CERTAIN RELATED PERSON TRANSACTIONS
Transactions with Aristo Technologies Limited
/ Mr. Yang
As
of December 31, 2009 and 2008, we had an outstanding receivable from Mr.
Yang, the President and Chairman of our Board of Directors, totaling $11,233,839
and $7,900,404. These advances bear no interest and are payable on demand.
The receivable due from Mr. Yang to the Company is derived from the consolidation
of the financial statements of Aristo, a variable interest entity, with the
Company. A repayment plan has been entered into (see Note 14 to consolidated
financial statements).
For the
years ended December 31, 2009 and 2008, we recorded compensation to Mr. Yang of
$1,300,000 and $735,026 respectively, and paid $1,300,000 and $735,026
respectively to Mr. Yang as compensation to him.
Transactions with Classic Electronic Limited
Mr.
Ben Wong, one of our directors, is a 99.9% shareholder of of Classic Electronics
Ltd. (Classic). The remaining 0.1% of Classic is owned by a non-related
party. As of December 31, 2009 and 2008, the Company had outstanding accounts
receivable from Classic totaling $0 and $1,717,320 respectively. This account
receivable was outstanding for more than 12 months in 2008 and paid off
in 2009.
Transactions with Solution Semiconductor
(China) Limited
Mr. Ben
Wong, one of our directors, is a 99% shareholder of Solution Semiconductor
(China) Ltd. (Solution). The remaining 1% of Solution is owned by a
non-related party. On April 1, 2009, we entered into a lease agreement with
Solution pursuant to which we lease one facility. The lease agreement for this
facility expires on March 31, 2012. The monthly lease payment for this lease is
$1,090. We incurred and paid an aggregate rent expense of $13,077 to Solution
during the years ended December 31, 2009 and 2008.
During the
years ended December 31, 2009 and 2008, we purchased inventories of $10,138 and
$0 respectively from Solution. As of December 31, 2009 and 2008, there were no
outstanding accounts payable to Solution.
Two
facilities located in Hong Kong owned by Solution were used by the Company as
collateral for loans from Citic Ka Wah Bank Limited (Citic)and Standard
Chartered Bank (Hong Kong) Limited (SCB) respectively.
Transactions with Systematic Information
Limited
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
a director and shareholder of Systematic Information Ltd. (Systematic
Information) with a total of 100% interest. On September 1, 2008, we entered
into a lease agreement with Systematic Information pursuant to which we lease
one facility. The lease agreement for this facility expires on August 31, 2010.
The monthly lease payment for this lease totals $641. We incurred and paid an
aggregate rent expense of $7,692 to Systematic Information during the years
ended December 31, 2009 and 2008.
During the
years ended December 31, 2009 and 2008, we received service charges of $5,436
and $0 respectively from Systematic Information. The service fee was charged
for back office support for Systematic Information.
During the
years ended December 31, 2009 and 2008, we sold products for $326,578 and
$1,913,071 respectively, to Systematic Information. As of December 31, 2009 and
2008, there were no outstanding accounts receivables from Systematic
Information.
During the
years ended December 31, 2009 and 2008, we purchased inventories of $74,688 and
$1,446,680 respectively from Systematic Information. As of December 31, 2009
and 2008, there were no outstanding accounts payable to Systematic Information.
A workshop
located in Hong Kong owned by Systematic Information was used by the Company as
collateral for loans from SCB.
Transactions with Global Mega Development
Limited
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
the sole beneficial owner of the equity interest of Global Mega Development
Ltd. (Global). During the years ended December 31, 2009 and 2008, we sold
products for $1,393 and $0 respectively, to Global. As of December 31, 2009 and
2008, there were no outstanding accounts receivables from Global.
Transactions with Systematic Semiconductor
Limited
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
the sole beneficial owner of the equity interest of Systematic Semiconductor
Ltd. (Systematic). During the years ended December 31, 2009 and 2008, we
received a management fee of $9,615 and $15,384 respectively from Systematic.
The management fee was charged for back office support for Systematic.
During the
years ended December 31, 2009 and 2008, we sold products for $19,914 and
$275,766 respectively, to Systematic. As of December 31, 2009 and 2008, there
were no outstanding accounts receivables from Systematic.
25
During the
years ended December 31, 2009 and 2008, we purchased inventories of $0 and
$560,750 respectively from Systematic. As of December 31, 2009 and 2008, there
were no outstanding accounts payable to Systematic.
Transactions with Aristo Components Limited
Mr. Ben
Wong, one of our directors, is a 90% shareholder of Aristo Components Ltd.
(Aristo Comp). The remaining 10% of Aristo Comp is owned by a non-related
party. During the years ended December 31, 2009 and 2008, we received a
management fee of $11,923 and $8,077 respectively from Aristo Comp. The
management fee was charged for back office support for Aristo Comp.
During the
years ended December 31, 2009 and 2008, we sold products for $12,060 and
$67,968 respectively, to Aristo Comp. As of December 31, 2009 and 2008, there
were no outstanding accounts receivables from Aristo Comp.
During the
years ended December 31, 2009 and 2008, we purchased inventories of $241,367
and $37,665 respectively from Aristo Comp. As of December 31, 2009 and 2008,
there were no outstanding accounts payable to Aristo Comp.
Transactions with Atlantic Storage Devices
Limited
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
a 40% shareholder of Atlantic Storage Devices Ltd. (Atlantic Storage). The
remaining 60% of Atlantic Storage is owned by a non-related party. During the
years ended December 31, 2009 and 2008, we sold products for $337,946 and
$575,386 respectively, to Atlantic Storage. As of December 31, 2009 and 2008,
there were no outstanding accounts receivables from Atlantic Storage.
During the
years ended December 31, 2009 and 2008, we purchased inventories of $0 and
$679,049 respectively, from Atlantic Storage. As of December 31, 2009 and 2008,
there were no outstanding accounts payable to Atlantic Storage.
Transactions with Rambo Technologies Limited
Mr. Ben
Wong, one of our directors, is a 60% shareholder of Rambo Technologies Ltd.
(Rambo). The remaining 40% of Rambo is owned by a non-related party. During
the years ended December 31, 2009 and 2008, we sold products for $73,219 and
$1,077,653 respectively, to Rambo. As of December 31, 2009 and 2008, there were
no outstanding accounts receivables from Rambo.
During the
years ended December 31, 2009 and 2008, we purchased inventories of $54,930 and
$10,314 respectively, from Rambo. As of December 31, 2009 and 2008, there were
no outstanding accounts payable to Rambo.
Transactions with Usmart Electronic Products
Limited
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
the sole beneficial owner of the equity interest of Usmart Electronic Products
Ltd. (Usmart). On October 7, 2009, we entered into a leasing payment
agreement with Usmart pursuant to which we lease one lot machinery facility to
Usmart. The leasing payment agreement for this facility expires on September
16, 2011. The monthly lease income for this lease totals $3,846. We received aggregate lease income of $13,333 and $0 from Usmart during the years ended December 31, 2009 and 2008.
During the years ended December 31, 2009 and 2008, we sold
products for $4,837 and $5,509 respectively, to Usmart. As of December 31, 2009
and 2008, there were no outstanding accounts receivables from Usmart.
During the
years ended December 31, 2009 and 2008, we purchased inventories of $42,596 and
$199,712 respectively, from Usmart. As of December 31, 2009 and 2008, there
were no outstanding accounts payable to Usmart.
Transactions with Imax Technology Limited
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
the sole beneficial owner of the equity interest of Imax Technology Ltd.
(Imax). During the years ended December 31, 2009 and 2008, we purchased
inventories of $0 and $3,167 respectively, from Imax. As of December 31, 2009
and 2008, there were no outstanding accounts payable from Imax.
Transactions with City Royal Limited
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
a 50% shareholder of City Royal Limited (City). The remaining 50% of City is
owned by the wife of Mr. Yang. A residential property located in Hong Kong
owned by City was used by the Company as collateral for loans from DBS Bank
(Hong Kong) Limited (DBS Bank).
Transactions with Kadatco Company Limited
Mr.
Yang, the Companys Chief Executive Officer, majority shareholder and
a director, a 99.99% shareholder of Kadatco Company Limited (Kadatco).
The remaining 0.01% of Kadatco is owned by a non-related party. During the
years ended December 31, 2009 and 2008, we purchased inventories of $24,895
and $0 respectively, from Kadatco. As of December 31, 2009 and 2008, there
was no outstanding payable from Kadatco.
26
|
|
I
tem 14.
|
Principal Accounting Fees and Services
|
The
following table presents fees, including reimbursements for expenses,
professional audit services and other services rendered by JTC Fair Song and
Albert Wong & Co. CPA firms during the years ended December 31, 2009 and
2008. JTC Fair Song CPA Firm conducted interim reviews of our quarterly
financial statements for the quarter ended March 31, 2009, June 30, 2009 and
September 30, 2009, and our annual financial statements and interim reviews of
our quarterly financial statements for the year ended December 31, 2008. Albert
Wong & Co. has re-audited our annual financial statements for the years
ended December 31, 2008 and 2007 and audited our annual financial statements
for the year ended December 31, 2009.
|
|
|
|
|
|
|
|
|
|
Fiscal 2009
|
|
Fiscal 2008
|
|
Audit Fees
(1)
|
|
$
|
75,000
|
|
$
|
35,000
|
|
Audit
Related Fees (2)
|
|
$
|
--
|
|
$
|
--
|
|
Tax Fees (3)
|
|
$
|
--
|
|
$
|
--
|
|
All Other
Fees (4)
|
|
$
|
--
|
|
$
|
--
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
75,000
|
|
$
|
35,000
|
|
|
|
(1)
|
Audit Fees consist of fees billed for professional services rendered
for the audit of the Companys consolidated annual financial statements and
review of the interim consolidated financial statements included in quarterly
reports and services that are normally provided by JTC Fair Song CPA and
Albert Wong & Co. CPA firms in connection with statutory and regulatory
filings or engagements. Audit Fees billed by Albert Wong & Co. CPA firm
includes re-audited fees for auditing our annual financial statements and interim reviews for the
fiscal year 2007 to 2009.
|
|
|
(2)
|
Audit-Related Fees consist of fees billed for assurance and related
services that are reasonably related to the performance of the audit or
review of the Companys consolidated financial statements and are not
reported under Audit Fees. There were no such fees in fiscal year 2009 or
2008.
|
|
|
(3)
|
Tax Fees consist of fees billed for professional services rendered
for tax compliance, tax advice and tax planning. There were no such fees in
fiscal year 2009 or 2008.
|
|
|
(4)
|
All Other Fees consist of fees for products and services other than
the services reported above. There were no such fees in fiscal year 2009 or
2008.
|
27
PART
IV
|
|
I
tem 15.
|
Exhibits and Financial Statement Schedules
|
|
|
|
(a)
|
Documents
filed as part of this Report
|
|
|
|
(1)
|
The financial statements listed in the Index to Consolidated
Financial Statements are filed as part of this report
|
|
|
|
|
(2)
|
The financial
statements listed in the Index are filed a part of this report.
|
|
|
|
|
|
Schedule II Valuation and Qualifying Accounts and Reserves.
Schedule II on page S-1 is filed as part of this report.
|
|
|
|
|
|
Schedule III Quarterly Information (Unaudited). Schedule III on page S-1 is filed as part of this report.
|
|
|
|
|
(3)
|
List of
Exhibits
|
|
|
|
|
|
See Index to
Exhibits in paragraph (b) below.
|
|
|
|
The Exhibits
are filed with or incorporated by reference in this report.
|
|
(b)
|
Exhibits
required by Item 601 of Regulation S-K.
|
|
|
Exhibit No.
|
Description
|
3.1
|
Certificate of incorporation of the Company, together with all
amendments thereto, as filed with the Secretary of State of the State of
Delaware, incorporated by reference to Exhibit 3.1 to the Form 8-K filed with
the Securities and Exchange Commission on December 19, 2003.
|
|
|
3.2
|
By-Laws of the Company, as amended, incorporated by reference to
Exhibit 3.2 to the Companys Registration Statement.
|
|
|
4.1(a)
|
Form of
specimen certificate for common stock of the Company.
|
|
|
10.1
|
Share Exchange and Reorganization Agreement, dated as of September 8,
2003, among Print Data Corp., Atlantic Components Limited and Mr. Chung-Lun
Yang, incorporated by reference to Exhibit 10.1 to the Form 8-K filed with
the Securities and Exchange Commission on October 16, 2003.
|
|
|
10.2
|
Conveyance Agreement, dated as of September 30, 2003, between Print
Data Corp. and New Print Data Corp., incorporated by reference to Exhibit
10.2 to the Form 8-K filed with the Securities and Exchange Commission on
October 16, 2003.
|
|
|
10.3
|
Securities Purchase Agreement, dated October 1, 2003, among Print Data
Corp, Jeffery Green, Phyllis Green and Joel Green, incorporated by reference
to Exhibit 10.3 to the Form 8-K filed with the Securities and Exchange
Commission on October 16, 2003.
|
|
|
10.4
|
Sales Restriction Agreement, dated September 30, 2003, between Print
Data Corp. and Phyllis Green, incorporated by reference to Exhibit 10.4 to
the Form 8-K filed with the Securities and Exchange Commission on October 16,
2003.
|
|
|
10.5
|
Sales Restriction Agreement, dated September 30, 2003, between Print
Data Corp. and Jeffery Green, incorporated by reference to Exhibit 10.5 to
the Form 8-K filed with the Securities and Exchange Commission on October 16,
2003.
|
|
|
10.6
|
Distribution Agreement, dated May 1, 1993, by and between Samsung
Electronics Co., Ltd. and Atlantic Components Limited, incorporated by
reference to Exhibit 10.6 to the Form 8-K filed with the Securities and
Exchange Commission on October 16, 2003.
|
|
|
10.7
|
Renewal of Distributorship Agreement, dated March 1, 2002, by and
between Samsung Electronics Co., Ltd. and Atlantic Components Limited,
incorporated by reference to Exhibit 10.7 to the Form 8-K filed with the
Securities and Exchange Commission on October 16, 2003.
|
|
|
10.8
|
Form of Note Subscription, dated as of December 31, 2003, by and
between the Company and Professional Traders Fund LLC, a New York limited
liability company (PTF), incorporated by reference to Exhibit 10.1 to the
Form 8-K filed with the Securities and Exchange Commission on March 24, 2004.
|
|
|
10.9
|
Form of 12% Senior Subordinated Convertible Note due December 31,
2004 in the aggregate principal amount of $250,000 issued by the Company to
PTF, incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the
Securities and Exchange Commission on March 24, 2004.
|
28
|
|
10.10
|
Form of Limited Guaranty and Security Agreement, dated as of December
31, 2003, by and among, the Company, PTF, Orient Financial Services Limited,
Mr. Li Wing-Kei and Emerging Growth Partners, Inc., incorporated by reference
to Exhibit 10.3 to the Form 8-K filed with the Securities and Exchange
Commission on March 24, 2004.
|
|
|
10.11
|
Form of Stock Purchase and Escrow Agreement, dated as of December 31,
2003, by and among, PTF, Orient Financial Services Limited, Mr. Li Wing-Kei
and Emerging Growth Partners, Inc., and the law firm of Sullivan &
Worcester LLP, as escrow agent, incorporated by reference to Exhibit 10.4 to
the Form 8-K filed with the Securities and Exchange Commission on March 24,
2004.
|
|
|
10.12
|
Form of Letter Agreement, dated as of December 31, 2003, by and
between the Company and PTF, incorporated by reference to Exhibit 10.5 to the
Form 8-K filed with the Securities and Exchange Commission on March 24, 2004.
|
|
|
10.13
|
Letter of Intent, dated December 29, 2003, between the Company and
Classic Electronics, Ltd., incorporated by reference to Exhibit 10.1 to the
Form 8-K filed with the Securities and Exchange Commission on March 25, 2004.
|
|
|
10.14
|
Note Subscription, dated as of December 31, 2003, by and between the
Company and Professional Traders Fund LLC, a New York limited liability
company (PTF), incorporated by reference to Exhibit 10.6 to the Form 8-K/A
filed with the Securities and Exchange Commission on April 13, 2004.
|
|
|
10.15
|
12% Senior Subordinated Convertible Note due December 31, 2004 in the
aggregate principal amount of $250,000 issued by the Company to PTF,
incorporated by reference to Exhibit 10.7 to the Form 8-K/A filed with the
Securities and Exchange Commission on April 13, 2004.
|
|
|
10.16
|
Limited Guaranty and Security Agreement, dated as of December 31,
2003, by and among, the Company, PTF, Orient Financial Services Limited, Mr.
Li Wing-Kei and Emerging Growth Partners, Inc., incorporated by reference to
Exhibit 10.8 to the Form 8-K/A filed with the Securities and Exchange
Commission on April 13, 2004.
|
|
|
10.17
|
Stock Purchase and Escrow Agreement, dated as of December 31, 2003,
by and among, PTF, Orient Financial Services Limited, Mr. Li Wing-Kei and
Emerging Growth Partners, Inc., and the law firm of Sullivan & Worcester
LLP, as escrow agent, incorporated by reference to Exhibit 10.9 to the Form
8-K/A filed with the Securities and Exchange Commission on April 13, 2004.
|
|
|
10.18
|
Letter Agreement, dated as of December 31, 2003, by and between the
Company and PTF, incorporated by reference to Exhibit 10.10 to the Form 8-K/A
filed with the Securities and Exchange Commission on April 13, 2004.
|
|
|
10.19
|
Stock Purchase Agreement, dated as of December 30, 2005, by and among
the Company, Classic Electronics, Ltd. (Classic) and the shareholders of
Classic, incorporated by reference to Exhibit 10.1 to the Form 8-K filed with
the Securities and Exchange Commission on January 6, 2006.
|
|
|
10.20
|
2006 Incentive Equity Stock Plan, incorporated by reference to
Exhibit 4.1 to the Form S-8 filed with the Securities and Exchange Commission
on April 27, 2006.
|
|
|
14
|
Code of Business Conduct and Ethics of the Company incorporated by
reference to Exhibit 14 to the Form 10-K for the period ended December 31,
2003.
|
|
|
16.1
|
Letter dated March 19, 2008 from Jeffrey Tsang & Co.,
incorporated by reference to Exhibit 16.1 to the Form 8-K filed with the
Securities and Exchange Commission on March 24, 2008.
|
|
|
21.1*
|
Subsidiaries of the Company
|
|
|
23.1*
|
Consent of Albert Wong & Co.
|
|
|
31.1
|
Certification of Principal Executive Officer required by Rule
13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
|
31.2
|
Certification of Principal Financial Officer required by Rule
13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
|
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
|
29
|
|
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
|
|
|
* Filed
herewith
|
|
(c)
|
Financial statements required by Regulation S-X which are excluded
from the annual report to shareholders by Rule 14a-3(b).
|
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
ACL
SEMICONDUCTORS INC.
|
|
|
|
By:
|
/s/
Chung-Lun Yang
|
|
|
Chung-Lun Yang
|
|
|
Chief Executive Officer
|
|
|
|
|
Dated: April
22, 2010
|
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
|
|
|
|
|
|
|
|
Signature
|
|
|
Title
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Chung-Lun Yang
|
|
Chief
Executive
Officer and
Chairman of the
Board of
Directors
(Principal
Executive
Officer)
|
|
April 22,
2010
|
|
|
|
|
Chung-Lun Yang
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Kenneth
Lap-Yin Chan
|
|
Chief
Financial Officer
(Principal
Financial and Accounting
Officer)
|
|
April 22,
2010
|
|
|
|
|
Kenneth
Lap-Yin Chan
|
|
|
|
|
|
|
|
|
/s/ Ben Wong
|
|
Director
|
|
April 22,
2010
|
|
|
|
|
|
Ben Wong
|
|
|
|
|
31
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
Index to Consolidated Financial Statements
|
F-1
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
|
ALBERT
WONG & CO.
|
CERTIFIED
PUBLIC ACCOUNTANTS
|
7th
Floor, Nan Dao Commercial Building
|
359-361
Queens Road Central
|
Hong Kong
|
Tel :
2851 7954
|
Fax: 2545
4086
|
|
ALBERT WONG
|
B.Soc., Sc., ACA., LL.B.,
C.P.A.(Practising)
|
|
|
|
|
|
|
To:
|
The board of directors and
stockholders of
|
|
ACL Semiconductors Inc.
(the Company)
|
R
eport of Independent
Registered Public Accounting Firm
We have audited the
accompanying balance sheets of the Company as of December 31, 2009 and 2008 and
the related statements of income, stockholders equity and cash flows for the
years then ended. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in
accordance with standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31,
2009 and 2008 and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, the financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
As discussed in Note 13 to
the consolidated financial statements, the Company does have numerous
significant transactions with businesses and affiliates controlled by, and/or
with personnel who are related to, the officers and directors of the Company.
|
|
|
/s/ Albert Wong & Co.
|
Hong Kong, China
|
Albert Wong & Co.
|
April 15, 2010
|
Certified Public
Accountants
|
F-2
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
(RESTATED)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
$
|
2,001,805
|
|
$
|
1,943,463
|
|
Restricted cash
|
|
|
|
|
|
2,086,504
|
|
|
5,169,753
|
|
Accounts receivable, net of allowance for
doubtful accounts of $0 for 2009 and 2008
|
|
|
|
|
|
12,434,386
|
|
|
10,342,453
|
|
Accounts receivable, related parties
|
|
|
|
|
|
|
|
|
1,717,320
|
|
Inventories, net
|
|
|
|
|
|
6,048,116
|
|
|
3,668,568
|
|
Restricted marketable securities
|
|
|
|
|
|
|
|
|
500,000
|
|
Other current assets
|
|
|
|
|
|
274,351
|
|
|
525,918
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
$
|
22,845,162
|
|
$
|
23,867,475
|
|
Property, plant and equipment, net
|
|
|
3
|
|
|
8,179,765
|
|
|
6,922,623
|
|
Other deposits
|
|
|
|
|
|
213,535
|
|
|
396,900
|
|
Amounts
due from Aristo / Mr. Yang
|
|
|
|
|
|
11,233,839
|
|
|
7,900,404
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
$
|
42,472,301
|
|
$
|
39,087,402
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
$
|
23,838,753
|
|
$
|
17,318,949
|
|
Accruals
|
|
|
|
|
|
527,582
|
|
|
409,367
|
|
Lines of credit and loan facilities
|
|
|
4
|
|
|
9,013,813
|
|
|
16,447,742
|
|
Current portion of long-term debt
|
|
|
5
|
|
|
318,972
|
|
|
160,447
|
|
Current portion of capital lease
|
|
|
6
|
|
|
318,135
|
|
|
58,683
|
|
Income tax payable
|
|
|
|
|
|
505,078
|
|
|
5,588
|
|
Due to shareholders for converted pledged
collateral
|
|
|
|
|
|
112,385
|
|
|
112,385
|
|
Other current liabilities
|
|
|
|
|
|
282,475
|
|
|
508,073
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
$
|
34,917,193
|
|
$
|
35,021,234
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt, less current portion
|
|
|
5
|
|
$
|
2,747,981
|
|
$
|
2,361,711
|
|
Capital
lease, less current portion
|
|
|
6
|
|
|
146,117
|
|
|
43,055
|
|
Deferred
tax liabilities
|
|
|
|
|
|
19,468
|
|
|
8,343
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
long-term liabilities
|
|
|
|
|
|
2,913,566
|
|
|
2,413,109
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
$
|
37,830,759
|
|
$
|
37,434,343
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS
EQUITY
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $.001 par value; 50,000,000 shares authorized; 28,729,936 and
28,329,936 shares issued and outstanding as of December 31, 2009 and
2008 respectively
|
|
|
|
|
|
28,730
|
|
|
28,330
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid in capital
|
|
|
|
|
|
3,658,627
|
|
|
3,593,027
|
|
Retained
earnings/accumulated losses
|
|
|
|
|
|
954,185
|
|
|
(1,968,298
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,641,542
|
|
$
|
1,653,059
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS EQUITY
|
|
|
|
|
$
|
42,472,301
|
|
$
|
39,087,402
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the consolidated financial statements
F-3
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
CONSOLIDATED STATEMENTS OF
INCOME AND COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
Notes
|
|
|
|
|
(RESTATED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
$
|
304,655,159
|
|
$
|
209,556,926
|
|
Costs of sales
|
|
|
|
|
|
(296,176,177
|
)
|
|
(205,388,286
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
$
|
8,478,982
|
|
$
|
4,168,640
|
|
Selling and distribution costs
|
|
|
|
|
|
(139,124
|
)
|
|
(82,285
|
)
|
General and administrative expenses
|
|
|
|
|
|
(4,549,182
|
)
|
|
(3,315,840
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income from operation
|
|
|
|
|
$
|
3,790,676
|
|
$
|
770,515
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
|
|
|
|
96,154
|
|
|
89,231
|
|
Interest expenses
|
|
|
|
|
|
(460,329
|
)
|
|
(1,073,798
|
)
|
Loss on disposal of marketable securities
|
|
|
|
|
|
|
|
|
(227,781
|
)
|
Management and service income
|
|
|
|
|
|
28,257
|
|
|
23,462
|
|
Net income on cash flow hedge
|
|
|
|
|
|
78,978
|
|
|
161,288
|
|
Interest income
|
|
|
|
|
|
38,576
|
|
|
90,706
|
|
Profit on disposals of equipment
|
|
|
|
|
|
18,946
|
|
|
|
|
Exchange differences
|
|
|
|
|
|
(25,217
|
)
|
|
(48,677
|
)
|
Miscellaneous
|
|
|
|
|
|
7,832
|
|
|
8,311
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
|
|
$
|
3,573,873
|
|
$
|
(206,743
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
7
|
|
|
(651,390
|
)
|
|
33,871
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
$
|
2,922,483
|
|
$
|
(172,872
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share basic and diluted
|
|
|
|
|
$
|
0.10
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares basic and diluted
|
|
|
8
|
|
|
28,681,717
|
|
|
28,329,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of shares
|
|
Amount
|
|
Additional
paid-in
capital
|
|
Retained
earnings/
(accumulated
losses)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2008
|
|
|
28,329,936
|
|
$
|
28,330
|
|
$
|
3,593,027
|
|
$
|
(1,795,426
|
)
|
$
|
1,825,931
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
(172,872
|
)
|
|
(172,872
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2008
|
|
|
28,329,936
|
|
$
|
28,330
|
|
$
|
3,593,027
|
|
$
|
(1,968,298
|
)
|
$
|
1,653,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2009
|
|
|
28,329,936
|
|
$
|
28,330
|
|
$
|
3,593,027
|
|
$
|
(1,968,298
|
)
|
$
|
1,653,059
|
|
Issue
of capital
|
|
|
400,000
|
|
|
400
|
|
|
65,600
|
|
|
|
|
|
66,000
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
2,922,483
|
|
|
2,922,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2009
|
|
|
28,729,936
|
|
$
|
28,730
|
|
$
|
3,658,627
|
|
$
|
954,185
|
|
$
|
4,641,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the consolidated financial statements
F-4
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
CONSOLIDATED STATEMENTS OF
CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
(RESTATED)
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,922,483
|
|
$
|
(172,872
|
)
|
Depreciation and amortisation
|
|
|
291,968
|
|
|
238,477
|
|
Bad debts
|
|
|
697,803
|
|
|
|
|
Change in inventory reserve
|
|
|
(26,970
|
)
|
|
(190,000
|
)
|
Issuance of common stocks to
consultant as professional fee under share option scheme
|
|
|
66,000
|
|
|
|
|
Gain on disposal of equipment
|
|
|
(18,946
|
)
|
|
|
|
Loss on disposal of marketable
securities
|
|
|
|
|
|
227,781
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
Accounts receivable other
|
|
|
(2,789,737
|
)
|
|
(2,715,435
|
)
|
Accounts receivable related parties
|
|
|
1,717,320
|
|
|
539
|
|
Inventories
|
|
|
(2,352,579
|
)
|
|
289,588
|
|
Other assets
|
|
|
183,365
|
|
|
(9,656
|
)
|
Income tax refundable
|
|
|
|
|
|
49,375
|
|
Other current assets
|
|
|
251,566
|
|
|
(436,734
|
)
|
Accounts payable
|
|
|
6,519,804
|
|
|
4,448,749
|
|
Accrued expenses
|
|
|
118,215
|
|
|
213,411
|
|
Income tax payable
|
|
|
499,490
|
|
|
5,588
|
|
Other current liabilities
|
|
|
(225,598
|
)
|
|
239,501
|
|
Deferred tax
|
|
|
11,125
|
|
|
(7,128
|
)
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
7,865,309
|
|
$
|
2,181,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
Advance (to) from
Aristo
/ Mr. Yang
|
|
$
|
(3,333,435
|
)
|
$
|
(1,842,916
|
)
|
|
|
|
|
|
|
|
|
Increase in restricted cash
|
|
|
3,083,249
|
|
|
(966,696
|
)
|
Increase in restricted
marketable securities
|
|
|
500,000
|
|
|
(500,000
|
)
|
Cash proceeds from sales of
marketable securities and restricted marketable securities
|
|
|
|
|
|
946,229
|
|
Cash proceeds from sales of automobiles
|
|
|
48,077
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(994,124
|
)
|
|
(164,565
|
)
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
$
|
(696,233
|
)
|
$
|
(2,527,948
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
Net
borrowings on lines of credit and notes payable
|
|
$
|
(7,433,929
|
)
|
$
|
837,254
|
|
Borrowing
under long-term debt
|
|
|
937,180
|
|
|
|
|
Principal
payments under long-term debt
|
|
|
(392,384
|
)
|
|
(152,321
|
)
|
Principal
payments under capital lease obligation
|
|
|
(221,602
|
)
|
|
(55,762
|
)
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
$
|
(7,110,735
|
)
|
$
|
629,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash and cash equivalents
sourced
|
|
$
|
58,341
|
|
$
|
282,407
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalentsbeginning
of year
|
|
|
1,943,463
|
|
|
1,661,056
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalentsend
of year
|
|
$
|
2,001,805
|
|
$
|
1,943,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
460,329
|
|
$
|
1,073,798
|
|
Income
tax paid
|
|
|
140,775
|
|
|
57,582
|
|
Income
tax refund
|
|
|
|
|
|
139,289
|
|
Compensation
received from insurance company related to bad debt under factoring
coverage
|
|
|
719,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary
schedule of non-cash investing and
|
|
|
|
|
|
|
|
financing
activities:
|
|
|
|
|
|
|
|
Income
tax provision
|
|
$
|
651,390
|
|
$
|
17,411
|
|
|
|
|
|
|
|
|
|
Capital
lease obligations incurred when capital
|
|
|
|
|
|
|
|
leases
were entered for new automobiles
|
|
$
|
584,117
|
|
$
|
62,538
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to the consolidated financial statements
F-5
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
N
OTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
1. ORGANIZATION AND PRINCIPAL ACTIVITY
|
|
|
Organization and Basis of Presentation
|
|
|
|
On September
8, 2003, ACL Semiconductors Inc. (formerly Print Data Corp.) (ACL) entered
into a Share Exchange and Reorganization Agreement with Atlantic Components
Ltd. (Atlantic), a Hong Kong based company, and Mr. Chung-Lun Yang (Mr.
Yang), the then sole beneficial stockholder of Atlantic. Under the terms of
the agreement, ACL issued 22,380,000 of its shares to Mr. Chung-Lun Yang and
2,620,000 of its shares to certain financial advisors in exchange for 100% of
the issued and outstanding shares of Atlantics capital stock. The Company
recorded an expense of $2,753,620 related to the issuance of 2,620,000 shares
of its common stock to these advisors, which was computed based on the quoted
market price of $1.05 on September 30, 2003, the effective date of the merger
and was classified as merger cost in the accompanying consolidated statements
of operations for the year ended December 31, 2003.
|
|
|
|
The share
exchange agreement closed and became effective on September 30, 2003. Upon
the completion of this transaction, Atlantic became the wholly owned
subsidiary of ACL, and Mr. Yang became the owner of approximately 80% of
ACLs issued and outstanding shares of common stock. In addition, ACLs
directors and officers resigned and were replaced by directors and officers
of Atlantic. For accounting purposes, the acquisition was accounted for as a
reverse-acquisition, whereby Atlantic was deemed to have acquired ACL.
Because the acquisition was accounted for as a purchase of ACL, the
historical financial statements of Atlantic became the historical financial
statements of ACL after this transaction.
|
|
|
|
In
connection with this transaction, ACL entered into a Conveyance Agreement on
September 30, 2003 with New Print Data Corp. (NewCo). Under the terms of
this agreement, effective September 30, 2003, ACL conveyed its historic
operations of providing supplies used in a computer or office environment to
NewCo, by assigning all of the assets and liabilities related to such
operations to NewCo which accepted the assignment and assumed all such
liabilities in exchange for 1,000,000 shares of common stock of NewCo.
|
|
|
|
On October
1, 2003, Print Data Corp. entered into a Securities Purchase Agreement with
the holders of Print Data Corp.s Series A Preferred Stock. Under the terms
of this agreement, Print Data Corp. sold its 1,000,000 shares of NewCo common
stock in exchange for the cancellation of the issued and outstanding 500,400
shares of ACLs Series A Preferred Stock (representing 100% of Print Data
Corp.s issued and outstanding preferred stock previously held by three
preferred stockholders).
|
|
|
|
On December
16, 2003, Print Data Corp. filed a Certificate of Amendment with the
Secretary of State of the State of Delaware changing its name from Print Data
Corp. to ACL Semiconductors Inc.
|
F-6
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
CONSOLIDATED STATEMENTS OF
CASH FLOWS
|
|
1. ORGANIZATION AND PRINCIPAL ACTIVITY
(Continued)
|
|
|
Business Activity
|
|
|
|
ACL
Semiconductors Inc. (Company or ACL) was incorporated
in the State of Delaware on September 17, 2002. Through a reverse-acquisition
of Atlantic Components Ltd., a Hong Kong based company, effective September
30, 2003, the Companys principal activities are distribution of electronic
components under the Samsung brand-name which comprise DRAM and
graphic RAM, Flash, SRAM and MASK ROM for the Hong Kong and Southern China
markets. Atlantic Components Ltd., its wholly owned subsidiary, was incorporated
in Hong Kong on May 30, 1991 with limited liability. On October 2, 2003, the
Company set up a wholly-owned subsidiary, Alpha Perform Technology Limited (Alpha),
a British Virgin Islands company, to provide services on behalf of the Company
in jurisdictions outside of Hong Kong. Effective January 1, 2004, the Company
ceased the operations of Alpha and all the related activities are
consolidated with those of Atlantic.
|
|
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
(a) Method of Accounting
|
|
|
|
The Company
maintains its general ledger and journals with the accrual method accounting
for financial reporting purposes. The consolidated financial statements and
notes are representations of management. Accounting policies adopted by the
Company conform to generally accepted accounting principles in the United
States of America and have been consistently applied in the presentation of
consolidated financial statements.
|
|
|
(b) Principles of consolidation
|
|
|
|
The
consolidated financial statements are presented in US Dollars and include the
accounts of the Company and its subsidiary. All significant inter-company
balances and transactions are eliminated in consolidation.
|
|
|
|
The Company
owned its subsidiary soon after its inception and continued to own the
equitys interests through December 31, 2009. The following table depicts the
identity of the subsidiary:
|
|
|
|
|
|
|
|
|
|
|
|
Name of subsidiary
|
|
Place of Incorporation
|
|
Attributable equity
interest %
|
|
Registered
capital
|
|
|
|
|
|
|
|
|
|
|
|
|
Alpha Perform Technology
Limited
|
|
|
BVI
|
|
100
|
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Atlantic Components Ltd
|
|
|
Hong
Kong
|
|
100
|
|
|
$
|
384,615
|
|
|
|
|
|
|
|
|
|
|
|
|
*Aristo Technologies
Limited
|
|
|
Hong
Kong
|
|
100
|
|
|
$
|
1,282
|
|
*Note: Deemed variable
interest entity
F-7
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
(b) Principles of consolidation (Continued)
According to ASC 810-10-25 which codified FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities an interpretation of ARB No. 51 (FIN 46R), an entity that has one or more of the
three characteristics set forth therein is considered a variable interest entity. One of such characteristics is that the equity investment at risk in the relevant entity is not sufficient to permit the entity to finance its activities without
additional subordinated financial support provided by any parties, including the equity holders. Based on a review of the equity investment at risk, the Company concluded that Aristo Technologies Limited (Aristo) is a variable interest
entity and is therefore subject to consolidation with the Company under the guidance applicable to variable interest entities.
Aristo Technologies Limited
Aristo is engaged in the marketing, selling and servicing of computer products and accessories including semiconductors, LCD products, mass storage devices, consumer electronics, computer peripherals and electronic components for
various brands such as Samsung, Hynix, Micro, Elpida, Qimonda, Lexar, Dane-Elec, Elixir, SanDisk and Winbond.
The Company sells to Aristo in order to fulfill Aristos
periodic need for Samsung memory products based on prevailing market prices,
which Aristo, in turn, sells to its customers. For fiscal
year 2009, sales to Aristo were $13,160,521 with accounts receivable of $10,315,388
as of December 31, 2009. For fiscal year 2008, sales to Aristo were $9,076,034
with accounts receivable of $6,695,409 as of December 31, 2008. For fiscal year
2007, sales to Aristo were
$17,165,728 with accounts receivable of $6,237,905 as of December 31,
2007.
The Company purchases from Aristo, from time to time,
LCD panels, Samsung memory chips, DRAM, Flash memory, central processing units,
external hard disks, DVD readers and writers that the Company cannot obtain from
Samsung directly due to supply limitations.
F-8
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
(c) Use of estimates
|
|
|
|
The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting periods.
Management makes these estimates using the best information available at the
time the estimates are made; however actual results could differ materially
from those estimates.
|
|
|
(d) Economic and political risks
|
|
|
|
The
Companys operation is conducted in Hong Kong. Accordingly, the Companys
business, financial condition and results of operations may be influenced by
the political, economic and legal environment in Hong Kong, and by the
general state of Hong Kong economy.
|
|
|
|
The
Companys operations in Hong Kong are subject to special considerations and
significant risks not typically associated with companies in North America
and Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. The
Companys results may be adversely affected by changes in the political and
social conditions in Hong Kong, and by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency
conversion, remittances abroad, and rates and methods of taxation, among
other things.
|
|
|
(e) Property, plant and equipment
|
|
|
|
Plant and
equipment are carried at cost less accumulated depreciation. Depreciation is
provided over their estimated useful lives, using the straight-line method.
Estimated useful lives of the plant and equipment are as follows:
|
|
|
|
|
|
Automobiles
|
|
|
3 1/3 years
|
|
Computers
|
|
|
5 years
|
|
Leasehold
improvement
|
|
|
5 years
|
|
Land and
buildings
|
|
|
By estimated useful life
|
|
Office equipment
|
|
|
5 years
|
|
Machinery
|
|
|
10 years
|
|
The cost and
related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statement
of income.
F-9
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
(f) Account receivable
|
|
|
|
Accounts
receivable is carried at the net invoiced value charged to customer. The
Company records an allowance for doubtful accounts to cover estimated credit
losses. Management reviews and adjusts this allowance periodically based on
historical experience and its evaluation of the collectability of outstanding
accounts receivable. The Company evaluates the credit risk of its customers
utilizing historical data and estimates of future performance.
|
|
|
(g) Accounting for the impairment of long-lived assets
|
|
|
|
The Company
periodically evaluates the carrying value of long-lived assets to be held and
used, including intangible assets subject to amortization, when events and
circumstances warrant such a review, pursuant to the guidelines established
in ASC No. 360 (formerly Statement of Financial Accounting Standards No.
144). The carrying value of a long-lived asset is considered impaired when
the anticipated undiscounted cash flow from such asset is separately
identifiable and is less than its carrying value. In that event, a loss is
recognised based on the amount by which the carrying value exceeds the fair
market value of the long-lived asset. Fair market value is determined
primarily using the anticipated cash flows discounted at a rate commensurate
with the risk involved. Losses on long-lived assets to be disposed of are
determined in a similar manner, except that fair market values are reduced
for the cost to dispose.
During the reporting years, there was no impairment
loss.
|
|
|
(h) Cash and cash equivalents
|
|
|
|
The Company
considers all highly liquid investments purchased with original maturities of
three months or less to be cash equivalents. The Company maintains bank
accounts in Hong Kong. The Company does not maintain any bank accounts in the
United States of America.
|
|
|
(i) Inventories
|
|
|
|
Inventories
are stated at the lower of cost or market and are comprised of purchased
computer technology resale products. Cost is determined using the first-in,
first-out method. The reserve for obsolescence was decreased by $26,970 for
2009 and increased by $190,000 for 2008. Inventory obsolescence reserves
totalled $347,133 and $374,103 as of December 31, 2009 and 2008,
respectively.
|
F-10
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
(j) Lease assets
|
|
|
|
Leases that
substantially transfer all the benefits and risks of ownership of assets to
the company are accounted for as capital leases. At the inception of a
capital lease, the asset is recorded together with its long term obligation
(excluding interest element) to reflect the purchase and the financing.
Leases which do not transfer substantially all the risks and rewards of
ownership to the company are classified as operating leases. Payments made
under operating leases are charged to income statement in equal instalments
over the accounting periods covered by the lease term. Lease incentives
received are recognized in income statement as an integral part of the
aggregate net lease payments made. Contingent rentals are charged to income
statement in the accounting period which they are incurred.
|
|
|
(k) Income taxes
|
|
|
|
Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred
tax assets, including tax loss and credit carry forwards, and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Deferred income tax expense represents the change during the period in the
deferred tax assets and deferred tax liabilities. The components of the
deferred tax assets and liabilities are individually classified as current
and non-current based on their characteristics. Realization of the deferred
tax asset is dependent on generating sufficient taxable income in future
years. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
|
|
|
(l) Foreign currency translation
|
|
|
|
The
accompanying consolidated financial statements are presented in United States
dollars. The functional currency of the Company is the Hong Kong Dollar
(HK$). The consolidated financial statements are translated into United
States dollars from HK$US$1.00=HKD7.80, a fixed exchange rate maintained
between Hong Kong and United States.
|
|
|
(m) Revenue recognition
|
|
|
|
The Company
derives revenues from resale of computer memory products. The Company
recognizes revenue in accordance with the SEC Staff Accounting Bulletin No.
104, Revenue Recognition (SAB 104). Under SAB 104, revenue is recognized
when there is persuasive evidence of an arrangement, delivery has occurred or
services are rendered, the sales price is determinable, and collectability is
reasonably assured. Revenue typically is recognized at time of shipment.
Sales are recorded net of discounts, rebates, and returns, which historically
were not material.
|
F-11
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
(n) Advertising
|
|
|
|
The Group
expensed all advertising costs as incurred. Advertising expenses included in
selling expenses were $5,377 and $7,118 for the years ended December 31, 2009
and 2008, respectively.
|
|
|
(o) Segment reporting
|
|
|
|
The
Companys sales are generated from Hong Kong and the rest of China and
substantially all of its assets are located in Hong Kong.
|
|
|
(p) Fair value of financial instruments
|
|
|
|
The carrying
amount of the Companys cash and cash equivalents, accounts receivable, lines
of credit, convertible debt, accounts payable, accrued expenses, and
long-term debt approximates their estimated fair values due to the short-term
maturities of those financial instruments.
|
|
|
(q) Comprehensive income
|
|
|
|
Comprehensive
income is defined to include all changes in equity except those resulting
from investments by owners and distributions to owners. Among other
disclosures, all items that are required to be recognized under current accounting
standards as components of comprehensive income are required to be reported
in a financial statement that is presented with the same prominence as other
consolidated financial statements. The Company has no items that represent
other comprehensive income and, therefore, has not included a schedule of
comprehensive income in the consolidated financial statements.
|
|
|
(r) Basic and diluted earnings (loss) per share
|
|
|
|
In
accordance with ASC No. 260 (formerly SFAS No. 128), Earnings Per Share,
the basic earnings (loss) per common share is computed by dividing net
earnings (loss) available to common stockholders by the weighted average
number of common shares outstanding. Diluted earnings (loss) per common share
is computed similarly to basic earnings (loss) per common share, except that
the denominator is increased to include the number of additional common
shares that would have been outstanding if the potential common shares had
been issued and if the additional common shares were dilutive.
|
|
|
(s) Reclassification
|
|
|
|
Certain
amounts in the prior year have been reclassified to conform to the current
years presentation.
|
F-12
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
(t) Recently implemented standards
|
|
|
ASC 105,
Generally Accepted Accounting Principles (ASC 105) (formerly Statement of
Financial Accounting Standards No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles a
replacement of FASB Statement No. 162) reorganized by topic existing
accounting and reporting guidance issued by the Financial Accounting Standards
Board (FASB) into a single source of authoritative generally accepted
accounting principles (GAAP) to be applied by nongovernmental entities. All
guidance contained in the Accounting Standards Codification (ASC) carries
an equal level of authority. Rules and interpretive releases of the
Securities and Exchange Commission (SEC) under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants.
Accordingly, all other accounting literature will be deemed non-authoritative.
ASC 105 is effective on a prospective basis for financial statements issued
for interim and annual periods ending after September 15, 2009. The Company
has implemented the guidance included in ASC 105 as of July 1, 2009. The
implementation of this guidance changed the Companys references to GAAP
authoritative guidance but did not impact the Companys financial position or
results of operations.
|
|
|
|
ASC 855,
Subsequent Events (ASC 855) (formerly Statement of Financial Accounting
Standards No. 165, Subsequent Events) includes guidance that was issued by
the FASB in May 2009, and is consistent with current auditing standards in
defining a subsequent event. Additionally, the guidance provides for
disclosure regarding the existence and timing of a companys evaluation of
its subsequent events. ASC 855 defines two types of subsequent events,
recognized and non-recognized. Recognized subsequent events provide
additional evidence about conditions that existed at the date of the balance
sheet and are required to be reflected in the financial statements.
Non-recognized subsequent events provide evidence about conditions that did
not exist at the date of the balance sheet but arose after that date and,
therefore; are not required to be reflected in the financial statements.
However, certain non-recognized subsequent events may require disclosure to
prevent the financial statements from being misleading. This guidance was
effective prospectively for interim or annual financial periods ending after
June 15, 2009. The Company implemented the guidance included in ASC 855 as of
April 1, 2009. The effect of implementing this guidance was not material to
the Companys financial position or results of operations.
|
|
|
|
ASC 944,
Financial Services Insurance (ASC 944) contains guidance that was
previously issued by the FASB in May 2008 as Statement of Financial
Accounting Standards No. 163, Accounting for Financial Guarantee Insurance
Contracts an interpretation of FASB Statement No. 60 that provides for
changes to both the recognition and measurement of premium revenues and claim
liabilities for financial guarantee insurance contracts that do not qualify
as a derivative instrument in accordance with ASC 815, Derivatives and
Hedging (formerly included under Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities). This
financial guarantee insurance contract guidance also expands the disclosure
requirements related to these contracts to include such items as a companys
method of tracking insured financial obligations with credit deterioration,
financial information about the insured financial obligations, and
managements policies for placing and monitoring the insured financial
obligations. ASC 944, as it relates to financial guarantee insurance
contracts, was effective for fiscal years beginning after December 15, 2008,
except for certain disclosures related to the insured financial obligations,
which were effective for the third quarter of 2008. The Company does not have
financial guarantee insurance products, and, accordingly, the implementation
of this portion of ASC 944 did not have an effect on the Companys results of
operations or financial position.
|
F-13
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
2. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
(t) Recently implemented standards
(Continued)
|
|
|
ASC 805, Business Combinations (ASC 805) (formerly included under
Statement of Financial Accounting Standards No. 141 (revised 2007), Business
Combinations) contains guidance that was issued by the FASB in December 2007.
It requires the acquiring entity in a business combination to recognize all
assets acquired and liabilities assumed in a transaction at the
acquisition-date fair value, with certain exceptions. Additionally, the
guidance requires changes to the accounting treatment of acquisition related
items, including, among other items, transaction costs, contingent
consideration, restructuring costs, indemnification assets and tax benefits.
ASC 805 also provides for a substantial number of new disclosure
requirements. ASC 805 also contains guidance that was formerly issued as FSP
FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a
Business Combination That Arise from Contingencies which was intended to
provide additional guidance clarifying application issues regarding initial
recognition and measurement, subsequent measurement and accounting, and
disclosure of assets and liabilities arising from contingencies in a business
combination. ASC 805 was effective for business combinations initiated on or
after the first annual reporting period beginning after December 15, 2008.
The Company implemented this guidance effective January 1, 2009. Implementing
this guidance did not have an effect on the Companys financial position or
results of operations; however it will likely have an impact on the Companys
accounting for future business combinations, but the effect is dependent upon
acquisitions, if any, that are made in the future.
|
|
|
|
ASC 810, Consolidation (ASC 810) includes new guidance issued by
the FASB in December 2007 governing the accounting for and reporting of
noncontrolling interests (previously referred to as minority interests). This
guidance established reporting requirements which include, among other
things, that noncontrolling interests be reflected as a separate component of
equity, not as a liability. It also requires that the interests of the parent
and the noncontrolling interest be clearly identifiable. Additionally,
increases and decreases in a parents ownership interest that leave control
intact shall be reflected as equity transactions, rather than step
acquisitions or dilution gains or losses. This guidance also requires changes
to the presentation of information in the financial statements and provides
for additional disclosure requirements. ASC 810 was effective for fiscal
years beginning on or after December 15, 2008. The Company implemented this
guidance as of January 1, 2009. The Company is in the process of evaluating ASC 810 and will make necessary changes accordingly.
|
F-14
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(t) Recently implemented standards
(Continued)
|
|
|
ASC 825, Financial Instruments (ASC 825) includes guidance which
was issued in February 2007 by the FASB and was previously included under
Statement of Financial Accounting Standards No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities Including an amendment of FASB
Statement No. 115. The related sections within ASC 825 permit a company to
choose, at specified election dates, to measure at fair value certain
eligible financial assets and liabilities that are not currently required to
be measured at fair value. The specified election dates include, but are not
limited to, the date when an entity first recognizes the item, when an entity
enters into a firm commitment or when changes in the financial instrument
causes it to no longer qualify for fair value accounting under a different
accounting standard. An entity may elect the fair value option for eligible
items that exist at the effective date. At that date, the difference between
the carrying amounts and the fair values of eligible items for which the fair
value option is elected should be recognized as a cumulative effect
adjustment to the opening balance of retained earnings. The fair value option
may be elected for each entire financial instrument, but need not be applied
to all similar instruments. Once the fair value option has been elected, it
is irrevocable. Unrealized gains and losses on items for which the fair value
option has been elected will be reported in earnings. This guidance was
effective as of the beginning of fiscal years that began after November 15,
2007. The Company does not have eligible financial assets and liabilities,
and, accordingly, the implementation of ASC 825 did not have an effect on the
Companys results of operations or financial position.
|
|
|
|
ASC 820, Fair Value Measurements and Disclosures (ASC 820)
(formerly included under Statement of Financial Accounting Standards No. 157,
Fair Value Measurements) includes guidance that was issued by the FASB in
September 2006 that created a common definition of fair value to be used
throughout generally accepted accounting principles. ASC 820 applies whenever
other standards require or permit assets or liabilities to be measured at
fair value, with certain exceptions. This guidance established a hierarchy
for determining fair value which emphasizes the use of observable market data
whenever available. It also required expanded disclosures which include the
extent to which assets and liabilities are measured at fair value, the
methods and assumptions used to measure fair value and the effect of fair
value measures on earnings. ASC 820 also provides additional guidance for
estimating fair value when the volume and level of activity for the asset or
liability have significantly decreased. The emphasis of ASC 820 is that fair
value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between willing market
participants, under current market conditions. ASC 820 also further clarifies
the guidance to be considered when determining whether or not a transaction
is orderly and clarifies the valuation of securities in markets that are not
active. This guidance includes information related to a companys use of
judgment, in addition to market information, in certain circumstances to
value assets which have inactive markets.
|
|
|
|
Fair value guidance in ASC 820 was initially effective for fiscal
years beginning after November 15, 2007 and for interim periods within those
fiscal years for financial assets and liabilities. The effective date of ASC
820 for all non-recurring fair value measurements of nonfinancial assets and
nonfinancial liabilities was fiscal years beginning after November 15, 2008.
Guidance related to fair value measurements in an inactive market was
effective in October 2008 and guidance related to orderly transactions under
current market conditions was effective for interim and annual reporting
periods ending after June 15, 2009.
|
F-15
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(t) Recently
implemented standards
(Continued)
|
|
|
The Company applied the provisions of ASC 820 to its financial assets
and liabilities upon adoption at January 1, 2008 and adopted the remaining
provisions relating to certain nonfinancial assets and liabilities on January
1, 2009. The difference between the carrying amounts and fair values of those
financial instruments held upon initial adoption, on January 1, 2008, was
recognized as a cumulative effect adjustment to the opening balance of
retained earnings and was not material to the Companys financial position or
results of operations. The Company implemented the guidance related to
orderly transactions under current market conditions as of April 1, 2009,
which also was not material to the Companys financial position or results of
operations.
|
|
|
|
In August 2009, the FASB issued ASC Update No. 2009-05, Fair Value
Measurements and Disclosures (Topic 820): Measuring Liabilities at Fair Value
(ASC Update No. 2009-05). This update amends ASC 820, Fair Value
Measurements and Disclosures and provides further guidance on measuring the
fair value of a liability. The guidance establishes the types of valuation
techniques to be used to value a liability when a quoted market price in an
active market for the identical liability is not available, such as the use
of an identical or similar liability when traded as an asset. The guidance
also further clarifies that a quoted price in an active market for the
identical liability at the measurement date and the quoted price for the
identical liability when traded as an asset in an active market when no
adjustments to the quoted price of the asset are required are both Level 1
fair value measurements. If adjustments are required to be applied to the
quoted price, it results in a level 2 or 3 fair value measurement. The
guidance provided in the update is effective for the first reporting period
(including interim periods) beginning after issuance. The Company does not
expect that the implementation of ASC Update No. 2009-05 will have a material
effect on its financial position or results of operations.
|
|
|
|
In September 2009, the FASB issued ASC Update No. 2009-12, Fair Value
Measurements and Disclosures (Topic 820): Investments in Certain Entities
that Calculate Net Asset Value per Share (or Its Equivalent) (ASC Update No.
2009-12). This update sets forth guidance on using the net asset value per
share provided by an investee to estimate the fair value of an alternative
investment. Specifically, the update permits a reporting entity to measure
the fair value of this type of investment on the basis of the net asset value
per share of the investment (or its equivalent) if all or substantially all
of the underlying investments used in the calculation of the net asset value
is consistent with ASC 820. The update also requires additional disclosures
by each major category of investment, including, but not limited to, fair
value of underlying investments in the major category, significant investment
strategies, redemption restrictions, and unfunded commitments related to
investments in the major category. The amendments in this update are
effective for interim and annual periods ending after December 15, 2009 with
early application permitted. The Company does not expect that the
implementation of ASC Update No. 2009-12 will have a material effect on its
financial position or results of operations.
|
F-16
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(t) Recently
implemented standards
(Continued)
|
|
|
In June 2009, FASB issued Statement of Financial Accounting Standards
No. 167, Amendments to FASB Interpretation No. 46(R) (Statement No. 167).
Statement No. 167 amends FASB Interpretation No. 46R, Consolidation of Variable
Interest Entities an interpretation of ARB No. 51 (FIN 46R) to require an
analysis to determine whether a company has a controlling financial interest
in a variable interest entity. This analysis identifies the primary
beneficiary of a variable interest entity as the enterprise that has a) the
power to direct the activities of a variable interest entity that most
significantly impact the entitys economic performance and b) the obligation
to absorb losses of the entity that could potentially be significant to the
variable interest entity or the right to receive benefits from the entity
that could potentially be significant to the variable interest entity. The
statement requires an ongoing assessment of whether a company is the primary
beneficiary of a variable interest entity when the holders of the entity, as
a group, lose power, through voting or similar rights, to direct the actions
that most significantly affect the entitys economic performance. This
statement also enhances disclosures about a companys involvement in variable
interest entities. Statement No. 167 is effective as of the beginning of the
first annual reporting period that begins after November 15, 2009. Although
Statement No. 167 has not been incorporated into the Codification, in accordance
with ASC 105, the standard shall remain authoritative until it is integrated.
The Company is in the process of evaluating Statement No. 167 and will
make necessary changes if required.
|
|
|
|
In June 2009, the FASB issued Statement of Financial Accounting
Standards No. 166, Accounting for Transfers of Financial Assets an amendment
of FASB Statement No. 140 (Statement No. 166). Statement No. 166 revises
FASB Statement of Financial Accounting Standards No. 140, Accounting for
Transfers and Extinguishment of Liabilities a replacement of FASB Statement
125 (Statement No. 140) and requires additional disclosures about transfers
of financial assets, including securitization transactions, and any
continuing exposure to the risks related to transferred financial assets. It
also eliminates the concept of a qualifying special-purpose entity, changes
the requirements for derecognizing financial assets, and enhances disclosure
requirements. Statement No. 166 is effective prospectively, for annual
periods beginning after November 15, 2009, and interim and annual periods
thereafter. Although Statement No. 166 has not been incorporated into the
Codification, in accordance with ASC 105, the standard shall remain
authoritative until it is integrated. The Company does not expect the
adoption of Statement No. 166 will have a material impact on its financial
position or results of operations.
|
F-17
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
3.
PROPERTY,
PLANT AND EQUIPMENT
, NET
Property,
plant and equipment, net comprise the following:
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
At cost
|
|
|
|
|
|
|
|
Land and buildings
|
|
$
|
7,663,340
|
|
$
|
6,754,351
|
|
Automobiles
|
|
|
168,181
|
|
|
152,185
|
|
Office equipment
|
|
|
218,462
|
|
|
194,896
|
|
Leasehold improvements
|
|
|
13,273
|
|
|
13,273
|
|
Furniture and fixtures
|
|
|
449,713
|
|
|
405,467
|
|
Machinery
|
|
|
499,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,012,583
|
|
$
|
7,520,172
|
|
Less: accumulated depreciation
|
|
|
(832,818
|
)
|
|
(597,549
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
8,179,765
|
|
$
|
6,922,623
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expenses included in the general
and administrative expenses
for the years ended December 31, 2009 and 2008 were $291,968 and $238,477
respectively.
|
4.
REVOLVING LINES OF CREDIT AND LOAN FACILITIES
|
|
|
The Company has available to it a
$5,128,205 revolving line of credit with DBS Bank with an outstanding balance
of $5,378,000 at December 31, 2009 and $4,722,616 at December 31, 2008. The
line of credit bears interest at the banks standard bills rate less 1% for
HKD borrowings and at the banks standard bills rate less 0.50% for other
currency borrowings as of December 31, 2009. The weighted average interest
rate approximated 4.5% for 2009 and 4.4% for 2008.
|
|
|
|
The Company has available to it a $641,026
factoring facility without recourse with DBS Bank without any outstanding
balance at December 31, 2009. The factoring facility bears a discounting
charge at the banks standard bills rate less 1% for advance in HKD or the
banks standard bills rate less 0.50% for advance in other currency as of
December 31, 2009. The weighted average interest rate approximated 4.5% for
2009 and 4.5% for 2008.
|
|
|
|
The Company has available to it a $384,615
letter of guarantee with DBS Bank with an outstanding balance of $384,615 at
December 31, 2009 and the letter of guarantee will expire on October 31,
2010. The line of credit bears a commission of 1.5% per annum which will be
refunded on a pro-rata basis upon return and cancellation of the letter of
guarantee.
|
|
|
|
The Company has available to it a
$3,846,154 factoring facility with SCB with an outstanding balance of
$888,000 at December 31, 2009. The factoring facility bears discounting
charges at the banks standard bills rate less 0.75% rate for advances in HKD
or the banks standard bills rates less 0.75% for advances in other currency
as of December 31, 2009. The weighted average interest rate approximated
4.75% for 2009 and 4.9% for 2008.
|
F-18
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
4.
REVOLVING LINES OF CREDIT AND LOAN FACILITIES (Continued)
|
|
|
The Company has available to it a
$3,076,923 revolving line of credit with The Bank of East Asia, Limited
(BEA) with an outstanding balance of $2,747,813 at December 31, 2009 and
$2,303,868 at December 31, 2008. The line of credit bears interest at the
higher of Hong Kong prime rate plus 0.25% or HIBOR plus 2% for HKD facilities
and LIBOR plus 2% for other currency facilities as of December 31, 2009. The
weighted average interest rate approximated 5.5% for 2009 and 5.9% for 2008.
|
|
|
|
The Company has available to it a $576,923
revolving line of credit with Fubon Bank (Hong Kong) Limited (Fubon) with
an outstanding balance of $308,947 at December 31, 2009 and $0 at December
31, 2008. The line of credit bears interest at the Hong Kong prime rate plus
0.5% as of December 31, 2009. The weighted average interest rate approximated
5.75% for 2009.
|
|
|
|
The summary of banking facilities at
December 31, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
facilities
|
|
Utilized
facilities
|
|
Not utilized
facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Overdraft
|
|
$
|
602,564
|
|
$
|
308,947
|
|
$
|
293,617
|
|
Instalment loan
|
|
|
2,361,825
|
|
|
2,361,825
|
|
|
|
|
Factoring loan
|
|
|
4,487,179
|
|
|
888,000
|
|
|
3,599,179
|
|
Import/export loan
|
|
|
8,205,128
|
|
|
8,125,813
|
|
|
79,315
|
|
Term Loan
|
|
|
859,081
|
|
|
859,081
|
|
|
|
|
Letter of guarantee
|
|
|
384,615
|
|
|
384,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,900,392
|
|
$
|
12,928,281
|
|
$
|
3,972,111
|
|
|
|
|
|
|
|
|
|
|
|
|
F-19
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
5. LONG-TERM DEBTS
Long-term debts were comprised of the following:
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
Installment loan having a
maturity date in July 2026 and carrying an interest rate of 2.75% below the
Hong Kong dollar Prime Rate (5.25% at December 31, 2009) to DBS Bank payable
in monthly installments of $9,663 including interest through December 2009
without any balloon payment requirements
|
|
$
|
1,572,720
|
|
$
|
1,648,222
|
|
|
|
|
|
|
|
|
|
Installment
loan having a maturity date in July 2011 and carrying an interest rate of 2%
below the Hong Kong dollar Prime Rate (5.25% at December 31, 2009) to DBS
Bank payable in monthly installments of $3,782 including interest through
December 2009 without any balloon payment requirements
|
|
|
69,949
|
|
|
112,312
|
|
|
|
|
|
|
|
|
|
Installment
loan having a maturity date in July 2023 and carrying an interest rate of
2.5% below the Hong Kong dollar Prime Rate (5.25% at December 31, 2009) to
DBS Bank payable in monthly installments of $5,240 including interest through
December 2009 without any balloon payment requirements
|
|
|
719,156
|
|
|
761,624
|
|
|
|
|
|
|
|
|
|
Installment loan having a maturity date in
July 2014 and carrying an interest rate of 0.25% plus the Hong Kong dollar
Prime Rate (5.25% at December 31, 2009) to BEA Bank payable in monthly
installments of $16,111 including interest through December 2009 without any
balloon payment requirements
|
|
|
705,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,066,953
|
|
$
|
2,522,158
|
|
Less:
current maturities
|
|
|
(318,972
|
)
|
|
(160,447
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
2,747,981
|
|
$
|
2,361,711
|
|
|
|
|
|
|
|
|
|
|
|
|
An analysis of long-term debt as of December 31 is as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
$
|
318,972
|
|
$
|
160,447
|
|
|
|
|
|
|
|
|
|
After 1 year, but within 2 years
|
|
$
|
586,013
|
|
$
|
316,063
|
|
After 2 years, but within 5 years
|
|
|
508,050
|
|
|
257,789
|
|
After 5 years
|
|
|
1,653,918
|
|
|
1,787,859
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,747,981
|
|
$
|
2,361,711
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,066,953
|
|
$
|
2,522,158
|
|
|
|
|
|
|
|
|
|
F-20
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
5. LONG-TERM DEBTS
(Continued)
|
|
|
|
With respect to all of the above referenced debt and credit
arrangements in Note 4, the Company pledged its assets as collateral
collectively to a bank group in Hong Kong comprised of DBS (formerly Overseas
Trust Bank Limited), BEA and Fubon for all current and future borrowings from
the bank group by the Company. In addition to the above pledged collateral,
the debt is also secured by:
|
|
|
|
1.
|
a fixed cash
deposit of $703,974 (HK$5,491,000), a security interest on two residential
properties and a workshop located in Hong Kong owned by Atlantic, a wholly
owned subsidiary of ACL, a security interest on a residential property
located in Hong Kong owned by City, a related party, a workshop located in
Hong Kong owned by Solution, a related party, plus a personal guarantee by
Mr. Yang as collateral for loans from DBS Bank;
|
|
|
|
|
2.
|
a fixed cash
deposit of $1,382,662 (HK$10,784,762), a workshop located in Hong Kong owned
by Systematic Information, a related party, a workshop located in Hong Kong
owned by Solution, a related party, plus an unlimited personal guarantee by
Mr. Yang, as collateral for loans from BEA;
|
|
|
|
|
3.
|
a security
interest on residential properties located in Hong Kong owned by Aristo, a
wholly owned company by Mr. Yang plus a personal guarantee by Mr. Yang as
collateral for loans from Fubon.
|
F-21
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
6. CAPITAL LEASE
OBLIGATIONS
|
|
|
The Company has several non-cancellable capital leases relating to
automobiles:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
$
|
318,135
|
|
$
|
58,683
|
|
Non-current portion
|
|
|
146,117
|
|
|
43,055
|
|
|
|
|
|
|
|
|
|
|
|
$
|
464,252
|
|
$
|
101,738
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, the value of automobiles under capital leases as
follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
716,855
|
|
$
|
193,514
|
|
Less: accumulated depreciation
|
|
|
(106,393
|
)
|
|
(51,463
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
610,462
|
|
$
|
142,051
|
|
|
|
|
|
|
|
|
|
|
|
|
At December
31, the Company had obligations under capital leases repayable as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
|
|
|
|
|
-Within one year
|
|
$
|
338,502
|
|
$
|
65,055
|
|
- After one year but within 5 years
|
|
|
156,078
|
|
|
47,329
|
|
|
|
|
|
|
|
|
|
|
|
$
|
494,580
|
|
$
|
112,384
|
|
Interest expenses relating to future
periods
|
|
|
(30,328
|
)
|
|
(10,646
|
)
|
|
|
|
|
|
|
|
|
Present value of the minimum lease payments
|
|
$
|
464,252
|
|
$
|
101,738
|
|
|
|
|
|
|
|
|
|
F-22
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
7. INCOME TAXES
|
|
|
Income tax (refund) expense amounted to $651,390 for 2009 and
$(33,871) for 2008 (an effective rate of 18% for 2009 and 0% for 2008). A
reconciliation of the provision for income taxes with amounts determined by
applying the statutory federal income tax rate of 34% to income before income
taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Computed tax at federal
statutory rate
|
|
$
|
1,215,117
|
|
$
|
(70,292
|
)
|
Tax rate
differential on foreign earnings of Atlantic and Aristo,
Hong Kong based
companies
|
|
|
(826,464
|
)
|
|
(121,297
|
)
|
Expenses
not deductible for tax
|
|
|
|
|
|
166,477
|
|
Unrecognized
timing difference
|
|
|
|
|
|
23,480
|
|
Tax
under/(over) provision for Atlantic
|
|
|
125,749
|
|
|
(97,973
|
)
|
Net
operating loss carry forward
|
|
|
136,988
|
|
|
65,734
|
|
|
|
|
|
|
|
|
|
|
|
$
|
651,390
|
|
$
|
(33,871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
The income tax provision consists of the following components:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
$
|
|
|
Foreign
|
|
|
651,390
|
|
|
(33,871
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
651,390
|
|
$
|
(33,871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
The Components of the deferred tax assets and liabilities are as
follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Net operating losses
|
|
$
|
1,259,714
|
|
$
|
1,122,726
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
1,259,714
|
|
$
|
1,122,726
|
|
Less: valuation allowance
|
|
|
(1,259,714
|
)
|
|
(1,122,726
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
F-23
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
8. WEIGHTED AVERAGE NUMBER OF SHARES
|
|
|
The Company
has a 2006 Incentive Equity Stock Plan, under which the Company may grant
options to its employees for up to 5 million shares of common stock. There
was no dilutive effect to the weighted average number of shares for the years
ended December 31, 2009 and 2008 since there were no outstanding options at December
31, 2009 and 2008.
|
9. CONCENTRATIONS OF CREDIT RISK AND MAJOR
CUSTOMERS
|
|
|
The Company
has a non-exclusive Distributorship Agreement with Samsung Electronics Hong
Kong Co., Ltd. (Samsung), which was initially entered into in May 1993 and
has been renewed annually. Under the terms of the agreement, Samsung
appointed the Company on a non-exclusive basis as Samsungs distributor to
distribute and market its products in the designated territory. The Company
has the right to market and sell the products of other manufacturers and
render service related to such activities, unless such activities result in
the Companys inability to fulfill its obligations under the Agreement.
However, the Company shall not purchase to sell any of the same product lines
as Samsung produces and deals in from any other Korean manufacturer during
the term of this Agreement. The most recent renewal of the Distributorship
Agreement expired on February 28, 2010. As of March 1, 2010, Samsung has
confirmed the annual renewal of such agreement for one year. Official signed
agreement should be received by the Company in May 2010.
|
|
|
|
The
Companys distribution operations are dependent on the availability of an
adequate supply of electronic components under the Samsung brand name which
have historically been principally supplied to the Company by the Hong Kong
office of Samsung. The Company purchased 51% and 48%, of materials from
Samsung for the years ended December 31, 2009 and 2008, respectively.
However, there is no written supply contract between the Company and Samsung
and, accordingly, there is no assurance that Samsung will continue to supply
sufficient electronic components to the Company on terms and prices
acceptable to the Company or in volumes sufficient to meet the Companys
current and anticipated demand, nor can assurance be given that the Company
would be able to secure sufficient products from other third party
supplier(s) on acceptable terms.
|
|
|
|
In addition,
the Companys operations and business viability are to a large extent
dependent on the provision of management services and financial support by
Mr. Yang. See Note 5 for details for Mr. Yangs support of the Companys
banking facilities. At December 31, 2009 and 2008, included in accounts
payable were $17,406,347 and $8,675,069, respectively, to Samsung.
Termination of such distributorship by Samsung will significantly impair and
adversely affect the continuation of the Companys business.
|
|
|
|
As of
December 31, 2008, Samsung has withheld a total of $350,000 of
rebate due to the Company as deposits. As agreed with Samsung, the deposits
were fully refunded to the Company on January 22, 2009.
|
F-24
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
10. RETIREMENT PLAN
|
|
|
Under the
Mandatory Provident Fund (MPF) Scheme Ordinance in Hong Kong, the Company
is required to set up or participate in an MPF scheme to which both the
Company and employees must make continuous contributions throughout their
employment based on 5% of the employees earnings, subject to maximum and
minimum level of income. For those earning less than the minimum level of
income, they are not required to contribute but may elect to do so. However,
regardless of the employees election, their employers must contribute 5% of
the employees income. Contributions in excess of the maximum level of income
are voluntary. All contributions to the MPF scheme are fully and immediately
vested with the employees accounts. The contributions must be invested and
accumulated until the employees retirement. The Company contributed and
expensed $34,099 for 2009 and $29,650 for 2008.
|
11. COMMITMENTS
|
|
|
The Company
leases its facilities. The following is a schedule by years of future minimum
rental payments required under operating leases that have non-cancellable
lease terms in excess of one year as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
parties
|
|
Others
|
|
Total
|
|
|
Year ending December 31,
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
18,846
|
|
$
|
201,516
|
|
$
|
220,362
|
|
2011
|
|
|
13,077
|
|
|
155,628
|
|
|
168,705
|
|
Thereafter
|
|
|
3,269
|
|
|
403,847
|
|
|
407,116
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
35,192
|
|
$
|
760,991
|
|
$
|
796,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Note 13
for related party leases. All leases expire prior to December 31, 2014. Real
estate taxes, insurance, and maintenance expenses are obligations of the
Company. It is expected that in the normal course of business, leases that
expire will be renewed or replaced by leases on other properties; thus, it is
anticipated that future minimum lease commitments will likely be more than
the amounts shown for 2009. Rent expense for the years ended December 31,
2009 and 2008 totalled $136,017 and $142,985, respectively.
|
F-25
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
12. DERIVATIVE INSTRUMENTS
|
On February
1, 2009, the Company adopted ASC 815 (formerly SFAS No. 161) as referenced in
Note 2. The adoption of ASC 815 requires additional disclosures about
Companys objectives and strategies for using derivative instruments, the
accounting for the derivative instruments and related hedged items under ASC
815 (formerly SFAS No. 133), Accounting for Derivative Instruments and
Hedging Activities, and the effect of derivative instruments and related
hedged items on the financial statements. The adoption had no financial
impact on the consolidated condensed financial statements.
|
|
Since all of
the Company sales are done in USD, the bank is exposed to foreign currency
exchange rate fluctuations in the normal course of its business. As part of
its risk management strategy, the Company purchases FX forward contracts from
the banks to secure the exchange rate for a period of time in order to hedge
any FX exposure between HKD and USD throughout the purchase & sale
period. The Company applies hedge accounting based upon the criteria
established by ASC 815, whereby the Company designates its derivatives as
cash flow hedges. Cash flows from the derivative programs were classified as
operating activities in the Consolidated Statement of Cash Flows.
|
|
As at
December 31, 2009 there is a participating forward currency option agreement
between the Company and SCB for the Company to buy US$500,000 from SCB at a
contract rate of 7.735 at specified dated up to January 7, 2010. According to
the terms of the agreement, the Company will buy USD in triple amounts if the
spot rate is less than the contract rate at specified dates. The gain on this
forward contract during the year ended December 31, 2009 was $12,564.
|
|
As at
December 31, 2009, there is a target redemption forward currency option
agreement between the Company and SCB for the Company to buy US$750,000 from
SCB at a lower strike contract rate of 7.75 and an upper strike contract rate
of 7.85 at specified dates up to April 29, 2010. According to the terms of
the agreement, the Company will buy USD in triple amounts if the spot rate is
less than the lower strike contract rate or greater than the upper strike
contract rate at specified dates. The gain on this forward contract during
the year ended December 31, 2009 was $1,260.
|
F-26
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
12. DERIVATIVE INSTRUMENTS (Continued)
There are
three foreign currency exchange agreements that matured as of December 31, 2009.
These agreements are:
|
|
|
Pivot bonus
forward currency option agreement between the Company and SCB for the Company
to buy US$1,000,000 from SCB at a lower strike contract rate of 7.73 and an
upper strike contract rate 7.749 at specified dates up to July 2, 2009.
According to the terms of the agreement, the Company will buy in triple
amounts if the spot rate is less than the lower strike contract rate. The
gain on this forward contract during the year ended December 31, 2009 was
$35,897.
|
|
|
|
The Company
has holdings of US$500,000 Commodity Basket Linked Notes which were issued by
SCB at specified dates up to February 17, 2009. According to the terms of
agreements, the Company will receive interest at a rate equal to 6% if the
Basket Return is larger than 0% and 100% redeemed if the Basket Return is
less than or equal to 0% on the maturity date. The Company fully redeemed the
securities at cost value on the maturity date of February 17, 2009.
|
|
|
|
As at
December 31, 2009, there is a cancellable target redemption forward currency
option agreement between the Company and SCB for the Company to buy
US$1,000,000 from SCB at a lower strike contract rate of 7.725 and an upper
strike contract rate of 7.75 at specified dates up to March 1, 2010.
According to the terms of the agreement, the Company will buy USD in triple
amounts if the spot rate is less than the lower strike contract rate or
greater than the upper strike contract rate at specified dates. The gain on
this forward contract during the year ended December 31, 2009 was $29,257.
|
The gross
notional and fair values of derivative financial instruments in the
Consolidated Balance Sheet as of December 31, 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
|
|
|
|
Gross
Notional(1)
|
|
Other
current
assets
|
|
Long-term
Financing
Receivables
and Other
Assets
|
|
Other
Accrued
Liabilities
|
|
Other
Liabilities
|
|
Derivatives designated as hedging instruments under ASC 815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
1,500,000
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Total derivatives not designated as hedging instruments under ASC 815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
$
|
1,500,000
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents
the face amounts of contracts that were outstanding as of December 31, 2009.
|
F-27
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
12. DERIVATIVE INSTRUMENTS (Continued)
The before-tax
effect of derivative instruments in cash flow and net investment hedging
relationships for the year ended December 31, 2009 and 2008 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain recognised in income on
derivative(1)
Year ended December 31,
|
|
|
|
Location
|
|
|
2009
|
|
|
2008
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
US$200,000 (HKD/USD)
|
|
Interest
and other, net
|
|
$
|
|
|
$
|
12,644
|
|
Foreign exchange contracts
USD500,000 (HKD/USD)
|
|
Interest
and other, net
|
|
|
12,564
|
|
|
36,346
|
|
Foreign exchange contracts
US$500,000 (HKD/USD)
|
|
Interest
and other, net
|
|
|
|
|
|
11,538
|
|
Foreign exchange contracts
USD500,000 (HKD/USD)
|
|
Interest
and other, net
|
|
|
|
|
|
17,917
|
|
Foreign exchange contracts
US$2,000,000 (CNY/USD)
|
|
Interest
and other, net
|
|
|
|
|
|
(30,000
|
)
|
Foreign exchange contracts
USD750,000 (HKD/USD)
|
|
Interest
and other, net
|
|
|
1,260
|
|
|
56,433
|
|
Foreign exchange contracts
US$1,000,000 (HKD/USD)
|
|
Interest
and other, net
|
|
|
35,897
|
|
|
56,410
|
|
Foreign exchange contracts
US$1,000,000 (HKD/USD)
|
|
Interest
and other, net
|
|
|
29,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash flow hedges
|
|
|
|
$
|
78,978
|
|
$
|
161,288
|
|
|
|
|
|
|
|
|
|
|
|
13. RELATED PARTY TRANSACTIONS
|
|
|
Transactions with Aristo Technologies Limited / Mr. Yang
|
|
|
|
As of
December 31, 2009 and 2008, we had an outstanding receivable from Mr. Yang,
the President and Chairman of our Board of Directors, totaling $11,233,839
and $7,900,404. These advances bear no interest and are payable on demand.
The receivable due from Mr. Yang to the Company is derived from the
consolidation of the financial statements of Aristo, a variable interest entity,
with the Company. A repayment plan has been entered into (See Note 14 for
details).
|
|
|
|
For the
years ended December 31, 2009 and 2008, we recorded compensation to Mr. Yang
of $1,300,000 and $735,026 respectively, and paid $1,300,000 and $735,026
respectively to Mr. Yang as compensation to him.
|
|
|
|
Transactions with Classic Electronic Limited
|
|
|
|
Mr. Ben
Wong, one of our directors, is a 99.9% shareholder of Classic Electronics Ltd.
(Classic). The remaining
0.1% of Classic is owned by a non-related
party. As of December 31, 2009 and 2008, the Company had outstanding accounts
receivable from Classic totaling $0 and $1,717,320 respectively. This
account receivable has been outstanding for more than 12 months in 2008 and
paid off in 2009.
|
F-28
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
13. RELATED PARTY TRANSACTIONS (Continued)
|
|
|
Transactions with Solution Semiconductor (China) Limited
|
|
|
|
Mr. Ben
Wong, one of our directors, is a 99% shareholder of Solution Semiconductor
(China) Ltd. (Solution). The remaining 1% of Solution is owned by a
non-related party. On April 1, 2009, we entered into a lease agreement with
Solution pursuant to which we lease one facility. The lease agreement for
this facility expires on March 31, 2012. The monthly lease payment for this
lease is $1,090. We incurred and paid an aggregate rent expense of $13,077
and $13,077 to Solution during the year ended December 31, 2009 and 2008.
|
|
|
|
During the
years ended December 31, 2009 and 2008, we purchased inventories of $10,138
and $0 respectively from Solution. As of December 31, 2009 and 2008, there
were no outstanding accounts payable to Solution.
|
|
|
|
Two facilities
located in Hong Kong owned by Solution were used by the Company as collateral
for loans from Citic Ka Wah Bank Limited (Citic)and Standard Chartered Bank
(Hong Kong) Limited (SCB) respectively.
|
|
|
|
Transactions with Systematic Information Limited
|
|
|
|
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director,
is a director and shareholder of Systematic Information Ltd. (Systematic
Information) with a total of 100% interest. On September 1, 2008, we entered
into a lease agreement with Systematic Information pursuant to which we lease
one facility. The lease agreement for this facility expires on August 31,
2010. The monthly lease payment for this lease totals $641. We incurred and
paid an aggregate rent expense of $7,692 and $7,692 to Systematic Information
during the years ended December 31, 2009 and 2008.
|
|
|
|
During the
years ended December 31, 2009 and 2008, we received service charges of $5,436
and $0 respectively from Systematic Information. The service fee was charged
for back office support for Systematic Information.
|
|
|
|
During the
years ended December 31, 2009 and 2008, we sold products for $326,578 and
$1,913,071 respectively, to Systematic Information. As of December 31, 2009
and 2008, there were no outstanding accounts receivables from Systematic
Information.
|
|
|
|
During the
years ended December 31, 2009 and 2008, we purchased inventories of $74,688
and $1,446,680 respectively from Systematic Information. As of December 31,
2009 and 2008, there were no outstanding accounts payable to Systematic
Information.
|
|
|
|
A workshop
located in Hong Kong owned by Systematic Information was used by the Company
as collateral for loans from SCB.
|
|
|
|
Transactions with Global Mega Development Limited
|
|
|
|
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director,
is the sole beneficial owner of the equity interest of Global Mega
Development Ltd. (Global). During the years ended December 31, 2009 and
2008, we sold products for $1,393 and $0 respectively, to Global. As of
December 31, 2009 and 2008, there were no outstanding accounts receivables
from Global.
|
F-29
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
13. RELATED PARTY TRANSACTIONS (Continued)
|
|
|
Transactions with Systematic Semiconductor Limited
|
|
|
|
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director,
is the sole beneficial owner of the equity interest of Systematic
Semiconductor Ltd. (Systematic). During the years ended December 31, 2009
and 2008, we received a management fee of $9,615 and $15,384 respectively
from Systematic. The management fee was charged for back office support for
Systematic.
|
|
|
|
During the
years ended December 31, 2009 and 2008, we sold products for $19,914 and
$275,766 respectively, to Systematic. As of December 31, 2009 and 2008, there
were no outstanding accounts receivables from Systematic.
|
|
|
|
During the
years ended December 31, 2009 and 2008, we purchased inventories of $0 and
$560,750 respectively from Systematic. As of December 31, 2009 and 2008,
there were no outstanding accounts payable to Systematic.
|
|
|
|
Transactions with Aristo Components Limited
|
|
|
|
Mr. Ben
Wong, one of our directors, is a 90% shareholder of Aristo Components Ltd.
(Aristo Comp). The remaining 10% of Aristo Comp is owned by a non-related
party. During the years ended December 31, 2009 and 2008, we received a
management fee of $11,923 and $8,077 respectively from Aristo Comp. The
management fee was charged for back office support for Aristo Comp.
|
|
|
|
During the
years ended December 31, 2009 and 2008, we sold products for $12,060 and
$67,968 respectively, to Aristo Comp. As of December 31, 2009 and 2008, there
were no outstanding accounts receivables from Aristo Comp.
|
|
|
|
During the
years ended December 31, 2009 and 2008, we purchased inventories of $241,367
and $37,665 respectively from Aristo Comp. As of December 31, 2009 and 2008,
there were no outstanding accounts payable to Aristo Comp.
|
|
|
|
Transactions with Atlantic Storage Devices Limited
|
|
|
|
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director,
is a 40% shareholder of Atlantic Storage Devices Ltd. (Atlantic Storage).
The remaining 60% of Atlantic Storage is owned by a non-related party. During
the years ended December 31, 2009 and 2008, we sold products for $337,946 and
$575,386 respectively, to Atlantic Storage. As of December 31, 2009 and 2008,
there were no outstanding accounts receivables from Atlantic Storage.
|
|
|
|
During the
years ended December 31, 2009 and 2008, we purchased inventories of $0 and
$679,048 respectively, from Atlantic Storage. As of December 31, 2009 and
2008, there were no outstanding accounts payable to Atlantic Storage.
|
F-30
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
13. RELATED PARTY TRANSACTIONS (Continued)
|
|
|
Transactions with Rambo Technologies Limited
|
|
|
|
Mr. Ben
Wong, one of our directors, is a 60% shareholder of Rambo Technologies Ltd.
(Rambo). The remaining 40% of Rambo is owned by a non-related party. During
the years ended December 31, 2009 and 2008, we sold products for $73,219 and
$1,077,653 respectively, to Rambo. As of December 31, 2009 and 2008, there
were no outstanding accounts receivables from Rambo.
|
|
|
|
During the
years ended December 31, 2009 and 2008, we purchased inventories of $54,930
and $10,314 respectively, from Rambo. As of December 31, 2009 and 2008, there
were no outstanding accounts payable to Rambo.
|
|
|
|
Transactions with Usmart Electronic Products Limited
|
|
|
|
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director,
is the sole beneficial owner of the equity interest of Usmart Electronic
Products Ltd. (Usmart). On October 7, 2009, we entered into a leasing
payment agreement with Usmart pursuant to which we lease one lot machinery facility
to Usmart. The leasing payment agreement for this facility expires on
September 16, 2011. The monthly lease income for this lease totals $3,846. We
received aggregate lease income of $13,333 and $0 from Usmart during the
years ended December 31, 2009 and 2008.
|
|
|
|
During the
years ended December 31, 2009 and 2008, we sold products for $4,837 and
$5,509 respectively, to Usmart. As of December 31, 2009 and 2008, there were
no outstanding accounts receivables from Usmart.
|
|
|
|
During the
years ended December 31, 2009 and 2008, we purchased inventories of $42,596
and $199,712 respectively, to Usmart. As of December 31, 2009 and 2008, there
were no outstanding accounts payable to Usmart.
|
|
|
|
Transactions Imax Technology Limited
|
|
|
|
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director,
is the sole beneficial owner of the equity interest of Imax Technology Ltd.
(Imax). During the years ended December 31, 2009 and 2008, we purchased
inventories of $0 and $3,167 respectively, to Imax. As of December 31, 2009
and 2008, there was no outstanding accounts payable from Imax.
|
|
|
|
Transactions with Kadatco Company Limited
|
|
|
|
Mr. Yang, the Company's Chief Executive Officer, majority shareholder
and a director, is a 99.99% shareholder of Kadatco Company Limited (Kadatco).
The remaining 0.01% of Kadatco is owned by a non-related party. During
the years ended December 31, 2009 and 2008, we purchased inventories of $24,895
and $0 respectively, from Kadatco. As of December 31, 2009 and 2008,
there were no outstanding accounts payable to Kadatco.
|
|
|
|
Transactions with City Royal Limited
|
|
|
|
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director,
is a 50% shareholder of City Royal Limited (City). The remaining 50% of
City is owned by the wife of Mr. Yang. A residential property located in Hong
Kong owned by City was used by the Company as collateral for loans from DBS
Bank (Hong Kong) Limited (DBS Bank).
|
F-31
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
14. SUBSEQUENT EVENTS
|
|
|
In preparing
these financial statements, the Company evaluated the events and transactions
that occurred from January 1, 2010 through April 15, 2010, the date these
financial statements are issued. The Company has made the required additional
disclosures in reporting periods in which subsequent events occur.
|
|
|
|
As discussed in Note 9 of the consolidated
financial statements, the Company is dependent on one single vendor
to supply its inventories. This vendor accounted for the majority of
the Companys purchases for 2009. The
Companys non-exclusive distributorship agreement with this vendor has a
one-year term and contains certain sales quotas to be met by the Company. This
agreement has been renewed more than ten times, most recently on March 1, 2009
and expired on February 28, 2010. As of March 1, 2010, this vendor has confirmed
the annual renewal of such agreement for one year. The Company has already signed
a renewal agreement with Samsung. The Company expects to receive the return of
a fully executed renewal agreement in the next two months. Termination of such
distributorship agreement by this vendor would have a material adverse effect
on the operations of the Company.
|
|
|
|
Aristo agreed to repay the Company a monthly payment of HK$1,000,000 (approximately $128,205) over the course of 5 years beginning June 1, 2010. The repayment plan is subject to review by the
Company from time to time.
|
F-32
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
15. RESTATEMENTS
On January 7, 2010, the Company filed the consolidated balance sheets
as of December 31, 2009 and 2008, its consolidated statements of income,
stockholders equity and cash flow for the year ended December 31, 2008, in
Form 10K/A (Amendment No. 2) Part IV Item 15 Page F-1- F-26 with the Securities
and Exchange Commission (SEC). The Company received a comment letter from the
Office of the Chief Accountant of the Division of Corporation Finance of SEC
regarding certain disclosures in the Companys financial statements for
the year ended December 31, 2008. The Company determined to re-do the 2007 and
2008 audit and restate the financial statements. The restated financial statements
will be filed with SEC. The effects of the restatements are shown in the
following tables.
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
Original
|
|
Restated
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
ITEMS
|
|
2008
|
|
2008
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,784,355
|
|
$
|
1,943,463
|
|
Restricted cash
|
|
|
5,169,753
|
|
|
5,169,753
|
|
Accounts receivable, net of
allowance for doubtful accounts of $0 for 2009 and 2008
|
|
|
10,230,464
|
|
|
10,342,453
|
|
Accounts receivable, related
parties
|
|
|
8,412,729
|
|
|
1,717,320
|
|
Inventories, net
|
|
|
2,060,195
|
|
|
3,668,568
|
|
Restricted marketable
securities
|
|
|
500,000
|
|
|
500,000
|
|
Income tax refundable
|
|
|
|
|
|
|
|
Other current assets
|
|
|
30,051
|
|
|
525,918
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
28,187,547
|
|
$
|
23,867,475
|
|
Property, plant
and equipment, net
|
|
|
6,007,456
|
|
|
6,922,623
|
|
Other deposits
|
|
|
392,069
|
|
|
396,900
|
|
Amounts
due from Aristo / Mr. Yang
|
|
|
|
|
|
7,900,404
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
34,587,072
|
|
$
|
39,087,402
|
|
|
|
|
|
|
|
|
|
F-33
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
15.
RESTATEMENTS (C
ontinued)
CONSOLIDATED
BALANCE SHEETS (Continued)
|
|
|
|
|
|
|
|
|
|
Original
|
|
Restated
|
|
|
|
December 31,
|
|
ITEMS
|
|
2008
|
|
2008
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
13,669,779
|
|
|
17,318,949
|
|
Accruals
|
|
|
396,755
|
|
|
409,367
|
|
Lines of credit and loan
facilities
|
|
|
16,447,742
|
|
|
16,447,742
|
|
Current portion of long-term
debt
|
|
|
160,447
|
|
|
160,447
|
|
Current portion of capital
lease
|
|
|
58,683
|
|
|
58,683
|
|
Income tax payable
|
|
|
5,588
|
|
|
5,588
|
|
Due to shareholders for
converted pledged collateral
|
|
|
112,385
|
|
|
112,385
|
|
Other current liabilities
|
|
|
301,076
|
|
|
508,073
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
31,152,455
|
|
$
|
35,021,234
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
Long-term debt, less current
portion
|
|
|
2,361,711
|
|
|
2,361,711
|
|
Capital lease, less current
portion
|
|
|
43,055
|
|
|
43,055
|
|
Deferred tax liabilities
|
|
|
|
|
|
8,343
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
2,404,766
|
|
|
2,413,109
|
|
Deferred tax
|
|
|
8,343
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
33,565,564
|
|
|
37,434,343
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
F-34
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
15.
RESTATEMENTS (C
ontinued)
CONSOLIDATED
BALANCE SHEETS (Continued)
|
|
|
|
|
|
|
|
STOCKHOLDERS
EQUITY
|
|
|
|
|
|
|
|
Common stock, $.001 par value;
50,000,000 shares authorized; 28,329,936 shares issued and outstanding as of
December 31, 2008
|
|
$
|
28,330
|
|
$
|
28,330
|
|
|
|
|
|
|
|
|
|
Additional paid in capital
|
|
|
3,593,027
|
|
|
3,593,027
|
|
Amount due from
stockholder/director
|
|
|
(39,633
|
)
|
|
|
|
Accumulated losses
|
|
|
(2,560,216
|
)
|
|
(1,968,298
|
)
|
|
|
|
|
|
|
|
|
|
|
|
1,021,508
|
|
|
1,653,059
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
34,587,072
|
|
|
39,087,402
|
|
|
|
|
|
|
|
|
|
As a result of restatement of the consolidated balance sheet as of
December 31, 2008, total assets increased from $34,587,072 as originally
reported, to $39,087,402, an increase of $4,500,330. The increase of total
assets was derived from an increase of $159,108 in cash and cash equivalents,
an increase of $111,989 in accounts receivable, a decrease of $6,695,409
in accounts receivables from related parties, an increase of $1,608,373 in
inventories, an increase of $495,867
in other current assets, an increase of $915,167 in property, plant and equipment,
an increase of $4,831 in other deposits, and an increase of $7,900,404 in amounts due from
stockholder/director.
The total liabilities increased from $33,565,564 as
originally reported, to $37,434,343, an increase of $3,868,779. The increase
of total liabilities was derived from an increase $3,649,170 in accounts
payable, an increase of $12,612 in accruals, and an increase of $206,997
in other current liabilities.
The total stockholders equity was restated from $1,021,508 as
originally reported, to $1,653,059, an increase of $631,551. The
increase of total stockholders equity was derived from a decrease of $591,918
in accumulated losses, and a reclassification of $39,633 in amount due from to
stockholder/director from stockholders equity.
The total liabilities and stockholders
equity were restated from $34,587,072 as originally reported, to $39,087,402,
an increase of $4,500,330.
F-35
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
15.
RESTATEMENTS (C
ontinued)
CONSOLIDATED STATEMENT
S OF INCOME
AND COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
Original
|
|
Restated
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
|
|
ITEMS
|
|
2008
|
|
2008
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
206,082,770
|
|
$
|
209,556,926
|
|
Costs of sales
|
|
|
(201,880,793
|
)
|
|
(205,388,286
|
)
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
4,201,977
|
|
$
|
4,168,640
|
|
Selling and distribution costs
|
|
|
(76,072
|
)
|
|
(82,285
|
)
|
General and administrative
expenses
|
|
|
(4,099,249
|
)
|
|
(3,315,840
|
)
|
|
|
|
|
|
|
|
|
Income from operation
|
|
$
|
26,656
|
|
$
|
770,515
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
Rental income
|
|
|
89,231
|
|
|
89,231
|
|
Interest expenses
|
|
|
(1,073,795
|
)
|
|
(1,073,798
|
)
|
Profit on disposals of
equipment
|
|
|
|
|
|
|
|
Loss on disposal of marketable
securities
|
|
|
(227,781
|
)
|
|
(227,781
|
)
|
Unrealised gain on disposal of
marketable securities
|
|
|
|
|
|
|
|
Management and service income
|
|
|
23,462
|
|
|
23,462
|
|
Net income on cash flow hedge
|
|
|
161,288
|
|
|
161,288
|
|
Director life insurance policy
refund
|
|
|
|
|
|
|
|
Exchange differences
|
|
|
(48,677
|
)
|
|
(48,677
|
)
|
Interest income
|
|
|
90,706
|
|
|
90,706
|
|
|
Miscellaneous
|
|
|
3,000
|
|
|
8,311
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(955,910
|
)
|
$
|
(206,743
|
)
|
F-36
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
15. RESTATEMENTS (Continued)
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME (Continued)
|
|
|
|
|
|
|
|
|
|
Original
|
|
Restated
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
|
|
ITEMS
|
|
2008
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
33,871
|
|
$
|
33,871
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(922,039
|
)
|
$
|
(172,872
|
)
|
|
|
|
|
|
|
|
|
Loss per share basic and diluted
|
|
$
|
(0.03
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
Weighted average number of shares basic
and diluted
|
|
|
28,329,936
|
|
|
28,329,936
|
|
|
|
|
|
|
|
|
|
As a result of
restatement of consolidated income and comprehensive income for the year ended
December 31, 2008, total net loss decreased from $922,039 as originally
reported to $172,872, a decrease of $749,167. The decreased loss was composed
of an increase of $3,474,156 in net sales, an increase of $3,507,493 in costs of sales,
an increase of $6,213 in selling and distribution costs, a decrease of $783,409 in general
and administrative expenses, an increase of $3 in interest expenses, and an increase
of $5,311 in sundry income.
F-37
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
CONSOLIDATED STATEMENT
S OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
Original
|
|
Restated
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
|
ITEMS
|
|
2008
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(922,039
|
)
|
$
|
(172,872
|
)
|
Depreciation and amortisation
|
|
|
238,477
|
|
|
238,477
|
|
Change in inventory reserve
|
|
|
(190,000
|
)
|
|
(190,000
|
)
|
Loss on disposal of marketable
securities
|
|
|
227,782
|
|
|
227,781
|
|
Loss on revaluation of
properties
|
|
|
883,116
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss
to net cash used in operating activities:
|
|
|
|
|
|
|
|
Accounts receivable other
|
|
|
(2,635,680
|
)
|
|
(2,715,435
|
)
|
Accounts receivable related parties
|
|
|
(456,965
|
)
|
|
539
|
|
Inventories
|
|
|
1,613,799
|
|
|
289,588
|
|
Other assets
|
|
|
(4,824
|
)
|
|
(9,656
|
)
|
Income tax refundable
|
|
|
49,375
|
|
|
49,375
|
|
Other current assets
|
|
|
53,010
|
|
|
(436,734
|
)
|
Accounts payable
|
|
|
1,077,094
|
|
|
4,448,749
|
|
Accrued expenses
|
|
|
210,017
|
|
|
213,411
|
|
Income tax payable
|
|
|
5,588
|
|
|
5,588
|
|
Other current liabilities
|
|
|
32,503
|
|
|
239,501
|
|
Deferred tax
|
|
|
(7,128
|
)
|
|
(7,128
|
)
|
|
|
|
|
|
|
|
|
F-38
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND 2009 AND
|
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
(Stated in US Dollars)
|
|
15.
RESTATEMENTS (C
ontinued)
CONSOLIDATED STATEMENT
S OF CASH FLOWS
(Continued)
|
|
|
|
|
|
|
|
|
|
Original
|
|
Restated
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
ITEMS
|
|
2008
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
174,125
|
|
$
|
2,181,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
Advance (to) from stockholders
|
|
$
|
36,365
|
|
$
|
(1,842,916
|
)
|
Increase in restricted cash
|
|
|
(966,696
|
)
|
|
(966,696
|
)
|
Increase in restricted
marketable securities
|
|
|
(500,000
|
)
|
|
(500,000
|
)
|
Cash proceeds from sales of
marketable securities and restricted marketable securities
|
|
|
946,229
|
|
|
946,229
|
|
Purchase of property, plant and equipment
|
|
|
(132,513
|
)
|
|
(164,565
|
)
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
$
|
(616,615
|
)
|
$
|
(2,527,948
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
Net borrowings on lines of
credit and notes payable
|
|
$
|
837,254
|
|
$
|
837,254
|
|
Principal payments under
long-term debt
|
|
|
(152,321
|
)
|
|
(152,321
|
)
|
Principal payments under
capital lease obligation
|
|
|
(55,762
|
)
|
|
(55,762
|
)
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
$
|
629,171
|
|
$
|
629,171
|
|
|
|
|
|
|
|
|
|
Net cash and cash equivalents sourced
|
|
|
186,681
|
|
|
282,407
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalentsbeginning
of year
|
|
|
1,597,674
|
|
|
1,661,056
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalentsend
of year
|
|
|
1,784,355
|
|
|
1,943,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow
information:
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
1,073,795
|
|
$
|
1,073,798
|
|
Income tax paid
|
|
|
57,582
|
|
|
57,582
|
|
Income tax refund
|
|
|
139,289
|
|
|
139,289
|
|
|
|
|
|
|
|
|
|
Supplementary schedule of
non-cash investing and financing activities:
|
|
|
|
|
|
|
|
Capital lease obligations
incurred when capital leases were entered for new automobiles
|
|
$
|
62,538
|
|
$
|
62,538
|
|
|
|
|
|
|
|
|
|
As a result of the restatement, the net cash
provided by operating activities for the year ended December 31, 2008 increased
by $2,007,059 from $174,125 as originally reported, to $2,181,184; net cash used
in investing activities increased by $1,911,333 from $616,615 as originally
reported, to $2,527,948. The cash and cash equivalents at end of year was increased by $159,108
from $1,784,355 as originally reported, to $1,943,463 owing to the
reclassification of cash and cash equivalents to restricted cash.
F-39
|
ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
AS OF DECEMBER 31, 2009 AND
2009 AND
|
THE YEARS ENDED DECEMBER 31,
2009 AND 2008
|
(Stated in US Dollars)
|
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
S
CHEDULE II
|
|
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
|
YEARS ENDED DECEMBER 31, 2009 AND 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at the Beginning
of the Year
|
|
Charged
to Costs
and Expenses
|
|
Deductions
|
|
Balance
At the End
of the Year
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful
Accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
2008
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Year ended December 31,
2009
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory Obsolescence
Reserve:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
2008
|
|
$
|
564,103
|
|
$
|
|
|
$
|
190,000
|
|
$
|
374,103
|
|
Year ended December 31,
2009
|
|
$
|
374,103
|
|
$
|
|
|
$
|
26,970
|
|
$
|
347,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Allowance for
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
2008
|
|
$
|
1,056,992
|
|
$
|
65,734
|
|
$
|
|
|
$
|
1,122,726
|
|
Year ended December 31,
2009
|
|
$
|
1,122,726
|
|
$
|
136,988
|
|
$
|
|
|
$
|
1,259,714
|
|
|
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|
|
S
CHEDULE III
|
|
QUARTERLY INFORMATION (UNAUDITED)
|
The summarized quarterly financial data
presented below reflects all adjustments, which in the opinion of management,
are of a normal and recurring nature necessary to present fairly the results of
operations for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands except per share data)
|
|
|
|
|
|
|
|
Total
|
|
Fourth
|
|
Third
|
|
Second
|
|
First
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
304,655
|
|
$
|
90,357
|
|
$
|
75,973
|
|
$
|
75,892
|
|
$
|
62,433
|
|
Gross profit
|
|
|
8,479
|
|
|
654
|
|
|
2,414
|
|
|
2,553
|
|
|
2,858
|
|
Net income (loss)
|
|
|
2,923
|
|
|
(317
|
)
|
|
987
|
|
|
1,084
|
|
|
1,169
|
|
Net income (loss) per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic and diluted
|
|
|
0.10
|
|
|
(0.01
|
)
|
|
0.03
|
|
|
0.04
|
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
209,557
|
|
$
|
57,614
|
|
$
|
51,849
|
|
$
|
46,603
|
|
$
|
53,491
|
|
Gross profit
|
|
|
4,169
|
|
|
697
|
|
|
1,747
|
|
|
1,394
|
|
|
331
|
|
Net income (loss)
|
|
|
(173
|
)
|
|
(294
|
)
|
|
571
|
|
|
365
|
|
|
(815
|
)
|
Net income (loss) per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic and diluted
|
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
0.02
|
|
|
0.01
|
|
|
(0.03
|
)
|
S-1