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Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
April 26, 2006 (February 14, 2006)
Delaware | 0-28104 | 95-4527222 |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
22619 Pacific Coast Highway, Malibu, California | 90265 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: | (310) 456-7799 |
¨ | Written Communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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This Form 8-K/A is an amendment to the registrant’s current report on Form 8-K filed on February 14, 2006 (relating to the registrant’s asset acquisition of Creative Designs International, Ltd. and Arbor Toys Company Limited (collectively, “CDI”)), to file the financial statements and pro forma financial information omitted from the initial filing of the Current Report, in accordance with Item 9.01.
ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
For a description of the Registrant's asset acquisition of CDI, refer to Item 2.01 of the Registrant's Current Report on Form 8-K, filed on February 14, 2006, which Item 2.01 is incorporated in its entirety herein by reference.
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ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
1. | Creative Designs International, Ltd. audited financial statements as of December 31, 2002, 2003 and 2004 and for the three years in the period ended December 31, 2004. | ||
2. | Arbor Toys Company Limited audited financial statements as of December 31, 2002, 2003 and 2004 and for the three years in the period ended December 31, 2004. | ||
3. | Creative Designs International, Ltd. unaudited financial statements as of September 30, 2004 and September 30, 2005 and for the nine months ended September 30, 2004 and 2005. | ||
4. | Arbor Toys Company Limited unaudited financial statements as of September 30, 2004 and September 30, 2005 and for the nine months ended September 30, 2004 and 2005. |
(b) Pro Forma Financial Information
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DECEMBER 31, 2003
Page | ||||
Independent auditors’ report | 1 | |||
Financial statements: | ||||
Balance sheets | 2 | |||
Statements of income | 3 | |||
Statements of retained earnings | 4 | |||
Statements of cash flows | 5-6 | |||
Notes to financial statements | 7-10 | |||
Supplemental information: | ||||
Independent auditors’ supplemental report | 11 | |||
Statements of operating expenses | 12 |
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Creative Designs International, Ltd.
Feasterville, PA 19053
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2003 | 2002 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 2,171,637 | $ | 4,467,977 | ||||
Accounts receivable — trade | 8,307,539 | 3,206,612 | ||||||
Accounts receivable — affiliate | 12,667,771 | 12,392,780 | ||||||
Miscellaneous receivable | 798,946 | 505,924 | ||||||
Inventory | 1,025,520 | 1,132,240 | ||||||
Prepaid expenses | 97,554 | 90,405 | ||||||
Total current assets | 25,068,967 | 21,795,938 | ||||||
Property and equipment | ||||||||
Fixed assets | 3,001,296 | 3,189,607 | ||||||
Less accumulated depreciation | 1,412,712 | 1,250,104 | ||||||
Net property and equipment | 1,588,584 | 1,939,503 | ||||||
Total assets | $ | 26,657,551 | $ | 23,735,441 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Loan payable — affiliate | $ | 2,000,000 | $ | 3,000,000 | ||||
Accounts payable — trade | 268,022 | 38,988 | ||||||
Accounts payable — affiliate | 220,712 | 4,428,440 | ||||||
Rebates payable | 1,077,379 | 1,343,732 | ||||||
Accrued royalties | 1,373,935 | 826,115 | ||||||
Accrued commissions | 894,136 | 707,477 | ||||||
Accrued state and local taxes | 314,486 | 179,058 | ||||||
Total current liabilities | 6,148,670 | 10,523,810 | ||||||
Stockholders’ equity | ||||||||
Common stock — no par value; 200 shares authorized, issued and outstanding | 2,000 | 2,000 | ||||||
Retained earnings | 20,506,881 | 13,209,631 | ||||||
Total stockholders’ equity | 20,508,881 | 13,211,631 | ||||||
Total liabilities and stockholders’ equity | $ | 26,657,551 | $ | 23,735,441 | ||||
accompanying notes to financial statements.
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2003 | 2002 | |||||||
Revenues | ||||||||
Commission income | $ | 24,689,165 | $ | 21,474,092 | ||||
Sales | 18,496,985 | 10,794,760 | ||||||
Design fee | 158,710 | 158,710 | ||||||
Total revenues | 43,344,860 | 32,427,562 | ||||||
Direct costs | ||||||||
Cost of sales | 13,182,663 | 9,986,791 | ||||||
Direct selling costs | 8,320,915 | 4,942,077 | ||||||
Product development costs | 462,581 | 497,099 | ||||||
21,966,159 | 15,425,967 | |||||||
Gross profit | 21,378,701 | 17,001,595 | ||||||
General and administrative expenses | 2,373,439 | 1,842,325 | ||||||
Income before other income and expenses | 19,005,262 | 15,159,270 | ||||||
Other income and expenses | ||||||||
Interest income | 89,750 | 42,254 | ||||||
Other income | 18,004 | 3,176 | ||||||
Depreciation | (665,767 | ) | (709,038 | ) | ||||
Loss on sale of assets | (6,152 | ) | — | |||||
(564,165 | ) | (663,608 | ) | |||||
Net income before officer’s compensation | 18,441,097 | 14,495,662 | ||||||
Officer’s compensation | 2,143,847 | 5,195,545 | ||||||
Net income | $ | 16,297,250 | $ | 9,300,117 | ||||
accompanying notes to financial statements.
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2003 | 2002 | |||||||
Balance, January 1 | $ | 13,209,631 | $ | 7,909,514 | ||||
Net income | 16,297,250 | 9,300,117 | ||||||
29,506,881 | 17,209,631 | |||||||
Less distributions | 9,000,000 | 4,000,000 | ||||||
Balance, December 31 | $ | 20,506,881 | $ | 13,209,631 | ||||
accompanying notes to financial statements.
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2003 | 2002 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 16,297,250 | $ | 9,300,117 | ||||
Adjustment to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation | 665,767 | 709,038 | ||||||
Loss on sale of property and equipment | 6,152 | — | ||||||
(Increase) decrease in assets | ||||||||
Accounts receivable — trade | (5,100,927 | ) | (841,816 | ) | ||||
Accounts receivable — affiliate | (274,991 | ) | (4,191,043 | ) | ||||
Miscellaneous receivable | (293,022 | ) | (505,924 | ) | ||||
Inventory | 106,720 | 329,816 | ||||||
Prepaid expenses | (7,149 | ) | (16,976 | ) | ||||
Increase (decrease) in liabilities | ||||||||
Accounts payable — trade | 229,034 | (9,652 | ) | |||||
Accounts payable — affiliate | (4,207,728 | ) | (338,666 | ) | ||||
Rebates payable | (266,353 | ) | 239,848 | |||||
Accrued royalties | 547,820 | 699,860 | ||||||
Accrued commissions | 186,659 | 285,847 | ||||||
Accrued state and local taxes | 135,428 | 38,712 | ||||||
Net cash provided by operating activities | 8,024,660 | 5,699,161 | ||||||
Cash flows from investing activities | (355,000 | ) | (1,328,513 | ) | ||||
Acquisition of property and equipment | (355,000 | ) | (1,328,513 | ) | ||||
Proceeds from sale of property and equipment | 34,000 | — | ||||||
Net cash used by investing activities | (321,000 | ) | (1,328,513 | ) | ||||
accompanying notes to financial statements.
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2003 | 2002 | |||||||
Cash flows from financing activities | ||||||||
Net advances and repayments of notes payable — officers | $ | (1,000,000 | ) | $ | 3,000,000 | |||
Distributions paid | (9,000,000 | ) | (4,000,000 | ) | ||||
Net cash used by financing activities | (10,000,000 | ) | (1,000,000 | ) | ||||
Net increase (decrease) in cash | (2,296,340 | ) | 3,370,648 | |||||
Cash, January 1 | 4,467,977 | 1,097,329 | ||||||
Cash, December 31 | $ | 2,171,637 | $ | 4,467,977 | ||||
accompanying notes to financial statements.
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1. | Summary of Significant Accounting Policies | |
This summary of significant accounting policies of Creative Designs International, Ltd. Is presented to assist in understanding the Company’s financial statements. The financial statements and accompanying notes are representations of the Company’s management, who are also responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. | ||
Business Activity and Concentration of Credit Risk | ||
The Company is engaged in the development and marketing of toys and related products internationally and the sale of those products to specific customers in the United States. | ||
The Company maintains its checking accounts with one bank. Cash balances with the bank in excess of $100,000 exceed the insurable limits as allowed by FDIC. Total cash balances with the bank at December 31, 2003 exceeded the insurable limits by $2,443,222. | ||
Use of Estimates | ||
Management has made estimates and assumptions relating to the reporting of assets and liabilities and related reporting of revenues and expenses to prepare these financial statements in accordance with generally accepted accounting principles. Actual results could differ from those estimates. | ||
Accounts Receivable — Trade | ||
Accounts receivable — trade is recorded at the amount the Company expects to collect on balances outstanding at year-end. Management closely monitors outstanding balances and writes off, as of year-end, all balances that they anticipate they will not collect as of the time the financial statements are issued. | ||
There was no bad debt expense charged to operations for the years ended December 31, 2003 and 2002. | ||
Inventory | ||
Inventory, consisting of finished goods, is valued at the lower of cost (first-in, first-out basis) or market. |
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1. | Summary of Significant Accounting Policies | |
Property and Equipment and Depreciation | ||
Property and equipment are stated at cost. Depreciation is provided under the straight-line and accelerated methods over the estimated useful lives of the related assets. | ||
Maintenance and repairs are expensed as incurred. Additions, betterments, and renewals, unless of minor amounts, are capitalized and depreciated. When property and equipment are sold or otherwise disposed of, the cost and related accumulated depreciation accounts are relieved, and the resulting gain or loss is included in operations. | ||
Advertising Expense | ||
The Company’s policy is to expense advertising costs as incurred. Advertising expense charged to operations for the years ended December 31, 2003 and 2002 was $94,783 and $10,257, respectively. | ||
Income Taxes | ||
The Company, with the consent of its shareholders, elected to be taxed as an S corporation for federal and state tax purposes, effective in 1986. Under these provisions, the shareholders are taxed on their proportionate share of the Company’s taxable income on their individual tax returns. The Company still pays franchise and gross receipts taxes to various municipalities. | ||
2. | Property and Equipment | |
A summary of property and equipment at December 31, 2003 and 2002 is as follows: |
2003 | 2002 | |||||||
Molds | $ | 1,690,892 | $ | 1,969,528 | ||||
Leasehold improvements | 295,971 | 274,249 | ||||||
Furniture and fixtures | 137,863 | 137,863 | ||||||
Computer equipment | 233,247 | 233,247 | ||||||
Transportation equipment | 643,323 | 574,720 | ||||||
3,001,296 | 3,189,607 | |||||||
Less accumulated depreciation | 1,412,712 | 1,250,104 | ||||||
$ | 1,588,584 | $ | 1,939,503 | |||||
Depreciation expense charged to operations for the years ended December 31, 2003 and 2002 was $665,767 and $709,038, respectively. |
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3. | Major Customers | |
The Company had a significant customer which represented 90% and 78% of the total sales for the years ended December 31, 2003 and 2002. This customer represented 93% and 64% of the accounts receivable balance at December 31, 2003 and 2002. | ||
4. | Related Party Transactions | |
The Company conducts its primary business operations in a facility leased from its stockholders under a lease which expires in 2010. The rental expense for this property was $74,142 and $59,748 for the years ended December 31, 2003 and 2002, respectively. | ||
The following is a schedule of future minimum lease payments as of December 31, 2003: |
Year ending December 31, 2004 | $ | 74,340 | ||
2005 | 78,060 | |||
2006 | 81,960 | |||
2007 | 86,064 | |||
2008 | 90,360 | |||
Thereafter | 194,508 |
The Company’s affiliate, Arbor Toys, Ltd. (Arbor), is a Hong Kong based company. Significant related party transactions with Arbor are as follows: |
The Company receives a commission from Arbor Toys, Ltd. on all Arbor sales for its marketing and licensing arrangements with customers. In addition, it receives various overrides on products sold. The total amount is recorded as commission income and was $24,689,165 and $21,474,092 for the years ended December 31, 2003 and 2002, respectively. | |||
The Company receives design fees for the development of product lines. Total fees were $158,710 for both years ended December 31, 2003 and 2002. | |||
The Company purchases all of its toys from Arbor. Total purchases for the year ended December 31, 2003 and 2002 were $10,720,712 and $7,288,944, respectively. |
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5. | Commitments and Contingencies | |
The Company leases showroom space at an industry toy exhibit under a noncancellable operating lease expiring in April, 2010. Future minimum rental payments under operating leases (excluding operating expenses) are as follows: |
Year ending December 31, 2004 | $ | 33,150 | ||
2005 | 33,150 | |||
2006 | 33,150 | |||
2007 | 33,150 | |||
2008 | 33,150 | |||
Thereafter | 44,202 |
The total rent expense for this and related party leases (See Note 3) was $113,402 and $97,942 for the years ended December 31, 2003 and 2002, respectively. |
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ON SUPPLEMENTAL INFORMATION
Creative Designs International, Ltd.
Feasterville, PA 19053
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2003 | 2002 | |||||||
Advertising | $ | 94,783 | $ | 10,257 | ||||
Auto expense | 19,737 | 13,902 | ||||||
Computer expenses | 98,747 | 62,162 | ||||||
Contributions | 35,707 | 60,350 | ||||||
Dues and subscriptions | 12,439 | 12,808 | ||||||
Employee benefits | 104,058 | 71,887 | ||||||
Equipment rental | 3,754 | 2,728 | ||||||
Gifts | 16,583 | 8,750 | ||||||
Insurance | 146,753 | 133,706 | ||||||
Interest expense | — | 4,765 | ||||||
Meals and entertainment | 55,908 | 26,665 | ||||||
Miscellaneous | 59,303 | 105,709 | ||||||
Professional fees | 48,193 | 65,093 | ||||||
Office expense | 111,554 | 58,661 | ||||||
Payroll | 660,269 | 375,929 | ||||||
Payroll taxes | 87,703 | 136,630 | ||||||
Postage | 4,543 | 3,514 | ||||||
Rent | 113,402 | 97,942 | ||||||
Repairs and maintenance | 13,784 | 15,353 | ||||||
Storage | 3,588 | 2,776 | ||||||
Taxes — other | 423,966 | 344,069 | ||||||
Telephone | 37,986 | 42,419 | ||||||
Travel | 191,925 | 175,693 | ||||||
Utilities | 28,754 | 10,557 | ||||||
$ | 2,373,439 | $ | 1,842,325 | |||||
See independent auditors’ supplemental report. | 12 |
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Page | ||
Independent auditors’ report | 1 | |
Financial statements: | ||
Balance sheets | 2 | |
Statements of income | 3 | |
Statements of retained earnings | 4 | |
Statements of cash flows | 5-6 | |
Notes to financial statements | 7-10 | |
Supplemental information: | ||
Independent auditors’ supplemental report | 11 | |
Schedules of general and administrative expenses | 12 |
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Creative Designs International, Ltd.
Feasterville, PA 19053
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2004 | 2003 | |||||||
Current assets | ||||||||
Cash | $ | 7,574,936 | $ | 2,171,637 | ||||
Accounts receivable — trade | 6,019,263 | 8,307,539 | ||||||
Accounts receivable — affiliate | 27,618,821 | 12,667,771 | ||||||
Miscellaneous receivable | 23,091 | 798,946 | ||||||
Due from affiliates | 6,404 | — | ||||||
Inventory | 3,077,067 | 1,025,520 | ||||||
Prepaid expenses | 94,524 | 97,554 | ||||||
Total current assets | 44,414,106 | 25,068,967 | ||||||
Property and equipment, net of accumulated depreciation | 1,940,633 | 1,588,584 | ||||||
Total assets | $ | 46,354,739 | $ | 26,657,551 | ||||
Current liabilities | ||||||||
Loan payable — affiliate | $ | — | $ | 2,000,000 | ||||
Accounts payable — trade | 319,165 | 268,022 | ||||||
Accounts payable — affiliate | 15,031,467 | 220,712 | ||||||
Rebates payable | 2,076,841 | 1,077,379 | ||||||
Accrued royalties | 3,272,007 | 1,373,935 | ||||||
Accrued commissions | 484,017 | 894,136 | ||||||
Accrued state and local taxes | 155,000 | 314,486 | ||||||
Payroll taxes payable | 4,775 | — | ||||||
Total current liabilities | 21,343,272 | 6,148,670 | ||||||
Stockholders’ equity | ||||||||
Common stock — no par value; 200 shares authorized, issued and outstanding | 2,000 | 2,000 | ||||||
Retained earnings | 25,009,467 | 20,506,881 | ||||||
Total stockholders’ equity | 25,011,467 | 20,508,881 | ||||||
Total liabilities and stockholders’ equity | $ | 46,354,739 | $ | 26,657,551 | ||||
accompanying notes to financial statements.
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2004 | 2003 | |||||||
Revenues | ||||||||
Commission income | $ | 32,692,754 | $ | 24,689,165 | ||||
Sales | 28,360,733 | 18,496,985 | ||||||
Design fee | 164,000 | 158,710 | ||||||
Total revenues | 61,217,487 | 43,344,860 | ||||||
Direct costs | ||||||||
Cost of sales | 19,760,539 | 13,182,663 | ||||||
Direct selling costs | 12,397,351 | 8,320,915 | ||||||
Product development costs | 824,809 | 462,581 | ||||||
32,982,699 | 21,966,159 | |||||||
Gross profit | 28,234,788 | 21,378,701 | ||||||
General and administrative expenses | 3,137,328 | 2,373,439 | ||||||
Income before other income and expenses | 25,097,460 | 19,005,262 | ||||||
Other income and expenses | ||||||||
Interest income | 88,591 | 89,750 | ||||||
Loss on sale of property and equipment | — | (6,152 | ) | |||||
Other income | — | 18,004 | ||||||
Depreciation | (534,265 | ) | (665,767 | ) | ||||
(445,674 | ) | (564,165 | ) | |||||
Income before officer’s compensation | 24,651,786 | 18,441,097 | ||||||
Officer’s compensation | 3,149,200 | 2,143,847 | ||||||
Net income | $ | 21,502,586 | $ | 16,297,250 | ||||
accompanying notes to financial statements.
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2004 | 2003 | |||||||
Balance, January 1 | $ | 20,506,881 | $ | 13,209,631 | ||||
Net income | 21,502,586 | 16,297,250 | ||||||
42,009,467 | 29,506,881 | |||||||
Less distributions | 17,000,000 | 9,000,000 | ||||||
Balance, December 31 | $ | 25,009,467 | $ | 20,506,881 | ||||
accompanying notes to financial statements.
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2004 | 2003 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 21,502,586 | $ | 16,297,250 | ||||
Adjustment to reconcile net income to net cash provided by operating activities | ||||||||
Bad debts | 80,033 | — | ||||||
Depreciation | 534,265 | 665,767 | ||||||
Loss on sale of property and equipment | — | 6,152 | ||||||
(Increase) decrease in assets | ||||||||
Accounts receivable — trade | 2,208,243 | (5,100,927 | ) | |||||
Accounts receivable — affiliate | (14,951,050 | ) | (274,991 | ) | ||||
Miscellaneous receivable | 775,855 | (293,022 | ) | |||||
Inventory | (2,051,547 | ) | 106,720 | |||||
Prepaid expenses | 3,030 | (7,149 | ) | |||||
Increase (decrease) in liabilities | ||||||||
Accounts payable — trade | 51,143 | 229,034 | ||||||
Accounts payable — affiliate | 14,810,755 | (4,207,728 | ) | |||||
Rebates payable | 999,462 | (266,353 | ) | |||||
Accrued royalties | 1,898,072 | 547,820 | ||||||
Accrued commissions | (410,119 | ) | 186,659 | |||||
Accrued state and local taxes | (159,486 | ) | 135,428 | |||||
Payroll taxes payable | 4,775 | — | ||||||
Net cash provided by operating activities | 25,296,017 | 8,024,660 | ||||||
Cash flows from investing activities | ||||||||
Acquisition of property and equipment | (965,627 | ) | (355,000 | ) | ||||
Proceeds from sale of property and equipment | — | 34,000 | ||||||
Net cash used by investing activities | (965,627 | ) | (321,000 | ) | ||||
accompanying notes to financial statements.
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2004 | 2003 | |||||||
Cash flows from financing activities | ||||||||
Net advances and repayments of notes payable — officers | $ | (2,000,000 | ) | $ | (1,000,000 | ) | ||
Net advances and repayments of amounts due to/from affiliates | 72,909 | — | ||||||
Distributions paid | (17,000,000 | ) | (9,000,000 | ) | ||||
Net cash used by financing activities | (18,927,091 | ) | (10,000,000 | ) | ||||
Net increase (decrease) in cash | 5,403,299 | (2,296,340 | ) | |||||
Cash, January 1 | 2,171,637 | 4,467,977 | ||||||
Cash, December 31 | $ | 7,574,936 | $ | 2,171,637 | ||||
accompanying notes to financial statements.
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1. | Summary of Significant Accounting Policies |
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1. | Summary of Significant Accounting Policies |
2. | Property and Equipment |
2004 | 2003 | |||||||
Molds | $ | 2,249,497 | $ | 1,690,892 | ||||
Leasehold improvements | 308,186 | 295,971 | ||||||
Furniture and fixtures | 163,001 | 137,863 | ||||||
Computer equipment | 233,247 | 233,247 | ||||||
Transportation equipment | 532,393 | 643,323 | ||||||
3,486,324 | 3,001,296 | |||||||
Less accumulated depreciation | 1,545,691 | 1,412,712 | ||||||
$ | 1,940,633 | $ | 1,588,584 | |||||
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2. | Property and Equipment (Cont’d.) |
3. | Royalties |
4. | Related Party Transactions and Commitments and Contingencies |
Year ending December 31, 2005 | $ | 81,960 | ||
2006 | 86,064 | |||
2007 | 90,360 | |||
2008 | 94,878 | |||
2009 | 99,622 |
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4. | Related Party Transactions and Commitments and Contingencies (Cont’d.) |
Year ending December 31, 2005 | $ | 33,150 | ||
2006 | 33,150 | |||
2007 | 33,150 | |||
2008 | 33,150 | |||
2009 | 33,130 | |||
Thereafter | 11,052 |
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ON SUPPLEMENTAL INFORMATION
Creative Designs International, Ltd.
Feasterville, PA 19053
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2004 | 2003 | |||||||
Advertising | $ | 24,183 | $ | 94,783 | ||||
Auto expense | 21,590 | 19,737 | ||||||
Bad debts | 80,033 | — | ||||||
Computer expenses | 48,744 | 98,747 | ||||||
Contributions | 12,884 | 35,707 | ||||||
Dues and subscriptions | 26,195 | 12,439 | ||||||
Employee benefits | 121,176 | 104,058 | ||||||
Equipment rental | 14,632 | 3,754 | ||||||
Gifts | 46,965 | 16,583 | ||||||
Insurance | 213,589 | 146,753 | ||||||
Meals and entertainment | 39,355 | 55,908 | ||||||
Miscellaneous | 28,150 | 59,303 | ||||||
Professional fees | 161,277 | 48,193 | ||||||
Office expense | 71,689 | 111,554 | ||||||
Payroll | 976,277 | 660,269 | ||||||
Payroll taxes | 127,260 | 87,703 | ||||||
Postage | 4,019 | 4,543 | ||||||
Rent | 114,373 | 113,402 | ||||||
Repairs and maintenance | 13,147 | 13,784 | ||||||
Storage | 3,731 | 3,588 | ||||||
Taxes — other | 640,204 | 423,966 | ||||||
Telephone | 31,074 | 37,986 | ||||||
Travel | 285,991 | 191,925 | ||||||
Utilities | 30,790 | 28,754 | ||||||
$ | 3,137,328 | $ | 2,373,439 | |||||
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MICHAEL YAM & COMPANY
Certified Public Accountants
HONG KONG
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Mr. Ho Chiu Ming
M. Y. Director No. 1 Limited
Mr. Ho Wai Kam Jimmy
23rd Floor
Chekiang First Bank Building
58-63 Gloucester Road
Wanchai
HONG KONG
Chinachem Golden Plaza
77 Mody Road
Tsimshatsui East
Kowloon
HONG KONG
23rd Floor
Chekiang First Bank Building
58-63 Gloucester Road
Wanchai
HONG KONG
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1. | PRINCIPAL ACTIVITY | |
The Company’s principal activity is trading in toys and related products. | ||
2. | FINANCIAL STATEMENTS | |
The profit of the Company for the year ended December 31, 2002 and the state of the Company’s affairs at that date are set out in the financial statements on pages 7 to 16. | ||
3. | DIVIDEND AND RESERVE | |
An interim dividend of HK$287 per ordinary share, totalling HK$28,700,000 was paid during the year. | ||
The Directors do not recommend the payment of a final dividend or the transfer of any amount to reserve for the financial year ended December 31, 2002. | ||
4. | FIXED ASSETS | |
Movements in fixed assets during the year are set out in note 6 to the financial statements. | ||
5. | DIRECTORS | |
During the year and up to the date of this report, the following Directors held office :- |
Mr. Ho Chiu Ming
M. Y. Director No. 1 Limited
Mr. Ho Wai Kam Jimmy
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6. | DIRECTORS’ INTERESTS IN CONTRACTS | |
No contracts of significance to which the Company was a party, and in which a Director had a material interest, subsisted at the end of the year or at any time during the year. | ||
7. | DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES | |
At no time during the year was the Company a party to any arrangements to enable a Director of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. | ||
8. | AUDITORS | |
Michael Yam & Company have expressed their willingness to continue as Auditors of the Company. | ||
9. | OTHER MATTERS | |
At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading. |
FOR AND ON BEHALF OF THE BOARD | ||
/s/ Ho Chiu Ming | ||
CHAIRMAN/SECRETARY |
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23RD FLOOR, CHEKIANG FIRST BANK BUILDING 58-63, GLOUCESTER ROAD, WANCHAI, HONG KONG TEL.: (852) 2529 9301 FAX: (852) 2529 7920 E-MAIL: mychk@myc.com.hk | ![]() |
![]() | ![]() |
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23RD FLOOR, CHEKIANG FIRST BANK BUILDING 58-63 GLOUCESTER ROAD, WANCHAI, HONG KONG TEL.: (852) 2529 9301 FAX: (852) 2529 7920 E-MAIL: mychk@myc.com.hk | ![]() |
MICHAEL YAM & COMPANY | ||
/s/ Michael Yam & Company | ||
CERTIFIED PUBLIC ACCOUNTANTS |
![]() | ![]() |
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12/31/2001 | ||||||||||||
CURRENT ASSETS | ||||||||||||
$ | 36,610,576 | Cash | $ | 63,052,640 | ||||||||
31,200,000 | Time deposits | -0- | ||||||||||
14,046,551 | Bills receivable | 33,838,466 | ||||||||||
8,742,749 | Accounts receivable | 9,984,072 | ||||||||||
6,021,121 | Prepayments, rental and utility deposits | 5,242,044 | ||||||||||
3,000,000 | Trade deposits | 230,989 | ||||||||||
10,079 | Inventories | -0- | ||||||||||
99,631,076 | $ | 112,348,211 | ||||||||||
706,490 | FIXED ASSETS (Note 6) | 1,855,829 | ||||||||||
$ | 100,337,566 | $ | 114,204,040 | |||||||||
CURRENT LIABILITIES | ||||||||||||
$ | 37,119,661 | Accounts payable and accrued charges | $ | 79,257,997 | ||||||||
28,988,250 | Dividend payable | -0- | ||||||||||
4,440,000 | Provision for taxation | 5,335,000 | ||||||||||
70,547,911 | $ | 84,592,997 | ||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
1,000,000 | Share capital (Note 7) | 1,000,000 | ||||||||||
28,789,655 | Retained profits | 28,611,043 | ||||||||||
29,789,655 | 29,611,043 | |||||||||||
THE FINANCIAL STATEMENTS ON PAGES 7 TO 16 WERE APPROVED AND AUTHORISED FOR ISSUE BY THE BOARD OF DIRECTORS ON 30 JUN 2003 | ||||||||||||
/s/ Marvin Greenberg /s/ Ho Chiu Ming | ||||||||||||
DIRECTOR DIRECTOR | ||||||||||||
$ | 100,337,566 | $ | 114,204,040 | |||||||||
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01/01/2001 | ||||||||
to | ||||||||
12/31/2001 | ||||||||
$ | 504,594,262 | TURNOVER (Note 2) | $ | 661,475,210 | ||||
2,023,553 | OTHER REVENUE | 3,486,715 | ||||||
(4,078,227 | ) | CHANGES IN INVENTORIES | (10,079 | ) | ||||
(359,436,166 | ) | PURCHASES AND DIRECT COSTS | (475,406,385 | ) | ||||
(102,876,312 | ) | SELLING EXPENSES | (142,949,384 | ) | ||||
(7,719,866 | ) | STAFF COSTS | (8,784,421 | ) | ||||
(334,190 | ) | DEPRECIATION AND AMORTISATION | (521,132 | ) | ||||
(2,468,691 | ) | OTHER OPERATING EXPENSES | (3,438,957 | ) | ||||
29,704,363 | PROFIT BEFORE TAXATION (Note 3) | 33,851,567 | ||||||
(4,438,775 | ) | TAXATION (Note 5) | (5,330,179 | ) | ||||
$ | 25,265,588 | PROFIT AFTER TAXATION | $ | 28,521,388 | ||||
$ | -0- | INTERIM DIVIDEND | $ | 28,700,000 | ||||
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SHARE | RETAINED | |||||||||||
CAPITAL | PROFITS | TOTAL | ||||||||||
AT JANUARY 1, 2001 | $ | 1,000,000 | $ | 49,724,067 | $ | 50,724,067 | ||||||
FINAL DIVIDEND PAID | -0- | (46,200,000 | ) | (46,200,000 | ) | |||||||
PROFIT FOR THE YEAR | -0- | 25,265,588 | 25,265,588 | |||||||||
AT DECEMBER 31, 2001 | $ | 1,000,000 | $ | 28,789,655 | $ | 29,789,655 | ||||||
AT JANUARY 1, 2002 | $ | 1,000,000 | $ | 28,789,655 | $ | 29,789,655 | ||||||
PROFIT FOR THE YEAR | -0- | 28,521,388 | 28,521,388 | |||||||||
INTERIM DIVIDEND PAID | -0- | (28,700,000 | ) | (28,700,000 | ) | |||||||
AT DECEMBER 31, 2002 | $ | 1,000,000 | $ | 28,611,043 | $ | 29,611,043 | ||||||
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1. | PRINCIPAL ACCOUNTING POLICIES |
(a) | Basis of Accounting | ||
The financial statements on pages 7 to 16 are prepared in accordance with and comply with all applicable Statements of Standard Accounting Practice (“SSAP”) and Interpretations issued by the Hong Kong Society of Accountants which does not differ significantly from accounting principles generally accepted in the United States of America (“US GAAP”) except that certain disclosures as required under US GAAP have not been included in these financial statements. The financial statements are prepared under the historical cost convention. | |||
(b) | Fixed Assets | ||
Fixed assets, comprising furniture and fixtures, office machinery and equipment and leasehold improvements, are stated at cost less accumulated deprecation. | |||
Depreciation is provided to write off the cost of depreciable assets over their estimated useful lives on a straight line basis at the following annual rates :- |
Furniture and fixtures | 10 | % | ||
Office machinery and equipment | 20 | % | ||
Leasehold improvements | Over the term of lease |
(c) | Translation of Foreign Currencies | ||
Monetary assets and liabilities denominated in foreign currencies are translated into Hong Kong Dollars at the rates of exchange ruling at the balance sheet date. | |||
Transactions in foreign currencies are translated into Hong Kong Dollars at the rates of exchange ruling at the dates of the transactions. | |||
All exchange differences arising from the above are included in the profit and loss statement. |
(d) | Inventories | ||
Inventories are stated at the lower of cost and net realisable value. Cost is determined on actual basis. |
(e) | Deferred Taxation | ||
Deferred taxation is provided, using the liability method, on all significant timing differences to the extent that it is probable that the liability will crystallise in the foreseeable future. |
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1. | PRINCIPAL ACCOUNTING POLICIES (CONT’D) |
(f) | Cash and Cash Equivalents | ||
For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposit held at call with banks, cash investments with a maturity of three months or less from the date of investment and bank overdrafts. | |||
(g) | Retirement Benefits | ||
The Company operates a defined contribution Mandatory Provident Fund retirement benefit scheme (“the Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for all its employees. The Scheme was effective from December 1, 2000. Contributions to the Scheme are based on a percentage of the employees’ basic salaries and are recognised as an expense in the profit and loss statement. | |||
(h) | Operating Leases | ||
Payments under operating leases are charged to the profit and loss statement on a straight line basis over the period of the respective leases. | |||
(i) | Revenue Recognition | ||
Sales are recognised as revenue when the risks and rewards of ownership of the goods have passed to customers. Bank interest earned is recognised on an accrual basis. |
2. | TURNOVER | |
Turnover represents gross sales less returns. |
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3. | PROFIT BEFORE TAXATION | |
Profit before taxation is arrived at |
2002 | 2001 | |||||||
after charging :- | ||||||||
Auditors’ remuneration | $ | 52,000 | $ | 52,000 | ||||
Depreciation | 521,132 | 334,190 | ||||||
Fixed assets written off | 40,478 | 17,621 | ||||||
Rental payable on land and buildings under operating leases | 1,670,385 | 926,040 | ||||||
Retirement benefit costs | 300,431 | 266,264 | ||||||
and crediting :- | ||||||||
Bank interest earned | $ | 492,384 | $ | 1,665,138 | ||||
Exchange gain | 37,720 | 114,021 | ||||||
4. | DIRECTORS’ EMOLUMENTS | |
The aggregate amounts of the Directors’ emoluments disclosed pursuant to Section 161 of the Companies Ordinance are as follows :- |
2002 | 2001 | |||||||
As director | $ | -0- | $ | -0- | ||||
As executive | 1,287,000 | 1,259,800 | ||||||
$ | 1,287,000 | $ | 1,259,800 | |||||
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5. | TAXATION |
2002 | 2001 | |||||||
Hong Kong profits tax | ||||||||
Provision for the year | $ | 5,335,000 | $ | 4,440,000 | ||||
Over-provision in prior year | (4,821 | ) | (1,225 | ) | ||||
$ | 5,330,179 | $ | 4,438,775 | |||||
6. | FIXED ASSETS |
Office | ||||||||||||||||
Furniture | Machinery | Leasehold | ||||||||||||||
and Fixtures | and Equipment | Improvements | Total | |||||||||||||
Cost | ||||||||||||||||
At January 1, 2002 | $ | 242,176 | $ | 1,090,311 | $ | 1,181,990 | $ | 2,514,477 | ||||||||
Additions during the year | 161,970 | 326,431 | 1,222,548 | 1,710,949 | ||||||||||||
Disposals during the year | (5.515 | ) | (64,838 | ) | (1,206,845 | ) | (1,277,198 | ) | ||||||||
At December 31, 2002 | 398,631 | 1,351,904 | 1,197,693 | 2,948,228 | ||||||||||||
Accumulated Depreciation | ||||||||||||||||
At January 1, 2002 | 170,868 | 481,008 | 1,156,111 | 1,807,987 | ||||||||||||
Charge for the year | 28,543 | 240,437 | 252,152 | 521,132 | ||||||||||||
Written back on disposals | (5,513 | ) | (55,830 | ) | (1,175,377 | ) | (1,236,720 | ) | ||||||||
At December 31, 2002 | 193,898 | 665,615 | 232,886 | 1,092,399 | ||||||||||||
Net Book Value | ||||||||||||||||
At December 31, 2002 | $ | 204,733 | $ | 686,289 | $ | 964,807 | $ | 1,855,829 | ||||||||
At December 31, 2001 | $ | 71,308 | $ | 609,303 | $ | 25,879 | $ | 706,490 | ||||||||
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7. | SHARE CAPITAL |
2002 | 2001 | |||||||
Authorised capital 100,000 shares of HK$10.00 each | $ | 1,000,000 | $ | 1,000,000 | ||||
Issued and fully paid capital 100,000 shares of HK$10.00 each | $ | 1,000,000 | $ | 1,000,000 | ||||
8. | COMMITMENTS UNDER OPERATING LEASES | |
At December 31, 2002, the Company had future aggregate minimum lease payments on land and buildings under non-cancellable leases as follows :- |
2002 | 2001 | |||||||
Not later than one year | $ | 1,744,025 | $ | 1,432,080 | ||||
Later than one year and not later than five years | 2,682,585 | 596,700 | ||||||
$ | 4,426,610 | $ | 2,028,780 | |||||
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9. | RECONCILIATION OF PROFIT BEFORE TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES |
2002 | 2001 | |||||||
Profit before taxation | $ | 33,851,567 | $ | 29,704,363 | ||||
Adjustments for :- | ||||||||
Bank interest earned | (492,384 | ) | (1,665,138 | ) | ||||
Depreciation | 521,132 | 334,190 | ||||||
Fixed assets written off | 40,478 | 17,621 | ||||||
Operating profit before working capital changes | 33,920,793 | 28,391,036 | ||||||
Change in bills receivable | (19,791,915 | ) | (592,693 | ) | ||||
Change in accounts receivable | (1,241,323 | ) | (2,608,267 | ) | ||||
Change in prepayments, rental and utility deposits | (339,519 | ) | 88,068 | |||||
Change in trade deposits | 2,769,011 | (3,000,000 | ) | |||||
Change in inventories | 10,079 | 4,078,227 | ||||||
Change in accounts payable and accrued charges | 42,138,336 | (17,290,125 | ) | |||||
Cash generated from operations | 57,465,462 | 9,066,246 | ||||||
Hong Kong profits tax paid | (3,316,583 | ) | (8,206,136 | ) | ||||
Net cash inflow from operating activities | $ | 54,148,879 | $ | 860,110 | ||||
10. | COMPARATIVE FIGURES | |
Certain comparative figures have been re-classified to conform with the current year’s presentation. This had no effect on the profit reported in the 2001 profit and loss statement. |
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(Amounts Expressed In Hong Kong Dollars)
2002 | 2001 | |||||||||||||||
NET CASH INFLOW FROM OPERATING ACTIVITIES (Note 9) | $ | 54,148,879 | $ | 860,110 | ||||||||||||
INVESTMENTS ACTIVITIES | ||||||||||||||||
Purchase of fixed assets | $ | (1,710,949 | ) | $ | (631,330 | ) | ||||||||||
Bank interest earned | 492,384 | 1,665,138 | ||||||||||||||
NET CASH (OUTFLOW)/INFLOW FROM INVESTING ACTIVITIES | (1,218,565 | ) | 1,033,808 | |||||||||||||
NET CASH INFLOW BEFORE FINANCING | 52,930,314 | 1,893,918 | ||||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||
Final dividend paid | (28,988,250 | ) | (17,211,750 | ) | ||||||||||||
Interim dividend paid | (28,700,000 | ) | -0- | |||||||||||||
NET CASH OUTFLOW FROM FINANCING | (57,688,250 | ) | (17,211,750 | ) | ||||||||||||
DECREASE IN CASH AND CASH EQUIVALENTS | (4,757,936 | ) | (15,317,832 | ) | ||||||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR | 67,810,576 | 83,128,408 | ||||||||||||||
CASH AND CASH EQUIVALENTS AT END OF THE YEAR | $ | 63,052,640 | $ | 67,810,576 | ||||||||||||
ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS | ||||||||||||||||
Cash at bank and in hand | $ | 63,052,640 | $ | 36,610,576 | ||||||||||||
Time deposits | -0- | 31,200,000 | ||||||||||||||
$ | 63,052,640 | $ | 67,810,576 | |||||||||||||
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(Amounts Expressed In Hong Kong Dollars)
01/01/2001 | ||||||||||
to | ||||||||||
12/31/2001 | ||||||||||
$ 504,594,262 | SALES | $ | 661,475,210 | |||||||
LESS : COST OF SALES | ||||||||||
4,088,306 | Opening inventories | $ | 10,079 | |||||||
348,910,298 | Purchases | 460,202,725 | ||||||||
352,998,604 | 460,212,804 | |||||||||
10,079 | Less : Closing inventories | -0- | ||||||||
352,988,525 | 460,212,804 | |||||||||
151,605,737 | 201,262,406 | |||||||||
LESS : DIRECT COSTS | ||||||||||
19,340 | Packaging charges | 17,099 | ||||||||
10,506,528 | Transportation | 15,186,561 | ||||||||
10,525,868 | 15,203,660 | |||||||||
141,079,869 | GROSS PROFIT | 186,058,746 | ||||||||
ADD : OTHER INCOME | ||||||||||
1,665,138 | Bank interest earned | 492,384 | ||||||||
114,021 | Exchange gain | 37,720 | ||||||||
189,727 | Miscellaneous income | 2,956,611 | ||||||||
54,667 | Provision for pension funds written back | -0- | ||||||||
2,023,553 | 3,486,715 | |||||||||
143,103,422 | 189,545,461 | |||||||||
LESS : SELLING EXPENSES | ||||||||||
1,518,467 | Bank charges | 1,622,428 | ||||||||
100,003,971 | Commission paid | 139,878,221 | ||||||||
123,874 | Customs declaration charges | 211,443 | ||||||||
1,230,000 | Design fees | 1,230,000 | ||||||||
-0- | Sample charges | 7,292 | ||||||||
102,876,312 | 142,949,384 | |||||||||
40,227,110 | 46,596,077 | |||||||||
10,522,747 | LESS: GENERAL AND ADMINISTRATIVE EXPENSES (Page 18) | 12,744,510 | ||||||||
$ 29,704,363 | PROFIT BEFORE TAXATION | $ | 33,851,567 | |||||||
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(Amounts Expressed In Hong Kong Dollars)
01/01/2001 | ||||||
to | ||||||
12/31/2001 | ||||||
$ 52,000 | Auditors’ remuneration | $ | 52,000 | |||
51,724 | Claims paid | 7,370 | ||||
25,800 | Cleaning expenses | 27,700 | ||||
334,190 | Depreciation | 521,132 | ||||
1,259,800 | Directors’ emoluments | 1,263,000 | ||||
58,253 | Electricity | 78,604 | ||||
84,130 | Entertainment | 116,847 | ||||
17,621 | Fixed assets written off | 40,478 | ||||
92,261 | Insurance | 114,605 | ||||
16,500 | Legal and professional fees | 20,000 | ||||
157,452 | Local travelling | 161,003 | ||||
266,264 | Provident funds | 300,431 | ||||
86,508 | Miscellaneous expenses | 95,390 | ||||
144,071 | Overseas travelling | 116,186 | ||||
-0- | Provision for pension funds | 146,678 | ||||
270,994 | Printing and stationery | 335,673 | ||||
1,289,420 | Rent and rates | 2,129,716 | ||||
30,613 | Repairs and maintenance | 41,591 | ||||
6,193,802 | Salaries | 7,074,312 | ||||
91,344 | Telecommunication and postage | 101,794 | ||||
$10,522,747 | $ | 12,744,510 | ||||
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Certified Public Accountants
HONG KONG
Table of Contents
Page | ||||
2 | ||||
3-4 | ||||
5-6 | ||||
7 | ||||
8 | ||||
9 | ||||
10-16 | ||||
17 | ||||
Detailed Profit and Loss Statement | 18-19 |
Table of Contents
Mr. Ho Chiu Ming
Mr. Ho Wai Kam Jimmy
M. Y. Director No. 1 Limited
23rd Floor
Wing Hang Finance Centre
60 Gloucester Road
Wanchai
HONG KONG
Chinachem Golden Plaza
77 Mody Road
Tsimshatsui East
Kowloon
HONG KONG
23rd Floor
Wing Hang Finance Centre
60 Gloucester Road
Wanchai
HONG KONG
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1. | PRINCIPAL ACTIVITY | |
The Company’s principal activity is trading in toys and related products. | ||
2. | FINANCIAL STATEMENTS | |
The profit of the Company for the year ended December 31, 2004 and the state of the Company’s affairs at that date are set out in the financial statements on pages 7 to 17. | ||
3. | DIVIDEND AND RESERVE . | |
The Director recommend the declaration of a final dividend of HK$333 per ordinary share, totalling HK$33,300,000. | ||
The Directors do not recommend the transfer of any amount to reserve for the year ended December 31,2004. | ||
4. | FIXED ASSETS | |
Movements in fixed assets during the year are set out in note 7 to the financial statements. | ||
5. | DIRECTORS | |
During the year and up to the date of this report, the following Directors held office :- |
Mr. Ho Chiu Ming
Mr. Ho Wai Kara Jimmy
M. Y. Director No. 1 Limited
In accordance with the Company’s Articles of Association, all the Directors retire from the Board and, being eligible, offer themselves for re-election. |
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6. | DIRECTORS’ INTERESTS IN CONTRACTS | |
No contracts of significance to which the Company was a party, and in which a Director had a material interest, subsisted at the end of the year or at any time during the year. | ||
7. | DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES | |
At no time during the year was the Company a party to any arrangements to enable a Director of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. | ||
8. | AUDITORS | |
Michael Yam & Company have expressed their willingness to continue as Auditors of the Company. | ||
9. | OTHER MATTERS | |
At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading. |
FOR AND ON BEHALF OF THE BOARD | ||
/s/ Ho Chiu Ming | ||
CHAIRMAN/SECRETARY |
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23RD FLOOR, WING HANG FINANCE CENTRE
60 GLOUCESTER ROAD, WANCHAI, HONG KONG
TEL: (852) 2529 9301 FAX: (852) 2529 7920 EMAIL: mychk@myc.com.hk
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CERTIFIED PUBLIC ACCOUNTANTS
23RD FLOOR, WING HANG FINANCE CENTRE
60 GLOUCESTER ROAD, WANCHAI, HONG KONG
TEL: (852) 2529 9301 FAX: (852) 2529 7920 EMAIL: mychk@myc.com.hk
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(Incorporated in Hong Kong with limited liability)
MICHAEL YAM & COMPANY | ||
/s/ Michael Yam & Company | ||
CERTIFIED PUBLIC ACCOUNTANTS |
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(Amounts Expressed In Hong Kong Dollars)
12/31/2003 | ||||||||||||
CURRENT ASSETS | ||||||||||||
$ | 106,823,615 | Cash | $ | 120,644,769 | ||||||||
11,275,307 | Time deposits | -0- | ||||||||||
40,058,322 | Bills receivable | 43,428,700 | ||||||||||
15,862,320 | Accounts receivable | 35,591,175 | ||||||||||
6,920,049 | Prepayments, rental and utility deposits | 8,171,302 | ||||||||||
26,832 | Trade deposits | -0- | ||||||||||
180,966,445 | $ | 207,835,946 | ||||||||||
1,368,217 | FIXED ASSETS (Note 7) | 965,387 | ||||||||||
$ | 182,334,662 | $ | 208,801,333 | |||||||||
CURRENT LIABILITIES | ||||||||||||
$ | 112,518,632 | Accounts payable and accrued charges | $ | 124,626,989 | ||||||||
7,086,124 | Provision for taxation | 8,790,052 | ||||||||||
119,604,756 | $ | 133,417,041 | ||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
1,000,000 | Share capital (Note 8) | 1,000,000 | ||||||||||
33,303,906 | Retained profits | 41,084,292 | ||||||||||
28,426,000 | Proposed final dividend | 33,300,000 | ||||||||||
62,729,906 | 75,384,292 | |||||||||||
THE FINANCIAL STATEMENTS ON PAGES 7 TO 17 WERE APPROVED AND AUTHORISED FOR ISSUE BY THE BOARD OF DIRECTORS ON 30 JUN 2005 | ||||||||||||
$ | 182,334,662 | $ | 208,801,333 | |||||||||
/s/ Geoffrey Robert Greenberg | /s/ Ho Chiu Ming | |||||||||||
DIRECTOR | DIRECTOR | |||||||||||
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(Amounts Expressed In Hong Kong Dollars)
01/01/2003 | ||||||||
to | ||||||||
12/31/2003 | ||||||||
$ | 748,476,591 | TURNOVER (Note 2) | $ | 994,199,406 | ||||
298,668 | OTHER REVENUE | 107,707 | ||||||
(526,001,772 | ) | PURCHASES AND DIRECT COSTS | (703,180,885 | ) | ||||
(168,220,674 | ) | SELLING EXPENSES | (224,813,387 | ) | ||||
(9,950,722 | ) | STAFF COSTS | (11,367,306 | ) | ||||
(708,359 | ) | DEPRECIATION AND AMORTISATION | (784,737 | ) | ||||
(3,687,484 | ) | OTHER OPERATING EXPENSES | (4,290,360 | ) | ||||
40,206,248 | PROFIT BEFORE TAXATION (Note 3) | 49,870,438 | ||||||
(7,087,385 | ) | TAXATION (Note 5) | (8,790,052 | ) | ||||
$ | 33,118,863 | PROFIT AFTER TAXATION | $ | 41,080,386 | ||||
$ | 28,426,000 | DIVIDENDS (Note 6) | $ | 33,300,000 | ||||
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(Amounts Expressed In Hong Kong Dollars)
SHARE | RETAINED | PROPOSED | ||||||||||||||
CAPITAL | PROFITS | DIVIDENDS | TOTAL | |||||||||||||
AT JANUARY 1, 2003 | $ | 1,000,000 | $ | 28,611,043 | $ | -0- | $ | 29,611,043 | ||||||||
PROFIT FOR THE YEAR | -0- | 33,118,863 | -0- | 33,118,863 | ||||||||||||
2003 FINAL DIVIDEND PROPOSED | -0- | (28,426,000 | ) | 28,426,000 | -0- | |||||||||||
AT DECEMBER 31, 2003 | $ | 1,000,000 | $ | 33,303,906 | $ | 28,426,000 | $ | 62,729,906 | ||||||||
AT JANUARY 1, 2004 | $ | 1,000,000 | $ | 33,303,906 | $ | 28,426,000 | $ | 62,729,906 | ||||||||
2003 FINAL DIVIDEND PAID | -0- | -0- | (28,426,000 | ) | (28,426,000 | ) | ||||||||||
PROFIT FOR THE YEAR | -0- | 41,080,386 | -0- | 41,080,386 | ||||||||||||
2004 FINAL DIVIDEND PROPOSED | -0- | (33,300,000 | ) | 33,300,000 | -0- | |||||||||||
AT DECEMBER 31, 2004 | $ | 1,000,000 | $ | 41,084,292 | $ | 33,300,000 | $ | 75,384,292 | ||||||||
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Table of Contents
1. | PRINCIPAL ACCOUNTING POLICIES |
(a) | Basis of Accounting | ||
The financial statements on pages 7 to 17 are prepared in accordance with and comply with all applicable Statements of Standard Accounting Practice (“SSAP”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants which does not differ significantly from accounting principles generally accepted in the United States of America (“US GAAP”) except that certain disclosures as required under US GAAP have not been included in these financial statements. The financial statements are prepared under the historical cost convention. | |||
(b) | Fixed Assets | ||
Fixed assets are stated at cost less accumulated deprecation. | |||
Depreciation is provided to write off the cost of fixed assets over their estimated useful lives on a straight line basis at the following annual rates :- |
Furniture and fixtures | 10% | |||
Office machinery and equipment | 20% | |||
Leasehold improvements | Over the term of lease |
(c) | Translation of Foreign Currencies | ||
Monetary assets and liabilities denominated in foreign currencies are translated into Hong Kong Dollars at the rates of exchange ruling at the balance sheet date. | |||
Transactions in foreign currencies are translated into Hong Kong Dollars at the rates of exchange ruling at the dates of the transactions. | |||
All exchange differences arising from the above are included in the profit and loss statement. | |||
(d) | Cash and Cash Equivalents | ||
For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposit held at call with banks, cash investments with a maturity of three months or less from the date of investment and bank overdrafts. |
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1. | PRINCIPAL ACCOUNTING POLICIES (CONT’D) |
(e) | Deferred Taxation | ||
Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted by the balance sheet date. | |||
Deferred tax assets are recognised to the extent it is probable that future taxable profit will be available against which the temporary differences can be utilised. | |||
(f) | Employee Benefits |
(i) | Long Service Payments | ||
The Company’s net obligation in respect of long service payment under the Employment Ordinance is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated according to the provision of the above Ordinance. | |||
(ii) | Retirement Benefits | ||
The Company operates a defined contribution Mandatory Provident Fund retirement benefit scheme (“the Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for all its employees. Contributions to the Scheme are based on a percentage of the employees’ basic salaries and are recognised as an expense in the profit and loss statement. |
(g) | Operating Leases | ||
Payments under operating leases are charged to the profit and loss statement on a straight line basis over the period of the respective leases. | |||
(h) | Revenue Recognition | ||
Sales are recognised as revenue when the risks and rewards of ownership of the goods have passed to customers. Bank interest earned is recognised on an accrual basis. |
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2. | TURNOVER | |
Turnover represents gross sales less returns. | ||
3. | PROFIT BEFORE TAXATION | |
Profit before taxation is arrived at |
2004 | 2003 | |||||||
after charging :- | ||||||||
Auditors’ remuneration | $ | 52,000 | $ | 52,000 | ||||
Depreciation | 784,738 | 708,359 | ||||||
Fixed assets written off | 41,053 | 2,403 | ||||||
Rental payable on land and buildings under operating leases | 1,987,565 | 1,744,025 | ||||||
Retirement benefit costs | 337,186 | 278,230 | ||||||
and crediting :- | ||||||||
Bank interest earned | $ | 51,818 | $ | 71,883 | ||||
Exchange gain | 36,874 | 22,984 | ||||||
4. | DIRECTORS’ EMOLUMENTS | |
The aggregate amounts of the Directors’ emoluments disclosed pursuant to Section 161 of the Companies Ordinance are as follows :- |
2004 | 2003 | |||||||
As director | $ | -0- | $ | -0- | ||||
As executive | 1,419,000 | 1,396,500 | ||||||
$ | 1,419,000 | $ | 1,396,500 | |||||
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5. | TAXATION |
2004 | 2003 | |||||||
Hong Kong profits tax | ||||||||
Provision for current year | $ | 8,790,052 | $ | 7,086,124 | ||||
Under/(Over)-provision in prior year | -0- | 1,261 | ||||||
$ | 8,790,052 | $ | 7,087,385 | |||||
The provision for Hong Kong profits tax has been calculated by applying the statutory rate of taxation of 17.5% (2003 — 17.5%) to the estimated assessable profits of the Company which were derived from Hong Kong during the reporting year. | ||
No provision for deferred taxation has been made in the financial statements as the effect of temporary differences is insignificant. | ||
Reconciliation between taxation expense and accounting profit at applicable taxation rates :- |
2004 | 2003 | |||||||
Profit before taxation | $ | 49,870,438 | $ | 40,206,248 | ||||
Tax at taxation tax rate of 17.5% | $ | 8,727,326 | $ | 7,036,093 | ||||
Tax effect of expenses that are not deductible in determining taxable profits | 155,013 | 134,768 | ||||||
Tax effect on income that is not assessable in determining taxable profits | (9,068 | ) | (30,974 | ) | ||||
Tax effect on allowances claimed | (83,219 | ) | (53,763 | ) | ||||
Under-provision in prior years | -0- | 1,261 | ||||||
Taxation expense for the year | $ | 8,790,052 | $ | 7,087,385 | ||||
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6. | DIVIDENDS |
2004 | 2003 | |||||||
Proposed final dividend of HK$333.00 (2003 – HK$284.26) per ordinary share | $ | 33,300,000 | $ | 28,426,000 | ||||
7. | FIXED ASSETS |
Office | ||||||||||||||||
Furniture | Machinery | Leasehold | ||||||||||||||
and Fixtures | and Equipment | Improvements | Total | |||||||||||||
Cost | ||||||||||||||||
At January 1, 2004 | $ | 400,831 | $ | 1,474,031 | $ | 1,236,076 | $ | 3,110,938 | ||||||||
Additions during the year | 26,358 | 367,545 | 29,058 | 422,961 | ||||||||||||
Disposals during the year | (5,310 | ) | (250,171 | ) | -0- | (255,481 | ) | |||||||||
At December 31, 2004 | 421,879 | 1,591,405 | 1,265,134 | 3,278,418 | ||||||||||||
Accumulated Depreciation | ||||||||||||||||
At January 1, 2004 | 222,659 | 872,974 | 647,088 | 1,742,721 | ||||||||||||
Charge for the year | 30,576 | 321,455 | 432,707 | 784,738 | ||||||||||||
Written back on disposals | (5,309 | ) | (209,119 | ) | -0- | (214,428 | ) | |||||||||
At December 31, 2004 | 247,926 | 985,310 | 1,079,795 | 2,313,031 | ||||||||||||
Net Book Value | ||||||||||||||||
At December 31, 2004 | $ | 173,953 | $ | 606,095 | $ | 185,339 | $ | 965,387 | ||||||||
At December 31, 2003 | $ | 178,172 | $ | 601,057 | $ | 588,988 | $ | 1,368,217 | ||||||||
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8. | SHARE CAPITAL |
2004 | 2003 | |||||||
Authorised capital 100,000 shares of HK$10.00 each | $ | 1,000,000 | $ | 1,000,000 | ||||
Issued and fully paid capital 100,000 shares of HK$10.00 each | $ | 1,000,000 | $ | 1,000,000 | ||||
9. | COMMITMENTS UNDER OPERATING LEASES | |
At December 31, 2004, the Company had future aggregate minimum lease payments on land and buildings under non-cancellable leases as follows :- |
2004 | 2003 | |||||||
Not later than one year | $ | 695,020 | $ | 1,987,565 | ||||
Later than one year and not later than five years | - 0 - | 695,020 | ||||||
$ | 695,020 | $ | 2,682,585 | |||||
10. | MATERIAL COMMITMENTS | |
At December 31, 2004, the Company had committed to purchase merchandise for an amount of approximately $244,969 (2003 — nil). |
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11. | RECONCILIATION OF PROFIT BEFORE TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES |
2004 | 2003 | |||||||
Profit before taxation | $ | 49,870,438 | $ | 40,206,248 | ||||
Adjustments for :- | ||||||||
Bank interest earned | (51,818 | ) | (71,883 | ) | ||||
Depreciation | 784,738 | 708,359 | ||||||
Fixed assets written off | 41,053 | 2,403 | ||||||
Operating profit before working capital changes | 50,644,411 | 40,845,127 | ||||||
Change in bills receivable | (3,370,378 | ) | (6,219,856 | ) | ||||
Change in accounts receivable | (19,728,855 | ) | (5,878,248 | ) | ||||
Change in prepayments, rental and utility deposits | (1,665 | ) | (276,648 | ) | ||||
Change in trade deposits | 26,832 | 204,157 | ||||||
Change in accounts payable and accrued charges | 12,108,357 | 33,260,635 | ||||||
Cash generated from operations | 39,678,702 | 61,935,167 | ||||||
Hong Kong profits tax paid | (8,335,712 | ) | (6,737,618 | ) | ||||
Net cash inflow from operating activities | $ | 31,342,990 | $ | 55,197,549 | ||||
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Table of Contents
(Amounts Expressed In Hong Kong Dollars)
2004 | 2003 | |||||||
NET CASH INFLOW FROM OPERATING ACTIVITIES (Note 11) | $ | 31,342,990 | $ | 55,197,549 | ||||
INVESTMENTS ACTIVITIES | ||||||||
purchase of fixed assets | $ | (422,961 | ) | $ | (226,950 | ) | ||
Sales proceeds of fixed assets | - 0 - | 3,800 | ||||||
Bank interest earned | 51,818 | 71,883 | ||||||
NET CASH OUTFLOW FROM INVESTING ACTIVITIES | (371,143 | ) | (151,267 | ) | ||||
NET CASH INFLOW BEFORE FINANCING | 30,971,847 | 55,046,282 | ||||||
FINANCING ACTIVITIES | ||||||||
Final dividend paid | (28,426,000 | ) | - 0 - | |||||
NET CASH OUTFLOW FROM FINANCING | (28,426,000 | ) | - 0 - | |||||
INCREASE IN CASH AND CASH EQUIVALENTS | 2,545,847 | 55,046,282 | ||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR | 118,098,922 | 63,052,640 | ||||||
CASH AND CASH EQUIVALENTS AT END OF THE YEAR | $ | 120,644,769 | $ | 118,098,922 | ||||
ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS | ||||||||
Cash at bank and in hand | $ | 120,644,769 | $ | 106,823,615 | ||||
Time deposits | - 0 - | 11,275,307 | ||||||
$ | 120,644,769 | $ | 118,098,922 | |||||
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01/01/2003 | ||||||||||||
to | ||||||||||||
12/31/2003 | ||||||||||||
$748,476,591 | SALES | $ | 994,199,406 | |||||||||
LESS : COST OF SALES | ||||||||||||
510,079,989 | Purchases | 684,312,480 | ||||||||||
238,396,602 | 309,886,926 | |||||||||||
LESS : DIRECT COSTS | ||||||||||||
12,994 | Packaging charges | $ | 14,479 | |||||||||
15,908,789 | Transportation | 18,853,926 | ||||||||||
15,921,783 | 18,868,405 | |||||||||||
222,474,819 | GROSS PROFIT | 291,018,521 | ||||||||||
ADD : OTHER INCOME | ||||||||||||
71, 883 | Bank interest earned | 51,818 | ||||||||||
22,984 | Exchange gain | 36,874 | ||||||||||
98,690 | Miscellaneous income | 19,015 | ||||||||||
105,111 | Provision for pension funds written back | - 0 - | ||||||||||
298,668 | 107,707 | |||||||||||
222,773,487 | 291,126,228 | |||||||||||
LESS : SELLING EXPENSES | ||||||||||||
1,653,804 | Bank charges | 2,654, 892 | ||||||||||
165,155,690 | Commission paid | 220,702,290 | ||||||||||
181,180 | Customs declaration charges | 226,205 | ||||||||||
1,230,000 | Design fees | 1,230,000 | ||||||||||
168,220,674 | 224,813,387 | |||||||||||
54,552,813 | 66,312,841 | |||||||||||
LESS : GENERAL AND ADMINISTRATIVE | ||||||||||||
14,346,565 | EXPENSES (Page 19) | 16,442,403 | ||||||||||
$ 40,206,248 | PROFIT BEFORE TAXATION | $ | 49,870,438 | |||||||||
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01/01/2003 | ||||||||
to | ||||||||
12/31/2003 | ||||||||
$ 52,000 | Auditors’ remuneration | $ | 52,000 | |||||
5,625 | Claims paid | 3,918 | ||||||
30,300 | Cleaning expenses | 31,200 | ||||||
708,359 | Depreciation | 784,738 | ||||||
1,372,500 | Directors’ emoluments | 1,395,000 | ||||||
107,832 | Electricity | 118,688 | ||||||
40,369 | Entertainment | 116,765 | ||||||
2,403 | Fixed assets written off | 41,053 | ||||||
145,138 | Insurance | 134,584 | ||||||
19,433 | Legal and professional fees | 14,500 | ||||||
187,499 | Local travelling | 219,322 | ||||||
128,126 | Miscellaneous expenses | 123,632 | ||||||
109,109 | Overseas travelling | 90,017 | ||||||
455,710 | Printing and stationery | 654,286 | ||||||
278,230 | Provident funds | 377,186 | ||||||
- 0 - | Provision for pension funds | 60,000 | ||||||
2,237,035 | Rent and rates | 2,515,275 | ||||||
64,823 | Repairs and maintenance | 68,849 | ||||||
8,299,992 | Salaries | 9,535,120 | ||||||
102,082 | Telecommunication and postage | 106,270 | ||||||
$ 14,346,565 | $ | 16,442,403 | ||||||
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Page | ||||
Financial statements: | ||||
Balance sheets | 1 | |||
Statements of income | 2 | |||
Statements of retained earnings | 3 | |||
Statements of cash flows | 4-5 | |||
Notes to financial statements | 6-9 | |||
Supplementary information: | ||||
Schedules of general and administrative expenses | 10 |
Table of Contents
2005 (Unaudited) | 2004 (Unaudited) | |||||||
Current assets | ||||||||
Cash | $ | 4,196,327 | $ | 1,526,042 | ||||
Accounts receivable — trade | 10,527,086 | 12,038,230 | ||||||
Accounts receivable — affiliate | 34,546,940 | 18,724,890 | ||||||
Miscellaneous receivable | 1,258 | 283,081 | ||||||
Due from affiliates | 6,404 | — | ||||||
Inventory | 5,532,816 | 4,695,841 | ||||||
Prepaid expenses | 123,555 | 38,140 | ||||||
Total current assets | 54,934,386 | 37,306,224 | ||||||
Property and equipment, net of accumulated depreciation | 2,386,194 | 2,258,629 | ||||||
Total assets | $ | 57,320,580 | $ | 39,564,853 | ||||
2005 | 2004 | |||||||
Current liabilities | ||||||||
Loans payable — officers | $ | 5,543,000 | $ | 2,500,000 | ||||
Accounts payable — trade | 680,341 | 173,703 | ||||||
Accounts payable — affiliate | 16,451,923 | 12,190,640 | ||||||
Rebates payable | 948,755 | 1,147,500 | ||||||
Accrued royalties | 6,087,413 | 3,625,953 | ||||||
Accrued commissions | 1,477,856 | 1,294,711 | ||||||
Accrued state and local taxes | 1,052,203 | 109,476 | ||||||
Advertising advances | 1,171,519 | — | ||||||
Total current liabilities | 33,413,010 | 21,041,983 | ||||||
Stockholders’ equity | ||||||||
Common stock — no par value; 200 shares authorized, issued and outstanding | 2,000 | 2,000 | ||||||
Retained earnings | 23,905,570 | 18,520,870 | ||||||
Total stockholders’ equity | 23,907,570 | 18,522,870 | ||||||
Total liabilities and stockholders’ equity | $ | 57,320,580 | $ | 39,564,853 | ||||
1
Table of Contents
2005 (Unaudited) | 2004 (Unaudited) | |||||||
Revenues | ||||||||
Commission income | $ | 32,426,886 | $ | 20,276,949 | ||||
Sales | 18,636,966 | 16,591,845 | ||||||
Design fee | 123,000 | 123,000 | ||||||
51,186,852 | 36,991,794 | |||||||
Direct costs | ||||||||
Cost of sales | 14,966,397 | 10,902,119 | ||||||
Direct selling costs | 12,100,166 | 7,776,546 | ||||||
Product development costs | 895,482 | 619,168 | ||||||
27,962,045 | 19,297,833 | |||||||
Gross profit | 23,224,807 | 17,693,961 | ||||||
General and administrative expenses | 3,677,413 | 2,319,810 | ||||||
Income before other income and expenses | 19,547,394 | 15,374,151 | ||||||
Other income and expenses | ||||||||
Interest income | 96,497 | 34,260 | ||||||
Depreciation | (652,177 | ) | (394,422 | ) | ||||
(555,680 | ) | (360,162 | ) | |||||
Net income | $ | 18,991,714 | $ | 15,013,989 | ||||
2
Table of Contents
2005 (Unaudited) | 2004 (Unaudited) | |||||||
Balance, January 1 | $ | 25,009,466 | $ | 20,506,881 | ||||
Net income | 18,991,714 | 15,013,989 | ||||||
44,001,180 | 35,520,870 | |||||||
Less distributions | 20,095,610 | 17,000,000 | ||||||
Balance, September 30 | $ | 23,905,570 | $ | 18,520,870 | ||||
3
Table of Contents
2005 (Unaudited) | 2004 (Unaudited) | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 18,991,714 | $ | 15,013,989 | ||||
Adjustment to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation | 652,177 | 394,422 | ||||||
(Increase) decrease in assets | ||||||||
Accounts receivable — trade | (4,507,823 | ) | (3,730,691 | ) | ||||
Accounts receivable — affiliate | (6,928,119 | ) | (6,057,119 | ) | ||||
Miscellaneous receivable | 21,833 | 515,865 | ||||||
Inventory | (2,455,749 | ) | (3,670,321 | ) | ||||
Prepaid expenses | (29,032 | ) | 59,414 | |||||
Increase (decrease) in liabilities | ||||||||
Accounts payable — trade | 361,176 | (94,319 | ) | |||||
Accounts payable — affiliate | 1,420,456 | 11,969,928 | ||||||
Rebates payable | (1,128,086 | ) | 70,121 | |||||
Accrued royalties | 2,815,406 | 2,252,018 | ||||||
Accrued commissions | 993,839 | 400,575 | ||||||
Accrued state and local taxes | 892,428 | (205,010 | ) | |||||
Advertising advances | 1,171,519 | — | ||||||
Net cash provided by operating activities | 12,271,739 | 16,918,872 | ||||||
Cash flows from investing activities | ||||||||
Acquisition of property and equipment | (1,097,738 | ) | (1,064,467 | ) | ||||
4
Table of Contents
2005 (Unaudited) | 2004 (Unaudited) | |||||||
Cash flows from financing activities | ||||||||
Net advances and repayments of loans payable — officers | $ | 5,543,000 | $ | 500,000 | ||||
Distributions paid | (20,095,610 | ) | (17,000,000 | ) | ||||
Net cash used by financing activities | (14,552,610 | ) | (16,500,000 | ) | ||||
Net decrease in cash | (3,378,609 | ) | (645,595 | ) | ||||
Cash, January 1 | 7,574,936 | 2,171,637 | ||||||
Cash, September 30 | $ | 4,196,327 | $ | 1,526,042 | ||||
5
Table of Contents
1. | Summary of Significant Accounting Policies |
6
Table of Contents
1. | Summary of Significant Accounting Policies |
2. | Property and Equipment |
2005 | 2004 | |||||||
Molds | $ | 3,344,410 | $ | 2,395,007 | ||||
Leasehold improvements | 308,186 | 308,186 | ||||||
Furniture and fixtures | 165,826 | 142,113 | ||||||
Computer equipment | 233,247 | 233,247 | ||||||
Transportation equipment | 532,393 | 643,323 | ||||||
4,584,062 | 3,721,876 | |||||||
Less accumulated depreciation | 2,197,868 | 1,463,247 | ||||||
$ | 2,386,194 | $ | 2,258,629 | |||||
7
Table of Contents
2. | Property and Equipment (Cont’d.) |
3. | Loans Payable — Officers |
4. | Advertising Advances |
5. | Royalties |
6. | Related Party Transactions |
Year ending September 30, 2006 | $ | 79,170 | ||
2007 | 85,038 | |||
2008 | 89,268 | |||
2009 | 93,680 | |||
2010 | 98,413 | |||
$ | 445,569 | |||
8
Table of Contents
6. | Related Party Transactions (Cont’d.) |
Year ending September 30, 2006 | $ | 33,150 | ||
2007 | 33,150 | |||
2008 | 33,150 | |||
2009 | 33,150 | |||
2010 | 19,326 | |||
$ | 151,926 | |||
9
Table of Contents
Table of Contents
2005 Unaudited | 2004 Unaudited | |||||||
Advertising | $ | 78,380 | $ | 15,516 | ||||
Auto expense | 13,478 | 17,707 | ||||||
Computer expenses | 65,361 | 47,324 | ||||||
Contributions | 1,000 | 4,384 | ||||||
Dues and subscriptions | 8,665 | 15,722 | ||||||
Employee benefits | 102,004 | 93,837 | ||||||
Equipment rental | — | 8,866 | ||||||
Gifts | 5,216 | 39,200 | ||||||
Insurance | 122,530 | 108,939 | ||||||
Meals and entertainment | 35,477 | 28,676 | ||||||
Miscellaneous | 42,357 | 22,075 | ||||||
Professional fees | 53,120 | 72,894 | ||||||
Office expense | 73,887 | 42,106 | ||||||
Payroll | 1,180,259 | 882,131 | ||||||
Payroll taxes | 87,292 | 75,260 | ||||||
Postage | 3,500 | 2,519 | ||||||
Rent | 87,916 | 90,694 | ||||||
Repairs and maintenance | 7,223 | 6,797 | ||||||
Storage | 2,771 | 2,718 | ||||||
Taxes — other | 1,505,590 | 477,080 | ||||||
Telephone | 26,613 | 20,905 | ||||||
Travel | 149,968 | 219,732 | ||||||
Utilities | 24,806 | 24,728 | ||||||
$ | 3,677,413 | $ | 2,319,810 | |||||
10
Table of Contents
Page | ||||
Balance Sheet (Unaudited) | 1 | |||
Profit and Loss Statement (Unaudited) | 2 | |||
Notes to the Financial Statements (Unaudited) | 3-11 |
Table of Contents
Balance Sheet as at September 30, 2005
(Amounts Expressed in Hong Kong Dollars)
9/30/04 (Unaudited) | 9/30/05 (Unaudited) | |||||||||||||||
FIXED ASSETS | ||||||||||||||||
$ | 425,359 | Furniture & Fixture | $ | 465,611 | ||||||||||||
245,424 | Less: Provision for Depreciation | 273,257 | ||||||||||||||
179,935 | 192,354 | |||||||||||||||
1,690,935 | Office Equipment | 2,135,332 | ||||||||||||||
1,078,650 | Less: Provision for Depreciation | 1,247,092 | ||||||||||||||
612,285 | 888,240 | |||||||||||||||
1,265,134 | Leasehold Improvement | 1,330,133 | ||||||||||||||
968,591 | Less: Provision for Depreciation | 1,303,815 | ||||||||||||||
296,543 | 26,318 | |||||||||||||||
1,088,763 | 1,106,912 | |||||||||||||||
CURRENT ASSETS | ||||||||||||||||
10,000 | Cash in Hand | 10,000 | ||||||||||||||
8,483,999 | Hong Kong Bank – HKD C/A | 1,997,920 | ||||||||||||||
7,955,727 | Hong Kong Bank – HKD Savings | 7,969,873 | ||||||||||||||
21,583,240 | Hong Kong Bank – USD Savings | 37,646,660 | ||||||||||||||
599,875 | Hong Kong Bank – USD Statement Savings | 1,090,200 | ||||||||||||||
32,550,769 | Hong Kong Bank – Call Deposits | 52,040,654 | ||||||||||||||
— | Fixed Deposits | 20,000,000 | ||||||||||||||
245,035,287 | Trade Debtors | 358,514,326 | ||||||||||||||
18,988 | Accounts Receivable – Others | (3,912 | ) | |||||||||||||
143,034 | Advance to Supplier | 300,441 | ||||||||||||||
366,399 | Prepayment | 7,644,975 | ||||||||||||||
681,595 | Rental & Utility Deposits | 695,140 | ||||||||||||||
317,428,913 | 487,906,277 | |||||||||||||||
LESS: CURRENT LIABILITIES | ||||||||||||||||
92,814,433 | Trade Creditors | 118,308,698 | ||||||||||||||
2,097,186 | Accounts Payable – Others | 3,428,144 | ||||||||||||||
1,077,908 | Advance from Customers | 1,001,990 | ||||||||||||||
145,117,901 | Commission Payable | 267,738,790 | ||||||||||||||
— | Dividend Payable | — | ||||||||||||||
41,250 | Provision for Audit Fees | 41,250 | ||||||||||||||
1,085,326 | Provision for Staff Bonus | 1,709,176 | ||||||||||||||
871,900 | Provision for Pension | 931,900 | ||||||||||||||
8,229,931 | Provision for Taxation | 16,552,716 | ||||||||||||||
251,335,835 | 409,712,664 | |||||||||||||||
66,093,078 | NET CURRENT ASSETS / (LIABILITIES) | 78,193,613 | ||||||||||||||
67,181,841 | TOTAL NET ASSETS | $ | 79,300,525 | |||||||||||||
FINANCED BY: | ||||||||||||||||
SHARE CAPITAL | ||||||||||||||||
Authorized Capital 100,000 shares of HKD10.00 each HKD1,000,000,00 | ||||||||||||||||
$ | 1,000,000 | Issued and fully paid capital 100,000 shares of HKD10.00 each | $ | 1,000,000 | ||||||||||||
33,303,906 | Retained Profit / (Loss) | 41,084,292 | ||||||||||||||
32,877,935 | Current Year Profit / (Loss) | 37,216,233 | ||||||||||||||
$ | 67,181,841 | SHAREHOLDERS’ EQUITY | $ | 79,300,525 | ||||||||||||
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Profit & Loss Statement
For the Nine Months ended September 30, 2005
(Amounts Expressed in Hong Kong Dollars)
01/01/04 to | 01/01/05 to | |||||
9/30/04 (Unaudited) | 9/30/05 (Unaudited) | |||||
$723,718,946 | Gross Sales | $922,648,525 | ||||
157,146,354 | Less: Commission | 251,308,372 | ||||
566,572,592 | Net Sales | 671,340,153 | ||||
512,051,255 | Cost of Goods Sold | 608,416,843 | ||||
54,521,337 | Gross Profit | 62,923,310 | ||||
Add: Other Income | ||||||
15,600 | Interest income | 665,815 | ||||
23,510 | Exchange Difference | 46,921 | ||||
39,110 | 712,736 | |||||
54,560,447 | Operation Income /(Loss) | 63,636,046 | ||||
Operating Expenses | ||||||
2,668,626 | Selling Expenses | 4,629,559 | ||||
12,033,543 | General & Administrative Expenses | 14,027,590 | ||||
14,702,169 | 18,657,149 | |||||
39,858,278 | Profit/(Loss ) from Operation | 44,978,897 | ||||
6,980,343 | Taxation | 7,762,664 | ||||
32,877,935 | Profit After Taxation | 37,216,233 | ||||
33,303,906 | Retained Profit/(Loss) Brought Forward | 41,084,292 | ||||
66,181,841 | 78,300,525 | |||||
Appropriation | ||||||
— | Interim Dividend | — | ||||
— | Final Dividend | — | ||||
$66,181,841 | Retained Profits/(Loss) Carried Forward | $78,300,525 | ||||
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1. | PRINCIPAL ACCOUNTING POLICIES |
(a) | Basis of Accounting | ||
The financial statements have been prepared in accordance with generally accepted accounting principles in Hong Kong and with accounting standards issued by the Hong Kong Society of Accountants. | |||
(b) | Fixed Assets | ||
Fixed assets are stated at cost less accumulated deprecation. | |||
Depreciation is provided to write off the cost of fixed assets over their estimated useful lives on a straight line basis at the following annual rates :- |
Furniture and fixtures | 10% | |||
Office machinery and equipment | 20% | |||
Leasehold improvements | Over the term of lease |
(c) | Translation of Foreign Currencies | ||
Monetary assets and liabilities denominated in foreign currencies are translated into Hong Kong Dollars at the rates of exchange ruling at the balance sheet date. | |||
Transactions in foreign currencies are translated into Hong Kong Dollars at the rates of exchange ruling at the dates of the transactions. | |||
All exchange differences arising from the above are included in the profit and loss statement. | |||
(d) | Cash and Cash Equivalents | ||
For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposit held at call with banks, cash investments with a maturity of three months or less from the date of investment and bank overdrafts. |
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1. | PRINCIPAL ACCOUNTING POLICIES (CONT’D) |
(e) | Deferred Taxation | ||
Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted by the balance sheet date. | |||
Deferred tax assets are recognised to the extent it is probable that future taxable profit will be available against which the temporary differences can be utilised. | |||
(f) | Employee Benefits |
(i) | Long Service Payments | ||
The Company’s net obligation in respect of long service payment under the Employment Ordinance is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated according to the provision of the above Ordinance. | |||
(ii) | Retirement Benefits | ||
The Company operates a defined contribution Mandatory Provident Fund retirement benefit scheme (“the Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for all its employees. Contributions to the Scheme are based on a percentage of the employees’ basic salaries and are recognised as an expense in the profit and loss statement. |
(g) | Operating Leases | ||
Payments under operating leases are charged to the profit and loss statement on a straight line basis over the period of the respective leases. | |||
(h) | Revenue Recognition | ||
Sales are recognised as revenue when the risks and rewards of ownership of the goods have passed to customers. Bank interest earned is recognised on an accrual basis. |
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2. | PROFIT BEFORE TAXATION | |
Profit before taxation is arrived at |
2005 | 2004 | |||||||
after charging :- | ||||||||
Auditors’ remuneration | $ | 39,000 | $ | 39,000 | ||||
Depreciation | 514,416 | 574,964 | ||||||
Fixed assets written off | 1 | 12,510 | ||||||
Rental payable on land and buildings under operating leases | 1,076,160 | 1,466,300 | ||||||
Retirement benefit costs | 352,442 | 278,914 | ||||||
and crediting :- | ||||||||
Bank interest earned | $ | 665,815 | $ | 15,600 | ||||
Exchange gain | 46,921 | 23,510 | ||||||
3. | DIRECTORS’ EMOLUMENTS | |
The aggregate amounts of the Directors’ emoluments disclosed pursuant to Section 161 of the Companies Ordinance are as follows :- |
2005 | 2004 | |||||||
As director | $ | — | $ | — | ||||
As executive | 794,500 | 771,000 | ||||||
$ | 794,500 | $ | 771,000 | |||||
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4. | TAXATION |
2005 | 2004 | |||||||
Hong Kong profits tax | ||||||||
Provision for current year | $ | 7,737,816 | $ | 7,015,940 | ||||
The provision for Hong Kong profits tax has been calculated by applying the statutory rate of taxation of 17.5% to the estimated assessable profits of the Company which were derived from Hong Kong during the reporting period. | ||
No provision for deferred taxation has been made in the financial statements as the effect of temporary differences is insignificant. | ||
Reconciliation between taxation expense and accounting profit at applicable taxation rates :- |
2005 | 2004 | |||||||
Profit before taxation | $ | 44,978,896 | $ | 39,858,278 | ||||
Tax at taxation tax rate of 17.5% | $ | 7,871,307 | $ | 6,975,198 | ||||
Tax effect of expenses that are not deductible in determining taxable profits | 97,898 | 110,683 | ||||||
Tax effect on income that is not assessable in determining taxable profits | (116,518 | ) | (2,730 | ) | ||||
Tax effect on allowances claimed | (114,871 | ) | (67,211 | ) | ||||
Taxation expense for the period | $ | 7,737,816 | $ | 7,015,940 | ||||
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5. | FIXED ASSETS |
Furniture | Machinery | Leasehold | ||||||||||||||
and Fixtures | and Equipment | Improvement | Total | |||||||||||||
Cost | ||||||||||||||||
At January 1, 2005 | $ | 421,879 | $ | 1,591,405 | $ | 1,265,134 | $ | 3,278,418 | ||||||||
Additions during the year | 43,732 | 547,210 | 64,999 | 655,941 | ||||||||||||
disposals during the year | — | (3,284 | ) | — | (3,284 | ) | ||||||||||
At September 30, 2005 | 465,611 | 2,135,331 | 1,330,133 | 3,931,075 | ||||||||||||
Accumulated Depreciation | ||||||||||||||||
At January 1, 2005 | 247,926 | 985,310 | 1,079,795 | 2,313,031 | ||||||||||||
Charge for the year | 25,330 | 265,065 | 224,021 | 514,416 | ||||||||||||
Written back on disposals | — | (3,283 | ) | — | (3,283 | ) | ||||||||||
At September 30, 2005 | 273,256 | 1,247,092 | 1,303,816 | 2,824,164 | ||||||||||||
Net Book value | ||||||||||||||||
At September 30, 2005 | $ | 192,355 | $ | 888,239 | $ | 26,317 | $ | 1,106,911 | ||||||||
At September 30, 2004 | $ | 179,936 | $ | 612,285 | $ | 296,542 | $ | 1,088,763 | ||||||||
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6. | SHARE CAPITAL |
2005 | 2004 | |||||||
Authorised capital 100,000 shares of HK$10.00 each | $ | 1,000,000 | $ | 1,000,000 | ||||
Issued and fully paid capital 100,000 shares of HK$10.00 each | $ | 1,000,000 | $ | 1,000,000 | ||||
7. | COMMITMENTS UNDER OPERATING LEASES | |
At September 30, 2005, the Company had future aggregate minimum lease payments on land and buildings under non-cancellable leases as follows :- |
2005 | 2004 | |||||||
Not later than one year | $ | 2,325,070 | $ | 1,216,285 | ||||
Later than one year and not later than five years | 1,705,790 | — | ||||||
$ | 4,030,860 | $ | 1,216,285 | |||||
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8. | RECONCILIATION OF PROFIT BEFORE TAXATION TO NEW CASH INFLOW FROM OPERATING ACTIVITIES |
09/30/2005 | 09/30/2004 | |||||||
HK$ | HK$ | |||||||
Profit before taxation | $ | 44,978,897 | $ | 39,858,278 | ||||
Adjustments for;- | ||||||||
Bank Interest earned | (665,815 | ) | (15,600 | ) | ||||
Depreciation | 514,416 | 574,964 | ||||||
Fixed Assets Written off | 1 | 12,510 | ||||||
Operating profit before working capital changes | 44,827,499 | 40,430,152 | ||||||
Change in bills receivable | (118,121,483 | ) | (67,542,704 | ) | ||||
Change in accounts receivable | (37,979,637 | ) | (30,161,126 | ) | ||||
Change in prepayments, rental and utility deposits | (168,813 | ) | 35,519 | |||||
Change in trade deposits | (300,441 | ) | (116,202 | ) | ||||
Change in accounts payable and accrued charges | 145,143,539 | 39,157,470 | ||||||
Cash generated from operations | 33,400,664 | (18,196,891 | ) | |||||
Hong Kong profits tax paid | 0 | 0 | ||||||
Net cash inflow from operating activities | $ | 33,400,664 | $ | (18,196,891 | ) | |||
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2005 (Unaudited) | 2004 (Unaudited) | |||||||
NET CASH INFLOW FROM OPERATING ACTIVITIES (Notes) | $ | 33,400,664 | $ | (18,196,891 | ) | |||
INVESTMENTS ACTIVITIES | ||||||||
Purchase of fixed assets | (655,942 | ) | (308,020 | ) | ||||
Sales proceeds of fixed assets | 0 | 0 | ||||||
Bank interest earned | 665,815 | 15,600 | ||||||
NET CASH OUTFLOW FROM INVESTING ACTIVITIES | 9,873 | (292,420 | ) | |||||
NET CASH INFLOW BEFORE FINANCING | 33,410,537 | (18,489,311 | ) | |||||
FINANCING ACTIVITIES | ||||||||
Final dividend paid | (33,300,000 | ) | (28,426,000 | ) | ||||
Interim dividend paid | 0 | 0 | ||||||
NET CASH OUTFLOW FROM FINANCING | (33,300,000 | ) | (28,426,000 | ) | ||||
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS | 110,537 | (46,915,311 | ) | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR | 120,644,769 | 118,098,922 | ||||||
CASH AND CASH EQUIVALENTS AT END OF THE YEAR | $ | 120,755,306 | $ | 71,183,611 | ||||
ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS | ||||||||
Cash at bank and in hand | $ | 100,755,306 | $ | 71,183,611 | ||||
Time Deposits | 20,000,000 | 0 | ||||||
$ | 120,755,306 | $ | 71,183,611 | |||||
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GENERAL AND ADMINISTRATIVE EXPENSES
For the Nine Months Ended September 30, 2005
(Amounts Expressed in Hong Kong Dollars)
(For Management Purposes only)
01/01/04 | 01/01/05 | |||||
to 9/30/04 (Unaudited) | to 9/30/05 (Unaudited) | |||||
$11,432 | Advertising | $720 | ||||
27,000 | Recruitment Fees | 58,838 | ||||
39,000 | Audit Fees | 39,000 | ||||
10,875 | Legal & Professional Fees | 10,875 | ||||
0 | Business Registration Fees | 0 | ||||
8,933 | Licence & Subscription Fees | 8,141 | ||||
21,600 | Cleaning Expenses | 23,400 | ||||
22,765 | Depn – Furniture & Fixture | 25,330 | ||||
230,696 | Depn – Office Equipment | 265,065 | ||||
321,504 | Depn – Leasehold Improvement | 224,021 | ||||
0 | Donation | 5,000 | ||||
76,168 | Entertainment | 51,487 | ||||
32,697 | Fax & Cable Charges | 33,193 | ||||
7,579 | Postage | 7,838 | ||||
41,213 | Telephone Expenses | 59,708 | ||||
17,237 | Office Supplies | 20,976 | ||||
450,882 | Printing & Stationary | 640,781 | ||||
1,859,270 | Rent & Rates | 1,532,080 | ||||
87,066 | Electricity | 104,851 | ||||
6,348,446 | Staff Salary | 7,968,658 | ||||
1,360,000 | Staff Bonus | 1,800,000 | ||||
45,000 | Pension | 45,000 | ||||
278,914 | Mandatory Provident Fund | 352,442 | ||||
306,000 | Directors’ Housing Allowance | 306,000 | ||||
74,356 | Staff Welfare | 70,827 | ||||
25,964 | Insurance | 30,262 | ||||
22,405 | Sundry Expenses | 24,838 | ||||
44,625 | Repairs & Maintenance | 47,796 | ||||
166,317 | Local Travelling | 245,280 | ||||
83,089 | Overseas Travelling | 25,382 | ||||
12,510 | Fixed Assets Written Off | 1 | ||||
0 | F. Assets Disposal (Gain) / Loss | (200 | ) | |||
$12,033,543 | $14,027,590 | |||||
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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENT
The following unaudited pro forma consolidated financial statements as of September 30, 2005 and for the year ended December 31, 2004 and the nine months ended September 30, 2005 give effect to the asset acquisition of CDI. The pro forma consolidated balance sheet presents our financial position as if the asset acquisition of CDI had occurred on September 30, 2005. The pro forma consolidated statement of operations presents our results as if the acquisition of CDI had occurred on January 1, 2004. Our fiscal year end is December 31 and CDI’s fiscal year end is December 31. The pro forma consolidated balance sheet as of September 30, 2005 is based upon our historical consolidated balance sheet as of September 30, 2005 which has been adjusted for the effects of the CDI asset acquisition. The pro forma consolidated statements of operations for the year ended December 31, 2004 and nine months ended September 30, 2005 are based on our historical consolidated statements of operations and the statements of operations of CDI for the year ended December 31, 2004 and the nine months ended September 30, 2005.
The pro forma consolidated financial statements include, in our opinion, all material adjustments necessary to reflect the asset acquisition of CDI. The pro forma consolidated financial statements do not represent the Company’s actual results of operations, including the acquisitions, nor do they purport to predict or indicate our financial position or results of operations at any future date or for any future period. The pro forma consolidated financial statements should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated financial statements and the related notes thereto and CDI’s financial statements and the related notes thereto included herein.
Table of Contents
JAKKS PACIFIC, INC. AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Balance Sheet
(In thousands)
SEPTEMBER 30, 2005 | ||||||||||||
HISTORICAL | PRO FORMA | PRO FORMA | ||||||||||
JAKKS | ADJUSTMENTS | BALANCE SHEET | ||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS | ||||||||||||
Cash and cash equivalents | $ | 228,053 | ($ | 105,253 | )(1) | $ | 122,800 | |||||
Accounts receivable, net | 144,334 | 16,720 | (2) | 161,054 | ||||||||
Inventory | 73,876 | 1,394 | (2) | 75,270 | ||||||||
Prepaid expenses and other current assets | 30,830 | 944 | (2) | 31,774 | ||||||||
Total current assets | 477,093 | (86,195 | ) | 390,898 | ||||||||
Property and equipment, at cost | 41,896 | 1,235 | (2) | 43,131 | ||||||||
Less accumulated depreciation and amortization | 30,095 | — | 30,095 | |||||||||
Property and equipment, net | 11,801 | 1,235 | 13,036 | |||||||||
Intangibles and Other, net | 20,835 | 17,170 | (3) | 38,005 | ||||||||
Investment in video game joint venture | 3,609 | — | 3,609 | |||||||||
Goodwill, net | 262,880 | 75,750 | (3) | 338,630 | ||||||||
Trademarks, net | 17,768 | 1,400 | (3) | 19,168 | ||||||||
Total assets | $ | 793,986 | $ | 9,360 | $ | 803,346 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
CURRENT LIABILITIES | ||||||||||||
Accounts payable and accrued expenses | $ | 126,357 | $ | 5,919 | (4) | $ | 132,276 | |||||
Reserve for sales returns and allowances | 27,400 | — | 27,400 | |||||||||
Income taxes payable | 30,162 | — | (4) | 30,162 | ||||||||
Total current liabilities | 183,919 | 5,919 | 189,838 | |||||||||
Long term debt | 98,000 | — | 98,000 | |||||||||
Deferred income taxes | 4,237 | — | 4,237 | |||||||||
Total Liabilities | 286,156 | 5,919 | 292,075 | |||||||||
STOCKHOLDERS EQUITY | ||||||||||||
Common stock | 27 | — | (1) | 27 | ||||||||
Additional paid-in capital | 281,229 | 3,441 | (1) | 284,670 | ||||||||
Retained earnings | 231,043 | — | 231,043 | |||||||||
Deferred compensation from restricted stock | (2,434 | ) | — | (2,434 | ) | |||||||
Accumulated comprehensive loss | (2,035 | ) | — | (2,035 | ) | |||||||
Total stockholders equity | 507,830 | 3,441 | 511,271 | |||||||||
Total liabilities and stockholders equity | $ | 793,986 | $ | 9,360 | $ | 803,346 | ||||||
Table of Contents
JAKKS PACIFIC, INC. AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Statements Of Operations
(In thousands, except per share amounts)
YEAR ENDED DECEMBER 31, 2004 | ||||||||||||||||||||
ACTUAL | ||||||||||||||||||||
ARBOR | CREATIVE | CDI | ||||||||||||||||||
TOYS | DESIGNS | CONSOLIDATING | CONSOLIDATED | JAKKS | ||||||||||||||||
Net Sales | $ | 128,284 | $ | 61,217 | (50,954 | ) | $ | 138,547 | $ | 574,266 | ||||||||||
Cost of sales | 119,211 | 29,420 | (50,790 | ) | 97,841 | 348,259 | ||||||||||||||
Gross Profit | 9,073 | 31,797 | (164 | ) | 40,706 | 226,007 | ||||||||||||||
Selling, general and administrative expenses | 2,652 | 10,383 | (164 | ) | 12,871 | 172,282 | ||||||||||||||
Income from operations | 6,421 | 21,414 | — | 27,835 | 53,725 | |||||||||||||||
Interest, net | — | 89 | — | 89 | (2,498 | ) | ||||||||||||||
Other income (expense) | 14 | — | — | 14 | 7,865 | |||||||||||||||
Income before provision for income taxes | 6,435 | 21,503 | — | 27,938 | 59,092 | |||||||||||||||
Provision for income taxes | 1,134 | — | — | 1,134 | 15,533 | |||||||||||||||
Net income (loss) | $ | 5,301 | $ | 21,503 | $ | — | $ | 26,804 | $ | 43,559 | ||||||||||
Basic earnings per share | $ | 1.69 | ||||||||||||||||||
Weighted average shares outstanding | 25,797 | |||||||||||||||||||
Diluted earnings per share | $ | 1.49 | ||||||||||||||||||
Weighted average shares and equivalents outstanding | 31,406 | |||||||||||||||||||
[Continued from above table, first column(s) repeated]
YEAR ENDED DECEMBER 31, 2004 | ||||||||||||
PRO FORMA | PRO FORMA | |||||||||||
COMBINED | ADJUSTMENTS | RESULTS | ||||||||||
Net Sales | $ | 712,813 | $ | — | $ | 712,813 | ||||||
Cost of sales | 446,100 | — | 446,100 | |||||||||
Gross Profit | 266,713 | — | 266,713 | |||||||||
Selling, general and administrative expenses | 185,153 | 6,768 | (5) | 191,921 | ||||||||
Income from operations | 81,560 | (6,768 | ) | 74,792 | ||||||||
Interest, net | (2,409 | ) | (4,899) | (6) | (7,308 | ) | ||||||
Other income (expense) | 7,879 | — | 7,879 | |||||||||
Income before provision for income taxes | 87,030 | (11,667 | ) | 75,363 | ||||||||
Provision for income taxes | 16,667 | 3,143 | (7) | 19,810 | ||||||||
Net income | $ | 70,363 | $ | (14,810 | ) | $ | 55,553 | |||||
Basic earnings per share | $ | 2.14 | ||||||||||
Weighted average shares outstanding | 150 | 25,947 | ||||||||||
Diluted earnings per share | $ | 1.87 | ||||||||||
Weighted average shares and equivalents outstanding | 150 | 31,556 | ||||||||||
Table of Contents
JAKKS PACIFIC, INC. AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Statements Of Operations
(In thousands, except per share amounts)
NINE MONTHS ENDED SEPTEMBER 30, 2005 | ||||||||||||||||||||
ACTUAL | ||||||||||||||||||||
ARBOR | CREATIVE | |||||||||||||||||||
TOYS | DESIGNS | CONSOLIDATING | CONSOLIDATED CDI | JAKKS | ||||||||||||||||
Net Sales | $ | 119,051 | $ | 51,187 | $ | (49,002 | ) | $ | 121,236 | $ | 495,266 | |||||||||
Cost of sales | 110,932 | 25,189 | (48,879 | ) | 87,242 | 299,529 | ||||||||||||||
Gross Profit | 8,119 | 25,998 | (123 | ) | 33,994 | 195,737 | ||||||||||||||
Selling, general and administrative expenses | 2,407 | 7,103 | (123 | ) | 9,387 | 120,229 | ||||||||||||||
Income from operations | 5,712 | 18,895 | — | 24,607 | 75,508 | |||||||||||||||
Interest, net | 86 | 96 | — | 182 | 17 | |||||||||||||||
Other income (expense) | 6 | — | — | 6 | 140 | |||||||||||||||
Income before provision for income taxes | 5,804 | 18,991 | — | 24,795 | 75,665 | |||||||||||||||
Provision for income taxes | 1,002 | — | — | 1,002 | 21,186 | |||||||||||||||
Net income | $ | 4,802 | $ | 18,991 | $ | — | $ | 23,793 | $ | 54,479 | ||||||||||
Basic earnings per share | $ | 2.04 | ||||||||||||||||||
Weighted average shares outstanding | 26,673 | |||||||||||||||||||
Diluted earnings per share | $ | 1.77 | ||||||||||||||||||
Weighted average shares and equivalents outstanding | 32,182 | |||||||||||||||||||
[Continued from above table, first column(s) repeated]
NINE MONTHS ENDED SEPTEMBER 30, 2005 | ||||||||||||
PRO FORMA | PRO FORMA | |||||||||||
COMBINED | ADJUSTMENTS | RESULTS | ||||||||||
Net Sales | $ | 616,502 | $ | — | $ | 616,502 | ||||||
Cost of sales | 386,771 | — | 386,771 | |||||||||
Gross Profit | 229,731 | — | 229,731 | |||||||||
Selling, general and administrative expenses | 129,616 | 3,008 | (5) | 132,624 | ||||||||
Income from operations | 100,115 | (3,008 | ) | 97,107 | ||||||||
Interest, net | 199 | (3,790 | )(6) | (3,591) | ||||||||
Other income (expense) | 146 | — | 146 | |||||||||
Income before provision for income taxes | 100,460 | (6,798 | ) | 93,662 | ||||||||
Provision for income taxes | 22,188 | 4,038 | (7) | 26,226 | ||||||||
Net income | $ | 78,272 | $ | (10,836 | ) | $ | 67,436 | |||||
Basic earnings per share | $ | 2.51 | ||||||||||
Weighted average shares outstanding | 150 | 26,823 | ||||||||||
Diluted earnings per share | $ | 2.16 | ||||||||||
Weighted average shares and equivalents outstanding | 150 | 32,332 | ||||||||||
Table of Contents
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated financial statements have been adjusted for items relating to the acquisition of CDI as set forth below (in thousands):
BALANCE SHEET
(1) | Consideration paid on or about the closing: | |||||||
Cash paid to or on behalf of stockholders | $ | 104,489 | ||||||
Other acquisition costs | 764 | |||||||
$ | 105,253 | |||||||
150,000 shares of JAKKS common stock issued | $ | 3,441 | ||||||
(2) | Assets acquired | $ | 20,293 | |||||
(3) | Other assets acquired (see Note A below): | |||||||
Intangible assets | $ | 17,170 | ||||||
Trademarks | 1,400 | |||||||
Excess of consideration paid over fair market value of net assets acquired (Goodwill) | 75,750 | |||||||
$ | 94,320 | |||||||
(4) | Liabilities assumed in the acquisition: | |||||||
Accounts payable and accrued expenses | $ | 5,919 | ||||||
STATEMENT OF OPERATIONS
Pro Forma | Pro Forma | |||||||||||
Year Ended | Nine Months Ended | |||||||||||
Dec 31, 2004 | Sep 30, 2005 | |||||||||||
(5) | Selling, general and administrative expenses are adjusted to reflect: | |||||||||||
Elimination of Hong Kong director fees | $ | 180 | $ | 39 | ||||||||
Amortization of intangible assets | 6,588 | 2,968 | ||||||||||
$ | 6,768 | $ | 3,008 | |||||||||
(6) | Interest, net is adjusted to reflect: | |||||||||||
The Elimination of interest income related to CDI cash balance as if they had no cash balance as of January 1, 2004 and September 1, 2005, respectively | $ | 89 | $ | 182 | ||||||||
The Elimination of interest income related to lower cash balances held by JAKKS | 4,810 | 3,608 | ||||||||||
$ | 4,899 | $ | 3,790 | |||||||||
(7) | Provision for income taxes is adjusted to reflect the tax effect of pro forma adjustments | $ | 3,143 | $ | 4,038 | |||||||
Note A: | In accordance with FASB Statement of Financial Accounting Standard No. 141 “Business Combinations”, the allocation of the purchase price is based on studies and valuations that are currently being performed and is expected to be completed by the second quarter of 2006. |
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(d) Exhibits.
Number | Description | |
10.1 | January 18, 2006 Asset Purchase and Sale Agreement(1) | |
99 | February 10, 2006 Press Release(2) |
(1) Filed as an exhibit to the Registrant’s January 24, 2006 Current Report on Form 8-K and incorporated herein by reference.
(2) Filed as an exhibit to the Registrant’s February 14, 2006 Current Report on Form 8-K and incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: April 26, 2006
JAKKS PACIFIC, INC. | |||
By: | /s/ JOEL M. BENNETT Joel M. Bennett Executive Vice President |
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Number | Description | |
10.1 | January 18, 2006 Asset Purchase and Sale Agreement(1) | |
99 | February 10, 2006 Press Release(2) |
(1) Filed as an exhibit to the Registrant’s January 24, 2006 Current Report on Form 8-K and incorporated herein by reference.
(2) Filed as an exhibit to the Registrant’s February 14, 2006 Current Report on Form 8-K and incorporated herein by reference.