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: December 16, 2004
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
Item 1.01. Entry into Material Definitive Agreement
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On December 16, 2004, the Registrant, through its wholly-owned
subsidiary PacificNet Investment Holdings Limited ("PacificNet Holdings"),
entered into a definitive agreement to obtain a controlling interest in
GuangZhou Dianxun Digital Network Technology Co., Ltd. ("Clickcom"), through the
purchase of a 51% interest in Clickcom's parent company, PacificNet Clickcom
Limited, a British Virgin Islands Company ("Clickcom-BVI"). Clickcom is the
wholly-owned subsidiary of Clickcom-BVI. Clickcom is in the business of
providing value-added telecom services (VAS), 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, BREW, EMS, 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.Mo168.com.
PacificNet Holdings agreed to purchase 1,625 shares (the "Sale Shares")
of Clickcom-BVI from Ming Zhang, Jinnan Lai and Dong Liu (the "Sellers"), and
directly subscribed to Clickcom-BVI to purchase 670 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.
The total consideration paid for the Sale Shares was payable as
follows:
(i)USD$650,000, by delivery of 130,000 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 escrow with an
escrow agent designated by PacificNet Holdings. The Registrant Shares will be
released to Sellers in equal installments of 26,000, the first installment to be
released 45 days after the closing of the transaction. The remaining
installments will be released within 30 days after the end of each quarter,
provided that Clickcom attains certain net income milestones by the end of each
quarter. The Sellers will be entitled to receive all of the Registrant Shares if
Clickcom has achieved cumulative net income for the year ended December 31, 2005
of not less than USD$600,000.
(ii) issuance of warrants to purchase up to 50,000 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 December
16, 2004. The warrant is exercisable for a period of three years.
PacificNet Holdings subscribed to Clickcom-BVI to purchase an
additional 670 shares. The total purchase price for the Subscribed Shares is
USD$268,000, 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 Clickcom and Clickcom-BVI approving the transaction.
In connection with the transactions described above, on October 31,
2004, Clickcom entered into a ten year Consulting Services Agreement, which was
amended on December 1, 2004, with Guangzhou DianXun Technology Limited, a
privately owned Chinese company that holds various ICP and telecom Value Added
Services licenses in China ("Guangzhou DianXun"). The Sellers own all of the
outstanding shares of Guangzhou DianXun. Pursuant to the terms of the Consulting
Agreement, Clickcom agreed to provide certain technical consulting services
required for Guangzhou DianXun 's business. For the consulting services,
Guangzhou DianXun agreed to pay Clickcom a set percentage of the income received
for sales of Guangzhou DianXun's value added services. As security for the
payment of this fee, on December 1, 2004, the Sellers entered into a Share
Pledge Agreement with Clickcom-BVI, pursuant to which they each pledged all of
their shares of Guangzhou DianXun to Clickcom-BVI. In connection with the
pledge, each of the Sellers granted Mr. Victor Tong a power of attorney to vote
their shares of Guangzhou DianXun. In the event Guangzhou DianXun defaults under
the pledge agreement, which includes a default in its obligation to pay the
consulting fees, Clickcom-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 December 16, 2004
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: December 21, 2004