BWOW Wowjoint Holdings Limited (MM)

As filed with the Securities and Exchange Commission on December 12, 2011

Registration No. 333-166479

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM F-1/A

AMENDMENT No. 10

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

WOWJOINT HOLDINGS LIMITED

(Exact name of registrant as specified in its charter)

 

1108 A Block Tiancheng Mansion

#2 Xinfeng Road

Deshengmenwai Street

Xicheng District, Beijing

China 100088

Tel: +86 (010) 8957 9330 (ext. 8011)

Fax: +86 (010) 8957 9553

(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

 

Vcorp Services LLC 20 Robert Pitt Drive, Suite 214 Monsey, NY 10952 Tel: +1 (888) 528 2677

 (Address, including zip code, and telephone number,

including area code, of agent for service)

With copies to:

Robert G. Wray

Skadden, Arps, Slate, Meagher & Flom LLP

1-6-1 Roppong, Izumi Garden Tower 21F

Minato-ku, Tokyo  106-6021

+81 (0)3-3568-2634

+81 (0)3-3568-2626 — Facsimile

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

 

 

CALCULATION OF REGISTRATION FEE CHART

(1)	Pursuant to Rule 416 of the Securities Act of 1933, as amended, the ordinary shares offered hereby also include such presently indeterminate number of shares of the Registrant’s ordinary shares as a result of stock splits, stock dividends or similar transactions.

(2)	Estimated solely for the purpose of calculating the registration fee.

(3)	Calculated pursuant to Rule 457(c) and Rule 457(g) under the Securities Act of 1933, as amended, based on the average high and low price of the ordinary shares and warrants of the registrant as quoted on the Over-The-Counter Bulletin Board on April 30, 2010.

(4)	Represents ordinary shares issuable upon exercise of the warrants that were originally issued to public investors in the registrant’s initial public offering, initially registered by the registrant on the registration statement on Form F-1 (File No. 333-150489) declared effective on May 15, 2008.

(5)	Represents warrants and ordinary shares issuable upon exercise of the warrants being registered for resale that were issued to private placement investors of the registrant prior to the registrant’s initial public offering.

 

 

(10)	All filing fees payable in connection with the registration of these securities were previously paid in connection with the filing of the original registration statement for the initial public offering.

(11)	Pursuant to Rule 457(i), no additional fee is due as a fee is being paid for registration of the ordinary shares underlying the warrants.

 

Pursuant to Rule 429 under the Securities Act of 1933, the prospectus included in this registration statement is a combined prospectus relating also to Registration Statement No. 333-150489 declared effective by the Securities and Exchange Commission on May 15, 2008. This Registration Statement, which is a new Registration Statement, upon effectiveness, also constitutes Post-Effective Amendment No. 1 to Registration Statement No. 333-150489, and such post-effective amendment shall hereafter become effective concurrently with the effectiveness of this Registration Statement and in accordance with Section 8(c) of the Securities Act of 1933.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

PRELIMINARY PROSPECTUS		SUBJECT TO COMPLETION, DATED DECEMBER 12, 2011

 

Wowjoint Holdings Limited

 

 

Our ordinary shares, warrants and units (consisting of one ordinary share and one warrant to purchase one ordinary share) are currently traded on the NASDAQ Stock Market under the trading symbols BWOW, BWOWW and BWOWU, respectively.  On December 9, 2011, the closing sale price of ordinary shares, warrants and units was $0.50 , $0.02 and $0.54, respectively. You are urged to obtain current market quotations of our securities before purchasing any of the securities being offered for sale pursuant to this prospectus.

INVESTING IN OUR SECURITIES INVOLVES SUBSTANTIAL RISKS. YOU SHOULD INVEST IN OUR SECURITIES ONLY IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. FOR A DISCUSSION OF SOME OF THE RISKS INVOLVED, SEE “RISK FACTORS” BEGINNING ON PAGE  6 OF THIS PROSPECTUS.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of the prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is ________, 2011.

This prospectus is not an offer to sell any securities other than the securities offered hereby. This prospectus is not an offer to sell securities in any circumstances in which such an offer is unlawful.

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

 

 

PROSPECTUS SUMMARY

This summary highlights key information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. It may not contain all of the information that is important to you. You should read the entire prospectus, including “Risk Factors,” our consolidated financial statements and the related notes thereto, and the other documents to which this prospectus refers, before making an investment decision.

Unless otherwise stated in this prospectus,

·

references to “Wowjoint,” “we,” “us” or “the Company” refer to Wowjoint Holdings Limited (together with its subsidiaries and affiliated entities, except where the context indicates otherwise);

 

·

references to “CFAC” or “China Fundamental” refer to China Fundamental Acquisition Corporation, our former name;

 

·

except where otherwise indicated, references to “Beijing Wowjoint” refer collectively to Authentic Genius Limited (“AGL”); its consolidated subsidiary, Beijing Xin Fu Industry Consulting Co., Ltd. (“BXFI”); its former variable interest entity ("VIE") and now wholly-owned subsidiary , Beijing Wowjoint Machinery Co., Ltd.; Giant Nova Holdings Limited ; and, for periods subsequent to May 10, 2010, Beijing Wowjoint Xingyun Co., Ltd. (“BWXC”) ;

 

·

references to the “acquisition” or the “business combination” refer to the purchase by China Fundamental of all of the outstanding shares of Beijing Wowjoint on February 22, 2010;

 

·

references to the financial statements of Beijing Wowjoint, either audited or unaudited, refer collectively to those of AGL and its consolidated subsidiary, BXFI; its former VIE and now wholly-owned subsidiary , Beijing Wowjoint Machinery Co; Ltd.; Giant Nova Holdings Limited; and, for periods subsequent to May 10, 2010, BWXC.

 

·

references to “our original shareholders” refer collectively to Chun Yi Hao, Hope Ni, Q.Y. Ma and Tan Xiao Wei, each of whom purchased China Fundamental shares and warrants prior to its initial public offering;

 

·

references to “PRC” or “China” refer to the People’s Republic of China;

 

·

references to “dollars” or “$” refer to the legal currency of the United States; and

 

·

references to “public shareholders” refer to the holders of shares purchased in China Fundamental’s initial public offering.

Overview

Wowjoint Holdings Limited, or Wowjoint, was incorporated in the Cayman Islands on December 12, 2007 under the name China Fundamental Acquisition Corporation as a blank check company for the purpose of acquiring, through a stock exchange, asset acquisition or other similar business combination, or controlling, through contractual arrangements, an operating business, that had its principal operations in Asia, with a primary focus on potential acquisition targets in the PRC.

On February 22, 2010, China Fundamental acquired all of the outstanding securities of Beijing Wowjoint from its shareholders, resulting in Beijing Wowjoint becoming wholly owned by China Fundamental. The acquisition followed the favorable vote of the public shareholders of China Fundamental in accordance with the approved procedures established at the time of China Fundamental’s initial public offering in May 2008. Prior to the acquisition of Beijing Wowjoint, China Fundamental did not have an operating business. China Fundamental Acquisition Corporation changed its name to Wowjoint Holdings Limited shortly after the acquisition of Beijing Wowjoint.

 

We believe that Wowjoint is one of the leading providers in the design, engineering and manufacturing of customized infrastructure equipment and machinery used in the construction of railways, highways, metro subways, bridges and viaducts in China, based on the range of major railway projects in which we have been involved or have been asked to bid on. We provide end-to-end solutions in various engineering applications involving the lifting, carrying and transporting of large-scale and heavy precast concrete beams, and other heavy goods. Since the middle of 2010, we have also engaged in the leasing of equipment, though it remains a small part of our business. See “Business – Beijing Wowjoint's History and Current Business.” Our main product lines include launching gantries, tyre trolleys, special carriers, integrated launching carriers, marine hoists and special purpose equipment. Our equipment and machinery are designed to overcome specific construction obstacles by meeting our customers, stringent engineering requirements wherever our products are deployed regardless of terrain, soil and climate conditions. We had approximately 265 employees as of August 15, 2011, of which 99 are highly trained engineers and technicians engaged in the design, engineering, manufacturing, installation and testing of highly specialized lifting and carrying equipment. For additional details regarding the company’s engineering and technical staff, please see “Business – Employees.”

 

Our principal executive office is located in Beijing, People’s Republic of China. Our telephone number is +86 (010) 8957-9330.

 

The Offering

 

Risks Affecting Wowjoint

Investing in our securities involves a high degree of risk. In considering an investment in Wowjoint’s securities, you should carefully read this prospectus and especially consider the factors discussed in the section titled “Risk Factors” commencing on page 6.

Enforceability of Civil Liabilities

We are a Cayman Islands company and our executive offices are located outside of the United States in the People’s Republic of China. Most of our directors, officers and some of the experts named in this prospectus reside outside the United States. In addition, almost all of our assets and the assets of our directors and officers are located outside of the United States. As a result, you may have difficulty serving legal process within the United States upon us or any of these persons. You may also have difficulty enforcing, both in and outside the United States, judgments you may obtain in U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws.

Furthermore, there is substantial doubt that the courts of the Cayman Islands or the People’s Republic of China would enter judgments in original actions brought in those courts predicated on U.S. federal or state securities laws.

 

The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience.

 

Source: Federal Reserve Statistical Release

(1)

Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant period.

 

RISK FACTORS

You should carefully consider the following risk factors, together with all of the other information included in this prospectus, before you decide whether to invest in our securities. You should pay particular attention to the fact that we are a Cayman Islands company, but with substantial operations in China. As a result, we are subject to legal and regulatory environments that differ in many respects from those of the United States.

Risks Associated with Our Business and Industry

Actual overall risks or costs of our contracts may exceed our initial evaluation and lead to cost overruns, resulting in a reduction in revenues, lower profitability or even losses on such contracts.

Wowjoint bases a number of contracts in part on cost estimates that are subject to a number of assumptions, including assumptions about future economic conditions, cost and availability of raw materials and labor. However, these assumptions may prove to be inaccurate. In addition, we may not be able to reduce our costs through our cost management scheme. Any deficiencies in internal cost control or unreasonable price increases in raw materials could result in cost overruns.

We currently generate, and expect to continue to generate, a substantial portion of our revenues from fixed-price contracts.  For the year ended August 31, 2009, and in the period since then, a substantial majority of our revenues from equipment sales were derived from fixed-price contracts. The terms in these contracts require us to complete the delivery of equipment and machinery for a fixed price and therefore expose us to cost overruns. Cost overruns, whether due to inefficiency, inaccurate estimates or other factors, result in lower profit or a loss on a contract. As a result, we will only realize profits on these contracts if we successfully estimate our costs and avoid cost overruns. Other variations and risks inherent in the performance of fixed price contracts, such as delays caused by technical issues, any inability to obtain the requisite permits and approvals, may cause our actual overall risks and costs to differ from our original estimates despite any buffer we may have built into our bids for increases in labor and material costs. While there have only been two occasions involving small projects where our costs have equaled or exceeded our revenues from the project, as a project based company, we expect to encounter cost overruns or delays on our current and future contracts. If such cost overruns or delays occur, we could experience an increase in cost exceeding our budget or be subject to penalties with a consequent reduction in, or elimination of, the profits on our contracts.

Some of our contracts contain price adjustment clauses, which allow us to recoup additional costs incurred as a result of unexpected increases in raw material costs. However, we are typically required to bear a portion of the increased costs. From time to time, we may be required to perform extra or “change order” work under our contracts despite the absence of prior agreements with our customers on the scope or price of the work to be performed. Even though our contracts generally contain adjustment clauses for customers to pay for the extra work, we may be required to fund the cost of such work until the change order is approved and funded by the customer. We account for the costs of contract performance pending approval and funding of a change order by a customer by temporarily recording such costs as deferred cost and then adjusting to cost of sales in the period when revisions to a sale contract are determined.  In addition, the performance of the extra work may cause delays in our other contract commitments and may have a negative impact on our ability to meet specified deadlines.

We rely on third parties to complete part of our equipment manufacturing, which may be adversely affected by the sub-standard performance or non-performance of such third parties.

We typically engage third-party subcontractors to perform a portion of the work under our contracts, in order to minimize the need to employ a large workforce that includes skilled labor and semi-skilled labor, as well as to maximize our-cost efficiency and flexibility. However, we may not be able to monitor the performance of these subcontractors as efficiently as our own in-house staff. In addition, our inability to engage qualified subcontractors could affect our ability to maintain the quality of our products. Subcontracting exposes us to risks associated with non-performance, delayed performance, or sub-standard performance by subcontractors. We may also suffer losses or a lesser profit margin if the amounts we pay our subcontractors exceeds our original estimates. As a result, we may experience deterioration in quality or delivery of our equipment, incur additional costs due to the delays or at a higher price in sourcing the services, or be subject to liability under the relevant contract for our subcontractor’s performances. Such events could impact upon our profitability, financial performance and reputation, and result in litigation or damage claims.

We often experience long delays in collecting on our accounts receivable, receiving progress payments and the release of retention money by our customers , and such delays, together with the continued growth in our leasing business, may materially affect our working capital and short-term liquidity.

Like other companies in the construction and construction equipment industry in China, we typically receive progress payments from our customers with reference to the value of work completed at specified milestones, as well as receiving final payments upon the delivery of complete equipment. We receive installment payments in the process of equipment manufacturing and usually a significant percentage of contract value would be billed upon the delivery of the equipment to our customers.

Usually, we are either requested by our customers to secure a letter of credit issued by a licensed commercial bank or a portion of the contract value is withheld by the customer as retention money, normally 5% to 10%, to be paid or released after the warranty period (generally one year after the completion of the respective equipment and products).

 

In the event that we encounter delays or defaults in the payment of accounts receivable or progress payments by our customers, we may be required to invest working capital to maintain our day to day operations. We cannot assure you that amounts due under accounts receivable, progress payments or retention money will be remitted by our customers on a timely basis or that those delays or defaults in payment will not affect our financial condition and results of operations.

 

Our revenues depend on gaining new customers and we do not have long-term purchase commitments from our customers.

Our revenues result from individual equipment sales, which produce limited amount of ongoing revenues from equipment maintenance and other services. In order to maintain and expand our business, we must be able to replenish new orders in our pipeline on a continuous basis. Our potential customers could choose products of our competitors instead. Should they do so, we could suffer a decline in revenues and profitability.

We expect to rely increasingly on our proprietary products and if we become involved in an intellectual property dispute, we may be forced to spend a significant amount of time and financial resources to resolve such intellectual property dispute, diverting time and resources away from our business and operations.

Our business is based on a number of proprietary products, which are protected by patents filed in the PRC. We expect our future growth will rely on these proprietary products to meet customers’ demands.  For example, given the expansion of China’s rail system into China into mountainous and heavily forested areas, we expect that sales of our integrated launching gantry, which is designed and well suited for such terrain, to represent an increasing portion of our overall sales in the next several years. However, if third parties should infringe on any of our intellectual property rights,  regarding the patents on our integrated launching gantry, or other products, as has happened on several occasions, we may need to devote significant time and financial resources in legal actions  brought through the China court system to attempt to halt the infringement. For example, there is currently one ongoing lawsuit in the Beijing appeals court which we have filed in connection with infringements of our patents. An earlier ruling of this lawsuit ended in our favor, whereby the Beijing court awarded us RMB1.0 million.  A second lawsuit that is also being heard by a court in Beijing, was recently settled, whereby we agreed to grant the infringing party the use of our patent in return for it entering into a multi-year contract with us. Conversely, in the event of an infringement claim by third parties against us, we may be required to spend a significant amount of time and financial resources to defend against such claim. However we may not always be successful in lawsuits which we initiate or in defending ourselves against claims made against us by others. Moreover, any litigation could result in substantial costs and diversion of our management resources and could materially and adversely affect our business and operating results.

We currently rely upon receiving an adequate supply of raw materials at acceptable prices and quality in a timely manner.

The success of our operations depends on our ability to obtain sufficient quantities of raw materials and supplies at acceptable prices and quality in a timely manner. We have historically relied on a few suppliers and should we subsequently lose any of these suppliers, we will be forced to seek other suppliers. Such suppliers may be difficult to replace. We are exposed to the market risk of fluctuations in certain commodity prices for raw materials and supplies, such as steel and electronic parts utilized in our products. The price and availability of such raw materials and supplies may vary significantly from year to year due to factors such as China’s import restrictions, consumer demand, producer capacity, market conditions and costs of materials. We do not have long-term contracts with our suppliers or guarantees of supply. Should the prices of raw materials rise, we may experience lower than expected profit margins on our existing contracts.

We may be exposed to potential product liability claims, which may affect our profitability and result in damages to our reputation.

A majority of our products are large scale heavy duty machines, which require skilled labor to operate. Failures in the design, quality control, installation and assembly, and operation of these machines, as well as accidents, geological catastrophes and other construction field hazards, may result in injuries to personnel, losses of lives and damages to property despite repeated testing by us before and after delivery of these machines to our customers. Existing PRC laws and regulations do not require us to maintain third party liability insurance to cover product liability claims and we currently do not carry product liability insurance. In the event a product liability claim is brought against us, the lawsuit may, regardless of merit or eventual outcome, result in damages to our reputation, loss of contracts, inhibit our ability to win future contracts, and lead to substantial costs in litigation, product recalls and loss of revenue.

China’s financial markets are not as sophisticated as markets in developed countries and regions, such as the United States, Europe Union, Hong Kong, Taiwan and Singapore. The choice and selection of insurance policies to cover the potential liability of our products may not be widely available, which may result in our inability to obtain adequate insurance coverage against product liability risks.

Our success depends on stringent quality controls and timely delivery of our products, and failure in such could adversely impact our financial performance and result in damages to our reputation.

We design, manufacture and install our products based on the specific requirements of each customer. Our ability in obtaining future orders depends on our ability to maintain and uphold the performance, reliability and quality standards required by our customers. We may experience delays in the collection of accounts receivables, additional expenses in warranty and maintenance services, and reduced, cancelled or discontinued orders. Additionally, performance, reliability or quality claims by our customers, with or without merit, could result in costly and time-consuming litigation, which would require significant time and attention of management and may result in significant monetary damages.

We depend upon customers concentrated in the infrastructure construction industry. A reduction in government spending in infrastructure development could adversely affect our performance.

 

 

The majority of our sales are generated from customers involved in the construction of railways and highways. In particular, China Railway Construction Corporation (“CRCC”), China Railway Group Limited (“CRG”), China Communications Company Limited (“CCC”) and SinoHydro Corporation (“SinoHydro”) have accounted for a sizeable portion of our total revenues in recent years. For example, in the fiscal year ended August 31, 2008, CRCC”, CCC and CRG accounted for 35% (Bureau 16, 20%; Bureau 12, 15%), 26% and 13% of our total sales, respectively; in the fiscal year ended August 31, 2009, CCC and CRG accounted for 46% and 16% of our total sales, respectively; in the four month transition period from August 31, 2009 to December 31, 2009, SinoHydro Corporation, a Chinese state-owned hydropower engineering and construction company, accounted for 98% of our total sales; and in the year ended December 31, 2010, CRCC, CCC and SinoHydro accounted for 37% (Bureau 16, 34%; Bureau 12, 3%), 20% and 19% of our total sales, respectively. Although we have a relatively few major customers, we deal with many different bureaus and subsidiaries within these very large PRC state-owned enterprises and often have a number of individual sales and service contracts with our major customers.  For example, CRG has approximately 10 separate bureaus, each with a number of different subsidiaries, while CRCC has 15 bureaus, each with multiple subsidiaries.  In the case of CRG, for example, we have had sales or contracts in place with more than a dozen individual bureaus and subsidiaries within CRG at any point in time, including China Railway 16th Bureau Group Ltd (No.4 Engineering Company Ltd.; No.5 Engineering Company Ltd.; and No.1 Engineering Company Ltd.), China Railway 3rd Bureau Group Co., Ltd (Bridge and Tunnel Engineering Company of the Third Engineering Group Co., Ltd. of China Railway; China Railway No.3 Construction and Installation Engineering Co., Ltd; No.2 Engineering Company Ltd.; No.5 Engineering Company Ltd.; and No.6 Engineering Company Ltd.), China Railway 12th Bureau Group Co., Ltd (No.1 Engineering Company Ltd.; No.3 Engineering Company Ltd.; and No.4 Engineering Company Ltd.), and China Railway 1st Bureau Group Co., Ltd.  All of these contracts have been entered into in the ordinary course of business, were individually negotiated and are for equipment custom tailored for a specific project. Any reduction or delay in the capital spending by these companies or in the PRC’s infrastructure development could cause a significant decline in our sales and profitability.

Our current products are custom-made for specific projects, which provides no guarantee of future success.

We are a solution provider of customized heavy duty large scale equipment for infrastructure construction projects. Each of our products is relatively unique to the construction projects in which it is designed to operate. Although most designs provide flexibility and capacity to be modified, we are usually engaged by our customer on a per project basis. Thus, a majority of our sales do not result in repetitive purchases of the some piece of equipment, which may limit the extent to which our sales and profitability are sustainable in the future.

Our plans to enter the international construction machinery and equipment market may not prove successful.

To date, we have conducted the majority of our business within China. We have been exploring business opportunities in selected markets outside China and strategically expanding our global footprint. Expansion into new markets outside China exposes us to substantial risks, such as currency fluctuations, regulatory problems, punitive tariffs, trade embargoes, differences in general business environments, higher competition from established incumbent players in these markets, legal and regulatory requirements, potential adverse tax consequences, insufficient experience dealing with local payment and business practices, competition and protectionism. In addition, the additional demands on our management from these activities may detract from efforts in the domestic Chinese market, causing our operating results in China to be adversely affected.

We  may not be able to retain, recruit and train adequate management and engineering personnel, and our inability to attract and retain qualified personnel may limit our developments.

Our success is dependent to a large extent on our ability to retain the services of our executive management personnel, who have contributed to our growth and expansion. The industry experience of our executive officers, directors and other members of our senior management is essential to our continuing success. Accordingly, the loss of their services, particularly those of Mr. Yabin Liu and Mr. Fude Zhang, may be difficult to replace and could have an adverse affect on our operations and future business prospects.

 

In addition, our continued operations are dependent upon our ability to identify and recruit adequate engineering personnel in China. We require trained graduates of varying levels of experience and a flexible work force of semi-skilled operators. Given the current rate of economic growth in China, competition for qualified personnel will be substantial. Wage rates that we must offer our employees to retain qualified personnel may not enable us to remain competitive.

Wowjoint currently enjoys certain preferential tax treatment in China; there is no assurance that this will continue.

Pursuant to the PRC Income Tax Laws, prior to January 1, 2008, Chinese companies were subject to Enterprise Income Taxes (“EIT”) at a statutory rate of 33%, which consisted of 30% national income tax and 3% local income tax. Beginning January 1, 2008, the new EIT law replaced the existing laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises (“FIEs”). The new standard EIT rate of 25% replaced the 33% rate currently applicable to both DES and FIEs, except for High Tech companies who pay a reduced rate of 15%. Companies established before March 16, 2007 will continue to enjoy tax holiday treatment approved by local government for a grace period of the next five years or until the tax holiday term is completed, whichever is sooner.

We currently qualify as a High Technology company, a classification  which is available to companies that consistently invest in the research and development of new technology or products or own proprietary intellectual property rights in key areas supported by the PRC government, and meet certain minimum revenue and employment requirements. As a result, we are entitled to preferential tax treatment and enjoy the benefit of a reduced income tax rate at 15%. We received a 50% tax exemption (Tax Exemption Certificate) from the tax authorities in the PRC for corporate enterprise income tax for the years ended August 31, 2007 through August 31, 2009. The approved income tax rate for the company is 7.5%. The reduced income tax rate was applicable until December 31, 2009. Our current income tax rate is 15%.

Our business and financial performance may be adversely affected if the PRC government reduces or postpones public spending on infrastructure construction.

Our largest customers are business entities such as project and construction companies established and directed by the central and local governments of the PRC. The future growth of the infrastructure construction industry in China depends primarily upon the continued need for major infrastructure projects. The nature, extent and timing of those projects will, however, be determined by the interplay of a variety of factors, including the PRC government’s spending on infrastructure in China, as well as the general conditions and prospects for China’s economy. Since the majority of funding for infrastructure construction projects in China comes from governmental budgets, implementation of the projects relies, to a significant degree, on the PRC government’s public policies and spending. Changes in public policies or government budgets may therefore impact our business operations and financial performance.

The PRC government’s spending on infrastructure has historically been, and will continue to be, cyclical in nature and vulnerable to China’s economic growth and direction. The PRC government has, in recent years, implemented various policies in an effort to control the growth rate of certain industries and to limit inflation, which has affected the level of public spending on infrastructure construction projects. A significant decrease or delay in public spending on infrastructure construction in China could reduce the number of available construction projects, which in turn could reduce the demand for heavy duty construction equipment, and thus reduce the market demand for our core business.

If we cannot compete successfully for market share against other non-standard construction equipment and machinery companies, we may not achieve sufficient revenues and our business could suffer.

The market for our products and services is characterized by intense competition and rapid technological advances. Our products and services compete with a multitude of products and services developed, manufactured and marketed by others. We will also compete with new market entrants in the future. Existing or future competing products may be of higher quality, contain more sophisticated technology, provide greater utility or lower costs and other benefits, or may offer comparable performance at a lower cost.  We must therefore continue to develop innovative new solutions and products for our customers to remain competitive. If our products fail to capture and maintain market share, we may not achieve sufficient product revenues, and our business could suffer.

 

 

Wowjoint may face risks related to health epidemics and other outbreaks, which could adversely affect our operations.

Our business could be materially and adversely affected by the outbreak of avian flu, severe acute respiratory syndrome or another epidemic. From time to time, there have been reports on the occurrences of avian flu in various parts of China, including a few confirmed human cases and deaths. Any prolonged recurrence of avian flu, severe acute respiratory syndrome or other adverse public health developments in China or elsewhere in Asia may have a material and adverse effect on our business operations.

 

Risks to Our Organization

 

Affiliates of Realink Group Limited, which is controlled by the company’s executive officers , beneficially own a majority of our voting shares.

Affiliates of Realink Group Limited, or Realink, may be deemed to beneficially own approximately 54.7% of our voting power. Realink is controlled by the company’s executive officers. Mr. Yabin Liu, our Chief Executive Officer and Chairman is a 44.4% holder of Realink, a British Virgin Island company.  Mr. Fude Zhang, our Chief Technical Officer and director is a 39.5% holder of Realink and Mr. Yasheng Liu, recently deceased, our Senior Vice President and the younger brother of Mr. Yabin Liu, was a 10.7% owner, with Mr. Liguo Liu being a 5.4% holder of Realink.  The shareholders of Realink have agreed that approximately 3.7 million of the ordinary shares held by them will be held in escrow until February 22, 2014.  In addition, pursuant to an earn-out provision in the Share Purchase Agreement, the company has agreed to issue to Realink up to 500,000 additional shares if certain performance targets are achieved by the company.  The performance targets are set forth under “Shares Eligible for Future Sale.”

 

Because of its control of our voting power, Realink is able to indirectly exert considerable influence and control over us, including the appointment of management and the outcome of all matters requiring shareholder approval. Realink’s affiliates may be able to cause, prevent or delay a change of control of us or a change in the composition of our board of directors and could preclude any unsolicited acquisition of us. In addition, because affiliates of Realink may substantially determine the outcome of a shareholder vote, Realink’s affiliates could deprive shareholders of an opportunity to receive a premium for their shares as part of a sale of us, and that voting control could ultimately affect the market price of our ordinary shares.

Prior to China Fundamental’s acquisition of Beijing Wowjoint in February 2010, China Fundamental had no operations, and Beijing Wowjoint had not operated as a public company. Fulfilling our obligations incidental to being a public company will be expensive and time consuming.

Prior to China Fundamental’s  acquisition of Beijing Wowjoint in February 2010, China Fundamental had no operations, and Beijing Wowjoint had not operated as a public company. Each of China Fundamental and Beijing Wowjoint had maintained relatively small finance and accounting staffs. Although China Fundamental had maintained disclosure controls and procedures and internal control over financial reporting as required under the Federal securities laws with respect to its very limited activities, it has not been required to maintain and establish these disclosure controls and procedures and internal control as will be required with respect to a business such as Beijing Wowjoint with its substantial operations. Under the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), we will need to implement additional corporate governance practices and adhere to a variety of reporting requirements and complex accounting rules. Compliance with these obligations will require significant management time, place significant additional demands on our finance and accounting staffs and on our financial, accounting and information systems, and will significantly increase our insurance, legal and financial compliance costs and other expenses. In addition, we must also implement corporate governance practices of public companies. We expect these and other rules and regulations applicable to public companies to increase our accounting, legal and financial compliance costs and to make certain corporate activities more time-consuming and costly. While we cannot yet accurately predict the amount of additional costs we may incur or the timing of such costs, we anticipate that our additional annual cash needs as a result of being a public company will exceed US$1 million per annum.  We have also been required to hire additional accounting and financial staff, including a new chief financial officer and comptroller, with appropriate public company experience and technical accounting knowledge, resulting in higher expenses. If we are unable to comply with the requirements of the Sarbanes-Oxley Act, then we may not be able to obtain the reports from our independent registered public accountant required by the Sarbanes-Oxley Act, which may preclude us from keeping our filings with the SEC current. Non-current reporting companies are subject to various restrictions and penalties.

 

We must comply with Section 404 of the Sarbanes-Oxley Act in a relatively short timeframe, which will require us to document and test our internal controls over financial reporting for fiscal 2010 and beyond. Any delays or difficulty in satisfying these requirements could adversely affect our future results of operations and stock price.

 

Section 404 of the Sarbanes-Oxley Act requires us to document and test the effectiveness of our internal controls over financial reporting in accordance with an established control framework and to report on our management’s conclusion as to the effectiveness of these internal controls over financial reporting beginning with the fiscal year 2010. We are also required to have an independent registered public accounting firm test the internal controls over financial reporting and report on the effectiveness of such controls for the fiscal year 2010 and subsequent years. Any delays or difficulty in satisfying these requirements could adversely affect future results of operations and our share price. We may also incur significant costs to comply with these requirements.

We may in the future discover areas of internal controls over financial reporting that need improvement. There can be no assurance that remedial measures will result in adequate internal controls over financial processes and reporting in the future. Any failure to implement the required new or improved controls, or difficulties encountered in their implementation, could materially adversely affect our results of operations or could cause us to fail to meet our reporting obligations. If we are unable to conclude that we have effective internal controls over financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified report regarding the effectiveness of internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act, investors may lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our securities. In addition, failure to comply with Section 404 of the Sarbanes-Oxley Act could potentially subject us to sanctions or investigation by the SEC or other regulatory authorities.

The price of our securities may continue to be volatile and may decrease in response to various factors, which could adversely affect our business and cause our shareholders to suffer significant losses.

 

Our securities are illiquid, and their prices have been and may continue to be volatile in the indefinite future. Only a limited market has developed for the purchase and sale of our securities. We cannot predict how liquid the market for our securities might become. Therefore, the purchase of our securities must be considered a long-term investment acceptable only for prospective investors who are willing and can afford to accept and bear the substantial risk of the investment for an indefinite period of time. Because there is a limited public market for the resale of our securities, an investor in our securities may not be able to liquidate his investment, and our securities may not be acceptable as collateral for a loan.

 

Since trading of our ordinary shares began on May 16, 2008, the high and low sale prices of our ordinary shares through December 8, 2011 were $7.98 and $0.50, and the high and low prices of our warrants for the same period were $2.00 and $0.02, respectively. The price of our securities could fluctuate widely in response to various factors, many of which are beyond our control, including the following:

 

·

changes in our industry;

 

·

competitive pricing pressures;

 

·

our ability to obtain working capital or financing;

 

·

additions or departures of key personnel;

 

·

limited “public float” in the hands of a small number of persons, whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our shares;

 

·

sales of our shares;

 

·

our ability to execute our business plan;

 

·

operating results that fall below expectations due to lower than expected revenues, higher than anticipated expenses or other factors;

 

·

loss of any strategic relationship;

 

·

economic and other external factors; and

 

·

period-to-period fluctuations in our financial results.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our securities.

 

We have failed to meet continued listing requirements on the NASDAQ Global Market which could adversely affect the price of our securities and the ability of securityholders to dispose of their securities.

 

Our securities are listed on the NASDAQ Global Market. We must comply with various NASDAQ MarketPlace rules in order to maintain the listing of our securities. The NASDAQ listing rules require, among other things, that listed companies maintain a minimum market value of publicly held shares, or MVPHS, of $5 million. MVPHS is calculated by multiplying the publicly held shares, which is the total outstanding shares less the shares held by officers, directors and beneficial owners of 10% or more of the company’s outstanding shares, by the closing bid price. If a NASDAQ-listed company trades below the applicable MVPHS requirement for 30 consecutive business days, it will be notified of the deficiency. Also, the listing rules require that if a company’s shares trade for 30 consecutive business days below the $1.00 minimum closing bid price requirement, NASDAQ will send a deficiency notice to the company.

 

We recently received two letters from the listing qualification staff of NASDAQ, one on October 31, 2011, indicating that we were not in compliance with the MVPHS of $5 million, and one on November 4, 2011, indicating that we were not in compliance with the $1.00 minimum closing bid price requirement. However, the listing rules provide us with a grace period of 180 calendar days in which to regain compliance with each of these requirements. To regain compliance with the MVPHS requirement, our MVPHS must attain a value of $5 million or more for a minimum of ten consecutive business days during this compliance period. To regain compliance with the minimum bid price requirement, we must have a closing bid price of $1.00 or more for 10 consecutive business days during this compliance period.

 

The notices that we received from NASDAQ have no current effect on the listing of our securities and our securities will continue to trade on the NASDAQ Global Market. However, if compliance is not demonstrated for each of these requirements within the applicable 180 day compliance period, the NASDAQ listing qualification staff will notify us that our securities will be delisted from the NASDAQ Global Market. We may, however, be eligible for an additional grace period if we satisfy the initial listing standards (with the exception of the minimum bid price rule) for listing on the NASDAQ Capital Market, and submit a timely notification to NASDAQ to transfer the listing of our ordinary shares to the NASDAQ Capital Market. We may also appeal NASDAQ’s delisting determination to a NASDAQ hearings panel. During any appeal process, our ordinary shares would continue to trade on the NASDAQ Global Market.

 

We intend to continue to monitor the bid price for our ordinary shares. If our ordinary shares do not trade at a level that is likely to regain compliance with the NASDAQ requirements, our board of directors will consider other options that may be available to achieve compliance, including, but not limited to, the possibility of implementing a reverse stock split, which would require approval of our shareholders. Our board of directors has taken no action at this time to implement a reverse stock split and may choose not to do so.  There can be no assurance that we would be successful in obtaining the approvals necessary to effect a reverse stock split or that, following any reverse stock split, the per share price of our ordinary shares would remain above $1.00. If we are unable to regain compliance, our securities will be delisted by NASDAQ. If our securities were to be delisted from NASDAQ, the trading of our securities could possibly be shifted instead to the OTC Bulletin Board or the Pink Sheets,   which could make it more difficult to dispose of, or obtain accurate quotations for the price of, our securities.  In addition, such a development would likely also trigger a reduction in the already limited coverage of our company by security analysts and the news media. Delisting and these other effects could cause the price of our securities to decline further.

Because we do not intend to pay dividends on our shares, shareholders will benefit from an investment in our shares only if they appreciate in value.

We currently intend to retain all future earnings, if any, for use in the operations and expansion of our business. As a result, we do not anticipate paying cash dividends in the foreseeable future. Any future determination as to the declaration and payment of cash dividends will be at the discretion of our board of directors and will depend on factors our board of directors deem relevant, including among others, our results of operations, financial condition and cash requirements, business prospects, and the terms of our credit facilities and other financing arrangements. Accordingly, realization of a gain on shareholders’ investments will depend on the appreciation of the price of our shares. There is no guarantee that our shares will appreciate in value.

Offers or availability for sale of a substantial number of our ordinary shares may cause the price of our securities to decline.

 

The ability of our security holders, including those named as selling security holders in this prospectus, to sell substantial amounts of our securities in the public market creates a circumstance commonly referred to as an “overhang” and in anticipation of significant sales the market price of our securities could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

 

 

We may choose to redeem our outstanding warrants at a time that is disadvantageous to the warrant holders.

Subject to there being a current prospectus under the U.S. Securities Act of 1933, we may redeem all of our outstanding warrants at any time at a price of $.01 per warrant, upon a minimum of 30 days prior written notice of redemption if, and only if, the last sale price of our shares equals or exceeds $10.00 per share for any 20 trading days within a 30 trading day period ending three business days before we send the notice of redemption. Calling all of our outstanding warrants for redemption could force the warrant holders:

 

·

to exercise the warrants and pay the exercise price for such warrants at a time when it may be disadvantageous for the holders to do so;

 

·

to sell the warrants at the then current market price when they might otherwise wish to hold the warrants; or

 

·

to accept the nominal redemption price which, at the time the warrants are called for redemption, is likely to be substantially less than the market value of the warrants.

 

Our warrant holders may not be able to exercise their warrants, which may create liability for us.

Holders of the warrants issued in our initial public offering and private placement will be able to receive ordinary shares upon exercise of the warrants only if (i) a current registration statement under the Securities Act of 1933 relating to the ordinary shares underlying the warrants is then effective and (ii) such shares are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of warrants reside. Although we have agreed to use our best efforts to maintain a current registration statement covering the shares underlying the warrants to the extent required by federal securities laws, and we intend to comply with such agreement, we cannot assure you that we will be able to do so. In addition, some states may not permit us to register the shares issuable upon exercise of its warrants for sale. The value of the warrants will be greatly reduced if a registration statement covering the shares issuable upon the exercise of the warrants is not kept current or if the securities are not qualified, or exempt from qualification, in the states in which the holders of warrants reside. Holders of warrants who reside in jurisdictions in which the shares underlying the warrants are not qualified and in which there is no exemption will be unable to exercise their warrants and would either have to sell their warrants in the open market or allow them to expire unexercised. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to qualify the underlying securities for sale under all applicable state securities laws. Since our obligations in this regard are subject to a “best efforts” standard, it is possible that, even if we are able to successfully assert a defense to a claim by warrant holders due to the impossibility of registration, a court may impose monetary damages on us to compensate warrant holders due to the change in circumstances that led to us being unable to fulfill our obligations.

 

PER SHARE MARKET INFORMATION

The following table sets forth, for the calendar quarter indicated the quarterly high and low sale prices for our units, ordinary shares and warrants, respectively. The Over-the-Counter Bulletin Board quotations listed below reflect interdealer prices, without retail markup, markdown or commission and may not necessarily represent actual transactions. The table below also reflects the high and low closing sales prices on the Nasdaq Global Market for the period from May 5, 2010 to December 9, 2011.

 

The closing price of our ordinary shares on the Nasdaq Global Market on December 9, 2011, was $0.50 per share.

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). This prospectus contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These forward-looking statements include information about our possible or assumed future results of operations or our performance. Words such as “expects,” “intends,” “plans,” “believes,” “anticipates,” “estimates,” and variations of such words and similar expressions are intended to identify the forward-looking statements.

The risk factors and cautionary language referred to in this report provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations described in our forward-looking statements, including among other things:

·

the diversion of management time on acquisition and integration related issues;

·

difficulties in integrating the merged businesses and management teams;

·

changes in Chinese government’s anticipated infrastructure construction plans;

·

changes in demand for non-standard special construction machinery and equipment used in bridge, road and railway construction;

·

changes in demand for customized heavy duty special construction machinery and equipment used in constructions of bridges, roads and railways;

·

the impact of inflation generally, as well as the rising costs of materials, such as steel;

·

loss of key customers;

·

changes in our operating expenses, partially attributable to fluctuating prices of raw materials such as steel;

·

changes in RMB exchange rate against major currencies that may negatively impact on the purchase of import materials or the export of finished products;

·

unanticipated decreases in revenues or increase in expenses;

·

legislation or regulatory environments, requirements or changes adversely affecting the construction machinery and equipment businesses in which we are engaged;

·

statements about industry trends in construction machinery and equipment, including infrastructure development and economic growth factors affecting supply and demand;

·

economic conditions in China generally and in particular in the construction machinery and equipment markets in which we operate; and

·

geo-political events and regulatory changes.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements.

We undertake no obligation to publicly update or revise any forward-looking statements contained in this prospectus, or the documents to which it refers you in this prospectus, to reflect any change in its expectations with respect to such statements or any change in events, conditions or circumstances on which any statement is based.

USE OF PROCEEDS

We will not receive any proceeds from any sale of ordinary shares or warrants by the selling security holders. However, we will receive proceeds from the exercise of the warrants , including those originally issued in China Fundamental’s initial public offering, in the event that any warrants are properly exercised for cash. Any such proceeds will be used for working capital. All net proceeds from sales of the ordinary shares issuable upon exercise of the warrants will be received by those persons selling such shares and not us.

DILUTION

We are not offering or selling any of the ordinary shares in this offering. All of the offered ordinary shares are held by selling security holders and, accordingly, no dilution will result from the sale of the securities.