Preliminary
Note:
This
Schedule 13D is being jointly filed by Vicis Capital, LLC (“Vicis”), SLS
Holdings III, LLC (“SLS III”) and SLS Holdings VII, LLC (“SLS
VII”). Messrs. Shadron Stastney, John Succo and Sky Lucas are each
members of Vicis, SLS III and SLS VII. Because the same three
individuals are members of each entity, Vicis, SLS III and SLS VII may be deemed
to constitute a “group.” This filing does not constitute an admission
that, by these actions, Vicis, SLS III and SLS VII constitute or have formed a
“group” within the meaning of Regulation 13D under the Securities Exchange Act
of 1934 (the “Exchange Act”).
Item
1. Security and Issuer
The securities to which this Schedule
13D (the “Schedule”) relates are shares of common stock, par value $0.001 per
share (the “Common Stock”), of China New Energy Group Company (the
“Issuer”). The address of the Issuer’s principal executive offices is
Block B1, 18/F, No. 85, NanJing Road, TianJin Emperor Place, HePing District,
Tianjin, 300040, People's Republic of China.
Item
2. Identity and Background
|
(a)
|
The
name of the reporting persons are Vicis Capital LLC (“Vicis”), SLS
Holdings III, LLC (“SLS III”) and SLS Holdings VII (“SLS
VII”).
Vicis
Capital Master Fund
(the “Fund”)
, for
which Vicis acts as investment advisor
, directly holds
107,099,378 of the shares reported on this
Schedule.
Vicis
may be deemed to beneficially own such
107,099,378 shares
within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended, by
virtue of the voting and dispositive power over such shares granted by the
Fund to Vicis.
SLS III directly holds
52,884,259
of
the
shares reported on this Schedule. SLS VII directly
holds 9,430,508 of the shares reported on this
Schedule.
|
|
(b)
|
The
address of Vicis is 445 Park Avenue, Suite 1901, New York, NY
10022. The address of SLS III is 445 Park Avenue, Suite 1901,
New York, NY 10022. The address of SLS VII is 445 Park Avenue,
Suite 1901, New York, NY 10022.
|
|
(c)
|
Vicis
is an investment adviser registered under the Investment Advisers Act of
1940, as amended, that provides investment advisory services to Vicis
Capital Master Fund (the “Fund”). SLS III is a limited
liability company, the principal business of which is the ownership of the
securities of the Issuer. SLS VII is a limited liability
company the principal business of which is the ownership of the securities
of the Issuer.
|
|
(d)
|
None
of Vicis, SLS III or SLS VII has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) during the last
five years.
|
|
(e)
|
None
of Vicis, SLS III or SLS VII has, during the last five years, been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such
laws.
|
|
(f)
|
Vicis
Capital LLC is a limited liability company organized under the laws of the
state of Delaware. SLS Holdings III, LLC is a limited liability
company organized under the laws of the state of Delaware. SLS
Holdings VII, LLC is a limited liability company organized under the laws
of the state of Delaware.
|
Pursuant to General Instruction C of
Schedule 13D, the following information is being provided with respect to each
member of Vicis, and the Board of Directors of SLS III and SLS VII, respectively
(the “Insiders”):
Members
of Vicis Capital LLC
Name
|
Occupation
|
|
|
Shad
Stastney
|
Member
and Chief Operating Officer
|
|
|
John
Succo
|
Member
and Chief Investment Officer
|
|
|
Sky
Lucas
|
Member
and Head of Global Convertible
Arbitrage
|
Board of
Directors of SLS Holdings III, LLC
Name
|
Occupation
|
|
|
Shad
Stastney
|
Member
and Chief Operating Office of Vicis Capital, LLC
|
|
|
John
Succo
|
Member
and Chief Investment Officer of Vicis Capital, LLC
|
|
|
Sky
Lucas
|
Member
and Head of Global Convertible Arbitrage of Vicis Capital,
LLC
|
Board of
Directors of SLS Holdings VII, LLC
Name
|
Occupation
|
|
|
Shad
Stastney
|
Member
and Chief Operating Office of Vicis Capital, LLC
|
|
|
John
Succo
|
Member
and Chief Investment Officer of Vicis Capital, LLC
|
|
|
Sky
Lucas
|
Member
and Head of Global Convertible Arbitrage of Vicis Capital,
LLC
|
The
business address of each of the Insiders is 445 Park Avenue, Suite 1901, New
York, NY 10022.
To
Vicis’s, SLS III’s and SLS VII’s knowledge, respectively, each of the Insiders
is a United States citizen, and none of the Insiders has, during the last five
years, been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors), nor has any Insider been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such
laws.
Item
3. Source and Amount of Funds or Other
Consideration
The Fund previously acquired: (i)
5,711,031 shares of Common Stock; (ii) 1,546,183 shares of Series A Convertible
Preferred Stock (the “Series A Preferred Stock”); (iii) a warrant to purchase
9,577,737 shares of Common Stock (the “2008 Warrant”); (iv) 1,116,388 shares of
Series B Convertible Preferred Stock (the “Series B Preferred Stock”); (iv) a
warrant to purchase 7,814,719 shares of Common Stock (the “2009 Warrant” and,
together with the 2008 Warrant, the “Warrants”);
(v)
9.365 shares of the Issuer's Series C
Convertible Preferred Stock
(the “Series C Preferred Stock”); (v
i) 1 share of the Issuer's Series D
Convertible Preferred Stock
(the “Series D Preferred Stock”); and (vii) a
Convertible Promissory Note
having
an
original principal amount of
$1,500,000
(the “Vicis
Note”)
from a private party. The Vicis Note was originally due
October 15, 2010, but the Fund agreed to extend the due date of the Vicis Note
to January 31, 2011.
The terms of the Series A
Preferred Stock Certificate of
Designations
and
of
each of the Warrants
contain
conversion caps that prevent the Fund from exercising or converting, as the case
may be, an amount of such Warrant or Series A Preferred Stock to the extent that
the Fund would beneficially own greater than 4.9% of the outstanding Common
Stock.
Each share of the Series A
Preferred
Stock
and
of
the Series B Preferred
Stock
is convertible, subject to adjustment,
into 35 shares of Common Stock
, such that 54,116,405 shares of Common
Stock underlie the Series A Preferred Stock owned by Vicis (subject to the
limitations imposed by the applicable conversion cap) and 39,073,580 shares of
Common Stock underlie the Series B Preferred Stock owned by Vicis
.
SLS III previously acquired:
(i) 9.365 shares of the Issuer's Series
C Convertible Preferred Stock
(the “Series C Preferred Stock”);
(ii) 1 share of the
Issuer's Series D Convertible Preferred Stock
(the “Series D Preferred Stock”); and a
Convertible Promissory Note
having
an
original principal amount of
$1,500,000 (the “SLS III Note” together
with the Vicis Note, the “Notes” and each a “Note”). The SLS III Note
was originally due on October 15, 2010, but SLS III agreed to extend the due
date of the SLS III Note to January 31, 2011.
In connection with the acquisition of
the Series C Convertible Preferred Stock and the Series D Convertible Preferred
Stock, China Hand Fund, LLC and the Issuer entered into a Backstop Agreement,
dated September 14, 2010 (the “Backstop Agreement”), and China Hand Fund,
LLC subsequently assigned
certain of its right
s
and obligations relating to the
Backstop Agreement to the Fund and to SLS
III
. Pursuant to
such assignment
, the Fund and SLS
III
have collectively agreed to provide up
to $20,100,000 in additional financing to the Issuer if the Issuer is unable to
raise enough capital to complete the acquisition of
Beijing Century Dadi
Gas Engineering Co., Ltd. and Zhoulu Dadi Gas Co. Ltd.
The Issuer's Series C Preferred Stock
currently converts on a 1-for-5,647,011 basis, such that 52,
884,259 shares of Common Stock underlie
the Series C Preferred Stock owned by Vicis and
52,
884,259 shares of Common Stock underlie
the Series C Preferred Stock owned by SLS III
. The Series C Preferred
Stock automatically converts into Common Stock upon the earlier of: (i)
May 31, 20
11 or (ii)
the
Issuer's acquisition of at least 70% of
the
equity interests in Beijing Century Dadi
Gas Engineering Co., Ltd. The number of shares of the Issuer's Common
Stock issuable upon conversion of each share of Series D Preferred Stock is
equal to: (219,605,986*(.72/.28) - A - B)/4, whereby A is equal to the number of
shares of Common Stock into which
the
Series C Preferred Stock may be
converted on the date the Series C Convertible
Preferred Stock is issued (the
“
Issuance Date
”
) plus any shares
of
Common Stock into which shares of Series
C Preferred Stock which may be converted upon conversion of any convertible
promissory notes convertible into such stock outstanding on the Issuance Date,
and whereby B is equal to the number of shares of Common Stock, plus the number
of shares of Common Stock into which any convertible preferred stock, debt or
other convertible securities are convertible, issued to new investors between
October 1, 2010 and April 30, 2011, which result in gross proceeds to the Issuer
which do not exceed $54,500,000.
The Series D
Preferred Stock automatically converts
into Common Stock immediately after the conversion of all Series C
P
referred Stock and upon the latest to
occur of: (i) May 31, 2011 or (ii) the date upon which the Issuer completes the
acquisition of at least 70% of the equity interests in Beijing Century Dadi Gas
Engineering Co., Ltd.
Because the Series D
Preferred Stock conversion ratio cannot be determined at this time, it is
unknown how many shares of Common Stock are underlying the Series D Preferred
Stock and no shares of Common Stock underlying the Series D Preferred Stock
owned by Vicis and the Series D Preferred Stock owned by SLS III have been
included as shares owned by Vicis or by SLS III, respectively, on this
Schedule.
On
December 28, 2010, SLS III and SLS VII entered into an Assignment and Assumption
Agreement (the “Assignment and Assumption Agreement”). Pursuant to
the Assignment and Assumption Agreement, SLS III assigned the SLS III Note to
SLS VII.
The terms
of the Notes, as modified to extend their respective due dates to January 31,
2011, provide that in the event the Issuer repays the original principal amount
of a Note in full by January 31, 2011, the holder of such Note will be
issued 1.67 shares of the Issuer's Series C Convertible Preferred Stock, and
that in the event the Issuer does not repay the original principal amount of a
Note in full by January 31, 2011, such Note will automatically convert into 3.75
shares of Series C Convertible Preferred Stock. As a result, assuming
the Issuer timely repays the original principal amount in full, the Fund and SLS
VII will each be deemed to beneficially own an additional 9,430,508 shares of
Common Stock underlying the Series C Preferred Stock acquired upon such timely
repayment.
As a
result of the transactions described above, when the 5,711,031 shares of Common
Stock previously acquired by the Fund are aggregated with the 39,073,580 shares
of Common Stock underlying the Series B Preferred Stock, the 52,884,259 shares
of Common Stock underlying the Series C Preferred Stock and the 9,430,508 shares
of Common Stock underlying the Vicis Note, Vicis may be deemed to beneficially
own 107,099,378 shares of Common Stock.
As a result of the transactions
described above, SLS III may be deemed to beneficially own 52,884,259 shares of
Common Stock underlying the Series C Preferred Stock.
As a result of the transactions
described above, SLS VII may be deemed to beneficially own 9,430,508 shares of
Common Stock underlying the Note.
Item
4. Purpose of Transaction.
Vicis, on behalf of the Fund, acquired
the securities of the Issuer described in this Schedule as held by the Fund for
investment purposes in the ordinary course of its business pursuant to specified
investment objectives of the Fund. SLS III acquired the securities of
the Issuer described in this Schedule as held by SLS III for investment
purposes. SLS VII acquired the securities of the Issuer described in
this Schedule as held by SLS VII for investment purposes.
On July 15, 2009, Mr. Shad Stastney was
appointed to the Issuer's board of directors.
Mr. Stastney is the Chief Operating
Officer and Hea
d of
Research for Vicis Capital
LLC, a company he jointly founded in 2004
, and a member of SLS III and SLS
VII
.
Mr. Stastney also jointly founded Victus
Capital Management LLC in 2001. From 1998 through 2001, Mr. Stastney worked with
the corporate equity derivatives origination group of Credit Suisse First
Boston, eventually becoming a Director and Head of the Hedging and Monetization
Group, a joint venture between derivatives and equity capital markets. In 1997,
he joined Credit Suisse First Boston’s then-combined convertible/equity
derivative origination desk. From 1994 to 1997, he was an associate at the law
firm of Cravath, Swaine and Moore in New York, in their tax and corporate
groups, focusing on derivatives. He graduated from the University of North
Dakota in 1990 with a B.A. in Political Theory and History, and from the Yale
Law School in 1994 with a J.D. degree focusing on corporate and tax law.
Mr. Stastney is currently a
director of
several public
companies
.
Vicis and representatives of Vicis and
the Fund have had discussions with senior management of the Issuer and may in
the future have such discussions concerning ways in which the Issuer could
maximize shareholder value.
SLS III and representatives of SLS III
have had discussions with senior management of the Issuer and may in the future
have such discussions concerning ways in which the Issuer could maximize
shareholder value.
SLS VII and representatives of SLS VII
have had discussions with senior management of the Issuer and may in the future
have such discussions concerning ways in which the Issuer could maximize
shareholder value.
Except as set forth in this Item 4,
none of the Reporting Persons have any present plans or proposals that relate to
or would result in any of the actions specified in clauses (a) through (j) of
Item 4 of Schedule 13D of the Act, but each Reporting Person will continue to
review this position based upon further developments.
As permitted by law, each Reporting
Person may purchase additional shares of Common Stock or other securities
convertible, exchangeable or exercisable into Common Stock or dispose of any or
all of such securities from time to time in the open market, in privately
negotiated transactions, or otherwise, depending upon future evaluation of the
Issuer and upon other developments, including general economic and stock market
conditions.
Item 5. Interest in
Securities of the Issuer
|
(a)
|
The
Fund,
for which Vicis
Capital LLC acts as investment advisor
,
directly holds
107,099,378 of the shares reported on this Schedule
.
Vicis Capital LLC may be deemed to
beneficially own such
107,099,378 shares within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended, by
virtue of the voting and dispositive power over such shares granted by
Vicis Capital Master Fund to Vicis Capital LLC.
The voting and dispositive power
granted to Vicis Capital LLC by Vicis Capital Master Fund
may be
revoked at any time
.
Vicis disclaims beneficial ownership of any shares reported on this
Schedule. The foregoing 107,099,378 shares of
Common Stock represent approximately 51.4% of the Issuer’s outstanding
Common Stock (based upon 107,070,281 shares of Common Stock outstanding at
November 15, 2010, as reported by the Issuer in its Quarterly Report on
Form 10-Q filed with the SEC on November 22, 2010, 39,073,580 shares of
Common Stock underlying the Series B Preferred Stock, 52,884,259 shares of
Common Stock underlying the Series C Preferred Stock and 9,430,508 shares
of Common Stock underlying the Note owned by the
Fund).
|
SLS III directly holds
52,884,259
of the shares reported on this Schedule
.
The foregoing
52,884,259 shares of Common Stock represent approximately 33.1% of the Issuer’s
outstanding Common Stock (based upon 107,070,281 shares of Common Stock
outstanding at November 15, 2010, as reported by the Issuer in its Quarterly
Report on Form 10-Q filed with the SEC on November 22, 2010, and 52,884,259
shares of Common Stock underlying the Series C Preferred Stock owned by SLS
III). SLS III disclaims beneficial ownership of any shares held by
the Fund or SLS VII reported on this Schedule.
SLS VII directly holds
9,430,508
of the shares reported on this Schedule
.
The foregoing
9,430,508 shares of Common Stock represent approximately 8.1% of the Issuer’s
outstanding Common Stock (based upon 107,070,281 shares of Common Stock
outstanding at November 15, 2010, as reported by the Issuer in its Quarterly
Report on Form 10-Q filed with the SEC on November 22, 2010 and 9,430,508 shares
of Common Stock underlying the Note owned by SLS VII). SLS VII
disclaims beneficial ownership of any shares held by the Fund or SLS III
reported on this Schedule.
|
(b)
|
For
information on voting and dispositive power with respect to the above
listed shares, see Items 7-10 of the Cover
Pages.
|
|
(c)
|
Except
as disclosed in Item 3 of this Schedule, the Reporting Persons have not
effected any transaction in the Common Stock in the past 60
days.
|
Item
6.
Contracts,
Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
The information set forth in Items 3
and 4 is hereby incorporated by reference in this Item 6.
Item
7. Material to Be Filed as Exhibits
Exhibit
No.
|
Description
|
|
|
Exhibit
A
|
Joint
Filing Agreement, dated October 5, 2010, between Vicis Capital, LLC SLS
Holdings III, LLC and SLS Holdings VII, LLC.
|
|
|
Exhibit
B
|
SLS
Holdings VII, LLC Action of Members in Lieu of Meeting, dated December 30,
2010 (incorporated herein by reference to Exhibit A to Form 4 filed by
Vicis Capital LLC, SLS Holdings III, LLC and SLS Holdings VII, LLC on
December 30, 2010).
|
|
|
Exhibit
C
|
SLS
Holdings III, LLC Action of Members in Lieu of Meeting, dated October 5,
2010 (incorporated herein by reference to Exhibit A to Schedule 13D filed
by Vicis Capital LLC and SLS Holdings III, LLC on October 6,
2010).
|
|
|
Exhibit
D
|
Warrant
to Purchase Shares of China New Energy Group Company (incorporated herein
by reference to Exhibit 4.1 to Form 8-K filed by China New Energy Group
Company on August 26, 2008).
|
|
|
Exhibit
E
|
China
New Energy Group Company Certificate of Designations of Preferences,
Rights and Limitations of Series A Convertible Preferred Stock
(incorporated herein by reference to Exhibit 4.2 to Form 8-K filed by
China New Energy Group Company on August 26, 2008).
|
|
|
Exhibit
F
|
Warrant
to Purchase Shares of Common Stock of China New Energy Group Company
(incorporated herein by reference to Exhibit 4.1 to Form 8-K filed by
China New Energy Group Company on May 6, 2009).
|
|
|
Exhibit
G
|
China
New Energy Group Company Certificate of Designations of Preferences,
Rights and Limitations of Series B Convertible Preferred Stock
(incorporated herein by reference to Exhibit 4.2 to Form 8-K filed by
China New Energy Group Company on May 6, 2009).
|
|
|
Exhibit
H
|
Series
B Convertible Preferred Stock Securities Escrow Agreement by and between
China New Energy Group Company, China Hand Fund, LLC, and Escrow, LLC,
dated August 20, 2008 (incorporated herein by reference to Exhibit 10.4 to
Form 8-K filed by China New Energy Group Company on May 6,
2009).
|
|
|
Exhibit
I
|
China
New Energy Group Company Certificate of Designations of Preferences,
Rights and Limitations of Series C Convertible Preferred Stock
(incorporated herein by reference to Exhibit 4.1 to Form 8-K filed by
China New Energy Group Company on September 20,
2010).
|
Exhibit
J
|
China
New Energy Group Company Certificate of Designations of Preferences,
Rights and Limitations of Series D Convertible Preferred Stock
(incorporated herein by reference to Exhibit 4.2 to Form 8-K filed by
China New Energy Group Company on September 20, 2010).
|
|
|
Exhibit
K
|
Series
C and Series D Convertible Preferred Stock Securities Purchase Agreement
by and between China New Energy Group Company and China Hand Fund I, LLC,
dated September 14, 2010 (incorporated herein by reference to Exhibit 10.1
to Form 8-K filed by China New Energy Group Company on September 20,
2010).
|
|
|
Exhibit
L
|
Backstop
Agreement by and between China New Energy Group Company and China Hand
Fund, LLC, dated September 14, 2010 (incorporated herein by reference to
Exhibit 10.2 to Form 8-K filed by China New Energy Group Company on
September 20, 2010).
|
|
|
Exhibit
M
|
Form
of Note Purchase Agreement, dated September 14, 2010 (incorporated herein
by reference to Exhibit 10.4 to Form 8-K filed by China New Energy Group
Company on September 20, 2010).
|
|
|
Exhibit
N
|
Form
of China New Energy Group Company Convertible Note, dated September 14,
2010 (incorporated herein by reference to Exhibit 10.5 to Form 8-K filed
by China New Energy Group Company on September 20,
2010).
|
SIGNATURE
After reasonable inquiry and to the
best of my knowledge and belief, I certify that the information set forth in
this statement is true, complete and correct.
VICIS
CAPITAL, LLC
January
5, 2011
———————————————————————
Date
By:
/s/ Andrew
Comito
———————————————————————
Name: Andrew Comito
Title: Compliance Officer*
*
Executed pursuant to the authorization of the members of Vicis Capital LLC
attached as Attachment A to the Schedule 13D/A previously filed with the SEC by
Vicis Capital LLC with respect to the Amacore Group, Inc. on October 1,
2009.
SLS
HOLDINGS III, LLC
January
5, 2011
———————————————————————
Date
By:
/s/ Andrew
Comito
———————————————————————
Name: Andrew Comito
Title:
Authorized
Representative
*
*
Executed pursuant to the authorization of the members of SLS Holdings III, LLC
attached as Exhibit A to the Schedule 13D/A previously filed with the SEC by
Vicis Capital LLC and SLS Holdings III, LLC with respect to China New Energy
Group Company on October 6, 2010.
SLS
HOLDINGS VII, LLC
January
5, 2011
———————————————————————
Date
By:
/s/ Andrew
Comito
———————————————————————
Name: Andrew Comito
Title:
Authorized Representative
*
*
Executed pursuant to the authorization of the members of SLS Holdings VII, LLC
attached as Exhibit A to the Form 4 previously filed with the SEC by SLS
Holdings III, LLC and SLS Holdings VII, LLC with respect to China New Energy
Group Company on December 30, 2010.
Exhibit
A
JOINT
FILING AGREEMENT
In
accordance with Rule 13d-1(k) of the Securities Exchange Act of 1934, as
amended, the undersigned agree to the joint filing on behalf of each of them of
a statement on Schedule 13D with respect to the Common Stock, par value $0.001
per share, of China New Energy Group Company which may be beneficially owned by
each of them, and further agree that this Joint Filing Agreement shall be
included as an Exhibit to such joint filing. The undersigned further agree that
any amendments to such statement on Schedule 13D shall be filed jointly on
behalf of each of them without the necessity of entering into additional joint
filing agreements.
The
undersigned further agree that each party hereto is responsible for timely
filing of such statement on Schedule 13D and any amendments thereto, and for the
completeness and accuracy of the information concerning such party contained
therein; provided that no party is responsible for the completeness or accuracy
of the information concerning any other party, unless such party knows or has
reason to believe that such information is
inaccurate. Notwithstanding the foregoing, Andrew Comito, Vicis
Capital LLC Compliance Officer, is hereby authorized to act as a representative
of the signatories hereof for purposes of effecting any Schedule 13D filing or
amendment thereof, or any other SEC ownership filing which may relate
hereto.
The
undersigned shall not be deemed to admit that the undersigned was required to
file a statement on Schedule 13D by reason of entering into this Joint Filing
Agreement. Further, the undersigned shall not be deemed to admit membership in a
group by reason of entering into this Joint Filing Agreement.
This
Joint Filing Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original instrument, but all of such counterparts
together shall constitute but one agreement.
In
evidence thereof the undersigned, being duly authorized, hereby execute this
Joint Filing Agreement as of this 3rd day of January, 2011.
|
VICIS
CAPITAL, LLC
|
|
|
|
|
By:
|
/s/
Andrew Comito, Compliance Officer
|
|
|
|
|
|
|
|
SLS
HOLDINGS III, LLC
|
|
|
|
|
By:
|
/s/
Andrew Comito, Authorized Representative
|
|
|
|
|
|
|
|
SLS
HOLDINGS VII, LLC
|
|
|
|
|
By:
|
/s/
Andrew Comito, Authorized
Representative
|