection with the transactions described above, on March 25, 2005,
Guangzhou 3G entered into an exclusive five year Consulting Services Agreement
with Guangzhou Sunroom Information Industrial Co. Ltd., a privately owned
Chinese company engaged in telecommunications value-added business in China
("Sunroom"). The Sellers own all of the outstanding shares of Sunroom. Pursuant
to the terms of the Consulting Agreement, Guangzhou 3G agreed to provide certain
technical consulting services required for Sunroom 's business. For the
consulting services, Sunroom agreed to pay Guangzhou 3G a set percentage of the
income received for sales of Sunroom's value added services. As security for the
payment of this fee, on March 26, 2005, the Sellers entered into a Share Pledge
Agreement with 3G-BVI, pursuant to which they each pledged all of their shares
of Sunroom to 3G-BVI. In connection with the pledge, each of the Sellers granted
Mr. Victor Tong a power of attorney to vote their shares of Sunroom. In the
event Sunroom defaults under the pledge agreement, which includes a default in
its obligation to pay the consulting fees, 3G-BVI shall have the right to demand
immediate payment of all outstanding fees, or dispose of the pledged shares as
provided for under applicable Chinese law.
ITEM 9. FINANCIAL STATEMENTS AND EXHIBITS
20.1 Press Release, dated March 30, 2005
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.
PACIFICNET INC.
By: /s/ Victor Tong
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Name: Victor Tong
Title: President
Dated: April 5, 2005