Thursday, August 18, 2005
China Digital Media (CDGT) 8-Ks continued
5/31/2005: lawsuit from Ziegler, Ziegler & Associates for $1.25 million damages from using their e-mail address and internet domain name to distribute promotional material.
The Registrant contests the allegations of the Plaintiffs and has retained counsel admitted to practice in the U.S. District Court for the Southern District of New York to vigorously defend the action. According to the Registrant, it did not hire a stock promoter or a spammer to distribute promotional e-mails, and it is as much a victim of the activities complained of as are the Plaintiffs.6/20/2005: Strategic alliance (more like an acquisition) with Pukonyi Culture Development Ltd. in PRC. They create TV programming. CDGT gets an exclusive on their programming. CDGT selects a majority of Pukonyi's Board of Directors and gets 90% of their profits. CDGT issues US$183,000 worth of stock. CDGT essentially gets all of their equity (with PRC workarounds). The term is for 10 years.
6/30/2005: CDGT is investing US$205K in a TV production with Guangdong Runshi Movie & Music Production Co. Ltd. in PRC. "The Story of a Small Town" based on a "well known" Chinese movie released in the late 1970s. 24 episodes. Completion expected end of 2005. Distribution to 26 of 33 provincial TV stations throughout China and 3 stations in 2006. Reach of 2/3 of China's TV viewers.
7/5/2005: Update to previous 8-K. Another TV program with Pukonyi and acquisition (which changed its name to HuaGuang Digimedia Culture Development Limited ("HuaGuang"). CDGT is the exclusive service provider, is appointing the majority of the Board of Directors, for US$183K in stock and financial guarantees of US$1.2 million during the term, and gets 90% of their profits.
CDGT is investing $566K in a TV program via Runshi, "Xiguan Affairs". 36 episodes, debut in 2nd half of 2005. Distribution agreements with more than half the provincial TV stations reaching at least half of Chinese TV viewers.
7/20/2005: Another acquisition: Guangdong M-Rider Media Company Ltd. US$133K and stock worth US$915K. M-Rider designs, produces, distributes advertising on TV channels. Guarantee of operation cash flow of US$1.2 million or else the share count above gets adjusted downward.
There are laws limiting foreign ownership of ad agencies in PRC, so this acquisition is structured as a strategic alliance with the same terms as the other deals above. The law is scheduled to be removed on Dec 10, 2005 and the acquired agrees to transfer ownership to CDGT at that time. Legally binding documents have been created in PRC.
7/21/2005: Auditors resigned! No disagreements, no qualified opinions except the going concern statement. Jimmy Cheung & Co. engaged. These guys were mentioned earlier. The previous auditors were in the US which makes them useless for a PRC business as mentioned in an earlier post on Chinese law.
8/10/2005: On the defaulted notes mentioned on 5/9 above, CDGT received US$971K of it so far. CDGT approved an additional 3 month extension for the rest. Interest rate is 9%.