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 August 31, 2006, 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, 2008.
Monthly lease payment for this lease totaled $641. Upon expiration of the lease
on August 31, 2008, ACL acquired this residential property from Systematic
Information. We incurred and paid an aggregate rent expense of $7,692 and
$2,564 to Systematic Information during the year ended December 31, 2007 and
2006.
During the
years ended December 31, 2007 and 2006, we received service charges $11,538 and
$6,410 respectively, from Systematic Information. As of December 31, 2007 and
2006, there was no outstanding accounts receivable from Systematic Information.
During the
years ended December 31, 2007 and 2006, we sold products for $666,742 and $0
respectively, to Systematic Information. As of December 31, 2007 and 2006,
there were no outstanding accounts receivables from Systematic Information.
During the
years ended December 31, 2007 and 2006, we purchased inventories of $1,523,238
and $0 respectively from Systematic Information. As of December 31, 2007 and
2006, 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 $17,521 and $38,462 to Systematic Information
during the year ended December 31, 2007 and 2006.
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, 2007 and 2006, we received
management fee of $5,769 and $7,692 respectively, from Global. As of December
31, 2007 and 2006, there was no outstanding accounts receivable from Global.
The management fees were charged for back office support for Global.
During the
years ended December 31, 2007 and 2006, we sold products for $25,337 and $0
respectively, to Global. As of December 31, 2007 and 2006, there were no
outstanding accounts receivables from Global.
During the
years ended December 31, 2007 and 2006, we purchased inventories of $18,294 and
$0 respectively from Global. As of December 31, 2007 and 2006, 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, 2007 and 2006, we received a
management fee of $0 and $7,692 respectively, from Intelligent. As of December
31, 2007 and 2006, there was no outstanding accounts receivable from
Intelligent. The management fees were charged for back office support for
Intelligent.
During the
years ended December 31, 2007 and 2006, we purchased inventories of $1,343,501
and $0 respectively from Intelligent. As of December 31, 2007 and 2006, 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, 2007 and 2006, we received
a management fee of $16,026 and $15,384 respectively, from Systematic. As of
December 31, 2007 and 2006, there was no outstanding accounts receivable from
Systematic. The management fees were charged for back office support for
Systematic.
During the
years ended December 31, 2007 and 2006, we sold products for $779,879 and $0
respectively, to Systematic. As of December 31, 2007 and 2006, there were no
outstanding accounts receivables from Systematic.
During the
years ended December 31, 2007 and 2006, we purchased inventories of $1,007,352
and $0 respectively from Systematic. As of December 31, 2007 and 2006, 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, 2007 and 2006, we sold products for
$349,327 and $0 respectively, to Aristo Comp. As of December 31, 2007 and 2006,
there were no outstanding accounts receivables from Aristo Comp.
29
Transactions with Atlantic
Storage Devices Limited
Mr. Yang, the Companys Chief Executive Officer, majority shareholder
and a director, is a 40% shareholder of Atlantic Storage Devices Ltd.
(Atlantic Storage). The remaining 60% of Atlantic Storage is owned by a
non-related party. During the years ended December 31, 2007 and 2006, we sold
products for $1,471,471 and $0 respectively, to Atlantic Storage. As of
December 31, 2007 and 2006, there were no outstanding accounts receivables from
Atlantic Storage.
During the years ended December 31, 2007 and 2006, we purchased
inventories of $581,444 and $0 respectively, from Atlantic Storage. As of
December 31, 2007 and 2006, there were no outstanding accounts payable to
Atlantic Storage.
Transactions with Rambo
Technologies Limited
Mr. Ben Wong, one of our directors, is a 60% shareholder of Rambo
Technologies Ltd. (Rambo). The remaining 40% of Rambo is owned by a
non-related party. During the years ended December 31, 2007 and 2006, we sold
products for $2,574,096 and $0 respectively, to Rambo. As of December 31, 2007
and 2006, there were no outstanding accounts receivables from Rambo.
Transactions with Usmart
Electronic Products Limited
Mr. Yang, the Companys Chief Executive Officer, majority shareholder
and a director, is the sole beneficial owner of the equity interest of Usmart
Electronic Products Ltd. (Usmart). During the years ended December 31, 2007
and 2006, we sold products for $703,683 and $0 respectively, to Usmart. As of
December 31, 2007 and 2006, there were no outstanding accounts receivables from
Usmart.
During the years ended December 31, 2007 and 2006, we purchased
inventories of $736,888 and $0 respectively, from Usmart. As of December 31,
2007 and 2006, there were no outstanding accounts payable to Usmart.
Transactions with Imax
Technology Limited
Mr. Yang, the Companys Chief Executive Officer, majority shareholder
and a director, is the sole beneficial owner of the equity interest of Imax
Technology Ltd. (Imax). During the years ended December 31, 2007 and 2006, we
sold products of $51,060 and $0 respectively, to Imax. As of December 31, 2007
and 2006, there were no outstanding accounts receivables from Imax.
Transactions with 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, 2007 and 2006, we sold products for $518,040 and $0
respectively, to Kadatco. As of December 31, 2007 and 2006, there were no
outstanding accounts receivables from Kadatco.
During the years ended December 31, 2007 and 2006, we purchased
inventories of $590,742 and $0 respectively, from Kadatco. As of December 31,
2007 and 2006, there were no outstanding accounts payable to Kadatco.
Transactions with
First World Logistics Limited
Mr. Yang the Companys Chief Executive Officer, majority shareholder
and a director, is the sole beneficial owner of the equity interest of First
World Logistics Ltd. (First). During the years ended December 31, 2007 and
2006, we sold $0 and $7,720,975 respectively to First.
During the years ended December 31, 2007 and 2006, we purchased
inventories for $0 and $825,900 respectively from First. As of December 31, 2007
and 2006, there was no outstanding accounts payable to First.
Transactions with City
Royal Limited
Mr. Yang, the Companys Chief Executive Officer, majority shareholder
and a director, is a 50% shareholder of City Royal Limited (City). The
remaining 50% of City is owned by the wife of Mr. Yang. A residential property
located in Hong Kong owned by City was used by the Company as collateral for
loans from DBS Bank (Hong Kong) Limited (DBS Bank).
30
|
|
I
tem 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 and Jeffrey
Tsang & Co for the audits of our annual financial statements and interim
reviews of our quarterly financial statements for the years ended December 31,
2007 and December 31, 2006, respectively, and fees billed for other services
rendered by JTC Fair Song CPA Firm and Jeffrey Tsang & Co during those
periods.
|
|
|
|
|
|
|
|
|
|
Fiscal 2007
|
|
Fiscal 2006
|
|
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 and Jeffrey Tsang & Co. and 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 2007 or 2006.
|
|
|
(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 2007 or
2006.
|
|
|
(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 2007 or 2006.
|
31
PART IV
|
|
I
tem 15.
|
Exhibits and Financial Statement Schedules
|
|
|
|
(a)
|
Documents
filed as part of this Report
|
|
|
|
(1)
|
The
financial statements listed in the Index to Consolidated Financial Statements
are filed as part of this report
|
|
|
|
|
(2)
|
The
financial statements listed in the Index are filed a part of this report.
|
|
|
|
|
|
Schedule II
Valuation and Qualifying Accounts and Reserves. Schedule II on page S-1 is
filed as part of this report.
|
|
|
|
|
|
Schedule III
Quarterly Information (Unaudited). Schedule 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.
|
|
|
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.
|
|
|
31.1
|
Certification
of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
|
|
|
31.2
|
Certification
of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
|
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
|
33
|
|
|
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: May 4, 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
|
|
May 4,
2010
|
|
|
Officer and
Chairman of the
|
|
|
Chung-Lun Yang
|
|
Board of
Directors
|
|
|
|
|
(Principal
Executive
|
|
|
|
|
Officer)
|
|
|
|
|
|
|
|
/s/ Kenneth
Lap-Yin Chan
|
|
Chief
Financial Officer
|
|
May 4,
2010
|
|
|
(Principal
Financial and Accounting
|
|
|
Kenneth
Lap-Yin Chan
|
|
Officer)
|
|
|
|
|
|
|
|
/s/ Ben Wong
|
|
|
|
May 4,
2010
|
|
|
Director
|
|
|
Ben Wong
|
|
|
|
|
35
ACL Semiconductors Inc. and Subsidiaries
Consolidated Financial Statements
As of December 31, 2007 and December 31, 2006 and
the Years Ended December 31, 2007 and 2006
With Report of Independent Registered Public
Accounting Firm
I
ndex to
Consolidated Financial Statements
F-1
JEFFREY TSANG
& CO.
CERTIFIED PUBLIC ACCOUNTANTS
Units 1205-6, 12/F, Cheuk Nang Centre, 9 Hillwood Road, Tsimshatsui, Kowloon,
Hong Kong.
Tel: (852) 2781
1606 Fax: (852) 2783
0752 E-mail:
info@hkjtc.com
R
EPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
ACL Semiconductors Inc.
Kowloon, Hong Kong
We have
audited the accompanying consolidated balance sheet of ACL Semiconductors Inc.
and subsidiaries as of December 31, 2006, and the related consolidated
statements of operations, stockholders equity (deficit), cash flows and
financial statement schedule of the year ended December 31, 2006. These
financial statements and financial statement schedule are the responsibility of
the Companys management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted
our audits in accordance with the 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 financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Companys internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, 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 of 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, 2006, and the results of its operations and its cash flows for the
year ended December 31, 2006, in conformity with U.S. generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed
in Note 10 to the consolidated financial statements, the Company has had
numerous significant transactions with businesses and affiliates controlled by,
and with persons who are related to, the officers and directors of the Company.
As discussed
in Note 7 to the consolidated financial statements, the Company is dependent on
one single vendor to supply its inventories and this single vendor provided the
majority of the Companys inventory purchases during the year ended December
31, 2006. The Companys non-exclusive distributorship agreement with this
supplier expired on March 1, 2007. The Company is still in negotiation with the
supplier regarding the renewal terms of the agreement, and such an agreement has
not yet been renewed. Termination of such distributorship agreement by the
supplier would have a material adverse effect on the operations of the Company.
As discussed
in Note 15, the accompanying consolidated financial statements as of December
31, 2006 have been restated.
|
|
/s/ JEFFREY TSANG & CO.
|
|
|
|
JEFFREY
TSANG & CO.
|
|
CERTIFIED
PUBLIC ACCOUNTANTS
|
|
|
Hong Kong
|
|
April 17,
2007, except for Note 15, which is as of April, 15 2008
|
F-2
|
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)
|
Report of Independent Registered Public
Accounting Firm
We have
audited the accompanying balance sheets of the Company as of December 31, 2007
and the related statements of income, stockholders equity and cash flows
for the years then ended. In connection with our audit of the financial statements,
we have also audited the financial statement schedule listed in the
accompanying index as of and for the year ended December 31, 2007. 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. The financial statements of the
Company as of December 31, 2006 and for the year ended December 31, 2006 were
audited by the predecessor principal auditors, whose report was dated April 17,
2007 except for Note 15 dated April 15, 2008, expressed an unqualified opinion
on those statements.
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, 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. Also, in our opinion, the financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
As discussed
in Note 10 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.
|
April 14,
2010, except for Note 15
|
Certified
Public Accountants
|
F-3
ACL SEMICONDUCTORS INC. AND SUBSDIARIES
C
ONSOLIDATED
BALANCE SHEETS
AS AT DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
ASSETS
|
|
|
|
|
|
|
|
|
Notes
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
(Restated)
|
|
(Restated)
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,661,056
|
|
$
|
1,447,486
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
4,203,057
|
|
|
2,708,577
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net of allowance for
doubtful accounts of $0 for 2007 and 2006
|
|
|
7,627,017
|
|
|
2,008,474
|
|
|
|
|
|
|
|
|
|
Accounts receivable, related parties
|
|
|
1,717,859
|
|
|
7,372,467
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
|
3,768,155
|
|
|
3,253,255
|
|
Restricted marketable securities
|
|
|
769,231
|
|
|
|
|
Marketable securities
|
|
|
404,780
|
|
|
|
|
Income tax refundable
|
|
|
49,375
|
|
|
|
|
Other current assets
|
|
|
89,183
|
|
|
40,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
20,289,713
|
|
|
16,831,196
|
|
|
|
|
|
|
|
|
|
Property, equipment and
improvements, net of accumulated depreciation and amortization
|
3
|
|
6,933,998
|
|
|
3,909,121
|
|
|
|
|
|
|
|
|
|
Other deposits
|
|
|
387,245
|
|
|
381,038
|
|
|
|
|
|
|
|
|
|
Amounts due from Aristo / Mr.
Yang
|
|
|
6,057,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
33,668,444
|
|
$
|
21,121,355
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated
financial statements
F-4
ACL SEMICONDUCTORS INC. AND SUBSDIARIES
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Restated)
|
|
(Restated)
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
12,870,200
|
|
$
|
5,009,723
|
|
Accrued expenses
|
|
|
|
|
195,956
|
|
|
314,224
|
|
|
|
|
|
|
|
|
|
|
|
Lines of credit and loan facilities
|
|
4
|
|
|
15,610,488
|
|
|
10,838,467
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
5
|
|
|
135,237
|
|
|
90,569
|
|
Current portion of capital lease
|
|
6
|
|
|
44,991
|
|
|
17,170
|
|
|
|
|
|
|
|
|
|
|
|
Income tax payable
|
|
|
|
|
|
|
|
74,839
|
|
|
|
|
|
|
|
|
|
|
|
Due to shareholders for converted pledged
collateral
|
|
|
|
|
112,385
|
|
|
112,385
|
|
Other current liabilities
|
|
|
|
|
268,572
|
|
|
293,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
29,237,829
|
|
|
16,750,994
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion
|
|
5
|
|
|
2,539,242
|
|
|
1,873,812
|
|
Capital lease, less current portion
|
|
6
|
|
|
49,971
|
|
|
27,185
|
|
Deferred tax liabilities
|
|
|
|
|
15,471
|
|
|
8,813
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
|
|
2,604,684
|
|
|
1,909,810
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
31,842,513
|
|
|
18,660,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2007
and 2006 respectively
|
|
|
|
|
28,330
|
|
|
28,330
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
3,593,027
|
|
|
3,593,027
|
|
|
|
|
|
|
|
|
|
|
|
Amount due to stockholder/director
|
|
|
|
|
|
|
|
913,463
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated losses
|
|
|
|
|
(1,795,426
|
)
|
|
(2,074,269
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
|
|
1,825,931
|
|
|
2,460,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,668,444
|
|
$
|
21,121,355
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated
financial statements
F-5
ACL SEMICONDUCTORS INC. AND SUBSDIARIES
C
ONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMEBR 31, 2007 AND 2006
(Stated in US Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Restated)
|
|
(Restated)
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
$
|
166,771,606
|
|
$
|
105,642,123
|
|
Cost of sales
|
|
|
|
|
(162,933,656
|
)
|
|
(101,544,098
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
3,837,950
|
|
|
4,098,025
|
|
|
|
|
|
|
|
|
|
|
|
Selling and distribution costs
|
|
|
|
|
(73,508
|
)
|
|
(791,367
|
)
|
General and administrative expenses
|
|
|
|
|
(3,066,995
|
)
|
|
(2,272,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
|
697,447
|
|
|
1,034,601
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
|
|
|
37,179
|
|
|
|
|
Interest expense
|
|
|
|
|
(1,009,010
|
)
|
|
(688,693
|
)
|
Provision for taxation written back
|
|
|
|
|
|
|
|
150,000
|
|
Unrealized gain on marketable securities
|
|
|
|
|
404,780
|
|
|
|
|
Management and service income
|
|
|
|
|
33,333
|
|
|
35,256
|
|
Net income on cash flow hedge
|
|
|
|
|
64,590
|
|
|
|
|
Interest income
|
|
|
|
|
169,055
|
|
|
79,838
|
|
Director life insurance policy refund
|
|
|
|
|
29,617
|
|
|
|
|
Exchange differences
|
|
|
|
|
34,672
|
|
|
2,114
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous:
|
|
|
|
|
5,013
|
|
|
703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes provision
|
|
|
|
|
466,676
|
|
|
613,819
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes (provision) reversal
|
|
8
|
|
|
(187,833
|
)
|
|
(163,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
278,843
|
|
$
|
450,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic and diluted
|
|
|
|
$
|
0.01
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares - basic
and diluted
|
|
9
|
|
|
28,329,936
|
|
|
28,151,004
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements
F-6
ACL SEMICONDUCTORS INC. AND SUBSDIARIES
C
ONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY AND
ACCUMULATED OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(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, 2006
|
|
|
27,829,936
|
|
|
27,830
|
|
|
3,360,405
|
|
|
(102,936
|
)
|
|
(2,524,673
|
)
|
|
760,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
common stock issued to consultant
|
|
|
500,000
|
|
|
500
|
|
|
104,500
|
|
|
|
|
|
|
|
|
105,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
common stock for option issued to employees
|
|
|
|
|
|
|
|
|
128,122
|
|
|
|
|
|
|
|
|
128,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
in due (from)/to stockholder/director
|
|
|
|
|
|
|
|
|
|
|
|
1,016,399
|
|
|
|
|
|
1,016,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,404
|
|
|
450,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated
Balance at December 31, 2006
|
|
|
28,329,936
|
|
|
28,330
|
|
|
3,593,027
|
|
|
913,463
|
|
|
(2,074,269
|
)
|
|
2,460,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated
Balance at December 31, 2007
|
|
|
28,329,936
|
|
$
|
28,330
|
|
$
|
3,593,027
|
|
$
|
|
|
$
|
(1,795,426
|
)
|
$
|
1,825,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated
financial statements
F-7
ACL SEMICONDUCTORS INC. AND SUBSDIARIES
C
ONSOLIDATED
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
(Restated)
|
|
(Restated)
|
|
Cash flows provided by (used for) operating activities:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
278,843
|
|
$
|
450,404
|
|
Depreciation and amortization
|
|
|
230,614
|
|
|
78,074
|
|
Change in inventory reserve
|
|
|
323,077
|
|
|
100,000
|
|
Gain on disposal of equipment
|
|
|
(218
|
)
|
|
|
|
Gain on disposal of marketable securities
|
|
|
(404,780
|
)
|
|
|
|
Fair value of options issued to employees
|
|
|
|
|
|
128,122
|
|
Issuance of common stocks to consultant as
professional fee under share option scheme
|
|
|
|
|
|
105,000
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net
cash used in operating activities:
|
|
|
|
|
|
|
|
Accounts receivable other
|
|
|
(5,618,543
|
)
|
|
(1,492,917
|
)
|
Accounts receivable related parties
|
|
|
5,654,608
|
|
|
(5,196,730
|
)
|
Inventories
|
|
|
(837,977
|
)
|
|
(2,265,503
|
)
|
Refundable deposits
|
|
|
(6,207
|
)
|
|
1,000,000
|
|
Other current assets
|
|
|
(48,246
|
)
|
|
222,363
|
|
Other assets
|
|
|
|
|
|
6
|
|
Accounts payable
|
|
|
7,860,477
|
|
|
513,904
|
|
Accrued expenses
|
|
|
(118,268
|
)
|
|
41,442
|
|
Payable related to debt settlement
|
|
|
|
|
|
(76,088
|
)
|
Income tax payable
|
|
|
(124,214
|
)
|
|
(142,614
|
)
|
Other current liabilities
|
|
|
(33,858
|
)
|
|
238,598
|
|
Deferred tax
|
|
|
15,471
|
|
|
8,813
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
6,891,936
|
|
|
(6,737,530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating
activities
|
|
|
7,170,779
|
|
|
(6,287,126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used for investing activities:
|
|
|
|
|
|
|
|
Advanced (to) from Aristo / Mr. Yang
|
|
|
(6,970,951
|
)
|
|
1,016,399
|
|
Increase in restricted cash
|
|
|
(1,494,480
|
)
|
|
(1,939,346
|
)
|
Increase in restricted marketable
securities
|
|
|
(769,231
|
)
|
|
|
|
Cash Proceeds from sales of equipment
|
|
|
385
|
|
|
|
|
Purchases of property, equipment and
improvements
|
|
|
(3,159,760
|
)
|
|
(3,833,649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for investing activities
|
|
|
(12,394,037
|
)
|
|
(4,756,596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by financing
activities:
|
|
|
|
|
|
|
|
Net borrowings on lines of credit and notes
payable
|
|
|
4,772,021
|
|
|
7,996,182
|
|
Borrowing under long-term debt
|
|
|
801,723
|
|
|
2,000,000
|
|
Principal payments under long-term debt
|
|
|
(91,625
|
)
|
|
(35,619
|
)
|
Principal payments under capital lease
obligation
|
|
|
(45,291
|
)
|
|
(7,154
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
5,436,828
|
|
|
9,953,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash and cash equivalents sourced
(used)
|
|
|
213,570
|
|
|
(1,090,313
|
)
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of
year
|
|
|
1,447,486
|
|
|
2,537,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
1,661,056
|
|
$
|
1,447,486
|
|
|
|
|
|
|
|
|
|
F-8
ACL SEMICONDUCTORS INC. AND SUBSDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
(Restated)
|
|
(Restated)
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
1,009,010
|
|
$
|
688,693
|
|
|
|
|
|
|
|
|
|
Income tax paid
|
|
$
|
305,389
|
|
$
|
147,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplement schedule of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
Capital lease obligations incurred when
capital leases were entered for new automobiles
|
|
$
|
95,898
|
|
$
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated
financial statements
F-9
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
N
OTES TO
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(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-10
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(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, 2007. 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. Based on a review of the equity investment at risk, the
Company concluded that Aristo Technologies Limited (Aristo) is a variable
interest entity and is therefore subject to consolidation with the Company
under the guidance applicable to variable interest entities.
|
|
|
|
Aristo Technologies Limited
|
|
|
|
Aristo is
engaged in the marketing, selling and servicing of computer products and
accessories including semiconductors, LCD products, mass storage devices,
consumer electronics, computer peripherals and electronic components for
various brands such as Samsung, Hynix, Micro, Elpida, Qimonda, Lexar,
Dane-Elec, Elixir, SanDisk and Winbond.
|
|
|
|
The Company
sells to Aristo in order to fulfill Aristos periodic need for
Samsung memory products based on prevailing market prices, which products
Aristo, in turn, sells to its customers. 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.
|
F-11
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
|
Note 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
|
|
|
(c)
|
Use of estimates
|
|
|
|
|
|
The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting
periods. Management makes these estimates using the best information
available at the time the estimates are made; however actual results could
differ materially from those estimates.
|
|
|
|
|
(d)
|
Economic and political risks
|
|
|
|
|
|
The
Companys operation is conducted in Hong Kong. Accordingly, the Companys
business, financial condition and results of operations may be influenced by
the political, economic and legal environment in Hong Kong, and by the
general state of Hong Kong economy.
|
|
|
|
|
|
The
Companys operations in Hong Kong are subject to special considerations and
significant risks not typically associated with companies in North America
and Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. The
Companys results may be adversely affected by changes in the political and
social conditions in Hong Kong, and by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency
conversion, remittances abroad, and rates and methods of taxation, among
other things.
|
|
|
|
|
(e)
|
Property, plant and equipment
|
|
|
|
|
|
Plant and
equipment are carried at cost less accumulated depreciation. Depreciation is
provided over their estimated useful lives, using the straight-line method.
Estimated useful lives of the plant and equipment are as follows:
|
|
|
Automobiles
|
3 1/3 years
|
Computers
|
5 years
|
Leasehold
improvement
|
5 years
|
Land and
buildings
|
By estimated useful life
|
Office
equipment
|
5 years
|
|
|
|
|
|
The cost and
related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the
statement of income.
|
|
|
|
|
(f)
|
Account receivable
|
|
|
|
|
|
Accounts
receivable is carried at the net invoiced value charged to customer. The
Company records an allowance for doubtful accounts to cover estimated credit
losses. Management reviews and adjusts this allowance periodically based on
historical experience and its evaluation of the collectability of outstanding
accounts receivable. The Company evaluates the credit risk of its customers
utilizing historical data and estimates of future performance.
|
|
|
|
|
(g)
|
Accounting for 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.
|
F-12
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
|
Note 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
|
|
|
(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 $323,077 for
2007 and increased by $100,000 for 2006. Inventory obsolescence reserves
totaled $564,103 and $241,025 as of December 31, 2007 and 2006, 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.
|
|
|
|
|
(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 $7,937 and $7,617 for the years
ended December 31, 2007 and 2006, respectively.
|
F-13
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
|
Note 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
|
|
|
(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.
|
|
|
|
|
(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.
|
F-14
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
|
Note 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
|
|
|
(t)
|
Recently implemented standards
|
|
|
|
|
|
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.
|
|
|
|
|
|
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.
|
F-15
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
|
Note 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
|
|
(t)
|
Recently implemented standards
|
|
|
|
|
|
ASC 810,
Consolidation (ASC 810) includes new guidance issued by the FASB in
December 2007 governing the accounting for and reporting of non-controlling
interests (previously referred to as minority interests). This guidance
established reporting requirements which include, among other things, that
non-controlling interests be reflected as a separate component of equity, not
as a liability. It also requires that the interests of the parent and the
non-controlling interest be clearly identifiable. Additionally, increases and
decreases in a parents ownership interest that leave control intact shall be
reflected as equity transactions, rather than step acquisitions or dilution
gains or losses. This guidance also requires changes to the presentation of
information in the financial statements and provides for additional
disclosure requirements. ASC 810 was effective for fiscal years beginning on
or after December 15, 2008. The Company implemented this guidance as of
January 1, 2009. The Company is in the process of evaluating ASC 810 and will
make necessary changes accordingly.
|
|
|
|
|
|
ASC 825,
Financial Instruments (ASC 825) includes guidance which was issued in
February 2007 by the FASB and was previously included under Statement of
Financial Accounting Standards No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities Including an amendment of FASB Statement No.
115. The related sections within ASC 825 permit a company to choose, at
specified election dates, to measure at fair value certain eligible financial
assets and liabilities that are not currently required to be measured at fair
value. The specified election dates include, but are not limited to, the date
when an entity first recognizes the item, when an entity enters into a firm
commitment or when changes in the financial instrument causes it to no longer
qualify for fair value accounting under a different accounting standard. An
entity may elect the fair value option for eligible items that exist at the
effective date. At that date, the difference between the carrying amounts and
the fair values of eligible items for which the fair value option is elected
should be recognized as a cumulative effect adjustment to the opening balance
of retained earnings. The fair value option may be elected for each entire
financial instrument, but need not be applied to all similar instruments.
Once the fair value option has been elected, it is irrevocable. Unrealized
gains and losses on items for which the fair value option has been elected
will be reported in earnings. This guidance was effective as of the beginning
of fiscal years that began after November 15, 2007. The Company does not have
eligible financial assets and liabilities, and, accordingly, the
implementation of ASC 825 did not have an effect on the Companys results of
operations or financial position.
|
|
|
|
|
|
ASC 820,
Fair Value Measurements and Disclosures (ASC 820) (formerly included under
Statement of Financial Accounting Standards No. 157, Fair Value Measurements)
includes guidance that was issued by the FASB in September 2006 that created
a common definition of fair value to be used throughout generally accepted
accounting principles. ASC 820 applies whenever other standards require or
permit assets or liabilities to be measured at fair value, with certain
exceptions. This guidance established a hierarchy for determining fair value
which emphasizes the use of observable market data whenever available. It
also required expanded disclosures which include the extent to which assets
and liabilities are measured at fair value, the methods and assumptions used
to measure fair value and the effect of fair value measures on earnings. ASC
820 also provides additional guidance for estimating fair value when the
volume and level of activity for the asset or liability have significantly
decreased. The emphasis of ASC 820 is that fair value is the price that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between willing market participants, under current market
conditions. ASC 820 also further clarifies the guidance to be considered when
determining whether or not a transaction is orderly and clarifies the
valuation of securities in markets that are not active. This guidance
includes information related to a companys use of judgment, in addition to
market information, in certain circumstances to value assets which have
inactive markets.
|
|
|
|
|
|
Fair value
guidance in ASC 820 was initially effective for fiscal years beginning after
November 15, 2007 and for interim periods within those fiscal years for
financial assets and liabilities. The effective date of ASC 820 for all
non-recurring fair value measurements of nonfinancial assets and nonfinancial
liabilities was fiscal years beginning after November 15, 2008. Guidance
related to fair value measurements in an inactive market was effective in
October 2008 and guidance related to orderly transactions under current
market conditions was effective for interim and annual reporting periods
ending after June 15, 2009.
|
F-16
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND
2006
(Stated in US Dollars)
|
|
|
Note 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
|
|
(t)
|
Recently implemented standards
|
|
|
|
|
|
The Company
applied the provisions of ASC 820 to its financial assets and liabilities
upon adoption at January 1, 2008 and adopted the remaining provisions
relating to certain nonfinancial assets and liabilities on January 1, 2009.
The difference between the carrying amounts and fair values of those
financial instruments held upon initial adoption, on January 1, 2008, was
recognized as a cumulative effect adjustment to the opening balance of
retained earnings and was not material to the Companys financial position or
results of operations. The Company implemented the guidance related to
orderly transactions under current market conditions as of April 1, 2009,
which also was not material to the Companys financial position or results of
operations.
|
|
|
|
|
|
In August
2009, the FASB issued ASC Update No. 2009-05, Fair Value Measurements and
Disclosures (Topic 820): Measuring Liabilities at Fair Value (ASC Update No.
2009-05). This update amends ASC 820, Fair Value Measurements and
Disclosures and provides further guidance on measuring the fair value of a
liability. The guidance establishes the types of valuation techniques to be
used to value a liability when a quoted market price in an active market for
the identical liability is not available, such as the use of an identical or
similar liability when traded as an asset. The guidance also further
clarifies that a quoted price in an active market for the identical liability
at the measurement date and the quoted price for the identical liability when
traded as an asset in an active market when no adjustments to the quoted price
of the asset are required are both Level 1 fair value measurements. If
adjustments are required to be applied to the quoted price, it results in a
level 2 or 3 fair value measurement. The guidance provided in the update is
effective for the first reporting period (including interim periods)
beginning after issuance. The Company does not expect that the implementation
of ASC Update No. 2009-05 will have a material effect on its financial
position or results of operations.
|
|
|
|
|
|
In September
2009, the FASB issued ASC Update No. 2009-12, Fair Value Measurements and
Disclosures (Topic 820): Investments in Certain Entities that Calculate Net
Asset Value per Share (or Its Equivalent) (ASC Update No. 2009-12). This
update sets forth guidance on using the net asset value per share provided by
an investee to estimate the fair value of an alternative investment.
Specifically, the update permits a reporting entity to measure the fair value
of this type of investment on the basis of the net asset value per share of the
investment (or its equivalent) if all or substantially all of the underlying
investments used in the calculation of the net asset value is consistent with
ASC 820. The update also requires additional disclosures by each major
category of investment, including, but not limited to, fair value of
underlying investments in the major category, significant investment
strategies, redemption restrictions, and unfunded commitments related to
investments in the major category. The amendments in this update are effective
for interim and annual periods ending after December 15, 2009 with early
application permitted. The Company does not expect that the implementation of
ASC Update No. 2009-12 will have a material effect on its financial position
or results of operations.
|
|
|
|
|
|
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.
|
F-17
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
|
|
|
(t)
|
Recently implemented standards
|
|
|
|
|
|
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.
|
|
|
|
Note 3.
|
PROPERTY, PLANT AND EQUIPMENT, NET
|
|
|
|
|
Property,
plant and equipment, net comprise the followings:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
At cost
|
|
|
|
|
|
|
|
Land and buildings
|
|
$
|
6,794,629
|
|
$
|
3,797,760
|
|
Automobiles
|
|
|
226,056
|
|
|
83,325
|
|
Office equipment
|
|
|
148,568
|
|
|
132,722
|
|
Leasehold improvements
|
|
|
150,822
|
|
|
46,015
|
|
Furniture and fixtures
|
|
|
13,273
|
|
|
10,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,333,348
|
|
|
4,070,512
|
|
Less:
accumulated depreciation and amortization
|
|
|
(399,350
|
)
|
|
(161,391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,933,998
|
|
$
|
3,909,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expenses included in the general and administrative expenses for the years
ended December 31, 2007 and 2006 were $230,614 and $78,074 respectively.
|
|
|
Note 4.
|
REVOLVING LINES OF CREDIT AND LOAN FACILITIES
|
|
|
|
The line of
credit granted by Dah Sing Bank, Limited to the Company matured on September
30, 2007. The outstanding balances with Dah Sing Bank, Limited were $0 at
December 31, 2007and $1,641,000 at December 31, 2006. For borrowings in Hong
Kong dollars (HKD), the line of credit bore interest at the greater of (1)
Hong Kong prime rate or (2) 1% over the Hong Kong Inter-bank Offer Rate
(HIBOR) as of December 31, 2006. Weighted average interest rate
approximated 7.9% for 2007 and 8.1% for 2006. For borrowings in foreign
currency, the line of credit carries interest at the Base Rate.
|
|
|
|
The Company
has available to it a $5,128,205 revolving line of credit with DBS Bank with
an outstanding balance of $5,635,176 at December 31, 2007 and $4,228,396 at
December 31, 2006. 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, 2007.
Weighted average interest rate approximated 6.7% for 2007 and 6.9% for 2006.
|
|
|
|
The Company
has available to it a $5,769,231 factoring facility with recourse/without
recourse with DBS Bank without any outstanding balance at December 31, 2007.
The factoring facility bears 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, 2007. Weighted average
interest rate approximated 6.7% for 2007 and 6.9% for 2006.
|
F-18
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
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, 2006 and the letter of
guarantee expired on December 17, 2007. The line of credit bears commission
1.5% per annum which will be refunded on pro-rata basis upon return and
cancellation of the letter of guarantee.
The Company
has available to it a $3,076,923 revolving line of credit with SCB with an
outstanding balance of $3,709,379 at December 31, 2007 and $1,015,825 at
December 31, 2006. 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 foreign currency facilities as of December 31,
2007. Weighted average interest rate approximated 7.4% for 2007 and 7.6% for
2006.
The Company
has available to it $1,025,641 factory facilities with SCB without any
outstanding balance at December 31, 2007. 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 advance in
other currency as of December 31, 2007. Weighted average interest rate
approximated 7.2% for 2007.
The Company
has available to it a $2,307,692 revolving line of credit with BEA with an
outstanding balance of $2,303,868 at December 31, 2007 and $2,307,150 at
December 31, 2006. The line of credit bears interest at the higher of Hong Kong
prime rate or HIBOR for HKD facilities and at other currencies LIBOR plus
1.75% for other currencies facilities as of December 31, 2007. Weighted average
interest rate approximated 7.9% for 2007 and 8.1% for 2006.
The Company
has available to it a $275,749 tax loan with BEA with an outstanding balance of
$252,770 at December 31, 2007. The line of credit bears interest at the higher
of Hong Kong prime rate less 2% or HIBOR and will be repayable by 11 monthly
installments as of December 31, 2007. Weighted average interest rate
approximated 7.9% for 2007.
The Company
has available to it a $2,307,692 revolving line of credit with Citic with an
outstanding balance of $2,297,061 at December 31, 2007 and $1,646,096 at
December 31, 2006. The line of credit bears interest at the higher of Hong Kong
prime rate less 0.5% or 1 month HIBOR plus 3% as of December 31, 2007. Weighted
average interest rate approximated 7.4% for 2007 and 8.1% for 2006.
The Company
has available to it a $1,923,077 revolving line of credit and factoring
facilities with Hang Seng with an outstanding balance of $1,665,003 at December
31, 2007. The line of credit bears interest at a rate of Hong Kong prime rate
less 0.5% for HKD facilities and at a rate of the banks board rate less 0.25%
for United States Dollar facilities as of December 31, 2007. Weighted average
interest rate approximated 7.4% for 2007 and 8.1% for 2006.
The summary of
banking facilities at December 31, 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted Facilities
|
|
Utilized Facilities
|
|
Not Utilized Facilities
|
|
|
|
|
|
|
|
|
|
Overdraft
|
|
$
|
282,051
|
|
$
|
|
|
$
|
282,051
|
|
Installment
Loan
|
|
|
2,817,949
|
|
|
2,674,479
|
|
|
143,470
|
|
Factoring
Loan
|
|
|
6,794,872
|
|
|
|
|
|
6,794,872
|
|
Import/Export
Loan
|
|
|
14,743,589
|
|
|
15,610,487
|
|
|
(866,898
|
)
|
Letter of
Guarantee
|
|
|
384,615
|
|
|
384,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,023,076
|
|
$
|
18,669,581
|
|
$
|
6,353,495
|
|
|
|
|
|
|
|
|
|
|
|
|
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
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 5.
|
LONG-TERM DEBTS
|
|
|
|
Long-term
debts were comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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% at December 31, 2007 and
2006) from DBS Bank. The monthly installments are approximately $11,397
including interest through December 2007 without any balloon payment requirements
|
|
$
|
1,719,704
|
|
$
|
1,774,020
|
|
|
|
|
|
|
|
|
|
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% at December 31, 2006 and 2007)
from DBS Bank. The monthly installments are approximately $3,193 including
interest through December 2007 without any balloon payment requirements
|
|
|
153,052
|
|
|
190,361
|
|
|
|
|
|
|
|
|
|
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% at December 31, 2006 and
2007) from DBS Bank. The monthly installments are approximately $6,034 including
interest through December 2007 without any balloon payment requirements
|
|
|
801,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,674,479
|
|
|
1,964,381
|
|
|
|
|
|
|
|
|
|
Less:
current maturities
|
|
|
(135,237
|
)
|
|
(90,569
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,539,242
|
|
$
|
1,873,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
An analysis
of long-term debt as of December 31 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
portion
|
|
$
|
135,237
|
|
$
|
90,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After 1
year, but within 2 years
|
|
|
290,618
|
|
|
196,797
|
|
After 2
years, but within 5 years
|
|
|
247,571
|
|
|
199,153
|
|
After 5
years
|
|
|
2,001,053
|
|
|
1,477,862
|
|
|
|
|
|
|
|
|
|
|
|
|
2,539,242
|
|
|
1,873,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,674,479
|
|
$
|
1,964,381
|
|
|
|
|
|
|
|
|
|
F-20
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(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, a wholly
owned subsidiary of ACL plus personal guarantee by Mr. Yang as collateral for
loans from DBS Bank;
|
|
|
|
|
|
|
2.
|
a fixed cash
deposit of $1,323,569 (HK$10,323,842) plus unlimited personal guarantee by
Mr. Yang, as collateral for loans from BEA;
|
|
|
|
|
|
|
3.
|
a cash
deposit/securities not less than $1,282,051 (HK$10,000,000), 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 $700,000, a security interest on 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.
|
marketable
securities of $769,231 (HK$6,000,000) plus an unlimited personal guarantee by
Mr. Yang as collateral for loans from Hang Seng.
|
|
|
|
|
Note 6.
|
CAPITAL LEASE OBLIGATIONS
|
|
|
|
|
The Company
has several non-cancelable capital leases relating to automobiles:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Current
portion
|
|
$
|
44,991
|
|
$
|
17,170
|
|
Non-current
portion
|
|
|
49,971
|
|
|
27,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,962
|
|
|
44,355
|
|
|
|
|
|
|
|
|
|
At December
31, the value of automobiles under capital leases as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Cost
|
|
$
|
145,890
|
|
$
|
49,992
|
|
Less: depreciation
|
|
|
(39,344
|
)
|
|
(2,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,545
|
|
|
47,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, the company had obligations
under capital leases repayable as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
|
|
|
|
|
-Within one year
|
|
$
|
50,381
|
|
$
|
19,205
|
|
- After one year but within 5 years
|
|
|
56,081
|
|
|
30,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,462
|
|
|
49,612
|
|
|
|
|
|
|
|
|
|
Interest expenses relating to future
periods
|
|
|
(11,500
|
)
|
|
(5,257
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of the minimum lease payments
|
|
$
|
94,962
|
|
$
|
44,355
|
|
|
|
|
|
|
|
|
|
F-21
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 7.
|
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 66% and 69% of materials from Samsung
for the years ended December 31, 2007 and 2006, 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, 2007 and 2006, 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, 2007 and 2006, Samsung has withheld a total of $350,000 of rebate due to
the Company as deposits. As agreed with Samsung, the deposits were fully
refunded to the Company on January 22, 2009.
|
|
|
Note 8.
|
INCOME TAXES
|
|
|
|
Income tax
expense amounted to $187,833 for 2007 and $163,415 for 2006 (an effective
rate of 40% for 2007 and 23% for 2006). 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:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Computed tax at federal statutory rate
|
|
$
|
158,670
|
|
$
|
208,698
|
|
|
|
|
|
|
|
|
|
Tax rate differential on foreign earnings
of Atlantic and Aristo, Hong Kong based
|
|
|
|
|
|
|
|
companies
|
|
|
(65,717
|
)
|
|
(154,077
|
)
|
|
|
|
|
|
|
|
|
Tax under/(over) provision for Atlantic
|
|
|
61,428
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carry forward
|
|
|
33,452
|
|
|
108,794
|
|
|
|
|
|
|
|
|
|
|
|
$
|
187,833
|
|
$
|
163,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The income tax provision consists of the
following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
$
|
|
|
Foreign
|
|
|
187,833
|
|
|
163,415
|
|
|
|
|
|
|
|
|
|
|
|
$
|
187,833
|
|
$
|
163,415
|
|
|
|
|
|
|
|
|
|
F-22
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 8.
|
INCOME TAXES (Continued)
|
|
|
|
The
Components of the deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
operating losses
|
|
$
|
1,056,992
|
|
$
|
1,023,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
deferred tax assets
|
|
$
|
1,056,992
|
|
$
|
1,023,540
|
|
Less:
valuation allowance
|
|
|
(1,056,992
|
)
|
|
(1,023,540
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 9.
|
WEIGHTED AVERAGE NUMBER OF SHARES
|
|
|
|
The Company
has a 2006 Inventive Equity Stock Plan, under which the Company may grant
options to its employees for up to 5 million shares of common stock. In May
2006, the Company granted options to a consultant to acquire 500,000 shares
of common stock of the Company as the consulting and advisory service fee and
the consultant exercised all of the options during the year ended December
31, 2006. In May 2006, the Company granted options to purchase an aggregate
2,000,000 shares of common stock of the Company to three employees. These
options were fully vested upon grant, had an exercise price of $0.22 per
share and expired in December 2006. There was no dilutive effect to the
weighted average number of shares for the years ended December 31, 2007 and
2006 since there were no outstanding options at December 31, 2007 and 2006.
|
|
|
Note 10.
|
RELATED PARTY TRANSACTIONS
|
|
|
|
Transactions with Aristo Technologies Limited / Mr. Yang
|
|
|
|
As of
December 31, 2007 and 2006, we had an outstanding receivable from Mr. Yang,
the President and Chairman of our Board of Directors, totaling $6,057,488 and
$0, respectively. These advances bear no interest and are payable on demand.
The receivable due from Mr. Yang to the Company is derived from the consolidation
of the financial statements of Aristo, a variable interest entity, with
the Company. A repayment plan has been entered into (see Note 14 to consolidated
financial statements).
|
|
|
|
As of
December 31, 2007 and 2006, we had an outstanding receivable from Mr. Yang,
the President and Chairman of our Board of Directors, totaling $6,057,488 and
$0. These advances bear no interest and are payable on demand.
|
|
|
|
For the
years ended December 31, 2007 and 2006, we recorded compensation to Mr. Yang
of $812,821and $200,000 respectively, and paid $812,821 and $200,000
respectively to Mr. Yang as compensation to him.
|
|
|
|
During each
of the years ended December 31, 2007 and 2006, we paid rent of $17,521 and
$68,280 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.
|
F-23
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 10.
|
RELATED PARTY TRANSACTIONS (Continued)
|
|
|
|
Transactions with Classic Electronic Limited
|
|
|
|
Mr. Ben Wong,
one of our directors, is a 99.9% shareholder of Classic Electronic Ltd.
(Classic). The remaining 0.1% of Classic is owned by a non-related party.
As of December 31, 2007 and 2006, we had net outstanding accounts receivable
from Classic totaling $1,717,859 and $6,709,495, respectively. This account
receivable has been outstanding for more than 12 months.
|
|
|
|
During the
years ended December 31, 2007 and 2006, we purchased inventories of $400,164
and $0 respectively from Classic. As of December 31, 2007 and 2006, there
were no outstanding accounts payable to Classic.
|
|
|
|
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 to Consolidated Financial Statements,
the Company has entered into a payment plan with Classic, and the amount due
to Classic has been settled.
|
|
|
|
We leased
one of our facilities and Mr. Yangs personal residence from Classic. Lease
agreements for those two properties expired and were acquired by Atlantic on
July 21, 2006. Monthly lease payments for these 2 leases totaled $6,684. We
incurred and paid rent expense of $0 and $44,418 to Classic for the years
ended December 31, 2007 and 2006 respectively.
|
|
|
|
On February
21, 2006, a cross corporate guarantee was executed between Classic and
Atlantic for banking facilities to be co-utilized with Standard Chartered
Bank (Hong Kong) Limited (SCB). The maximum amount of facilities that could
be utilized by Atlantic was $1.154 million (HKD9 millions) and the facility
lines was fully covered by collaterals provided by Classic and companies
other than Atlantic Subsequently, the cross guarantees were released on
December 7, 2006.
|
|
|
|
On July 6,
2006, a cross corporate guarantee was executed between Classic and Atlantic
for banking facilities to be co-utilized with The Bank of East Asia Limited
(BEA). The cross guarantee was temporarily created due to selling of
properties by Classic to Atlantic. During the period of execution of the
assignment of legal title, BEA requested a cross guarantee for both
companies. All facilities and outstanding loan balances were booked under and
utilized by Atlantic which will not absorb any losses from Classic.
Subsequently, the cross guarantees were released on December 8, 2006.
|
|
|
|
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 01, 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. Monthly lease payment for this lease
is $1,090. We incurred and paid an aggregate rent expense of $12,385 and
$3,436 to Solution during the year ended December 31, 2007 and 2006.
|
|
|
|
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 SCB
respectively.
|
F-24
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 10.
|
RELATED PARTY TRANSACTIONS (Continued)
|
|
|
|
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 August 31, 2006, 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,
2008. Monthly lease payment for this lease totaled $641. Upon expiration of
the lease on August 31, 2008, ACL acquired this residential property from
Systematic Information. We incurred and paid an aggregate rent expense of
$7,692 and $2,564 to Systematic Information during the year ended December
31, 2007 and 2006.
|
|
|
|
During the
years ended December 31, 2007 and 2006, we received service charges $11,538
and $6,410 respectively, from Systematic Information. As of December 31, 2007
and 2006, there was no outstanding accounts receivable from Systematic
Information.
|
|
|
|
During the
years ended December 31, 2007 and 2006, we sold products for $666,742 and $0
respectively, to Systematic Information. As of December 31, 2007 and 2006,
there were no outstanding accounts receivables from Systematic Information.
|
|
|
|
During the
years ended December 31, 2007 and 2006, we purchased inventories of $1,523,238
and $0 respectively from Systematic Information. As of December 31, 2007 and
2006, 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 $17,521 and $38,462 to
Systematic Information during the year ended December 31, 2007 and 2006.
|
|
|
|
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, 2007 and
2006, we received management fee of $5,769 and $7,692 respectively, from
Global. As of December 31, 2007 and 2006, there was no outstanding accounts
receivable from Global. The management fees were charged for back office
support for Global.
|
|
|
|
During the
years ended December 31, 2007 and 2006, we sold products for $25,337 and $0
respectively, to Global. As of December 31, 2007 and 2006, there were no
outstanding accounts receivables from Global.
|
|
|
|
During the
years ended December 31, 2007 and 2006, we purchased inventories of $18,294
and $0 respectively from Global. As of December 31, 2007 and 2006, 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, 2007 and 2006, we received a
management fee of $0 and $7,692 respectively, from Intelligent. As of
December 31, 2007 and 2006, there was no outstanding accounts receivable from
Intelligent. The management fees were charged for back office support for Intelligent.
|
|
|
|
During the
years ended December 31, 2007 and 2006, we purchased inventories of
$1,343,501 and $0 respectively from Intelligent. As of December 31, 2007 and
2006, there were no outstanding accounts payable to Intelligent.
|
F-25
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 10.
|
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, 2007 and 2006, we
received a management fee of $16,026 and $15,384 respectively, from
Systematic. As of December 31, 2007 and 2006, there was no outstanding
accounts receivable from Systematic. The management fees were charged for
back office support for Systematic.
|
|
|
|
During the
years ended December 31, 2007 and 2006, we sold products for $779,879 and $0
respectively, to Systematic. As of December 31, 2007 and 2006, there were no
outstanding accounts receivables from Systematic.
|
|
|
|
During the
years ended December 31, 2007 and 2006, we purchased inventories of
$1,007,352 and $0 respectively from Systematic. As of December 31, 2007 and
2006, 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, 2007 and 2006, we sold products
for $349,327 and $0 respectively, to Aristo Comp. As of December 31, 2007 and
2006, there were no outstanding accounts receivables from Aristo Comp.
|
|
|
|
Transactions with Atlantic Storage Devices Limited
|
|
|
|
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director,
is a 40% shareholder of Atlantic Storage Devices Ltd. (Atlantic Storage).
The remaining 60% of Atlantic Storage is owned by a non-related party. During
the years ended December 31, 2007 and 2006, we sold products for $1,471,471
and $0 respectively, to Atlantic Storage. As of December 31, 2007 and 2006,
there were no outstanding accounts receivables from Atlantic Storage.
|
|
|
|
During the
years ended December 31, 2007 and 2006, we purchased inventories of $581,444
and $0 respectively, from Atlantic Storage. As of December 31, 2007 and 2006,
there were no outstanding accounts payable to Atlantic Storage.
|
|
|
|
Transactions with Rambo Technologies Limited
|
|
|
|
Mr. Ben
Wong, one of our directors, is a 60% shareholder of Rambo Technologies Ltd.
(Rambo). The remaining 40% of Rambo is owned by a non-related party. During
the years ended December 31, 2007 and 2006, we sold products for $2,574,096
and $0 respectively, to Rambo. As of December 31, 2007 and 2006, there were
no outstanding accounts receivables from Rambo.
|
|
|
|
Transactions with Usmart Electronic Products Limited
|
|
|
|
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director,
is the sole beneficial owner of the equity interest of Usmart Electronic
Products Ltd. (Usmart). During the years ended December 31, 2007 and 2006,
we sold products for $703,683 and $0 respectively, to Usmart. As of December
31, 2007 and 2006, there were no outstanding accounts receivables from
Usmart.
|
|
|
|
During the
years ended December 31, 2007 and 2006, we purchased inventories of $736,888
and $0 respectively, from Usmart. As of December 31, 2007 and 2006, there were
no outstanding accounts payable to Usmart.
|
|
|
|
Transactions with Imax Technology Limited
|
|
|
|
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director,
is the sole beneficial owner of the equity interest of Imax Technology Ltd.
(Imax). During the years ended December 31, 2007 and 2006, we sold products
of $51,060 and $0 respectively, to Imax. As of December 31, 2007 and 2006,
there were no outstanding accounts receivables from Imax.
|
F-26
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 10.
|
RELATED PARTY TRANSACTIONS (Continued)
|
|
|
|
Transactions with 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, 2007 and 2006, we sold products for $518,040 and $0 respectively, to
Kadatco. As of December 31, 2007 and 2006, there were no outstanding accounts
receivables from Kadatco.
|
|
|
|
During the
years ended December 31, 2007 and 2006, we purchased inventories of $590,742
and $0 respectively, from Kadatco. As of December 31, 2007 and 2006, there were
no outstanding accounts payable to Kadatco.
|
|
|
|
Transactions with First World Logistics Limited
|
|
|
|
Mr. Yang the
Companys Chief Executive Officer, majority shareholder and a director, is
the sole beneficial owner of the equity interest of First World Logistics
Ltd. (First). During the years ended December 31, 2007 and 2006, we sold $0
and $7,720,975 respectively to First.
|
|
|
|
During the
years ended December 31, 2007 and 2006, we purchased inventories for $0 and
$825,900 respectively from First. As of December 31, 2007 and 2006, there was
no outstanding accounts payable to First.
|
|
|
|
Transactions with City Royal Limited
|
|
|
|
Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director,
is a 50% shareholder of City Royal Limited (City). The remaining 50% of
City is owned by the wife of Mr. Yang. A residential property located in Hong
Kong owned by City was used by the Company as collateral for loans from DBS
Bank (Hong Kong) Limited (DBS Bank).
|
|
|
Note 11.
|
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 $29,062 for 2007 and $21,475 for 2006
|
F-27
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
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, 2007, there is a ratio par forward agreement between the Company
and DBS for the Company to buy USD500,000 from DBS at a contract forward rate
of 7.735 at specified dates up to March 18, 2008. According to the terms of
the agreements, the Company will buy USD in double amount if the spot rate is
less than the contract forward rate. The gain on this forward contract during
the year ended December 31, 2007 was $37,244.
|
|
|
|
As at 31
December 2007, there is a callable ratio par forward agreement between the
Company and DBS for the Company to buy USD500,000 from DBS at a contract
forward rate of 7.74 at specified dates up to March 20, 2009. According to
the terms of the agreements, the Company will buy USD in double amount if the
spot rate is less than the contract forward rate. There is no gain or loss on
this forward contract during the year ended December 31, 2007.
|
|
|
|
As at
December 31, 2007 there is a participating forward currency option agreement
between the Company and SCB for the Company to buy USD200,000 from SCB at a
contract rate of 7.725 at specified dates up to July 03, 2008. According to
the terms of the agreements, the Company will buy USD in double amount 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, 2007 was $20,897.
|
|
|
|
As at
December 31, 2007, there is a participating knock-out forward currency option
agreement between the Company and SCB for the Company to buy USD500,000 from
SCB at a contract rate of 7.739 at specified dates up to April 23, 2009.
According to the terms of the agreements, the Company will buy USD in triple
amount if the spot rate is less than the contract rate at specified dates and
the agreement will be terminated whenever the spot rate is higher than a rate
of 7.809 during the contract period. The gain on this forward contract during
the year ended December 31, 2007 was $6,449. The agreement was terminated in
January 3, 2008.
|
|
|
|
No foreign
currency exchange agreements were matured as of December 31, 2007.
|
F-28
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 12.
|
DERIVATIVE INSTRUMENTS (Continued)
|
|
|
|
The gross
notional and fair values of derivative financial instruments in the
Consolidated Balance Sheet as of December 31, 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
|
|
|
|
|
|
Gross
Notional
(1)
|
|
Other Current
Assets
|
|
Long-term
Financing
Receivables
and Other
Assets
|
|
Other
Accrued
Liabilities
|
|
Other
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as
hedging instruments under ASC 815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
1,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives not
designated as hedging instruments under ASC 815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
$
|
1,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Represents the face amounts of contracts
that were outstanding as of December 31, 2007.
The before-tax
effect of derivative instruments in cash flow and net investment hedging
relationships for the year ended December 31, 2007 and 2006 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain Recognized in
Income on Derivative(1)
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
Location
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
US$200,000 (HKD/USD)
|
|
|
Interest and other, net
|
|
$
|
20,897
|
|
$
|
|
|
Foreign exchange contracts
US$500,000 (HKD/USD)
|
|
|
Interest and other, net
|
|
|
6,449
|
|
|
|
|
Foreign exchange contracts
US$500,000 (HKD/USD)
|
|
|
Interest and other, net
|
|
|
37,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash flow hedges
|
|
|
|
|
$
|
64,590
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
F-29
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 13.
|
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, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related Party
|
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
Year ending December 31,
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
18,205
|
|
$
|
76,495
|
|
$
|
94,700
|
|
2009
|
|
|
3,269
|
|
$
|
48,833
|
|
$
|
52,102
|
|
Thereafter
|
|
|
|
|
$
|
19,972
|
|
$
|
19,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
21,474
|
|
$
|
145,300
|
|
$
|
166,774
|
|
|
|
|
|
|
|
|
|
See Note 10
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 2007. Rent expense for the years ended December 31, 2007 and
2006 totaled $120,942 and $116,321 respectively.
|
|
Note 14.
|
SUBSEQUENT EVENTS
|
In preparing
these financial statements, the Company evaluated the events and transactions
that occurred from January 1, 2010 through May 3, 2010, the date these
financial statements are issued. The Company has made the required additional
disclosures in reporting periods in which subsequent events occur.
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 7 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 2007. 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 supplier would have a material adverse effect on the operations of the
Company.
Aristo agreed
to repay the Company a monthly payment of HK$1,000,000 (approximately $128,205)
over the course of 5 years beginning June 1, 2010. The repayment plan is
subject to review by the Company from time to time.
F-30
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 15.
|
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
The
financial statements for the year ended December 31, 2006 was restated to
reflect the omission of the issuance of 500,000 common shares of the Company
to a consultant as the consulting and advisory service fee in May 16, 2006
under the Companys share option scheme. The following financial statement
line items for the year ended December 31, 2006 were affected by the
omission.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally Reported
|
|
Effect of
Omission
|
|
As
Adjusted
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Operations For
the year ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
$
|
2,167,057
|
|
$
|
105,000
|
|
$
|
2,272,057
|
|
Income from operations
|
|
|
1,139,601
|
|
|
(105,000
|
)
|
|
1,034,601
|
|
Income before income taxes
|
|
|
718,819
|
|
|
(105,000
|
)
|
|
613,819
|
|
Net profit
|
|
|
555,404
|
|
|
(105,000
|
)
|
|
450,404
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic and diluted
|
|
$
|
0.02
|
|
$
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
27,829,936
|
|
|
324,068
|
|
|
28,154,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet as of December
31, 2006
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
27,830
|
|
$
|
500
|
|
$
|
28,330
|
|
Additional paid in capital
|
|
|
3,488,527
|
|
|
104,500
|
|
|
3,593,027
|
|
Accumulated deficit
|
|
|
(1,969,269
|
)
|
|
(105,000
|
)
|
|
(2,074,269
|
)
|
Total stockholders equity
|
|
$
|
2,460,551
|
|
$
|
|
|
$
|
2,460,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Cash Flows For
the year ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by/(used for) operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
555,404
|
|
$
|
(105,000
|
)
|
$
|
450,404
|
|
Adjustments to reconcile net income to net
cash provided by/(used for) operating activities:
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stocks to a consultant
as consulting and advisory service fee under share option scheme
|
|
|
|
|
|
105,000
|
|
|
105,000
|
|
Total Adjustments to reconcile net income
to net cash provided by/(used for) operating activities:
|
|
|
(6,842,530
|
)
|
|
105,000
|
|
|
(6,737,530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by/(used for) operating
activities
|
|
$
|
(6,287,126
|
)
|
$
|
|
|
$
|
(6,287,126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
F-31
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 15.
|
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
Reported
|
|
Effect of
Omission
|
|
As
Adjusted
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Stockholders
Equity for the year ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
Common stock:
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005 (27,829,936
shares)
|
|
$
|
27,830
|
|
$
|
|
|
$
|
27,830
|
|
Issuance of common stock to a consultant as
consulting and servicing fee (500,000 shares)
|
|
|
|
|
|
500
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006 (28,329,936
shares)
|
|
$
|
27,830
|
|
$
|
500
|
|
$
|
28,330
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital:
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
$
|
3,360,405
|
|
$
|
|
|
$
|
3,360,405
|
|
Issuance of common stock to a consultant as
consulting and servicing fee
|
|
|
|
|
|
104,500
|
|
|
104,500
|
|
Issuance of common stock for option issued
to employees
|
|
|
128,122
|
|
|
|
|
|
128,122
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
$
|
3,488,527
|
|
$
|
104,500
|
|
$
|
3,593,027
|
|
|
|
|
|
|
|
|
|
|
|
|
Computed tax at federal statutory rate
|
|
$
|
244,398
|
|
$
|
|
|
$
|
244,398
|
|
Tax rate differential on foreign earnings
of Atlantic Components Ltd., a Hong Kong based company
|
|
|
(154,077
|
)
|
|
(35,700
|
)
|
|
(189,777
|
)
|
Net operating loss carry forward
|
|
|
73,094
|
|
|
35,700
|
|
|
108,794
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
163,415
|
|
$
|
|
|
$
|
163,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Components of the deferred tax assets
and liabilities as at December 31, 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating losses
|
|
$
|
987,840
|
|
$
|
35,700
|
|
$
|
1,023,540
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
987,840
|
)
|
$
|
35,700
|
|
$
|
1,023,540
|
|
Less: valuation allowance
|
|
|
(987,840
|
)
|
|
(35,700
|
)
|
|
(1,023,540
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-32
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 16.
|
RESTATEMENT OF 2007 CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
On January
7, 2010, the Company filed the consolidated balance sheets as of December 31,
2007 and 2006, its consolidated statements of income, stockholders equity
and cash flow for the year ended December 31, 2007, in Form 10K/A (Amendment
No. 2) Part IV Item 15 Page F-1- F-29 with the Securities and Exchange
Commission (SEC). The Company received a comment letter from the Office of
the Chief Accountant of the Division of Corporation Finance of SEC regarding
certain disclosures in the Companys financial statements for the year
ended December 31, 2007. The Company determined to re-do the 2007 audit and
restate the financial statements. The effects of the restatements are shown
in the following tables.
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
Original
|
|
2007
Restated
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,597,674
|
|
$
|
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
|
|
|
7,627,017
|
|
Accounts receivable, related
parties
|
|
|
7,955,764
|
|
|
1,717,859
|
|
Inventories, net
|
|
|
3,483,994
|
|
|
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
|
|
|
89,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
26,141,720
|
|
$
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
33,462,963
|
|
$
|
33,668,444
|
|
|
|
|
|
|
|
|
|
F-33
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 16.
|
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
CONSOLIDATED BALANCE SHEETS (Continued)
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
Original
|
|
2007
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
12,592,685
|
|
|
12,870,200
|
|
Accruals
|
|
|
186,738
|
|
|
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
|
|
|
268,572
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
28,951,097
|
|
$
|
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
|
|
|
31,842,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
$
|
|
|
$
|
|
|
F-34
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 16.
|
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
CONSOLIDATED BALANCE SHEETS (Continued)
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
Original
|
|
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 to stockholder/director
|
|
|
(75,998
|
)
|
|
|
|
Accumulated losses
|
|
|
(1,638,177
|
)
|
|
(1,795,426
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,907,182
|
|
$
|
1,825,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,462,963
|
|
$
|
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 $6,121 in other current assets, and an increase of $6,057,488
in amounts due from stockholder/director.
|
|
|
|
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 decrease of $157,249 in accumulated losses, and a decrease
of $75,998 in amount due (from) to stockholder/director.
|
|
|
|
The total
liabilities and stockholders equity were restated from $33,462,963 as
originally reported, to $33,668,444, an increase of $205,481
|
F-35
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 16.
|
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
Original
|
|
2007
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
160,404,924
|
|
$
|
166,771,606
|
|
Costs of sales
|
|
|
(156,533,635
|
)
|
|
(162,933,656
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
3,871,289
|
|
$
|
3,837,950
|
|
Selling and distribution costs
|
|
|
(69,260
|
)
|
|
(73,508
|
)
|
General and administrative expenses
|
|
|
(2,942,542
|
)
|
|
(3,066,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operation
|
|
$
|
859,487
|
|
$
|
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
|
)
|
|
(1,009,010
|
)
|
Miscellaneous
|
|
|
218
|
|
|
5,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
623,925
|
|
$
|
466,676
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
(187,833
|
)
|
|
(187,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
436,092
|
|
$
|
278,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic and diluted
|
|
$
|
0.02
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares basic and diluted
|
|
$
|
28,329,936
|
|
$
|
28,329,936
|
|
|
|
|
|
|
|
|
|
As a result of
restatement of consolidated income and comprehensive income for the year ended
December 31, 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-36
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 16.
|
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
Original
|
|
2007
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
Net income
|
|
$
|
436,092
|
|
$
|
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
|
)
|
|
(5,618,544
|
)
|
Accounts receivable related parties
|
|
|
(583,297
|
)
|
|
5,654,608
|
|
Inventories
|
|
|
(553,816
|
)
|
|
(837,977
|
)
|
Refundable deposits
|
|
|
|
|
|
(6,207
|
)
|
Income tax refundable
|
|
|
(49,375
|
)
|
|
|
|
Other current assets
|
|
|
(42,124
|
)
|
|
(48,246
|
)
|
Other assets
|
|
|
(6,207
|
)
|
|
|
|
Accounts payable
|
|
|
7,582,962
|
|
|
7,860,477
|
|
Accrued expenses
|
|
|
(127,486
|
)
|
|
(118,268
|
)
|
Income tax payable
|
|
|
(74,839
|
)
|
|
(124,214
|
)
|
Other current liabilities
|
|
|
(25,044
|
)
|
|
(33,858
|
)
|
Deferred tax
|
|
|
6,658
|
|
|
15,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
1,125,907
|
|
$
|
7,170,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
Advance (to) from stockholders
|
|
$
|
(989,461
|
)
|
$
|
(6,970,951
|
)
|
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
|
)
|
$
|
(12,394,037
|
)
|
|
|
|
|
|
|
|
|
F-37
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006 AND
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
|
|
Note 16.
|
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
Original
|
|
2007
Restated
|
|
|
|
|
|
|
|
|
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
|
|
$
|
213,570
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalentsbeginning of year
|
|
|
1,447,486
|
|
|
1,447,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalentsend of year
|
|
$
|
1,597,674
|
|
$
|
1,661,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
1,009,006
|
|
$
|
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
|
|
$
|
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 $1,661,056.
|
F-38
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
S
CHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES
YEARS ENDED DECEMBER 31, 2007 AND 2006
(Stated in US Dollars)
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Balance
at the Beginning
of the Year
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Charged
to Costs
and Expenses
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Deductions
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Balance
At the End
of the Year
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Allowance
for Doubtful Accounts:
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Year ended
December 31, 2006
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$
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$
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$
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$
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Year ended
December 31, 2007
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$
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|
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$
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|
|
$
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$
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Inventory
Obsolescence Reserve:
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Year ended
December 31, 2006
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$
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141,026
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$
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100,000
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$
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|
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$
|
241,026
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Year ended
December 31, 2007
|
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$
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241,026
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$
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323,077
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$
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$
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564,103
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Valuation
Allowance for Deferred Tax Assets:
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Year ended
December 31, 2006
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$
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914,746
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$
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108,794
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$
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$
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1,023,540
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Year ended
December 31, 2007
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$
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1,023,540
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$
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33,452
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$
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$
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1,056,992
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S
CHEDULE III
QUARTERLY INFORMATION (UNAUDITED)
(Stated in US Dollars)
The summarized
quarterly financial data presented below reflects all adjustments, which in the
opinion of management, are of a normal and recurring nature necessary to
present fairly the results of operations for the periods presented.
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(dollars in thousands except per share data)
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Total
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Fourth
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Third
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Second
|
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First
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2007
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Total net
sales
|
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$
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166,772
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$
|
53,601
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$
|
45,655
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$
|
34,102
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$
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33,414
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Gross profit
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|
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3,838
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|
868
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|
|
1,835
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|
|
558
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|
|
577
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Net income
(loss)
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|
|
279
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|
|
16
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|
|
706
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|
(145
|
)
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|
(298
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)
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|
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|
|
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Net income
(loss) per share:
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|
|
|
|
|
|
|
|
|
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|
|
|
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basic and diluted
|
|
$
|
0.01
|
|
$
|
0.00
|
|
$
|
0.03
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|
$
|
(0.01
|
)
|
$
|
0.00
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|
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|
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2006
(1)
|
|
|
|
|
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|
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Total net
sales
|
|
$
|
105,642
|
|
$
|
29,283
|
|
$
|
30,139
|
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$
|
21,044
|
|
$
|
25,176
|
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Gross profit
|
|
|
4,098
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|
|
1,228
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|
|
1,203
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|
|
716
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|
|
951
|
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Net income
(loss)
|
|
|
450
|
|
|
239
|
|
|
176
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|
|
(79
|
)
|
|
114
|
|
Net income
(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic and diluted
|
|
|
0.02
|
|
|
0.01
|
|
|
0.01
|
|
|
(0.00
|
)
|
|
0.00
|
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(1) The unaudited selected
financial data for the quarters ended December 31, 2006, September 30, 2006,
June 30, 2006, and March 31, 2006 has been restated to reflect adjustments
related to stock based compensation.
S-1