During the years ended December 31, 2008 and 2007, we purchased
inventories of $1,446,680 and $1,523,238 respectively from Systematic
Information. As of December 31, 2008 and 2007, there were no outstanding
accounts payable to Systematic Information.
On April 1, 2005, we entered into a lease agreement with Systematic
Information pursuant to which we lease one residential property for Mr. Yangs
personal use for a monthly lease payment of $3,205. Upon expiration of the
lease on June 15, 2007, ACL acquired this residential property from Systematic
Information. We incurred and paid an aggregate rent expense of $0 and $17,521
to Systematic Information during the years ended December 31, 2008 and 2007.
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, 2008 and
2007, we received management fees of $0 and $5,769 respectively from Global. As
of December 31, 2008 and 2007, there were no outstanding accounts receivables
from Global. The management fees were charged for back office support for
Global.
During the years ended December 31, 2008 and 2007, we sold products for
$0 and $25,337 respectively, to Global. As of December 31, 2008 and 2007, there
were no outstanding accounts receivables from Global.
During the years ended December 31, 2008 and 2007, we purchased
inventories of $2,323 and $18,294 respectively from Global. As of December 31,
2008 and 2007, there were no outstanding accounts payable to Global.
Transactions with Intelligent Network
Technology Limited
Mr. Yang the Companys Chief Executive Officer, majority shareholder
and a director, is a director and 80% shareholder of Intelligent Network Technology
Ltd. (Intelligent). The remaining 20% of Intelligent is owned by a
non-related party. During the years ended December 31, 2008 and 2007, we
purchased inventories of $0 and $1,343,501 respectively from Intelligent. As of
December 31, 2008 and 2007, there were no outstanding accounts payable to
Intelligent.
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, 2008 and 2007, we received a
management fee of $15,384 and $16,026 respectively from Systematic. The
management fee was charged for back office support for Systematic.
During the years ended December 31, 2008 and 2007, we sold products for
$275,766 and $779,879 respectively, to Systematic. As of December 31, 2008 and
2007, there were no outstanding accounts receivables from Systematic.
During
the years ended December 31, 2008 and 2007, we purchased inventories of
$560,750 and $1,007,352 respectively from Systematic. As of December 31, 2008
and 2007, 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, 2008 and 2007, we
received a management fee of $8,077 and $0 respectively from Aristo Comp. The
management fee was charged for back office support for Aristo Comp.
During the years ended December 31, 2008 and 2007, we sold products for
$67,968 and $349,327 respectively, to Aristo Comp. As of December 31, 2008 and
2007, there were no outstanding accounts receivables from Aristo Comp.
During the years ended December 31, 2008 and 2007, we purchased
inventories of $37,665 and $0 respectively, from Aristo Comp. As of December
31, 2008 and 2007, there were no outstanding accounts payable to Aristo Comp.
Transactions 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, 2008 and 2007, we sold products for
$575,386 and $1,471,471 respectively, to Atlantic Storage. As of December 31,
2008 and 2007, there were no outstanding accounts receivables from Atlantic
Storage.
During the years ended December 31, 2008 and 2007, we purchased
inventories of $679,048 and $581,444 respectively, from Atlantic Storage. As of
December 31, 2008 and 2007, there were no outstanding accounts payable to
Atlantic Storage.
Transactions 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, 2008 and 2007, we sold products
for $1,077,653 and $2,574,096 respectively, to Rambo. As of December 31, 2008
and 2007, there were no outstanding accounts receivables from Rambo.
During the years ended December 31, 2008 and 2007, we purchased
inventories of $10,314 and $0 respectively, from Rambo. As of December 31, 2008
and 2007, there were no outstanding accounts payable to Rambo.
30
Transactions 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). During the years ended December 31, 2008
and 2007, we sold products for $5,509 and $703,683 respectively, to Usmart. As
of December 31, 2008 and 2007, there were no outstanding accounts receivables
from Usmart.
During the years ended December 31, 2008 and 2007, we purchased
inventories of $199,712 and $736,888 respectively, from Usmart. As of December
31, 2008 and 2007, 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, 2008 and 2007, we sold products of
$0 and $51,060 respectively, to Imax. As of December 31, 2008 and 2007, there
were no outstanding accounts receivables from Imax.
During the years ended
December 31, 2008 and 2007, we purchased inventories of $3,167 and $0
respectively, from Imax. As of December 31, 2008 and 2007, there were no
outstanding accounts payable to Imax.
Transactions Kadatco Co Limited
Mr. Yang, the Companys Chief Executive Officer, majority shareholder
and a director, is a 99.99% shareholder of Kadatco Co Ltd. (Kadatco). The
remaining 0.01% of Kadatco is owned by a non-related party. During the years ended December 31, 2008 and 2007, we sold products for
$0 and $518,040 respectively, to Kadatco. As of December 31, 2008 and 2007,
there were no outstanding accounts receivables from Kadatco.
During the years ended December 31, 2008 and 2007, we purchased
inventories of $0 and $590,742 respectively, from Kadatco. As of December 31,
2008 and 2007, there were no outstanding accounts payable to Kadatco.
Transactions 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).
|
|
Item 14.
|
Principal Accounting Fees and Services
|
The
following table presents fees, including reimbursements for expenses, for
professional audit services rendered by JTC Fair Song CPA Firm for the audits
of our annual financial statements and interim reviews of our quarterly
financial statements for the years ended December 31, 2008 and December 31, 2007
and fees billed for other services rendered by JTC Fair Song CPA Firm during
those periods.
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
Fiscal 2007
|
|
Audit Fees
(1)
|
|
$
|
35,000
|
|
$
|
35,000
|
|
Audit
Related Fees (2)
|
|
$
|
|
|
$
|
|
|
Tax Fees (3)
|
|
$
|
|
|
$
|
|
|
All Other
Fees (4)
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
35,000
|
|
$
|
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 Firm in
connection with statutory and regulatory filings or engagements.
|
|
|
(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 2008 or
2007.
|
|
|
(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 2008 or 2007.
|
|
|
(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 2008 or
2007.
|
31
PA
RT IV
|
|
Item 15.
|
E
xhibits and Financial Statement
Schedules
|
|
|
|
(a)
|
Documents
filed as part of this Report
|
|
|
|
|
(1)
|
The financial statements listed in the Index to Consolidated
Financial Statements are filed as part of this report
|
|
|
|
|
(2)
|
The financial statements listed in the Index are filed a part of this
report.
Schedule II Valuation and Qualifying Accounts and Reserves.
Schedule II on page S-1 is filed as part of this report.
Schedule III
Quarterly Information (Unaudited). Schedule 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.
|
|
|
|
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
|
|
Subsidiaries of the Company
|
|
|
Atlantic Components Limited, a Hong Kong corporation
|
|
|
Alpha Perform Technologies Limited, a British Virgin Islands
corporation
Aristo Technologies Limited, a Hong Kong corporation (variable
interest entity)
|
|
|
|
23.1
|
|
Consent of Albert Wong & Co. incorporated by reference to Exhibit 23.1 of the Form 10-K/A filed May 04, 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.*
|
33
|
|
|
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.*
|
|
|
|
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
S
IGNATURES
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
|
|
|
|
|
|
|
|
|
|
/s/ Ming Yan
Leung
|
|
Chief
Technology Officer
|
|
September
20, 2010
|
|
|
and Director
|
|
|
Ming Yan
Leung
|
|
|
|
|
|
|
|
|
|
/s/ Wun Kin
Fong
|
|
Director
|
|
September
20, 2010
|
|
|
|
|
|
Wun Kin Fong
|
|
|
|
|
35
ACL
Semiconductors Inc. and Subsidiaries
Consolidated Financial Statements
As of December 31, 2008 and December 31, 2007 and
the Years Ended December 31, 2008 and 2007
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, 2008 and 2007 and the related consolidated
statements of income and comprehensive income, consolidated statements of
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, 2008 and 2007 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.
|
|
Hong Kong,
China
|
Albert Wong
& Co.
|
September 20,
2010
|
Certified Public Accountants
|
F-2
ACL SEMICONDUCTORS INC. AND SUBSDIARIES
C
ONSOLIDATED
BALANCE SHEETS
AS AT DECEMBER 31, 2008 AND 2007
(Stated in US Dollars)
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Restated)
|
|
(Restated)
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
$
|
1,943,463
|
|
$
|
1,661,056
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
|
|
|
5,169,753
|
|
|
4,203,057
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net of allowance for
doubtful accounts of $0 for 2008 and 2007
|
|
|
|
|
|
10,342,453
|
|
|
7,627,017
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, related parties
|
|
|
|
|
|
1,717,320
|
|
|
1,717,859
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
|
|
|
|
3,668,568
|
|
|
3,768,155
|
|
Restricted marketable securities
|
|
|
|
|
|
500,000
|
|
|
769,231
|
|
Marketable securities
|
|
|
|
|
|
|
|
|
404,780
|
|
Income tax refundable
|
|
|
|
|
|
|
|
|
49,375
|
|
Other current assets
|
|
|
|
|
|
525,918
|
|
|
89,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
|
|
|
23,867,475
|
|
|
20,289,713
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, equipment and
improvements, net of accumulated depreciation and amortization
|
|
|
3
|
|
|
6,922,623
|
|
|
6,933,998
|
|
|
|
|
|
|
|
|
|
|
|
|
Other deposits
|
|
|
|
|
|
396,900
|
|
|
387,245
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts due from Aristo / Mr.
Yang
|
|
|
|
|
|
7,900,404
|
|
|
6,057,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
|
|
$
|
39,087,402
|
|
$
|
33,668,444
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated
financial statements
F-3
ACL SEMICONDUCTORS INC. AND SUBSDIARIES
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2008 AND 2007
(Stated in US Dollars)
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
$
|
17,318,949
|
|
$
|
12,870,200
|
|
Accrued expenses
|
|
|
|
|
|
409,367
|
|
|
195,956
|
|
|
|
|
|
|
|
|
|
|
|
|
Lines of credit and loan facilities
|
|
|
4
|
|
|
16,447,742
|
|
|
15,610,488
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
5
|
|
|
160,447
|
|
|
135,237
|
|
Current portion of capital lease
|
|
|
6
|
|
|
58,683
|
|
|
44,991
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax payable
|
|
|
|
|
|
5,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to shareholders for converted pledged
collateral
|
|
|
|
|
|
112,385
|
|
|
112,385
|
|
Other current liabilities
|
|
|
|
|
|
508,073
|
|
|
268,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
|
|
|
35,021,234
|
|
|
29,237,829
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion
|
|
|
5
|
|
|
2,361,711
|
|
|
2,539,242
|
|
Capital lease, less current portion
|
|
|
6
|
|
|
43,055
|
|
|
49,971
|
|
Deferred tax liabilities
|
|
|
|
|
|
8,343
|
|
|
15,471
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
long-term liabilities
|
|
|
|
|
|
2,413,109
|
|
|
2,604,684
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
37,434,343
|
|
|
31,842,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
Common stock - $0.001 par value, 50,000,000
shares authorized, 28,329,936 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
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated losses
|
|
|
|
|
|
(1,968,298
|
)
|
|
(1,795,426
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
|
|
|
1,653,059
|
|
|
1,825,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,087,402
|
|
$
|
33,668,444
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated
financial statements
F-4
ACL SEMICONDUCTORS INC. AND SUBSDIARIES
C
ONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMEBR 31, 2008 AND 2007
(Stated in US Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
$
|
209,556,926
|
|
$
|
166,771,606
|
|
Cost of sales
|
|
|
|
|
|
(205,388,286
|
)
|
|
(162,933,656
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
4,168,640
|
|
|
3,837,950
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution costs
|
|
|
|
|
|
(82,285
|
)
|
|
(73,508
|
)
|
General and
administrative expenses
|
|
|
|
|
|
(3,315,840
|
)
|
|
(3,066,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
|
|
770,515
|
|
|
697,447
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
|
|
|
|
89,231
|
|
|
37,179
|
|
Interest expense
|
|
|
|
|
|
(1,073,798
|
)
|
|
(1,009,010
|
)
|
Loss on disposal of marketable securities
|
|
|
|
|
|
(227,781
|
)
|
|
|
|
Unrealized gain on marketable securities
|
|
|
|
|
|
|
|
|
404,780
|
|
Management and service income
|
|
|
|
|
|
23,462
|
|
|
33,333
|
|
Net income on cash flow hedge
|
|
|
|
|
|
161,288
|
|
|
64,590
|
|
Interest income
|
|
|
|
|
|
90,706
|
|
|
169,055
|
|
Director life insurance policy refund
|
|
|
|
|
|
|
|
|
29,617
|
|
Exchange differences
|
|
|
|
|
|
(48,677
|
)
|
|
34,672
|
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous
|
|
|
|
|
|
8,311
|
|
|
5,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes provision
|
|
|
|
|
|
(206,743
|
)
|
|
466,676
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes reversal
(
provision)
|
|
|
7
|
|
|
33,871
|
|
|
(187,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
|
|
$
|
(172,872
|
)
|
$
|
278,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per share - basic and diluted
|
|
|
|
|
$
|
(0.01
|
)
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares - basic and diluted
|
|
|
8
|
|
|
28,329,936
|
|
|
28,329,936
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated
financial statements
F-5
ACL SEMICONDUCTORS INC. AND SUBSDIARIES
C
ONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY AND
ACCUMULATED OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Stated in US Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in
capital
|
|
Due
(from)/to
stockholder/
Director
|
|
Accumulated
deficit
|
|
Total
stockholders
Equity
(deficit)
|
|
|
|
Common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
January 1, 2007
|
|
|
28,329,936
|
|
$
|
28,330
|
|
$
|
3,593,027
|
|
$
|
913,463
|
|
$
|
(2,074,269
|
)
|
$
|
2,460,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
|
|
|
|
|
|
|
|
|
|
|
|
(913,463
|
)
|
|
|
|
|
(913,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
278,843
|
|
|
278,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2007
|
|
|
28,329,936
|
|
|
28,330
|
|
|
3,593,027
|
|
|
|
|
|
(1,795,426
|
)
|
|
1,825,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
January 1, 2008
|
|
|
28,329,936
|
|
|
28,330
|
|
|
3,593,027
|
|
|
|
|
|
(1,795,426
|
)
|
|
1,825,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(172,872
|
)
|
|
(172,872
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2008
|
|
|
28,329,936
|
|
$
|
28,330
|
|
$
|
3,593,027
|
|
$
|
|
|
$
|
(1,968,298
|
)
|
$
|
1,653,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated
financial statements
F-6
ACL SEMICONDUCTORS INC. AND SUBSDIARIES
C
ONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Stated in US Dollars)
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
(Restated)
|
|
(Restated)
|
|
Cash flows provided by (used for) operating activities:
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(172,872
|
)
|
$
|
278,843
|
|
Depreciation and amortization
|
|
|
238,477
|
|
|
230,614
|
|
Change in inventory reserve
|
|
|
(190,000
|
)
|
|
323,077
|
|
Gain on disposal of equipment
|
|
|
|
|
|
(218
|
)
|
Loss (Gain) on disposal of marketable
securities
|
|
|
227,781
|
|
|
(404,780
|
)
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
Accounts receivable other
|
|
|
(2,715,435
|
)
|
|
(5,618,543
|
)
|
Accounts receivable related parties
|
|
|
539
|
|
|
5,654,608
|
|
Inventories
|
|
|
289,588
|
|
|
(837,977
|
)
|
Refundable deposits
|
|
|
(9,656
|
)
|
|
(6,207
|
)
|
Income tax refundable
|
|
|
49,375
|
|
|
|
|
Other current assets
|
|
|
(436,734
|
)
|
|
(48,246
|
)
|
Other assets
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
4,448,749
|
|
|
7,860,477
|
|
Accrued expenses
|
|
|
213,411
|
|
|
(118,268
|
)
|
Income tax payable
|
|
|
5,588
|
|
|
(124,214
|
)
|
Other current liabilities
|
|
|
239,501
|
|
|
(33,858
|
)
|
Deferred tax
|
|
|
(7,128
|
)
|
|
15,471
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
2,077,798
|
|
|
6,891,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities
|
|
|
2,181,184
|
|
|
7,170,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used for investing activities:
|
|
|
|
|
|
|
|
Advanced from Aristo / Mr. Yang
|
|
|
11,453,796
|
|
|
11,153,115
|
|
Advanced to Aristo / Mr. Yang
|
|
|
(13,296,712
|
)
|
|
(18,124,066
|
)
|
Increase in restricted cash
|
|
|
(966,696
|
)
|
|
(1,494,480
|
)
|
Increase in restricted marketable
securities
|
|
|
(500,000
|
)
|
|
(769,231
|
)
|
Cash Proceeds from sales of marketable
securities and restricted marketable securities
|
|
|
946,229
|
|
|
|
|
Cash Proceeds from sales of equipment
|
|
|
|
|
|
385
|
|
Purchases of property, equipment and
improvements
|
|
|
(164,565
|
)
|
|
(3,159,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for investing activities
|
|
|
(2,527,948
|
)
|
|
(12,394,037
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by financing activities:
|
|
|
|
|
|
|
|
Net borrowings on lines of credit and notes
payable
|
|
|
837,254
|
|
|
4,772,021
|
|
Borrowing under long-term debt
|
|
|
|
|
|
801,723
|
|
Principal payments under long-term debt
|
|
|
(152,321
|
)
|
|
(91,625
|
)
|
Principal payments under capital lease
obligation
|
|
|
(55,762
|
)
|
|
(45,291
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
629,171
|
|
|
5,436,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash and
cash equivalents sourced (used)
|
|
|
282,407
|
|
|
213,570
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents, beginning of year
|
|
|
1,661,056
|
|
|
1,447,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents,
end of year
|
|
$
|
1,943,463
|
|
$
|
1,661,056
|
|
|
|
|
|
|
|
|
|
F-7
ACL SEMICONDUCTORS INC. AND SUBSDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Stated in US Dollars)
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
(Restated)
|
|
(Restated)
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
1,073,798
|
|
$
|
1,009,010
|
|
Income tax paid
|
|
|
57,582
|
|
|
305,389
|
|
Income tax refund
|
|
|
139,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplement schedule of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
17,411
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations incurred when
capital leases were entered for new automobiles
|
|
$
|
62,538
|
|
$
|
95,898
|
|
|
|
|
|
|
|
|
|
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, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 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, 2008 AND
2007
(Stated in US Dollars)
|
|
|
Note 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, 2008. 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.
|
|
|
|
|
|
By virtue of the above analysis, it has been determined that the
Company is the primary beneficiary of Aristo.
|
F-10
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
|
|
|
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 2008 and 2007 sales were
around 20 million and 27 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
products Aristo, in turn, sells to its customers. 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 from Aristo 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.
|
|
|
|
|
(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
|
|
|
|
|
|
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-11
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
|
Note 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
(f)
|
Account receivable
|
|
|
|
|
|
Accounts receivable is carried at the net invoiced value charged to
customer. The Company records an allowance for doubtful accounts to cover
estimated credit losses. Management reviews and adjusts this allowance
periodically based on historical experience and its evaluation of the
collectability of outstanding accounts receivable. The Company evaluates the
credit risk of its customers utilizing historical data and estimates of
future performance.
|
|
|
|
|
(g)
|
Accounting for 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 recognized 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 $190,000 for 2008 and increased by $323,077 for 2007.
Inventory obsolescence reserves were $374,103 and $564,103 as of December 31,
2008 and 2007, respectively.
|
|
|
|
|
(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 the income statement in equal
installments over the accounting periods covered by the lease term. Lease
incentives received are recognized in the 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.
|
F-12
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
|
Note 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
(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 Company expensed all advertising costs as incurred. Advertising
expenses included in selling expenses were $7,118 and $7,937 for the years
ended December 31, 2008 and 2007, respectively.
|
|
|
|
|
(o)
|
Segment reporting
|
|
|
|
|
|
The Companys sales are generated from Hong Kong and the rest of
China and substantially all of its assets are located in Hong Kong.
|
|
|
|
|
(p)
|
Fair value of financial instruments
|
|
|
|
|
|
|
|
|
The carrying amount of the Companys cash and cash equivalents,
accounts receivable, lines of credit, convertible debt, accounts payable,
accrued expenses, and long-term debt approximates their estimated fair values
due to the short-term maturities of those financial instruments.
|
|
|
|
|
(q)
|
Comprehensive income
|
|
|
|
|
|
Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distributions to
owners. Among other disclosures, all items that are required to be recognized
under current accounting standards as components of comprehensive income are
required to be reported in a financial statement that is presented with the
same prominence as other consolidated financial statements. The Company has
no items that represent other comprehensive income and, therefore, has not
included a schedule of comprehensive income in the consolidated financial
statements.
|
|
|
|
|
(r)
|
Basic and diluted earnings (loss) per share
|
|
|
|
|
|
In accordance with ASC No. 260 (formerly SFAS No. 128), Earnings Per
Share, the basic earnings (loss) per common share is computed by dividing
net earnings (loss) available to common stockholders by the weighted average
number of common shares outstanding. Diluted earnings (loss) per common share
is computed similarly to basic earnings (loss) per common share, except that
the denominator is increased to include the number of additional common
shares that would have been outstanding if the potential common shares had
been issued and if the additional common shares were dilutive.
|
|
|
|
|
(s)
|
Reclassification
|
|
|
|
|
|
Certain amounts in the prior year have been reclassified to conform
to the current years presentation.
|
F-13
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
|
Note 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-14
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
|
Note 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
(t)
|
Recently implemented standards
|
|
|
|
|
|
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 periods 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-15
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
|
Note 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
(t)
|
Recently implemented standards
|
|
|
|
|
|
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-16
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
|
Note 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
(t)
|
Recently implemented standards
|
|
|
|
|
|
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 change if
required.
|
|
|
|
|
|
In June 2009, the FASB issued Statement of Financial Accounting
Standards No. 166, Accounting for Transfers of Financial Assets an amendment
of FASB Statement No. 140 (Statement No. 166). Statement No. 166 revises
FASB Statement of Financial Accounting Standards No. 140, Accounting for
Transfers and Extinguishment of Liabilities a replacement of FASB Statement
125 (Statement No. 140) and requires additional disclosures about transfers
of financial assets, including securitization transactions, and any
continuing exposure to the risks related to transferred financial assets. It
also eliminates the concept of a qualifying special-purpose entity, changes
the requirements for derecognizing financial assets, and enhances disclosure
requirements. Statement No. 166 is effective prospectively, for annual
periods beginning after November 15, 2009, and interim and annual periods
thereafter. Although Statement No. 166 has not been incorporated into the
Codification, in accordance with ASC 105, the standard shall remain
authoritative until it is integrated. The Company does not expect the
adoption of Statement No. 166 will have a material impact on its financial
position or results of operations.
|
F-17
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 3.
|
PROPERTY, PLANT AND EQUIPMENT, NET
|
|
|
|
A summary is
as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Land and
buildings
|
|
$
|
6,754,351
|
|
$
|
6,794,629
|
|
Office
equipment
|
|
|
152,185
|
|
|
148,568
|
|
Leasehold
improvements
|
|
|
194,896
|
|
|
150,822
|
|
Furniture
and fixtures
|
|
|
13,273
|
|
|
13,273
|
|
Automobiles
|
|
|
405,467
|
|
|
226,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,520,172
|
|
|
7,333,348
|
|
Less:
accumulated depreciation and amortization
|
|
|
(597,549
|
)
|
|
(399,350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,922,623
|
|
$
|
6,933,998
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense for property, equipment, and
improvements amounted to $238,477 and $230,614 for the years ended December
31, 2008 and 2007 respectively.
|
|
|
Note 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 $4,722,616 at December 31, 2008
and $5,635,176 at December 31, 2007. The line of credit bears interest at the
banks standard bills rate less 1.25% for HKD borrowings and at the banks
standard bills rate less 0.75% for other currency borrowings as of December
31, 2008. The weighted average interest rate approximated 4.4% for 2008 and
6.7% for 2007.
|
|
|
|
The Company has available to it a $5,769,231 factoring facility
without recourse with DBS Bank without any outstanding balance at December
31, 2008. The factoring facility bears a discounting charge at the banks
standard bills rate less 1.25% for advance in HKD or the banks standard
bills rate less 0.75% for advance in other currency as of December 31, 2008.
The weighted average interest rate approximated 4.4% for 2008 and 6.7% for
2007.
|
|
|
|
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, 2008 and the
letter of guarantee will expire on October 31, 2009. 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 $6,410,256 revolving line of credit
with SCB with an outstanding balance of $5,742,934 at December 31, 2008 and
$3,709,379 at December 31, 2007. The line of credit bears interest at a rate
of the banks standard bills rate less 0.5% for HKD facilities and at a rate
of the banks standard bills rate plus 1% for other foreign currency facilities
as of December 31, 2008. The weighted average interest rate approximated 5.1%
for 2008 and 7.4% for 2007.
|
|
|
|
The Company has available to it a $5,128,205 factoring facility with
SCB with an outstanding balance of $1,753,562 at December 31, 2008. 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, 2008. The
weighted average interest rate approximated 4.9% for 2008 and 7.2% for 2007.
|
|
|
|
The Company has available to it a $2,307,692 revolving line of credit
with The Bank of East Asia, Limited (BEA) with an outstanding balance of
$2,060,747 at December 31, 2008 and $2,303,868 at December 31, 2007. The line
of credit bears interest at the higher of Hong Kong prime rate plus 0.25% or
HIBOR plus 1% for HKD facilities and LIBOR plus 2% for other currency
facilities as of December 31, 2008. The weighted average interest rate
approximated 5.9% for 2008 and 7.9% for 2007.
|
F-18
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 4.
|
REVOLVING LINES OF CREDIT AND LOAN FACILITIES (Continued)
|
|
|
|
The Company has available to it a $1,153,846 revolving line of credit
with Citic with an outstanding balance of $1,014,883 at December 31, 2008 and
$2,297,061 at December 31, 2007. The line of credit bears interest at the
higher of the Hong Kong prime rate less 1.5% or HIBOR plus 2% as of December
31, 2008. The weighted average interest rate approximated 4.1% for 2008 and
7.4% for 2007.
|
|
|
|
The line of credit granted by Hang Seng Bank Limited (Hang Seng) to
the Company matured on September 19, 2008. The outstanding balances with Hang
Seng were $0 at December 31, 2008 and $1,665,003 at December 31, 2007. The
line of credit bore interest at a rate of the Hong Kong prime rate less 0.5%
for HKD facilities and at a rate of the banks board rate less 0.25% for USD
facilities as of December 31, 2007. The weighted average interest rate
approximated 5% for 2008 and 7.4% for 2007.
|
|
|
|
The Company has available to it a $1,602,564 revolving line of credit
with the ICBC with an outstanding balance of $1,153,000. The line of credit
bears interest at the higher of the Hong Kong prime rate less 0.5% or HIBOR
plus 3% for HKD facilities and a rate of the banks board rate less 0.5% for
foreign currency facilities as of December 31, 2008. The weighted average interest
rate approximated 5.1% for 2008.
|
|
|
|
The summary of banking facilities at December 31, 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted facilities
|
|
Utilized facilities
|
|
Not Utilized
Facilities
|
|
|
|
|
|
|
|
|
|
Lines of
credit and loan facilities
|
|
|
|
|
|
|
|
|
|
|
Factoring Loan
|
|
$
|
10,897,436
|
|
$
|
1,753,562
|
|
$
|
9,143,874
|
|
Import/Export Loan
|
|
|
16,602,564
|
|
|
14,694,180
|
|
|
1,908,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,500,000
|
|
$
|
16,447,742
|
|
$
|
11,052,258
|
|
|
|
|
|
|
|
|
|
|
|
|
Instalment/Term
Loan Long Term
|
|
$
|
2,776,923
|
(a)
|
$
|
2,522,158
|
|
$
|
254,765
|
|
Overdraft
|
|
|
282,051
|
|
|
0
|
|
|
282,051
|
|
Letter of
Guarantee
|
|
|
384,615
|
(b)
|
|
384,615
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,943,589
|
|
$
|
19,354,515
|
|
$
|
11,589,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Per
summary of Note (5)
|
|
(b)
Guarantee granted to a supplier
|
|
|
|
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-19
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 5.
|
LONG-TERM
DEBTS
|
|
|
|
A summary is
as follows as of December 31:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Installment
loan having a maturity date in July 2026 and carrying an interest rate of
2.75% below the Hong Kong dollar Prime Rate (7.25% and 5.25% at December 31,
2007 and 2008) from DBS Bank. The monthly installments are approximately
$9,663 including interest through December 2008 without any balloon payment
requirements
|
|
$
|
1,648,222
|
|
$
|
1,719,704
|
|
|
|
|
|
|
|
|
|
Installment
loan having a maturity date in July 2011 and carrying an interest rate of 2%
below the Hong Kong dollar Prime Rate (7.25% and 5.25% at December 31, 2007
and 2008) from DBS Bank. The monthly installments are approximately $3,782
including interest through December 2008 without any balloon payment
requirements
|
|
|
112,312
|
|
|
153,052
|
|
|
|
|
|
|
|
|
|
Installment
loan having a maturity date in July 2023 and carrying an interest rate of
2.5% below the Hong Kong dollar Prime Rate (7.25% and 5.25% at December 31,
2008) from DBS Bank. The monthly installments are approximately $5,240
including interest through December 2008 without any balloon payment
requirements
|
|
|
761,624
|
|
|
801,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,522,158
|
|
|
2,674,479
|
|
|
|
|
|
|
|
|
|
Less:
current maturities
|
|
|
(160,447
|
)
|
|
(135,237
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,361,711
|
|
$
|
2,539,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
An analysis
of long-term debt as of December 31 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
portion
|
|
$
|
160,447
|
|
$
|
135,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After 1
year, but within 2 years
|
|
|
316,063
|
|
|
290,618
|
|
After 2
years, but within 5 years
|
|
|
257,789
|
|
|
247,571
|
|
After 5
years
|
|
|
1,787,859
|
|
|
2,001,053
|
|
|
|
|
|
|
|
|
|
|
|
|
2,361,711
|
|
|
2,539,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,522,158
|
|
$
|
2,674,479
|
|
|
|
|
|
|
|
|
|
F-20
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
|
Note 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 Bank. (formerly Overseas Trust Bank Limited), SCB, BEA,
Citic and Industrial and Commercial Bank of China (Asia) Limited (ICBC) 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 $641,025 (HK$5,000,000), a security interest on two residential
properties and a workshop located in Hong Kong owned by Atlantic Components
Ltd (Atlantic), a wholly owned subsidiary of ACL, a security interest on a
residential property located in Hong Kong owned by City, a related party,
plus a personal guarantee by Mr. Yang as collateral for loans from DBS Bank;
|
|
|
|
|
2.
|
a fixed cash
deposit of $1,380,010 (HK$10,764,075) plus an unlimited personal guarantee by
Mr. Yang, as collateral for loans from BEA;
|
|
|
|
|
3.
|
a cash
deposit/securities not less than $2,051,282 (HK$16,000,000), a security
interest on a workshop located in Hong Kong owned by Systematic Information,
a related party, a security interest on 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 SCB;
|
|
|
|
|
4.
|
a cash
deposit not less than $1,015,407 (US$756,402 plus HK$2,020,236), a security
interest on a workshop located in Hong Kong owned by Solution, a related
party, plus a personal guarantee by Mr. Yang as collateral for loans from
Citic;
|
|
|
|
|
5.
|
a cash
deposit not less than $641,025 (HK$5,000,000) plus an unlimited personal
guarantee by Mr. Yang as collateral for loans from ICBC.
|
|
|
Note 6.
|
CAPITAL LEASE OBLIGATIONS
|
|
|
|
The Company
has several non-cancelable capital leases relating to automobiles:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
Current
portion
|
|
$
|
58,683
|
|
$
|
44,991
|
|
Non-current
portion
|
|
|
43,055
|
|
|
49,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,738
|
|
|
94,962
|
|
|
|
|
|
|
|
|
|
|
At December
31, the value of automobiles under capital leases as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
193,514
|
|
$
|
145,890
|
|
Less:
depreciation
|
|
|
(51,463
|
)
|
|
(39,344
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142,051
|
|
|
106,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December
31, the company had obligations under capital leases repayable as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Total minimum
lease payments
|
|
|
|
|
|
|
|
-Within one year
|
|
$
|
65,055
|
|
$
|
50,381
|
|
- After one year but within 5 years
|
|
|
47,329
|
|
|
56,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112,384
|
|
|
106,462
|
|
|
|
|
|
|
|
|
|
Interest
expenses relating to future periods
|
|
|
(10,646
|
)
|
|
(11,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present
value of the minimum lease payments
|
|
$
|
101,738
|
|
$
|
94,962
|
|
|
|
|
|
|
|
|
|
F-21
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 7.
|
INCOME TAXES
|
|
|
|
Income tax (refund) expense amounted to $(33,871) for 2008 and
$187,833 for 2007 (an effective rate of 0% for 2008 and 40% for 2007). 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:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Computed tax at federal statutory rate
|
|
$
|
(70,292
|
)
|
$
|
158,670
|
|
|
|
|
|
|
|
|
|
Tax rate differential on foreign earnings
of Atlantic and Aristo, Hong Kong based companies
|
|
|
(121,297
|
)
|
|
(65,717
|
)
|
|
|
|
|
|
|
|
|
Expenses not deductible for tax
|
|
|
166,477
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized timing difference
|
|
|
23,480
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax under/(over) provision for Atlantic
|
|
|
(97,973
|
)
|
|
61,428
|
|
|
|
|
|
|
|
|
|
Net operating loss carry forward
|
|
|
65,734
|
|
|
33,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(33,871
|
)
|
$
|
187,833
|
|
|
|
|
|
|
|
|
|
|
The income
tax provision consists of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
$
|
|
|
Foreign
|
|
|
(33,871
|
)
|
|
187,833
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(33,871
|
)
|
$
|
187,833
|
|
|
|
|
|
|
|
|
|
|
The
Components of the deferred tax assets and liabilities are as follow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
Net
operating losses
|
|
$
|
1,122,726
|
|
$
|
1,056,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
deferred tax assets
|
|
$
|
1,122,726
|
|
$
|
1,056,992
|
|
Less:
valuation allowance
|
|
|
(1,122,726
|
)
|
|
(1,056,992
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company did not have any interest and penalty recognized in the
income statements for the year ended December 31, 2008 and 2007 or balance
sheet as of December 31, 2008 and 2007. The Company did not have uncertainty
tax positions or events leading to uncertainty tax position within the next
12 months. The Companys 2006, 2007 and 2008 U.S. Corporation Income Tax
Return are subject to U.S. Internal Revenue Service examination and the
Companys2002/3, 2003/4, 2004/5, 2005/6, 2006/7, 2007/8, 2008/9 Hong Kong
Corporations Profits Tax Return filing are subject to Hong Kong Inland
Revenue Department examination.
|
|
|
Note 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, 2008 and 2007 since there were no
outstanding options at December 31, 2008 and 2007.
|
F-22
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 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 48% and 66% of materials from
Samsung for the years ended December 31, 2008 and 2007, 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, 2008 and 2007, included in accounts
payable were $8,675,069 and $9,562,199, 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 and 2007, Samsung has withheld a total of $350,000 of
rebate due to the Company as deposits. As agreed with Samsung, the rebate
deposits were fully refunded to the Company on January 22, 2009.
|
|
|
Note 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 $29,650 for 2008 and $29,062 for 2007.
|
F-23
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 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, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related Party
|
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
Year ending
December 31,
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$
|
10,961
|
|
$
|
42,372
|
|
$
|
53,333
|
|
2010
|
|
|
5,128
|
|
$
|
19,972
|
|
$
|
25,100
|
|
Thereafter
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
16,089
|
|
$
|
62,344
|
|
$
|
78,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Note 13
for related party leases. All leases expire prior to December 31, 2010. 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 2008. Rent expense for the years ended December 31, 2008
and 2007 are $142,985 and $120,942, respectively.
|
|
|
Note 12.
|
DERIVATIVE INSTRUMENTS
|
|
|
|
On February
1, 2009, the Company adopted SFAS 161 as referenced in Note 2. The adoption
of SFAS 161 requires additional disclosures about Companys objectives and
strategies for using derivative instruments, the accounting for the
derivative instruments and related hedged items under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities (SFAS 133),
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 and sale period.
The Company applies hedge accounting based upon the criteria established by
SFAS 133, 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,
2008 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, 2008 was $36,346.
|
|
|
|
As at
December 31, 2008, there is a target redemption forward currency option
agreement between the Company and SCB for the Company to buy US$750,000 from
SCB at a lower strike contract rate of 7.75 and an upper strike contract rate
of 7.85 at specified dates up to April 29, 2010. According to the terms of
the agreement, the Company will buy USD in triple amounts if the spot rate is
less than the lower strike contract rate or greater than the upper strike
contract rate at specified dates. The gain on this forward contract during
the year ended December 31, 2008 was $56,433.
|
|
|
|
As at
December 31, 2008, there is a 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, 2008 was $56,410.
|
|
|
|
As at
December 31, 2008, 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.
|
F-24
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 12.
|
DERIVATIVE INSTRUMENTS (Continued)
|
|
|
|
|
There are three foreign currency exchange agreements matured as of
December 31, 2008. These agreements are:
|
|
|
|
|
|
Ratio par
forward contract agreement between the Company and DBS Bank for the Company
to buy US$500,000 from DBS Bank at a contract rate of 7.735 at specified
dated up to March 18, 2008. According to the terms of the agreement, the
Company will buy USD in double 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, 2008 was $11,538.
|
|
|
|
|
|
Ratio par
forward contract agreement between the Company and DBS Bank for the Company
to buy US$500,000 from DBS Bank at a contract rate of 7.74 at specified dated
up to May 27, 2008. According to the terms of the agreement, the Company will
buy USD in double 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, 2008 was $17,917.
|
|
|
|
|
|
Ratio par
forward contract agreement between the Company and SCB for the Company to buy
US$200,000 from SCB at a contract rate of 7.725 at specified dated up to July
3, 2008. According to the terms of the agreement, the Company will buy USD in
double 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,
2008 was $12,644.
|
|
|
|
|
The gross notional and fair values of derivative financial
instruments in the Consolidated Balance Sheet as of December 31, 2008 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008
|
|
|
|
|
|
|
|
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
|
|
$
|
2,250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives not designated as hedging
instruments under ASC 815
|
|
|
500,000
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
$
|
2,750,000
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Represents
the face amounts of contracts that were outstanding as of December 31, 2008.
|
F-25
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 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, 2008 and 2007 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain Recognized in Income on Derivative(1)
|
|
|
|
Location
|
|
Year ended
December 31,
2008
|
|
Year ended
December 31,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts US$200,000
(HKD/USD)
|
|
|
Interest and other, net
|
|
$
|
12,644
|
|
$
|
20,897
|
|
Foreign exchange contracts USD500,000
(HKD/USD)
|
|
|
Interest and other, net
|
|
|
36,346
|
|
|
6,449
|
|
Foreign exchange contracts US$500,000
(HKD/USD)
|
|
|
Interest and other, net
|
|
|
11,538
|
|
|
37,244
|
|
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
|
|
|
56,433
|
|
|
|
|
Foreign exchange contracts US$1,000,000
(HKD/USD)
|
|
|
Interest and other, net
|
|
|
56,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash flow hedges
|
|
|
|
|
$
|
161,288
|
|
$
|
64,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 13.
|
RELATED PARTY TRANSACTIONS
|
|
|
|
Transactions with Aristo Technologies Limited / Mr. Yang
|
|
|
|
As of December 31, 2008 and 2007, we had an outstanding receivable
from Mr. Yang, the President and Chairman of our Board of Directors, totaling
$7,900,404 and $6,057,488 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, 2008 and 2007, we recorded
compensation to Mr. Yang of $735,026 and $812,821 respectively, and paid
$735,026 and $812,821 respectively to Mr. Yang as compensation to him.
|
|
|
|
During each of the years ended December 31, 2008 and 2007, we paid
rent of $0 and $17,521 respectively for Mr. Yangs personal residence as
fringe benefits to him. All such payments have been recorded as compensation
expense in the accompanying financial statements.
|
|
|
|
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. During the years ended December 31, 2008 and 2007, we sold
products for $0 and $366,840 respectively, to Classic. As of December 31,
2008 and 2007, the Company had outstanding accounts receivable from Classic
totaling $1,717,320 and $1,717,859 respectively. This account receivable has
been outstanding for more than 12 months.
|
|
|
|
Classic has historically met its payment obligations to the Company
and the Company has no reason to believe that Classics receivables are not
collectible. Pursuant to a written personal guarantee agreement, Mr. Yang has
personally guaranteed up to $10.0 million of the outstanding accounts
receivable from Classic. The Company has received verbal assurances from Mr.
Yang of his intent and ability to perform under the above-referenced
guarantee and based on information provided by Mr. Yang, his net worth is
approximately $17 million. In addition, as discussed in Note 14, the Company
has entered into a payment plan with Classic and the amount due from Classic
has been settled.
|
F-26
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 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, 2007, 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, 2009. The monthly lease
payment for this lease is $1,090. We incurred and paid an aggregate rent
expense of $13,077 and $12,385 to Solution during the years ended December
31, 2008 and 2007.
|
|
|
|
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, 2008 and 2007.
|
|
|
|
During the years ended December 31, 2008 and 2007, we received
service charges of $0 and $11,538 respectively from Systematic Information.
The service fee was charged for back office support for Systematic
Information.
|
|
|
|
During the years ended December 31, 2008 and 2007, we sold products
for $1,913,071 and $666,742 respectively, to Systematic Information. As of
December 31, 2008 and 2007, there were no outstanding accounts receivables
from Systematic Information.
|
|
|
|
During the years ended December 31, 2008 and 2007, we purchased
inventories of $1,446,680 and $1,523,238 respectively from Systematic
Information. As of December 31, 2008 and 2007, there were no outstanding
accounts payable to Systematic Information.
|
|
|
|
On April 1, 2005, we entered into a lease agreement with Systematic
Information pursuant to which we lease one residential property for Mr.
Yangs personal use for a monthly lease payment of $3,205. Upon expiration of
the lease on June 15, 2007, ACL acquired this residential property from Systematic
Information. We incurred and paid an aggregate rent expense of $0 and $17,521
to Systematic Information during the years ended December 31, 2008 and 2007.
|
|
|
|
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, 2008
and 2007, we received management fees of $0 and $5,769 respectively from
Global. As of December 31, 2008 and 2007, there were no outstanding accounts
receivables from Global. The management fees were charged for back office support for Global.
|
|
|
|
During the years ended December 31, 2008 and 2007, we sold products for $0
and $25,337 respectively, to Global. As of December 31, 2008 and 2007, there were no outstanding accounts
receivables from Global.
|
|
|
|
During the years ended December 31, 2008 and 2007,
we purchased inventories of $2,323 and $18,294 respectively from Global. As
of December 31, 2008 and 2007, there were no outstanding accounts payable to
Global.
|
F-27
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 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, 2008 and 2007, we received a management fee of $15,384 and $16,026
respectively from Systematic. As of December 31, 2008 and 2007, there were no
outstanding accounts receivables from Systematic. The management fee was
charged for back office support for Systematic.
|
|
|
|
During the years ended December 31, 2008 and 2007, we sold products
for $275,766 and $779,879 respectively, to Systematic. As of December 31,
2008 and 2007, there were no outstanding accounts receivables from
Systematic.
|
|
|
|
During the years ended December 31, 2008 and 2007, we purchased
inventories of $560,750 and $1,007,352 respectively from Systematic. As of
December 31, 2008 and 2007, there were no outstanding accounts payable to
Systematic.
|
|
|
|
Transactions with Intelligent Network
Technology Limited
|
|
|
|
Mr. Yang the Companys Chief Executive Officer, majority shareholder
and a director, is a director and 80% shareholder of Intelligent Network
Technology Ltd. (Intelligent). The remaining 20% of Intelligent is owned by
a non-related party.
During the years ended December 31, 2008 and 2007, we
purchased inventories of $0 and $1,343,501 respectively from Intelligent. As
of December 31, 2008 and 2007, there were no outstanding accounts payable to
Intelligent.
|
|
|
|
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, 2008 and 2007, we
received a management fee of $8,077 and $0 respectively from Aristo Comp. The
management fee was charged for back office support for Aristo Comp.
|
|
|
|
During the years ended December 31, 2008 and 2007, we sold products
for $67,968 and $349,327 respectively, to Aristo Comp. As of December 31,
2008 and 2007, there were no outstanding accounts receivables from Aristo
Comp.
During the years ended December 31, 2008 and 2007, we purchased
inventories of $37,665 and $0 respectively, from Aristo Comp. As of December
31, 2008 and 2007, there were no outstanding accounts payable to Aristo Comp.
|
|
|
|
Transactions 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, 2008 and 2007, we sold
products for $575,386 and $1,471,471 respectively, to Atlantic Storage. As of
December 31, 2008 and 2007, there were no outstanding accounts receivables
from Atlantic Storage.
|
|
|
|
During the years ended December 31, 2008 and 2007, we purchased
inventories of $679,049 and $581,444 respectively, from Atlantic Storage. As
of December 31, 2008 and 2007, there were no outstanding accounts payable to
Atlantic Storage.
|
|
|
|
Transactions 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, 2008 and 2007, we sold
products for $1,077,653 and $2,574,096 respectively, to Rambo. As of December
31, 2008 and 2007, there were no outstanding accounts receivables from Rambo.
|
|
|
|
During the years ended December 31, 2008 and 2007, we purchased
inventories of $10,314 and $0 respectively, from Rambo. As of December 31,
2008 and 2007, there were no outstanding accounts payable to Rambo.
|
F-28
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 13.
|
RELATED PARTY TRANSACTIONS (Continued)
|
|
|
|
Transactions 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). During the years ended December 31, 2008
and 2007, we sold products for $5,509 and $703,683 respectively, to Usmart.
As of December 31, 2008 and 2007, there were no outstanding accounts
receivables from Usmart.
|
|
|
|
During the years ended December 31, 2008 and 2007, we purchased
inventories of $199,712 and $736,888 respectively, from Usmart. As of
December 31, 2008 and 2007, 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, 2008 and 2007,
we sold products of $0 and $51,060 respectively, to Imax. As of December 31,
2008 and 2007, there were no outstanding accounts receivables from Imax.
During
the years ended December 31, 2008 and 2007, we purchased inventories
of $3,167 and $0 respectively, from Imax. As of December 31, 2008 and 2007, there were no outstanding accounts
payable to Imax.
|
|
|
|
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, 2008 and 2007, we sold products for $0 and $518,040
respectively, to Kadatco. As of December 31, 2008 and 2007, there were no
outstanding accounts receivables from Kadatco.
|
|
|
|
During the years ended December 31, 2008 and 2007, we purchased
inventories of $0 and $590,742 respectively, from Kadatco. As of December 31,
2008 and 2007, there was no outstanding accounts payable to Kadatco.
|
|
|
|
Transactions 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-29
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 14.
|
SUBSEQUENT EVENTS
|
|
|
|
In preparing
these financial statements, the Company evaluated the events and transactions
that occurred from January 1, 2009 through May 3, 2010, the date these
financial statements were issued. The Company has made the required
additional disclosures in reporting periods in which subsequent events occur.
|
|
|
|
After year
ended December 31, 2008, two banks canceled the banking facilities granted to
the Company and restricted bank deposits were released. One bank reduced the
amount of facilities granted to the Company.
|
|
|
|
Effective as
of October 1, 2009, Classic, a related party, and the Company agreed to a
payment plan for the pay down of accounts receivable from Classic of
$1,717,320 as of June 30, 2009 according to which Classic has agreed to pay
to the Company $650,000 before the end of 2009 with the remainder of the
accounts receivable balance to be paid during 2010. Mr. Alan Yang, our Chief
Executive Officer, director and majority stockholder has personally
guaranteed up to $10 million of outstanding accounts receivable of Classic.
As of December 31, 2009, the accounts receivable from Classic has been fully
settled.
|
|
|
|
On November
2, 2009, the Company entered into two leases for office space. The leases
expire on November 30, 2014. The monthly lease payments are $4,487 and
$7,051, respectively.
|
|
|
|
As discussed
in Note 9 of the consolidated financial statements, the Company is dependent
on one single vendor to supply its inventories. This vendor accounted for the
majority of the Companys purchases for 2009. The Companys non-exclusive
distributorship agreement with this vendor has a one year term and contains
certain sales quotas to be met by the Company. This agreement has been
renewed more than ten times, most recently on March 1, 2009 and expired on
February 28, 2010. As of March 1, 2010, this vendor has confirmed the annual
renewal of such agreement for one year. The Company has already signed a
renewal agreement with Samsung. The Company expects to receive the return of
a fully executed renewal agreement in the next two months. Termination of
such distributorship agreement by this vendor would have a material adverse
effect on the operations of the Company.
|
|
|
|
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-30
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 15.
|
RESTATEMENTS
|
|
|
|
On January 7, 2010, the Company filed the consolidated balance sheets
as of December 31, 2008 and 2007, its consolidated statements of income,
stockholders equity and cash flow for the year ended December 31, 2007 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
2007 and 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
is the primary beneficiary of Aristo and get control of Aristo through the
related party, Mr. Yang. Therefore, Aristo is 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 ASC 820-10-35 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 rendered the assets impairment provision on a
temporary market over or under reaction not applicable in this group of real
property assets that was 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-31
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 15.
|
RESTATEMENTS (Continued)
|
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-32
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(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-33
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 15.
|
RESTATEMENTS (Continued)
|
CONSOLIDATED BALANCE SHEETS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
2007
Original
|
|
ASC 810
Changes
|
|
ASC 820
changes
|
|
2007
Restated
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,597,674
|
|
|
63,382
|
|
|
|
|
$
|
1,661,056
|
|
Restricted cash
|
|
|
4,203,057
|
|
|
|
|
|
|
|
|
4,203,057
|
|
Accounts receivable, net of allowance for
doubtful accounts of $0 for 2007 and 2006
|
|
|
7,594,784
|
|
|
32,233
|
|
|
|
|
|
7,627,017
|
|
Accounts receivable, related parties
|
|
|
7,955,764
|
|
|
(6,237,905
|
)
|
|
|
|
|
1,717,859
|
|
Inventories, net
|
|
|
3,483,994
|
|
|
284,161
|
|
|
|
|
|
3,768,155
|
|
Restricted marketable securities
|
|
|
769,231
|
|
|
|
|
|
|
|
|
769,231
|
|
Marketable securities
|
|
|
404,780
|
|
|
|
|
|
|
|
|
404,780
|
|
Income tax refundable
|
|
|
49,375
|
|
|
|
|
|
|
|
|
49,375
|
|
Other current assets
|
|
|
83,061
|
|
|
6,122
|
|
|
|
|
|
89,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
26,141,720
|
|
|
(5,852,007
|
)
|
|
|
|
$
|
20,289,713
|
|
Property, plant and equipment, net
|
|
|
6,933,998
|
|
|
|
|
|
|
|
|
6,933,998
|
|
Other deposits
|
|
|
387,245
|
|
|
|
|
|
|
|
|
387,245
|
|
Amounts due from Aristo / Mr. Yang
|
|
|
|
|
|
6,057,488
|
|
|
|
|
|
6,057,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
33,462,963
|
|
|
205,481
|
|
|
|
|
$
|
33,668,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-34
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 15.
|
RESTATEMENTS (Continued)
|
CONSOLIDATED BALANCE SHEETS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
2007
Original
|
|
ASC 810
changes
|
|
ASC 820
changes
|
|
2007
Restated
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
12,592,685
|
|
|
277,515
|
|
|
|
|
|
12,870,200
|
|
Accruals
|
|
|
186,738
|
|
|
9,218
|
|
|
|
|
|
195,956
|
|
Lines of credit and loan facilities
|
|
|
15,610,488
|
|
|
|
|
|
|
|
|
15,610,488
|
|
Current portion of long-term debt
|
|
|
135,237
|
|
|
|
|
|
|
|
|
135,237
|
|
Current portion of capital lease
|
|
|
44,991
|
|
|
|
|
|
|
|
|
44,991
|
|
Due to shareholders for converted pledged
collateral
|
|
|
112,385
|
|
|
|
|
|
|
|
|
112,385
|
|
Other current liabilities
|
|
|
268,573
|
|
|
(1
|
)
|
|
|
|
|
268,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
28,951,097
|
|
|
286,732
|
|
|
|
|
$
|
29,237,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion
|
|
|
2,539,242
|
|
|
|
|
|
|
|
|
2,539,242
|
|
Capital lease, less current portion
|
|
|
49,971
|
|
|
|
|
|
|
|
|
49,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
2,589,213
|
|
|
|
|
|
|
|
|
2,589,213
|
|
Deferred tax
|
|
|
15,471
|
|
|
|
|
|
|
|
|
15,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
31,555,781
|
|
|
286,732
|
|
|
|
|
|
31,842,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
$
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-35
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 15.
|
RESTATEMENTS (Continued)
|
CONSOLIDATED BALANCE SHEETS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
2007
Original
|
|
ASC 810
changes
|
|
ASC 820
changes
|
|
2007
Restated
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $.001 par value; 50,000,000
shares authorized; 28,329,936 shares issued and outstanding as of December
31, 2007 and 2006 respectively
|
|
$
|
28,330
|
|
|
|
|
|
|
|
$
|
28,330
|
|
Additional paid in capital
|
|
|
3,593,027
|
|
|
|
|
|
|
|
|
3,593,027
|
|
Amount due (from) to stockholder/director
|
|
|
(75,998
|
)
|
|
75,998
|
|
|
|
|
|
|
|
Accumulated losses
|
|
|
(1,638,177
|
)
|
|
(157,249
|
)
|
|
|
|
|
(1,795,426
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,907,182
|
|
|
(81,251
|
)
|
|
|
|
$
|
1,825,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
|
$
|
33,462,963
|
|
|
205,481
|
|
|
|
|
$
|
33,668,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of restatement of the consolidated balance sheet as of
December 31, 2007, total assets increased from $33,462,963 as originally
reported, to $33,668,444, an increase of $205,481. The increase of total
assets was derived from an increase of $63,382 in cash and cash equivalents,
an increase of $32,232 in accounts receivable, a decrease of $6,237,905 in
accounts receivables from related parties, an increase of $284,161 in
inventories, an increase of $6,122 in other current assets, and an increase
of $6,057,488 in amounts due from Aristo/Mr. Yang.
|
|
|
|
The total liabilities increased from $31,555,781 as originally
reported, to $31,842,513, an increase of $286,732. The increase of total
liabilities was derived from an increase of $277,515 in accounts payable, an
increase of $9,218 in accruals, and a decrease of $1 in other current
liabilities.
|
|
|
|
The total stockholders equity was restated from $1,907,182 as
originally reported, to $1,825,931, a decrease of $81,251. The increase of
total stockholders equity was derived from a increase of $157,249 in
accumulated losses, and a decrease of $75,998 in amount due from
stockholder/director.
|
|
|
|
The total liabilities and stockholders equity was restated from
$33,462,963 as originally reported, to $33,668,444, an increase of $205,481.
|
F-36
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(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-37
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
|
|
Note 15.
|
RESTATEMENTS (Continued)
|
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
2007
Original
|
|
ASC 810
changes
|
|
ASC 820
changes
|
|
2007
Restated
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
160,404,924
|
|
|
6,366,682
|
|
|
|
|
$
|
166,771,606
|
|
Costs of
sales
|
|
|
(156,533,635
|
)
|
|
(6,400,021
|
)
|
|
|
|
|
(162,933,656
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
3,871,289
|
|
|
(33,339
|
)
|
|
|
|
$
|
3,837,950
|
|
Selling and
distribution costs
|
|
|
(69,260
|
)
|
|
(4,248
|
)
|
|
|
|
|
(73,508
|
)
|
General and
administrative expenses
|
|
|
(2,942,542
|
)
|
|
(124,453
|
)
|
|
|
|
|
(3,066,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operation
|
|
$
|
859,487
|
|
|
(162,040
|
)
|
|
|
|
$
|
697,447
|
|
Other income
(expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
|
37,179
|
|
|
|
|
|
|
|
|
37,179
|
|
Unrealized gain on disposal of marketable
securities
|
|
|
404,780
|
|
|
|
|
|
|
|
|
404,780
|
|
Management and service income
|
|
|
33,333
|
|
|
|
|
|
|
|
|
33,333
|
|
Net income on cash flow hedge
|
|
|
64,590
|
|
|
|
|
|
|
|
|
64,590
|
|
Exchange differences
|
|
|
34,672
|
|
|
|
|
|
|
|
|
34,672
|
|
Director life insurance policy refund
|
|
|
29,617
|
|
|
|
|
|
|
|
|
29,617
|
|
Interest income
|
|
|
169,055
|
|
|
|
|
|
|
|
|
169,055
|
|
Interest expenses
|
|
|
(1,009,006
|
)
|
|
(4
|
)
|
|
|
|
|
(1,009,010
|
)
|
Miscellaneous
|
|
|
218
|
|
|
4,795
|
|
|
|
|
|
5,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
623,925
|
|
|
(157,249
|
)
|
|
|
|
$
|
466,676
|
|
Income taxes
|
|
|
(187,833
|
)
|
|
|
|
|
|
|
|
(187,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
436,092
|
|
|
(157,249
|
)
|
|
|
|
$
|
278,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic and diluted
|
|
$
|
0.02
|
|
|
(0.01
|
)
|
|
|
|
$
|
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, 2007, total net income
decreased from $436,092 as originally reported to $278,843, a decrease of
$157,249. The decreased income was composed of an increase of $6,366,682 in
net sales, an increase of $6,400,021 in costs of sales, an increase of $4,248
in selling and distribution costs, an increase of $124,453 in general and
administrative expenses, an increase of $4 in interest expenses, and an
increase of $4,795 in miscellaneous income.
|
F-38
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(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-39
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(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-40
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
Note 15. RESTATEMENTS (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
Original
|
|
ASC 810
changes
|
|
ASC 820
changes
|
|
2007
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
436,092
|
|
|
(157,249
|
)
|
|
|
|
$
|
278,843
|
|
Depreciation and amortization
|
|
|
230,614
|
|
|
|
|
|
|
|
|
230,614
|
|
Change in inventory reserve
|
|
|
323,077
|
|
|
|
|
|
|
|
|
323,077
|
|
Gain on disposal of equipment
|
|
|
(218
|
)
|
|
|
|
|
|
|
|
(218
|
)
|
Gain on disposal of marketable securities
|
|
|
(404,780
|
)
|
|
|
|
|
|
|
|
(404,780
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net
cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable other
|
|
|
(5,586,310
|
)
|
|
(32,234
|
)
|
|
|
|
|
(5,618,544
|
)
|
Accounts receivable related parties
|
|
|
(583,297
|
)
|
|
6,237,905
|
|
|
|
|
|
5,654,608
|
|
Inventories
|
|
|
(553,816
|
)
|
|
(284,161
|
)
|
|
|
|
|
(837,977
|
)
|
Refundable deposits
|
|
|
|
|
|
(6,207
|
)
|
|
|
|
|
(6,207
|
)
|
Income tax refundable
|
|
|
(49,375
|
)
|
|
49,375
|
|
|
|
|
|
|
|
Other current assets
|
|
|
(42,124
|
)
|
|
(6,122
|
)
|
|
|
|
|
(48,246
|
)
|
Other assets
|
|
|
(6,207
|
)
|
|
6,207
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
7,582,962
|
|
|
277,515
|
|
|
|
|
|
7,860,477
|
|
Accrued expenses
|
|
|
(127,486
|
)
|
|
9,218
|
|
|
|
|
|
(118,268
|
)
|
Income tax payable
|
|
|
(74,839
|
)
|
|
(49,375
|
)
|
|
|
|
|
(124,214
|
)
|
Other current liabilities
|
|
|
(25,044
|
)
|
|
(8,814
|
)
|
|
|
|
|
(33,858
|
)
|
Deferred tax
|
|
|
6,658
|
|
|
8,813
|
|
|
|
|
|
15,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by (used in) operating activities
|
|
$
|
1,125,907
|
|
|
6,044,872
|
|
|
|
|
$
|
7,170,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced from Aristo / Mr. Yang
|
|
$
|
|
|
|
11,153,115
|
|
|
|
|
$
|
11,153,115
|
|
Advanced to Aristo / Mr. Yang
|
|
|
(989,461
|
)
|
|
(17,134,605
|
)
|
|
|
|
|
(18,124,066
|
)
|
Increase in restricted cash
|
|
|
(1,494,480
|
)
|
|
|
|
|
|
|
|
(1,494,480
|
)
|
Increase in restricted marketable
securities
|
|
|
(769,231
|
)
|
|
|
|
|
|
|
|
(769,231
|
)
|
Cash proceeds from sales of equipment
|
|
|
385
|
|
|
|
|
|
|
|
|
385
|
|
Purchase of property, plant and equipment
|
|
|
(3,159,760
|
)
|
|
|
|
|
|
|
|
(3,159,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
used in investing activities
|
|
$
|
(6,412,547
|
)
|
|
(5,981,490
|
)
|
|
|
|
|
(12,394,037
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings on lines of credit and notes
payable
|
|
$
|
4,772,021
|
|
|
|
|
|
|
|
$
|
4,772,021
|
|
Borrowing under long-term debt
|
|
|
801,723
|
|
|
|
|
|
|
|
|
801,723
|
|
Principal payments under long-term debt
|
|
|
(91,625
|
)
|
|
|
|
|
|
|
|
(91,625
|
)
|
Principal payments under capital lease
obligation
|
|
|
(45,291
|
)
|
|
|
|
|
|
|
|
(45,291
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by financing activities
|
|
$
|
5,436,828
|
|
|
|
|
|
|
|
$
|
5,436,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash and
cash equivalents sourced (used)
|
|
$
|
150,188
|
|
|
63,382
|
|
|
|
|
$
|
213,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalentsbeginning of year
|
|
|
1,447,486
|
|
|
|
|
|
|
|
|
1,447,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalentsend of year
|
|
$
|
1,597,674
|
|
|
63,382
|
|
|
|
|
$
|
1,661,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-41
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
Note 15. RESTATEMENTS (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
Original
|
|
|
ASC 810
changes
|
|
ASC 820
changes
|
|
2007
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary
cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
1,009,006
|
|
|
|
4
|
|
|
$
|
1,009,010
|
|
Income tax paid
|
|
|
305,389
|
|
|
|
|
|
|
|
305,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary schedule of non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations incurred when
capital leases were entered for new automobiles
|
|
$
|
91,752
|
|
|
4,146
|
|
|
$
|
95,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of the restatement, the net cash provided by operating
activities for the year ended December 31, 2007 increased by $6,044,872 from
$1,125,907 as originally reported, to $7,170,779; net cash used in investing
activities increased by $5,981,490 from $6,412,547 as originally reported, to
$12,394,037. The cash and cash equivalents at end of year were increased by $63,382
from $1,597,674 as originally reported, to $1,661,056.
F-42
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
SCHEDU
LE II
VALUATION 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.
SCHEDU
LE III
QUARTERLY 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-1