10-K 1 d10k.htm FROM 10-K Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2009 OR ¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-02642 COGO GROUP, INC. (Exact name of registrant as specified in its charter) Maryland 52-0466460 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Room 1001, Tower C, Skyworth Building High-Tech Industrial park Nanshan, Shenzhen, PRC 518057 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (86)-755-267-43210 Securities registered pursuant to Section 12(b) of the Act: $0.01 par value Common Stock Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No x Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x The aggregate market value of the voting stock held by non-affiliates of the Registrant was $153,812,608 based on the reported last sale price of common stock on the Nasdaq Global Market on June 30, 2009. The number of shares outstanding of the registrant’s common stock at $.001 par value as of March 3, 2010 was 36,117,867. DOCUMENTS INCORPORATED BY REFERENCE None. Table of Contents COGO GROUP, INC. Annual Report on Form 10-K for the Year Ended December 31, 2009 PART I 2 ITEM 1. BUSINESS 2 ITEM 1A. RISK FACTORS 12 ITEM 1B. UNRESOLVED STAFF COMMENTS 26 ITEM 2. PROPERTIES 27 ITEM 3. LEGAL PROCEEDINGS 27 ITEM 4. RESERVED FOR FUTURE USE BY THE SECURITIES AND EXCHANGE COMMISSION. 27 PART II 27 ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 27 ITEM 6. SELECTED FINANCIAL DATA 29 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 33 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 53 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 55 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 55 ITEM 9A. CONTROLS AND PROCEDURES 55 ITEM 9B. OTHER INFORMATION 57 PART III 58 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 58 ITEM 11. EXECUTIVE COMPENSATION 62 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS 75 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 77 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 78 PART IV 79 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 79 Table of Contents FORWARD LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipates”, “believes”, “expects”, “can”, “continue”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predict”, “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions. Uncertainties and other factors, including the risks outlined under Risk Factors contained in Item 1A of this Form 10-K, may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. A variety of factors, some of which are outside our control, may cause our operating results to fluctuate significantly. They include: • the availability and cost of products from our suppliers incorporated into our customized module design solutions; • changes in end-user demand for the products manufactured and sold by our customers; • general and cyclical economic and business conditions, domestic or foreign, and, in particular, those in China’s mobile handset, telecommunications equipment and digital media industries; • the rate of introduction of new products by our customers; • the rate of introduction of enabling technologies by our suppliers; • changes in our pricing policies or the pricing policies of our competitors or suppliers; • our ability to compete effectively with our current and future competitors; • our ability to manage our growth effectively, including possible growth through acquisitions; • our ability to enter into and renew key corporate and strategic relationships with our customers and suppliers; • our implementation of share-based compensation plans; • changes in the favorable tax incentives enjoyed by our People’s Republic of China (“PRC”) operating companies; • foreign currency exchange rates fluctuations; • adverse changes in the securities markets; and • legislative or regulatory changes in China. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Form 10-K is filed, and we do not intend to update any of the forward-looking statements after the filing date to conform these statements to actual results, unless required by law. We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy and information statements and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended. You may read and copy these materials at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding us and other companies that file materials with the SEC electronically. You may also obtain copies of reports filed with the SEC, free of charge, via a link included on our website at http://www.cogo.com.cn. 1 Table of Contents PART I ITEM 1. BUSINESS Company Overview We provide customized module design solutions for a diverse set of applications and end markets, serving as a gateway for our technology component suppliers to access leading electronics manufacturers in China. Our customized module design solutions allow our customers to take advantage of technology components from reputable suppliers in an efficient and cost-effective manner, effectively reducing their time-to-market and lowering their overall costs. Our close collaboration with our customers’ product development teams provides us with a unique understanding of their needs, enabling us to customize our suppliers’ technology components with module designs that meet our customers’ needs. In addition, in 2006 we began offering technology and engineering services in China and in 2007, we began offering software design service in China. We focus on the digital media, telecommunications equipment and industrial business end-markets in China. In the digital media end-market, we provide mobile handset and module solutions for functionalities such as CMMB mobile TV, motion sensor, camera, power supply and bluetooth as well as solutions for high definition digital set-top box, GPS applications and solutions for Smartbook. In the telecommunications equipment end-market, we provide solutions for public switched telephone network, or PSTN, switching, optical transmitters, electrical signal processing and optical signal amplification. In the industrial business end-market, which commenced since the beginning of 2008, we provide industrial solutions for the smart meter, smart grid, railway and auto-electronics sectors. Currently, we have over 1,400 customers, including many of the most established manufacturers in the telecommunications equipment, digital media and industrial end-markets in China such as ZTE, TCL and BYD. We work with original equipment manufacturers, or OEMs, as well as subsystem designers and contract manufacturers to provide solutions to support industry leaders like Huawei.