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.
31
Transactions Atlantic
Storage Devices Limited
Mr. Yang, the Companys Chief Executive
Officer, majority shareholder and a director, is a 40% shareholder of Atlantic
Storage Devices Ltd. (Atlantic Storage). The remaining 60% of Atlantic
Storage is owned by a non-related party. During the years ended December 31,
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 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 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 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 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 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).
32
|
|
Item 14.
|
Principal Accounting Fees and Services
|
The following table presents fees, including reimbursements for
expenses, for professional audit services rendered by JTC Fair Song CPA Firm
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.
|
33
PART IV
|
|
Item 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.
|
34
|
|
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
|
35
|
|
|
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).
|
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
ACL
SEMICONDUCTORS INC.
|
|
|
|
|
By: /s/
|
Chung-Lun Yang
|
|
|
Chung-Lun Yang
|
|
|
Chief Executive
Officer
|
|
|
|
|
Dated:
September 7, 2010
|
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
|
|
|
|
|
|
|
|
Signature
|
|
|
Title
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/ Chung-Lun Yang
|
|
Chief
Executive
|
|
September 7,
2010
|
|
|
Officer and
Chairman of the
|
|
|
Chung-Lun Yang
|
|
Board of
Directors
|
|
|
|
|
(Principal
Executive
|
|
|
|
|
Officer)
|
|
|
|
|
|
|
|
/s/ Kun Lin
Lee
|
|
Chief
Financial Officer
|
|
September 7,
2010
|
|
|
(Principal
Financial and Accounting
|
|
|
Kun Lin Lee
|
|
Officer) and
Director
|
|
|
|
|
|
|
|
/s/ Kenneth
Lap Yin Chan
|
|
Chief
Operating Officer
|
|
September 7,
2010
|
|
|
and Director
|
|
|
Kenneth Lap
Yin Chan
|
|
|
|
|
|
|
|
|
|
/s/ Ming Yan
Leung
|
|
Chief
Technology Officer
|
|
September 7,
2010
|
|
|
and Director
|
|
|
Ming Yan
Leung
|
|
|
|
|
|
|
|
|
|
/s/ Wun Kin
Fong
|
|
Director
|
|
September 7,
2010
|
|
|
|
|
|
Wun Kin Fong
|
|
|
|
|
37
|
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 consolidated balance sheets of the
Company as of December 31, 2007 and the related consolidated statements of
income and comprehensive income, consolidated statement of stockholders equity
and accumulated other comprehensive income and consolidated 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, 2009. 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.
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 reversal
(provision)
|
|
|
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
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 Aristo / Mr. Yang
|
|
|
(18,124,066
|
)
|
|
|
|
Advanced from Aristo / Mr. Yang
|
|
|
11,153,115
|
)
|
|
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
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.
|
|
|
|
ASC 810-05-08A specifies the two characteristics of a controlling
financial interest in a variable interest entity (
VIE
): (1) the
power to direct the activities of a VIE that most significantly impact the
VIEs economic performance; and (2) the obligation to absorb losses of the
VIE that could potentially be significant to the VIE or the right to receive
benefits from the VIE that could potentially be significant to the VIE. The
Company is the primary beneficiary of Aristo because the Company can direct
the activities of Aristo through the common director and major shareholder,
Also, the Company extended substantial account receivable to Aristo and
created an obligation to absorb losts if Aristo failed. Moreover, ASC
810-25-42 & 43 provides guidance on related parties treatment of VIE and
specifies the relationship of de-facto agent and principal. Those guidance
will help to determine whether the Company will consolidate Aristo.
|
|
|
|
Owing to the extent of outstanding large amounts of accounts
receivable since 2007 together with the nominal amount of paid-up capital
contributed by Mr. Yang when Aristo was formed, it has been determined that
Aristo cannot finance its operations without subordinated financial support
from ACL and accordingly, ACL is considered to be the de facto principal of
Aristo, Aristo is considered to be the de facto subsidiary of the Company and
Mr. Yang is considered to be the related party of both the Company and Aristo.
|
|
|
|
By virtue of
the above analysis, it has been determined that the Company is the primary
beneficiary of Aristo.
|
F-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)
|
|
|
Aristo Technologies Limited
|
|
|
|
The Company sells Samsung memory chips to Aristo and allows long
grace periods for Aristo to repay the open accounts receivable. Being the
biggest creditor, the Company does not require Aristo to pledge assets or
enter into any agreements to bind Aristo to specific repayment terms. The
Company does not provide any bad debt provision or experience derived from
Aristo. Although, the Company is not involved in Aristos daily operation, it
believes that there will not be significant additional risk derived from the
trading relationship and transactions with Aristo.
|
|
|
|
Aristo is engaged in the marketing, selling and servicing of computer
products and accessories including semiconductors, LCD products, mass storage
devices, consumer electronics, computer peripherals and electronic components
for various brands such as Samsung, Hynix, Micron, Elpida, Qimonda, Lexar,
Dane-Elec, Elixir, SanDisk and Winbond. Aristo 2007 sales was around 27
million; it was only a small distributor that accommodated special
requirements for specific customers.
|
|
|
|
The Company sells to Aristo in order to fulfill Aristos periodic
need for Samsung memory products based on prevailing market prices, which
products Aristo, in turn, sells to its customers. For fiscal year 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-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)
|
|
|
|
|
(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-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)
|
|
|
|
|
(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-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)
|
|
|
|
|
(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-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 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-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
|
|
|
|
|
|
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, 2010 and made necessary changes accordingly
including but not limited to filing amendments for the prior periods to
comply with all applicable requirements. ASC 825, Financial Instruments (ASC
825) includes guidance which was issued in February 2007 by the FASB and was
previously included under Statement of Financial Accounting Standards No.
159, The Fair Value Option for Financial Assets and Financial Liabilities
Including an amendment of FASB Statement No. 115. The related sections within
ASC 825 permit a company to choose, at specified election dates, to measure
at fair value certain eligible financial assets and liabilities that are not
currently required to be measured at fair value. The specified election dates
include, but are not limited to, the date when an entity first recognizes the
item, when an entity enters into a firm commitment or when changes in the
financial instrument causes it to no longer qualify for fair value accounting
under a different accounting standard. An entity may elect the fair value option
for eligible items that exist at the effective date. At that date, the
difference between the carrying amounts and the fair values of eligible items
for which the fair value option is elected should be recognized as a
cumulative effect adjustment to the opening balance of retained earnings. The
fair value option may be elected for each entire financial instrument, but
need not be applied to all similar instruments. Once the fair value option
has been elected, it is irrevocable. Unrealized gains and losses on items for
which the fair value option has been elected will be reported in earnings.
This guidance was effective as of the beginning of fiscal years that began
after November 15, 2007. The Company does not have eligible financial assets
and liabilities, and, accordingly, the implementation of ASC 825 did not have
an effect on the Companys results of operations or financial position.
|
|
|
|
|
|
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-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
|
|
|
|
|
|
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-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)
|
|
|
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-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)
|
|
|
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
|
|
|
|
|
|
|
|
|
|
Lines of credit and loan facilities
|
|
|
|
|
|
|
|
|
|
|
Factoring Loan
|
|
$
|
6,794,872
|
|
$
|
0
|
|
$
|
6,794,872
|
|
Import/Export Loan
|
|
|
14,743,589
|
|
|
15,610,487
|
|
|
(866,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,538,461
|
|
$
|
15,610,487
|
|
$
|
5,927,974
|
|
|
|
|
|
|
|
|
|
|
|
|
Instalment/Term Loan
|
|
$
|
2,817,949
|
(a)
|
$
|
2,674,479
|
|
$
|
143,470
|
|
Overdraft
|
|
|
282,051
|
|
|
0
|
|
|
282,051
|
|
Letter of Guarantee
|
|
|
384,615
|
(b)
|
|
384,615
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,023,076
|
|
$
|
18,669,581
|
|
$
|
6,353,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Per
summary of Note (5)
|
|
(b)
Guarantee granted to a supplier
|
|
|
|
With the exception of the $384,615 letter of guarantee issued by DBS
Bank, which will expire on 31 October, 2009, amounts borrowed by the Company
under the revolving lines of credit and loan facilities described above are
repayable within a period of three (3) months of drawdown
|
F-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
|
|
|
|
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-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 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-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 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-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 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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company did not have any interest and penalty recognized in the
income statements for the year ended December 31, 2007and 2006 or balance
sheet as of December 31, 2007 and 2006. The Company did not have uncertainty
tax positions or events leading to uncertainty tax position within the next
12 months. The Companys 2004, 2005 and 2006 U.S. Corporation Income Tax
Return are subject to U.S. Internal Revenue Service examination and the
Companys 2001/2, 2002/3, 2003/4, 2004/5, 2005/6, 2006/7, 2007/8, Hong Kong
Corporations Profits Tax Return are subject to Hong Kong Inland Revenue
Department examination.
|
|
|
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. Because the Companys business is
distributing computer components and is heavily dependant on Samsung,
Mr. Yang took a loan from the Company and used it to
invest in other companies to create new business platforms.
These business platforms include manufacturing, research and
development, which Mr. Yang believes can help improve the Companys business
in the long term. These advances bear no interest and are payable
on demand. The receivable due from Mr. Yang to the Company is derived from
the consolidation of the financial statements of Aristo, a variable interest
entity, with the Company.
|
|
|
|
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-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 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-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 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-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 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 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 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 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 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-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 10.
|
RELATED PARTY TRANSACTIONS (Continued)
|
|
|
|
Transactions Kadatco Co Limited
|
|
|
|
Mr. Yang, the Companys Chief Executive Officer, majority shareholder
and a director, is a 99.99% shareholder of Kadatco Co Ltd. (Kadatco). The
remaining 0.01% of Kadatco is owned by a non-related party. During the years
ended December 31, 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-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
|
|
|
|
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-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 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
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
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.
|
|
|
|
The Company
is seeking to finalize a loan repayment agreement with Mr. Yang whereby Mr.
Yang will repay the outstanding loan at an interest rate of 0.5% and monthly
repayment amounts of $95,706 over a period of ten years.
|
F-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 CONSILIDATED 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-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 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-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 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 determined to re-do the
2007 audit and restate the financial statements in reference to ASC 810-10
Consolidation of Variable Interest and Special-Purpose Entities. 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-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
|
|
|
|
|
|
|
|
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-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 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-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 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-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
|
|
|
|
|
|
|
|
|
|
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 Aristo/Mr. Yang
|
|
$
|
(989,461
|
)
|
$
|
(18,124,066
|
)
|
Advance from Aristo/Mr. Yang
|
|
|
|
|
|
11,153,115
|
|
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-38
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-39
ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
S
CHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES
We are a smaller reporting company as defined by Rule 12b-2 of the
Exchange Act and are not required to provide the information required under
this item.
S
CHEDULE III
QUARTERLY INFORMATION (UNAUDITED)
We are a smaller reporting company as defined by Rule 12b-2 of the
Exchange Act and are not required to provide the information required under
this item.
S-1