6-K 1 unaudit917final.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 or 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 333-147086-01 TONGXIN INTERNATIONAL LTD. _____________________________________________________________________ (Translation of Registrant's Name into English) 199 Pierce Street,Suite 202 Birmingham, Michigan 48009 _____________________________________________________________________ (Address of Principal Executive Office) Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F [X] Form 40-F [ ] Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____ Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders. Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____ Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR. Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes [ ] No [X] If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): This form 6-K consists of the following exhibits attached hereto: 1. Tongxin International, Ltd. Reports Fiscal Year Unaudited 2009 Financial Results ------------------------------------------------------------------------- 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, thereunto duly authorized. TONGXIN INTERNATIONAL LTD. ---------------------------------- (Registrant) By: /s/ Rudy Wilson ----------------------------- Name: Rudy Wilson Title: Chairman of the Board and Chief Executive Officer /s/ Jackie Chang ----------------------------- Name: Jackie Chang Title: Chief Financial and Accounting Officer Date: September 17, 2010 ================================================================= EXHIBIT Exhibit Number Description 1. Tongxin International, Ltd. Reports Fiscal Year Unaudited 2009 Financial Results ================================================================= Tongxin International, Ltd. Reports Full Year Unaudited 2009 Financial Results - Revenues increased 23.7% to $121.6 million from $98.4 million meeting pre-announced revenues of $121 to $124 million - Non GAAP "adjusted" net income excluding non-cash charges was $8.1 million for the year with adjusted EPS of $0.68 per share versus guidance of $16.7 million in 2008 - Company files Compliance Plan with Nasdaq NEW YORK and CHANGSHA, China, September 17, 2010 Xinhua- PRNewswire- FirstCall - Tongxin International Ltd. ("Tongxin") ("Company") (NASDAQ:TXIC-News) a manufacturer of engineered commercial vehicle body structures ("EVBS" or "Cabs"), SUV passenger vehicle bodies and stamped body parts for the Chinese commercial vehicle market, today announced the Company's 2009 full year unaudited financial results for the period ended December 31, 2009 and the filing of a Plan of Compliance ("Plan") with NASDAQ. Compliance with NASDAQ Listing Requirements On July 23, 2010 TXIC announced it received a NASDAQ Staff Deficiency Letter on July 19, 2010 indicating that TXIC no longer complies with NASDAQ Listing Rules (the "Rules") for continued listing set forth in NASDAQ Listing Rule 5810(c)(2) (the "Rule") due to TXIC's failure to file its Form 20-F for the period ended December 31, 2009, by the due date, as extended by TXIC's filing under SEC Rule 12b-25, of July, 15, 2010, as indicated above. The Company today submitted to NASDAQ a Plan to regain compliance with the Rules. If the plan is accepted by NASDAQ, the Company will receive an extension of up to 180 calendar days from the due date, as extended, or until January 11, 2011, to establish evidence of compliance. There can be no assurance that these actions will be successful in maintaining the Company's listing on NASDAQ for the Company's common stock. If NASDAQ does not accept the Company's plan for compliance or if the Company is unable to comply with all applicable listing requirements of NASDAQ, then the Company's common stock could be delisted from NASDAQ Global Markets. This could impair the liquidity and market price of the Company's common stock. In addition, the delisting of the Company's common stock could materially adversely affect the Company's access to the capital markets, and any limitation on market liquidity or reduction in the price of the Company's common stock as a result of that delisting could adversely affect the Company's ability to raise capital, if needed, on terms acceptable to the Company or at all. Accounting Treatment of Certain Related Party Transactions As disclosed on July 15, 2010 the Company was in the process of obtaining adequate documentation to support and determine the appropriate accounting treatment of certain related-party transactions of approximately $7.7 million with a related party, Meihua Bus ("MB"). As a result of the foregoing, the Company's completion of its annual consolidated financial statements and required disclosures were delayed pending the Company's review of these related-party matters. The Company's Audit Committee has obtained a third-party, KPMG, LLP on April 26, 2010, to assist in obtaining adequate documentation for this review. The Company has completed this review and has accounted for the transactions on its income statement and balance sheet. See Extraordinary Net Income Items Incurred During 4th Quarter 2009 for further details. The Company is discussing with its subsidiary, Hunan Tongxin Enterprise Co Ltd. the resolution of certain related party transactions of $7.7 million and anticipates resolving these issues as soon as possible allowing the company to file its 2009 audited financial statements. While these discussions are on going, the Company has elected to provide to its investors unaudited financial statements. The Company does not anticipate any material changes between the unaudited and audited financial statements when filed. 2009 Fiscal Year Financial Results Net revenues for the year ended December 31, 2009 reached $121.6 million, an approximate $23.3 million or 23.7% increase over the same period of the prior year. According the RL Polk, a total of 12.8 million vehicles were built in China during 2009, representing a 50% year-over-year increase. Exports to Vietnam reached $12.5 million, or 21.4% increase over the same period in 2008 due to shipments of 4,810 EVBS (including 5 different EVBS models). The Vietnamese automotive market began to show signs of returning to annual growth trend of approximately 15% in 2009 versus 2008. The Company expects that this emerging market will continue to grow in 2010. Cost of goods sold were $102.8 million in 2009, an increase of $19.3 million or 23.2% versus the same period in 2008. The increase in costs was primarily due to increased sales volume. Costs of goods as a percentage of revenues was 84.6% in 2009 compared to 84.9% in 2008. Overall, steel prices decreased by approximately 10% on average from 2008 to 2009. The decrease in steel prices was offset by higher operational costs including labor costs of $1.2 million, transportation costs of $1 million, costs for cab components and accessories, reserves for related party transactions of $3.3 million and related party purchases of $7.7 million which the company is in discussions with the related party and plans to settle the amount in 2010. As a result, gross margin only increased a minimal 40 basis points to 15.5% in 2009 from 15.1 % for the prior period ended December 31, 2008. Total operating expenses for the year 2009 were $9.4 million versus $7.0 million for the same period in 2008. As a percentage of revenues, operating expenses were 7.7% compared with 7.2% for the same period, 2008. Included in the 2009 operating expenses was approximately $0.5 million in costs reflecting SOX and ERP expenses. Excluding onetime costs, total operating expenses were 7.3% of revenue for 2009. The Company is reporting a non GAAP "adjusted" operating and net income as a result of the non-cash warrant loss of $20.8 million reported in its 20-F and financial tables below. The non-cash loss and SOX expenses are excluded from the "adjusted" numbers reported for the year. Considering the effect the warrant loss have on the reported GAAP financials, the management of Tongxin believes adjusted numbers provide more visibility in its operational performance. GAAP operating income was $9.4 million versus $7.8 million the period ended December 31st, 2008. Tongxin is subject to the standard Chinese corporate tax rate of 25% and rate reduction of 10% from High Tech. Enterprise tax. GAAP net loss was $13.3 million and Non GAAP adjusted net income was $8.1 million, representing a decrease of 10% from $9.0 million reported in the same period prior year. Adjusted net profit margins were 6.7% for the year versus 9.1% reported for the same period of 2008. 2009 GAAP earnings per share were ($1.12) while Non GAAP adjusted earnings per share were $0.68. Extraordinary Net Income Items Incurred Accounted in the Fourth Quarter 2009 1. Related Parties Accounts Receivables On December 31, 2008, the Company had approximately $17.3 million in receivables from related parties. Related parties to Hunan Tongxin include; Meihua Bus Manufacture Co. , $14.1 million and Hunan Tongxin Development and Construction Company $3.2 million. During 2009, related party receivables decreased due to a combination of sales of steel and exports of $14.6 million and cash collections, offsetting purchases from related parties and bad debt reserves associated to related party transactions. Specifically, $21.9 million were collected as cash from related parties, $3.3 million was a bad debt reserve and $7.7 million in related party payables were used to offset the remaining balance of related party receivables. As a result, payable to related parties of approximately $0.9 million is recorded on the Company's unaudited financials. Management believes, based upon its collection history of related party receivables, that the Company will be able to resolve any collection disputes with its related parties. 2. Related Party Accounts Payable to Meihua Bus Adjustment of the Company's 2008 $17.3 million in related party receivables were offset by trade payables of approximately $7.7 million resulting from component purchases from Meihua Bus throughout 2009. The payables were used to offset accounts receivables related to sale of steel, export sales and miscellaneous. items due the Company from Meihua Bus. The Company has recorded the $7.7 million as a cost against net income resulting in an unfavorable variance to net income for fiscal 2009. Of the $7.7 million purchase, $3.1 million was recorded in the 4th quarter 2009. 3. Inventory Reconcilement The Company did not have adequate internal controls in place to ensure that inventories purchased for production and assembly purpose were timely and completely recorded and accrued upon receipt and quality inspection. Substantial resources had to be devoted at period end to quantify the purchase accrual for financial reporting purposes, which resulted in a material adjustment of approximately $4.6 million to accrued purchases and cost of goods sold during the 4th quarter and an unfavorable variance to net income for fiscal 2009. Balance Sheet and Cash Flow Discussion As of December 31, 2009, Tongxin International had approximately $16.5 million in cash and cash equivalents compared to $11.3million on December 31st, 2008. The company maintained a non-GAAP current ratio of 1.03 and GAAP current ratio of 0.88 and $16.6 million in accounts receivable on December 31, 2009. Corresponding days sales outstanding were 50 days. Stockholders' equity was $87.3 million on December 31, 2009 versus $79.8 million reported December 31st, 2008. The increase is a result of exercised warrant of $10.7 million. Cash Flow from operations was $17.3 million for 2009 vs. $12.5 million in 2008. Total capital expenditures were $18.1 million in 2009 vs. $9.6 million in 2008. Total non weighted common shares outstanding were 13,455,453 as of December 31, 2009. Tongxin further recognizes it has yet to resolve the reported $17.4 million of prior year income tax payable reported on its balance sheet. It has petitioned the local tax authorities to remove this line item from Tongxin International's liabilities since the taxes in question preceded its merger with Hunan Tongxin. The Company has approximately 2.88 million warrants outstanding with strike price of $5.00 and callable at $10.00. At the Company's option, and in the event the selling price of the Company's common shares trades at an average price of $10.00 for twenty days out of a thirty day selling period, it may redeem the warrants on an all on none basis. The warrants expire on April 10, 2011. This press release and the Form 6-K contain forward-looking statements, including (without limitation) statements related to the Company's intentions to regain compliance with NASDAQ rules. Words such as "will", "plans to" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon the Company's current expectations. Forward-looking statements involve risks and uncertainties. These and other risk factors are discussed under "Risk Factors" and elsewhere in the Company's filings with the Securities and Exchange Commission. The Company expressly any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. For more information, please contact: COMPANY: Mr. Rudy Wilson, CEO Ms. Jackie Chang, CFO Tel: 248-593-8330 Email: rudy@txicint.com jackie@txicint.com Web: www.txicint.com TONGXIN INTERNATIONAL, LTD. CONSOLIDATED BALANCE SHEETS As of December 31, 2009 and 2008 and December 31, 2008 (US$ amounts expressed in thousands, except for share data and earnings per share)
December 31,2009 December 31,2008 ---------------- ------------------- (unaudited) (audited) Assets Current assets: Cash and cash equivalents $ 16,493 $ 11,313 Restricted cash-Security deposit 4,692 5,836 Notes receivable 5,769 2,939 Accounts receivable - Trade, net of allowance for doubtful accounts of $2,957 and $3,856, respectively 10,865 10,214 Other receivable - net of allowance for doubtful accounts of $406 and $407, respectively 2,103 1,600 Due from related party, net of valuation allowance of $3,391 in 2009 (947) 17,313 Inventories 25,070 19,096 Prepaid expenses 421 1,331 Advance to suppliers 1,960 3,012 Deferred income tax assets 2,211 2,067 --------------- -------------- Total current assets 68,638 74,721 --------------- -------------- Investments in non-consolidated subsidiaries and affiliates 209 208 Property,plant and equipment, net of depreciation of $5,709 and $1,927, respectively 47,303 36,918 Land occupancy rights 13,274 9,633 Goodwill 36,880 36,696 --------------- -------------- Total assets 166,303 158,176 --------------- -------------- Liabilities and Stockholders' equity Current liabilities: Accounts payable 13,273 15,201 Notes payable 4,692 5,836 Accrued expenses and other liabilities 7,080 7,393 Income taxes payable 16,196 17,418 Short-term loans 24,876 16,669 Short-term loans from shareholders - 8,591 Warrant liabilitt 11,649 452 --------------- -------------- Totoal current liabilities 77,766 71,560 Long-term Liabilities: Long-term loans - 4,523 Deferred income tax liability 1,283 2,243 Other - 25 --------------- -------------- Total liabilities 79,049 78,351 Shareholders' equity: Successor Preferred stock - $0.001 par value,authorized, 1,000,000 shares; none issued Common stock-successor, $0.001 par value, authorized 39,000,000 shares; issued 15,044,875 shares and outstanding 13,455,453 shares 15 13 Additional paid-in capital 97,420 77,081 Successor Treasury stock, 1,589,422 shares (7,682) (7,682) Accumulated other comprehensive income 788 426 Retained earnings (3,287) 9,987 --------------- -------------- Total shareholders' equity 87,254 79,825 --------------- -------------- Total liabilities and shareholders' equity 166,303 158,176 --------------- --------------
==================================================== TONGXIN INTERNATIONAL, LTD. CONSOLIDATED INCOME STATEMENT (US$ amounts expressed in thousands, except for share data and earnings per share)
Successor Predecessor company company for -------------------------------------- the eight- for the month four-month Year ended Period from Period from Year ended Year ended May 1, 2008 Jan.1, 2008 December31, to Dec.31, to April 30, December 31, December 31, 2009 2008 2008 2008 2007 ------------ ------------ ----------- ----------- ------------ (unaudited) (audited) (audited) (audited) (audited) Revenues $ 121,629 $ 55,770 $ 42,588 $ 98,358 $ 89,873 Cost of Goods Sold 102,847 35,516 31,463 66,979 60,543 Cost of goods sold from related party purchase - 11,691 4,847 16,538 9,322 ------------ ------------ ----------- ----------- ------------ Total cost of goods sold 102,847 47,207 36,310 83,517 69,865 Gross Profit 18,782 8,563 6,278 14,841 20,008 Operating expenses: Selling and General and administrative 9,400 5,248 1,793 7,041 5,372 expenses ------------ ------------ ----------- ----------- ------------ Operating income 9,382 3,315 4,485 7,800 14,636 Other income, net Nonoperating income 27 78 4,111 4,189 - Subsidy income 702 469 212 681 - (loss)gain on warrants (20,806) 13,535 - 13,535 - Investment income 15 15 - 15 - Equity earnings from equity investee - - - - 19 ------------ ------------ ------------ ----------- ------------ Total Other Income (20,062) 14,097 4,323 18,420 19 Other Expenses Nonoperating expenses - 183 6 189 - Interest expense 1,753 1,095 1,607 2,702 1,723 ----------- ------------ ------------ ---------- ------------ Total Other Expenses 1,753 1,278 1,613 2,891 1,723 Income(loss) before income taxes (12,433) 16,134 7,195 23,329 12,932 Income taxes expense 841 627 2,216 2,843 3,853 ----------- ------------ ------------ ---------- ------------ Net(loss)income (13,274) 15,507 4,979 20,486 9,079 Other comprehensive income- Foreign translation adjustment 362 426 721 1,147 940 ----------- ------------ ------------ ---------- ------------ Comprehensive income (12,912) 15,933 5,700 21,633 10,019 ----------- ------------ ------------ ---------- ------------ Net Income per common share-basic (1.12) 1.37 0.07 1.81 0.13 Net Income per common share-diluted (1.12) 1.37 0.07 1.81 0.13 =========== ============ ============ ========== ============ Weighted average shares outstanding-basic 11,846,273 11,294,633 72,521,705 11,294,633 72,521,705 Weighted average shares outstanding-diluted 11,846,273 11,294,633 72,521,705 11,294,633 72,521,705
================================================== Consolidated Statements of Cash Flows (US$ amounts expressed in thousands)
Successor Predecessor company company for -------------------------------------- the eight- for the month four-month Year ended Period from Period from Year ended Year ended May 1, 2008 Jan.1, 2008 December31, to Dec.31, to April 30, December 31, December 31, 2009 2008 2008 2008 2007 ------------ ------------ ----------- ----------- ------------ (unaudited) (audited) (audited) (audited) (audited) Cash flows from operating activities: Net(loss) income $ (13,274) $ 15,507 $ 4,979 $ 20,486 $ 9,079 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Reversal of bad debt allowance - (944) - (944) (409) Depreciation expense 3,782 1,927 901 2,828 2,080 Amortization expense 318 39 15 54 42 Deferred income taxes (1,104) (105) 297 192 - Loss(gain) on warrant 20,806 (13,535) - (13,535) - Changes in operating assets and liabilities: (Increase)/decrease in inventories (5,974) (3,291) (1,821) (5,112) (4,980) (Increase)/decrease in trade accounts receivable (3,481) 6,835 4,618 11,453 (14,684) (Increase)/decrease in Due from related party 18,260 7,751 (9,475) (1,724) - (Increase)/decrease of prepaid expenses and other current assets 1,459 (872) (401) (1,273) (324) Increase/(decrease)in accounts payable (1,929) (1,610) 2,577 967 15,976 Increase/(decrease)of accrued expenses, and other liabilities (339) (2,937) 1,994 (943) 321 Increase/(decrease)in income taxes payble (1,222) - - - - ------------ ------------ ----------- ----------- ------------ Net cash provided by operating activities 17,302 8,765 3,684 12,449 7,101 ------------ ------------ ----------- ----------- ------------ Cash flows from investing activities: Acquisition of Hunan Tongxin Enterprise Co., Ltd., net of cash acquired of $5,319 - (7,700) - (7,700) - Purchase of property and equipment and land occupancy rights (18,125) (8,434) (1,134) (9,568) (6,390) ------------ ------------ ----------- ----------- ------------ Net cash used in investing activities (18,125) (16,134) (1,134) (17,268) (6,390) ------------ ------------ ----------- ----------- ------------ Cash folws from financing activities: Proceeds from loans payable 25,733 16,559 7,090 23,649 17,437 Proceeds from loans-related parties - 4,638 5,256 9,894 - Dividends paid - - - - (1,054) Payments to loans payable (22,049) (18,252) (5,192) (23,444) (20,343) Payments to loans-related parties (8,591) (9,343) (7,082) (16,425) - Cash received from warrant redemption 10,732 - - - - ------------ ------------ ----------- ----------- ------------ Net cash (used in) provided by financing activities 5,825 (6,398) 72 (6,326) (3,960) ------------ ------------ ----------- ----------- ------------ Effect of foreign exchange rate changes 178 (837) 1,036 199 1,329 Net increase(decrease)in cash and cash equivalents 5,180 (14,604) 3,658 9,651 (1,920) Cash and cash equivalents at beginning of year 11,313 25,917 1,662 1,662 3,582 ------------ ------------ ----------- ----------- ------------ Cash and cash equivalents at end of year 16,493 11,313 5,320 11,313 1,662 ------------ ------------ ----------- ----------- ------------ Supplemental information: Income taxes paid 1,104 439 373 812 936 Interest paid 2,083 1,451 1,458 2,909 2,424 Shares issued for acquisition of Hunan Tongxin Enterprise Co., Ltd. - 51,546 - - - Debt extinguishment via sale of equity investment - - 686 - - Capitalized Interest - 324 - - - Non-cash investing and financing activities: Long-term loans from shareholders - - - - 10,476 Dividends to shareholders - - - - (10,476)