|
|
I
tem 13.
|
Certain Relationships and Related Transactions, and Director
Independence
|
All related
person transactions are reviewed and, as appropriate, may be approved or
ratified by the Board of Directors. Related person transactions are approved by
the Board of Directors only if, based on all of the facts and circumstances,
they are in, or not inconsistent with, our best interests and our stockholders,
as the Board of Directors determines in good faith. The Board of Directors
takes into account, among other factors it deems appropriate, whether the
transaction is on terms generally available to an unaffiliated third-party
under the same or similar circumstances and the extent of the related persons
interest in the transaction. The Board of Directors may also impose such
conditions as it deems necessary and appropriate on us or the related person in
connection with the transaction.
In the case
of a transaction presented to the Board of Directors for ratification, the
Board of Directors may ratify the transaction or determine whether rescission
of the transaction is appropriate.
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 respectively. Because the Companys business is distributing
computer components and is heavily dependant on Samsung, Mr. Yang took a loan
from the Company and used it to invest in other companies to create new
business platforms. These business platforms include manufacturing, research
and development, which Mr. Yang believes can help improve the Companys
business in the long term. 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.
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
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.
29
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.
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.
30
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.
|
|
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.
|
31
P
ART 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.
|
|
|
|
|
(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 incorporated by reference to Exhibit 4.1(a) to the Form 10-K
filed April 14, 2004.
|
|
|
|
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.
|
32
|
|
|
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.
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|
|
|
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, incorporated by reference to Exhibit
21.1 to the Form 10-K/A filed with the Securities and Exchange Commission on
April 22, 2010.
|
|
|
|
23.1
|
|
Consent of Albert Wong & Co. incorporated by reference to Exhibit
23.1 to the Form 10-K/A filed with the Securities and Exchange Commission on
April 22, 2010.
|
|
|
|
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.*
|
33
|
|
|
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).
|
34
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: September 20, 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
|
|
September
20, 2010
|
|
|
Officer and
Chairman of the
|
|
|
Chung-Lun Yang
|
|
Board of
Directors
|
|
|
|
|
(Principal
Executive
|
|
|
|
|
Officer)
|
|
|
|
|
|
|
|
/s/ Kun Lin
Lee
|
|
|
Chief
Financial Officer
|
|
September
20, 2010
|
|
|
|
(Principal
Financial and Accounting
|
|
|
Kun Lin Lee
|
|
Officer) and
Director
|
|
|
|
|
|
|
|
/s/ Kenneth
Lap Yin Chan
|
|
|
Chief
Operating Officer
|
|
September
20, 2010
|
|
|
|
and Director
|
|
|
Kenneth Lap
Yin Chan
|
|
|
|
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|
|
|
/s/ Ming Yan
Leung
|
|
|
Chief
Technology Officer
|
|
September
20, 2010
|
|
|
|
and Director
|
|
|
Ming Yan
Leung
|
|
|
|
|
|
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|
|
|
/s/ Wun Kin
Fong
|
|
|
Director
|
|
September
20, 2010
|
|
|
|
|
|
|
Wun Kin Fong
|
|
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|
35
|
ACL
Semiconductors Inc. and Subsidiaries
|
Consolidated Financial Statements
|
As of
December 31, 2009 and December 31, 2008 and
|
the Years
Ended December 31, 2009 and 20078
|
With Report of Independent Registered Public Accounting Firm
|
I
ndex to
Consolidated Financial Statements
F-1
|
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 consolidated balance sheets of the Company as of December 31, 2009 and 2008 and the related consolidated
statements of income and
comprehensive income, consolidated stockholders equity and accumulated other
comprehensive income and consolidated 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.
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.
|
September 20, 2010
|
Certified Public Accountants
|
F-2
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Stated in US Dollars)
C
ONSOLIDATED 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-3
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Stated in US Dollars)
|
|
|
|
|
|
|
|
|
|
|
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-4
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Stated in US Dollars)
C
ONSOLIDATED 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-5
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)
C
ONSOLIDATED
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-6
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)
C
ONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
(RESTATED)
|
|
|
|
|
|
|
|
|
|
Cash flows
from operating activities
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,922,483
|
|
$
|
(172,872
|
)
|
Depreciation and amortization
|
|
|
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
|
|
|
|
|
|
|
|
Advanced from Aristo / Mr. Yang
|
|
$
|
6,414,900
|
|
$
|
11,453,796
|
|
Advanced to Aristo / Mr. Yang
|
|
|
(9,748,335
|
)
|
|
(13,296,712
|
)
|
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
|
)
|
|
|
|
|
|
|
|
|
F-7
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)
|
|
|
|
|
|
|
|
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-8
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
N
OTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR 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.
|
|
|
|
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.
|
F-9
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)
|
|
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
|
|
|
|
Variable
Interests Entities
|
|
|
|
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.
|
|
|
|
ASC 810-05-08A specifies the two characteristics of a controlling
financial interest in a variable interest entity (
VIE
): (1) the power to
direct the activities of a VIE that most significantly impact the VIEs
economic performance; and (2) the obligation to absorb losses of the VIE that
could potentially be significant to the VIE or the right to receive benefits
from the VIE that could potentially be significant to the VIE. The Company is
the primary beneficiary of Aristo because the Company can direct the
activities of Aristo through the common director and major shareholder, Also,
the Company extended substantial account receivable to Aristo and created an
obligation to absorb losts if Aristo failed. Moreover, ASC 810-25-42 & 43
provides guidance on related parties treatment of VIE and specifies the
relationship of de-facto agent and principal. Those guidance will help to
determine whether the Company will consolidate Aristo.
|
|
|
|
Owing to the extent of outstanding large amounts of accounts
receivable since 2007 together with the nominal amount of paid-up capital
contributed by Mr. Yang when Aristo was formed, it has been determined that
Aristo cannot finance its operations without subordinated financial support
from ACL and accordingly, ACL is considered to be the de facto principal of
Aristo, Aristo is considered to be the de facto subsidiary of the Company and
Mr. Yang is considered to be the related party of both the Company and
Aristo.
|
F-10
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)
|
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
(b)
|
Principles of consolidation (Continued)
|
|
|
|
By virtue of the above analysis, it has been determined that the
Company is the primary beneficiary of Aristo.
|
|
|
|
Aristo Technologies Limited
|
|
|
|
The Company sells Samsung memory chips to Aristo and allows long
grace periods for Aristo to repay the open accounts receivable. Being the
biggest creditor, the Company does not require Aristo to pledge assets or
enter into any agreements to bind Aristo to specific repayment terms. The
Company does not provide any bad debt provision or experience derived from
Aristo. Although, the Company is not involved in Aristos daily operation, it
believes that there will not be significant additional risk derived from the
trading relationship and transactions with Aristo.
|
|
|
|
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, Micron, Elpida, Qimonda, Lexar,
Dane-Elec, Elixir, SanDisk and Winbond. Aristo 2009 and 2008 sales was around
30 million and 20 million; it was only a small distributor that accommodated
special requirements for specific customers.
|
|
|
|
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.
|
|
|
(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.
|
F-11
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)
|
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
|
(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)
|
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 totaled $347,133 and $374,103 as of December
31, 2009 and 2008, respectively.
|
F-12
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR 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.
|
|
|
(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.
|
F-13
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Stated in US Dollars)
|
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
|
(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-14
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR 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-15
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR 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, 2010 and made necessary changes accordingly
including but not limited to filing amendments for the prior period to comply
with all applicable requirements.
|
|
|
|
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.
|
F-16
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR 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 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.
|
|
|
|
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.
|
F-17
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR 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 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.
|
|
|
|
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-18
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR 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-19
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lines of credit and loan facilities
|
|
|
|
|
|
|
|
|
|
|
Factoring Loan
|
|
$
|
4,487,179
|
|
$
|
888,000
|
|
$
|
3,599,179
|
|
Import/Export Loan
|
|
|
8,205,128
|
|
|
8,125,813
|
|
|
79,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,692,307
|
|
$
|
9,013,813
|
|
$
|
3,678,494
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loan - short term
|
|
$
|
153,953
|
(a)
|
$
|
153,953
|
|
$
|
0
|
|
Instalment/Term Loan
|
|
|
3,066,953
|
(b)
|
|
3,066,953
|
|
|
0
|
|
Overdraft
|
|
|
602,564
|
(c)
|
|
308,947
|
|
|
293,617
|
|
Letter of Guarantee
|
|
|
384,615
|
(d)
|
|
384,615
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,900,393
|
|
$
|
12,928,281
|
|
$
|
3,972,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Loan
repayment within one year, including on other current liabilities
|
|
(b)
|
Per summary
of Note (5)
|
|
(c)
|
Including on
cash and cash equivalents
|
|
(d)
|
Guarantee
granted to a supplier, no entry make on the book
|
|
|
|
|
With the exception of the $384,615 letter of guarantee issued by DBS
Bank, which will expire on 31 October, 2009, amounts borrowed by the Company
under the revolving lines of credit and loan facilities described above are
repayable within a period of three (3) months of drawdown
|
F-20
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)
|
|
5.
|
LONG-TERM DEBTS
|
|
|
|
Long-term debts were comprised of the following as of December 31:
|
|
|
|
|
|
|
|
|
|
|
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-21
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR 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.
|
|
|
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
FOR 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
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company did not have any interest and penalty recognized in the
income statements for the year ended December 31, 2009 and 2008 or balance
sheet as of December 31, 2009 and 2008. The Company did not have uncertainty
tax positions or events leading to uncertainty tax position within the next
12 months. The Companys 2007, 2008 and 2009 U.S. Corporation Income Tax
Return are subject to U.S. Internal Revenue Service examination and the
Companys 2003/4, 2004/5, 2005/6, 2006/7, 2007/8, 2008/9, 2009/2010 Hong Kong
Corporations Profits Tax Return filing are subject to Hong Kong Inland
Revenue Department examination.
|
|
F-23
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR 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
FOR 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
totaled $136,017 and $142,985, respectively.
|
F-25
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR 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 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.
|
F-26
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR 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.
|
|
|
|
|
|
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.
Since the target of the agreement has been met, the agreement is matured on
January 29, 2010.
|
|
|
|
|
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
FOR 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 recognized
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
respectively. Because the Companys business is distributing
computer components and is heavily dependant on Samsung, Mr. Yang took
a loan from the Company and used it to invest in other
companies to create new business platforms. These
business platforms include manufacturing, research and development,
which Mr. Yang believes can help improve the Companys business in the
long term. 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.
|
|
|
|
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
FOR 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
FOR 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
FOR 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 Companys 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,
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
FOR 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.
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 and received the fully executed renewal agreement from
Samsung. Termination of such distributorship agreement by this vendor would
have a material adverse effect on the operations of the Company.
|
|
|
|
On June
1, 2010, Mr. Ben Wong resigned as a director of the Company. On the same
date, the Company has appointed several new individuals to the board of
directors and management. Details please see the 8-K filed by Company on June
14, 2010.
|
|
|
|
The
Company is seeking to finalize a loan repayment agreement with Mr. Yang
whereby Mr. Yang will repay the outstanding loan at an interest rate of 0.5%
and monthly repayment amounts of $95,706 over a period of ten years.
|
F-32
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)
|
|
|
15.
|
RESTATEMENTS
|
|
|
|
|
|
On July, 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, 2009 and 2008, in Form 10K/A (Amendment No. 1) Part
IV Item 15 Page F-1- F-26 with the Securities and Exchange Commission (SEC).
The Company determined to re-do the 2008 audit and restate the financial
statements. All the changes and related corrections are incurred in
accordance with the ASC 250 Accounting Change and Error Correction.
|
|
|
|
|
|
There was a change on
applicable accounting principle according to ASC 810-10 Consolidation of
Variable Interest and Special-Purpose Entities where Aristo was considered a
de facto agent of the Company and the Company was the primary beneficiary of
Aristo and got control of Aristo through the related party, Mr. Yang.
Therefore, Aristo was a deemed subsidiary and should consolidate with the
Company. See Note 2(b) for detail analysis. ASC 810 changes are listed in a
separate column below.
|
|
|
|
|
|
There was a change on estimate
of the value of the property according to ASC820-10-35 where the properties
in-use reflected the maximum value for the Company. Therefore,
the fair value of the Company to obtain the same in-use property should
include the valuation of land and building and their related improvements
which render the assets impairment provision on a temporary market over or
under reaction not applicable in this group of real property assets that is
being fully in-use by the Company. The ASC 820 changes are listed in a separate
column below.
|
|
|
|
|
|
The effects of the
restatements are shown in the following tables.
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
Original
|
|
ASC 810
changes
|
|
ASC 820
changes
|
|
2008
Restated
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,784,355
|
|
|
159,108
|
|
|
|
|
$
|
1,943,463
|
|
Restricted cash
|
|
|
5,169,753
|
|
|
|
|
|
|
|
|
5,169,753
|
|
Accounts receivable, net of
allowance for doubtful accounts of $0 for 2008 and 2007
|
|
|
10,230,464
|
|
|
111,989
|
|
|
|
|
|
10,342,453
|
|
Accounts receivable, related
parties
|
|
|
8,412,729
|
|
|
(6,695,409
|
)
|
|
|
|
|
1,717,320
|
|
Inventories, net
|
|
|
2,060,195
|
|
|
1,608,373
|
|
|
|
|
|
3,668,568
|
|
Restricted marketable
securities
|
|
|
500,000
|
|
|
|
|
|
|
|
|
500,000
|
|
Income tax refundable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
30,051
|
|
|
495,867
|
|
|
|
|
|
525,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
28,187,547
|
|
|
(4,320,072
|
)
|
|
|
|
$
|
23,867,475
|
|
Property, plant
and equipment, net
|
|
|
6,007,456
|
|
|
32,051
|
|
|
883,116
|
|
|
6,922,623
|
|
Other deposits
|
|
|
392,069
|
|
|
4,831
|
|
|
|
|
|
396,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts due from Aristo / Mr.
Yang
|
|
|
|
|
|
7,900,404
|
|
|
|
|
|
7,900,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
34,587,072
|
|
|
3,617,214
|
|
|
883,116
|
|
$
|
39,087,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-33
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)
|
|
Note 15.
|
RESTATEMENTS (C
ontinued)
|
CONSOLIDATED
BALANCE SHEETS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
Original
|
|
ASC 810
Changes
|
|
ASC 820
changes
|
|
2008
Restated
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
13,669,779
|
|
|
3,649,170
|
|
|
|
|
|
17,318,949
|
|
Accruals
|
|
|
396,755
|
|
|
12,612
|
|
|
|
|
|
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
|
|
|
206,997
|
|
|
|
|
|
508,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
31,152,455
|
|
|
3,868,779
|
|
|
|
|
$
|
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
|
|
|
|
|
|
8,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
2,404,766
|
|
|
8,343
|
|
|
|
|
|
2,413,109
|
|
Deferred tax
|
|
|
8,343
|
|
|
(8,343
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
33,565,564
|
|
|
3,868,779
|
|
|
|
|
|
37,434,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
$
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-34
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)
|
|
Note 15.
|
RESTATEMENTS (Continued)
|
CONSOLIDATED BALANCE SHEETS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
Original
|
|
ASC 810
Changes
|
|
ASC 820
Changes
|
|
2008
Restated
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $.001 par value; 50,000,000
shares authorized; 28,329,936 shares issued and outstanding as of December
31, 2008 and 2007 respectively
|
|
$
|
28,330
|
|
|
|
|
|
|
|
$
|
28,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid in capital
|
|
|
3,593,027
|
|
|
|
|
|
|
|
|
3,593,027
|
|
Amount due (from) to stockholder/director
|
|
|
(39,633
|
)
|
|
39,633
|
|
|
|
|
|
|
|
Accumulated losses
|
|
|
(2,560,216
|
)
|
|
(291,198
|
)
|
|
883,116
|
|
|
(1,968,298
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,021,508
|
|
|
(251,565
|
)
|
|
883,116
|
|
|
1,653,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
|
$
|
34,587,072
|
|
|
3,617,214
|
|
|
883,116
|
|
$
|
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 Aristo/Mr. Yang.
|
|
|
|
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 of $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
stockholder/director from stockholders equity.
|
|
|
|
The total liabilities and stockholders equity was 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
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)
|
|
Note 15.
|
RESTATEMENTS (Continued)
|
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
Original
|
|
ASC 810
Changes
|
|
ASC 820
changes
|
|
2008
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
206,082,770
|
|
|
3,474,156
|
|
|
|
|
$
|
209,556,926
|
|
Costs of sales
|
|
|
(201,880,793
|
)
|
|
(3,507,493
|
)
|
|
|
|
|
(205,388,286
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
4,201,977
|
|
|
(33,337
|
)
|
|
|
|
$
|
4,168,640
|
|
Selling and distribution costs
|
|
|
(76,072
|
)
|
|
(6,213
|
)
|
|
|
|
|
(82,285
|
)
|
General and administrative expenses
|
|
|
(4,099,249
|
)
|
|
(99,707
|
)
|
|
883,116
|
|
|
(3,315,840
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operation
|
|
$
|
26,656
|
|
|
(139,257
|
)
|
|
883,116
|
|
$
|
770,515
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
|
89,231
|
|
|
|
|
|
|
|
|
89,231
|
|
Loss on disposal of marketable securities
|
|
|
(227,781
|
)
|
|
|
|
|
|
|
|
(227,781
|
)
|
Management and service income
|
|
|
23,462
|
|
|
|
|
|
|
|
|
23,462
|
|
Net income on cash flow hedge
|
|
|
161,288
|
|
|
|
|
|
|
|
|
161,288
|
|
Exchange differences
|
|
|
(48,677
|
)
|
|
|
|
|
|
|
|
(48,677
|
)
|
Interest income
|
|
|
90,706
|
|
|
|
|
|
|
|
|
90,706
|
|
Interest expenses
|
|
|
(1,073,795
|
)
|
|
(3
|
)
|
|
|
|
|
(1,073,798
|
)
|
Miscellaneous
|
|
|
3,000
|
|
|
5,311
|
|
|
|
|
|
8,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(955,910
|
)
|
|
(133,949
|
)
|
|
883,116
|
|
$
|
(206,743
|
)
|
Income taxes
|
|
$
|
33,871
|
|
|
|
|
|
|
|
$
|
33,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(922,039
|
)
|
|
(133,949
|
)
|
|
883,116
|
|
$
|
(172,872
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share basic and diluted
|
|
$
|
(0.03
|
)
|
|
0.02
|
|
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares basic
and diluted
|
|
|
28,329,936
|
|
|
|
|
|
|
|
|
28,329,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of the 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 miscellaneous income.
|
F-36
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)
|
|
Note 15.
|
RESTATEMENTS (Continued)
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
Original
|
|
ASC 810
changes
|
|
ASC 820
changes
|
|
2008
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities Net
(loss) income
|
|
$
|
(922,039
|
)
|
|
(133,949
|
)
|
|
883,116
|
|
$
|
(172,872
|
)
|
Depreciation and amortization
|
|
|
238,477
|
|
|
|
|
|
|
|
|
238,477
|
|
Change in inventory reserve
|
|
|
(190,000
|
)
|
|
|
|
|
|
|
|
(190,000
|
)
|
Loss (gain) on disposal of marketable
securities
|
|
|
227,782
|
|
|
(1
|
)
|
|
|
|
|
227,781
|
|
Loss on revaluation of properties
|
|
|
883,116
|
|
|
|
|
|
(883,116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net
cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable other
|
|
|
(2,635,680
|
)
|
|
(79,755
|
)
|
|
|
|
|
(2,715,435
|
)
|
Accounts receivable related parties
|
|
|
(456,965
|
)
|
|
457,504
|
|
|
|
|
|
539
|
|
Inventories
|
|
|
1,613,799
|
|
|
(1,324,211
|
)
|
|
|
|
|
289,588
|
|
Refundable deposits
|
|
|
|
|
|
(9,656
|
)
|
|
|
|
|
(9,656
|
)
|
Income tax refundable
|
|
|
49,375
|
|
|
|
|
|
|
|
|
49,375
|
|
Other current assets
|
|
|
53,010
|
|
|
(489,744
|
)
|
|
|
|
|
(436,734
|
)
|
Other assets
|
|
|
(4,824
|
)
|
|
4,824
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
1,077,094
|
|
|
3,371,655
|
|
|
|
|
|
4,448,749
|
|
Accrued expenses
|
|
|
210,017
|
|
|
3,394
|
|
|
|
|
|
213,411
|
|
Income tax payable
|
|
|
5,588
|
|
|
|
|
|
|
|
|
5,588
|
|
Other current liabilities
|
|
|
32,503
|
|
|
206,998
|
|
|
|
|
|
239,501
|
|
Deferred tax
|
|
|
(7,128
|
)
|
|
|
|
|
|
|
|
(7,128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
174,125
|
|
|
2,007,059
|
|
|
|
|
$
|
2,181,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced from Aristo / Mr. Yang
|
|
$
|
36,365
|
|
|
11,417,431
|
|
|
|
|
$
|
11,453,796
|
|
Advanced to Aristo / Mr. Yang
|
|
|
|
|
|
(13,296,712
|
)
|
|
|
|
|
(13,296,712
|
)
|
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
|
)
|
|
(32,052
|
)
|
|
|
|
|
(164,565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
$
|
(616,615
|
)
|
|
(1,911,333
|
)
|
|
|
|
$
|
(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
|
|
|
95,726
|
|
|
|
|
|
282,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalentsbeginning of year
|
|
|
1,597,674
|
|
|
63,382
|
|
|
|
|
|
1,661,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalentsend of year
|
|
|
1,784,355
|
|
|
159,108
|
|
|
|
|
|
1,943,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-37
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)
|
|
Note 15.
|
RESTATEMENTS (Continued)
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
Original
|
|
ASC 810
changes
|
|
ASC 820
changes
|
|
2008
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
1,073,795
|
|
|
3
|
|
|
|
|
$
|
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 beginning of year were increased
by $63,382 from $1,597,674 as originally reported, to $1,661,056. The cash
and cash equivalents at end of year were increased by $159,108 from $1,784,355
as originally reported, to $1,943,463.
|
F-38
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
SCHEDULE II
V
ALUATION AND
QUALIFYING ACCOUNTS AND RESERVES
We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are
not required to provide the information required under this item.
SCHEDULE III
Q
UARTERLY
INFORMATION (UNAUDITED)
We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are
not required to provide the information required under this item.
S-2