RULE 14F-1
REPORT OF CHANGE IN MAJORITY OF DIRECTORS
INFORMATION PURSUANT TO SELECTION 14(f) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMET TECHNOLOGIES, INC.
8 East Broadway #428
Salt Lake City, UT 84111
May 17, 2006
This report ("Report") is being furnished to holders of record of the
common stock, par value $0.001 per share, of Comet Technologies, Inc., a
Nevada corporation (the "Company"), in accordance with the requirements of
Section 14(f) of the Securities Exchange Act of 1934, as amended, and Rule
14f-1 promulgated under the Exchange Act, to provide notice of a change in
management.
No vote or other action by the Company's stockholders is required in
response to this Report. Proxies are not being solicited.
INTRODUCTION
The Company anticipates that, following the expiration of the ten-day
period beginning on the later of the date of the filing of this Report with
the U.S. Securities and Exchange Commission (the "SEC") pursuant to Rule 14f-1
or the date of mailing of this Report to the Company's stockholders, the
transactions contemplated by the Stock Exchange Agreement discussed below
under "Change of Control" will be completed. At that time:
1. Pursuant to the terms of a Stock Exchange Agreement ("Exchange
Agreement") dated May 11, 2006, by and among the Company, American California
Pharmaceutical Group, Inc. ("ACPG") and the shareholders of ACPG, the Company
has agreed to issue to the ACPG shareholders, at closing, 10,193,377
restricted shares of common stock of the Company in exchange for 100% of the
issued and outstanding shares of common stock of ACPG; and
2. Jack M. Gertino will resign as a director of the Company, and be
replaced by Liu Yan-qing, as a director; Richard B. Stuart will resign as a
director and be replaced by Han Xiao-yan; Wang Hai-feng will be appointed as
an additional director of the Company; and Liu Yan-qing, Han Xiao-yan and Wang
Hai-feng shall be appointed as the new officers; and Liu Yan-qing, Han
Xiao-yan and Wang Hai-feng shall constitute the entire board of directors and
all of the officers immediately following the closing of the Exchange
Agreement (the "Closing").
Because of the change in the composition of the Company's board of
directors and the exchange of securities pursuant to the Exchange Agreement,
there will be a change in control of the Company on the date the proposed
transactions are completed.
As of May 17, 2006, the Company had issued and outstanding 516,780 shares
of common stock, the Company's only class of voting securities that would be
entitled to vote for directors at a stockholders meeting if one were to be
held. Each share of common stock is entitled to one vote.
Please read this Report carefully. It describes the terms of the
proposed Exchange Agreement and contains certain biographical and other
information concerning the Company's executive officers and directors after
completion of the transactions under the Exchange Agreement.
CHANGE OF CONTROL
On May 11, 2006, the Company entered into an Exchange Agreement with ACPG
and the shareholders of ACPG. Under the terms of the Exchange Agreement, all
outstanding equity securities of ACPG will be exchanged for 10,193,377 shares
of the Company's common stock, resulting in ACPG becoming a wholly owned
subsidiary of the Company. The Company currently has 516,780 shares of common
stock outstanding. At closing, the Company will have a total of 10,960,620
shares issued and outstanding, of which 10,193,377 shares, or approximately
93%, will be held by the ACPG shareholders, 516,780 shares will be held by the
current shareholders and a total of 219,212 shares will be issued to the two
current officers under a consulting agreement.
The Closing is expected to occur on May 30, 2006, but the Closing is
subject to the satisfaction of certain conditions.
At Closing, the Company's current directors will resign, seriatum, and
Liu Yan-qing, Han Xiao-yan and Wang Hai-feng will be appointed as the
Company's directors. At that time, Liu Yan-qing, Han Xiao-yan and Wang
Hai-feng will be appointed President, Chief Financial Officer and
Secretary/Treasurer, respectively, of the Company. However, the resignations
and the appointment of the new officers and directors will not become
effective until after the expiration of the ten-day time period specified in
Rule 14f-1 as promulgated under the Securities Exchange Act of 1934.
ACPG is a California holding corporation, which owns all of the issued
and outstanding shares of registered capital of Harbin Tian Di Ren Medical
Science and Technology Company ("TDR"), a limited liability company organized
in Heilongjiang Province in the People's Republic of China ("PRC" or "China").
TDR is engaged in the manufacture, marketing and sale of over-the-counter
nutraceutical and medicinal products, primarily in China. For a detailed
description of the transaction and the business of ACPG and TDR, reference is
made to a Current Report on Form 8-K of the Company dated May 15, 2006, which
can be retrieved by visiting the website of the SEC at www.sec.gov.
Statements made in this Report concerning the contents of any document
referred to herein are not necessarily complete.
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of common stock
beneficially owned by (i) those persons or groups known to beneficially own
more than 5% of the Company's common stock prior to the closing of the
Exchange Agreement, (ii) those persons or groups known to beneficially own
more than 5% of the Company's common stock on and after the closing of the
Exchange Agreement, (iii) each current director and each person that will
become a director upon the closing of the Exchange Agreement, (iv) all current
directors and executive officers as a group and (v) all directors and
executive officers on and after the closing of the Exchange Agreement as a
group. The information is determined in accordance with Rule 13d-3
promulgated under the Exchange Act. Except as indicated below, the
stockholders listed possess sole voting and investment power with respect to
their shares.
Before Closing of Exchange After Closing of Exchange
Agreement (1) Agreement (2)
---------------------------- -----------------------
Name and Address of Common Percent Common Percent
Beneficial Owner Stock Of Class Stock of Class
----------------------- ------------- -------------- ------------ ----------
Officers and Directors:
Jack M. Gertino (3)
8 East Broadway #428
Salt Lake City, UT
84111 53,975 10.44 163,581(6) 1.49
Richard B. Stuart (3)
PO Box 236
Edmonds, WA 98020 50,960 9.86 160,566(6) 1.46
Liu Yan-qing (4)(5) 0 0.00 4,660,595 42.52
Han Xiao-yan (4)(5) 0 0.00 1,402,907 12.80
Wang Hai-feng (4)(5) 0 0.00 0 0.00
All Officers and Directors
as a group (2 persons prior
to and three persons
following the consummation
of the Exchange Agreement): 104,935 20.30 6,063,502 55.32
Other Principal Shareholders:
The Harker Group Limited
1717 Monte Carlo Drive
Salt Lake City, UT 84121 51,944 10.05 51,944 *
Jin Zheng (4) 0 0.00 812,284 7.41
Sun Xiao-guang (4) 0 0.00 1,085,402 9.90
Qu Zhi-hua (4) 0 0.00 1,090,912 9.95
*Less than 1%
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(1) As of the date of this Form 8-K, the Company had 516,780 shares of
common stock outstanding.
(2) Based on 10,960,620 shares of the Company's common stock projected to
be outstanding following the closing of the transactions contemplated
by the Exchange Agreement.
(3) Current officer and director of the Company.
(4) The street address of the named beneficial and other principal
shareholder is No. 38 Dingxin 3rd Street, Nangang District, Harbin
Heilongjiang Province, People's Republic of China 150001.
(5) Officer and director after closing of the Exchange Agreement in the end
of May, 2006.
(6) In connection with the closing of the Exchange Agreement, Messrs.
Gertino and Stuart will be issued a total of 219,212 shares, or 109,606
shares each, under a Consulting Agreement. (See "Certain Relationships
and Related Transactions").
DIRECTORS AND EXECUTIVE OFFICERS
Current Management of the Company
Effective upon the closing of the transaction under the Exchange
Agreement and following the expiration of the ten-day period beginning on the
later of the date of the filing of an Information Statement with the SEC
pursuant to Rule 14f-1, the Company's board of directors will be reconstituted
and fixed at three directors. On that date, Jack M. Gertino and Richard B.
Stuart will resign as directors of the Company, and Liu Yan-qing, Han Xiao-yan
and Wang Hai-feng will be appointed as directors and shall constitute the
entire board of directors immediately following the closing of the
transactions contemplated by the Exchange Agreement. The following tables set
forth information regarding the Company's current executive officers and
directors and the Company's proposed executive officers and directors after
completing the proposed transaction under the Exchange Agreement.
Each member of the Company's board of directors serves a term of one year
or from the date of election until the end of the designated term and until
the successor is elected and qualified.
Current Executive Officers and Directors
Set forth below are the current officers and directors of the Company,
who are expected to resign in approximately the end of May, 2006, in
connection with the closing of the Exchange Agreement.
Name Age Positions Since
---------------------- ------ ------------------------------------ -----
Richard B. Stuart 72 President and Director 1986
Jack M. Gertino 67 Secretary, Treasurer and Director 1986
The following is information on the business experience of each current
director and officer.
4
Richard B. Stuart earned his Bachelor of Arts degree at New York
University in 1955 and masters and doctoral degrees at Columbia University in
1960 and 1965, respectively. He currently holds the following positions:
President, Behavior Change Systems (Ann Arbor, MI), a firm offering business
consulting and program development services; Clinical Professor Emeritus,
Department of Psychiatry, University of Washington (Seattle, WA). Dr. Stuart
also provides psychological services through a private practice in Seattle,
WA. From 1972 to 1983, he was Psychological Director of Weight Watchers
International and President of its subsidiary, One-To-One Weight Control
Clinics. Dr. Stuart has also been a consultant to companies involved in
businesses ranging from wholesale groceries to auto parts production and human
services.
Jack M. Gertino has been a private investor and business consultant in
Salt Lake City, Utah, for the past ten years. For the past ten years, he has
also been engaged in the private development of, and investment in, commercial
and residential real estate in Utah, Arizona and New Mexico. He currently
provides consulting services for financial institutions. Mr. Gertino has been
involved in private and public financings over the past twenty years. From
February 1992 to August 2005, he served as a director of Red Horse
Entertainment Corporation, a publicly held shell corporation.
Executive Officers and Directors After the Closing of the Exchange Agreement
The following individuals are expected to be appointed as the officers
and directors in the end of May, 2006, in connection with the closing of the
Exchange Agreement ("New Management").
Name Age Positions
------------------------ ---- ---------------------------------
Liu Yan-qing 42 CEO, President and Director
Han Xiao-yan 40 CFO and Director
Wang Hai-feng 30 Secretary/Treasurer and Director
The following is information on the business experience of each of the
members of management after the closing of the Exchange Agreement.
Liu Yan-qing has been Chairman of the Board and Chief Executive Officer
of ACPG since December, 2005, and Chairman of the Board of TDR, ACPG's
wholly-owned subsidiary, since 2000. He is a founder of TDR. He also serves
as the General Manager of Harbin First Bio-Engineering Company Limited, a
subsidiary of TDR. He graduated from Prophylactic Department of Harbin
Medicine University, in 1988, where he obtained his bachelor's degree. In
2005, he studied at Tsing Hua University and got an Executive Master of
Business Administration in 2005. Before establishing his own company, he had
8 years of experience as a reporter of Family Health Newspaper. He has 10
years of experience in drug marketing, R&D of new drugs and enterprise
management. He has been instrumental in establishing TDR's sales program and
sales network covering the PRC.
5
Han Xiao-yan has been an officer and director of ACPG since December,
2005, and has served as the General Manager of TDR since 2004 and a member of
the board of directors of TDR since 2000. She is a founder of TDR. She also
serves as the Vice Director of Harbin First Bio-Engineering Company Limited.
She received a Master of Business Administration at Harbin Industrial
University in 2002. She graduated from Heilongjiang Economic and Management
Institute in 1990. She had five years of hygiene and medical media experience
before becoming employed by TDR, and has been instrumental in developing and
marketing TDR's products and expanding its sales. She serves as senior
marketing manager and administrative manager. She has 10 years of financial
management experience. In 2004, she was appointed the general manager of TDR,
with responsibility for financing, production, quality control and purchasing.
In 2003, she was appointed vice director of First Bio-Engineering Company
Limited.
Wang Hai-feng has been an officer and director of ACPG since December,
2005. He graduated from Heilongjiang University in 2001, with a bachelor's
degree in English. He graduated from Jiamusi University in 1998 with a
bachelor's degree in International Trade. He joined TDR in 2003 and has
served as the manager of the international business department, and the
assistant to the president and the secretary of the board of directors. He
has been instrumental in the establishment of the Company's international
business department and the expansion of foreign trade. He has been a
director of TDR since 2005. In 2005, he assisted in product innovation and
branding for international markets. Through the efforts of Mr. Wang, the
Company has established strategic relationships with several foreign partners.
Before his employment by TDR, Mr. Wang had experience in product exporting,
translating and project operations in foreign companies.
Involvement in Certain Legal Proceedings
Neither the current executive officers and directors, nor the individuals
named above who will be appointed at the closing, have been named in any
material legal proceedings which occurred within the last five (5) years of
any type as described in Regulation S-K.
Board Committees; Selection of Directors; Stockholder Communication; Board
Compensation
Prior to the acquisition of ACPG in May, 2006, the Company had no active
operations and its assets consisted entirely of cash. Consequently, the Board
of Directors had determined that it was not necessary or practical for the
Company to establish an audit committee or audit committee charter, recruit a
financial expert to serve on the Board, establish a nominating committee or
nominating committee charter, establish a compensation committee, or adopt a
code of ethics applicable to its chief executive and financial officers.
Immediately following the closing, the new Board of Directors will, after it
takes office, evaluate and make determinations with respect to: (a) whether
the Company has an audit committee financial expert within the meaning of Item
401(f) of Regulation S-B adopted by the Securities and Exchange Commission and
whether that person is independent; (b) the formation of committees, including
a compensation and nominating committee; (c) committee assignments; and (d)
related matters.
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The Company has not held an election of directors or had any vacancies
in the Board since the Company registered its common stock under Section 12(g)
of the Securities Exchange Act of 1934 in 1999. Under Nevada law failure to
hold director elections does not affect the standing or status of a
corporation, and directors continue to hold office until their successors are
elected. Management believed that, during the period the Company was a shell
corporation, recruiting additional directors would likely have little or no
success, and that replacing directors would provide little or no benefit to
the Company and its stockholders. Consequently, management determined that
using the Company's limited cash to establish director recruiting and election
policies and procedures, including the formation of a nominating committee,
would not be in the best interest of the Company and its stockholders. Since
no procedures have been adopted for recruiting directors and no elections of
directors have been held, the Company has not adopted a policy regarding
consideration of director candidates recommended by stockholders. An
evaluation of whether to adopt any such policies or procedures, including any
process for stockholders to recommend nominees for election to the Board or
for considering stockholder nominees, will be undertaken by the new directors
after taking office.
At December 31, 2005, the Company was a shell corporation with
approximately 100 stockholders of record and only one business office. As a
result of these circumstances, which have characterized the Company since
1986, management determined it was not necessary to establish a formal process
for stockholders to send communications to the Board in order for them to
communicate with the Board. An evaluation of whether to adopt in the future a
process for stockholders to communicate with the Board will be undertaken by
the new directors after taking office.
Reports of Beneficial Ownership
Section 16(a) of the Securities Exchange Act of 1934 requires officers
and directors of the Company and persons who own more than ten percent of a
registered class of its equity securities to file reports of ownership and
changes in their ownership on Forms 3, 4, and 5 with the Securities and
Exchange Commission, and forward copies of such filings to the Company. Each
of the new officers and directors have indicated their intention to timely
file a Form 3 with the Securities and Exchange Commission reporting their
respective stock ownership in the Company.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
Current Management
The following sets forth the compensation of Comet's current executive
officers for the three fiscal years ended December 31, 2005. These
individuals are expected to resign and be replaced by New Management in the
end of May, 2006, in connection with the closing of the Exchange Agreement.
7
------------------------------------------------------------------------------
Fiscal
Name and Principal Year ended All other
Position December 31 Salary($) Bonus($) Options(#)Compensation($)
-------------------- ------------ --------- -------- --------- ---------------
Richard B. Stuart 2005 0 0 0(4) 10,000(1)
President and Chief 2004 0 0 0 19,265(2)
Executive Officer 2003 0 0 0 10,000(3)
------------------------------------------------------------------------------
Jack M. Gertino 2005 0 0 0(4) 20,000(1)
Secretary/Treasurer 2004 0 0 0 38,530(2)
and Chief Financial 2003 0 0 0 20,000(3)
Officer
------------------------------------------------------------------------------
(1) The Company recorded compensation expense for Richard B. Stuart and
Jack M. Gertino, computed on an hourly basis, in the amounts indicated, for
their efforts in reviewing specific business opportunities for a possible
business combination during the fiscal year, participating in meetings and
conference calls in connection with such opportunities, and undertaking
related activities.
(2) The Company recorded compensation expense for Richard B. Stuart and
Jack M. Gertino, computed on an hourly basis, in the amounts indicated, for
their efforts in reviewing a possible business combination during the fiscal
year 2004, participating in meetings and conference calls in connection with
such opportunity, assisting in the negotiation and preparation of agreements
and in the preparation of disclosure documents, and undertaking related
activities.
(3) The Company recorded compensation expense for Richard B. Stuart and
Jack M. Gertino, computed on an hourly basis, in the amounts indicated, for
their efforts in reviewing the business opportunity in 2003.
(4) On March 11, 1999, the Company granted to Richard B. Stuart, Phillip C.
Gugel (deceased) and Jack M. Gertino, officers and directors, options to
purchase 25,000 shares of common stock each at an exercise price of $1.50,
which was the average of the bid and asked prices for the common stock on that
date. The options were issued to compensate these persons for their services
to the Company over the past 13 years, for which they had received no other
compensation. On September 26, 2005, the Company's current officers and
directors agreed to eliminate certain indebtedness owed to them through the
exercise of certain stock options referenced above. Accordingly, Jack M.
Gertino exercised his stock options in full, for the conversion of a total of
$37,500 in indebtedness to him, into a total of 25,000 shares of restricted
common stock at a price of $1.50 per share. Richard B. Stuart agreed to
convert the entire obligation to him ($23,265), into a total of 15,510 shares
of common stock under his stock options at a price of $1.50 per share.
Because Dr. Stuart did not exercise all of his stock options, he was reissued
stock options to purchase a total of 9,490 shares at $1.50 per share. These
options were exercised on January 28, 2006, for cash. Therefore, the options
of Richard B. Stuart and Jack M. Gertino have now been fully exercised. The
options of Mr. Gugel have now passed on to his estate.
8
New Management (expected to be appointed in the end of May, 2006)
The Company expects that in the end of May, 2006, current management of
the Company will resign, and the designees of ACPG will be appointed, in
connection with the closing of the Exchange Agreement. The following sets
forth the compensation of these individuals from ACPG and its wholly-owned
subsidiary, TDR, for the three fiscal years ended December 31, 2005.
------------------------------------------------------------------------------
Fiscal
Name and Principal Year ended All other
Position December 31 Salary($)*Bonus($) Options(#)Compensation($)
-------------------- ------------ --------- -------- --------- ---------------
Liu Yang-qing 2005 19,500 0 0 0
President and Chief 2004 15,000 0 0 0
Executive Officer 2003 12,000 0 0 0
-------------------- ------------ --------- -------- --------- --------------
Han Xiao-yan 2005 16,500 0 0 0
Chief Financial 2004 9,000 0 0 0
Officer 2003 6,000 0 0 0
-------------------- ------------ --------- -------- --------- --------------
Wang Hai-feng 2005 13,500 0 0 0
Secretary/Treasurer 2004 5,375 0 0 0
2003 4,500 0 0 0
------------------------------------------------------------------------------
*Based on conversion rate of approximately 8.00RMB for $1.00US.
Stock option
The Company has not adopted any stock option plan and no options have
been issued, or are proposed to be issued, to the new officers and directors
after the closing of the Exchange Agreement at the present time.
Employment contracts
Each of the new officers and directors are employed under written
employment contracts with ACPG. The employment contracts are for a term of
two years that began December 15, 2005 and end December 15, 2007. All three
officers also have employment agreements with TDR, the subsidiary, beginning
January, 2005 and terminating January, 2008. These agreements provide for the
same government benefits and employment regulation that are generally
applicable to employees in the People's Republic of China.
Compensation of directors
The Company has not adopted any plan or arrangement for compensating
directors for their services.
9
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 26, 2005, Jack Gertino and Richard Stuart, M.D., officers
and directors, exercised Options resulting in the issuance of 29,515 shares
and 15,510 shares of restricted common stock, respectively, to Mr. Gertino and
Dr. Stuart. Mr. Gertino and Dr. Stuart were owed $46,530, and $23,265,
respectively, for services rendered to the Company, primarily in connection
with a possible merger transaction that, after several months of efforts, was
terminated. The options were issued in exchange for the cancellation of debt
to Messrs. Gertino and Stuart. For additional information concerning these
transactions, reference is made to a Current Report on Form 8-K filed on or
about September 28, 2005, incorporated herein by reference. Following this
transaction, Dr. Stuart's remaining option entitled him to purchase an
additional 9,490 shares at $1.50 per share, which he exercised for cash on
January 28, 2006.
Except as indicated above, there are no proposed transactions and no
transactions during the past two years to which the Company was a party and in
which any officer, director, or principal shareholder, or their affiliates or
associates, was also a party.
In connection with the Exchange Agreement, the Company and ACPG have
entered into a Consulting Agreement dated May 11, 2006, with Jack M. Gertino
and Richard B. Stuart, officers and directors who will resign at closing,
providing for their services as consultants following the closing. Messrs.
Gertino and Stuart have agreed to provide consulting services to the Company
for a two-year period in the areas of financial and management planning,
financing assistance and capital formation. For such services, the Company
and ACPG have agreed to compensate Messrs. Gertino and Stuart as follows: (a)
the sum of $3,000 per month for a period of two years; (b) the issuance of a
total of 219,212 shares of restricted common stock (or 109,606 shares each) of
the Company, of which one-half will be issued at closing and he other one-half
will be held in escrow and delivered after three months following the closing;
and (c) a Warrant to purchase up to $100,000 in equity securities of the
Company, on the same terms, and at the same exercise price, at which the
Company may offer equity securities in the next private or public equity
offering of securities by the Company. This transaction cannot be considered
the result of arms' length negotiations.
Liu Yan-qing and Han Xiao-yan, officers of ACPG and TDR who will be
appointed as directors and President and Chief Financial Officer,
respectively, of the Company acquired 100% of ACPG in December, 2005, for a
nominal amount of cash ($700), for the purpose of creating a holding company
for TDR and its subsidiaries. On December 15, 2005, ACPG and TDR entered into
a transaction under the terms of which ACPG issued stock to the TDR
shareholders in exchange for 100% of the stock of TDR.
Effective March 9, 2006, the Company completed a 1-for-8 reverse split of
its outstanding common stock. All numbers in this report give effect to the
reverse split.
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