PROSPECTUS SUPPLEMENT	Filed pursuant to Rule
	424(b)(5)
(To Prospectus dated May 10, 2012)	File No. 333-178325

SINOCOKING COAL AND COKE CHEMICAL INDUSTRIES, INC.

2,815,845 Shares of Common Stock
1,409,423 Series A and 1,644,737 Series B Warrants to purchase up to
1,409,423 Shares of Common Stock
and 1,644,737 Shares of Common Stock underlying the Series A and Series B Warrants

1,644,737 Shares of Common Stock issuable during the Option Period,
Option to purchase up to 1,644,737 Shares of Common Stock,
the accompanying Series C Warrants to purchase 822,369 Shares of Common Stock and
822,369 Shares of Common Stock underlying the Series C Warrants

 

Pursuant to this prospectus supplement and the accompanying prospectus, we are offering to investors 2,815,845 shares of our common stock to be issued on the initial closing of this offering and up to 1,644,737 shares to be issued if the investors exercise their right to purchase such shares pursuant to this prospectus during the Option Period (defined below) (the “Shares”) together with 1,409,423 Series A warrants to purchase an aggregate of 1,409,423 shares of common stock at an exercise price of $6.38 per share (the “Series A Warrants”), 1,644,737 Series B warrants to purchase an aggregate of 1,644,737 shares of common stock at an exercise price of $6.08 per share (the “Series B Warrants”), and, if the investors exercise their right to purchase shares pursuant to this prospectus during the Option Period (defined below), 822,369 Series C warrants to purchase an aggregate of 822,369 shares of common stock at an exercise price of $6.08 per share (the “Series C Warrants” and together with the Series A Warrants and Series B Warrants, the “Warrants”). The Series A and Series C Warrants have a term of four years and are exercisable by the holders at any time after the date of issuance. The Series B Warrants will be exercisable at any time following six months and one day from the date this initial offering closes and prior to the ten month anniversary from such date (subject to extension in certain circumstances as described in the Securities Purchase Agreement (as defined herein)) only if the Company’s shelf registration statement on Form S-3 (File No. 333-178325), is not effective or is not otherwise available for the issuance of the Shares issuable during the Option Period (defined below)or any prospectus contained therein is not available for use (a “Registration Failure”) at an exercise price of $6.08 per common share. The Series B Warrants expire on the ten month anniversary of the date the initial offering closes if no Registration Failure has occurred prior thereto or, if a Registration Failure does occur prior to such date, on the fourth anniversary of such Registration Failure. In connection with this offering, we will also issue, as additional compensation, to FT Global Capital, Inc., our exclusive placement agent, placement agent warrants to purchase up to 8% of the Shares placed in this offering, at an exercise price of 120% of the purchase price of the Shares, which warrants are also being offered pursuant to this prospectus supplement (the “Placement Agent Warrants”).

 

The Shares and Series A and Series B Warrants will be sold together as a unit consisting of one Share and two Warrants. The purchase price per unit will be $5.10 (the “Purchase Price”). The Shares and the Warrants will be issued separately but can only be purchased together in this offering. The shares of common stock issuable from time to time pursuant to the exercise of the Warrants and the Placement Agent Warrants are also being offered pursuant to this prospectus supplement and the accompanying prospectus.

 

At any time after six months and one day from the date this offering closes and prior to the ten month anniversary from the date the initial offering closes (the “Option Period”), any investor in the initial closing of Shares and Series A and Series B Warrants will have an option to purchase its pro rata share of up to 1,644,737 shares of common stock and its pro rata share of Series C Warrants to purchase an aggregate of up to 822,369 shares of our common stock at a price equal to the last consolidated closing bid price of the Company's common stock as determined in accordance with NASDAQ rules immediately preceding the Company entering into the Securities Purchase Agreement.

 

Our common stock trades on the NASDAQ Capital Market under the symbol “SCOK.” The last reported sale price of our common stock on the NASDAQ Capital Market on September 17, 2014 was $6.08 per share. There is no established public trading market for the Warrants and we do not expect a market to develop. In addition, we do not intend to apply for listing of the Warrants on any national securities exchange. As of September 17, 2014, the aggregate market value of our outstanding common stock held by non-affiliates was approximately $80,214,680 based on 21,141,372 shares of outstanding common stock, of which 7,948,168 shares were held by affiliates as of such date, and a price of $6.08 per share, which was the last reported sale price of our common stock as quoted on the NASDAQ Capital Market on September 17, 2014.

 

  

		Per Unit				Total
Public offering price of units in Initial Offering		$	5.10			$	14,360,810
Placement agent fees in Initial Offering(1)		$	0.31			$	861,649
Proceeds, before other expenses, to us		$	4.79			$	13,499,161
Public offering price of units in Option Period		$	6.08			$	10,000,001
Placement agent fees in Option Period Offering(1)		$	0.36			$	600,000
Proceeds, before other expenses, to us		$	5.72			$	9,400,001
Total Placement Agent fees in Offering						$	1,461,649
Total proceeds, before expenses, to us in Offering						$	22,899,162

 

(1)	Does not include any Placement Agent Warrants.

 

We have retained FT Global Capital, Inc. to act as exclusive placement agent in connection with this offering. The placement agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number of dollar amount of securities. See “Plan of Distribution” beginning on page S-10 of this prospectus supplement for more information regarding these arrangements.

_____________________________________________

 

Investing in our securities involves a high degree of risk. See the section entitled “Risk Factors” beginning on page S-6 of this prospectus supplement and in the documents we incorporate by reference in this prospectus supplement and the accompanying prospectus. In addition, see “Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2013, as amended, which has been filed with the Securities and Exchange Commission and is incorporated by reference into this prospectus supplement and the accompanying prospectus. You should carefully consider these risk factors, as well as the information contained in this prospectus supplement and the accompanying prospectus, before you invest.

 

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

 

_____________________________________________

 

We estimate the total expenses of this offering, excluding the placement agency fees and cost reimbursements, will be approximately $200,000. Because there is no minimum offering amount required in this offering, the actual offering amount, the placement agent fees and net proceeds to us, if any, in this offering may be substantially less than the total offering amounts set forth above. We are not required to sell any specific number or dollar amount of the securities offered in this offering, but the placement agent will use its reasonable efforts to arrange for the sale of all of the securities offered. The closing of the sale of securities will take place on or around September 23, 2014.

 

The date of this prospectus supplement is September 18, 2014

 

 

TABLE OF CONTENTS

 

PROSPECTUS SUPPLEMENT
FORWARD-LOOKING STATEMENTS	S-2
PROSPECTUS SUPPLEMENT SUMMARY	S-3
RISK FACTORS	S-6
USE OF PROCEEDS	S-7
DESCRIPTION OF SECURITIES	S-7
PLAN OF DISTRIBUTION	S-10
LEGAL MATTERS	S-12
EXPERTS	S-12
WHERE YOU CAN FIND MORE INFORMATION	S-12
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE	S-13
PROSPECTUS
ABOUT THIS PROSPECTUS	1
PROSPECTUS SUMMARY	1
THE OFFERING	2
OUR COMPANY	2
RISK FACTORS	3
USE OF PROCEEDS	4
RATIO OF EARNINGS TO FIXED CHARGES	4
DESCRIPTIONS OF THE SECURITIES WE MAY OFFER	5
CAPITAL STOCK	5
WARRANTS	7
DEBT SECURITIES	9
UNITS	15
PLAN OF DISTRIBUTION	17
LEGAL MATTERS	18
EXPERTS	19
WHERE YOU CAN FIND MORE INFORMATION ABOUT US	19
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE	19

 

ABOUT THIS PROSPECTUS SUPPLEMENT

 

This prospectus supplement is a supplement to the accompanying prospectus that is also a part of this document. This prospectus supplement and the accompanying prospectus, dated September 18, 2014, are part of a registration statement on Form S-3 (File No. 333-178325) that we filed with the Securities and Exchange Commission, or the SEC, utilizing a “shelf” registration process. Under this shelf registration process, we may offer and sell from time to time in one or more offerings the securities described in the accompanying prospectus.

 

This document is in two parts. The first part is this prospectus supplement, which describes the securities we are offering and the terms of the offering and also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference into the accompanying prospectus. The second part is the accompanying prospectus, which provides more general information, some of which may not apply to the securities offered by this prospectus supplement. Generally, when we refer to this “prospectus,” we are referring to both documents combined. To the extent there is a conflict between the information contained in this prospectus supplement, on the one hand, and the information contained in the accompanying prospectus or any document incorporated by reference therein, on the other hand, you should rely on the information in this prospectus supplement. We urge you to carefully read this prospectus supplement and the accompanying prospectus and any related free writing prospectus, together with the information incorporated herein and therein by reference as described under the heading “Where You Can Find Additional Information,” before buying any of the securities being offered.

 

You should rely only on the information that we have provided or incorporated by reference in this prospectus supplement and the accompanying prospectus and any related free writing prospectus that we may authorize to be provided to you. We have not, and the placement agent has not, authorized anyone to provide you with different information. No other dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus supplement and the accompanying prospectus or any related free writing prospectus that we may authorize to be provided to you. You must not rely on any unauthorized information or representation. This prospectus supplement is an offer to sell only the securities offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information in this prospectus supplement and the accompanying prospectus or any related free writing prospectus is accurate only as of the date on the front of the document and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of the time of delivery of this prospectus supplement and the accompanying prospectus or any related free writing prospectus, or any sale of a security.

 

  

This prospectus supplement contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus supplement is a part, and you may obtain copies of those documents as described below under the heading “Where You Can Find More Information.”

 

FORWARD-LOOKING STATEMENTS

 

This prospectus supplement, accompanying prospectus and the documents that we have filed with the SEC that are incorporated by reference in this prospectus supplement contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act and may involve material risks, assumptions and uncertainties. Forward-looking statements typically are identified by the use of terms such as “may,” “will,” “should,” “believe,” “might,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” and similar words, although some forward-looking statements are expressed differently.

 

Any forward looking statements contained in this prospectus supplement, accompanying prospectus and the documents that we have filed with the SEC that are incorporated by reference in this prospectus supplement are only estimates or predictions of future events based on information currently available to our management and management’s current beliefs about the potential outcome of future events. Whether these future events will occur as management anticipates, whether we will achieve our business objectives, and whether our revenues, operating results, or financial condition will improve in future periods are subject to numerous risks. There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. These important factors include those that we discuss under the heading “Risk Factors” and in other sections of our Annual Report on Form 10-K for the fiscal year ended June 30, 2013, as amended, as well as in our other reports filed from time to time with the SEC that are incorporated by reference into this prospectus supplement and the accompanying prospectus. You should read these factors and the other cautionary statements made in this prospectus supplement, the accompanying prospectus and in the documents we incorporate by reference into this prospectus supplement and the accompanying prospectus as being applicable to all related forward-looking statements wherever they appear in this prospectus supplement or the documents we incorporate by reference into this prospectus supplement and the accompanying prospectus. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

    

PROSPECTUS SUPPLEMENT SUMMARY

 

This summary is not complete and does not contain all of the information that you should consider before investing in the securities offered by this prospectus. You should read this summary together with the entire prospectus supplement and accompanying prospectus, including our risk factors (as provided for herein and incorporated by reference), financial statements, the notes to those financial statements and the other documents that are incorporated by reference in this prospectus supplement, before making an investment decision. You should carefully read the information described under the heading “Where You Can Find More Information.” We have not authorized anyone to provide you with information different from that contained in this prospectus. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our securities.

 

Unless the context otherwise requires, the terms “SCOK,” “the Company,” “we,” “us,” and “our” in this prospectus each refer to SinoCoking Coal and Coke Chemical Industries, Inc., our subsidiaries, and our consolidated entities. “China” and the “PRC” refer to the People’s Republic of China.

 

The Company

 

We were incorporated in Florida on September 30, 1996, originally under the name “J. B. Financial Services, Inc.” We changed our name to “Ableauctions.com, Inc.” on July 19, 1999.

 

On December 30, 2009, our shareholders approved a Plan and Agreement of Share Exchange, dated July 17, 2009, with Top Favour Limited, a British Virgin Islands corporation (“Top Favour”), under which we agreed to acquire all of the outstanding capital stock of Top Favour in exchange for the issuance of 13,117,952 shares of our common stock to the shareholders of Top Favour (the “Share Exchange”). The Share Exchange was consummated on February 5, 2010. We changed our name to “SinoCoking Coal and Coke Chemical Industries, Inc.” on February 5, 2010.

 

All of our business operations are conducted by Henan Province Pingdingshan Hongli Coal & Coke Co., Ltd. (“Hongli”), which we control through contractual arrangements that Hongli and its owners have entered into with Pingdingshan Hongyuan Energy Science and Technology Development Co., Ltd. (“Hongyuan”), a wholly-owned subsidiary of Top Favour. These contractual arrangements provide for management and control rights, and in addition entitle us to receive the earnings and control the assets of Hongli.

 

Our Business

 

We are a vertically integrated coal and coke producer based in Henan Province, PRC. We use coal from both of our own mines and that of third-party mines to produce basic and value-added coal products such as thermal coal, washed metallurgical coal, and chemical and metallurgical coke for steel manufacturers, power generators, and various industrial users. We also produce and sell coal, including raw (unprocessed) and washed coal (which is coal that has been prepared for coking or thermal uses), medium coal and coal slurries (by-products of the coal-washing process), and coal tar (a by-product of the coke manufacturing process).

 

    

The Offering

 

Units offered by us		2,815,845 units in Initial Offering; 1,644,737 units in Option Period
Common stock offered by us (Not including the Shares issuable during the Option Period)		2,815,845 Shares
Common stock to be outstanding after this offering (assuming no exercise of the warrants offered by us)		23,960,217 Shares
Common stock to be outstanding after the issuance of all Shares included in Option Period  (assuming no exercise of the warrants offered by us)		25,594,204 Shares
Warrants offered by us		Series A Warrants to purchase an aggregate of 1,409,423 Shares at an exercise price of $6.38 per share. The Series A Warrants have a term of four years and are exercisable by the holders at any time after the date of issuance.
		Series B Warrants to purchase an aggregate of 1,644,737 Shares at an exercise price of $6.08 per share. The Series B Warrants will be exercisable at any time following six months and one day from the date this offering closes and prior to the ten month anniversary of the date the initial offering closes (subject to extension in certain circumstances as described in the Securities Purchase Agreement (as defined herein)) only if the Company’s shelf registration statement on Form S-3 (File No. 333-178325), is not effective or is not otherwise available for the issuance of the Shares issuable during the Option Period or any prospectus contained therein is not available for use (a “Registration Failure”). The Series B Warrants expire on the ten month anniversary of the date the initial offering closes if no Registration Failure has occurred prior thereto or, if a Registration Failure does occur prior to such date, on the fourth anniversary of such Registration Failure.
		Series C Warrants to purchase an aggregate of 822,369 Shares  at an exercise price of $6.08 per share. The Series C Warrants have a term of four years and are exercisable by the holders at any time after the date of issuance.
		This prospectus also relates to the offering of the Shares of Common Stock issuable upon exercise of the Warrants.
Use of proceeds		We intend to use the net proceeds from this offering solely for working capital and other general corporate purposes. There is no assurance that any of the Warrants will ever be exercised for cash, if at all. See “Use of Proceeds” on page S-7.

 

 

Market for the Shares and Warrants		Our common stock is quoted and traded on the NASDAQ Capital Market under the symbol “SCOK.” However, there is no established public trading market for the Warrants, and we do not expect a market to develop. In addition, we do not intend to apply to list the Warrants on any securities exchange. The warrants are immediately separable from the Shares being offered as part of the units.
Risk factors		You should read the “Risk Factors” section on page S- 6 of this prospectus supplement, the “Risk Factors” section on page 3 of the accompanying prospectus, and the “Risk Factors” section in our Annual Report for the year ended June 30, 2013 on Form 10-K, for a discussion of factors to consider before deciding to purchase our securities.

The number of shares of Common Stock to be outstanding after this offering (23,960,217) is based on the actual number of shares outstanding as of September 17, 2014, which was 21,141,372 and does not include, as of that date:

 

•	Shares being held in reserve by the Company for its future issuance of shares underlying the warrants and/or options that were outstanding prior to the date hereto;
•	Shares issuable upon the exercise of the Warrants and the Placement Agent Warrants in connection with the initial closing;
•	Shares issuable upon the exercise of the Warrants and the Placement Agent Warrants issuable upon the full exercise of the investor options;
•	Shares available for future issuance under our equity compensation plans.

 

Unless otherwise stated, outstanding share information throughout this prospectus supplement excludes the above.

 

 

RISK FACTORS

 

An investment in our securities involves a high degree of risk. Before making any investment decision, you should carefully consider the risk factors set forth in this prospectus supplement, the accompanying prospectus and the information incorporated by reference herein and therein, including under the caption “Risk Factors” in our most recent annual report on Form 10-K and our subsequent quarterly reports on Form 10-Q, which are incorporated by reference in this prospectus, as well as in any applicable prospectus supplement, as updated by our subsequent filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

These risks could materially affect our business, results of operation or financial condition and affect the value of our securities. Additional risks and uncertainties that are not yet identified may also materially harm our business, operating results and financial condition and could result in a complete loss of your investment. You could lose all or part of your investment. For more information, see “Where You Can Find More Information.”

 

Risks Related to This Offering

 

Management will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.

 

Subject to certain limited exceptions set forth in the offering documents, we have agreed to use the net proceeds from this offering solely for general corporate purposes. Our management will have significant flexibility in applying the net proceeds of this offering for general corporate purposes. You will be relying on the judgment of our management with regard to the use of these net proceeds, and subject to any agreed upon contractual restrictions under the terms of the subscription agreements, you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that the net proceeds will be invested in a way that does not yield a favorable, or any, return for us. The failure of our management to use such funds effectively could have a material adverse effect on our business, financial condition, operating results and cash flow.

 

You will experience immediate dilution in the book value per share of the common stock you purchase.

 

Because the price per share of our Common Stock being offered is higher than the book value per share of our Common Stock, you will suffer substantial dilution in the net tangible book value of the common stock you purchase in this offering. Based on the initial offering price of $5.10 per Share, if you purchase the Shares offered in this offering, you will suffer immediate and substantial dilution per Share in the net tangible book value of the common stock.

 

There is no public market for the warrants to purchase common stock in this offering.

 

There is no established public trading market for the Warrants being sold in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the Warrants on any securities exchange. Without an active market, the liquidity of the Warrants will be limited.

 

Future sales or other dilution of our equity could depress the market price of our Common Stock.

 

Sales of our Common Stock, preferred stock, warrants, debt securities or any combination of the foregoing in the public market, or the perception that such sales could occur, could negatively impact the price of our Common Stock. If any institutional or individual shareholders (or groups thereof) that own significant blocks of our Common Stock were to sell large portions of their holdings in a relatively short time, for liquidity or other reasons, the prevailing market price of our Common Stock could be negatively affected.

 

In addition, the exercise by the investors of their option to purchase additional Shares and the accompanying Warrants or any other issuance of additional shares of our Common Stock, securities convertible into or exercisable for our Common Stock, other equity-linked securities, including preferred stock or warrants, debt securities or any combination of the securities pursuant to this prospectus will dilute the ownership interest of our common shareholders and could depress the market price of our Common Stock and impair our ability to raise capital through the sale of additional equity securities.

 

  

We may need to seek additional capital. If this additional financing is obtained through the issuance of equity securities, debt convertible into equity or options or warrants to acquire equity securities, our existing shareholders could experience significant dilution upon the issuance, conversion or exercise of such securities.

 

Holders of the Warrants will have no rights as common stockholders until they acquire our Common Stock.

 

Until you acquire shares of our Common Stock upon exercise of any of the Warrants, you will have no rights with respect to our Common Stock. Upon exercise of any Warrants held, you will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.

 

USE OF PROCEEDS

 

We estimate that the net proceeds we will receive from this initial offering will be approximately $13.1 million, after deducting estimated offering expenses of approximately $1.2 million. If all the Investors fully exercise their option to subscribe for additional shares during the Option Period, we would receive additional aggregate proceeds of $10 million. We will not receive any proceeds from the sale of common stock issuable upon exercise of the Warrants that we are offering unless and until such Warrants are exercised.

 

If all of the Series A Warrants (warrants to purchase 1,409,423 Shares, including the Placement Agent Warrants to purchase 225,268 Shares) issued in connection with the initial closing are fully exercised for cash, we would receive additional aggregate proceeds of $10,370,759. If all of the Series A and Series C Warrants (warrants to purchase 2,231,792 Shares, including the Placement Agent warrant to purchase an aggregate of 356,847 Shares) to be issuance upon a full exercise of investor options during the Option Period, we would receive additional aggregate proceeds of $16,176,026.

 

We intend to use the net proceeds from this offering for general corporate purposes and working capital, including for research and development, general and administrative expenses, and potential ordinary course acquisitions of technologies that complement our business. In the Securities Purchase Agreement we have entered into with the institutional investors in this offering, we have, subject to certain exceptions, specifically agreed not to use the proceeds of this offering to satisfy any existing debt (other than ordinary course trade payables), to redeem any of our outstanding securities, or to settle any litigation.

 

We have not specifically identified the precise amounts we will spend on each of these areas or the timing of these expenditures. The amounts actually expended for each purpose may vary significantly depending upon numerous factors, including assessments of potential market opportunities and competitive developments. In addition, expenditures may also depend on the establishment of new collaborative arrangements with other companies, the availability of other financing, and other factors. Subject to any agreed upon contractual restrictions under the terms of the purchase agreement, our management will have some discretion in the application of the net proceeds from this offering. Our stockholders may not agree with the manner in which our management chooses to allocate and spend the net proceeds. Moreover, our management may use the net proceeds for purposes that may not result in our being profitable or increase our market value.

 

DESCRIPTION OF THE SECURITIES

 

In this offering, we are offering 2,815,845 common shares to be issued on the initial closing of the offering (the “Initial Offering”). The Initial Offering includes Series A warrants to purchase an aggregate of 1,409,423 shares of common stock and Series B warrants, which are not exercisable for six months, may become exercisable only to the extent the Company does not have an effective registration statement available for the shares underlying such warrants and in any event expire after certain registration conditions are satisfied, to purchase an aggregate of 1,644,737 shares of common stock.

 

  

The Shares and Series A and Series B Warrants will be sold together as a unit consisting of one Share and two Warrants.

 

We are offering the units at a purchase price of $5.10 per unit. Units will not be issued or certificated. The Shares and the Warrants are immediately separable and will be issued separately.

 

Under the Purchase Agreement, the investors will also have an option to purchase up to $10 million of additional shares and warrants during the Option Period. At any time during the Option Period, the investors in the initial closing of Shares and Series A and Series B Warrants will have the option to purchase their pro rata share of up to 1,644,737 shares of common stock and would receive a pro rata share of Series C Warrants to purchase an aggregate of up to 822,369 shares of our common stock at a price equal to the last consolidated closing bid price of the Company’s common stock as determined in accordance with NASDAQ rules immediately preceding the Company entering into the Purchase Agreement, which amount was $6.08.

 

This prospectus supplement also relates to the offering of the Placement Agent Warrants and of the shares of our common stock issuable upon exercise, if any, of the Placement Agent Warrants. The Placement Agent will receive warrants to purchase up to 8% of the Shares placed in this offering (including Shares issued during the Option Period), at an exercise price of 120% of the purchase price of the Shares.

 

Common Stock

 

A description of the Shares of Common Stock we are offering pursuant to this prospectus supplement is set forth under the heading “Description of the Securities We May Offer,” starting on page 5 of the accompanying prospectus. As of September 17, 2014, we had 21,141,372 shares of outstanding Common Stock.

 

Warrants

 

The material terms and provisions of the Warrants being offered pursuant to this prospectus supplement and the accompanying prospectus are summarized below. The summary is subject to, and qualified in its entirety by, the form of warrant which will be provided to each investor in this offering and will be filed as an exhibit to a Current Report on Form 8-K with the SEC in connection with this offering.

 

The Series A Warrants will be exercisable immediately as of the date of issuance at an exercise price of $6.38 per common share and expire four years from the date of issuance. The exercise price of the Series A Warrants is subject to customary adjustment in the case of future issuances or deemed issuances of common shares, stock splits, stock dividends, combinations of shares and similar recapitalization transactions. A holder of the Series A Warrants also will have the right to exercise its warrants on a cashless basis if the registration statement or prospectus contained therein is not available for the issuance of the common shares issuable upon exercise thereof. The exercisability of the Series A Warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially own more than 9.99% of the Company’s common shares.

 

The Series B Warrants will be exercisable at an exercise price of $6.08 per share at any time following six months and one day from the date the Initial Offering closes and prior to ten months from the date the Initial Offering closes (subject to extension in certain circumstances as described in the Purchase Agreement) only if the Company’s shelf registration statement on Form S-3 (File No. 333-178325), is not effective or is not otherwise available for the issuance of the Shares issuable during the Option Period or any prospectus contained therein is not available for use (a “Registration Failure”). The Series B Warrants expire on the date ten months from the date the Initial Offering closes if no Registration Failure has occurred prior thereto or, if a Registration Failure does occur prior to such date, on the fourth anniversary of such Registration Failure. The exercise price of the Series B Warrants is subject to customary adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. A holder of the Series B Warrants also will have the right to exercise its warrants on a cashless basis if the registration statement or prospectus contained therein is not available for the issuance of the common shares issuable upon exercise thereof. The exercisability of the Series B warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially own more than 9.99% of the Company’s common shares.

 

  

The Series C Warrants will be exercisable immediately as of the date of issuance at an exercise price of $6.08 per common share and expire four years from the date of issuance. The exercise price of the Series C Warrants is subject to customary adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. A holder of the Series C Warrants also will have the right to exercise its warrants on a cashless basis if the registration statement or prospectus contained therein is not available for the issuance of the common shares issuable upon exercise thereof. The exercisability of the Series C Warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially own more than 9.99% of the Company’s common shares.

 

Holders of the Warrants may exercise their Warrants to purchase shares of our Common Stock by delivering an exercise notice, appropriately completed and duly signed. Payment of the exercise price for the number of shares for which the warrant is being exercised is required to be delivered within one trading day after exercise of a Warrant. In the event that the registration statement relating to such warrant shares is not effective, a holder of warrants will have the right to exercise its Warrants for a net number of warrant shares pursuant to the cashless exercise procedures specified in the Warrants. The Warrants may be exercised in whole or in part, and any portion of a warrant not exercised prior to the termination date shall be and become void and of no value. The absence of an effective registration statement or applicable exemption from registration does not alleviate our obligation to deliver Common Stock issuable upon exercise of a Warrant.

 

Upon the holder’s exercise of a Warrant, we will issue the shares of common stock issuable upon exercise of such Warrant within three trading days of our receipt of notice of exercise.

 

Underlying Shares

 

The shares of common stock issuable on exercise of the Warrants will be, when issued in accordance with the Warrants, duly and validly authorized, issued and fully paid and non-assessable. We will authorize and reserve at least that number of shares of common stock equal to the number of shares of common stock issuable upon exercise of all outstanding Warrants.

 

Fundamental Transaction

 

If, at any time the Warrants are outstanding, we consummate any fundamental transaction, as described in the Warrants and which generally includes, but is not limited to the following: (i) any consolidation or merger into another corporation, (ii) the consummation of a transaction whereby another entity acquires more than 50% of our outstanding voting stock, (iii) or the sale of all or substantially all of our assets, the successor entity must assume in writing all of our obligations to the holders of the Warrants.

 

Additionally, in the event of a fundamental transaction, each Warrant holder will have the right to require us, or our successor, to repurchase its Warrants for an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of the Warrant.

 

  

Limitations on Exercise

 

The exercisability of the Warrants may be limited in certain circumstances if, upon exercise, the holder or any of its affiliates would beneficially own more than 4.99% of our Common Stock.

 

No Stockholder Rights

 

The holder of a Warrant will not possess any rights as a stockholder under the Warrant until the holder exercises such Warrant.

 

No Market for Warrants

 

There is no established public trading market for the Warrants, and we do not expect a market to develop. We do not intend to apply to list the Warrants on any securities exchange. Without an active market, the liquidity of the Warrants will be limited. In addition, in the event our Common Stock price does not exceed the per share exercise price of the Warrants during the period when the Warrants are exercisable, the Warrants will not have any value.

 

PLAN OF DISTRIBUTION

 

Placement Agent Agreement

 

We have entered into a Placement Agent Agreement (the “Placement Agent Agreement”), dated as of September 9, 2014, with FT Global Capital, Inc. (“FT Global Capital”), pursuant to which FT Global Capital agreed to act as our exclusive placement agent in connection with this offering. The Placement Agent Agreement with FT Global Capital was attached as Exhibit 10.2 to a Form 8-K, filed September 18, 2014.

 

The placement agent is not purchasing or selling any units offered by this prospectus supplement, nor is it required to arrange the purchase or sale of any specific number or dollar amount of the units, but the placement agent has agreed to use its best efforts to arrange for the direct sale of all of the securities in this offering pursuant to this prospectus supplement and the accompanying prospectus. There is no requirement that any minimum number of securities or dollar amount of units be sold in this offering and there can be no assurance that we will sell all or any of the units being offered. Therefore, we will enter into a purchase agreement directly with each investor in connection with this offering and we may not sell the entire amount of units offered pursuant to this prospectus supplement. We have agreed to indemnify the placement agent and purchasers against liabilities under the Securities Act and to contribute to payments that the placement agent may be required to make in respect of such liabilities.

 

We entered into a Securities Purchase Agreement, dated as of September 18, 2014 (“Securities Purchase Agreement”) with certain institutional investors purchasing the units being issued pursuant to this offering. The form of the Securities Purchase Agreement is included as an exhibit to our Current Report on Form 8-K filed with the SEC in connection with this offering. The closing of this offering will take place on or around September 23, 2014, and the following will occur:

 

•	we will receive funds in the amount of the aggregate purchase price;
•	the placement agent will receive the placement agent fees and the Placement Agent Warrants in accordance with the terms of the Placement Agent Agreement; and
•	we will deliver the units, consisting of the Shares and the Warrants to be issued at the initial closing.  If the investors exercise their option to purchase additional units during the Option Period, we will deliver such additional units and related Warrants at such time.

 

 

We have also agreed to indemnify the investors against certain losses resulting from our breach of any of our representations, warranties, or covenants under agreements with the purchasers as well as under certain other circumstances described in the Securities Purchase Agreement.

 

In connection with this offering, the Placement Agent may distribute this prospectus supplement and the accompanying prospectus electronically.

 

The placement agent may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended, or the Securities Act, and any fees or commissions received by it and any profit realized on the resale of securities sold by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. As an underwriter, the placement agent would be required to comply with the requirements of the Securities Act and the Exchange Act, including, without limitation, Rule 415(a)(4) under the Securities Act and Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of shares of common stock and warrants by the placement agent. Under these rules and regulations, the placement agent: (i) may not engage in any stabilization activity in connection with our securities; and (ii) may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until it has completed its participation in the distribution.

 

Fees

 

In exchange for these placement agent services, we have agreed to pay the Placement Agent upon the closing of this offering (including any additional closings resulting from the investors exercising their right to purchase additional units pursuant to this prospectus supplement) a cash fee equal to 6% of the aggregate purchase price of the units sold under this prospectus supplement and accompanying prospectus. In addition, we agreed to pay additional compensation in the form of warrants (the Placement Agent Warrants) to purchase that number of shares which equals 8% of the aggregate number of Shares included in the units sold in this offering (including at any additional closings resulting from the investors exercising their right to purchase additional units pursuant to this prospectus supplement) at an exercise price of 120% of the purchase price for such units. Under the Placement Agent Agreement, the placement agent is also entitled to additional tail compensation for any financings consummated within the eighteen (18) month period following September 23, 2014 to the extent that such financing is provided to us by investors that the Placement Agent had introduced to us. The Placement Agent Warrants issuable to the placement agent shall generally be on the same terms and conditions as the Series A Warrants offered pursuant to this prospectus supplement, provided that the Placement Agent Warrants will not provide for certain anti-dilution protections included in the Series A Warrants in accordance with FINRA Rule 5110, will not be exercisable for a period of six months and one day from the date of the offering and will expire four years after they become exercisable. The Placement Agent Warrants and the shares of common stock underlying the Placement Agent Warrants are being registered pursuant to this prospectus supplement.

 

Pursuant to FINRA Rule 5110(g), with limited exceptions, neither the Placement Agent Warrants nor any shares issued upon exercise of the Placement Agent Warrants shall be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the date of effectiveness or commencement of sales of this offering.

 

We have agreed to indemnify the Placement Agent and purchasers against liabilities under the Securities Act and to contribute to payments that the Placement Agent may be required to make in respect of such liabilities.

 

  

The following table shows the per unit and total placement agent fees we will pay to the Placement Agent in connection with the sale of units offered pursuant to this prospectus supplement assuming the purchase of all of the units offered hereby:

 

		Total
Aggregate Offering Price of units		$	24,360,810	(1)
Placement agent fees(2)		$	1,461,649

 

(1)

Includes $10,000,000 that we would receive if the investors exercise their rights to purchase additional units.  Does not include any amounts we would receive upon exercise of the Warrants issued to the investors.

(2)

Does not include any Placement Agent Warrants.

  

Because there is no minimum offering amount in this offering, the actual total placement agent fees are not presently determinable and may be substantially less than the maximum amount set forth above.

 

We estimate the total offering expenses of this offering that will be payable by us, excluding the placement agent fees, will be approximately $200,000, which include our legal and printing costs, and various other fees. At the closing, our transfer agent will credit the Shares to the respective accounts of the purchasers. We will mail the Warrants directly to the purchasers at their respective addresses set forth in the Securities Purchase Agreement.

 

The foregoing does not purport to be a complete statement of the terms and conditions of the Placement Agent Agreement and the Securities Purchase Agreement. Copies of the each have previously been included, or will be included, as exhibits to our current reports on Form 8-K that have been or will be filed with the SEC and incorporated by reference into the Registration Statement of which this prospectus supplement forms a part.

 

LEGAL MATTERS

 

Selected legal matters with respect to the validity under Florida law of the securities offered by this prospectus supplement will be passed upon for us by Barnett, Bolt, Kirkwood, Long & McBride, P.A., Tampa, Florida, and with respect to federal securities law by Kaufman & Canoles, P.C., Richmond, Virginia. Certain legal matters will be passed upon for the Placement Agent by Schiff Hardin LLP, Washington, D.C.

 

EXPERTS

 

The consolidated financial statements of our Company appearing in our annual report on Form 10-K for the fiscal years ended June 30, 2013 and 2012 have been audited by Friedman LLP, independent registered public accounting firm, as set forth in the reports thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such reports given on the authority of such firms as experts in accounting and auditing.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We have filed with the SEC a registration statement on Form S-3 under the Securities Act with respect to the securities we are offering under this prospectus supplement. This prospectus supplement and the accompanying prospectus do not contain all of the information set forth in the registration statement and the exhibits to the registration statement.

 

For further information with respect to us and the securities we are offering under this prospectus supplement, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus supplement as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference. We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC's website at http:/www.sec.gov. You may also read and copy any document we file at the SEC's public reference room, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room.

 

  

IMPORTANT INFORMATION INCORPORATED BY REFERENCE

 

The SEC allows us to “incorporate by reference” the information we file with them into this prospectus supplement. This means that we can disclose important information about us and our financial condition to you by referring you to another document filed separately with the SEC instead of having to repeat the information in this prospectus supplement. The information incorporated by reference is considered to be part of this prospectus supplement and later information that we file with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until this offering is completed:

 

•	our Annual Report on Form 10-K for the year ended June 30, 2013 filed on September 30, 2013;
•	our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 filed on November 14, 2014, our Quarterly Report on Form 10-Q for the quarter ended December 31, 2013 filed on February 19, 2014, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 filed on May 23, 2014;
•	our Current Reports on Form 8-K filed on June 11, 2014, July 29, 2014, September 15 and 18, 2014; and
•	the description of our Common Stock contained in the registration statement on Form 8-A, dated February 17, 2010, File No. 001-15931, and any amendments thereto or reports filed for the purpose of updating such description.

 

Additionally, all reports and other documents subsequently filed by us pursuant to Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act after the date of this prospectus supplement and prior to the termination or completion of this offering, shall be deemed to be incorporated by reference in this prospectus supplement and to be part hereof from the date of filing of such reports and other documents. Any information that we subsequently file with the SEC that is incorporated by reference as described above will automatically update and supersede any previous information that is part of this prospectus supplement.

 

You may request a copy of the filings incorporated herein by reference, including exhibits to such documents that are specifically incorporated by reference, at no cost, by writing or calling us at the following address or telephone number:

 

Kuanggong Road and Tiyu Road, 10th Floor,
ChengshiXin Yong She, Tiyu Road,
Xinhua District, Pingdingshan, Henan Province
People’s Republic of China
Attn: Song Lv, Chief Financial Officer
+86-3752882999

 

Statements contained in this prospectus as to the contents of any contract or other documents are not necessarily complete, and in each instance you are referred to the copy of the contract or other document filed as an exhibit to the registration statement or incorporated herein, each such statement being qualified in all respects by such reference and the exhibits and schedules thereto.